Re Dairy Soils Pty Ltd (in liq)

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT

CORPORATIONS LIST

S ECI 2025 01414

IN THE MATTER OF DAIRY SOILS PTY LTD (IN LIQUIDATION) (ACN 640 459 490)

AGFOR RURAL PTY LTD (ACN 649 673 638) AS TRUSTEE FOR THE AGFOR RURAL UNIT TRUST (ABN 76 325 592 437)	Plaintiff
v
DAIRY SOILS PTY LTD (IN LIQUIDATION) (ACN 640 459 490)	Defendant

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JUDGE:	Waller J
WHERE HELD:	Melbourne
DATE OF HEARING:	7 August 2025
DATE OF RULING:	2 September 2025
CASE MAY BE CITED AS:	Re Dairy Soils Pty Ltd (in liq)
MEDIUM NEUTRAL CITATION:	[2025] VSC 540

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CORPORATIONS – Personal Property Securities Act 2009 (Cth) – Security interests – Purchase money security interests – Lease of livestock and machinery – Failure to register within prescribed time – Where failure to register due to inadvertence – Application to fix later time for registration – Whether discretion should be exercised – Company in liquidation – Crystallised rights of unsecured creditors – Substantial delay in registration – Prejudice to creditors – Corporations Act 2001 (Cth) s 588FM.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	M McKillop	Rigby Cooke Lawyers
For the Defendant	DF McAloon	Tisher Liner FC Law

HIS HONOUR:

A. INTRODUCTION

The plaintiff, Agfor Rural Pty Ltd as trustee for the Agfor Rural Unit Trust (Agfor), owns farming properties in West Gippsland, cattle and associated farm machinery.

On 1 July 2021, Agfor entered into a lease agreement with the defendant, Dairy Soils Pty Ltd (Dairy Soils). The agreement included the lease from Agfor to Dairy Soils of livestock and machinery valued at some $1.4 million. The lease was for a term of 10 years with subsequent automatic extensions of 5 years.

The interests of Agfor in the livestock and machinery are purchase money security interests (PMSIs) pursuant to the Personal Property Securities Act 2009 (Cth) (PPSA). To preserve its priority against other security holders and to protect itself against the vesting of its security interests in Dairy Soils upon an insolvency event, Agfor was required to register those interests on the Personal Property Securities Register (PPSR) within 20 business days of their creation.

Agfor failed to register the interests on the PPSR until 23 January 2025 and the registration on that date failed to indicate that the interests were PMSIs. Agfor subsequently correctly registered the livestock as PMSIs on 13 March 2025 and the machinery on 17 March 2025.

On 18 March 2025, Agfor commenced this proceeding seeking orders pursuant to s 588FM of the Corporations Act 2001 (Cth) (the Act), for the Court to fix a later time by which the security interests must be registered on the PPSR.

On 21 March 2025, liquidators were appointed to Dairy Soils which had the effect of vesting Agfor’s interests in the livestock and machinery in Dairy Soils.[1]
[1]Corporations Act 2001 (Cth) s 588FL.

The question that arises for determination in this application is whether the Court should exercise its discretion pursuant to s 588FM(2) of the Act to order the fixing of a later time by which Agfor’s security interests in the livestock and machinery are to be registered.

For the reasons set out below, I am not satisfied that the discretion should be exercised in favour of granting relief.

B. MATERIAL RELIED ON

Agfor relies on the following material in support of its application:

(a) the affidavit of Mr Ian Birchall sworn 18 March 2025 (First Birchall Affidavit);

(b) the affidavit of Mr Ian Birchall sworn 27 June 2025;

(c) the affidavit of Mr Ian Birchall sworn 24 July 2025; and

(d) the plaintiff’s written submissions filed 30 July 2025.

Dairy Soils, through its joint and several liquidators, opposes the orders sought by Agfor and relies on the following material:

(a) the affidavit of Mr Peter Gountzos sworn 16 July 2025;

(b) the affidavit of Mr Peter Gountzos sworn 1 August 2025 (Second Gountzos Affidavit); and

(c) the defendant’s written submissions filed 30 July 2025.

C. RELEVANT FACTS

As noted above, Agfor entered into a lease agreement with Dairy Soils (which was then known as SSW Dairy Pty Ltd) on 1 July 2021 (the 2021 Lease).[2] The background clause to the lease records that Agfor was entering into a contract to purchase farming land in Korumburra and, upon completion, was leasing it to Dairy Soils, which was establishing and scaling its operation of dairy farms.
[2]First Birchall Affidavit 101. I note the 2021 Lease incorrectly states that the lessor was the ‘Agfor Rural Unit Trust’; in fact, the lessor must have been Agfor because the legal interest in the assets being leased are held by the trustee, not the unit trust.

The 2021 lease provided for the lease of land, dairy infrastructure and equipment, any water licences and, relevant to this application, livestock (being cows and heifers) and machinery. The precise numbers of livestock at the commencement of the lease were 414 milking cows and 47 heifers. The livestock had been purchased by Agfor for $1,247,000, and the machinery purchased for $178,600. The lease term was 10 years with ongoing automatic extensions of 5 years on the same terms unless terminated by either party.

The 2021 Lease also provided that Dairy Soils would own all progeny of the livestock herd, ‘except for 25% replacements’. Dairy Soils was also required to replace any culled or dead stock so that the herd would be kept at the same age. It recorded that the intention of the parties was that Dairy Soils would purchase the herd over time using cashflow generated from the farm.

It is not in contention that Agfor was required by the PPSA to register its security interests in the livestock and machinery as PMSIs on the PPSR within 20 business days of the 2021 Lease coming into force, being by 29 July 2021. This registration was necessary to prevent its interests vesting in Dairy Soils upon an insolvency event under s 588FL of the Act.

Mr Birchall, a director of Agfor, deposes that he was not advised by Malkin Lawyers, the solicitors who handled the 2021 Lease, of any requirement to register the security interests on the PPSR. This inadvertence continued through subsequent legal engagements.

On 1 July 2022, Agfor and Dairy Soils entered into a second lease agreement which concerned the lease of an additional property but did not create any new interests relevant to this application. The parties then executed a subsequent addendum on 16 August 2023, which varied the terms of the two lease agreements.[3] The addendum noted that the herd number had dropped to 464 livestock, despite Agfor earlier adding to the herd to bring its total number to 510. It provided for Agfor to own all progeny and control management of the herd.
[3]First Birchall Affidavit 101–16.

Agfor was not advised by any solicitors regarding the second lease agreement or the addendum. It engaged another firm of solicitors in September 2022, Sharrock Pitman Legal Pty Ltd, to issue a notice to Dairy Soils pursuant to s 146 of the Property Law Act 1958 (Vic) and did not receive any advice regarding the requirement to register its security interests in the livestock and machinery.

Around January 2025, a dispute arose between the parties concerning various matters relating to the leases.

Agfor engaged Rigby Cooke Lawyers in relation to the dispute and on 22 January 2025 they advised Agfor to urgently register its security interests in the livestock and machinery.[4]
[4]First Birchall Affidavit [17].

Mr Birchall deposes that, on 23 January 2025, he registered Agfor’s security interests on the PPSR in respect of the livestock (registration number: 202501230003540) (January 2025 Livestock Registration) and machinery (registration number: 202501230006894) (January 2025 Machinery Registration) (collectively, January 2025 Registrations).[5]
[5]First Birchall Affidavit [18].

