Hewlett Packard Australia Pty Ltd v GE Capital Finance Pty Ltd

background facts and applicable statutory provisions 16 I have had the considerable benefit of reading in draft the judgment of Allsop J. I gratefully adopt his Honour's brief outline of the facts and identification of the relevant current statutory provisions.

Cross‑appeal 17 In my view, it is convenient to give consideration to the cross‑appeal first. 18 The notice of cross-appeal asserts, in effect, that, in the absence of proof that any unsecured creditor of the Company would suffer actual prejudice, his Honour erred in taking into account potential prejudice to unsecured creditors of the Company, and in granting relief to GE on a condition intended to alleviate potential prejudice to unsecured creditors. 19 Nothing in his Honour's reasons for judgment lends support to the view that, absent the proffered condition, or some other means of protecting the interests of unsecured creditors, his Honour would have exercised the discretion vested in the Court by s 266(4) in favour of granting GE the extension of time that it sought. In my view, it is clear that his Honour was not prepared to grant GE the relief that it sought unconditionally (see [37] below). In the circumstances, the proffered condition was an essential aspect of his Honours evaluation of whether it was 'just and equitable to grant relief'. If the exercise of his Honour's discretion was affected by error in the way suggested by GE, it follows that the exercise wholly miscarried and order 1 as well as order 2 would be unsustainable. 20 GE did not, however, invite this Court to re-exercise the discretion. Nor did it contend that a proper exercise of the discretion could have led to only one result, namely an unconditional extension of time. Incidentally, and for completeness, I note that GE also did not contend that order 2 is not, or is not just, a term or condition of the grant of relief afforded by order 1 within the meaning of s 266(4). By so noting I do not intend to convey a view as to the merit of that contention had it been made. In the circumstances it is not now open to GE to challenge order 2 while seeking to retain the benefit of order 1. 21 HPA, on the other hand, did not adopt the approach of conceding that the cross-appeal should succeed and embracing the consequence that this Court should re-exercise the discretion. Nor did HPA contend that by instituting the cross-appeal GE had conceded the validity of ground (e) of the notice of appeal which is expressed as follows: 'his Honour's discretion to extend time miscarried in all of the circumstances'. No criticism of the approach adopted by HPA is implicit in the above observations; counsel could not know how this Court would evaluate their respective arguments. 22 However, being conscious of the caution expressed by McHugh, Gummow, Callinan and Heydon JJ in Australian Communication Exchange Ltd v Deputy Commissioner of Taxation [2003] HCA 55; (2003) 201 ALR 271 at [41] in respect of this Court adopting an approach that neither party has sought, it seems to me that the cross-appeal must simply be dismissed. However, I consider it appropriate to add the following. 23 It is not open to a party before this Court, as it seems to me, to suggest that potential prejudice to unsecured creditors is an irrelevant consideration in the exercise of the discretion created by s 266(4) in the sense that the Court is implicitly forbidden to take such prejudice into account. See Re Dudley Engineering Pty Limited and Companies Act [1968] 1 NSWR 483 per Street J at 485-486; In Re Flinders Trading Co Pty Ltd (1978) 20 SASR 14 per Bray CJ at 34, Mitchell J at 47-48 and Walters J at 50; Scarfe Steel Supplies Pty Limited v SMP Pty Ltd (1981) 27 SASR 187 per Zelling J; Commercial Banking Company of Sydney Limited v George Hudson Pty Limited (in liquidation) (1973) 131 CLR 605 per Menzies J at 613; Walsh J at 618 and Stephen J at 621; Wilde v Australian Trade Equipment Co Proprietary Limited (1981) 145 CLR 590 per Gibbs J at 595; Stephen, Murphy and Wilson JJ, with whom Aickin J agreed, at 606. If this line of authority is to be disturbed, I consider that it should be by the High Court (see [24] below).

Appeal 24 I agree with Allsop J, for the reasons which his Honour gives, that it is likely that neither s 205(3) of the Companies Act 1981 (Cth) and the various State Codes nor s 266 of the Corporations Law was intended to empower a court, after the commencement of official management or winding up, to extend the period within which a notice in respect of a charge could be lodged. However, as his Honour points out, there is now an established line of authority to the contrary effect. Section 266 of the Corporations Act has been enacted against the background provided by that line of authority. Even if it had not, I share his Honour's view that that line of authority should now only be disturbed by the High Court (Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485 at 492; Telstra Corporation Ltd v Treloar (2000) 102 FCR 595 per Branson and Finkelstein JJ at [27]-[28]; National Australia Bank Ltd v Davis & Waddell (Vic) Pty Ltd [2003] VSC 1; (2003) 44 ASCR 296 per Hansen J at [77]]). 25 I also agree with Allsop J, for the reasons that his Honour gives, that the submission of GE that 'the question whether or not the court ought grant an extension under sub-s.266(4) is necessarily anterior to the question of whether the charge is void' should be rejected. The primary judge rightly approached the exercise of the s 266(4) discretion on the basis that the security was void. 26 Further, accepting, as I consider this Court must, that an extension of time can be granted after the occurrence of one of the events identified in s 266(1)(a), (b) and (ba), I agree with Allsop J that there is no rule of law that constrains the exercise of the broad discretion conferred on the Court by s 266(4) to cases in which 'exceptional circumstances' can be found. 27 This is not to say that the exercise of the discretion is unguided. First, the exercise of the discretion is guided by the requirement of the subsection that the Court be satisfied that 'it is just and equitable to grant relief'. The express reference in s 266(4) to the position of creditors and shareholders (s 266(4)(b)) reveals that, in considering whether or not it is just and equitable to grant relief, the Court must have regard to the interests of all those who might be affected by a grant of relief and not just to the interests of the chargee. Secondly, the discretion must be exercised judicially and not arbitrarily or capriciously. While each application for relief must be considered on its own facts, the requirement that the discretion be exercised judicially calls for consistency of approach from case to case. As a consequence any rule of practice or guide to the exercise of the discretion that has evolved over the years should not lightly be disregarded. 28 One such rule of practice or guide is that an extension of time 'will almost invariably be refused after the commencement of a winding up and will only be granted in exceptional circumstances' (see Douglas‑Brown as liquidator of De Barros Nominees Pty Ltd (in liq) v Standard Chartered Finance Ltd (1990) 8 ACLC 993 per Malcolm CJ and Rowland J at 998; see also Campbell Finance Pty Ltd v Vivstan Packaging (Aust) Pty Ltd [1998] 2 VR 340 per Batt J; Morris v Woodings (1997) 25 ACSR 636 per Wheeler J; Re Lloyd Anthony Furniture Pty Ltd; Ex parte Walker (1996) 19 ACSR 478 per Branson J). This rule of practice reflects the fact that the validation of a charge that would otherwise be void against the liquidator will reduce the assets available to satisfy the claims of unsecured creditors. The chargee will thus be assisted by the court at the expense of the unsecured creditors. However, as Allsop J explains, 'exceptional circumstances' in the above context are simply circumstances sufficient to justify defeating the rights of unsecured creditors, which they acquired when the liquidation commenced, in the assets the subject of the charge (see In re Anglo-Oriental Carpet Manufacturing Company [1903] 1 Ch 914 at 918). To put the matter another way, 'exceptional circumstances' are simply circumstances sufficient to render it just and equitable to grant relief notwithstanding that the grant of relief will defeat rights of unsecured creditors. 29 The requirement that the Court be satisfied that it is just and equitable to grant relief has, as it seems to me, the following practical consequences. If an application for an extension of time within which to lodge notice of a charge is made where none of the events referred to in s 266(1)(a), (b) or (ba) has occurred, the starting position is that the security is valid but could be rendered void if, in the events that happen, the notice is not lodged within the time frame specified by s 266(1)(c). For this reason, as it seems to me, consideration should ordinarily be given to the financial position of the company. If the financial position of the company is apparently secure, in the sense that the company is solvent and no threat to its solvency can be identified, the Court will readily be satisfied that it is just and equitable to grant relief. The financial position of the company means that a 'critical day' is unlikely to arise in the foreseeable future. The chargee would therefore face little risk of losing its security if, without approaching the Court, it were to obtain a fresh charge and lodge it within the relevant period, or alternatively, if it were to lodge a notice in relation to the existing charge outside the relevant period. Consequently the grant of relief would be unlikely to affect any person adversely. 30 However, if the financial position of the company is insecure, the Court will ordinarily assess the extent of the risk that a grant of relief might adversely affect a person with an interest in the assets of the company in the course of determining whether the Court is satisfied that it is just and equitable to grant relief. If liquidation, or an administration founded on insolvency, seems imminent, the risk that, for example, unsecured creditors could be adversely affected by a grant of relief would be high. Where insolvency is a remote and distant possibility only, that risk would be low. 31 If an application for an extension of time within which to lodge notice of a charge is made where one of the events referred to in s 266(1)(a), (b) or (ba) has occurred, the starting position is that the security is void. The fact that the legislature has provided for this starting position where one of the events referred to in s 266(1)(a), (b) or (ba) has occurred reflects, as it seems to me, recognition that each of those events requires a person external to the company to take control of the assets of the company. Those assets must be able to be identified by that person with certainty. However, since s 266(1) has no relevant operation in respect of solvent companies, the provision for voidness also reflects, as it seems to me, the critical interest of unsecured creditors in the assets of an insolvent or potentially insolvent company. Any grant of relief under s 266(4) will either immediately impact on the crystallised rights of unsecured creditors in those assets or impact on the administration of the company or of the deed of company arrangement in a way that is likely to be adverse to unsecured creditors. A determination that it is just and equitable to grant relief in such circumstances will require the identification of factors of sufficient significance to outweigh the adverse impact on unsecured creditors of the grant of relief. 32 I turn to consider whether, as the appellant contends, the primary judge failed to articulate the appropriate test for the exercise of his discretion and, further, failed to apply an appropriate test with the result that the exercise of discretion miscarried. 33 The primary judge did not explicitly state as a test any test for the exercise of his discretion. He stated, however, that '[g]enerally speaking, it is accepted that once winding up intervenes the secured creditor is required to show exceptional circumstances before time will be extended'. His Honour observed that in some cases a more benign view of what might constitute exceptional circumstances had been taken than in other cases. 34 His Honour noted that an administrator had been appointed to the Company pursuant to Part 5.3A of the Act; that is, that the event identified in s 266(1)(b) had occurred. Moreover, his Honour formed the opinion, which is not challenged, that for all practical purposes, the chance of the Company returning to the control of its directors without liquidation or entry into a deed of company arrangement could be discounted. For this reason his Honour proceeded on the basis that the avoidance of the charge against the administrators was likely to be continued against a liquidator or the administrator of a deed unless the extension of time was granted. 35 His Honour indicated that, notwithstanding the different statutory regimes and the rather more inflexible approach adopted in the United Kingdom on winding up, he found persuasive the analysis by Millet J in In re Barrow Borough Transport Ltd [1990] Ch 227 particularly at 235. The analysis to which his Honour referred may be presumed to be that contained in the following passage: 'The administration procedure is an alternative and, while in force, a substitute for liquidation. If the rescue or rehabilitation of the company and its business as a going concern is one of the statutory purposes inserted in the order and it is still capable of achievement, there may be no reason why an extension of time should not be granted. But if that purpose is not included in the order, or if it has already proved incapable of achievement, then in my judgment simple justice requires that no extension of time should be granted. In the absence of a voluntary arrangement or formal scheme of arrangement, when the creditors themselves are in control, liquidation is not merely imminent but inevitable. It is true that there are no accrued rights which have crystallised by the commencement of liquidation vested in the administrator or in the creditors. But the administrator is under a duty, if required by the creditors, to apply to the court for the discharge of the administration order and such consequential orders as the court thinks fit, which would inevitably in the circumstances mean a winding‑up order, and the court could not, in justice to the creditors in the meantime, grant an extension of time on the ground that the creditors' rights had not yet crystallised by liquidation, when that was because the court by its own order had prevented the creditors from taking the necessary steps to put the company into liquidation. Not only does justice require that no extension of time should be granted in such circumstances, but so do considerations of policy. Administration procedure is an alternative to liquidation, and it would be most unfortunate if the presence of an unregistered charge and the possibility that the creditor might obtain an extension of time to register it should tip the scales against the making of an administration order and in favour of liquidation or embarrass the court when considering whether, in the interests of all the creditors, an administration order should be made or not.' 36 His Honour's reference to the above analysis suggests that his Honour considered that the appropriate approach was to treat the application before him as one that could only succeed if it would also have succeeded had a resolution been passed for the winding up of the Company. As is noted above, his Honour acknowledged that, '[g]enerally speaking, it is accepted that once winding up intervenes the secured creditor is required to show exceptional circumstances before time will be extended'. 37 It is clear that the primary judge was concerned that an extension of time had the potential to cause prejudice to unsecured creditors. His Honour's reasons, when carefully considered, make it clear, in my view, that his Honour was not prepared to grant the appellant unconditional relief. The fact that his Honour did grant the appellant relief on the condition which ultimately found expression in order 2 of his Honour's order of 13 June 2003 leads to the conclusion that his Honour considered that the effect of the condition would be to so reduce the impact of the grant of relief on the unsecured creditors that any remaining effect on them was outweighed by the circumstances that tended in favour of the grant of relief. The factors identified by his Honour that tended in favour of the grant of relief included that there was no fault on the part of GE and that the security related to current advances which should in significant measure be reflected in current assets. 38 So understood, in my view, his Honour has not been shown to have applied, as HPA contended, an inappropriately lenient test. It is not necessary to determine on this appeal whether, as GE contended, his Honour applied an inappropriately strict test. 39 HPA further submitted that Gyles J failed to take into account a material consideration. That consideration was contended to be that, by reason of a subordination deed, GE would be entitled in any liquidation of the Company to lodge proofs of debt such that it would receive 100 cents in the dollar in respect of its debts even if those debts were wholly unsecured. His Honour did not overlook the subordination deed. He referred to it as a complicating factor. He indicated that he was not able in this proceeding to determine whether the deed was affected by the failure to notify the charge. It appears that his Honour for this reason attached no weight to the subordination deed in determining to grant the extension of time sought by GE. 40 In my view the primary judge was not bound to determine the effect of the subordination deed. His Honour's view that to do so would involve consideration of commercial as well as legal consideration has not been shown to be incorrect. Consideration of matters of that kind on an application under s 266(4), which should be determined without delay, will rarely be appropriate. Further, as Hansen J observed when considering an application for relief under s 266(4) in National Australia Bank Ltd v Davis & Waddell (Vic) Pty Ltd at [78]: 'The NAB was entitled to pursue its rights under the several securities in the order, and as and when it chose. It is no answer to the present application for the unsecured creditors of Davis & Waddell to say that the NAB should first establish the likely extent of recovery, let alone exercise its rights, under its other securities and only rely on the debenture for such balance of its debt as appears likely to, or may then, exist. As the security holder, the NAB is entitled to pursue its rights under the debenture according to its terms and as the law may allow. Moreover, in terms of the present application, it was important for the NAB to apply with expedition, and not delay on account of seeking to ascertain the position concerning other securities.'

