Diversa Pty Ltd v Taiping Trustees Limited

Counsel for the Second Respondent: The second respondent filed a submitting notice save as to costs and otherwise did not appear

BETWEEN: DIVERSA PTY LTD (ACN 079 201 835) First Applicant

DANIEL WALLEY IN HIS CAPACITY AS RECEIVER AND MANAGER OF SC AUSTRALIAN HOLDINGS 1 PTY LTD (RECEIVER AND MANAGER APPOINTED) (IN LIQUIDATION) (ACN 624 531 237) Second Applicant

SC AUSTRALIAN HOLDINGS 1 PTY LTD (ACN 624 531 237) Third Applicant

AND: TAIPING TRUSTEES LIMITED (A COMPANY REGISTERED IN HONG KONG) First Respondent

REGISTRAR OF PERSONAL PROPERTY SECURITIES Second Respondent

AND BETWEEN: TAIPING TRUSTEES LIMITED (A COMPANY REGISTERED IN HONG KONG) Cross-Claimant

AND: DIVERSA PTY LTD (ACN 079 201 835) (and others named in the Schedule) First Cross-Respondent

order made by: BEACH J DATE OF ORDER: 31 March 2022

1. The applicants within 7 days of the date of these orders file and serve proposed minutes of orders and submissions (limited to 3 pages) to give effect to these reasons, including any consequential orders for the disposition of any outstanding question.
2. The respondents within 7 days of receipt of the applicants' proposed minutes and submissions file and serve responding minutes and submissions (limited to 3 pages).
3. Liberty to apply. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

BEACH J: 1 The present proceeding concerns disputes between the first applicant, Diversa Pty Ltd, and the first respondent, Taiping Trustees Limited, as to their entitlement to two pools of funds realised by the receivers of SC Australian Holdings 1 Pty Ltd (receivers and managers appointed) (in liquidation) (SCAH), which receivers were appointed by Diversa as a secured creditor of SCAH. SCAH is a wholly owned subsidiary of Sargon Capital Pty Ltd (in liquidation) and part of the broader Sargon Group. 2 What is in dispute is whether Diversa or Taiping has the higher priority security interest with respect to the proceeds from the sale of shares in Sequoia Financial Group Ltd (the SEQ shares) and, separately, the sale of shares in Madison Financial Group Pty Ltd, AdviceNet Pty Ltd, WealthPortal Pty Ltd and ProActive Portfolios Pty Ltd (the Madison shares). 3 The resolution of the nature of the competing security interests and their priority requires consideration of various provisions of the Personal Property Securities Act 2009 (Cth) (PPSA) and under the general law. 4 Now as the case was originally formulated and run, the first set of disputes with respect to the proceeds of sale of the SEQ shares concerned whether Taiping at the time of the sale of the SEQ shares had a perfected security interest in the SEQ shares and any proceeds from the sale of those shares by the application of s 34 of the PPSA. If not, a further issue then arose as to whether Taiping had priority by virtue of having later satisfied the requirements of s 68, which question requires consideration of whether it is possible to re-perfect a security interest once the collateral to which it attaches has been sold post-enforcement and converted to proceeds. But during closing addresses, Taiping abandoned its principal reliance upon s 34. Accordingly, only the s 68 issue is now principally left in the frame together with some miscellaneous alternative questions. Taiping relies upon its so-called re-perfection under s 68. 5 But Diversa says that in the circumstances, s 68 does not enable Taiping to re-perfect a transferor-granted interest over the proceeds of sale of the SEQ shares. It says that once the SEQ shares were transferred free of security interests by virtue of their sale by the SCAH receivers, SCAH had no interest in those proceeds other than a right to participate in any surplus after the satisfaction of all other creditors pursuant to s 140. Accordingly, the proceeds of the post-enforcement share sale were not "proceeds" within the meaning of s 31, and as a consequence of the express exclusion in s 31(3). And because they did not constitute "proceeds", the post-enforcement moneys were incapable of having the original security interest in the SEQ shares continue in them. Accordingly, there was no transferred collateral as that term is used in s 68. 6 In summary, I accept Diversa's case concerning its priority over the SEQ shares and their proceeds. Taiping's ambitious attempt to perfect the imperfectible fails. 7 Now as to the Madison shares, a different set of legal issues arises. The principal question is whether there was ever a security interest in favour of Taiping, who was a secured creditor of Sargon Capital but in one respect is said to have the benefit of a security given by SCAH, as a subsidiary of Sargon Capital, to secure obligations owed by Sargon Capital to Taiping. On this aspect, Diversa says that it is entitled to the proceeds of the Madison shares because there is no obligation to be secured by or intention to grant the alleged security of Madison shares by SCAH to Taiping with the result that there is no security interest as defined by s 12 and no equitable mortgage as alleged by Taiping. But I disagree. 8 In summary, I accept Taiping's case that it had a security interest in the form of an equitable mortgage and it has priority concerning the proceeds of the Madison shares. Diversa's contentions to the contrary lacked a modicum of commerciality given that Taiping ultimately funded the purchase of the Madison shares and held the Madison share certificates and share transfer forms executed by SCAH (as transferor) in escrow. 9 I should at this point set out a little of the background concerning the relevant securities involved before getting into the detail. 10 Now at one stage Diversa owned all of the shares in Diversa Trustees Ltd and CCSL Ltd, two entities which formed part of a business that provided superannuation trustee services. But by a share purchase agreement entered into on 20 December 2018 and subsequent variations (the Diversa SPA), Diversa sold all of its shares in Diversa Trustees Ltd and CCSL Ltd to two entities within the Sargon Group, namely, Sargon Superannuation Holdings Pty Ltd and Sargon Superannuation Holdings SPV Pty Ltd. Sargon Capital guaranteed the purchasers' obligations. The initial purchase price was AUD 37 million with adjustment; it ultimately became AUD 41 million. 11 Diversa was not fully paid by the purchasers; as at April 2021 they owed Diversa AUD 31 million under the Diversa SPA. 12 In late June 2019, SCAH gave security to Diversa in the form of a general security deed (Diversa GSD), the terms of which relevantly included that SCAH agreed to guarantee the obligations of the purchasers under the Diversa SPA concerning the deferred purchase price. Under the Diversa GSD, SCAH granted Diversa a security interest over all property of SCAH, both present and after-acquired; such a security is known under the PPSA as an "all present and after-acquired personal property" (AllPAP) security interest. The security ultimately covered the SEQ shares and purported to cover the Madison shares. Indeed, SCAH undertook to deposit the share certificates for the Madison shares with Diversa, which it never did. It was, in my view, put on notice that these were elsewhere. 13 At the same time as the grant of the Diversa GSD, Diversa lodged a financing statement in respect of its AllPAP security interest on the Personal Property Securities Register. 14 At this point I should also note that in late 2019 a fifth variation to the Diversa SPA and first variation to the Diversa GSD were executed, pursuant to which the parties agreed that if either the purchasers or Sargon Capital became insolvent or the subject of a court application to appoint an external administrator, the deferred purchase price would become immediately due and payable and the SEQ shares, which at the time were held by Sargon Capital, would be transferred from Sargon Capital to SCAH, which would then be grabbed under the Diversa GSD. This transfer of the SEQ shares occurred on 6 December 2019, and so at that point fell under the Diversa GSD. 15 On 4 February 2020, receivers and managers were appointed to SCAH by Diversa under the Diversa GSD; I will elaborate on this in a moment. 16 But at this point it is convenient to say something about Taiping and its security position. 17 On 9 February 2018, Taiping entered into a secured promissory note with Trimantium Investment Management Pty Ltd (TTIM), an entity within the Sargon Group, and Sargon Capital as obligor (secured promissory note). Under the secured promissory note, Taiping advanced HKD 500,000,000 or about AUD 81,000,000 to TTIM to be applied for approved purposes upon receipt and approval by Taiping of any applicable drawdown requests. 18 In order to secure the performance of the obligations of both TTIM including its redemption obligations and Sargon Capital under the secured promissory note, on or about 9 February 2018, Trimantium Capital Funds Management Pty Ltd (TCFM) entered into a guarantee and a general security deed with Taiping. Taiping additionally entered into a general security deed with TTIM. From 12 February 2018 the security interests granted to Taiping have been registered on the PPSR. 19 I should also note that on 28 February 2018, Pharos Financial Group Pty Ltd and FPWS Pty Ltd agreed to sell various shares to SCAH, with Sargon Capital guaranteeing SCAH's obligations. The shares included part of the Madison shares, that is, the Madison shares but not including shares in AdviceNet. I will return to the detail of this later. 20 In late April 2018, Sargon Capital issued a promissory note in favour of TTIM for HKD 190,000,000 in consideration for receipt of the corresponding sum. 21 To secure its obligations, Sargon Capital was to enter into a general security agreement in favour of Taiping, and to grant a first ranking security interest in favour of the latter in the form of a general security deed. Sargon Capital was also to deliver title documents and executed blank share transfer forms to Taiping with respect to the funded transactions. These included the Madison shares. Various drawdown requests in evidence make it plain that the funds advanced by Taiping and/or TTIM to Sargon Capital were to be used to purchase the Madison shares. 22 The relevant promissory note and security documents at this point make no reference to SCAH, although it was of course a wholly owned subsidiary of Sargon Capital at this time. 23 On or around 27 April 2018, and in anticipation, Sargon Capital entered into a general security deed in favour of Taiping to secure, inter alia, the obligations that I have just referred to (the Taiping GSD) in which Sargon Capital granted Taiping an AllPAP security interest over all the property of Sargon Capital, both present and after-acquired, which AllPAP interest was perfected by registration. 24 By the end of July 2018 Sargon Capital owned the SEQ shares which were covered by the Taiping GSD, although as I have said the SEQ shares were later transferred by Sargon Capital to SCAH. 25 On 29 January 2020 Taiping appointed Mr Jason Preston and Mr Shaun Fraser of McGrathNicol as receivers and managers of Sargon Capital under the Taiping GSD. They were also appointed as receivers and managers of TTIM and TCFM. 26 On 8 March 2020, Mr Joseph Hayes and Mr Andrew McCabe of Wexted Advisors were appointed by Taiping to act as administrators of Sargon Capital, TTIM and TCFM pursuant to s 436C of the Corporations Act 2001 (Cth). On 8 April 2020 these entities were wound up under a creditors' voluntary winding up, with the administrators becoming liquidators. 27 Let me now return to the two share parcels. 28 On and prior to 6 December 2019 the SEQ shares were owned by Sargon Capital and therefore, as I have said, subject to Taiping's security interest under the Taiping GSD. They were transferred at that time from Sargon Capital to SCAH. Diversa asserts that at that time they became subject to Diversa's security interest under the Diversa GSD. 29 On 3 February 2020 Mr Adam Nikitins and Mr Stewart McCallum of Ernst & Young were appointed administrators under s 436A of the Corporations Act of certain entities within the Sargon Group, including SCAH and the purchasers. 30 On 4 February 2020 Diversa appointed Mr Christopher Hill and Mr Daniel Walley of PricewaterhouseCoopers to act as receivers and managers of SCAH in accordance with its rights under the Diversa GSD. The receivers have since sold the SEQ shares and the Madison shares; the latter disposition required the co-operation of Taiping which I will explain in a moment. 31 The SEQ shares were sold by SCAH's receivers on the ASX to a third party on 19 February 2020. On 21 February 2020 the third party became the registered holder of the SEQ shares. 32 The Madison shares were later sold by the receivers to Clime Investment Management Ltd; I will return to the details of this sale later. But I should note at this point that in evidence and produced from the possession of the receivers appointed by Taiping to Sargon Capital, were copies of share certificates for the Madison shares in favour of SCAH and blank but executed transfer forms by SCAH of those shares. 33 Now it is common ground that the Madison shares have at all relevant times been owned by SCAH and not Sargon Capital, and that the Diversa GSD purports to cover the Madison shares. But in the lead-up to the sale of the Madison shares by the SCAH receivers, Diversa and those receivers were informed that Taiping held the original Madison share certificates and signed share transfer forms in respect of those shares pursuant to an alleged security. Diversa and Taiping subsequently came to an agreement pursuant to which Taiping provided the Madison share certificates to the SCAH receivers in order to allow the Madison share sale to proceed. 34 Let me now turn to the detail of the dispute concerning the SEQ shares. I will return to the dispute concerning the Madison shares later.

The SEQ shares dispute 35 It is appropriate to begin by reciting some further facts concerning the SEQ shares before turning to the arguments and analysis.