PPSR searches performed on 18 March 2025 show that the secured party in respect of the January 2025 Machinery Registration is CommSec Pty Ltd rather than Agfor.

Further, the January 2025 Registrations failed to indicate that the security interests were PMSIs. After counsel was retained on 12 March 2025, Agfor was advised to register its interests as PMSIs.

Mr Birchall registered Agfor’s security interests as PMSIs in respect of the livestock on 13 March 2025 (registration number: 202503130082654) (March 2025 Livestock Registration) and in respect of the machinery on 17 March 2025 (registration number: 202503170079465) (March 2025 Machinery Registration) (collectively, March 2025 Registrations).[6] PPSR searches conducted on 18 March 2025 indicate that the collateral classes of the March 2025 Livestock Registration and March 2025 Machinery Registration are ‘livestock’ and ‘motor vehicle’, respectively.
[6]First Birchall Affidavit [24]–[25].

The PPSR searches also show the details of other security interests granted by Dairy Soils in favour of other creditors. Relevantly:

(a) there are 35 registrations in total as at 18 March 2025;

(b) under the collateral class of ‘livestock’, there are two registrations on 11 March 2021 in favour of Elders Rural Services Australia Ltd;

(c) under the collateral class of ‘motor vehicle’, there are multiple registrations in favour of De Lage Landen Pty Ltd in October 2020, June 2021, July 2021, August 2021, January 2022, May 2022 and September 2022; and

(d) there is an all present and after acquired property (AllPAAP) registration on 7 March 2025 in favour of Jocono Pty Ltd and others.

On 18 March 2025, Agfor filed its originating process seeking orders pursuant to s 588FM of the Act extending the time to register its security interests under the PPSA. In particular, it sought orders pursuant to s 588FM(1) to:

(a) fix 23 January 2025 as the time by which the January 2025 Livestock Registration was required to be registered for the purposes of s 588FL(2)(b)(iv);

(b) fix 13 March 2025 as the time by which the March 2025 Livestock Registration was required to be registered for the purposes of s 588FL(2)(b)(iv); and

(c) fix 17 March 2025 as the time by which the March 2025 Machinery Registration was required to be registered for the purposes of s 588FL(2)(b)(iv).

The originating process also sought orders reserving liberty to apply to any liquidator, administrator, restructuring practitioner, deed administrator and unsecured creditor in the event that a winding up commences, an administrator or restructuring practitioner is appointed, or the company executes a deed of company arrangement or restructuring plan within six months of each of the registration dates.

On 21 March 2025, Mr Michael Carrafa and Mr Peter Gountzos were appointed to Dairy Soils as liquidators, pursuant to a resolution of its members. As such, the security interests of Agfor in the livestock and machinery vested in Dairy Soils by the operation of s 588FL of the Act.

As a result of the liquidators being appointed, Agfor was also proceeding against a company in liquidation. It sought leave to proceed with its application pursuant to s 500(2) of the Act, which I granted on 16 May 2025.

In the Second Gountzos Affidavit, Mr Gountzos deposes that if the orders sought by Agfor are not made, there will be sufficient assets to pay ordinary unsecured creditors a dividend. A report exhibited to that affidavit estimates a return to unsecured creditors of approximately 26 cents in the dollar. If the orders are made, there will be insufficient assets for any return to unsecured creditors.

On 4 August 2025, Xavia Patching of SV Partners, who is assisting the liquidators of Dairy Soils, sent a letter to its creditors notifying them of Agfor’s application for orders pursuant to s 588FM of the Act and providing contact details for those who wished to participate, express support or opposition, or obtain a copy of relevant documents.

On 5 August 2025, Dairy Soils received the only reply that was responsive to their letter from Paul Bide. Mr Bide is a director of Paul Family Pty Ltd, which is a member of Dairy Soils and also a creditor in the sum of $272,000. He stated that he supported the liquidator’s actions in seeking a dismissal of Agfor’s application and welcomed that outcome and any other action that would allow some return to creditors.

D. APPLICABLE LAW AND PRINCIPLES

Section 588FL of the Act relevantly provides:

(1) This section applies if:
(a) any of the following events occurs:
(i)an order is made, or a resolution is passed, for the winding up of a company;
…
[and]

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

(2) This subsection covers a PPSA security interest if:
(a)at the critical time, or, if the security interest arises after the critical time, when the security interest arises:
(i)the security interest is enforceable against third parties under the law of Australia; and
(ii)the security interest is perfected by registration, and by no other means; and

(b)the registration time for the collateral is after the latest of the following times:
(i) 6 months before the critical time;
(ii)the time that is the end of 20 business days after the security agreement that gave rise to the security interest came into force, or the time that is the critical time, whichever time is earlier;
…
(iv) a later time ordered by the Court under section 588FM.

(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);

…
(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.
…

The effect of the relevant subsections of s 588FL is that a PPSA security interest will vest in the grantor company immediately before a winding-up resolution is passed if it has not been registered on the PPSR by the time specified in s 588FL(2)(b). Relevantly, it must be registered before the later of either 6 months before the winding up of the company, or 20 business days after the agreement which gave rise to the security interest came into force, unless the Court orders a later time under s 588FM. If a security interest is not registered within 20 days of the agreement, the secured creditor risks losing its security if the company goes into liquidation within six months of the actual registration date.

Section 9 of the Act relevantly defines ‘PPSA security interest’ to mean ‘a security interest within the meaning of the [PPSA] and to which that Act applies…’.

Turning to the PPSA, s 13 relevantly provides that a lease of goods for a term of more than 2 years is a ‘PPS lease’, where such a lease is by a lessor regularly engaged in the business of leasing goods.

Section 12(3)(c) of the PPSA deems the interest of a lessor of goods under a PPS lease to be a security interest. Further, s 14(1)(c) of the PPSA relevantly provides that the interest of a lessor of goods under a PPS lease is a PMSI.

Section 267 of the PPSA also provides that an unperfected security interest (i.e., a security interest that was unperfected at the critical time) will vest in the grantor upon the grantor’s winding up.

In Tedesco v LVT Capital Pty Ltd as trustee for the LVT Capital Discretionary Trust (Tedesco), Shariff J summarised the background and context of the PPSA and s 588FL of the Act as follows:

The PPSA established a (then) new national law governing security interests in personal property. It is necessary to consider the provisions of that scheme as they impact upon the issues to be determined in these proceedings.
… Section 12(3) provides that a security interest also includes certain interests whether or not the transaction concerned, in substance, secures payment or performance of an obligation, such as the interest of a lessor or bailor of goods under a “PPS lease”.
…
Under s 267 of the PPSA, unperfected security interests vest in the grantor upon the happening of an event such as winding up, administration, deed of company arrangement or bankruptcy.
Further, where a security interest is registered late, and too close to the grantor’s insolvency, the security interest can be lost.
…
Broadly, the effect of s 588FL(2) is that when a company is being wound up, an administrator has been appointed or a deed of company arrangement executed, any PPSA security interest which was perfected, registered, or enforceable against a third party after the latest of six months before the critical time or 20 days after the security agreement came into force or such later time as the Court may fix under s 588FM, vests in the company, for the benefit of creditors generally, and the secured creditor loses the benefit of the security: Re Cardinia Nominees Pty Ltd [2013] NSWSC 32 at [11]; Re Black Opal IP Pty Ltd [2013] NSWSC 1225 at [6].[7]

[7][2024] FCA 601, [23]–[35] (Tedesco).