conclusion 41 I would dismiss both the appeal and the cross‑appeal. I agree with the orders proposed by Allsop J. I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Branson .

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

MARTIN BROWN AND GREGORY HALL AS LIQUIDATORS OF DAISYTEK AUSTRALIA PTY LTD (ACN 075 675 795)

Background 42 This is an appeal from an order of a Judge of this Court made pursuant to subs 266(4) of the Corporations Act 2001 (Cth) (the Corporations Act) extending, nunc pro tunc, up to and including 14 March 2003, the period for lodging with the Australian Securities Investment Commission under s 263 of the Corporations Act the notice of a charge given by Daisytek Australia Pty Ltd (the Company) to GE Capital Finance Pty Ltd (GE). The second respondents are the liquidators of the Company. The winding up order in respect of the Company was made after his Honour's orders. 43 The order made by the primary judge had a condition attached to its operation to the effect that the charge would only be enforceable against any of the persons referred to in subs 266(1) of the Corporations Act at such times and only at such amounts as the amount owing to GE by the Company under a facility agreement between GE, the Company and a company related to the Company, exceeded $3.7 million and only in respect of such amount as was in excess of $3.7 million. 44 The appellant, Hewlett Packard Australia Pty Ltd (HPA) was and is an unsecured creditor of the Company. In its notice of appeal, HPA asserted a number of errors of the primary judge. In argument, one further ground of appeal was identified. It was not embodied in an amendment to the notice of appeal. Given my views on this issue (being the first question of construction discussed below) there is perhaps no necessity at this stage for the notice of appeal to be amended. The first respondent, GE, sought to maintain the decision of the primary judge in an amended notice of contention and, also, as cross-appellant, appealed against the attachment of the condition to the primary order extending the period for lodgment of the notification.

A brief outline of the facts 45 By a facility agreement executed on 28 October 2002, GE provided a revolving credit facility, including a letter of credit sub-facility, to the Company in the amount of $35m, with a sub-limit of $500,000 to the letter of credit facility. The facility was secured by a fixed and floating charge over all the assets of the Company executed, as a deed, on 22 November 2002. GE also took the benefit of a subordination deed executed in late October 2002 whereby the Company, a related Australian company and the Texan parent company agreed, by various provisions, to subordinate the parent's rights as a creditor against the Company and the related company to the rights of GE. 46 In circumstances which it is unnecessary to canvas, there was a failure to lodge within the period provided by s 263 of the Corporations Act (45 days) a notice in the prescribed form of the charge granted by the Company. It suffices to say that the failure was caused by innocent inadvertence by those then acting on behalf of the Company. 47 There was evidence that the facility would not have been given without the charge as security. In the light of the following surrounding circumstances, that can be readily accepted. In late 2002, the Company, which carried on a substantial business of selling computer equipment supplies, required working capital to finance its business. The primary judge said that in November 2002 the Company's balance sheet showed little in the way of tangible assets apart from stock on hand and little in the way of capital. In November 2002, the GE loan stood at somewhat over $15m and an inter-company borrowing stood at $15m. The assets of the Company providing the tangible security were receivables and stock on hand. The primary judge found that the business was trading vigorously: sales turnover in November 2002 was over $10m, over $12m in December 2002, over $15m in January 2003, over $10m in February 2003 and over $11m in March 2003. Throughout this period the business was running at a revenue loss. 48 The last date for lodgment of the notice under s 263 was 6 January 2003. On 4 March 2003, the solicitors for GE became aware that the relevant form had not been lodged in respect of the Company. The form was lodged on 14 March 2003. No application to the Court under subs 266(4) was made at this point. On 16 May 2003, Mr Brown was appointed administrator of the Company under Part 5.3A of the Corporations Act by a resolution of directors which stated that: the Company is insolvent or likely to become insolvent at some future time. On this day, an officer of GE was told by Mr Brown that "there was a problem with [the GE] charge." On 22 May 2003, proceedings were commenced under subs 266(4) to extend the time in which to lodge the requisite notice.

The relevant current statutory provisions 49 Chapter 2K of the Corporations Act deals with charges. Part 2K.2 deals with registration. Subsection 263(1), relevantly, provides as follows: Where a company creates a charge, the company must ensure that there is lodged, within 45 days after the creation of the charge: (a) a notice in the prescribed form setting out the following particulars: [the relevant statutory requirements are then set out] It is unnecessary to consider the provisions dealing with companies registered under Chapter 5B of the Corporations Act. 50 Part 2K.3 deals with the order of priorities of competing securities. Generally speaking, the question of priority between such securities is determined by the order of registration. 51 Section 266 deals with the relationship between certain charges and the liquidator or administrator. It is, relevantly, in the following terms: (1) Where: (a) an order is made, or a resolution is passed, for the winding up of a company; or (b) an administrator of a company is appointed under section 436A, 436B or 436C; or (ba)a company executes a deed of company arrangement; a registrable charge on property of the company is void as a security on that property as against the liquidator, the administrator of the company, or the deed's administrator, as the case may be, unless: (c) a notice in respect of the charge was lodged under section 263 or 264, as the case requires: (i) within the relevant period; or (ii) at least 6 months before the critical day; or (d) in relation to a charge other than a charge to which subsection 263(3) applies - the period within which a notice in respect of the charge (other than a notice under section 268) is required to be lodged, being the period specified in the relevant section or that period as extended by the Court under subsection (4), has not ended at the start of the critical day and the notice is lodged before the end of that period; or (e) in relation to a charge to which subsection 263(3) applies - the period of 45 days after the chargee becomes aware that the registrable body has been registered as a company under Part 5B.1, or registered under Part 5B.2, has not ended at the start of the critical day and the notice is lodged before the end of that period; or (f) in relation to a charge to which section 264 applies - the period of 45 days after the chargee becomes aware that the property charged has been acquired by a company has not ended at the start of the critical day and the notice is lodged before the end of that period. (2) The reference in paragraph (1)(c) to the relevant period is to be construed as a reference to: (a) in relation to a charge to which subsection 263(1) applies - the period of 45 days specified in that subsection, or that period as extended by the Court under subsection (4) of this section; or (b) in relation to a charge to which subsection 263(3) applies - the period of 45 days after the chargee becomes aware that the registrable body has been registered as a company under Part 5B.1 or registered under Part 5B.2; or (c) in relation to a charge to which section 264 applies - the period of 45 days after the chargee becomes aware that the property has been acquired by a company. … (4) The Court, if it is satisfied that the failure to lodge a notice in respect of a charge, or in respect of a variation in the terms of a charge, as required by any provision of this Part: (a) was accidental or due to inadvertence or some other sufficient cause; or (b) 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. … (8) In this section: critical day, in relation to a company, means: (a) if the company is being wound up - the day when the winding up began; or (b) if the company is under administration - the section 513C day in relation to the administration; or (c) if the company has executed a deed of company arrangement - the section 513C day in relation to the administration that ended when the deed was executed.

Outline of issues raised by the appeal 52 The appeal and cross-appeal raise important issues, including questions concerning the proper construction of s 266. The first such issue was not contained in the notice of appeal, but was, after the issue had been adverted to by the Court, taken by the appellant. This issue is whether or not, on the proper construction of s 266, after the occurrence of any of the events in s 266(1)(a), (b) and (ba), s 266(1) and (2) contemplate a court order for an extension of time under s 266(4), other than an order already made before any of the events identified by s 266(1)(a), (b) and (ba) has occurred, and before the critical day identified by s 266(8). 53 The second issue (also a question of statutory construction) arises only if this Court should proceed on the basis that ss 266(1) and (2) do contemplate a court order for an extension of time even if that order has not yet been made, or indeed even if such proceedings have not yet been begun, before the critical day. This second question is whether, if it cannot be concluded as at the critical day that the circumstances provided for in s 266(1)(c) and (d) are not, or will not be, present, the charge is void on the critical day. Put another way, if there is the possibility of a court extension under s 266(4) affecting the application of s 266(1)(c)(i) (through s 266(2)) or affecting the application of s 266(1)(d) (whether or not proceedings seeking such an order have been commenced) can one say, prior to any such order being made, that the charge is void or not void? 54 The third issue is the identification of principle to apply in assessing whether to grant an extension of time under subs 266(4) in circumstances where an event contemplated by pars 266(1)(a), (b) and (ba) has occurred. 55 The fourth issue is whether the primary judge erred in his approach to this question. 56 The fifth issue is whether this Court should re-exercise the discretion in a different way, if the primary judge did err in the approach he took. 57 Other questions arise on the cross-appeal and amended notice of contention which are largely subsumed within the above issues and which need not be adverted to at this point.