Some further facts 36 On 6 July 2018, Mr Andy Wang of Taiping sent an approval application to Taiping management entitled "Sargon Capital Secured Private Placement Bond Approval Application on Releasing AUD 37 million from the Escrow Account". Under the application, Taiping's markets department sought approval from Taiping to advance AUD 6 million to acquire up to approximately 19.9% of the issued share capital in the ASX listed company Sequoia Financial Group Ltd. 37 On 11 July 2018, the directors of Sargon Capital including Mr Kingston issued a drawdown request to Taiping and TTIM in accordance with the terms of the secured promissory note to draw down an amount of AUD 37,001,715.64. With respect to AUD 6 million of that amount, the request stated inter-alia as follows: The purpose and use of the drawdown amount of A$6,000,000.00 is to purchase (Sequoia Acquisition) up to an additional 18.4% of the fully paid ordinary shares ("FPO") in Sequoia Financial Group Ltd (ASX: SEQ) ("Sequoia") to add to the approximate 1.5% of the FPO in Sequoia already held by Sargon through Valuead Pty Ltd. Sequoia is a publicly traded company listed on the Australian Securities Exchange ("ASX"). The board of directors of Sargon on Thursday 14th June 2018, approved the purchase of up to 19.9% of the FPO in Sequoia at a price of up to 35 cents per FPO ahead of a full company takeover scheduled to be held in August 2018. If a person's voting power in a company increases from under 20% to over 20%, a full takeover offer must be made according to the Australian law. Sargon is planning to purchase 100% of the FPO in Sequoia upon completion of the foregoing full takeover offer; Sequoia has approximately $A4.5 billion in Funds Under Management, Advice and Supervision and underlying EBITDA of A$6 million, with cash and cash equivalents on hand of approximately A$15 million. As Sequoia is a publicly traded company, the share price moves every day, but the expected total purchase price is between A$42 million and A$45 million. … Sargon and TTIM further respectively confirm that the Amount will not be used for any other purpose without express prior written consent from Taiping, and the Amount will only be respectively kept in Sargon's and TTIM's bank account which fall within the definition of "collateral" under the General Security Deed, thereby ensuring that Taiping has security over this Amount. Taiping has confirmed that this security over this Amount is in a form acceptable to it. 38 On 13 July 2018, AUD 37,001,715 was deposited by Taiping into a bank account held with Westpac in the name of Sargon Capital. Over the course of three transfers on 6, 10 and 18 July 2018, AUD 6,636,904 was transferred from the Sargon Capital account for the purchase of shares in Sequoia Financial Group Ltd. 39 So, by the end of July 2018, Sargon Capital had purchased 23,032,816 shares being the SEQ shares. And as I have noted, Taiping held extensive security interests over the assets of Sargon Capital including the Taiping GSD, which then covered the SEQ shares. 40 On 2 December 2019, Ashurst issued a letter on behalf of Taiping to notify TTIM and Sargon Capital that events of default had arisen under the secured promissory note. This demand was not complied with. 41 On 6 December 2019, Sargon Capital transferred the SEQ shares to SCAH for nil consideration. 42 On 19 December 2019, and 20 January 2020, further letters of demand were issued by Ashurst to TTIM and Sargon Capital asserting that events of default had arisen under the secured promissory note, and to demand payment of the amount owing. These demands were not complied with. 43 As I have said, on 29 January 2020, Taiping appointed the Sargon Capital receivers under the Taiping GSD. 44 And as I have said, on 19 February 2020, the SCAH receivers caused SCAH to sell the SEQ shares for AUD 4,376,235 (the SEQ proceeds). After expenses and brokerage were paid by SCAH and an amount retained by SCAH for receivership expenses, the remaining sale proceeds of AUD 4,196,607 were paid to Diversa on 25 February 2020. A transaction history report for SCAH's NAB account shows that on 25 February 2020 an amount of AUD 4,196,642 was debited in favour of Diversa. 45 Subsequently, on 26 May 2020, Taiping purported to register its security interest in the SEQ shares against SCAH on the PPSR. On that day, Taiping gave notice to Diversa purportedly as contemplated by s 68 with respect to the SEQ shares. On 5 June 2020, Taiping made two additional registrations on the PPSR with respect to its security interest in the SEQ proceeds. 46 On 9 June 2020, Ashurst for Taiping sent a letter to Arnold Bloch Leibler for Diversa in the following terms: 1. SALE OF SEQ SHARES 1.1 On 19 February 2020 the SEQ Shares were sold by SCAH and converted into proceeds. On that date: (a) the purchaser of the SEQ Shares acquired those shares free of Taiping and Diversa's security interest pursuant to sections 49 and 51 of the PPSA; and (b) Taiping and Diversa's security interest in the SEQ Shares immediately attached to their sale proceeds with Taiping and Diversa having the same priority in those proceeds as they previously had in the SEQ Shares: see sections 32(1)(b) and 32(5) of the PPSA. 1.2 As at 19 February 2020, Taiping's security interest ranked ahead of Diversa's security interest in the SEQ Shares pursuant to section 55(5) of the PPSA given: (a) the SEQ Share continued to be subject to Taiping's security interest which was temporarily perfected pursuant to section 34(1) of the PPSA; (b) Taiping did not obtain actual or constructive knowledge of SCAH and Diversa's interest in the SEQ Shares until 13 February 2020; and (c) the SEQ shares were sold by SCAH on 19 February 2020, being within the end of 5 business days after the day upon which Taiping acquired knowledge of the transfer. 1.3 Even if the Taiping's security interest became temporarily unperfected prior to 19 February 2020 (which is not admitted), Taiping has re-perfected its security interest and regained its priority to the proceeds by issuing a notice to your clients under section 68(5) of the PPSA. 2. PROCEEDS 2.1 In these circumstances, the sum of $4,196,607.32 paid by the receivers and managers of SCAH to Diversa on 25 February 2020: (a) represents personal property that is derived directly or indirectly from a dealing with the collateral subject to Taiping's and Diversa's security interest for the purpose of section 31(1)(a) of the PPSA; (b) these proceeds remain subject to Taiping and Diversa's security interests pursuant to section 33(1)(a) of the PPSA; and (c) is subject to Part 4.4 of the PPSA, being proceeds received by Diversa as a result of enforcing its security interest in the SEQ Shares. 2.2 Going forward, it is our client's position that these proceeds must be applied by Diversa in accordance with the order of priorities set out in section 140(2) of the PPSA. 2.3 Out of an abundance of caution, and likely unnecessarily on the basis of the above analysis, Taiping has registered its security interest in the proceeds against Diversa on the PPSR (PPSR Registered Security Interest No. 202006050020241 and 202006050020097). 2.4 To facilitate clarity between our respective clients as to the ultimate treatment of the proceeds (over which this dispute has developed): (a) Diversa should quarantine the proceeds and not draw on or otherwise deal with the proceeds without first obtaining the written consent of Taiping; and (b) immediately account to Taiping for any drawings Diversa has made to date on the proceeds without its consent. 47 In summary, it is not in doubt that by 24 July 2018, Sargon Capital became the owner of the SEQ shares and that Sargon Capital continued to be the owner of those shares until 6 December 2019. Further, the SEQ shares were "personal property" within the meaning of s 10. 48 Further, it is not in doubt that on and from 24 July 2018 until 6 December 2019, at least, Taiping had held a security interest perfected by registration in the SEQ shares within the meaning of s 12. 49 Taiping held various security interests in the property of Sargon Capital by virtue of and including the secured promissory note, TCFM guarantee, the Sargon Capital guarantee and the Taiping GSD, which had been perfected by registration. 50 So, immediately before Sargon Capital transferred the SEQ shares to SCAH on or about 6 December 2019, Taiping's security interest in the form of the Taiping GSD was attached to the SEQ shares. So, at least until that date, Taiping held a security interest over the SEQ shares which had been perfected. 51 But as I say, on 6 December 2019 Sargon Capital transferred the SEQ shares to SCAH for nil consideration, which then fell under the Diversa GSD. But at that time, Taiping was not asked to and did not provide any release of its security interest in the SEQ shares prior to the transfer. 52 Did Taiping lose its security by these events? Did it lose its priority to Diversa by these events? Let me turn now to Taiping's arguments.

First argument (now abandoned) - temporary perfection 53 As the case was originally run by Taiping, it asserted prior to closing addresses and as its primary case that a result of the transfer of the SEQ shares was to enliven s 34(1). Now with respect to s 34(1), at the time of the transfer on 6 December 2019, Taiping held a perfected security interest, which was temporarily further perfected for the period starting at the time of the transfer and ending at the earliest of the various times set out in the provision. In this case, only s 34(1)(c)(ii) could be theoretically engaged, which provided that Taiping's security interest would remain temporarily perfected until the end of 5 business days after which it acquired the requisite knowledge required to perfect its interest by registration over the transferee (i.e. SCAH). 54 Taiping originally ran a case saying that if the Diversa interests failed to establish that Taiping acquired the requisite knowledge for the purposes of s 34(1)(c)(ii) before the relevant time, then Taiping's security interest remained perfected and ultimately attached to the SEQ proceeds; the SEQ proceeds were the monetary consideration received by the SCAH receivers who caused SCAH to on-sell the SEQ shares on 19 February 2020, with settlement of the sale on 21 February 2020. Here it was said that all consideration obtained and to be obtained from the sale of the SEQ shares fell within the definition of "proceeds" in s 31(1)(a) and/or (e). 55 Upon the sale of the SEQ shares, and those shares in turn giving "rise to proceeds (by being dealt with or otherwise)", it was said that Taiping's security interest attached to the proceeds (s 32(1)(b)), but maintained the same time of possession and perfection that it had with respect to the SEQ shares themselves (s 32(5)). It was said that Taiping's security interest remained perfected (see ss 33(1)(a), 57(1), (2A) and (3), 153(1) and reg 2.4 in Sch 1, Part 2 of the Personal Property Securities Regulations 2010 (Cth)). 56 Accordingly, in terms of the way Taiping originally put its case, at the time of the generation of the SEQ proceeds Taiping held a perfected security interest in them which had priority over any interest of Diversa, such that Diversa was obliged to apply the SEQ proceeds under s 140 in favour ultimately of Taiping. 57 But as the evidence unfolded, Taiping's case did not go well in terms of when it acquired the knowledge referred to in s 34(1)(c)(ii). So, Taiping now accepts that it did not have a perfected security interest at the time of the generation of the SEQ proceeds.