Section 588FM of the 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)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.

An application needs to satisfy only one of the three grounds under s 588FM(2) to enliven the Court’s jurisdiction to exercise its discretion to make the order sought under s 588FM.[8]
[8]Re Appleyard Capital Pty Ltd; 123 Sweden AB v Appleyard Capital Pty Ltd (2014) 101 ACSR 629, 633 [9] (Brereton J) (Re Appleyard); Re Psyche Holdings Pty Ltd [2018] NSWSC 1254, [31] (Ward CJ in Eq) (Re Psyche Holdings).

It is important to distinguish between the jurisdictional requirements under s 588FM(2) and the exercise of discretion under s 588FM. Establishing one of the three grounds in s 588FM(2) confers jurisdiction on the Court to make an order, but does not compel the Court to do so. The use of the word ‘may’ in both s 588FM(2) and s 588FM(3) makes clear that the Court retains a discretion whether to grant relief even where a jurisdictional ground is established. This includes circumstances where the Court is satisfied under s 588FM(2)(b) that ‘it is just and equitable to grant relief’ — such a finding establishes the power to grant relief but does not mandate its exercise.

The phrase ‘on other grounds, it is just and equitable to grant relief’ in s 588FM(2)(b) does not suggest that considerations of justice and equity are irrelevant to the first two grounds. Rather, the reference to ‘other grounds’ indicates that s 588FM(2)(b) provides a residual equitable jurisdiction for circumstances not captured by the specific tests of inadvertence or absence of prejudice. However, as the authorities demonstrate, even where inadvertence under s 588FM(2)(a)(i) is clearly established, the Court’s discretion under s 588FM is informed by broader considerations of justice and equity in determining whether relief should be granted and on what terms.

This two-stage analysis explains why courts consistently engage in detailed balancing exercises even in cases where the jurisdictional gateway is readily satisfied, whether based on inadvertence, absence of prejudice, or other equitable grounds. The establishment of jurisdiction does not predetermine the exercise of discretion, which must be undertaken having regard to all relevant circumstances at the time of the hearing, including factors that may have emerged or changed since the jurisdictional ground was established.

The purpose and effect of an order under s 588FM was described by Brereton J in Re Appleyard Capital Pty Ltd; 123 Sweden AB v Appleyard Capital Pty (Re Appleyard) as follows:

Essentially, the purpose and effect of an order under s 588FM is to avoid the vesting of the security interest in the company if it goes into liquidation or administration within six months after the actual date of registration, and thereby preserve the secured creditor’s security, to the necessary detriment of the unsecured creditors for whose benefit the security interest would otherwise vest in the company. The only utility of such an order is in the event that the company does go into liquidation or administration within six months.[9]

[9]Re Appleyard 634 [13] (Brereton J).

The meaning of ‘inadvertence’ was explained by Brereton J in Re Appleyard, and this interpretation has been adopted in subsequent cases:

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…[10]

[10]Re Appleyard 633 [10] (Brereton J), citing Sanwa Australia Finance Ltd v Ground-Breakers Pty Ltd (in liq) [1991] 2 Qd R 456; Campbell Finance Pty Ltd v Vivstan Packaging (Aust) Pty Ltd (in liq) [1998] 2 VR 340; Freightlines Northern Territory Pty Ltd [2000] 2 Qd R 384; In the matter of Cardinia Nominees Pty Ltd [2013] NSWSC 32, [14]–[16] (Black J) (Re Cardinia Nominees).

In Re Cardinia Nominees Pty Ltd (Re Cardinia Nominees), Black J held that the ‘inadvertence’ ground may also be satisfied where a party operates under a mistake as to the consequences of failing to register a security interest.[11] Black J explained that:

The approach adopted in the case law of treating a matter of that kind as amounting to inadvertence is consistent with the emphasis placed in the case law upon the benevolent operation of predecessor sections, at least 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 obligation…[12]

[11]Re Cardinia Nominees [15] (Black J).

[12]Re Cardinia Nominees [15] (Black J).

The concept of inadvertence also includes human error or oversight or not being properly attentive.[13]
[13]Bluewaters Power 1 Pty Ltd v The Griffin Coal Mining Company Pty Ltd [2019] WASC 438, [40] (Vaughan J).

Examples of circumstances where inadvertence was established include where:

(a) the director of the plaintiff company was aware that its security interest over the defendant company had to be registered on the PPSR within 20 business days, but he did not know the consequences of not complying with such requirement;[14]

(b) the principal of the plaintiff company had not previously conducted business in Australia and was not aware of any legal or regulatory requirement for registration or the consequences of failing to do so within time;[15] and

(c) the solicitor for the plaintiff, who provided advice to the plaintiff on a general security deed, did not recall instructing a team member to effect the registration of the security, although it was the solicitor’s usual practice to register all security interests as early as possible (in this case, the defendant conceded that the error was clearly inadvertent).[16]

[14]Re Cardinia Nominees [5], [16] (Black J).

[15]Re Appleyard 634 [11] (Brereton J).

[16]Adia Venture Ltd v Traffic Technologies Ltd (admin apptd) [2025] FCA 564, [9], [35]–[36] (O’Callaghan J) (Adia).

Once one of the three grounds is established, it is for the Court to determine whether it should exercise its discretion as to whether to make the order sought in the application and the terms and conditions on which the order is made pursuant to s 588FM(3) of the Act.[17]
[17]Re Cardinia Nominees (Black J) [18].

While the Court’s exercise of discretion under s 588FM must turn on the particular facts of each case, the Court is guided by established practice in past decisions concerning the exercise of the discretion. Authorities concerning the exercise of discretion under the predecessor provision, s 266(4) of the Act, may also be of assistance. As Shariff J observed in Tedesco:

Sections 588FL and 588FM of the Corporations Act were introduced as part of the reforms that enacted the PPSR under the Personal Property Securities Act 2009 (Cth) (PPSA). The terms of s 588FM are broadly similar to the circumstances in which the Court could previously extend the time for lodgement of notice of a charge under a predecessor provision, being s 266(4) of the Corporations Act. It has been held that the authorities that were decided under s 266(4) provide assistance in guiding the exercise of the Court’s discretion under s 588FM: Re Barclays Bank plc [2012] NSWSC 1095 at [4].[18]

[18]Tedesco [23] (Shariff J).

A significant line of authority has considered that the prejudice to unsecured creditors is a weighty consideration in circumstances where an order to extend the time by which a security interest must be registered is sought where the company is being wound up. That is because the rights of unsecured creditors in the security interests will have crystallised and the making of the order will effect the destruction of those rights.

Secured creditors who have registered their security interests will not be prejudiced by the delay in the registration of the security interest (which may have conferred them priority over the late registrant) and an order under s 588FM will not disturb their priority.[19]
[19]Re Appleyard 634–5 [15] (Brereton J); Re Accolade Wines Australia Ltd [2016] NSWSC 1023, [21] (Brereton J).