A summary of my views 58 In my view, uninstructed by, and putting to one side the significance of, authority on the predecessor provisions to s 266 of the Corporations Act, the better view isthat the extension of time granted by the Court contemplated by subs 266(2) (for the purposes of par 266(1)(c)(i)) and by par 266(1)(d), is an extension that has been ordered by the Court prior to the "critical day" and does not include orders of the court which may be made thereafter. So, if, as here, on the day of the appointment of the administrator, no order of the Court extending time had been made, (and, indeed, no proceedings had been commenced which sought such an order), there was no order under subs 266(4) which could thereafter be made that would have any effect for the purposes of subs 266(1) and (2) to prevent the charge being void, because no such future order was contemplated by the terms of subss 266(1) and (2). 59 The view which I favour is contrary to most (but not all) expressions of judicial views on, or assumptions made about, the operation of the predecessor provisions to s 266 under the Corporations Law 1989 and various State Codes passed in 1981. Whilst this is the view that I favour, I am not prepared to decide the appeal on this basis. The course of past authority, the enactment of legislation after 1981 on the assumption of settled jurisprudence and the obligations of intermediate appellate courts in circumstances such as the present to maintain consistency in the administration of the law are such as to require the appeal to be decided on the basis of the continued availability of an order for extension of time under subs 266(4) that would satisfy par 266(1)(c)(i) (through subs 266(2)) and par 266(1)(d), even after an event of the kind referred to in pars 266(1)(a), (b) and (ba) has occurred and after the critical day has passed. 60 On the second construction question, in my view, if pars 266(1)(c) and (d) are not satisfied on the critical day, but they might yet be satisfied by a later court order extending time under subs 266(4) and but for this future contingency pars 266(1)(c) and (d) would not be satisfied, the charge is void unless and until the court order extending time is made. 61 Thus approached, in my view, the correct approach to applications under subs 266(4) in circumstances where one of the events in pars 266(1)(a), (b) and (ba) has occurred is one which recognises this state of the charge until the exercise of any discretion by the court. Further, it is necessary in such circumstances to exercise the discretion recognising the rights, liabilities and statutory schemes created by such events. 62 On this basis, whilst others may not have exercised the discretion as the primary judge did, I see no error of principle in the approach adopted by him.

The first question of construction: Is an order under subs 266(4) relevant after the critical day?

The statutory context prior to the Companies (State) Codes 1981 63 By s 43 of The Companies Act 1862 (25 & 26 Vict c 89) every limited company was required to keep a register of all mortgages and charges specifically affecting the property of the company. If due entry was not made, every director, manager or other officer of the company who knowingly or wilfully authorised or permitted the omission incurred a penalty not greater than fifty pounds. In the late nineteenth century in England, there was a conflict of judicial opinion as to whether these provisions rendered an unregistered mortgage or charge void. It was eventually held that the charge was not void: In re Patent Bread Machinery Company; Ex parte Valpy and Chaplin (1872) LR 7 Ch App 289 and other cases cited by Buckley On the Companies Acts (9th Ed, 1909) p 222 ftnt (a) and Buckley The Law and Practice Under The Companies Act 1862 to 1882 (4th Ed, 1883) pp 147-150. (Although, in a winding up, as an incident of their fiduciary position, directors were not allowed to set up against general creditors an unregistered charge.) 64 Section 14 of The Companies Act 1900 (63 & 64 Vict c 48) (the 1900 Act) was introduced to render void unregistered mortgages or charges. By s 14 of the 1900 Act every mortgage or charge contemplated by the section that was created by a company after 1 January 1901 was void against the liquidator and any creditor of the company unless filed with the registrar in the appropriate manner within 21 days after the date of its creation, but without prejudice to any contract or obligation of repayment. The structure and terms of s 14 were as follows: Every mortgage or charge created by a company after the commencement of this Act and being either - [There were then set out various types of security.] shall, so far as any security on the company's property or undertaking is thereby conferred, be void against the liquidator and any creditor of the company, unless filed with the registrar for registration in manner required by this Act within twenty-one days after the date of its creation, but without prejudice to any contract or obligation for repayment of the money thereby secured. 65 Section 15 of the 1900 Act provided for curial remedying of omission to register or of otherwise faulty registration, in the following terms: A judge of the High Court, on being satisfied that the omission to register a mortgage or charge within the time required by this Act, or the omission or misstatement of any particular with respect to any such mortgage or charge, was accidental, or due to inadvertence or to some other sufficient cause, or is not of a nature to prejudice the position of creditors or shareholders of the company, 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 judge just and expedient, order that the time for registration be extended, or, as the case may be, that the omission or misstatement be rectified. 66 Sections 14 and 15 of the 1900 Act were re-enacted in 1908 in ss 93 and 96 of The Companies (Consolidation) Act 1908 (8 Edw vii c 69) (the 1908 Act) in similar terms. Section 93 was, relevantly, in the following terms: Every mortgage or charge created after the first day of July nineteen hundred and eight by a company registered in England or Ireland and being either - [A somewhat expanded list of securities was then set out.] shall, so far as any security on the company's property or undertaking is thereby conferred, be void against the liquidator and any creditor of the company, unless the prescribed particulars of the mortgage or charge, together with the instrument (if any) by which the mortgage or charge is created or evidence are delivered to or received by the registrar of companies for registration in manner required by this Act within twenty-one days after the date of its creation, but without prejudice to any contract or obligation for repayment of the money thereby secured, and when a mortgage or charge becomes void under this section the money secured thereby shall immediately become payable: provided that:- [Various provisos were set out which are not relevant.] 67 Section 96 of the 1908 Act was, in substance, identical to s 15 of the 1900 Act. 68 The structure of the two provisions was that the first section (s 14 of the 1900 Act and s 93 of the 1908 Act) made the charge void as a security "against the liquidator and any creditor of the company" unless the charge was registered within a defined period. There was no reference within this first section to the power of the Court under the second section (s 15 of the 1900 Act and s 96 of the 1908 Act) to extend the time for registration. The first section rendered the charge void as a security. The second section, with no temporal limitation as to when the application could be brought, gave power to extend the time and so, after the event, overcome the voiding effect of the first section. 69 Sections 79 and 85 of the The Companies Act 1929 (19 & 20 Geo 5 c 23) (the 1929 Act) re-enacted ss 14 and 15 of the 1900 Act and ss 93 and 96 of the 1908 Act. It should be noted that s 79 of the 1929 Act commenced with the introductory phrase, "Subject to the provisions of this Part of this Act …". Section 85 was in "this Part" (that is, Part iii), and, so, s 79 was expressly subject to s 85. 70 Section 95 and 101 of The Companies Act 1948 (11 & 12 Geo 6, c 38) (the 1948 Act) re-enacted in substantially similar terms these provisions. 71 Part xii of the Companies Act 1985 (UK) dealing with registration of charges retained the general structure that had existed in the United Kingdom throughout the twentieth century. Sections 395 and 404 were, relevantly, in the following terms: 395(1) Subject to the provisions of this chapter, a charge created by a company registered in England and Wales and being a charge to which this section applies is, so far as any security on the company's property or undertaking is conferred by the charge, void against the liquidator or administrator and any creditor of the company, unless the prescribed particulars of the charge together with the instrument (if any) by which the charge is created or evidence, are delivered to or received by the registrar of companies for registration in the manner required by this Chapter within 21 days after the date of the charge's creation. … 404(1) The following applies if the court is satisfied that the omission to register a charge within the time required by this Chapter or that the omission or mis-statement of any particular with respect to any such charge or in a memorandum of satisfaction was accidental or due to inadvertence or to some other sufficient cause, or is not of a nature to prejudice the position of creditors or shareholders of the company, or that on the other grounds it is just and equitable to grant relief. 404(2) The court may, on the application of the company or a person interested, and on such terms and conditions as seem to the court just and expedient, order that the time for registration shall be extended or, as the case may be, that the omission or misstatement shall be rectified. 72 In 1989, radical changes were made in the United Kingdom by the Companies Act 1989. Curial extension of time was done away with entirely. Provision was made for late delivery of particulars. The intervention of winding up or administration was fatal if the relevant provisions had not been complied with up to that point: see ss 399 and 400 of the Companies Act 1985 inserted by s 95 of the Companies Act 1989, and see also Gough Company Charges (2nd Ed) p 804. 73 In Australia, the structure provided for by ss 14 and 15 of the 1900 Act and ss 93 and 96 of the 1908 Act became the model for Australian State legislation such as ss 3 and 7 of the Companies (Registration of Securities) Act 1918 (NSW) which amended the Companies Act 1899 (NSW) and ss 185 and 190 of the Companies Act 1936 (NSW) ss 2(2), 2(3), 3 and 9 of the Companies Act Amendment Act 1909 (Qld) No 13, ss 5 and 8 of the Companies (Mortgages, Charges and Debentures) Act (SA) 1924, ss 101 and 105 of the Companies Act 1920 (TAS), ss 101 and 104 of the Companies Act 1910 (Vic)No 2293 (See also ss 101 and 104 of the Companies Act 1928 (Vic), ss 99, 100, 106 and 109 of the Companies Act 1934 (SA), ss 84, 85, 88 and 92 of the Companies Act 1931 (Qld), ss 101 and 105 of the Companies Act 1920 (Tas) and other State companies legislation of the 1930s. For example, ss 185 and 190 of the Companies Act 1936 (NSW) were, relevantly, in the following terms: 185. (1) Every charge created after the commencement of this Act by a company and being either - [There were then set out various charges.] shall, so far as any security on the company's property or undertaking is thereby conferred, be void against the liquidator and any creditor of the company unless the instrument (if any) by which the charge is created or evidenced, or a copy thereof accompanied by an affidavit verifying the execution of the charge, and in the case of a copy also verifying it as a true copy of such charge, is filed with the Registrar-General for registration in manner required by this Part within thirty days after the date of its creation, but without prejudice to any contract or obligation for repayment of the money thereby secured. (2) When a charge becomes void under this section the moneys secured thereby shall immediately become payable. … 190. (1) The court, on being satisfied that the omission to register a charge within the time required by this Act, or that the omission or mis-statement of any particular with respect to any such charge or in a memorandum of satisfaction, was accidental or due to inadvertence or to some other sufficient cause, or is not of a nature to prejudice the position of creditors or shareholders of the company, 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, order that the time for registration shall be extended, or, as the case may be that the omission or mis-statement shall be rectified. 74 The uniform companies legislation passed by the States in the early 1960s contained, in Division 7 of Part IV, provisions concerning the registration of charges. The relevant parts of ss 100 and 106 of the Companies Act 1961 (NSW) were as follows: 100 (1) Subject to this Division where a charge to which this section applies is created by a company there shall be lodged with the Commission for registration within thirty days after the creation of the charge a statement of the prescribed particulars and - (a) the instrument (if any) by which the charge is created or evidenced: or (b) a copy thereof together with a statutory declaration verifying the execution of the charge and also verifying the copy as being a true copy of the instrument - and if this section is not complied with in relation to the charge the charge shall, so far as any security on the company's property or undertaking is thereby conferred, be void against the liquidator and any creditor of the company. (2) Nothing in subsection (1) shall prejudice any contract or obligation for repayment of the money secured by a charge and when a charge becomes void under this section the money secured thereby shall immediately become payable. … 106 The Court, on being satisfied that the omission to register a charge (whether under this or any corresponding previous enactment) within the time required or that the omission or mis-statement of any particular with respect to any such charge or in a memorandum of satisfaction was accidental or due to inadvertence or to 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 order that time for registration be extended or that the omission or mis-statement be rectified.