Second argument - re-perfection 58 Taiping's fall-back position is that if its interest had become unperfected before 19 February 2020 by operation of s 34(1)(c)(ii), Taiping later re-perfected its interest under s 68 and restored its priority in what were by then the SEQ proceeds in the following fashion. 59 As I have said, on 26 May and 5 June 2020, Taiping registered its purported security interest in the SEQ shares and proceeds thereof in the hands of SCAH as transferee of the SEQ shares. Taiping says that coupled with the provision of various notices to Diversa, this had the result that Taiping's security interest in the SEQ shares and any proceeds of their sale was re-perfected within the meaning of s 68(1), which states: The transferor granted interest in the transferred collateral has priority (except as mentioned in subsection (2)) if: (a) the transferred collateral is not registered with a serial number (see subsection (4)); and (b) the interest was perfected by registration immediately before the transfer; and (c) the interest becomes unperfected; and (d) the interest is later re perfected; and (e) a notice is given (whether before or after the interest is re perfected as mentioned in paragraph (d)) to all other secured parties who have a registration that describes the transferred collateral; and (f) the notice is given in accordance with subsection (5); and (g) the interest has been continuously perfected since it was re perfected as mentioned in paragraph (d). 60 Taiping also says that s 68(2) is not engaged on the facts of this case. 61 Now by the time of the purported restoration of perfection and priority by Taiping, the SEQ shares had become the SEQ proceeds and then funds forwarded to Diversa. But Taiping says that s 32, and s 32(5) in particular, had the effect of equating the position of a secured party in relation to collateral which has been converted into proceeds with the position of the secured party in relation to the original collateral. Section 32 provides: (1) Subject to this Act, if collateral gives rise to proceeds (by being dealt with or otherwise), the security interest: (a) continues in the collateral, unless: (i) the secured party expressly or impliedly authorised a disposal giving rise to the proceeds; or (ii) the secured party expressly or impliedly agreed that a dealing giving rise to the proceeds would extinguish the security interest; and (b) attaches to the proceeds, unless the security agreement provides otherwise. … (5) For the purposes of section 55 (default priority rules), the time of registration or possession in relation to original collateral, or the time of perfection of a security interest in original collateral, is also the time of registration, possession or perfection in relation to the proceeds of the original collateral. 62 For that reason, Taiping says that the ability to restore priority of a security interest in "transferred collateral" in s 68(1) should be read as encompassing the proceeds generated by that transfer. Taiping says that ss 20(1)(a), (1)(b) and 32(1)(b) and (5) provide for Taiping's interest in the SEQ shares, even if that interest be unperfected, to attach to the SEQ proceeds. 63 I should set out s 20 which provides: (1) A security interest is enforceable against a third party in respect of particular collateral only if: (a) the security interest is attached to the collateral; and (b) one of the following applies: (i) the secured party possesses the collateral; (ii) the secured party has perfected the security interest by control; (iii) a security agreement that provides for the security interest covers the collateral in accordance with subsection (2). (2) A security agreement covers collateral in accordance with this subsection if: (a) the security agreement is evidenced by writing that is: (i) signed by the grantor (see subsection (3)); or (ii) adopted or accepted by the grantor by an act, or omission, that reasonably appears to be done with the intention of adopting or accepting the writing; and (b) the writing evidencing the agreement contains: (i) a description of the particular collateral, subject to subsections (4) and (5); or (ii) a statement that a security interest is taken in all of the grantor's present and after‑acquired property; or (iii) a statement that a security interest is taken in all of the grantor's present and after‑acquired property except specified items or classes of personal property. … (6) A security interest in proceeds is enforceable against a third party whether or not the security agreement providing for the security interest contains a description of the proceeds. 64 Relevantly to its belated purported re-perfection, Taiping says that in this case, the SEQ shares and proceeds were not registered with a serial number (s 68(1)(a)), Taiping's interest was perfected by registration immediately before the transfer of the SEQ shares by Sargon Capital to SCAH on 6 December 2019 (s 68(1)(b)), Taiping's interest subsequently became unperfected (s 68(1)(c)), its interest was later re-perfected by virtue of its registration of that interest on the PPSR (s 68(1)(d)), the requisite notice was given (s 68(1)(f)) by Taiping to Diversa, and the security interest has been continuously perfected since its re-perfection (s 68(1)(g)). Taiping subsequently made two further registrations on the PPSR with respect to the SEQ shares and their proceeds in Diversa's hands. 65 So, Taiping says that it re-perfected and restored the priority of its original security interest. The result is that by operation of the priority rules in the PPSA, including under s 55, Taiping's security interest has priority over any security interest of Diversa in the SEQ proceeds. I should set out s 55 which provides: (1) This section sets out the priority between security interests in the same collateral if this Act provides no other way of determining that priority. (2) Priority between unperfected security interests in the same collateral is to be determined by the order of attachment of the security interests. (3) A perfected security interest in collateral has priority over an unperfected security interest in the same collateral. (4) Priority between 2 or more security interests in collateral that are currently perfected is to be determined by the order in which the priority time (see subsection (5)) for each security interest occurs. (5) For the purposes of subsection (4), the priority time for a security interest in collateral is, subject to subsection (6), the earliest of the following times to occur in relation to the security interest: (a) the registration time for the collateral; (b) the time the secured party, or another person on behalf of the secured party, first perfects the security interest by taking possession or control of the collateral; (c) the time the security interest is temporarily perfected, or otherwise perfected, by force of this Act. (6) A time is a priority time for a security interest only if, once the security interest is perfected at or after that time, the security interest remains continuously perfected. 66 So, according to Taiping, the result is that the conditions in s 68(1) are satisfied, and pursuant to the chapeau, Taiping's interest in the transferred collateral, being the SEQ shares and later the SEQ proceeds, has priority over Diversa's interest. 67 Now Taiping says that there are two relevant points in time for the application of s 68(1). The first is when an interest becomes unperfected by registration, here, 6 December 2019. The second is when that interest becomes re-perfected, here, 26 May 2020. Further, it says that events that occur between those two points in time are of no import, providing that the criteria in s 68(1) can otherwise be satisfied. It is said that this construction best promotes the purpose of s 68, which is to provide protection to the holder of the transferor-granted interest (priority holder) where the collateral in which it holds a perfected interest is transferred. 68 Now Taiping accepts that there is an alternative construction, namely, that events between the two relevant points in time can operate to defeat the transferor-granted interest, such as a transferee converting the transferred collateral into proceeds, even where the criteria of the provision would otherwise be satisfied. But it says that such a construction would provide a means for the priority holder's interest to be avoided or frustrated by the actions of the transferee. And if a transferee were able to acquire collateral subject to a transferor-granted interest, and then sell that collateral and collect the proceeds, and in doing so prevent the priority holder from relying upon s 68 with respect to those proceeds, the value of a transferor-granted interest within the statutory scheme would be diminished and the purpose of s 68 thwarted. And Taiping says that this is particularly so in circumstances where the relevant transfer may have occurred behind the priority holder's back. 69 Let me exemplify the point that Taiping has attempted to make. 70 If a priority holder was unaware that collateral worth $100 in which it held an interest had been transferred and only learned of the transfer at a later date, had that collateral been sold and converted into $100 in proceeds by the transferee in the interim, the priority holder would have no recourse under s 68. Contrastingly, had that collateral not been sold and converted, the priority holder would be able under s 68 to re-perfect its interest in the collateral worth $100. So it is said that the alternative construction is both arbitrary, in that whether the transferor-granted interest prevails will turn on the circumstance of whether the transferee has decided to convert the collateral into proceeds, and incoherent, in that there is no good reason why it should be the case that in the latter instance the priority holder has recourse to the value of the collateral, and in the former instance it does not. This is particularly so where the priority holder may have had no knowledge at all of the transfer of the collateral, and would in effect be at the whim of the transferee as to whether or not it would be able to rely upon s 68 to re-perfect its interest. 71 Taiping says that the alternative construction, if correct, would in effect reward a transferee should it convert transferred collateral into proceeds upon receiving it, by providing the transferee protection from the operation of s 68 that it would not otherwise have. But it is said that the purpose of s 68 is to provide protection for the interest of the priority holder, not the interest of the transferee. 72 In summary, Taiping says that the fact that the SCAH receivers caused SCAH to sell the SEQ shares and receive the SEQ proceeds on 19 February 2020, alternatively 21 February 2020, in the middle of the two relevant points in time, does not impede Taiping's ability to satisfy the requisite conditions in s 68(1). And Taiping says that there is nothing in the text of ss 31 or 140 that compels a different outcome. 73 Section 31 provides: (1) In this Act: proceeds of collateral to which a security interest is (or is to be) attached means identifiable or traceable personal property of the following types, subject to subsections (2) and (3): (a) personal property that is derived directly or indirectly from a dealing with the collateral (or proceeds of the collateral); (b) a right to an insurance payment or other payment as indemnity or compensation for loss of, or damage to, the collateral (or proceeds of the collateral); (c) a payment made in total or partial discharge or redemption of the collateral (or proceeds of the collateral), if the collateral (or proceeds) consists of any of the following: (i) chattel paper; (ii) intangible property; (iii) an investment instrument; (iv) an intermediated security; (v) a negotiable instrument; (d) if the collateral is intellectual property (or an intellectual property licence) - in addition to any other proceeds, the right of a licensor of the property (whether or not the property is itself a licence) to receive payments under any licence agreement in relation to the collateral; (e) if the collateral is an investment instrument or intermediated security - any of the following: (i) rights arising out of the collateral; (ii) property collected on the collateral; (iii) property distributed on account of the collateral. … (3) However, personal property is proceeds only if: (a) either: (i) the grantor has an interest in the proceeds; or (ii) the grantor has the power to transfer rights in the proceeds to the secured party (or to a person nominated by the secured party); and (b) the interest in the proceeds does not arise because of the operation of paragraph 140(2)(f). … 74 Section 140 provides: (1) This section applies if any amount, personal property or proceeds (within the ordinary meaning of that term) of collateral is received by or on behalf of a secured party as a result of enforcing a security interest in collateral (whether or not under section 120 or 128). (1A) This section does not prevent the operation of another law of the Commonwealth, or a law of a State or Territory, to the extent that the law requires the amount, personal property or proceeds to be applied towards one or more obligations to persons that do not hold security interests (or any other interests) in the collateral before being applied towards any (or all) of the obligations mentioned in subsection (2). (2) The amount, personal property or proceeds must be applied in the following order: (a) obligations to persons holding interests (other than security interests) in the collateral that have a higher priority (whether under this Act or otherwise) than the interest of the secured party; (b) reasonable expenses incurred in relation to the enforcement of security interests against the collateral, to the extent that the expenses are secured by the security interests; (c) obligations to persons holding security interests in the collateral that have a higher priority (whether under this Act or otherwise) than the interest of the secured party; (d) obligations to the secured party that are secured by the security interest in the collateral; (e) obligations to persons holding interests or security interests in the collateral that have a lower priority (whether under this Act or otherwise) than the interest of the secured party; (f) to the grantor. (3) An amount, personal property or proceeds must be applied against interests to which paragraph (2)(a), (c) or (e) applies in the order of their priority (whether under this Act or otherwise). (4) This section applies in relation to a security interest in collateral even if a person takes the collateral free of the security interest under section 133. (5) An amount paid, or personal property or proceeds applied, in accordance with subsection (2) discharges an obligation secured by an interest in the collateral to the extent of the amount paid or the value of the proceeds or property applied. (6) To avoid doubt, any amount paid by the higher priority party to an enforcing party in accordance with section 127 is, for the purposes of this section, an expense incurred by the higher priority party in relation to the enforcement of the security interest in the collateral. (7) A secured party is not liable to an action, suit or proceeding in relation to an application of proceeds in accordance with this section if: (a) the secured party applied the proceeds honestly; and (b) the secured party applied the proceeds in a commercially reasonable manner. 75 Of course, s 140(1) applied from 25 February 2020 when Diversa received the SEQ proceeds. 76 Now Taiping says that absent from the text of these provisions is any temporal language that mandates that the relevant proceeds are to be applied on a once and for all basis as at a particular time. Section 140(1) uses the language of "applies if" rather than "applies when". Similarly, s 140(3) does not state: "An amount, personal property or proceeds must be applied against interests to which paragraph (2)(a), (c) or (e) applies in the order of their priority as at the date that s 140(1) is enlivened (whether under this Act or otherwise)". To the contrary, Taiping says that there is no suggestion within the text of the provision that it could not seek that s 140(2) to (3) be applied after it re-perfected its security interest. The condition in s 140(1) remains satisfied, and ss 140(2) and (3) are to be applied in accordance with their terms. As to s 31, Taiping also says that it is wrong to say that when the SCAH receivers sold the SEQ shares and received the SEQ proceeds, SCAH had no right in the proceeds. It says that SCAH had an ownership interest in the funds, with the result that s 31(1) was enlivened but s 31(3) was not, and the funds are "proceeds" both within the meaning of s 31(1) and on the ordinary meaning of that term. 77 Let me elaborate on why Taiping says that the moneys received by SCAH on 21 February 2020 were "proceeds" for the purposes of s 31. 78 Division 2 of Part 2.4 sets out a regime for assessing when a security interest held by a secured creditor in collateral will attach to the proceeds generated on the sale of that collateral by a grantor. Now of course the PPSA does not create a scheme akin to an old law mortgage whereby the mortgagee owns the property and all the owner has is an equity of redemption. Rather, the grantor is always the owner of collateral, and a secured creditor simply has a security interest in the collateral rather than having ownership of it. 79 Section 31(1)(a), which I have already set out, contains a definition of "proceeds" that is notably broad. The definition extends to personal property that is derived directly and indirectly from a dealing with both the collateral and a dealing with proceeds of that collateral. Taiping says that applying the definition of "proceeds" contained in s 31, the funds received by SCAH on 21 February 2020, being the relevant proceeds, fell within the scope of ss 31(1)(a) and 31(3), being personal property that was derived directly from dealing with the SEQ shares and in which SCAH had an interest as the owner of those proceeds. 80 Now Taiping says that to succeed on its claim it does not need to prove that the funds currently held by Diversa are still "proceeds" as defined by s 31. Clearly they are not, as SCAH has transferred the funds to Diversa (s 31(3)). Rather the key questions are whether the funds constitute an "amount, personal property or proceeds (within the ordinary meaning of that term) of collateral" that was received by Diversa as a result of it enforcing its security interest in the SEQ shares (s 140(1)), and whether Taiping has a security interest in the funds which Diversa is required to recognise under s 140(2); Taiping has referred to these funds as quarantined. 81 Now with none of the take free rules applying, Taiping says that its security interest having attached to the SEQ proceeds on 21 February 2020, that interest will also attach to any personal property that is derived from dealing with the SEQ proceeds, relevantly including the quarantined funds, unless the take free provisions apply. Further, it says that Diversa is bound to take into account Taiping's security interest in applying any amount, personal property or proceeds (within the ordinary meaning of that term) that is received by it as a result of enforcing its security interest in the SEQ shares under s 140, again including the quarantined funds. 82 Let me at this point say something more about s 32. Another issue is whether Diversa's and Taiping's security interests attached to the proceeds under s 32 on 21 February 2020. Taiping says that both Diversa and Taiping had subsisting security interests in the SEQ shares on 19 February 2020, when SCAH sold the SEQ shares. And both of their security interests, by virtue of s 32(1)(b), attached to the relevant proceeds that were derived by SCAH from the selling the SEQ shares on 21 February 2020. It says that the only difference between their two respective security interests was that Diversa's security interest was perfected as at 21 February 2020 whereas Taiping security interest, at least at that time, was not. But Taiping says that whilst the perfection or un-perfection of those security interests may affect their priority as against each other under ss 32(5), 55 and elsewhere, it does not prevent those security interests from attaching to the relevant proceeds under s 32(1)(b). 83 Taiping also raised a further question as to whether the transfer of the proceeds from SCAH to Diversa on 25 February 2020 enabled Diversa to take those funds free of any security interest arising in favour of Taiping. Taiping says that the answer to this question is governed by the take free rules provided for in Part 2.5 of the PPSA, which provide for circumstances in which Diversa may have taken these funds free of Taiping's security interest. It says that none of those circumstances are enlivened. Rather, so it asserted, Diversa knew of Taiping's alleged security interest in the SEQ shares and their proceeds of sale when those proceeds were transferred by SCAH to Diversa on 25 February 2020. The result is that none of the take free rules provided for in Part 2.5 can apply. Taiping says that that is so even if Taiping's security interest was unperfected as at 25 February 2020. 84 In summary, Taiping submits that it is able to rely upon s 68 to re-perfect its security interest because as at 26 May 2020 Diversa was holding identifiable and traceable personal property which the security interest of Taiping had attached to under s 32(1)(b) being the quarantined funds. And it is Taiping's position that a re-perfection under s 68 will remain available as long as there is identifiable and traceable personal property available to which its security interest attaches. 85 Now I tentatively observed during the course of argument in considering Taiping's submission as to the operation of s 68: But how does that operate with section 34? If you haven't done what you were supposed to do - the statute gives you a temporary perfection period, and you sit on your hands and do nothing, and let's assume that temporary perfection period goes, and then suddenly, magically, you can wave your fairy wand and somehow later, at any time of your choosing, seek to re-perfect? 86 Underlying my reticence was that it may be said to be odd to allow a secured party to re-perfect under s 68 after the temporary protection period provided for by s 34 may have expired. But Taiping says that having regard to the manner in which s 68 operates, there is no oddity in the result that arises on its construction. That is because the power of a secured party to perfect that is provided by s 68 is subject to a number of significant restrictions, such that its scope is significantly narrower than may appear on first inspection. There is the need to satisfy the various subsections in the provision, the need for there to remain proceeds that it is possible to re-perfect against, and the outer limit of two years for the provision to be enlivened. Further restrictions include the following matters. First, a re-perfection under s 68 would not allow a secured creditor to enforce its security interest in circumstances where the protection in s 68(2) is enlivened. But it is said that this is not applicable here because Diversa was on notice of Taiping's interest. Second, a re-perfection under s 68 would not allow a secured creditor to enforce its security interest against a third party who purchased collateral to which the take free rules in Part 2.5 of the PPSA would apply, which it says is not this case. Third, a notice given under s 68(5) would not enable a re-perfecting secured creditor to take priority under s 68(1) from another secured creditor who can take advantage of s 68(2), which it is said is not this case. Fourth, a re-perfection under s 68 would not be available to assist a secured creditor who has taken too long to register a financing change statement where the proceeds have been dealt with in a way that makes them impossible to trace or identify, exchanged for an item of personal property that the original grantor does not have an interest in, or applied by another secured creditor under s 140, which is not this case. 87 I should say now that some of these points are not completely devoid of merit, but they do not assuage my scepticism concerning Taiping's belated use of s 68. 88 Now at this point I should say something more about s 140 and Taiping's arguments in that context. 89 Taiping points out that s 140 provides protection to a party in the position of Diversa by virtue of s 140(7). Neither condition in s 140(7) is onerous. So, in the case where a party applies proceeds under s 140, and a secured creditor in the position of Taiping later re-perfects its interest under s 68, s 140(7) will typically operate to prevent the secured creditor from claiming in those proceeds from a party in the position of Diversa. And so s 140(7) provides a constraint on the scope of s 68. 90 Now Taiping says that the basis for the inclusion of s 140(7) is readily appreciable. It operates to prevent any unfairness that may arise should a party in the position of Taiping re-perfect its interest and seek to claim against proceeds in circumstances where events have moved on and the proceeds have been applied. But Taiping says that the present case is not a typical case. Taiping says that Diversa has not applied the relevant proceeds but rather quarantined them. That has had the effect of preserving the state of affairs, rather than allowing events to move on. It has resulted in there being no application of proceeds that could trigger the protection in s 140(7). So, Taiping says that Diversa remains vulnerable to Taiping's claim. And it says that there is no oddity that arises from that result. So, although the application of s 68, as Taiping would have it, may appear to be counter-intuitive, given in context that it is a provision that provides only narrow and limited protection for the secured creditor, nonetheless it says that it is enlivened on the unusual facts of the present case. It follows that Taiping's security interest in the quarantined funds regained its priority on 26 May 2020 and still has priority over Diversa's security interest. 91 Let me address another point as to the manner in which s 140 is to be applied. 92 Taiping rejects the notion that the key "snapshot date" for determining how Diversa should apply the money is the date upon which those funds were received. It says that s 140 is a provision that has a temporal dimension. And that dimension does not require that the provision be applied on a once and for all basis on the date on which the funds were received. Rather, what it requires is that whenever the provision is applied, regard must be had as to the situation as at that point of time. That is, the correct application of the provision can only be determined on the date on which the proposed proceeds are being applied. So, Taiping points out that Diversa has not applied the quarantined funds. They remain whole and have not been mixed in with any other moneys. As such, it is said that the task for me is to determine how Diversa should now apply these funds. This requires me to have reference to the waterfall provided for by s 140 and to determine which of the security interests claimed by Taiping and Diversa in the quarantined funds have priority as at today's date. 93 Now Taiping accepts that if s 140 had been applied during the period between when Taiping lost its temporary perfection under s 34, which on Taiping's case is 25 February 2020, and when it re-perfected its security interest on 26 May 2020, Diversa could have dealt with the quarantined funds and satisfied its security interest ahead of Taiping's security interest. In those circumstances, Taiping would have had difficulty having recourse against Diversa because of the immunities available under s 140(7). But Taiping says that Diversa did not proceed in this way. 94 Taiping says that on the application of s 140 today, Diversa is obliged to apply the quarantined funds to make a payment to Taiping after it has paid any priority costs that are payable under ss 140(2)(a) and (b), the quantification of which will be determined by a Registrar of this Court pursuant to the reference which has previously been made by me. 95 Let me now turn to some new arguments which were belatedly raised by Taiping and unpleaded.