In Hewlett Packard Australia Pty Ltd v GE Capital Finance Pty Ltd, Allsop J undertook a detailed analysis of the legislative history and case law in respect of the predecessor provision s 266(4), before observing that:

If a winding up has intervened, the rights of creditors of a statutory and quasi-proprietorial kind have crystallised. Over a century of authority recognises the character and importance of that circumstance. In circumstances of the intervention of a winding-up, whilst the cases have used the phrase “exceptional circumstances”, the appropriate way of expressing the matter conformably with the width of the discretion, is to say that it is to be exercised in the recognition of intervening rights of all creditors, the nature of which rights has been described by courts without debate for over a century. These rights arise because of the avoiding effect of s 266. The ex post facto validation of the charge and the consequent destruction of the creditors’ rights are possibilities, as they always were; but the circumstances would need to be sufficient to warrant the destruction of crystallised rights in the nature of property over the property the subject of the charge. To say that the intervention of a winding up is but one factor to take into account is apt to deflect attention from these considerations involving the consequences of winding up.
… Cases such as Re Ashpurton in England and Douglas-Brown in Australia correctly identify the important consequences of winding up. They are in accordance with an unquestioned and uniform judicial approach throughout the whole of the 20^th century to the effect of winding up on creditors’ rights. As I have said, they do not impermissibly fetter the discretion or engraft a limitation on it. Rather, they recognise, consequent upon the avoidance of the charge by operation of the statute, the statutory rights of all unsecured creditors crystallising over property falling within the unsecured assets upon winding up and the need for circumstances to exist which would warrant the destruction of these rights.[20]

[20](2003) 135 FCR 206, 265–266 [196]–[197] (Hewlett Packard).

In the same case, Branson J agreed with Allsop J that ‘there is no rule of law that constrains the exercise of the broad discretion conferred on the Court by s 266(4) to cases in which “exceptional circumstances” can be found’. [21] Her Honour nevertheless considered that:

[t]his is not to say that the exercise of the discretion is unguided. First, the exercise of the discretion is guided by the requirement of the subsection that the Court be satisfied that “it is just and equitable to grant relief”. The express reference in s 266(4) to the position of creditors and shareholders (s 266(4)(b)) reveals that, in considering whether or not it is just and equitable to grant relief, the Court must have regard to the interests of all those who might be affected by a grant of relief and not just to the interests of the chargee. Second, the discretion must be exercised judicially and not arbitrarily or capriciously. While each application for relief must be considered on its own facts, the requirement that the discretion be exercised judicially calls for consistency of approach from case to case. As a consequence any rule of practice or guide to the exercise of the discretion that has evolved over the years should not lightly be disregarded.
One such rule of practice or guide is that an extension of time “will almost invariably be refused after the commencement of a winding up and will only be granted in exceptional circumstances” (see Douglas-Brown v Standard Chartered Finance Ltd per Malcolm CJ and Rowland J at 998; see also Campbell Finance Pty Ltd v Vivstan Packaging (Aust) Pty Ltd (in liq) [1998] 2 VR 340 per Batt J; Morris v Woodings (1997) 25 ACSR 636 per Wheeler J; Re Lloyd Anthony Furniture Pty Ltd; Ex parte Walker (1996) 19 ACSR 478 per Branson J). This rule of practice reflects the fact that the validation of a charge that would otherwise be void against the liquidator will reduce the assets available to satisfy the claims of unsecured creditors. The chargee will thus be assisted by the court at the expense of the unsecured creditors. However, as Allsop J explains, “exceptional circumstances” in the above context are simply circumstances sufficient to justify defeating the rights of unsecured creditors, which they acquired when the liquidation commenced, in the assets the subject of the charge (see Re Anglo-Oriental Carpet Manufacturing Co [1903] 1 Ch 914 at 918). To put the matter another way, “exceptional circumstances” are simply circumstances sufficient to render it just and equitable to grant relief notwithstanding that the grant of relief will defeat rights of unsecured creditors.[22]

[21]Hewlett Packard 217 [26].

[22]Hewlett Packard 217 [27]–[28].

A similar observation was made of s 266(4) by French J in Craig Mostyn & Co Pty Ltd v Old Valley Pty Ltd (in liq) (Craig Mostyn):

Where a discretion is conferred upon the Court it is to be exercised in accordance with the terms and conditions and purposes of the Act conferring the discretion and not constrained by quasi-legislative thresholds. That is not to say that the established practice of the courts and their accumulated experience reflected in the course of many years of decision-making will not provide a guide to a sensible and principled approach to the exercise of the discretion in particular cases. On that established practice the extension of time in the case of an insolvent company or a company in liquidation is not lightly made and then generally upon conditions designed to minimise the risk of any unfair prejudice to any creditor.[23]

[23](2004) 139 FCR 477, 491 [53] (Craig Mostyn).

Nevertheless, French J exercised the discretion to make the order in circumstances where the charge had been registered only seven days later than the 45 day period for which the relevant provisions provided, stating:

It is necessary, in my opinion, to take care not to confer upon the “crystallised rights” of unsecured creditors a status and weight disconnected from the circumstances in which they came into being. In the case in which a chargee has advanced money to a failing company and has accidentally or inadvertently delayed, by a short time beyond the relevant period, to register the charge, the statutory rights of unsecured creditors, upon the commencement of the winding up, may be regarded as inflated by reason of that accident or inadvertence. The diminution by prompt judicial intervention, of what might be regarded as windfall elements of those rights, may be neither unfair nor inconsistent with the general policy of the law governing the winding up of companies and the rights of creditors.[24]

[24]Craig Mostyn 491 [52].

In Re Appleyard, the grantor company was not yet in administration or liquidation but there was a significant risk that it would be within 6 months. Brereton J exercised the discretion under s 588FM to allow a later time for registration, but also ordered that a future liquidator or administrator had liberty to apply to discharge or vary the order, which has been described as a ‘Guardian order’.[25]
[25]Re Appleyard 641 [35]. The reference to a ‘Guardian order’ or ‘Guardian Securities condition’ can be traced to the decision in Re Guardian Securities Ltd [1984] 1 NSWLR 95.

Brereton J’s conclusion does not appear to be inconsistent with the foregoing authorities because it did not concern circumstances where the rights of unsecured creditors had already crystallised. But his approach placed less weight on the relevance of the prejudice to unsecured creditors caused by the exercise of the discretion. As his Honour considered:

The purpose of giving the court a discretion to fix a later time is to relieve a secured creditor from the consequences of accident or inadvertence. In the event of insolvency this necessarily involves detriment to unsecured creditors who would otherwise benefit from the vesting of the security in the company. It would be contrary to the purpose of the section to treat the risk that unsecured creditors could be adversely affected by making an order as a dominant consideration. The fact that absence of prejudice to creditors is an alternative ground for relief [s 588FM(2)(a)(ii)] indicates that it was not intended that relief from accident or inadvertence be granted only where there is no prejudice to creditors, as Bray CJ observed in Flinders Trading Co (at ACLR 220). The cases to which I have referred show that, despite the majority view in Flinders Trading Co, courts have not infrequently been prepared to grant extensions of time, even in a context where liquidation or administration is in contemplation, though reserving leave to any liquidator or administrator to apply to set the order aside.
Thus, although I accept, as the authorities make clear, that the presence or absence of prejudice to unsecured creditors is a relevant discretionary consideration, relevant prejudice is not necessarily established merely by showing that the dividend to unsecured creditors will be less if the security interest does not vest in the company; the unsecured creditors may well have been in no different a position had the security interest been timely registered. The type of prejudice that is of particular relevance is prejudice attributable to the delay in registration, rather than prejudice from making the order (which is inevitable). This is the type of prejudice contemplated [by] the legislation (see s 588FM(2)(a)(ii), which refers to prejudice from the failure to register earlier, not from making the order), and referred to by Buckley J in Cardiff Workmen’s Cottage Co; by Long Innes J in Limited Company (see also Flinders Trading Co at ACLR 225 per Bray CJ; at ACLR 234 per Mitchell J); and by McLelland J in Guardian Securities (at 98). The period of delay in effecting registration is relevant, because the shorter the delay the less likely that the failure to register within time will have had any impact. The significance of the passage of time is mainly related to the possibility of competing interests having arisen, in particular through others having dealt with the company on the footing that the collateral was unencumbered.
Accordingly, while the interests of unsecured creditors are relevant, the mere fact that if the extension is granted they will be deprived of the benefit of the security interest vesting in the company, and thus receive a lesser dividend, is no objection to making an order. It would be otherwise if the position of the unsecured creditors was detrimentally affected by the delay in registration, for example if they traded with the company on the faith of a register that showed no security interest.[26]

[26]Re Appleyard 639–40 [29]–[31] (Brereton J).