The development of the law prior to the Companies (State) Codes 1981 75 By 1906 the following can be said about the structure of, and approach to, ss 14 and 15 of the 1900 Act: (a) A condition protecting rights in, or against, the property the subject of the charge which had been acquired would invariably be inserted into any order made pursuant to s 15. (b) The "rights" contemplated by such usual condition included the rights of later secured creditors and persons who had taken a later interest in the assets of the company, but did not include those of general creditors, in the absence of a winding up. (c) The "rights" contemplated by such usual condition did include those of general creditors if, before registration, a winding up had occurred, because the rights of general creditors at that point were those created by the statute (whether strictly in the nature of a trust or not) to have the property of the company administered for their benefit (the charge, at this point of time, being void) and such rights were viewed as in the nature of rights in, or against, the property of the company. (d) The position of general creditors, in particular, but not necessarily limited to, those who gave credit after the time when the charge should have been registered, might, in any particular circumstances, need to be examined, perhaps in the presence of someone to represent their interests, to see whether any further condition was "just and expedient". (e) The nature of the inter-relationship between the voiding provision (ss 14 and 93) and the remedial provision (ss 15 and s 96) had been explained. The avoidance was not absolute, but only as a security, but that avoidance as a security was subject to the court's power, in effect to validate, by the exercise of the power to extend time. If such power were exercised, and if registration occurred in accordance with the extension granted, the charge was taken to have been registered within time and was made valid ab initio, by the making of a nunc pro tunc order. The two provisions were read together to produce this result. (As earlier noted, s 79 of the 1929 Act commenced with the introductory phrase "Subject to the provision of this Part…". See also the introductory words to s 100 of the Uniform Companies Acts in the 1960s in Australia. This is how the two sections had been interpreted, in any event, before these specific words came into the relevant legislation.) (f) By the avoidance of the charge as a security, not only against the liquidator, but also any creditor, the provisions dealt not only with the security if a liquidation intervened, but also with the question of priorities between secured creditors. 76 Because of the importance of this early seminal period, it is appropriate to examine, in a little detail, the main reported decisions which dealt with most of the above propositions and the development of the jurisprudence up to 1981. 77 In In re Joplin Brewery Company Ltd [1902] 1 Ch 79 Buckley Jsaw the application under s 15 of the 1900 Act as a similar application to the application to register out of time under s 14 of the Bills of Sale Act (UK) 1878. Buckley J referred to the usual practice in applications under s 14 of the Bills of Sale Act of attaching to any order extending time a proviso to protect the rights of third parties. He said the following at 81: These applications are made without serving the creditors, and the orders ought to be drawn so as to save the rights of persons who have become creditors of the company before registration is effected, just as in the case of bills of sale. I therefore direct that there be added to the order the words: "but that this order be without prejudice to the rights of parties acquired prior to the time when the debentures shall be actually registered"; and I intimate my opinion that these words ought to be added in every case, unless there is some good ground to the contrary - eg, in cases in which the order could not prejudice the rights of any creditors. 78 Buckley J noted at 80 (in a case before him of a family business, the few owners all supporting the application and an entirely solvent company) about the making of orders under the Bills of Sale Act 1878: …these orders are made readily upon proper evidence of accident or inadvertence for the reasons that by the insertion of these words [the without prejudice qualification] the rights of absent parties are not affected. The reference by Buckley J to the protection of "rights of persons who have become creditors" was to be the focus of some judicial discussion and disagreement in due course, to which I will come. 79 Within six weeks of In re Joplin Brewery being decided, Swinfen Eady J in In re Spiral Globe Ltd [1902] 1 Ch 396 dealt with an application under s 15 of the 1900 Act in circumstances of the intervention of a winding up and a less than solvent company. Debentures had been issued and, due to inadvertence, not registered. In April 1901, resolutions of the company were passed for the voluntary winding up of the company and the appointment of a liquidator. The assets of the company were not sufficient to satisfy unsecured creditors in full, without recourse to the property charged by the debentures. The applicant sought an order under s 15 without the proviso imposed by Buckley J in In re Joplin Brewery. It is important to understand the arguments of counsel for the debenture holders, who said that the imposition of the proviso would give general creditors access to property by inadvertence and through no fault of the debenture holders (a kind of "windfall" argument) and that the Bills of Sale Act cases could be distinguished, because in those cases true property rights had intervened - a creditor in one case had taken goods in execution and, in another, a trustee in bankruptcy had acceded to the estate of the holder of the bill of sale. After a winding up, it was said, general creditors had no right to the property of the company. Also it was said that if any proviso was to be made, only creditors who had become such since creation of the debentures should be its subject. Swinfen Eady J rejected all these arguments and stated as follows at 399: …It is true that on the winding-up of a company the property does not become vested in the liquidator as it does become vested in the trustee of a bankrupt on the bankruptcy of an individual. But the principle of the cases before referred to is not limited in its application to those cases in which the ownership of or property in goods or chattels has actually changed; it extends, in my judgment, to cases in which the rights of third persons have actually accrued, and which would be prejudicially affected if registration were allowed without saving and protecting those rights. Upon a winding-up the rights of the whole body of the company's creditors have intervened, and the position of the liquidator, and through him of all the general creditors of the company, would now be very much prejudiced if the time for registration were unconditionally extended. The Company being now in liquidation, the difficulty cannot be avoided by issuing fresh debentures. The order will therefore be made, but with the addition of the words before mentioned. [emphasis added] The result was that Swinfen Eady J made an order which was of no utility, as counsel had submitted. His Lordship might just as easily (its effect being understood to have been the same) have dismissed the application on the grounds of the intervention of the winding up and the accrual of the rights of creditors. It is important to note, however, that Swinfen Eady J was of the view that the winding up wrought a change to the rights of all creditors. 80 Buckley J returned to the question in February 1902 in In re S Abrahams & Sons [1902] 1 Ch 695, where debentures were issued and not registered. In October 1901, the company passed a resolution for voluntary winding up. Thereafter, an application was made under s 15 of the 1900 Act. The assets of the company were insufficient to pay the debenture in full plus costs. If the extension were to be granted, the general creditors would have obtained nothing. In argument Buckley J said (at 697): Ought an order extending the time to be made after a winding-up has commenced? True there is no vesting of the company's property in the liquidator, but the rights of parties have crystallised. Counsel for the applicant debenture holders then referred to the course taken by Swinfen Eady J in In re Spiral Globe. Counsel for the liquidators was not called on. In his reasons Buckley J said at (698-701): The applicant desires that the order extending the time may be made without the insertion therein of the words which I inserted in the order made in In re Joplin Brewery Co. What he wants is an order operating retrospectively to a date prior to the commencement of the winding-up. I cannot make such an order. [Buckley J then described the financial position of the company describing other debenture holders in respect of securities issued before 1 January 1901, general creditors and continued.] …If I made such an order as has been asked for, the holders of the debentures for 5000l., whose security is now barely sufficient, would be prejudicially affected, and if any surplus remained the unsecured creditors would be prejudicially affected, for the effect of the order would be to give the applicant priority over them in respect of his debt of 500l. What ground is there for making such an order? … But, in my judgment, I ought not to make any order which will prejudice the position of the other creditors. … When this company went into liquidation in October, 1901, the rights of its creditors attached, and the unsecured creditors had the right to say that the assets should be administered on the footing that only the holders of the debentures which did not require registration and the holders of any debentures which required registration and had been registered should have priority. I cannot see that there is any principle on which I ought to take those rights away. Sect. 14 of the Act of 1900 says that if the debentures are not registered within a certain time they shall be "void against the liquidator and any creditor of the company." … Unless in very exceptional cases, I think that orders extending the time for registration ought to be qualified as in In re Joplin Brewery Co. I am unable to see how, if a winding-up has commenced, an order containing the words inserted in the order made in that case can do anybody any good. If you have secured and unsecured creditors of a company in liquidation, you must, under an order in the form in In re Joplin Brewery Co., first pay the secured creditors in full or to the extent of the assets. If there is a surplus after paying the secured creditors in full, the debenture-holder whose debenture has not been registered in time, and who obtains an extension of time on the terms imposed in In Re Joplin Brewery Co cannot claim priority over but will come in pari passu with the unsecured creditors, and this position he would obtain without any order from the Court under s 15 of the Act of 1900. Such an order as I made in In re Joplin Brewery Co. would, in my judgment, be useless to the applicant. Under these circumstances his summons must be dismissed with costs. [emphasis added] 81 Thus, Buckley J saw the intervention of a winding up as virtually fatal to the application by reason of the crystallisation of rights of the unsecured creditors over all the assets of the company, including the assets covered by the (void) charge, and their statutory equality with the unregistered debenture holder. Only in "very exceptional circumstances" would an order be made without the proviso, and that proviso protected unsecured creditors when a winding up had intervened. 82 In May 1902, the Court of Appeal in In re I C Johnson & Co Ltd [1902] 2 Ch 101 dealt with an order made by Kekewich J which had included the proviso introduced by Buckley J in In re Joplin Brewery. In In re I C Johnson there were pari passu debentures, some issued before 1 January 1901, some after. The company was solvent. The appellants (the post 1901 unregistered debenture holders) sought a position different to that brought about by Buckley J's decision in In re S Abrahams (in which case there had also been pari passu debentures issued before and after 1 January 1901). In upholding the appeal, the Court of Appeal drew a qualification to the In re Joplin Brewery condition which excluded the earlier issued debentures from its effect, so as to maintain ranking pari passu status between the contractually equal debentures. Cozens-Hardy LJ (at 110) added a rider to his reasons in which he doubted whether the proviso as drafted by Buckley J in In re Joplin Brewery would ever have any effect in protecting unsecured creditors: …who had not taken some proceedings to get a charge or a security upon the goods. Expressed in those terms Cozens-Hardy LJ might be seen as limiting the protection of the proviso to later secured creditors. As will be seen, his Lordship did not have that view. 83 In April 1903, in In re Anglo-Oriental Carpet Manufacturing Company [1903] 1 Ch 914, Buckley J returned to the question of the effect of ss 14 and 15 of the 1900 Act and the role of the proviso. Debentures creating a charge had been issued, but not registered within 21 days. On 1 November 1901, an order was made with the usual proviso ("without prejudice to the rights of parties acquired prior to the time when such trust deed and debentures shall be actually registered") extending time until 15 November 2001. The charge was registered on 15 November 2001. In the meantime, on 11 November, the company passed a resolution for voluntary winding up. Buckley J held that the proviso protected the whole general body of creditors. Buckley J said at 918: …On November 11, 1901, by force of the Act of Parliament, the undertaking and assets of the company passed under the control of the liquidator, whose duty it was to convert them into money, and out of the proceeds to pay the creditors existing at that date. The assets have been said to be impressed in the hands of the liquidator with a statutory trust in favour of the creditors. Upon the commencement of the winding-up an immediate duty was cast upon the liquidator to collect the assets and distribute them among the creditors then existing. At that moment the debenture-holders were unsecured creditors of the company, for they did not hold any security registered as required by the Act of 1900. It has been argued on behalf of the debenture-holders that when registration was made on November 15, 1901, there arose a security which was not in existence at the date when the liquidation commenced. But whether that was so or not, the order extending the time for registration was made "without prejudice to the rights of parties acquired prior to the time when such trust deed and debentures shall be actually registered." Whatever the exact limit of those words may be, they certainly in my judgment include the rights of creditors, acquired on the passing of the winding up resolution, to have the assets realized and distributed among them pari passu. [emphasis added] 84 The obiter dictum of Cozens-Hardy LJ in In re I C Johnson and the nature of the rights to be protected in any application under s 15, and the operation of s 15 were further illuminated by the Court of Appeal in July 1906 in In re Ehrmann Brothers Ltd [1906] 2 Ch 697. Debentures had been issued after 1 January 1901 secured by a floating charge, which, by inadvertence, was not registered within 21 days. The judge at first instance extended the time for registration, with a proviso as contained in In re I C Johnson. Registration was effected pursuant to the order extending time. Thereafter, a petition was filed for the compulsory winding up of the company; and thereafter the company passed a resolution for its voluntary winding up. Buckley J permitted the petitioning creditor to participate in an inquiry as to the priorities between the (now) registered debenture holder and the unsecured creditors. The result of that inquiry at first instance was that Joyce J placed the unsecured creditors at the same level as the debenture holders who had, before the intervention of winding up, registered the charge pursuant to the leave that had been granted. An appeal from Joyce J was allowed. Vaughan Williams LJ recognised that the effect of registration (pursuant to the extension granted) was that the debentures were "no longer void". Vaughan Williams LJ limited the protective effect of the proviso to those who had acquired rights of, or against, the property the subject of the charge (at 704) prior to registration. Vaughan Williams LJ expressed the view (at 705) that Buckley J had expressed the matter too widely in In re Joplin Brewery if he had intended that the proviso protect unsecured creditors generally. Vaughan Williams LJ then referred to the dictum of Cozens-Hardy LJ in In re I C Johnson (see [82] above) and continued at 705-706, making clear his view as to the effect of winding up: …Of course, that does not mean only creditors who individually have so done, [that is as Cozens-Hardy LJ in In re I C Johnson said: taken some proceedings to get a charge or security],but creditors who come within the operation and benefit of an order for winding-up giving the creditors a right to have such property administered for their benefit. That is the conclusion which I have come to in this case. I think that the intention of the Legislature, as appears by the statute itself, was, in a case where the omission to register was accidental and the extension of time was a just thing to grant, to place the debenture-holders in the same position as they would have been in if they had registered in due time. But of course the Legislature had to make provision for the rights of those who had obtained rights which existed at the time when the order for the extension of time was made. I do not think that the Legislature meant by that that an unsecured creditor, merely because he was an unsecured creditor at the time the extension order was made, should be allowed to say, "So far as I am concerned, that debenture which was not registered in due time, but which was registered under the order for extension, is a void debenture." [emphasis added] 85 Romer LJ (at 706-7) explained the avoidance by s 14 and the operation of s 15 as follows: …but the Act does not avoid the mortgage or charge absolutely, but only so far as any security is given thereby upon the company's property or undertaking. The effect, therefore, is that if any mortgage or charge is not registered it is valid as an admission of debt, but as against a creditor or the liquidator it could not be said that a valid charge was effected thereby. Then comes s 15. Now that provides for an extension of time within which the registration should be effected in certain given cases, and if you look at the wording of the section it will be seen how carefully the Legislature has provided for the extension of time only being granted in what I may call fit and proper cases, as, for example, where the omission to register was due to inadvertence or some other sufficient cause, or was not of a nature to prejudice the position of creditors or shareholders of the company, or was such that on other grounds it was just and equitable to grant relief. In such cases power is given to the Court to extend the time, and, of course, if the time is extended and registration is made within the extended time, then the debentures would be constituted a valid charge ab initio subject only to such conditions as might be imposed by a judge giving the extended time. emphasis added] Romer LJ continued, and said that the Court would protect those who had acquired rights against the property charged before registration, and (at 708) explained the meaning of "right" in the usual proviso: …The word "right" used in the order means something affecting the debenture-holders as security holders, and something which the Court could recognize and enforce; it cannot mean something - if I may so call it - in the air, some claim or contention which the Court could not recognize or give effect to in any valid proceeding. Now, in the absence of liquidation before the date of registration or of some charge acquired by a creditor, no ordinary creditor had a right which could have been enforced by him as against the debenture-holders, if the debenture-holders sought to get payment of their charge. The general avoidance of the debentures as charges as against the ordinary creditor prior to liquidation proceedings, and in the absence of any charge acquired by him, would not entitle him to intervene as between the company and the debenture-holders if the company chose to pay the debenture-holders or to apply any part of its property in payment of those debenture-holders or to give other security to the debenture-holders; nor, in my opinion, could such a creditor apply or intervene in an action brought by the debenture-holders against the company where the debenture-holders were seeking to enforce their alleged security if the company chose to recognize the charge and to use its assets in paying those debentures off. An ordinary creditor would have no locus standi; if there was liquidation, of course different considerations would apply; and if he had a charge different considerations would apply; he might then intervene, and I think his intervention would be accepted by the Court. But, as I have said, in the absence of liquidation and the absence of something in the nature of a charge acquired upon the security comprised in the debentures, a creditor could not intervene as against any property of the company or as against the debenture-holders in any way whatever. That being so, it appears to me, as I have said, that the only right protected is something which affects the property covered by the debentures. [emphasis added] 86 Romer LJ specifically approved the decision of Buckley J in In re Anglo-Oriental Carpet Manufacturing Co, saying (at 709): …In that case the company had gone into liquidation prior to the registration, and a right had been acquired by the creditors which the Court recognized and put in force through the liquidator, saying that all the assets then existing of the company not charged must be applied rateably amongst the then existing creditors. ... 