Solicitors:
Bartier Perry (plaintiffs)
Etheringtons Solicitors (defendants)
File Number(s): 2013/223812
[2]
Judgment (ex tempore)
HIS HONOUR: In these proceedings, the plaintiff liquidator of Trinity Sports and Events Management Pty Ltd sought to recover from the defendant Kissane Family Pty Ltd a sum in the order of $1.5 million approximately which the defendant had recouped from the company pursuant to a fixed and floating charge it apparently held over the assets and undertaking of the company securing advances in excess of $5 million made by the defendant to the company to fund the promotion of a tour in Australia by the Everton Football Club. The plaintiff alleged that the fixed and floating charge was void pursuant to the (Cth) Corporations Act 2001, s 266, in the form in which it was at the time of the relevant events in 2010 and before the repeal of Chapter 2K consequent upon the enactment of the prescribed personal properties security legislation. Corporations Act, s 1504, preserves the operation of the relevant provisions of Chapter 2K in respect of a charge that was void under that Part prior to its repeal and also authorises a declaration where an application for an extension of time in respect of such a charge is made. A declaration that the charge is not and never has been void.
In short, it seems that the charge was at least arguably created on 29 April 2010, and at the latest, when it was ultimately executed by all parties, on 12 May 2010. Forty-five days from 29 April expired on or about 13 June 2010. However, because of complications in the execution of the deed of charge itself, it was not registered until 2 July 2010, which was between five and nineteen days outside the forty-five day period.
The company went into external administration on 27 July 2010, when voluntary administrators were appointed; the company subsequently went into liquidation. Accordingly, pursuant to s 266, the charge was void against the liquidator, as the requisite notice was not lodged within the forty-five day period.
The proceedings have now settled on the basis that, subject to the Court being satisfied that the proposed orders should be made, time for registration of the charge be extended, and the proceedings otherwise dismissed.
Corporations Act, s 266(4), in the form applicable pursuant to s 1504, provides that the Court, if satisfied that the failure to lodge a notice in respect of a charge was accidental or due to inadvertence or some other sufficient cause or is not of a nature to prejudice the position of creditors or shareholders or that on other grounds it is just and equitable to grant relief, may, on the application of the company or any person interested and on such terms and conditions as seem to the Court just and expedient, by order extend the period for such further period as is specified in the order.
The evidence establishes that, due to some confusion that arose in the course of obtaining execution by the requisite parties of the deed of charge, it was dated when received in the defendants' solicitors' office on 19 May, although it had been executed at least some days earlier than that, and as a result, the solicitor responsible for registering it treated the forty-five days as running from 19 May. I am satisfied that that falls within the liberal definition of "accident, inadvertence or other sufficient cause" referred to in s 266(4)(a) that has been adopted by the authorities in this area, and that the power to make an extending order is thereby enlivened.
As to the discretion to make the order once the power is enlivened, the relevant considerations include the extent of the delay, which in this case is relatively short; the explanation for the delay, which in this case is understandable on account of the accident or inadvertence to which I have referred, and most relevantly the prejudice to others, in particular unsecured creditors, occasioned by the delay.
The evidence indicates that the company did incur debts to unsecured creditors during the period while the charge should have been, but was not, registered. However, there is nothing to indicate that those creditors traded with the company on the faith that no such charge was registered. In any event, it is proposed that leave be reserved to any such creditor to apply to vary or set aside the proposed orders. This is not a case in which the creditors are unrepresented, because the liquidator is the opposing party in the proceedings and is presumably conscious of the interests of creditors in that respect.
Although the company is in administration and the application is made after the company has gone into administration, the charge had already been registered prior to its first going into administration, and in any event an application for an extension of time may be made after the winding up of the company. In so far as it has sometimes been suggested that such an application ought to succeed only in exceptional circumstances, the better view is that sufficient circumstances exist so long as it is just and equitable to grant relief notwithstanding that it will defeat rights of unsecured creditors: see Hewlett Packard Australia Pty Limited v GE Capital Finance Pty Limited (2003) 47 ACSR 589, [28] and In the matter of Appleyard Capital Pty Limited [2014] NSWSC 782, [22]-[23], [29]-[30].
The defendant advanced a very substantial sum of money to the company on the faith of the security of the charge. It would not have done so, but for the belief that it was taking a valid charge. There was not at that time any suggestion or apprehension of insolvency in respect of the company. The charge was registered but a short time after the expiration of the relevant period, and during that period only a relatively small amount, probably about $20,000, once a debt to a director who must have been aware of the charge is disregarded was incurred by way of trade debts during that period.
The defendant has in any event suffered a substantial loss, and has recovered pursuant to the charge only about $1.5 million of the $5 million or so that it had advanced. The liquidator who instituted the proceedings does not suggest that any prejudice to the unsecured creditors is such as to warrant declining relief on discretionary grounds. In any event, as I have said, it is proposed that the right of any unsecured creditor who can establish that they relied on the state of the register during the relevant period, to apply to set aside the proposed order, be preserved.
In those circumstances, I am satisfied that the Court's discretion should be exercised to make the orders sought.
I note the document entitled "Consent Orders" signed by the solicitor for the plaintiffs and counsel for the defendant, initialled by me, dated this day and placed with the papers.
By consent, the Court declares that:
1. The charge over the undertaking, property and assets of the Second Plaintiff (Trinity Sports and Events Management Pty Ltd (in liq) (ACN 143 090 626)), notice of which charge was lodged with the Australian Securities and Investments Commission on 2 July 2010 by ASIC Document No. 026623322 ("the charge"), was created on or before 19 May 2010.
The Court orders that:
1. Pursuant to (Cth) Corporations Act 2001, s 1504 and s 266(4), the notice period (also referred to as the relevant period) in relation to the charge and for the purposes of Corporations Act, s 263, be extended up to and including 2 July 2010.
The Court declares that:
1. Pursuant to s 1504, the charge is not and never has been void under s 266.
The Court further orders that:
1. The Amended Originating Process be dismissed.
2. The Interlocutory Process filed on behalf of the Defendant on 3 December 2013 be otherwise dismissed.
3. Any creditor of the Second Plaintiff have liberty to apply to the Court to vary the orders and/or declarations set out in paragraphs 2 and 3 above, if any such creditor advanced funds or gave credit to the Second Plaintiff in reliance upon the registers or databases of ASIC not disclosing the existence of the charge between 13 June 2010 and 2 July 2010.
The Court makes no order as to the costs of the Originating Process or the Interlocutory Process to the intent that each party bear its own costs of the proceedings.
[3]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 18 February 2016