Thus, Brereton J focused his consideration of prejudice on the prejudice attributable to the delay in registration, rather than the prejudice arising from the making of the order and the lower dividend that would be available to unsecured creditors. In a later case of Re Antqip Hire Pty Ltd (in liq) (Antqip), Brereton J confirmed in dicta that he considered an emphasis on prejudice attributable to delay in registration was also appropriate in circumstances where the grantor company was already in liquidation and the making of the order would effect the destruction of the crystallised rights of unsecured creditors.[27]
[27][2021] NSWSC 1122, [82] (Antqip).

Before discussing Antqip in more detail, it will be helpful to consider the approach of Moshinky J in Kaizen Global Investments Ltd v Australia New Agribusiness & Chemical Group Ltd (in liq) (Kaizen)[28] which was decided after Re Appleyard and before Antqip, and was the subject of substantial submissions from both parties.
[28](2017) 120 ACSR 220 (Kaizen).

In Kaizen, the applicant had failed to register its share mortgage within the 20 days required by s 588FL. By the time its application to fix a later time for registration was heard, the grantor of the mortgage, ANB, was in liquidation.

Following a detailed consideration of the relevant authorities, Moshinky J emphasised the significance of the prejudice to unsecured creditors where the company was in liquidation. In these circumstances what was required was the ‘identification of factors of sufficient significance to outweigh the adverse impact on unsecured creditors of the grant of relief’ before making of an order under s 588FM.[29]
[29]Kaizen 241 [87].

His Honour said:

…I consider the following principles to be applicable to the exercise of the discretion in s 588FM(2) in circumstances where, subsequent to registration but before the Court is called upon to exercise the discretion, the mortgagor company has gone into liquidation or administration or has become subject to a deed of company arrangement:
(a)An order pursuant to s 588FM(2) fixing a later time for the purposes of s 588FL(2)(b) can be granted after the occurrence of one of the events identified in s 588FL(1) (namely, the company going into liquidation or administration or becoming subject to a deed of company arrangement).
(b)Section 588FM(2) confers a broad judicial discretion informed, at least at one level, by what is “just and equitable”; as such, it is to be read liberally for the purpose intended by the statute in question and is not to be constrained or limited by glosses or implications not found in the relevant statute: Hewlett Packard at [187].
(c)Generally, the principles developed in relation to the exercise of the discretion in former s 266(4) have continuing relevance in relation to the discretion in s 588FM to fix a later time for the purposes of s 588FL(2)(b).
(d)In circumstances where the company has gone into liquidation or administration or become subject to a deed of company arrangement, there is no rule of law that constrains the exercise of the broad discretion conferred on the Court by s 588FM(2) to cases in which “exceptional circumstances” can be found: Hewlett Packard at [26], [192].

(e)A determination that it is appropriate to grant relief in such circumstances will require the identification of factors of sufficient significance to outweigh the adverse impact on unsecured creditors of the grant of relief: Hewlett Packard at [31].
(f)Consistently with established practice, an order fixing a later time in the case of an insolvent company or a company in liquidation is not lightly made and then generally upon conditions designed to minimise the risk of any unfair prejudice to any creditor: Craig Mostyn & Co Pty Ltd v Old Valley Pty Ltd (in liq) at [53].[30]

[30]Kaizen 241 [87] (Moshinsky J).

In the circumstances of the case, Moshinsky J did not consider that there were factors of sufficient significance that would outweigh the adverse impact on unsecured creditors of the grant of relief. It is convenient to extract his analysis of those factors, some of which point further against the grant of relief:

The period of the delay in the present case – approximately three months – is significant. The period of 20 business days in which to register the Share Mortgage ended on 12 January 2016. The mortgage was not registered until 12 April 2016. Moreover, Kaizen did not move quickly once it became aware, on 10 March 2016, of the requirement to register the Share Mortgage on the PPSR. It did not register the Share Mortgage until 12 April 2016, some 33 days later. It was contended by Kaizen that this period was only 20 business days; the defendants contended that it was, in fact, 21 business days. Whether the period was 20 or 21 business days, the period of 20 business days prescribed by the legislation runs from the time when the relevant security agreement came into force, not from when the mortgagee became aware of the requirement to register. In circumstances where Kaizen had through inadvertence failed to register the Share Mortgage and later became aware of the requirement to register, it was incumbent on Kaizen to move quickly to rectify the situation. However it did not do so. It took another 33 days to register the mortgage. I do not think a satisfactory explanation has been provided of why it took this long.
I am mindful that Kaizen is an overseas company and needed to engage an Australian lawyer to effect registration. But the evidence demonstrates that Kaizen had an investment in an Australian company (Venus) and Mr Liu travelled internationally. In this light, I do not think the task of engaging an Australian lawyer to effect registration was an overly onerous or time-consuming one. It is also true that Kaizen did not become aware of the time frame for registration or the consequences of registration until some time later. However, I do not think this assists its case. Having become aware, on 10 March 2016, of the requirement to register the Share Mortgage, I think it was incumbent on Kaizen to move quickly to do so, regardless of whether it knew the time frame for registration or the consequences of failing to register. In any event, it could have sought urgent advice about these matters, having become aware of the requirement to register, but it did not do so.
The circumstances in which Kaizen failed to register the Share Mortgage within 20 business days include that Forrest Advisers DMCC had recommended that Kaizen have the Transaction Documents reviewed by Australian counsel to ensure their compatibility with Australian law. This was sensible advice and it was careless of Kaizen not to follow the suggestion. Had it done so, it is likely that the Share Mortgage would have been registered within the 20 business day period.
Another factor to be taken into account is that the company, ANB, is now in liquidation. In these circumstances, the making of an order fixing a later time for the purposes of s 588FL(2)(b) will reduce the amount of funds available for distribution to unsecured creditors. While it is not necessary for Kaizen to show “exceptional circumstances”, a determination that it is appropriate to grant relief in such circumstances will require the identification of factors of sufficient significance to outweigh the adverse impact on unsecured creditors of the grant of relief. Consistently with established practice, an order fixing a later time in the case of an insolvent company or a company in liquidation is not lightly made and then generally upon conditions designed to minimise the risk of any unfair prejudice to any creditor.
Kaizen entered into the Loan Agreement on the basis that it would be secured by the Share Mortgage and, it may be inferred, would not have lent the $5 million to ANB without the provision of that security. In these circumstances, it may be said that the amount available for unsecured creditors has been enhanced by the loan being made (see Craig Mostyn & Co Pty Ltd v Old Valley Pty Ltd (in liq) at [52]). However, the position in this regard is far from clear. As noted above, $4.6 million was transferred from ANB to Venus (a company in which Kaizen held an interest) a few days after the loan was made. It may be inferred that this represented the majority of the loan funds. Remarkably, Ms Yang, who was both the company secretary of ANB and (at the time) the sole director of Venus, could not explain the reason for the transfer in her public examination. The defendants submitted that it was unclear whether the amount transferred to Venus would be recoverable. There is insufficient evidence to enable me to make a finding on this matter. In any event, in light of the evidence of Ms Yang at her public examination, I am concerned that the Court does not have a complete picture of the consequences of the loan transaction. In these circumstances, Kaizen has not established that the amount available for unsecured creditors of ANB has been enhanced by the loan.[31]

[31]Kaizen 242–3 [90]–[94].