87 Cozens-Hardy LJ agreed. He reiterated the view that he had expressed In re I C Johnson and emphasised that the word "rights" in the usual proviso meant rights acquired against the property the subject of the charge. Cozens-Hardy LJ also, in the context of assessing what "rights" would be so protected, said the following about liquidation and its effect (at 710): Then there are two subsequent decisions of Buckley J in In re S Abrahams & Sons ([1902] 1 Ch 695) and in In re Anglo-Oriental Carpet Manufacturing Co ([1903] 1 Ch 914). In those cases there had been a winding-up of the company. In one instance it was before the application to enlarge the time, and in the other case it was after the order for the extension of the time had been made, but before the debentures were actually registered; and in both those cases the learned judge held that rights had been acquired by the creditors, not by an individual creditor, but by virtue of proceedings taken which involved the administration of the assets of the company for the benefit of all creditors. The decision in In re Spiral Globe, Ld ([1902] 1 Ch 396), is exactly on the same lines, and it seems to me to be perfectly right. 88 It is clear that each of Vaughan Williams, Romer and Cozens-Hardy LJJ was of the view that the intervention of winding up before registration created rights in all the unsecured creditors protected by the proviso. 89 Shortly thereafter, in August 1906, in In re Cardiff Workmen's Cottage Company Ltd [1906] 2 Ch 627 Buckley J dealt, not with the question as to what the proviso developed by him in In re Joplin Brewery meant (as had been the subject of consideration in In re I C Johnson and In re Ehrmann Brothers), but with the question as to whether,prior to any winding up,the unsecured creditors should be protected by a differently worded proviso. Buckley J posited the terms of a possible further protective condition as follows (at 629): …"Provided always that the security conferred by the debentures for whose registration the time is extended shall not, as against any creditor of the company who shall have become a creditor after the date when those debentures ought to have been registered, and before the time when they shall be actually registered, be of any greater validity than if this order had not been made." 90 Buckley J then (at 629-30) considered that there could, in any given circumstance, be creditors who gave credit on the faith of the state of the register. He accepted that it was superficially attractive, on that hypothesis, to draft a condition to protect them; but he pointed out that fresh debentures might be issued to replace those unregistered, which fresh debentures might be immediately registered, and then defeat these creditors. In a sense, as he said, if the company is a going concern, the unsecured creditors always take the risk of a creditor taking a charge with priority. Nevertheless, Buckley J felt that there could be circumstances in which creditors should be given the opportunity to be heard as to what, if any, condition would be "just and expedient" in their interests. In the circumstances before him, no such steps were necessary, and no variation was made to the order made in In re I C Johnson. 91 In re Cardiff Workmen's Cottage appears to bethe first occasion in which the state of the register, for the benefit of unsecured creditors to view and upon which to decide whether or not to give credit, was discussed in the reported English cases. Nevertheless, it would appear that there were grounds for concluding that it became practice, from 1901, to support the application under s 15 of the 1900 Act, and like later provisions, with evidence of the solvency of the company, and with evidence that no winding up was pending and that no judgment had been recovered against the company which remained unsatisfied: Re Bootle Cold Storage and Ice Co [1901] WN 54 and In re Tingri Tea Company Ltd [1901] WN 165. As will be seen shortly, that practice, and the view as to whether or not it existed, became controversial in England by the 1930s. 92 Prior to 1981, there was no suggestion in the jurisprudence in England or Australasia that the intervention of winding up before registration would, or should, cease to affect the position of the applicant for an extension as described in these early cases. It has been sometimes expressed that "invariably" the order would be refused if winding up intervened. This perhaps masks the position uniformly adopted. The view had never been challenged that in understanding the effect of the usual proviso developed as early as 1902 in In re Joplin Brewery, if a winding up intervened before registration, all the general creditors were regarded as having rights protected by the usual proviso, and, so, there was no utility in making the order. 93 There was, however, one important divergence of approach between England and Australasia in the 1930s. This concerned the practice of examining the position of unsecured creditors and the solvency of the company when winding up had not intervened. 94 In In re L H Charles & Co Ltd [1935] WN 15, Clauson J made an order on the company's undertaking, in circumstances where a voluntary winding up was in contemplation, that if a resolution for winding up became effective within a month from the date of the order and if within three weeks thereafter the liquidator applied to discharge the order, the company would abide by any order of the Court to rectify the register by removing the charge from the register. Clauson J said that this mechanism was to be preferred to standing over the application to a date after any winding up because by that time an order made would be "useless". (One difficulty with the course undertaken by Clauson J was pointed out by the High Court in 1981 in Wilde v Australian Trade Equipment Co Pty Ltd (1981) 145 CLR 590; that is, that whilst the order might be set aside, the registration might remain valid.) The course proposed by Clauson J was clearly predicated upon the fatal effect of winding up to an application, and the relevance of the imminence of winding up. Also, Clauson J referred to the practice of the court to scrutinise carefully the evidence to satisfy itself of solvency and that no winding up was pending. 95 This view as to the relevance of the position of general creditors and the solvency of the company absent the intervention of winding up, and the relevance of any impending winding up was reflected in contemporaneous Australian and New Zealand authority on provisions similar in terms and structure to the English provisions. In In re A Limited Company (1928) 28 SR (NSW) 364, Long Innes J referred to, amongst other cases, In re Cardiff Workmen's Cottage and, whilst not agreeing with everything said by Buckley J there, agreed with the proposition that in some cases it would be appropriate to hear unsecured creditors. Long Innes J was of the view that in the circumstances before him it was a proper case to allow the unsecured creditors to come in and put submissions. So, he made the extension order, but suspended its operation until the creditors had had an opportunity to be heard. Advertising was required to effect this. 96 In In re Dalgety & Co Ltd [1928] NZLR 731 Reed J appeared to accept that the practice in England was, in appropriate cases, to hear the unsecured creditors. Reed J said that the practice in England should be followed in New Zealand, and at 736 said that: …[i]n order to enable the Court to decide whether an opportunity should be given to ordinary creditors to be heard it is essential that a company applying for an extension should, in the supporting affidavit, in addition to giving full particulars relating to the grounds upon which the application is made, give a very full and complete statement of the financial position of the company, with information (i) as to the amount owing to unsecured creditors and the nature of the accounts - ie, whether ordinary monthly accounts or of long standing; (ii) as to whether there are any judgments outstanding against the company; (iii) as to whether any proceedings are pending for winding-up the company; and generally such full and complete information as may be necessary to enable the Court to be fully seized of the position. 97 A form of order for the protection of unsecured creditors can be found in In re Cinema Art Films Ltd [1930] NZLR 500 at 502-3: "Provided always that the security conferred by the debenture for whose registration the time is extended shall not, as against any creditor of the company who shall have become a creditor after the date when the debenture ought to have been registered and before the time when it shall be actually registered, or against any liquidator of the company in so far as concerns the claims of any such creditor, be of any greater validity than if this order had not been made (the intent of this order being that so long as the claims of such creditors remain unsatisfied by the company the debenture holder shall have no greater priority as against such creditors in respect of company's New Zealand assets than if this order had not been made and the debenture had remained unregistered), and so that it shall be competent for any person or persons, corporation or corporations, whether claiming under or in respect of any right or interest accruing to or arising in any such person or persons, corporation or corporations, or claiming as of being a creditor or creditors of the company, or claiming as the liquidator of the company, or otherwise for any reason whatsoever claiming to be prejudicially affected by this order, to move before this honourable Court or a Judge thereof to set aside, vary, or discharge this order, and so that it shall be a condition of this order inseparable therefrom that the debenture-holder shall not raise any question as to, or make any objections to, the jurisdiction of this honourable Court or any Judge thereof to set aside, vary, or discharge this order, and will not further rely upon or seek to enforce," &c. (following the terms of the undertaking as above). 98 A different view as to the position of unsecured creditors was taken by the English Court of Appeal in In re MIG Trust Ltd [1933] Ch 542. An application under s 85 of the 1929 Act was opposed by the company at an early stage and before the matter came on for hearing. The mortgagor company was hopelessly insolvent with a winding up petition impending. A few days later, on the instructions of a director of the company who had an interest in the mortgagee company, the opposition of the company was withdrawn and the order was made. Shortly thereafter, the company was wound up. The primary judge, Eve J, set aside the registration of the charge as a fraudulent preference. The Court of Appeal allowed the appeal. Lord Hanworth MR (at 559-60) was somewhat critical of the approach of Buckley J in In re Joplin Brewery in equating s 14 of the Bills of Sale Act 1878 (UK) with s 15 of the 1900 Act, noting the wider terms of the discretion in s 15. Lord Hanworth said (at 560): …It seems to me quite clear that the Legislature did intend by those very wide terms not to give a restricted opportunity to repair an omission but to give the widest possible discretion to the Court in circumstances which need not show that the omission was accidental or due to inadvertence but which would be sufficient on other grounds to make it just and equitable to grant relief. … [In speaking of Buckley J's approach in adding what became the usual proviso Lord Hanworth continued.] …This would seem, therefore, to make too little use of the section, because it would only be exercised without prejudice to the rights of any creditors. … After referring to In re Ehrmann Brothers and to passages from the reasons of Vaughan Williams LJ and Romer LJ in In re Ehrmann Brothers Lord Hanworth said (at 561-62): …In other words, this protective clause is not to safeguard the rights of unsecured creditors but only those who are indicated in the two passages to which I have referred. … In other words we have got this: that when an order is made under s 85 the limitation of the order ought not to favour unsecured creditors but it is only intended to protect the rights affected by a priority charge by the debenture holders, and the effect therefore of an order under s 85 is that it is an order which may militate against, or certainly does not provide protection for the rights of unsecured creditors. 99 Given, however, the clear recognition by Vaughan Williams LJ and Romer LJ (and, indeed, also Cozens-Hardy LJ) in In re Ehrmann Brothers of the "rights" of unsecured creditors in circumstances where a winding up intervened before registration, nothing in these passages of Lord Hanworth should be understood as affecting the recognition of the importance of the effect of the intervention of winding up before registration to the position of the unsecured creditors. 100 Romer LJ (the son of Romer LJ in In re Ehrmann Brothers) recounted the history of the cases and the apparent protection given to unsecured creditors by the In re Joplin Brewery proviso, if the word "rights" were to be widely construed. (The proprietary character of the extent of the protection had, however, been settled in In re Ehrmann Brothers.) At 571 Romer LJ contested the proposition that it was in fact the practice for the Court to insist on: …being furnished with evidence to the effect that there has been no judgment obtained against a company, that no resolution has been passed or even notice sent out to convening a meeting of the company to pass a resolution to wind up… 101 The clarity of the dispute about the existence of this practice can be gauged from the fact that Clauson J in In re LH Charles said the following in the first paragraph of his ex tempore reasons (at 16), after having just had the passages of Romer LJ's reasons in In re MIG Trust at "569 et seq" cited to him: …upon applications under s 85 of the Companies Act, 1929, it was the practice of the Court to scrutinise carefully the evidence in support of the application, in order to satisfy itself that the company was solvent and that no winding up of the company was impending. The propriety of such practice had been explained in certain reported decisions of the Courts upon applications under that section and the practice was one which ought to be continued. … 102 Romer LJ and Clauson J had diametrically opposed views as to what the practice was (or, perhaps, what the practice should be) and as to the relevance of the position of unsecured creditors before any winding up. 103 Fifteen years later, Vaisey J in In re Kris Cruisers Ltd [1949] 1 Ch 138, followed In re MIG Trust, and expressed a view as to the irrelevance of the position of the unsecured creditors prior to any winding up. He said (at 141-42): …The protecting words will go into this order as they go into every similar order so far as my experience goes; and the effect of them is now, I think, a matter which is beyond discussion, at any rate in this court; that is to say, they are for the protection of persons to whom have accrued rights of property in the assets of a company and they do not extend to protect the inchoate or other rights of unsecured creditors as such. The position is certainly peculiar and, in some respects, anomalous. It has been pointed out that the absence of the charge on the register may possibly have induced people to give credit to the company, on the footing that the assets of the company were not subject to any registrable charge or mortgage. The true view is, however, that there is a statutory right in the mortgagee or chargee to come to the court to be relieved of the consequences of his own negligence and lack of caution provided that the court is satisfied that the omission to register was not an omission with any fraudulent intention but was, in the words of the Act, "due to inadvertence or to some" other sufficient cause."… … I have hesitated in this matter because this section always seems to me to be a benevolent section in this sense, that it appears to give the mortgagee or the chargee a complete and unfettered opportunity for repentance and really to place him in the same position exactly as if he had been careful and not careless, diligent and not negligent. In the present case I propose to make an order in the usual form with the usual qualifying words, and (although I am satisfied in this case that the company is very far from solvent but the contrary), I think that the solvency or insolvency of the company is not a matter to which I need pay attention. … 104 There is nothing in Vaisey J's reasons to throw doubt on the effect of a winding up on the position of creditors - that such put them in a position to be protected by the proviso if winding up took place before registration. 105 By 1954, when the third edition of Halsbury was published, the following appeared in Vol 6 at 499-50 in the footnote adjacent to the references to Re Bootle Cold Storage and Ice Co and Re Tingri Tea Co Ltd and the statement in the text that the usual practice was to state in the supporting affidavit that no petition to wind up the company had been presented, no notice of a meeting for voluntary liquidation had been served and that there was no outstanding unsatisfied judgment: … These statements in the affidavit are, it appears, unnecessary since the purpose of the discretion given to the court as regards granting registration out of time is to protect secured creditors, not unsecured creditors of the company (Re MIG Trust, Ltd [1933] Ch 542, CA at p 571). 106 It was this state of authority which was before Street J (as his Honour then was) in Re Dudley Engineering Pty Ltd [1968] 1 NSWLR 483. The case concerned ss 100 and 106 of the Companies Act 1961 (NSW). Winding up had not occurred. Street J said that unsecured creditors had an interest in the extension question, citing Re A Limited Company and In re L H Charles. Street J (at 486) specifically disagreed with the following statement of Vaisey J in In re Kris Cruisers: … I think that the solvency or insolvency of the company is not a matter to which I need pay attention. … Street J continued (at 486): But in disagreeing with this observation I do not wish to be taken to be expressing the view that the solvency or insolvency of the company is a governing consideration. It represents but one of the overall complex of facts upon which the Court must exercise its discretion in deciding whether or not an order should be made and if so, upon what terms and conditions. It is clear on the cases culminating in Re Kris Cruisers … that the mere fact that the grant of an extension of time will prejudice ordinary unsecured creditors is not sufficient either to require a refusal of the extension or the insertion of a condition protecting the rights of unsecured creditors. 