New arguments 96 Taiping has put an alternative case involving various bases for it to claim priority over the relevant proceeds in the event that its claim under s 68 fails, principally based on Buhr v Barclays Bank PLC [2001] EWCA Civ 1223, where Arden LJ accepted the primary judge's proposition that security in an asset extends to the proceeds of sale of an authorised disposition by the debtor and an unauthorised disposition effected on behalf of the creditor rather than for the debtor's own account. She then went on and said at [45]: I agree with the judge's conclusion that, if, as here, the mortgagor makes a disposition of the mortgaged property in a manner which destroys the mortgagee's estate in the mortgaged property, a security interest in the property which represents the mortgaged property automatically and as a matter of law comes into existence as from the moment that the mortgagor becomes entitled to that property. To that extent I also agree with Professor Roy Goode. In my judgment, the disposition by the Buhrs was not authorised: their authority from Barclays to sell the mortgaged property could not extend to selling Rectory Farm in a manner which destroyed Barclay's security. 97 It was also observed that "Professor Sir Roy Goode's basic proposition - that security in an asset carries through to its proceeds - is also supported by common sense. If the judge's conclusion is wrong there is a significant lacuna in the law of mortgages" (at [50]). 98 The principle in Buhr has been endorsed in various State intermediate appellate courts and has also been considered by the Full Court of this Court in Commissioner of Taxation v Park (2012) 205 FCR 1. I should say that Park does not entail that the principle in Buhr is not to be applied; see the discussion by Jessup and Katzmann JJ at [102]. 99 Now in considering the application of the principle in Buhr, Taiping says that the following facts are relevant. In July 2018, Taiping lent money to Sargon Capital for the purpose of Sargon Capital acquiring the SEQ shares. As part of this transaction, Taiping was granted security over the SEQ shares. On 6 December 2019, Sargon Capital transferred the SEQ shares to SCAH for nil consideration. Taiping was not asked to and did not provide any release of its security interest in the SEQ shares prior to the transfer. In February 2020, SCAH, under the control of the Diversa receivers, sold the SEQ shares, generating the SEQ proceeds, which ultimately resulted in the quarantined funds. The sale of the SEQ shares occurred without Taiping's consent. On these facts, Taiping says that the principle in Buhr is enlivened, and that that principle gives rise to an equitable charge over the quarantined funds in favour of Taiping which enjoys priority over any interest of Diversa. It has put the following arguments. 100 First, the transfer of the SEQ shares by Sargon Capital to SCAH occurred without Taiping's consent or knowledge, and in circumstances where Diversa was a party to the transaction and was on notice of Taiping's alleged security over the SEQ shares. That transaction was, in the language of Buhr, a disposition "in a manner that destroys the mortgagee's estate in the mortgaged property". Taiping then had existing security over the SEQ shares by reason of the transaction documents entered into as between Taiping and Sargon Capital. The transfer by Sargon Capital to SCAH "destroyed" Taiping's (or the "mortgagee's") direct interest granted to it under the transaction documents (or the "estate") in the SEQ shares (or the "mortgaged property"), even though of course Taiping says that it retained recourse to enforce its security interest under the PPSA and at equity. Taiping says that an equitable charge in Taiping's favour would ordinarily come into existence upon the disposition. And it says that such an equitable charge would typically attach to the "fruits of the mortgaged property", being the proceeds of the SEQ shares. However, a feature of the transfer of the SEQ shares from Sargon Capital to SCAH is that it occurred for nil consideration, with the result that there are no proceeds to which an equitable charge could attach. In those circumstances, so Taiping expressed it, the fruits of the mortgaged property had yet to be plucked from the tree, such that the equitable charge instead attached to the SEQ shares in the hands of SCAH. Significantly, the equitable charge did not come into existence due to a consensual transaction. To the contrary, Taiping did not consent to the transfer of the SEQ shares. As a result, so Taiping said, the equitable charge is an interest that is "created, arises or is provided for by operation of the general law" within the meaning of s 8(1)(c), and exists in parallel to Taiping's interests under the PPSA. 101 Second, Taiping says that upon the sale by the SCAH receivers, the SEQ shares converted into the relevant proceeds. As Goode and Gullifer observe "[s]ecurity in an asset will almost invariably carry through to the proceeds of an unauthorised disposition by the debtor or a third party and will also extend to proceeds of an unauthorised disposition where it is effected on behalf of the creditor rather than for the debtor's own account"; see Goode and Gullifer, Legal Problems of Credit and Security (Sixth edition, 2017) at [1-63]. That is, the proceeds resulting from the sale of the SEQ shares are the fruits of the mortgaged property, such that the equitable charge carried through and attached to those proceeds. 102 Third, as Taiping put it, upon the relevant proceeds being transferred to Diversa and being quarantined, the character of those proceeds did not change, and they remained the fruits of the mortgaged property. As such, Taiping says that there is an equitable charge in Taiping's favour over the proceeds of the SEQ shares in the hands of Diversa, particularly in circumstances where it is said that Diversa was on notice of Taiping's security interest. 103 Fourth, Taiping's security interest takes priority over the quarantined funds by virtue of s 73(1). 104 But there is more. Taiping says that there is another basis upon which an equitable charge in Taiping's favour may have come into existence when, as a result of the sale by the SCAH receivers, the SEQ shares converted into the SEQ proceeds. It says that that sale was, in the language of Buhr, a disposition "in a manner that destroys the mortgagee's estate in the mortgaged property", because Taiping's interest did not follow into the SEQ shares in the hands of their new owner. As a result, and again in the language of Buhr, "a security interest in the property which represents the mortgaged property automatically and as a matter of law comes into existence as from the moment that the mortgagor becomes entitled to their property". That is to say, an equitable charge in Taiping's favour came into existence, which attached to the "fruits of the mortgaged property" being the proceeds of the SEQ shares. It is also said that this alternative equitable charge did not come into existence due to a consensual transaction. 105 Let me now turn to yet another argument of Taiping concerning the second principle in Buhr, where there was held to be an alternative pathway by which the charge could arise (at [49]): The same result as the judge reached could in my judgment be achieved by an alternative route. The Buhrs' disposition was unauthorised. They purported to sell with full title guarantee and thus free from Barclays' charge. Barclays (if indeed it has already done so by commencing these proceedings) could adopt this transaction and thus retrospectively make the Buhrs its agent. In the context of this transaction, the Buhrs would in my judgment then be bound to keep the proceeds of sale separate from their other assets and would hold them (subject to prior charges) on trust for Barclays and so would be bound to account to Barclays for the amount secured by its charge. 106 Taiping says that this alternative route is also applicable by analogy in the present case. 107 It said that Sargon Capital warranted to SCAH as part of the transfer of the SEQ shares that the shares were free from encumbrances. It is said that Sargon Capital so warranted, despite the fact that it was on notice of Taiping's claimed security over the SEQ shares. Moreover, Taiping says that SCAH and Diversa, who were also parties to the transaction, were also on notice of Taiping's claimed security. Thus, so the argument went, Taiping "could adopt this transaction and thus retrospectively make [Sargon Capital] its agent" in respect of the transfer of the SEQ shares. That would, under the second Buhr principle, have the result that Sargon Capital "would…then be bound to keep the proceeds of sale separate from their other assets and would hold them (subject to prior charges) on trust for [Taiping] and so would be bound to account to [Taiping] for the amount secured by its charge". 108 Now of course there were no proceeds arising from the transfer of the SEQ shares to SCAH because that transfer was for nil consideration. So the present case has this point of factual divergence from Buhr. But undeterred, Taiping says that in circumstances where SCAH and Diversa were on notice of Taiping's claimed security over the SEQ shares at the time of both the initial transfer to SCAH and the subsequent disposition, Taiping, through Sargon Capital as its agent, can trace the SEQ shares into the hands of SCAH and into their subsequent proceeds. 109 Accordingly, Taiping says that the second Buhr principle provides a separate basis for Taiping to succeed in its claim, in addition to the other foundations concerning the equitable charge and alternative equitable charge. And this is all put as an alternative case if its reliance on s 68 fails. 110 I should say here that some of these latter propositions and claims go beyond the pleading. It should be apparent that they are being put by Taiping to establish an independent path to priority, by triggering the exclusion under s 8(1)(c) to take the equitable charge(s) asserted outside the general purview of the PPSA, save to invoke s 73 or otherwise apply general law principles as to priority to its advantage.