Justice Moshinky considered that whether any unsecured creditor had been prejudiced by reason of the delay in registration was:

but one factor to be taken into account in the exercise of the discretion. At times, the submissions on behalf of Kaizen seemed to suggest that prejudice of this type was the only relevant prejudice. I do not think this is correct.[32]

[32]Kaizen 244 [96].

In Antqip, Brereton J was not required to exercise the discretion under s 588FM because his Honour found that s 588FL did not apply in circumstances where relevant security interests were granted after the critical time in s 588FL(2).[33]
[33]Antqip [63].

Nevertheless, in commenting on Moshinsky J’s approach in Kaizen, Brereton J observed:

It is fair to say that the approach enunciated by Moshinsky J is one that gives considerably greater significance to delay, and to prejudice arising from the making of the order (as distinct from prejudice arising from delay), than the approach that I have favoured in Appleyard and Accolade Wines, and to which I continue to adhere for the reasons given in those cases and above. But the difference is one of weight. Nonetheless, in my view, mere delay, even if unexplained, which does not occasion prejudice, is of slight if any significance.
Similarly, prejudice arising from making the order, by removing assets from the divisible pool in favour of the secured creditor to the detriment of unsecured creditors, is of limited importance, given that that will be the effect of granting relief in any case in which relief is actually required. The purpose of s 588FM is to avoid injustice to secured parties where their failure strictly to comply with the registration requirements is attributable to inadvertence or has not occasioned prejudice – not to protect windfalls for unsecured creditors.[34]

[34]Antqip [82]–[83].

To the extent that there is a difference in the approach of Moshinky J in Kaizen and that of Brereton J in Re Appleyard and Antqip, I prefer the approach of Moshinsky J for the following reasons.

First, the crystallisation of creditor rights upon liquidation represents a qualitatively different situation from cases where liquidation is merely prospective. As Allsop J observed in Hewlett Packard, these crystallised rights are ‘in the nature of property’ and their destruction requires justification.

Secondly, where the grantor company has already gone into liquidation or administration, there is no capacity for the Court to make a ‘Guardian order’ reserving liberty to a future liquidator or administrator to apply to vary or discharge the order.

Thirdly, while s 588FM is remedial, it operates within a statutory scheme that also protects creditor interests through mandatory registration timeframes. The balance struck by that scheme should not be too readily displaced post-liquidation absent compelling circumstances. That is not to give the rights of the unsecured creditors ‘a status and weight disconnected from the circumstances in which they came into being’[35] but it also does not ascribe to them only limited importance. This approach does not treat prejudice to unsecured creditors as determinative, but recognises it as a weighty factor requiring countervailing considerations of substance.
[35]Craig Mostyn 491, [52] (French J).

There are several cases other than Craig Mostyn in which the discretion was exercised despite the fact that the company was already in liquidation or administration and the rights of unsecured creditors had crystallised.

In Sanwa Australia Finance Ltd v Ground-Breakers Pty Ltd (in liq) (Sanwa), which concerned a similar provision to s 588FM under the Company (Queensland) Code, the Court allowed the fixing of a later time for registration after summarising the relevant factors that operated on the discretion as follows:

Relevant factors which would appear to me to be in favour of the exercise of the discretion are these:
(a)The charges were in each case registered and notices lodged prior to the commencement of the winding up.
(b)The time which in the respective cases elapsed between the dates on which the notices should have been lodged and when they were in fact lodged, although, particularly in the case of the first and fourth charges, certainly significant, was such that it could be said that the appellant remedied its default within a reasonable time.
(c)None of the charges was over the whole of the respondent’s assets.
(d)If an order were not made the appellant which had given value for its securities, although admittedly in default by reason of the inadvertence of its servants or agents (as I consider to be the case), would be deprived of the benefit of those securities.
(e)There is no evidence that any unsecured creditor extended credit or advanced money to the respondent after searching the register at a time when it did not but should have disclosed the existence of the charges.
(f)The appellant when entering into the transactions had no reason to have any concern with the solvency of the respondent. That this was so appears from an affidavit of Mr Cutting, a director of the appellant who was responsible for the supervision of its credit department, and there is no evidence which would indicate otherwise, although the liquidator on his subsequent examination of the records of the company found that its financial position dramatically deteriorated during the period from 30 December 1988 to 30 April 1989.

Relevant factors which would operate against the exercise of the discretion would appear to be these:
(a)It was the appellant as grantee by its then solicitors which was responsible for the failure to lodge the respective notices within due time.
(b)There was a delay of some three months after the appointment of the provisional liquidator before the application for extension of time was filed.
(c)The rights and interests acquired by the unsecured creditors upon the liquidation of the respondent would be displaced.
(d)The reluctance of the courts to make such an order when a company is in liquidation.

Balancing up these factors, in my opinion the circumstances may properly be regarded as sufficiently exceptional to make the case a proper one for exercising discretion in favour of the appellant. Accordingly, I would allow the appeal, set aside the order of the learned judge of first instance and in lieu order that the time for lodgment of the notices pursuant to s. 201(1)(a) of the Code in respect of each of the four charges the subject of these proceedings be extended to the actual date of lodgment thereof.[36]

[36][1991] 2 Qd R 456, 465–6 (Kelly SPJ, Macrossan CJ agreeing at 459, Connolly J agreeing at 466) (Sanwa).

National Australia Bank Ltd v Davis & Waddell (NAB) concerned s 266 of the Act, which preceded the current provision. The plaintiff had registered a charge late with ASIC in circumstances where there was an existing charge on the register from HSBC, under which the plaintiff held subrogated rights and which was discharged by the plaintiff upon registering its charge. Hansen J relied on the now deprecated language of ‘exceptional circumstances’ but nonetheless exercised the discretion on the following reasoning:

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.[37]

[37]National Australia Bank Ltd v Davis & Waddell (2003) 44 ACSR 296, 321 [89] (NAB).

In Adia Venture Ltd v Traffic Technologies Ltd (administrator appointed) (Adia), the defendant was in administration and an order was made in favour of the plaintiff where:

(a) there was a delay of 2 months and 3 weeks in the plaintiff’s registration of its security in the nature of an AllPAAP;

(b) even though the delay in registration had the potential to impact unsecured creditors who may have dealt with the company on the basis that it was unencumbered by the plaintiff’s security interest, unsecured creditors would have been able to ascertain from the PPSR that the defendant company had granted general security interests over its AllPAAP to other secured creditors, which significantly diminished the impact of the delay on unsecured creditors; and

(c) even on the assumption that the plaintiffs were secured creditors, the defendant’s statement was that it was ‘very unlikely’ that any surplus funds would be available to the plaintiff.[38]

[38]Adia [33], [37]–[40] (O’Callaghan J).