107 Nothing said by Street J in Re Dudley Engineering was directed to the effect of winding up on the position and rights of unsecured creditors; his Honour was directing his attention to the position of unsecured creditors and the question of solvency in the absence of an intervening winding up. Indeed, Street J's comments (at 487) on the usual form of proviso make that clear: … To a small degree this differs from what has become the customary form of order in this jurisdiction, as made in Re Glasson, (1938) 56 WN (NSW) 56. That customary form of order was that the extension would be without prejudice to the rights of any person who, prior to the actual registration, registers or has registered another charge over the property comprised in the charge in respect of which the extension is granted. It seems to me that the condition should be slightly wider, in that the order for extension should not merely be without prejudice to the rights of a person who has subsequently registered another charge but that it should be without prejudice to the rights of any person who may as a creditor (s 100(1)) have acquired rights of property in the assets which are subject to the charge in respect of which the extension is granted. This will give full effect to the meaning of the condition as laid down by Vaisey, J, and a general form of condition to this effect should be inserted both in orders obtained under the Companies Act and in extensions of time obtained under the corresponding legislation in the Bills of Sale Act 1898, as amended. … 108 In 1973, the High Court dealt with the issue of the position of unsecured creditors before a winding up in The Commercial Banking Company of Sydney Ltd v George Hudson Pty Ltd (In Liquidation)(1973) 131 CLR 605. There, a registrar in the Queensland Supreme Court granted an extension under s 106 of the Companies Act 1961(Qld). The registrar only had power to do this if the application were "unopposed". At the time of the application in Queensland by the secured creditor (the bank), a petition to wind up the chargor company had been presented in the Supreme Court of New South Wales, but not yet finally dealt with, though a provisional liquidator had been appointed on the day of the filing of the petition. A liquidator was later appointed in New South Wales two weeks after the making of the extension order. It was argued in support of the "unopposed" status of the application that there was no established practice to serve creditors with the application, that the chargor company could not have opposed the application and that there was no evidence of any creditors who had an interest. Menzies J said the proceedings were not unopposed, because there was someone entitled to be given the opportunity of appearing who was not given that opportunity. The provisional liquidator was entitled to appear "because the order affected him adversely". He said at 613: …It is because the granting of the application put the bank in a position to defeat the liquidator upon an unassailable ground not otherwise available to it that the liquidator was entitled to an opportunity to oppose the application with a view to ensuring that the status quo should be maintained. … The considerations which I have adverted to show not only that the proceeding before the registrar was not an unopposed application in the relevant sense, but that, if the registrar could have granted the application, he should have refused to do so and have maintained the status quo. The company was in the course of being wound up when the registrar made an order which would give the bank the opportunity to strengthen its hand against a liquidator who had already been provisionally appointed. It is a deeply rooted principle of company law that, when liquidation has commenced, one creditor should not be assisted by the court to improve its position vis-ŕ-vis other creditors. 109 Walsh J agreed (at 617) and said that the unsecured creditors should have also been given notice to allow them to appear if the provisional liquidator did not. Stephen J said (at 621) that the provisional liquidators and creditors had been prejudiced. Thus, two justices expressly referred to unsecured creditors; all three referred to the interests of the provisional liquidator. 110 It should be noted that the argument in Hudson's case ranged over the English, Australian, New Zealand and Canadian cases concerning the position of unsecured creditors in applications to extend the relevant period: see the comments of Wanstall SPJ in Re Davleco Equipment Pty Ltd [1974] Qd R 247, 251. In Re Davleco, Wanstall SPJ expressed the view that the expressions of view in Hudson's case could not be seen as relevant to a solvent company. (It is unnecessary to express a view as to whether, so broadly expressed, this is correct.) Wanstall SPJ also said at 252: Nevertheless one consequence of the decision and the dicta in Hudson's case is to render inapplicable in Australia the dicta of Romer LJ in In Re MIG Trust Limited [1933] Ch 542, at 571, that on such an application the court has no concern with the interests of unsecured creditors of the company, and that therefore statements in an affidavit that it is solvent and that no winding up is imminent are irrelevant. 111 Somers J in Re Jack Harris Ltd [1977] 1 NZLR 141 followed Re Dudley Engineering and In re Dalgety on the question of the relevance of the interests of unsecured creditors and did not follow In re MIG Trust and In re Kris Cruisers. (Hudson's case does not appear to have been cited to Somers J.) 112 In 1978 the Full Court of the Supreme Court of South Australia looked at the question of the position of unsecured creditors prior to the intervention of winding up in In re Flinders Trading Co Pty Ltd (1978) 20 SASR 14. On 10 February 1977, the chargee sought an order under s 106 of the Companies Act 1962 (SA) extending time to lodge a charge. Several adjournments occurred. On 29 March 1977, the Master made an order extending time to 19 April 1977, but suspended the operation of the order until 5 May 1977, or such further date as might then be fixed. He ordered advertising to notify unsecured creditors that they could appear on 5 May to show cause why an extension should not be made. The order had a provision of an In re Joplin Brewery kind. On the material before the Master on 29 March 1977, the winding up of the company was a distinct possibility. On 5 and 6 May 1977, various creditors appeared. On 6 May 1977, the Master removed the suspension order, except as regards two creditors. On 9 May 1977, the Court made an order winding the company up. On 14 July 1977, Sangster J discharged the Master's orders of 29 March and 6 May 1977 - leaving the charge unregistered and void as a security. Sangster J was of the view that the apparent insolvency and impending winding up (as at 29 March 1977) meant that the extension of time should not be given. The Full Court, by majority (Mitchell J and Walters J, Bray CJ dissenting) dismissed the appeal. The point of difference between the majority and Bray CJ was the importance of the position of unsecured creditors before winding up. There was unanimity of expression of view (obiter) of the effect of a winding up before registration (indeed, even an interstate winding up). Sangster J had also adverted to the effect of winding up on creditors' rights as discussed in In re Anglo-Oriental Carpet Manufacturing Co. In a passage which was not contradicted by the majority in the Full Court, Sangster J stated the position as follows at 30-31: 17. The consequences of the commencement of a winding up have been described as follows: "the undertaking and assets of the company passed under the control of the liquidator, whose duty it was to convert them into money, and out of the proceeds to pay the creditors existing at that date. The assets have been said to be impressed in the hands of the liquidator with a statutory trust in favour of the creditors" (In re Anglo-Oriental Carpet Manufacturing Co [1903] 1 Ch. 914, per Buckley J at p 918). 18. It seems to me that not only will a court not (or at least will not without exceptional cause) extend the time for registration of a debenture once the winding up has commenced, but ought to be reluctant to do so if a winding up order seems imminent, eg if a petition for winding up has already been presented and (or so I would think to be implied in the reasoning) appeared likely to be pursued and likely to succeed. This, I think, is a consequence of the view which I take - indeed, which I consider myself obliged to take - that the court, in considering whether to extend the time for registration of a debenture should consider the interests of the unsecured creditors even though those interests have not yet crystallised into a direct interest, through a liquidator on a winding up, in the assets of the company. See Commercial Banking Company of Sydney Ltd v George Hudson Pty Ltd (in liquidation) (1973) 47 ALJR 732, per Menzies J at p 734 and per Walsh J at pp 735-736; and see also Re Davleco Equipment Pty Ltd [1974] Qd. R. 247, per Wanstall SPJ at pp 248-252. 19. With great respect I do not accept the proposition that on an application for extension of time for registration of a debenture the Court has no concern with the interests of unsecured creditors of the company, and I regard as inapplicable to South Australia the English Court of Appeal decision and dicta in In re MIG Trust Ltd [1933] Ch 542 (and particularly per Romer LJ at p 571). I agree, with respect, with the observations of Wanstall SPJ in this respect: See Re Davleco Equipment Pty Ltd [1974] Qd. R. 247, at p 252. 113 Bray CJ (at 34) recognised that the authorities in Australia and New Zealand diverged from those in England on the question of the relevance of the position of unsecured creditors. Bray CJ, however, saw the overturning of the Master's decision as going further than any case hitherto had in protecting the rights of unsecured creditors before winding up. Bray CJ recounted some of the history of the English provisions; he referred to the In re Joplin Brewery proviso and continued at (35): …The notion apparently got about that that condition was designed to protect ordinary unsecured creditors. That notion received its quietus (so far as England is concerned) from the Court of Appeal as far back as 1906 in Re Ehrmann Bros Ltd [1906] 2 Ch 697 when it was held that the Joplin condition was there only to protect rights acquired against or affecting the property charged by the debenture; see per Romer LJ at 707. A liquidator, of course, would be such a person if he was appointed before the relevant date, which, as I have said, I assume to be the date of the hearing of the application for extension, and, indeed, he would have precedence if he was appointed before the actual date of registration in pursuance of the order. Probably a creditor who had taken out execution would be in a similar category. So if there had been a resolution for a voluntary winding up, or the presentation of a petition for winding up before the relevant date, since the winding up commences and the liquidator's title relates back to those events (Companies Act s 223); see re Anglo-Oriental Carpet Manufacturing Co [1903] 1 Ch 914. It is clear that in England on the application for extension of time the interests of unsecured creditors who have not proceeded to execution are ignored unless the winding up has commenced. 114 Bray CJ recounted the history of the divergence between the Australasian and English authorities. Whilst Bray CJ accepted that on the authority of Hudson's case the interests of unsecured creditors were not to be disregarded, his Honour said that how they were to be regarded was another, and quite different, question. Bray CJ was not prepared to refuse the extension only on the basis of the parlous financial circumstances of the company. He said the following at 37-38: …No decision has gone so far as to hold that the order should be refused because of the insolvency or the imminent insolvency of the company when there is no suggestion that anyone has yet acquired any proprietary right in relation to the assets covered by the charge which would be adversely affected by the registration. We are asked to do that for the first time. … The unsecured creditors notified of the application may be able to show matters which would make the order improper. They may be able to show that an execution has been issued, or a petition presented or a winding up order made in another jurisdiction. They may be able successfully to challenge the grounds of the application and show that none of the statutory alternatives applies. They may be able successfully to invoke the discretion of the court against extending the time for all sorts of reasons. I do not, however, think that mere proof of the parlous or desperate financial state of the company ought to be regarded as necessitating the refusal of the order. 115 It should be noted that Bray CJ recognised that one way an unsecured creditor could legitimately oppose the extension, as against it, was to show that it had given credit on the faith of the register. His Honour said at 39-40: I might add that, like Mitchell J, I do not find it necessary to consider the condition placed by the Master in his order in addition to the Joplin condition, which in effect provides that the security shall not operate to the prejudice of certain named unsecured creditors, presumably because they had given the company credit after searching the register. Mr Legoe did not argue that if the appeal were allowed that condition should be deleted. 116 Mitchell J also surveyed the authorities on the position of unsecured creditors in relation to the application. Her Honour expressed the view (at 47-48) that the decision in Hudson's case made the position of unsecured creditors relevant, and meant that there was no error in the judgment of Sangster J that the court ought to be reluctant to grant an extension if winding up was imminent. At 49 her Honour expressed the view, based on Hudson's case, that: …even where it is mere inadvertence which leads to the failure to register a charge within the prescribed time, the argument that the registration of the charge merely puts the mortgagee in the position in which he or it would have been had there been no inadvertence should not prevail over the claims of unsecured creditors where there is a danger that such claims will not be met in full owing to the insolvency or likely insolvency of the company. 117 Walters J agreed with Mitchell J and concluded as follows at 51: …I think, therefore, that if at the date of the hearing of the application for enlargement of time for registration of a charge, there is insufficient evidence of the company's solvency, or ifit be made to appear that the company is unable to pay its debts as they fall due and that a winding up order is imminent and inescapable, the Court ought not, in the exercise of the discretion conferred by s 106 of the Act, extend the time for registration of the charge. Putting it at its very lowest, the Court should hesitate long before exercising its discretion in favour of a company which is in breach of s 100 of the Act. 118 None of the judges in the Full Court in In re Flinders Trading doubted the proposition that winding up crystallised the position of unsecured creditors' rights, and that if winding up occurred before registration the usual proviso placed in extension orders made by courts since the very beginning of the operation of the cognate English provisions protected the position of unsecured creditors in a winding up. 119 In Scarfe Steel Supplies Pty Limited v SMP Pty Ltd (1981) 27 SASR 187, Zelling J dealt with an application under s 106 in which the company was insolvent and not in a position to resist an order for its winding up; but no such order had been made and no such order was imminent. Following In re Flinders Trading, Zelling J refused the application. Zelling J applied what Sangster J had stated in [18] of his reasons in In re Flinders Trading (See [112] above). 120 Thus, the Australian cases had, by 1981, brought into close alignment the considerations relevant to applications under s 106 when winding up had intervened and when it had not, but where the company was not solvent. However, the similarity of expression used by Sangster J in [18] of his reasons ("exceptional" when a winding up had intervened, and "ought to be reluctant" when a winding up was imminent) should not mask the fact that the foundation for the attitude of the court when a winding up had intervened was the effect on the statutory rights of the creditors wrought by winding up. In this regard, there was no difference between the English, Australian and New Zealand authorities. If no winding up had occurred, but the company's solvency was in doubt, there was a difference between English, Australian and New Zealand authorities (subject to the matters referred to below). In Australia at least, on the authority of In re Flinders Trading and Scarfe Steel, the court was most reluctant to grant an extension in circumstances of lack of solvency, though not because the rights of the creditors had yet changed. I do not think that this reflected a difference of view as to principle from what Street J had said in Re Dudley Engineering. The superficial similarity in the expression of reluctance by Sangster J in relation to the two circumstances in [18] of his reasons in In re Flinders Trading should not be allowed to disguise the real difference between the legal rights of the unsecured creditors after winding up, under a regime structured around the avoidance of the charge, as under the provisions of the kind hitherto discussed, and the legal rights of the unsecured creditors before winding up. 121 In 1981 in Wilde v Australian Trade Equipment Co Pty Ltd (1981) 145 CLR 590 the High Court dealt with a procedural aspect of orders for extension. An order was made ex parte extending time for registration on the same day as a petition for the winding up of the company was filed. Within a little over a week a winding up order was made. The majority of the court decided that whilst the order extending time could be set aside, the registration effected in reliance upon it could not be and remained valid. The decision revealed the difficulties in a reservation in an extension order granting parties the right to come in and to seek to vary or discharge the extension order as contemplated in In re A Limited Company or In re Cinema Art Films or In re LH Charles: see the comments of McLelland J in Re Application of Guardian Securities Ltd [1984] 1 NSWLR 95, 98, discussed below. All the judgments of the High Court in Wilde's case, however, recognised the change of rights of unsecured creditors brought about by winding up: see 595 (per Gibbs J) and 606 (per Stephen, Murphy and Wilson JJ) and 608 (per Aickin J). 122 The divergence between the English and the Australasian authorities on the relevance of the position of unsecured creditors before a winding up was arguably done away with in 1967, and was certainly done away with in 1983. In In re Resinoid & Mica Products Limited 3 May 1967 (Court of Appeal, unreported until 1983) Lord Denning MR, Davies LJ and Russell LJ applied Clauson J in In Re L H Charles & Co. Lord Denning referred to the practice discussed by Clauson J and said that it was far too late, in the circumstances before the Court, to grant an extension when the winding up was imminent. Russell LJ also made reference to the practice referred to by Clauson J in In re L H Charles & Co. There was no reference to In re MIG Trust (or to In re Kris Cruisers Ltd). 123 In re Resinoid & Mica Products was not reported until 1983 when it was placed as a note to the decision of the Court of Appeal (Lawson, Brightman and Oliver LJJ) in In re Ashpurton Estates Ltd [1983] 1 Ch 110. In that case, the Court, in reasons delivered by Lord Brightman, approved the approach of Lord Denning in In re Resinoid & Mica Products to the effect that the imminence of liquidation, as distinct from the fact of liquidation, was a proper discretionary ground for refusing an extension of time. This was a disagreement, of course, with what Romer LJ, at least, had said in In re MIG Trust and with the views of Vaisey J in In re Kris Cruisers. The Court decided that In re MIG Trust and In re Kris Cruisers should not be followed in this respect. Reference was made to the approach of the South Australian Full Court in In re Flinders Trading. The Court once again affirmed the importance of the intervention of winding up before any order. Lord Brightman said at 124: The position accordingly became firmly established that the court (i) invariably adds to an order extending time the proviso which I have mentioned and (ii) will not make an order once liquidation has supervened because of the effect of the proviso would be to render the order futile. This is a matter of discretion and not of law. It is possible to imagine a case for example where fraud is involved, in which the court might extend the time for registration after the commencement of liquidation and omit the proviso which would render the order futile; we do not know of such a case in practice, and certainly the instant case does not fall into the category of fraud. 124 This expression of what had been the firm practice was equally applicable in Australia prior to 1981. 125 The Court made clear that if winding up was imminent, in circumstances where the company was insolvent, such matters were relevant to the exercise of the discretion and could legitimately form the basis of a refusal of the application.