Analysis 111 I should begin by saying that the relevant primary facts are not in dispute. 112 First, Taiping held an AllPAP security interest in the SEQ shares granted by Sargon Capital on and from the date the SEQ shares were bought by Sargon Capital. 113 Second, Diversa held an AllPAP security interest over the property of SCAH under the Diversa GSD and perfected by registration on the PPSR from 28 June 2019. 114 Third, the SEQ shares were transferred from Sargon Capital to SCAH on or about 6 December 2019, at which time Diversa's security interest pursuant to the Diversa GSD attached to the SEQ shares. 115 Fourth, at the time of such transfer, Taiping had the benefit of the temporary perfection period under s 34 in respect of the security interest initially granted to it in the SEQ shares by Sargon Capital. But it lost that temporary protection. As I say, Taiping no longer relies upon its original case concerning s 34, although it has left in the frame one miscellaneous argument concerning s 34 that I will dispose of later. 116 Fifth, the receivers appointed to SCAH by Diversa sold the SEQ shares to a third party in February 2020. I should note that as a consequence, the SEQ shares were obtained by the purchaser free from any interest held by either Taiping or Diversa, which follows from s 49 which I do not need to linger on. 117 Sixth, the waterfall provisions of s 140 were enlivened once the moneys from the sale of the SEQ shares by SCAH's receivers were received by Diversa, which was on or around 25 February 2020. The evidence before me is that the SCAH receivers transferred the money to Diversa on or around 25 February 2020. 118 On these facts, the principal question is whether Taiping's security interest concerning the SEQ shares, having been initially perfected by registration before Diversa's interest, has priority over Diversa's interest because it was later re-perfected by virtue of the satisfaction of all the requirements of s 68(1). 119 Let me at this point say something about the enforcement of security interests. 120 Upon the SEQ shares being sold and turned into moneys and the remittance of those moneys to the hands of Diversa by the SCAH receivers, there was no property in the hands of the receivers. Chapter 4 then applied. The negation in s 116(1) did not operate, which provides that: This Chapter does not apply in relation to property while a person is a controller of the property in either of the following capacities: (a) receiver; (b) receiver and manager. 121 So, once collateral is realised during enforcement and turned into money which is then in the hands of Diversa, as the secured party, rather than the SCAH receivers, Chapter 4 operated and s 140(2) prescribes how the money is to be distributed. Specifically, priority contests over the collateral that has become proceeds within the meaning of s 140 are resolved by ss 140(2) and (3). 122 Further, the time to determine priority contests between security interests taken over the same collateral is at the time the underlying property is realised. Accordingly, because a priority contest is to be assessed at the time the SEQ shares were sold to a third party, what Taiping attempted to do after 21 or indeed 25 February 2020 is of no consequence. 123 Now given that Taiping's security interest does not enjoy the benefit of temporary perfection under s 34(1) in terms of the argument as originally formulated, Diversa's security interest would normally as a consequence of s 55(3) have priority over Taiping's security interest, which provides that a perfected security interest in collateral has priority over an unperfected security interest in the same collateral. But Taiping asserts that it is nevertheless entitled to priority because it has triggered s 68. But I reject Taiping's case on that aspect. 124 Once the SEQ shares had been transferred to the third-party purchaser free of any security interests by virtue of the sale by the SCAH receivers, and once the associated net sale proceeds had been received by Diversa, SCAH had no interest in either the SEQ shares or the proceeds other than a right to participate in any surplus flowing from any distribution to creditors in accordance with s 140(2)(f). There was no "collateral" of SCAH in the sense of personal property of SCAH to which a security interest attached. Moreover, SCAH's right to any surplus under s 140(2)(f) does not and did not at any time constitute "proceeds" as s 31(3) makes clear. 125 Let me say something about s 31. As a general proposition, a security interest continues in collateral unless and until extinguished or the collateral is "taken free" (Pt 2.5). However, consistent with the scheme of s 140, proceeds from enforcement do not fall within this general rule. Section 31(1) defines the word "proceeds" as I have already set out. But the definition of "proceeds" is expressly subject to s 31(3) which I have also set out. So, the moneys received by Diversa from enforcement are not "proceeds" within the meaning of s 32(1) to the extent that on and from 25 February 2020 they were governed by s 140. I would also note that the very reference to proceeds in s 140(1) is using a different concept, "within the ordinary meaning of that term", than the s 31 concept. This indicates that moneys generated from enforcement held by Diversa are not under s 31. 126 Consequently, following the sale of the SEQ shares by the SCAH receivers and the receipt by Diversa there was no "transferred collateral" as that term is used in s 68. Further, it was not possible under s 68 for Taiping to re-perfect its interest in the SEQ shares or any proceeds. At the time of such a purported re-perfection, SCAH no longer had any rights in the SEQ shares or any proceeds, other than with respect to any s 140 surplus. There was no collateral or transferred collateral. 127 Now s 68(1)(d) required Taiping to re-perfect its security interest in the SEQ shares by the time of the third-party sale. But Taiping attempted to comply with s 68(1)(d) by lodging registrations after the sale date. And in respect of such registrations specifying SCAH as grantor, the registrations were incapable of perfecting any security interest held by Taiping. Moreover, any entitlement SCAH may have had under s 140 to the surplus does not constitute "transferred collateral" as that term is used in s 68. 128 Moreover, any security interest granted by SCAH in any s 140 surplus would, were it to have been granted, be a new security interest or a security interest over new collateral. It would not be the continuation of any security interest in the SEQ shares. But in any event there was no such grant. 129 Let me briefly dispose of some other points. 130 First, Taiping's reference to the take-free provisions are a red-herring. They are all about collateral and following it through in various forms. As Ms Vanessa Whittaker SC colourfully put it, they are all about transfers where the merry-go-round is still in motion. But we are at a point where the merry-go-round has stopped and s 140 and Chapter 4 are in operation. Sections 41 to 43 have little to do with the matter. 131 Second, and I will elaborate on this in the context of the Buhr arguments, Diversa did not have notice of Taiping's interest at the time it received the proceeds on 25 February 2020. 132 Third, and contrary to Taiping's assertions, Diversa has not "quarantined" the funds in the manner suggested. All that has occurred is that the funds held by Diversa have not yet been applied in accordance with the s 140 statutory waterfall. But to say this does not entail that Taiping has any PPSA interest whatsoever in such s 140 funds. 133 In summary, although Taiping claims that its security interest has priority over the proceeds because it complied with s 68 by having re-perfected by registration its interest in the SEQ shares and any proceeds thereof "in the hands of SCAH as the transferee of the SEQ shares" on 26 May 2020, and given notice to Diversa in the form required by s 68(5), I agree with Diversa that it was not possible for Taiping to have perfected or re-perfected any interest in the SEQ shares or their proceeds after their sale in February 2020, and accordingly, applying s 140 and the priority rules in s 55 as at the date of the sale, Diversa's perfected security interest has priority over that of Taiping. 134 Let me turn to a different topic. In terms of the questions raised concerning permutations of the application of various principles raised in Buhr, I would note the following. 135 First, many of the matters raised by Taiping in this context concerning the non-consensual creation of various alternative equitable charges have not been pleaded by Taiping. These various Buhr questions were first raised by Mr Hamish Austin QC during supplementary closing submissions. Further, if they had been raised earlier then there was a realistic chance, as Ms Whittaker SC put it, that evidence may have been called concerning Diversa's knowledge of Taiping's continued interest. 136 Second, the acceptance of the various Buhr arguments would require adjudication between a prior equitable interest (the various permutations of an equitable charge) and a subsequent legal interest and a resolution of the question of priority perhaps under s 73 or indeed in a fashion exogenous to the PPSA. But on that aspect and on the evidence as currently framed, the subsequent legal interest of Diversa would have priority absent notice or other conduct on the part of Diversa that may justify a postponement. And on that aspect, I am not satisfied that there was such notice or other conduct by Diversa at the time Sargon Capital transferred the SEQ shares to SCAH or at the time SCAH's receivers sold the SEQ shares and then accounted for the proceeds to Diversa. The first time notice was given was on 2 June 2020, being a time after the fresh registration on 28 May 2020. Further, material before me indicates that on 19 November 2019 Diversa's solicitors sought clarification from Sargon Capital's solicitors that the SEQ shares were not caught by Taiping's security, and Sargon Capital's solicitors so confirmed. 137 Finally, let me dispose of one other argument. Taiping say that alternatively, and only insofar as the receipt of the SEQ proceeds by Diversa on 3 June 2020, being the date of a letter from ABL to Ashurst in which it was confirmed that the Diversa receivers had arranged for SCAH to sell the SEQ shares for AUD 4.3 million, that AUD 4.19 million was paid on 25 February 2020, and the balance was paid to the Diversa receivers, might be characterised as a transfer of collateral concerning the SEQ proceeds within s 34, Taiping acquired actual or constructive knowledge required to perfect or re-perfect its security interest in the SEQ proceeds as against Diversa within the meaning of s 34(1)(c)(ii) and did so perfect or re-perfect that interest within the meaning of s 34(2) by virtue of registering its security interest in the SEQ proceeds on or about 5 June 2020. This argument is specious. After 25 February 2020 and when the relevant proceeds were in the hands of Diversa to be applied under s 140, there was no further work for s 34 to do. 138 In summary, Diversa is entitled to the SEQ proceeds.

The Madison shares dispute 139 It is necessary to begin with some further background facts.

Some further facts 140 On 20 February 2018, Mr Phillip Kingston, in his capacity as sole director of TTIM, issued a drawdown request to Taiping in accordance with the terms of the secured promissory note to draw down an amount of AUD 50,000,100 for the purpose of TTIM acquiring 333,334 preference shares in Sargon Capital. I should note that Mr Kingston was also a director of SCAH, sole director of TTIM and director of Sargon Capital at all material times. Taiping approved the drawdown request. 141 The preference shares were to be acquired by TTIM from TCFM as trustee for the Trimantium Sargon Investment Trust and then held by TTIM which had entered into a general security deed providing security to Taiping over all of its current and future assets. 142 On 21 February 2018, AUD 50,000,100 was deposited into a term deposit in the name of TCFM. 143 On 28 February 2018, SCAH, Sargon Capital, FPWS Pty Ltd and Pharos Financial Group Pty Ltd entered into a share sale deed pursuant to which FPWS agreed to sell to SCAH 20 fully paid ordinary shares in WealthPortal Pty Ltd, Pharos agreed to sell to SCAH 849,300 fully paid ordinary shares in Madison Financial Group Pty Ltd and 100 fully paid ordinary shares in ProActive Portfolios Pty Ltd, and Sargon Capital provided a guarantee and indemnity in favour of FPWS and Pharos as surety for SCAH's obligations under the Madison sale deed. 144 On 13 March 2018, the term deposit in the name of TCFM matured and the principal amount of AUD 50,000,100 and associated interest were transferred to a bank account held with ANZ in the name of TCFM. 145 On 29 March 2018, the market department of Taiping submitted an approval application report on signing the Sargon Capital secured promissory note documents and releasing funds for Sargon Capital's acquisition of Madison, which was then approved by Taiping. 146 On 9 April 2018, Taiping registered its security interest against all of the current and future property of Sargon Capital on the PPSR. 147 On 10 April 2018, the purchase under the Madison sale deed completed, with TCFM paying AUD 12,874,631 to the vendors. This payment by TCFM to the vendors was recorded as a loan from Sargon Capital to SCAH within Sargon Capital's general ledger. 148 On 14 April 2018, Mr Kingston of SCAH sent an email to Mr Andy Wang of Taiping, who was on 11 May 2018 appointed a director of Sargon Capital on the nomination of Taiping, which relevantly stated: In the meantime, on April 10th, 2018, with Taiping's permission, we have acquired 100% of the shares in Madison Financial Group and have pledged those shares to Taiping, with original share certificates posted via registered post to Taiping in Hong Kong. 149 Shortly after receipt of this email, and as anticipated by it, Taiping received from SCAH the original share certificates for the shares held by SCAH in each of WealthPortal, ProActive, Madison and AdviceNet Pty Ltd, and Madison share certificates and Madison shares respectively, as well as blank share transfer forms for the shares in each of those companies executed by both of the directors of SCAH. The shares in AdviceNet were not acquired as a result of the Madison sale deed, but were nonetheless registered in SCAH's name on 3 May 2018, being the same date that the other Madison shares were registered. This does not affect the analysis. 150 On 27 April 2018, Sargon Capital entered into the Taiping GSD in order to further secure the performance of the obligations of TTIM and Sargon Capital under the secured promissory note. 151 On 28 April 2018, there was a retrospective approval of the drawdown request to complete the acquisition of the Madison shares. 152 On 28 June 2019, Diversa and SCAH entered into the Diversa GSD. 153 On 2 December 2019, 19 December 2019 and 20 January 2020, letters of demand were issued by Ashurst on behalf of Taiping to notify TTIM, Sargon Capital and Mr Kingston that events of default had arisen under the secured promissory note, and to demand payment of the amount owing. These demands were not complied with. 154 As I have said, on 29 January 2020 Taiping appointed the Sargon Capital receivers. On 3 February 2020, voluntary administrators were appointed to various companies in the Sargon Group, including SCAH. And on 4 February 2020, Diversa appointed receivers and managers to SCAH. 155 From 4 February 2020 to 26 June 2020, the Diversa receivers sought to market and sell the Madison shares in the enforcement of the Diversa GSD. 156 On 14 May 2020, SCAH was placed in liquidation. 157 On 14 May 2020 and 25 May 2020, Taiping made additional registrations of its security interests against SCAH on the PPSR, relating to the Madison shares. Taiping says that these registrations are not critical given that Taiping had earlier perfected its security interest over the Madison shares by control. 158 On 2 June 2020, the Diversa receivers caused SCAH to enter into a share sale deed with Clime Investment Management Limited concerning the sale of the Madison shares. Taiping did not consent to SCAH entering into the Clime sale deed. By the terms of the Clime sale deed, it was agreed that the performance of the parties' obligations under the Clime sale deed was to be subject to the receipt of either a court order requiring completion and transfer or written consent from Taiping to the sale of the Madison shares to Clime pursuant to the terms of the Clime sale deed. 159 On or about 24 June 2020, Taiping entered into an agreement with Diversa pursuant to which it would provide its written consent to enable SCAH to satisfy the terms of the Clime sale deed, with the proceeds held in a controlled moneys account and "each party's entitlement to the proceeds ... to be determined based on the same priority as the party has in the MFG shares". 160 On 26 June 2020, the completion of the sale of the Madison shares to Clime occurred pursuant to the terms of the Clime sale deed, with the original share certificates for the Madison shares being delivered by Taiping to Clime on settlement. The final consideration for the sale of the Madison shares to Clime was AUD 4,900,000, with AUD 2,259,817 of that amount paid at completion of the sale, with the remainder to be paid over the following 24 months. 161 The money received at settlement of the sale of the Madison shares to Clime was paid into, and remains in, an Ashurst controlled moneys account pending resolution of the dispute between Diversa and Taiping. 162 It is now necessary to turn to the arguments.