In Re Enviro Pallets (NSW) Pty Ltd (Enviro Pallets), an administrator was appointed to the respondent, which subsequently went into liquidation, and an order under s 588FM was made where:

(a) the delay was approximately four months;

(b) the applicant would not have advanced funds to the respondent without the agreed security interest;

(c) the applicant moved quickly after becoming aware of what had taken place;

(d) the applicant provided considerable value for the security documents;

(e) the respondent had previous debt factoring facilities, which were registered and would have been known to creditors;

(f) the respondent relied on the facility to continue its trading;

(g) the liquidator neither consented or opposed the application; and

(h) there were no unsecured creditors wishing to be heard at the hearing of the application, despite having been put on notice to that effect by the liquidator.[39]

[39]Re Enviro Pallets (NSW) Pty Ltd [2013] QSC 220, 6–7 (Philippides J) (Enviro Pallets).

As the exercise of the Court’s discretion may engage questions of what the PPSR would have shown had any unsecured creditors performed PPSR searches, it is also relevant to examine the purpose of the PPSR.

In Auburn Shopping Village Pty Ltd v Nelmeer Hoteliers Pty Ltd, Ward CJ in Eq emphasised that unlike the Torrens system in relation to land, the PPSA is a ‘notice-based’ system.[40] Having regard to Brereton J’s observation that the PPSA was modelled on New Zealand and Canadian legislation and that the Commonwealth government should be taken to have intended the same approach,[41] Ward CJ in Eq referred to the Canadian case of Re Lambert, in which the Court of Appeal of Ontario said of the Canadian legislation:

The purpose of the registration system is to provide enough information to enable a person searching the system to know whom to contact to obtain information regarding a secured transaction. It is for this reason that the registration system is referred to as a notice-filing system.[42]
[40](2017) 324 FLR 378, 392 [64] (Auburn Shopping).
[41]Re Maiden Civil (P&E) Pty Ltd (2013) 277 FLR 337, 348 [32].
[42]Auburn Shopping 392 [65], quoting Re Lambert (1994) 20 OR (3d) 108, [32]– [33].

E. PLAINTIFF’S SUBMISSIONS

Agfor submitted that its failure to register its security interests was due to inadvertence because it did not understand its obligation or its ability to register its interests in the livestock and machinery on the PPSR and was not advised by its solicitors to do so. Agfor submitted that the requirements of s 558FM(2)(a)(i) are thus met.

In respect of the Court’s discretion to make the orders sought under s 588FM, Agfor submitted that a delay in registration is not decisive even if it is for a long period. It noted several cases including Re Psyche Holdings Pty Ltd,[43] and Re Amotran Pty Ltd,[44] where delays of a similar length did not preclude the exercise of discretion. It submitted that, following Brereton J’s reasoning in Re Appleyard and Antqip, prejudice to unsecured creditors from making the order was of little relevance. Instead, the focus should be on the prejudice caused to unsecured creditors by Agfor’s delay in registering its interests.
[43][2018] NSWSC 1254.
[44][2017] VSC 637.

Agfor submitted that despite the long delay in registering its interests, there was no evidence to suggest that any unsecured creditors had advanced money on the basis that their search of the PPSR did not reveal Agfor’s interests. Unsecured creditors were notified of the application but none came forward to present such evidence.

Agfor submitted that the potential for delay prejudice was also minimised because there were extant registrations over livestock and motor vehicles, which were the categories of registration that Agfor eventually undertook, and which predated the time by which Agfor was required to register its interests. As such, an unsecured creditor could, at the very least, ascertain that some livestock and motor vehicles of Dairy Soils was encumbered. Agfor relied on Adia to support this proposition, though it acknowledged that there were some differences with the present case, including that Adia concerned the late registration of an AllPAAP where there was an existing registration of an AllPAAP.

Agfor further submitted that the purpose of ss 588FL and 588FM is not to provide or preserve windfalls for unsecured creditors and that undoing a windfall is not relevantly prejudicial. Counsel relied on the observations of Brereton J in Re Appleyard in making this submission, and suggested that this approach was to be preferred to the extent that it differed with that of Moshinsky J in Kaizen.

Nevertheless, Agfor submitted that even if the approach of Moshinky J in Kaizen were applied, it would be appropriate to grant the orders sought in this case. While Agfor conceded that Moshinsky J found no delay prejudice but nonetheless refused to exercise the discretion, it submitted that Kaizen could be distinguished on the basis that there was a 33 day delay between advertence and registration, that Kaizen had been advised by their overseas lawyers that they were not skilled in registration law in Australia and that there was doubt about whether the advanced funds were actually ever available to the company because of evidence that $4.6 million had been transferred out of the company within days of an advance of $5 million being transferred in. On the other hand, Agfor registered within 4 days of becoming aware of its failure to register in each case, and there is no doubt that collateral was in fact provided.

Agfor submitted that the interests of unsecured creditors were also adequately represented by Dairy Soils, as the creditors were informed of the application in a circular from the liquidator and again in an updated letter several days before the hearing of the application.

Agfor also referred to Sanwa and NAB as cases where the grantor company was already in liquidation and the discretion was exercised despite the resulting prejudice to unsecured creditors, noting that they were pre-PPSA cases.

F. DEFENDANT’S SUBMISSIONS

Dairy Soils accepted that the jurisdiction under s 588FM was enlivened by reason of Agfor’s inadvertence in failing to register its security interests. It submitted that the only issue was whether the discretion should be exercised.

Dairy Soils identified six features which distinguished the present case from previous instances where extension orders were made and militated against the exercise of the s 588FM discretion in favour of making an order.

First, unlike the case of ReAppleyard, on which Agfor relied heavily, Dairy Soils is in liquidation. Counsel submitted that the only s 588FM case that resembles the present case is Kaizen, in which the grantor company was also in liquidation. In particular, as Dairy Soils is in liquidation, the prejudice to its unsecured creditors has crystallised unlike cases where the plaintiff was not yet in liquidation.

Secondly, Dairy Soils submitted that in Kaizen a three month delay was considered ‘significant’. Counsel suggested that rather than the 33 day delay from advertence to registration being the critical aspect of delay, it was instead the entire period of delay which was ‘referrable to the fact that it gives rise to a prospect of creditors or people dealing with the company going to the notice board and being unaware of any interest being claimed by a prospective secured creditor’, and that the delay in this instance was three years and six months. The cases cited by Agfor that involved longer periods of delay did not involve an insolvent company.

Thirdly, Dairy Soils submitted that during the three and a half years between the date by which Agfor was required to register its interests and the date on which it ultimately did, there was no other such registration by Agfor. It submitted that existing registrations relating to livestock and motor vehicles by other parties were not material, given those registrations could be of low-value and concern only one or two head of cows which is self-evidently different to the interests of Agfor.