The change of the statutory regime in Australia and my view on the first question 126 At about this time, the landscape in Australia changed. The movement to unify the State and Territory Companies Acts and Ordinances had been gathering pace since the early 1970s. It is important to understand the structural and textual changes wrought by the Companies Codesin 1981, by the Corporations Law in 1989 and by the Corporations Act in 2001. One must begin with the background to the State and Territory Companies Codes passed in 1981 as complementary to the Companies Act 1981 (Cth). 127 In July 1972, the Company Law Advisory Committee to the Standing Committee of Attorneys-General (the Eggleston Committee) provided its Seventh Interim Report dealing with registration of charges. The following extracts from the report are relevant: 4. The object of these provisions [referring to ss 100 - 110 of the Uniform Companies Act] is presumably the same as that of the Bills of Sale legislation (in Victoria, the Instruments Act 1958), that is to say, to protect creditors who extend credit to a company believing that it has unencumbered assets, when in fact those assets have been charged in favour of another creditor. It will be seen that the protection is imperfect, in that there is a period of thirty days in which the creditor may be deceived. A mortgagee may register his charge, having searched to ascertain whether any prior charges have been registered, only to find that a valid charge exists, granted at an earlier date, and registered at a later date, but still within thirty days after its creation. The difficulty is made more acute by the fact that section 37 of the Stamps Act (in Victoria) precludes the Registrar from receiving the instrument creating the charge for registration until the stamp duty has been assessed and paid. Section 107, which requires the company to keep a register of charges at its registered office, might be relied on as a source of information as to charges awaiting the registration, but for the fact that that section specifies no time within which entries are to be made in that register, nor does failure to keep that register up to date involve invalidity, being the subject of a penalty only. … 45. The next question for consideration is the effect which should be attributed to failure to register. The Act states that if the section is not complied with "the charge shall, so far as any security on the company's property is thereby conferred, be void against the liquidator and any creditor of the company". Professor Gower, in his Ghanaian report, expressed the view that this form of relative invalidity has strange results, in that, if the mortgagee realised his security by selling, the purchaser got a good title and the liquidator or the other creditors would be unable to recover the proceeds of sale. On the other hand, he thought that a purchaser of the property from the company might not get a good title, as the charge is only void against creditors and not against purchasers. As to the first point, we would doubt whether if the mortgagee sold the property he could retain the proceeds against a liquidator if the winding up followed closely enough to bring the preference provision into operation. If the sale were so far separated from liquidation that these provisions were not available, we would see no reason why the mortgagee should not get the benefit of his security. The second point, however, is more serious. It could be covered, as Professor Gower suggests, by simply making the charge void as a security. In this event, however, it would, we think, be necessary to protect an innocent purchaser who bought the property as a result of a sale by the mortgagee, in circumstances in which the purchaser had no means of knowing that property was being sold in order to realise the security. In some cases it might be reasonable to expect him to make enquiries. In others it might not. The point could be covered by inserting a provision protecting the rights of a purchaser for value from the mortgagee without notice of the invalidity of the charge, but making the mortgagee accountable for the proceeds of sale if the company were wound up within six months of their receipt. However, for reasons stated below, we have come to the conclusion that a better solution would be to substitute a system of priorities for the provisions making charges invalid if not registered within the thirty days period. [emphasis added] 128 Thus, the effect of the non-registration was to be placed into a priority regime. The intention of the priority regime was then explained: 47. As stated above, we have come to the conclusion that the best solution for the problems created by the form of the present legislation is to substitute a system of priorities for the present system of partial invalidity. The present system, although stated in terms of validity, is itself really a system of priorities, since the invalidity is stated to operate only as against the liquidator and any creditor of the company. The consequence of failure to register, therefore, is not to destroy the security absolutely but to destroy the preferential rights of the holder of the charge as against creditors and liquidators, but not (as pointed out by Professor Gower) as against persons who purchase the property from the company. The effect of non-registration therefore is to alter the priorities attaching to a charge. But it is apparent that the method of alteration of priorities set out in section 100 is unsatisfactory for several reasons. 48. In the first place, as we have already pointed out, the protection of a person registering a charge is imperfect in that such a person may register the charge at a time when the register is clear, only to find that an earlier charge which was not registered at the time of registration of the second charge is registered within thirty days of its creation, and so takes priority over the second charge . In the second place, charges which have not been perfected by registration ought to be postponed, not only to the claims of creditors, but also the claims of persons who, having searched and found no relevant charges on the register, have purchased the property subject to the charge from the company. Thirdly, under the present system, if the charge is not registered in time it becomes void as a security to the extent stated in section 100, and the situation can only be cured by an application to the Court under section 106. If a suitable system of priorities were laid down, there would be no need to impose a time limit on registration except insofar as failure to register might involve penalties for non-compliance with the Act. Late registration might result in the postponement of the charge as against interests created prior to registration, but need not affect its priority over interests created after the charge was registered. It would follow that sub-section (10) of section 100, and section 106, could be omitted from the Act. The power to extend the time for filing (section 108) would not only affect the question of penalties, and could be made to apply generally, and not merely in the case of out-of-State documents. … 51. As between registered charges and unregistrable interests, the ordinary rule of priority in time would prevail, but as between an unregistered charge and an unregistrable interest the unregistered charge would be postponed to a subsequent unregistrable interest, provided that the person who acquired the unregistrable interest did so for value and without notice of the charge. An alternative view would be to postpone the unregistered charge to all unregistrable interests. This would be the effect of the proposal put forward by Professor Gower for the Ghana Code, but we do not think it is necessary to go so far. It should however be provided that the burden of proof is on the chargee to prove that the other party had notice of the charge. 52. The position of execution creditors has next to be considered. The existing section says that the charge, so far as any security over the company's property or undertaking is thereby conferred, is void "against the liquidator and any creditor of the company". This presumably means that a creditor who has levied execution against the property of the company can sell the property free of the charge, and we think this position should be retained. 53. So far as liquidators are concerned, we think that an unregistered charge should not confer any priority in a liquidation. This accords with the present position. But in the case of a registered charge, we think there should be a provision that the person entitled to a registered charge shall not be entitled to the benefit of the charge unless it is registered within thirty days of its creation, or at least six months prior to the liquidation. Otherwise a person might avoid disclosure of the existence of the charge until just before the company was about to go into liquidation, and then by a last-minute registration obtain the benefit of the charge. [emphasis added]