Arguments and analysis 163 Taiping's primary submission with respect to the Madison dispute is that the provision of the Madison shares to Taiping pursuant to what was said to be the Madison shares security agreement on or around 14 April 2018 constituted the grant of a security interest by SCAH in those shares and any proceeds thereof in favour of Taiping. 164 Further, Taiping says that since the delivery of the Madison shares and Madison share transfer forms, Taiping's security interest in the Madison shares, and any proceeds thereof, has been perfected by control within the meaning of the PPSA. 165 The significant events that took place on or around 14 April 2018 are the following. One has the sending of an email from Mr Kingston of SCAH to Mr Wang of Taiping on 14 April 2018 which I have already set out. Further, there was the subsequent delivery of the Madison share certificates and the Madison share transfer forms by SCAH by way of registered post to Taiping in Hong Kong. Moreover, there was no request for the Madison share certificates and Madison share transfer forms to be returned to SCAH, for example, on the basis that the Madison share certificates were accidentally provided by SCAH to Taiping. 166 I should say now that I accept Taiping's case on this aspect. In my view, these events have the result of giving rise to what is pleaded as arising by conduct and to be implied as the Madison shares security agreement in the cross-claim, which is that in or about April 2018, to further secure the performance of the obligations of TTIM and Sargon Capital under the secured promissory note, it was agreed by Taiping and SCAH that SCAH would grant to Taiping a security interest over the shares which SCAH had acquired in Madison, AdviceNet, WealthPortal and ProActive, namely, the Madison shares, and SCAH would do so by delivery to Taiping of a first-ranking security interest in favour of Taiping of the title documents and executed blank share transfer form. 167 Let me turn next to the statutory concept of a security interest. 168 Section 12 addresses the meaning of a "security interest", relevantly stating: (1) A security interest means an interest in personal property provided for by a transaction that, in substance, secures payment or performance of an obligation (without regard to the form of the transaction or the identity of the person who has title to the property). (2) For example, a security interest includes an interest in personal property provided by any of the following transactions, if the transaction, in substance, secures payment or performance of an obligation: (a) a fixed charge; (b) a floating charge; (c) a chattel mortgage; (d) a conditional sale agreement (including an agreement to sell subject to retention of title); (e) a hire purchase agreement; (f) a pledge; (g) a trust receipt; (h) a consignment (whether or not a commercial consignment); (i) a lease of goods (whether or not a PPS lease); (j) an assignment; (k) a transfer of title; (l) a flawed asset arrangement. … 169 As may be observed, for an interest to be a security interest, the first requirement is that the interest is in personal property. The property in question was the Madison shares, the proceeds thereof and potentially the Madison share transfer forms and the share certificates. Now Diversa accepts that the Madison shares and any proceeds thereof satisfy the definition of "personal property", but disputes that the Madison share certificates and share transfer forms satisfy that definition. Now given that the Madison share certificates and share transfer forms were part of the means by which Taiping held the necessary "control" or "possession" of the Madison shares so as to perfect its security interest, I do not need to resolve this question. But it is nevertheless useful to consider the concept of "personal property" and s 10 which relevantly defines "personal property": personal property means property (including a licence) other than: (a) land; or (b) a right, entitlement or authority that is: (i) granted by or under a law of the Commonwealth, a State or a Territory; and (ii) declared by that law not to be personal property for the purposes of this Act. … 170 As may be observed, the definition is broadly expressed. Subject to the exceptions, "personal property" means "property". The broad meaning of "personal property" is amplified by other provisions of the PPSA. In particular, "financial property" is defined in s 10 to mean any of the following personal property, namely, chattel paper, currency, a document of title, an investment instrument and a negotiable instrument. Each of these terms are themselves defined in s 10. The definition of "investment instrument" is relevantly defined to mean "a share in a body, or a debenture of a body" and "an assignable option to have an allotment of an investment instrument (apart from this paragraph) made to the holder of the option". 171 The following general observations may be made concerning the interpretation of s 12. 172 First, s 12(1) is expressed in broad terms, consistent with the evident purpose that no narrow or constrained view should be taken. 173 Second, the examples included in s 12(2) do not set the boundaries of the interests that the terms of s 12(1) may capture, but rather may broaden the scope of s 12(1). 174 Third, the only limitations upon the application of the provision are those found in s 12(5), none of which are presently applicable to this matter. But I would note that the presence of s 12(5) also indicates that the legislature turned its mind to the boundaries of what a security interest may include, and there is no basis to introduce any further limitations. 175 In my view, s 12(1) applies to the present dispute and the Madison shares security agreement resulted in SCAH granting to Taiping a security interest within the meaning of s 12 over the Madison shares. The relevant "personal property" is the Madison shares. The relevant transaction that gives rise to an interest is the provision of that property, together with the Madison share certificates and the Madison share transfer forms, pursuant to the Madison shares security agreement. That agreement, in substance, secured payment or performance of an obligation, the obligation being the repayment of the funds the subject of the authorisation and draw down of funds under the secured promissory note. The "grantor" was SCAH, the "secured party" was Taiping, and the "collateral" was the Madison shares, consistently with the s 10 definitions. Let me elaborate on some aspects. 176 In my view, SCAH was properly characterised as the "grantor" of the security interest to Taiping. Limb (a) of the s 10 definition of "grantor" is as follows: a person who has the interest in the personal property to which a security interest is attached (whether or not the person owes payment or performance of an obligation secured by the security interest);… 177 Clearly, the grantor does not need to be the debtor. Indeed, s 10 has a separate definition of "debtor" and the PPSA generally distinguishes between the two concepts. 178 First, the Madison share certificates that were provided to Taiping expressly state that the shares are owned by SCAH. So for example, share certificate No 40 which is associated with shares in Madison states: SC AUSTRALIAN HOLDINGS 1 PTY LTD of Level 9, 287 Collins St Melbourne VIC 3000 is the registered holder of eight hundred and forty-nine thousand three hundred (849,300) fully paid ordinary shares in the capital of MADISON FINANCIAL GROUP PTY LTD subject to its constitution and no amount is unpaid on the shares. 179 Similarly, the associated Madison share transfer form states that the "Company" is "MADISON FINANCIAL GROUP PTY LTD (ACN 002 459 001)" and the "Transferor" is "SC Australian Holdings 1 Pty Ltd ACN 624 531 237". 180 Second, in the part of the Madison share transfer form titled "Transferor Signs Here", the Share Transfer Form states "EXECUTED by SC Australian Holdings 1 Pty Ltd ACN 624 531 237 in accordance with s 127(1) of the Corporations Act 2001 (Cth) by authority of its directors". Each form is then signed by both directors of SCAH, Mr Kingston and Mr Aron D'Souza in their capacity as such. 181 Third, as evidenced by the email sent on 14 April 2018, Mr Kingston, a director of SCAH, authorised and arranged for the Madison share certificates to be delivered to Taiping. 182 Accordingly, on an ordinary application of s 12(1), Taiping was given a security interest over the Madison shares. 183 Further, the relevant transaction answers the description of variously expressly enumerated categories of security interest referred to in s 12(2), including a "pledge". 184 The relevant transaction involves a "pledge" (s 12(2)(f)) as it involves personal property delivered as security for the payment of a debt or the discharge of some obligation. In this respect, it would be supererogation to add to the analysis of Ormiston J in Australia and New Zealand Banking Group Ltd v Curlett, Cannon and Galbell Pty Ltd [1992] 2 VR 647 at 653 to 654: In my opinion the definition of a pledge has been and should be more broadly stated. Judicial definitions are few and far between (outside the United States), but Willes J. said in 1868, on behalf of the Court of Exchequer Chamber consisting of himself, Blackburn, Keating, Montague Smith and Lush JJ., that a pledge was a transaction intermediate between a lien and a mortgage, "where by contract a deposit of goods is made a security for a debt": Halliday v. Holgate (1868) LR. 3 Ex. 299, at p. 302. Not dissimilar language was used by Cohen J. recently in Askrigg Pty. Ltd. v. Student Guild of the Curtin University of Technology (1989) 18 N.S.W.L.R. 738, at p. 743. Wider language, however, has been used in all four editions of Halsbury's Laws of England: "A 'pawn' or 'pledge' is a bailment of personal property as a security for some debt or engagement": 4th ed., vol. 36, para. 101. The breadth of obligation which may be secured is supported in other works of authority: R.H. Coote, Law of Mortgage, 9th ed., (1927) vol. II, pp. 1458-59, and W.R. Fisher and J.M. Lightwood, The Law of Mortgage, 7th ed, p. 108; and see N. E. Palmer, Palmer on Bailment, 2nd ed., p. 1379, footnote 1. The authority cited in each case is that eminent judge and jurist, Mr. Justice Story of the United States Supreme Court, in his work on Commentaries on the Law of Bailments, and in particular, para. 286 of each of the editions of his work. In the 9th ed. (1878) of his work, Story discusses definitions of pledges confined to securities for debts and continues, at para. 286: "The foregoing definitions are sufficiently descriptive of the nature of a pawn or pledge. They are, in terms, limited to cases where a thing is given as a mere security for a debt; but a pawn may well be given as security for any other engagement. The definition of Domat is, therefore, more accurate, because it is more comprehensive; namely, that it is an appropriation of the thing given for the security of an engagement. (1 Domat, B3, Tit. l, para. l, Art. 1.). In the common law, it may be defined to be a bailment of personal property, as a security for some debt or engagement". … Despite the lack of recent authority there seems no reason to doubt the correctness of the width of Story's proposition. … 185 On any view, for the purposes of Australian law the circumstances in which the Madison share certificates and the Madison share transfer forms were provided to Taiping answer the description of a "pledge"; I do accept though that there may be differences under English law. 186 Further, the relevant transaction involves an equitable mortgage or charge over personal property. In this case, there has been a delivery to Taiping of the Madison share certificates and Madison share transfer forms. These circumstances give rise to an equitable mortgage over the Madison shares. Indeed such a mortgage may arise by a deposit of title deeds with or without a signed transfer in blank. There is little doubt that an equitable mortgage can arise from a deposit of title deeds, where the deposit is made with the intent to grant or confer a security. Further, no writing is necessary. This form of security is so common that the Diversa GSD itself required that SCAH deliver the Madison share certificates to Diversa at the time of the Diversa GSD, together with blank executed transfer forms. 187 Generally, the deposit of title deeds as security for a third party's debt is effective in equity; see World Tech Pty Ltd v Yellowin Holdings Pty Ltd (1992) 5 BPR 11,729 at 11,732 per McLelland J and In re Wallis & Simmonds (Builders) Ltd [1974] 1 WLR 391 at 398 per Templeman J. And to the extent that intention is required to confer security, one can rely upon the presumption discussed in both World Tech and Wallis where the deposit of title deeds can give rise to a presumption as to the creation of an equitable mortgage or charge. For completeness I note that Theodore v Mistford Pty Ltd (2005) 221 CLR 612 discussed the proposition that upon receipt of title deeds or similar instruments, a rebuttable presumption may arise whereby the court can presume that the depositing party intended to create a security, but ultimately left the question open (at [24]). In my view, in the case before me there is a rebuttable presumption that has not been rebutted. But putting to one side the question of a presumption, I would be prepared to infer from the evidence the requisite intention on the part of SCAH to grant the security in favour of Taiping in any event. For completeness, in the present context what I have described as an equitable mortgage could also be described as an equitable charge if it is said that the deposit did not result in any transfer of the equitable estate. But for present purposes I do not need to linger on any such distinctions or whether we are also in the realm of a lien. 188 In summary, in my view on one or more of the above bases, Taiping held at the relevant time a security interest in the Madison shares. 189 Further, in my view Taiping's security interest has been perfected by control or possession at all relevant times, including both prior to and following the sale of the Madison shares. Prior to the sale of the Madison shares, Taiping's security interest was perfected because the conditions in s 21(1)(b) were satisfied, namely, that its interest attached to the Madison shares was enforceable against third parties and because the conditions in s 21(2) were satisfied. In this regard, two points can be made. First, Taiping's interest was perfected by control. It had "control", as contemplated by s 21(2)(c)(iii), of the Madison shares within the meaning of that term as defined by s 27(3), which provides in essence that a person has control of an investment instrument that is evidenced by a certificate if that person has possession of the instrument and is able to transfer the instrument to itself, or to another person, or otherwise deal with the instrument. Second, Taiping's interest was perfected by possession. It "possessed", as contemplated by s 21(2)(b), the Madison shares within the meaning of that term as affected by s 24(6). So, by virtue of Taiping having control of and/or possessing the relevant property, the conditions in s 21(2)(b) and (c) were satisfied. 190 Now following the sale of the Madison shares, it is to be noted that the agreement of the parties that allowed the sale of the Madison shares included the acknowledgment that each party's entitlement to the relevant proceeds were to be determined based on the same priority as each party had in the Madison shares. 191 In my view, and given that Taiping's interest was perfected by control, Taiping's interest over the Madison shares and any proceeds thereof has by virtue of s 57 at all times had priority over the Diversa security interest, which was perfected only by registration and only on 28 June 2019. Section 57 provides: (1) A security interest in collateral that is currently perfected by control has priority over a security interest in the same collateral that is currently perfected by another means. (2) Priority between 2 or more security interests in collateral that are currently perfected by control is to be determined by the order in which the interests were perfected by control (where the perfection by control has been continuous). (2A) A perfected security interest (the priority interest) in the proceeds of original collateral has priority over any other security interest in the proceeds, except a security interest in the proceeds as original collateral that is perfected by control, if: (a) the security interest in the first‑mentioned original collateral was perfected by control when the collateral gave rise to proceeds; and (b) the priority interest is not perfected by control. (3) This section applies despite the application of any other provision of this Part. 192 Further, the outcome would be the same if Taiping possessed the Madison shares, by virtue of the relevant priority time for Taiping's interest being earlier than the Diversa security interest; see ss 55(4) and (5) which I have set out earlier. 193 Now Diversa denies the existence of any security agreement or interest in favour of Taiping. Diversa does not deny the existence of Mr Kingston's 14 April 2018 email or the posting to and receipt by Taiping of the relevant share certificates and executed blank share transfer forms. But Diversa denies that the Kingston email and share certificate provision gave rise to a security agreement with SCAH as grantor and Taiping as secured party. It is said that the mere passing of possession does not create a security agreement between SCAH and Taiping. 