Fourthly and relatedly, Dairy Soils submitted that the position may be different if an AllPAAP had been registered which was the case in Adia where the discretion to extend time was exercised. Relevantly, an AllPAAP would alert any potential creditor over all its present and after acquired property, whereas in the absence of an AllPAAP, an unsecured creditor could not have known that a party had a security interest over some or all of the cows then stationed at the farms being operated by the defendant. While an AllPAAP was registered on 7 March 2025, its ameliorating effect for potential creditors was limited given it was only registered some weeks before Dairy Soils went into liquidation.

Fifthly, Dairy Soils submitted that numerous creditors would be affected by the extension order because the collateral secured by the secured interest had significant value. It submitted that if the extension order was not made employee entitlements would be able to be paid in full. This was therefore different from the situation in Adia where it was very unlikely that any surplus funds would be available to the plaintiff assuming it had a valid security interest.

Finally, Dairy Soils submitted that unsecured creditors would receive a meaningful dividend if an extension order were not made. The anticipated value of the collateral would return an estimated 25.94 cents in the dollar. There was no secured creditor who would ‘scoop’ the whole amount.

In the result, Dairy Soils submitted that in the language of Moshinky J in Kaizen, Agfor had failed to demonstrate ‘factors of sufficient significance to outweigh the adverse impact on unsecured creditors’.

G. CONSIDERATION

I accept that the jurisdiction under s 588FM is enlivened. Agfor’s failure to register its security interests within the required timeframe was clearly due to inadvertence within the meaning of s 588FM(2)(a)(i). Mr Birchall’s evidence establishes that neither he nor Agfor understood the obligation to register the interests on the PPSR, and they received no advice from their solicitors regarding this requirement. This falls squarely within the established meaning of inadvertence as explained in Re Appleyard.

The central question is whether I should exercise my discretion to make the orders sought.

Having carefully considered the relevant authorities and the particular circumstances of this case, I am not satisfied that the discretion should be exercised in favour of granting relief.

While I acknowledge the different approaches taken by Brereton J in Re Appleyard and Moshinsky J in Kaizen, I prefer the approach in Kaizen for the reasons I have outlined above.[45] The intervention of liquidation and the crystallisation of unsecured creditors’ rights is a matter of considerable significance that cannot be treated as merely one factor among many.
[45]While Cameron J in Re Carpenter International Pty Ltd (administrators appointed) 51 VR 190 approved Brereton J’s approach in Re Appleyard (at 246–7 [235]–[239]), I cannot accord those views significant weight as they were obiter, concerned a much shorter delay of 130 days and preceded Kaizen and therefore were without the benefit of Moshinsky J’s analysis.

Following the approach in Kaizen, the question is whether there are factors of sufficient significance to outweigh the adverse impact on unsecured creditors of granting relief. In this case, I find that there are not.

The delay in this case is substantial and materially distinguishable from the cases where relief has been granted. Agfor was required to register its interests by 29 July 2021 (20 business days after the 2021 Lease commenced). It did not register until 23 January 2025 — a delay of approximately three years and six months. This is significantly longer than the delays considered in Kaizen (three months),[46] Sanwa (between 18 and 51 days for different interests),[47] Craig Mostyn (seven days),[48] NAB (24 days),[49] Adia (almost 3 months)[50] and Enviro Palletts (4 months).[51]
[46]Kaizen 242 [90] (Moshinsky J).
[47]Sanwa 459 (Kelly SPJ).
[48]Craig Mostyn 479 [1] (French J).
[49]NAB 297 [1] (Hansen J).
[50]Adia [33] (O’Callaghan J).
[51]Enviro Pallets 6 (Philippides J).

While Agfor submits that cases like Re Psyche Holdings and Re Amotran involved similar delays, those cases did not involve companies in liquidation where unsecured creditors’ rights had already crystallised.

Even after being advised of the registration requirement on 22 January 2025, Agfor’s response was not entirely prompt. While it registered the interests on 23 January 2025, this initial registration incorrectly failed to indicate that they were PMSIs. The correct PMSI registrations were not completed until 13 and 17 March 2025 — nearly two months later. This contrasts unfavourably with cases where secured parties moved swiftly once aware of their obligations.

The appointment of liquidators on 21 March 2025 has crystallised the rights of unsecured creditors in the livestock and machinery. As the authorities make clear, this creates rights ‘in the nature of property’ that should not be destroyed lightly. The making of the orders sought would necessarily defeat these crystallised rights.

The evidence establishes that the making of the orders would cause substantial prejudice to unsecured creditors. Mr Gountzos’ evidence indicates that without the orders, there will be sufficient assets to pay unsecured creditors a dividend of approximately 26 cents in the dollar. If the orders are made, there will be insufficient assets for any return to unsecured creditors.

This is materially different from cases like Adia where it was ‘very unlikely’ any surplus funds would be available to the plaintiff even assuming valid security, or cases where only minimal prejudice would result.

While there were existing registrations over livestock and motor vehicles on the PPSR, these would have provided limited comfort to potential creditors. The existing livestock registrations were in favour of Elders Rural Services Australia Ltd, registered on 11 March 2021. These registrations related to financing arrangements for agricultural inputs or livestock purchases and would not have indicated to a searching creditor that major livestock assets worth over $1.2 million were subject to competing security interests.

Similarly, the multiple motor vehicle registrations in favour of De Lage Landen Pty Ltd related to specific equipment financing and would not have alerted creditors to the existence of Agfor’s broader machinery interests valued at $178,600.

This distinguishes the present case from Adia, where an existing AllPAAP registration would have alerted creditors to general security interests over all present and after acquired property. The AllPAAP registration in favour of Jocono Pty Ltd in this case occurred only on 7 March 2025, merely two weeks before liquidation, and provides minimal ameliorating effect.

A prudent creditor searching the PPSR before extending credit would have seen various specific security interests but could not reasonably have inferred that the substantial livestock and machinery assets later claimed by Agfor were encumbered. The existing registrations therefore provide limited comfort regarding prejudice from the registration delay.

The secured assets have substantial value — livestock worth $1.247 million and machinery worth $178,600. The removal of these assets from the pool available to unsecured creditors represents a significant detriment, affecting not only ordinary unsecured creditors but also employee entitlements.

While I accept that Agfor’s failure was inadvertent and made in good faith, inadvertence alone is not sufficient to warrant the exercise of discretion, particularly where substantial prejudice to crystallised creditor rights would result. Nor is the fact that Agfor has added to the pool of assets available to creditors by the transfer of possession of livestock and machinery, in circumstances where its delay extended for three and a half years.

While it is also true that only one creditor (Mr Bide) responded to the liquidator’s circular expressing opposition to the application, the absence of active opposition does not diminish the prejudice that would be caused to the body of unsecured creditors as a whole.

The purpose of s 588FM is to provide relief from the harsh consequences of inadvertent failure to comply with registration requirements. However, this purpose must be balanced against the legitimate expectations and crystallised rights of unsecured creditors, particularly where the delay has been substantial and the prejudice is significant.

Balancing all relevant factors, I am not satisfied that there are circumstances of sufficient significance to warrant the destruction of the crystallised rights of unsecured creditors.

H. CONCLUSION AND ORDERS

For these reasons, I do not consider it appropriate to make an order fixing a later time for the purposes of s 588FL(2)(b) of the Act.

Accordingly, the application will be dismissed.

The parties are required to confer and, within seven days, either submit a consent minute in respect of the appropriate orders including as to costs or, failing agreement, file and serve submissions of no more than 3 pages addressing these matters.

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[2025] VSC 540

2 September 2025