Dempsey Resources Pty Ltd v Continental Coal Ltd

Reasons for the application 15 Chapter 2K of the Corporations Act 2001 (Cth) (the Act), comprising ss 261-282, contains provisions requiring the registration of company charges and the powers of ASIC to exempt persons from compliance with certain provisions as well as determining the priorities of registrable charges. 16 Section 262(1) of the Act identifies the charges required to be registered. Section 262(2) of the Act specifies the types of charges that do not require registration. 17 Section 268(2) of the Act provides that where there is a variation in the terms of the charge having the effect of increasing the liabilities secured thereby; or prohibiting or restricting the creation of subsequent charges on the property, then the company which created the charge is obliged to lodge a notice of such variation within 45 days of the variation having been made. It is on this basis that the Notices should have been lodged. 18 Failure to register does not automatically destroy the security. However, by virtue of s 266(3) of the Act, it does render the charge void as a security as against the liquidator or administrator of the company or the administrator of a deed of company arrangement. The charge is otherwise a valid security but, in certain circumstances, it is postponed in priority in favour of a registered charge. The rules as to priority are set out in ss 280-282 of the Act.

The grounds of the application 19 The application is made under s 266(4)(a) of the Act which, relevantly, gives the Court a discretion to extend the period for lodging a notice of a charge if it is satisfied that the failure to lodge a noticein respect of a charge, or in respect of a variation in the terms of a charge, was due to inadvertence. 20 The period of delay in lodging the Notice is relevant to the exercise of discretion. In Standard Chartered Finance Ltd v De Barros Nominees Pty Ltd (in liq) (1988) 7 ACLC 15 Pidgeon J held that the 2 months between the date on which the Notice in question ought to have been lodged and the date on which the Notice was lodged to be a short period. The short period that had elapsed influenced Pidgeon J's discretion to extend the time for registering the Notice. 21 Remediation of the default within a reasonable time is a relevant factor which will influence the Court to exercise its discretion: Sanwa Australia Finance Ltd v Ground-Breakers Pty Ltd (in liq) [1991] 2 Qd R 456 at 466(b). 22 The fact of solvency and that no other charges are registered is also relevant. It was held in Investa Properties Ltd v Westpac Property Funds Management Ltd (2001) 40 ACSR 124 at [31] that: If there is no hint of any possibility of winding up or administration and it is shown that there exists no other chargee occupying a position actually or potentially adversely affected by the system of priorities under Pt 2K.3, it is open to the court to conclude that late lodgment (that is, lodgment outside the 45 days) will not disturb or affect accrued or accruing rights meriting consideration. And that, in such a case, will normally be the end of the matter. 23 The failure to lodge a Notice due to inadvertence is of considerable importance in the exercise of the Court's discretion: Vector Capital Ltd v SNS Software Network Systems Pty Ltd (1988) 12 NSWLR 1 at 8. 24 Inadvertence is 'the fact or habit of being inadvertent; want of advertence, failure to observe or pay attention; inattention': National Australia Bank Ltd v David & Waddell (Vic) Pty Ltd (2003) 44 ACSR 296 at 308 or 'not [being] properly attentive': Hewlett-Packard Australia Pty Ltd v Exceed Pty Ltd (2004) 48 ACSR 670 at 678. 25 A circumstance of a similar nature has, correctly in my respectful opinion, been held to constitute 'inadvertence' in this context: Re Kris Cruisers Ltd [1948] 2 All ER 1105. In that case the failure to lodge Notice of a charge arose where the chargee's solicitors and the company secretary each mistakenly thought that the other was attending to the registration has been held to be 'inadvertence'.

Dempsey ICD 26 Mr Brewer gave the Dempsey ICD to Mr Durack expecting Mr Durack to execute it on behalf of LinQ Finance and register the relevant Notice with ASIC. 27 However, Mr Brewer did not specifically instruct Mr Durack to do any of these things. He ought to have made it clear what he wanted Mr Durack to do. 28 As was routine for Mr Durack, he did not look at the Dempsey ICD nor did he execute it on behalf of any companies before he put the Dempsey ICD away in a secure file. 29 Mr Durack did not think to register the relevant Notice with respect to the Dempsey ICD with ASIC as he believed that registration would be taken care of by the person with the conduct of the matter, namely, Mr Brewer. He ought to have satisfied himself that this, in fact, was the case. 30 The Dempsey ICD was executed and Notice was lodged with ASIC as soon as Mr Brewer realised the oversight. 31 I find that the failure to lodge the Notice with respect to the Dempsey ICD was due to inadvertence, in part by Mr Brewer and in part by Mr Durack. Each mistakenly thought that the other was attending to the registration.

Perpetual ICD 32 At the time Perpetual advanced funds to Continental, Mr Brewer was busy organising an equity raising. As a result, the Perpetual ICD was not executed nor was the relevant Notice lodged with ASIC at this time. 33 The Perpetual ICD was executed and the relevant Notice was lodged with ASIC as soon as Mr Brewer realised his oversight. 34 I find that the failure to lodge the Notice with respect to the Perpetual ICD was due to inadvertence on the part of Mr Brewer.

The Court's discretion 35 The question of whether a Court will exercise its discretion under s 266(4)(a) of the Act will depend on the facts and circumstances of each individual case: National Australia Bank Ltd v David & Waddell (Vic) Pty Ltd (2003) 44 ACSR 296. 36 The Notice of the Perpetual ICD was lodged 9 days after it should have been. The Notice with respect to the Dempsey ICD was lodged 55 days after it should have been. These, in the circumstances, are very short periods of time which, in my view, favour an exercise of discretion to grant the orders sought. 37 Continental's balance sheet, as at 30 June 2009, shows net assets of $7,269,734. 38 An ASIC search of Continental shows that it is not in any form of external administration. It also shows that there were no charges registered in 2009 other than those in favour of LinQ Finance being the Security Agreements. 39 Remedial steps were taken promptly. Mr Brewer took steps to execute and register the Notices as soon as he became aware of the oversight. 40 The failure in each case to lodge the Notice was inadvertent.

Conclusion 41 For these reasons I would make the orders sought in the plaintiffs' application. I certify that the preceding forty-one (41) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gilmour.