194 In summary, Diversa makes the following points. First, Taiping bears the onus of demonstrating the existence of the security interest and that it attaches to the personal property in issue (s 296(a)). Second, SCAH is not a party to the secured promissory note. Third, under that note, TTIM is contractually obliged itself to deliver to Taiping a duly executed "General Security Agreement" in registrable form in relation to the assets of TTIM and all documents and evidence of title to the property the subject of such security agreement (cl 2(f)(i)(1)). Fourth, contrary to cl 2(f)(i)(1) of the secured promissory note, no "General Security Agreement" was entered between Taiping and TTIM. Instead, on or about 27 April 2018, Sargon Capital granted Taiping an AllPAP security interest over its personal property, in the Taiping GSD. Fifth, SCAH is not a party to the Taiping GSD. And sixth, the Kingston email that Taiping points to is signed off by Mr Kingston as: Founder and Managing Director, Trimantium GrowthOps Ltd (ASX:TGO) Co-Founder and Managing Director, Sargon Capital 195 But importantly, according to Diversa, no reference is made to SCAH in any of these documents, including the Kingston email, notwithstanding that SCAH owned the Madison shares at all material times. In those circumstances, Diversa says that there was no agreement or acceptance by SCAH to agree to provide security for another entity's debts. 196 It is said that nothing in the Kingston email purports to create any agreement between SCAH and Taiping. And it is said that the fact that Mr Kingston sought to discharge obligations owed by Sargon Capital to Taiping using property other than that belonging to Sargon Capital might reflect at the least a misunderstanding on his part. But it is said that I cannot be satisfied that SCAH's intention, whether assessed subjectively or objectively, was to create a security interest between SCAH and Taiping. 197 Now as to s 12(1), Diversa prays in aid Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (2014) 49 VR 86 at [107] where Santamaria JA blessed the four necessary and sufficient conditions for a "security interest" identified by Professor John Stumbles being: (a) an outstanding existing monetary or non-monetary obligation; (b) an "in substance security" to support the performance of that obligation; (c) that the security must amount to an "interest" in personal property; and (d) that the interest must arise out of a transaction. 198 Now in respect of condition (a), Diversa says that there is no dispute that Sargon Capital owed Taiping money under the secured promissory note. But Diversa says that whilst the party owing the obligation can be different from the party granting a security interest over personal property, it must be clear, as a matter of contract, that the grantor (not the debtor) is agreeing to encumber its own property to support the satisfaction of another's obligations (s 18(1)). 199 In the present case, Diversa says that it is not necessary to seek to construe the terms of the agreement between SCAH and Taiping with a view to ascertaining whether or not a security interest arises because there was no agreement between SCAH and Taiping. 200 Now Diversa accepts that the holding of original share certificates is one of the means by which a security interest over shares can be perfected by the secured party under the PPSA. But the means of perfecting a security interest does not speak to whether or not a security interest exists in the first instance. It merely speaks to whether or not the secured party has complied with s 21. 201 Diversa says that the same observation is true in respect of security interests that are perfected by registration. All that a registration on the PPSR requires is that (s 151(1)): … the person believes on reasonable grounds that the person described in the statement as the secured party is, or will become, a secured party in relation to the collateral (otherwise than by virtue of the registration itself). 202 The concluding words in parentheses make this point. It is not the act of lodging a registration which creates the security interest. The step to perfect a security interest is an additional and separate step in order to comply with the requirements of the PPSA. 203 In summary, Diversa says that because there is no security interest between SCAH and Taiping, any contest between Diversa and Taiping as to who is entitled to the Madison shares is not resolved by the PPSA, and accordingly s 57 has no application. 204 In summary, I reject Diversa's arguments. There are various matters that support the existence of the Madison shares security agreement, namely, the repayment obligation arising from the funding of TTIM/Sargon Capital to purchase the Madison shares, the Kingston email, the delivery of the Madison share certificates and Madison share transfer forms by SCAH by way of registered post to Taiping in Hong Kong, and the absence of any request for those documents to be returned to SCAH. And it hardly needs to be said that the relevant events must be considered in context. 205 First, the funding for the purchase of the Madison shares was pre-approved by Taiping under the secured promissory note and was duly provided, albeit that the Madison shares ended up being held by SCAH, not TTIM or Sargon Capital. 206 Second, the Kingston email was sent in which Mr Kingston stated that the Madison shares had been "pledged to Taiping, with original share certificates posted". 207 Third, shortly after the receipt of the Kingston email, Taiping received by post from SCAH the Madison share certificates and the Madison share transfer forms. That is to say, what happened aligned with what Mr Kingston stated would occur in the Kingston email. 208 Further, it is not merely the posting to and receipt by Taiping of the Madison share certificates and Madison share transfer forms that is significant, but also the context and content of those documents. The Madison share certificates expressly state that SCAH was the owner of the Madison shares. The Madison share transfer forms expressly state that SCAH was the "transferor" of the Madison shares. The Madison share transfer forms were executed by SCAH by authority of its directors, Mr Kingston and Mr D'Souza, who both signed each of the five Madison share transfer forms. 209 Now Diversa focuses on the email sign off Mr Kingston used when sending the Kingston email. But in doing so, Diversa prioritises form over substance. Mr Kingston was a director of SCAH. Mr Kingston stated in the Kingston email that the Madison shares were pledged and posted to Taiping, shortly before the constituent documents were received by Taiping by post from SCAH. SCAH executed the Madison share transfer forms. Mr Kingston and Mr D'Souza signed the Madison share transfer forms in their capacity as directors of SCAH. What happened here is not a mere passing of possession, but rather part of the course of conduct making up the Madison shares security agreement. The email sign off Mr Kingston used does not alter that conclusion. It may also be noted that throughout the body of the email Mr Kingston referred to "Sargon" in general terms. 210 Now Diversa asserts that Mr Kingston as the mutual director did not turn his mind to the difference between Sargon Capital and SCAH. It is then submitted that the effect of that assertion is that SCAH did not consent to the relevant transaction, and that the terms of s 12(1) are therefore not satisfied. But I reject this submission. 211 The Madison purchase completed on 10 April 2018, the Kingston email was sent on 14 April 2018, and the Madison share certificates and Madison share transfer forms were received by Taiping shortly after that date. This indicates that the Madison share transfer forms were drafted around that period. The capacity in which Mr Kingston signed the Madison shares security agreements, as director of SCAH, is clear from the text of the documents. To the extent the question of whether Mr Kingston turned his mind to the difference between Sargon Capital and SCAH is at all relevant, the evidence shows that he was conscious of the distinction. In any event, irrespective of whether Mr Kingston turned his mind to the difference between Sargon Capital and SCAH, the relevant intention is manifested by the relevant events and documents. In particular, the Madison share transfer forms are executed by SCAH, by authority of its directors, in a manner expressly stated to be in accordance with s 127(1) of the Corporations Act, enlivening the protections provided by s 129(5). It would be wrong to suggest that the express intention of SCAH evidenced in the Madison share transfer forms and the other events Taiping relies upon could somehow be displaced by the assertion to which Diversa points. 212 Further, it would be counter-intuitive for the fact that Mr Kingston was associated with both Sargon Capital and SCAH to operate against Taiping, the innocent party; cf the spirit of ss 127(1) and 129(5). That is particularly so where SCAH is indebted to Sargon Capital with respect to the Madison shares, evidencing a commercial nexus. SCAH owed Sargon Capital AUD 12,874,601 in connection with the flow of funds to purchase the Madison shares; see Mr Fraser's evidence and the journal entry which refers under the ID No. to "Madison payment", and has the account name of "Loan to SC Aust Holdings 1" in the amount of AUD 12,874,601. 213 Further, SCAH is a subsidiary of Sargon Capital, Mr Kingston was the controlling mind of both companies, and Sargon Capital and SCAH operated with a unity of purpose pursuant to which SCAH was able to obtain access to funding provided by Taiping, which it did not otherwise have access, to purchase the Madison shares. It can be for the benefit of solvent companies in a group to guarantee the liabilities of a holding company in order to benefit the guarantor companies as well as other members of the group. I also note s 187 of the Corporations Act and the associated principles, including that benefits to the company indirectly, which accrue to the company through benefits to the group as a whole, if they are real, may be taken into account. 214 Further, the party owing the relevant obligation may be different from the party granting the interest. It is clear that SCAH as grantor was agreeing to encumber its own property, the purchase of which had been funded by Taiping. So much is clear from the executed Madison share transfer forms. Further, SCAH's provision of security ensured that the benefit of funds would be available to the Sargon corporate group, of which Sargon Capital was the holding company, with SCAH thereby acting in the best interests of Sargon Capital. 215 Further, the delivery of the constituent documents was not made ignoring the fact that SCAH owned the Madison shares. That ignores the text of the Madison share transfer forms and Madison share certificates, which expressly address the ownership of the Madison shares by SCAH. 216 In summary, Taiping had at all relevant times under s 12 a security interest which was perfected by possession or control. Accordingly, its security interest has priority over Diversa's security interest under s 57. 217 Let me now flip the analysis and deal with a scenario, which was raised during the course of argument and regrettably by me given an alternative pathway that I perceived to be potentially open, where it is said that although Taiping has some form of equitable security, it is not a security governed by s 12 because s 8(1)(c) applies. In other words, I am faced with a priority dispute between a PPSA security interest and a non-PPSA security interest for want of a better description. 218 Now Taiping says that if it holds an equitable security interest, but it is one subject to the s 8(1)(c) exclusion, it should take priority to the Diversa security interest by virtue of s 73(1). Section 73(1) is drafted in broad terms, and as is stated in the note to the subsection, it includes a priority interest which "might be an interest to which this Act would otherwise not apply (see subsection 8(2))". Section 73(1) provides: An interest (the priority interest) in collateral has priority over a security interest in the collateral if: (a) the priority interest arises (by being created, arising or being provided for): (i) under a law of the Commonwealth, a State or a Territory, unless the person who owns the collateral in which the priority interest is granted agrees to the interest; or (ii) by operation of the general law; and (b) the priority interest arises in relation to providing goods or services in the ordinary course of business; and (c) the person who holds the priority interest provided those goods or services; and (d) no law of the Commonwealth, a State or a Territory provides for the priority between the priority interest and the security interest; and Example: A law of the Commonwealth, a State or a Territory to which subsection (2) applies is a law that provides for the priority between the priority interest and the security interest. (e) the person who holds the priority interest acquired the interest without actual knowledge that the acquisition constitutes a breach of the security agreement that provides for the security interest. Note: The priority interest might be an interest to which this Act would otherwise not apply (see subsection 8(2)). 219 I will return to s 73 later, but for the moment let me focus on s 8 and its interaction with s 12. 220 Section 8(1)(c) provides: Interests to which this Act does not apply (1) This Act does not apply to any of the following interests (except as provided by subsection (2) or (3)): … (c) a lien, charge, or any other interest in personal property, that is created, arises or is provided for by operation of the general law… 221 The term "general law" embraces "the principles and rules of the common law and equity" (s 10). 222 In respect of s 8, in Dura Santamaria JA explained (at [115] and [116]) that: The exclusion from the application of the Act, by operation of s 8, of interests in personal property which arise by operation of law, notwithstanding that they may be said to arise from transactions (using that term in its broadest possible sense), strongly suggests that the use of the term 'transaction' in s 12 is confined to consensual transactions inter partes. This seems to be the reasoning of various text writers who say that the word 'transaction' in s 12 refers to a 'consensual transaction'… 223 Let me say something about the relationship between ss 8 and 12 of the PPSA, given that a question has arisen as to whether the Madison shares security agreement gave rise to a security interest within the meaning of s 12 or an "interest to which this Act does not apply" pursuant to the carve out contained in s 8(1)(c). 224 Now for s 8(1)(c) to apply in the circumstances of the present case, Taiping must have succeeded in establishing its equitable mortgage claim. But if that is so, then in my view the Madison shares security agreement gave rise to a "security interest" within the meaning of s 12. Such a conclusion is in accordance with a construction which promotes the purpose, context and text of the provisions. 225 First, a quirk in the drafting of ss 8(1)(c) and 12 is that depending upon how the text of those provisions is interpreted, certain interests may be capable of satisfying both provisions, which is compounded by the absence of any express tie-breaker provision. But to the extent that an interest does satisfy the text in both provisions, matters of context and purpose support the view that s 12 is the leading provision. Now that is not to overlook the express intention manifested by s 8(1)(c) that certain interests fall outside the PPSA, subject relevantly to s 8(2) and certain other provisions including s 73 as referenced in that subsection. But s 8(1)(c) does not stand in the way of the narrow proposition that where an interest may conceivably answer both ss 8(1)(c) and 12, the better view as a matter of purpose and context is that it should fall within the scope of the PPSA and as such be captured by s 12. This conclusion is fortified by s 12(2). Many of the security interests specifically singled out in that subsection could additionally or alternatively answer the text of s 8(1)(c). It would be an odd outcome for an interest that answers both a specifically enumerated description in s 12(2) and the text of s 8(1)(c) to fall outside of the PPSA. The better view is that the legislature, having expressly singled out certain interests as being "security interests" within the meaning of s 12, intended that an interest that answers the text of both provisions to be captured by s 12 rather than the carve out in s 8(1)(c). So, s 12 is the lead provision. Moreover, the Madison shares security agreement, which answers various enumerated concepts in s 12(2), falls within s 12. 226 Second, where an interest arises as the result of a consensual transaction, it will be captured by s 12 rather than s 8(1)(c). I have already referred to Santamaria JA in Dura at [115] and [116]. I also note that this matter was addressed in Ship "Sam Hawk" v Reiter Petroleum Inc (2016) 246 FCR 337 at [144] per Allsop CJ and Edelman J. In this case, the Madison shares security agreement arose as the result of a consensual transaction, and as such is captured by s 12. Therefore, the Madison shares security agreement is a "security interest" within the meaning of s 12. 227 Third, albeit said in a different context, Templeman J in Wallis (at 404) considered that an analogous security, being a charge arising by presumption, did not arise by operation of law. 228 But if, contrary to my conclusion, the Madison shares security agreement is not captured by s 12, then it is an interest captured by s 8(1)(c). And if that be so, then an interesting priorities question arises. 229 Diversa says that if Taiping is able to establish that it holds a non-PPSA equitable mortgage over the Madison shares, then any contest of priority would not be resolved by the PPSA. Diversa says that PPSA priority contests are resolved by Part 2.6 which concerns competing security interests for the purposes of the PPSA or contests between PPSA security interests and declared statutory interests (s 73), but not between PPSA security interests and other interests in personal property. And it says that s 73(1) does not apply to the present case. Further, it says that no other provision of the PPSA resolves or addresses the priority conflict which arises in the present case. 230 Moreover, Diversa says that any contest of priority between Diversa's legal interest in the Madison shares and any equitable interest held by Taiping resolves in favour of Diversa. This is said to be a product of the orthodox application of the principle that the legal estate prevails over all other encumbrances of whose security the legal estate holder has no notice when it makes its advance. Diversa says that as a matter of general law, the priority rules in respect of competing encumbrances over company shares are governed by the same rules of priority as apply to mortgages of general land law. The consequence is that even if Taiping has an equitable interest in the Madison shares, it does not prevail over the legal interest of Diversa. 231 Now let me put to one side for the moment s 73. There is no Australian authority which has directly considered a contest between a PPSA security interest and an equitable interest to which s 73 does not apply. But in iTrade Finance Inc v Bank of Montreal [2011] 2 SCR 360, a decision of the Supreme Court of Canada, the issue did arise. That court determined a contest between a PPSA security interest and a general law interest in accordance with orthodox principles of competing priorities. Diversa submits that I should take a substantively identical approach here, such that Diversa's legal interest would have priority over Taiping's equitable one. 232 The facts of iTrade Finance were not dissimilar to the present case. In that case, two creditors, namely, iTrade Finance Inc and Bank of Montreal were in dispute over which was entitled to proceeds from the sale of shares which had been initially acquired by Webworx Inc, using funds it obtained from iTrade on the back of fraudulent misrepresentations. After acquiring the shares, Webworx pledged them to the bank, who took its interest in the shares without any knowledge of iTrade's equitable interest in or over them. 233 In analysing the question of priority, it was first necessary to ascertain the nature of the competing interests. The court held that the interest held by the bank over the funds constituted a PPSA security interest. With respect to iTrade's interest, the court held that it arose in equity and was not subject to the PPSA. In this respect Deschamps J stated (at [30] and [31]): Regardless of whether i Trade elects to take the constructive trust or the equitable lien route to assert its interest, the PPSA does not apply to those rights. This is because i Trade acquired them as a result of Belobaba J's judgment granting a constructive trust or an equitable lien. The rights thus resulted from a court order, not from a "transaction . . . that in substance creates a security interest" (PPSA, s 2). In addition, the creation of the rights was not consensual… Since i Trade's interest in the disputed funds is not subject to the PPSA, it arises in equity. (emphasis in original) 234 The next question was whether the bank's PPSA security interest prevailed over iTrade's equitable interest. In this respect, the court held that in circumstances where the internal rules of the PPSA could not be invoked, the principles of law and equity determined priority. Deschamps J stated (at [58] and [59]): The PPSA's priority rules do not apply here. Although BMO's interest is covered by the PPSA, i Trade's interest is not. As pervasive as it may be, the PPSA provides that, insofar as the principles of law and equity are not inconsistent with its express provisions, they supplement it and continue to apply. Section 72 reads: 72. Except in so far as they are inconsistent with the express provisions of this Act, the principles of law and equity, including the law merchant, the law relating to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake and other validating or invalidating rules of law, shall supplement this Act and shall continue to apply. Recourse to the principles of law and equity does not render the PPSA meaningless. That Act continues to apply to BMO's statutory security interest. I find the following comment of the Court in Bank of Montreal (at para. 30) regarding the Saskatchewan PPSA illustrative of this point: It is true that the internal priority rules of the PPSA cannot be invoked to resolve the dispute. However, it does not follow that the provincial security interest created under the PPSA does not exist outside these priority rules. 235 Section 254(1) of the PPSA is the equivalent of s 72 of the Ontario PPS regime which was being considered in iTrade Finance, and provides: This Act is not intended to exclude or limit the operation of any of the following laws (a concurrent law), to the extent that the law is capable of operating concurrently with this Act: (a) a law of the Commonwealth (other than this Act); (b) a law of a State or Territory; (c) the general law. 236 I should note that given the genesis of our PPSA, the Canadian approach has some relevance (Dura at [16]). But I do note the caveat of Professor Anthony Duggan in his article, "Some Canadian PPSA cases and their implications for Australia and New Zealand" (2010) 38 Australian Business Law Review 161 where he expressed the view that "Australia's departure from the Canadian model comes at the cost of making the Canadian cases and secondary sources less reliable as a guide to the meaning and implications" of the PPSA (at 161). But as he said, "it would be a mistake … to disregard Canadian learning altogether" (at 173). 237 As to the characterisation of a PPSA security interest at general law, iTrade Finance drew from Bank of Montreal v Innovation Credit Union [2010] 3 SCR 3, another Supreme Court of Canada decision which similarly involved a contest between a PPSA security interest and a non-PPSA interest. In that case, the competing security interest was one created under different legislation, being the Bank Act, S.C. 1991. Charron J said (at [41] to [43]): The PPSA does not contain any provisions which identify the nature of a PPSA security interest in proprietary terms. This is because, as discussed above, for those interests to which the PPSA applies, the PPSA resolves priority disputes through a detailed set of priority rules rather than on the basis of title or the form of a transaction. However, because the PPSA's internal provisions do not apply to Bank Act security, and because the security regime contained in the Bank Act is property-based, it is necessary for the purposes of deciding the priority dispute in this case to characterize the PPSA security interest as a matter of property law: see Cuming and Wood, at p. 274. Two characteristics of the PPSA are relevant for the present case. First, it is clear that a PPSA security interest, just as the Bank Act security interest, is a statutorily created interest and, as such, an interest recognized at law. While some of the historical forms of security created equitable rather than legal interests, the effect of the PPSA's functional approach, which covers all of these antecedent security interests, is to treat them all equally as "security interests" under the PPSA. This conclusion is also the consensus found in the academic commentary, and I see no reason to depart from it: see Cuming and Wood, at p. 275; Poirier, at p. 360. Second, it is clear that having a PPSA security interest in collateral does not give a creditor full right and title to the collateral. Rather, a PPSA security interest gives the secured creditor an interest in the property to the extent of the debtor's obligation. Upon the debtor's default, the secured creditor has no interest in the collateral beyond the satisfaction of the debtor's obligation as well as reasonable costs of seizing and disposing of the collateral to satisfy the obligation: ss. 59 and 60. 238 Diversa says that applying that analysis to the present case and specifically the first-mentioned characteristic, the Diversa GSD gave Diversa a legal interest in the Madison shares. Diversa's interest is properly one treated as arising at law, whereas on the counterfactual under consideration, Taiping's interest would be equitable. So, according to Diversa, any contest of priority between Diversa's legal interest in the Madison shares and any equitable interest held by Taiping therefore resolves in favour of Diversa. This is a product of the orthodox application of the principle that the legal estate prevails over all other encumbrances of whose security the legal estate holder has no notice when it makes its advance. 239 But in my view s 73 applies and in Taiping's favour. 240 Now Diversa challenges the satisfaction of s 73(1)(b), namely the requirement that "the priority interest arises in relation to providing goods or services in the ordinary course of business". But in my view Taiping's interest arose with respect to its provision of financial services in the ordinary course of its business as a financial insurance group, noting that it is the putative prior interest holder's business, here that of Taiping, that is relevant. Now in Lewis v LG Electronics Australia Pty Ltd (2014) 291 FLR 407, Sifris J generally discussed the phrase "ordinary course of business", but he was specifically concerned with the s 46 use of the phrase "if the personal property was sold or leased in the ordinary course of the seller's or lessor's business of selling or leasing personal property of that kind". But s 73 is of broader scope than s 46. Nothing that he said persuades me to depart from the conclusion that I have just expressed. 241 In my view, s 73 applies and has been satisfied by Taiping, such that if Taiping's security interest "falls" under s 8(1)(c) it has priority. Under s 73(1), and assuming that Taiping's interest in the collateral arises "by operation of the general law" (s 73(1)(a)(ii)), given that such an interest arose in Taiping proving financial services in the ordinary course of business (s 73(1)(b)) and where it held that interest (s 73(1)(c)), and where no Commonwealth law or State law otherwise provides for the priority between Taiping's interest and Diversa's interest (s 73(1)(d)), the PPSA not otherwise regulating the same, and where Taiping acquired its interest without knowledge, obviously, that such an acquisition constituted any breach of any security relationship between SCAH and Diversa (s 73(1)(e)), Taiping's interest (defined as the priority interest) has priority over Diversa's security in the collateral. And nothing more need be said. The resolution of the priority is straight-forward. 242 But assuming that s 73(1) is not satisfied by Taiping, the question then to be determined is whether there has been postponing conduct such that even looking outside of s 73, Taiping's interest takes priority over that of Diversa. In other words let me deal with the scenario where there is a contest between a PPSA security interest and an equitable interest to which s 73 does not apply. 243 Now during the course of the hearing mention was made to the postponing effect that notice of a prior encumbrance would have. 244 In the present case, in circumstances where Taiping asserts that Diversa took its security interest with notice of Taiping's earlier security interest, I accept that the onus lies with Taiping to prove such notice. But in my view it has discharged such onus. 245 Now Diversa says that whilst it would have been better from a priority standpoint for it to have had delivered up to it the share certificates and blank transfer forms in respect of the Madison shares so that it could take advantage of s 57, that omission does not mean that Diversa did not take a security interest over the Madison shares by entering into the Diversa GSD and nor does it mean that Diversa took its security interest with notice of Taiping's purported interest. 246 Further, it says that inquiries were made by Diversa regarding the certificates in connection with the Madison shares, albeit late in the piece. 247 Further, it says that the Diversa GSD did not require inquiries as to the Madison shares to be made by Diversa. Instead, the Diversa GSD contains a series of representations and warranties which were made by SCAH in accordance with cl 6.1 of the Diversa GSD. Those representations and warranties included, at cl 1, that: (j) (Shares) Schedule 2 ("Issuers") sets out the details of all of the Shares as at the date of this document. (k) (control) no person other than the Secured Party has possession or control of the Collateral or an Encumbrance in the Collateral which is perfected by control; 248 In addition to these representations and warranties, SCAH also undertook, at cl 2 of Schedule 1, to: (d) (deposit documents) deposit with the Secured Party or its nominee at the time of the Grantor's execution of this document (or in the case of Future Shares, within 5 Business Days after the Grantor acquires any Future Shares): (i) any Certificates in respect of those Shares; and (ii) the number of Transfers specified by the Secured Party of the Shares with the name of the transferee and the consideration and date left blank; 249 Further, Diversa says that the fact that SCAH did not do that which it undertook to do does not give Diversa notice that the Madison shares were certificated at all or that the certificates were held by a third party, as opposed to other possibilities, including that the certificates had been lost or misplaced. 250 And it says that because any priority dispute is capable of being resolved under the PPSA without regard to the share certificates themselves, it was reasonable for Diversa to take no further steps beyond perfecting the security interest created by the Diversa GSD by lodging a financing statement on the PPSR, which is what Diversa did. 251 In those circumstances Diversa says that it cannot be said that it had constructive notice of a purported prior encumbrance held by Taiping. In summary, Diversa says that it had no actual or constructive notice that Taiping had any interest in the Madison shares at the time it took its own interest. Therefore, in this battle between innocents it is said that there is nothing to disturb the application of the principle that the later in time legal interest of Diversa prevails over the earlier in time equitable interest of Taiping. 252 In my view there is an air of unreality to Diversa's submissions on this aspect. An intending mortgagee must satisfy himself that the mortgagor has at least a prima facie title and will be deemed to have notice of all facts which he would have learned upon a proper investigation of the title. If, therefore, an intending mortgagee does not ask for the title deeds, he may be affected with notice of the rights of an undisclosed mortgagee in whose custody they are. But here, it is even worse for Diversa. It both required and sought the share certificates but never obtained them. And it never received a satisfactory explanation for their non-provision. 253 In my view it had the requisite constructive notice such that its legal interest should be postponed to Taiping's equitable interest. But I need not linger further on this aspect. This is because ss 12 and 57 apply in any event to give Taiping priority. And if they do not, then ss 8(1)(c) and 73 apply to give Taiping priority. But if s 8(1)(c) applies but s 73 does not apply, then for the reasons that I have given, Taiping's earlier equitable interest prevails over Diversa's later legal interest given the constructive notice that Diversa had of the former at the time of entry into of the latter.

Conclusion 254 It should be apparent from my reasons that each party has had a measure of success. 255 Taiping has priority over Diversa as to the entitlement to the net proceeds of the sale of the Madison shares. 256 Diversa has priority over Taiping as to the entitlement to the net proceeds of the sale of the SEQ shares. 257 I will hear further from the parties as to any necessary declarations and consequential orders, save that each party should bear their own costs given the mixed result reflected in my conclusions. I certify that the preceding two hundred and fifty-seven (257) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Beach.

SCHEDULE OF PARTIES VID 517 of 2020 Cross-Respondents Second Cross-Respondent DANIEL WALLEY IN HIS CAPACITY AS RECEIVER AND MANAGER OF SC AUSTRALIAN HOLDINGS 1 PTY LTD (RECEIVER AND MANAGER APPOINTED) (IN LIQUIDATION) (ACN 624 531 237) Third Cross-Respondent SC AUSTRALIAN HOLDINGS 1 PTY LTD (ACN 624 531 237) Fourth Cross-Respondent REGISTRAR OF PERSONAL PROPERTY SECURITIES