129 The report set out in appendix B these rules of priorities, which appendix included the following concerned with priorities in respect of unsecured creditors:

1. The following order of priorities is subject to any consent (express or implied), given by the person who would otherwise be entitled to priority, according priority to the holder of another interest. 2. Subject to 1. above, a registered charge has priority over - … (d) Execution creditors (e) Liquidators, if the charge was registered within thirty days of its creation, or at least six months before the commencement of the winding up. 3. Subject to 1. above, a registered charge is postponed to - … (d) Liquidators, unless the charge was registered within thirty days of its creation, or at least six months before the commencement of the winding up. … …
2. Subject to 1. above, an unregistered charge is postponed to - … (d) Execution creditors. (e) Liquidators.

130 Thus, the Seventh Interim Report of the Eggleston Committee recommended a structure significantly different to that then existing. The notion of voidness against a limited class of people was removed. Charges could be registered at any time, but priorities were determined significantly by reference to the competing dates of registration. The competition between the chargee and the unsecured creditors was founded upon the express assumption that a charge would fail to have any priority over a liquidator unless the charge had been registered within time or, if not registered within time, unless its registration took place more than six months prior to winding up. This regime, it was thought, removed the need for any extension order. As the Report stated (at [53], see [128] above):

So far as liquidators are concerned, we think that an unregistered charge should not confer any priority in a liquidation. This accords with the present position. 131 And so it did "accord with the present position". The "present position", which had never been questioned from 1901, was that the winding up of a company meant that unsecured creditors obtained sufficient rights in relation to the property the subject of the (void) charge as to warrant their usual or invariable protection within the proviso to any extension order that might otherwise have been made, in the terms first propounded by Buckley J in In re Joplin Brewery. The debates that had taken place about the protection, of unsecured creditors before winding up intervened did not weaken or undermine that position, in the slightest. The position in relation to an extension application if winding up intervened before the application was put at its most flexible when Buckley J in In re Mechanisations (Eaglescliffe) Ltd [1966] 1 Ch 20 said (at 36): …Having regard to what was said in the decisions in In re Abrahams (S.) & Sons and In re Anglo-Oriental Carpet Manufacturing Co, [1902] 1 Ch 695;… it appears to me that a very exceptional case would have to be made out to justify the court in making any order under section 101 after a company had gone into liquidation and the rights of unsecured creditors in the liquidation had crystallised. … (Cf Buckley J in In re S Abrahams & Sons at [80] and [81] above.) 132 In no reported decision had that possibility been considered and there were many cases, which as a matter of course assumed, or which stated, that winding up had the effect of crystallising rights of creditors, which rights would be protected against the consequences of any extension. The Eggleston Report stated that. It was correct in so doing. 133 The exceptional circumstances referred to by Buckley J in In re Mechanisations can be seen as not merely a reflection of a high standard of persuasion in the context of a wide general discretion, but as exceptional circumstances sufficient to warrant the destruction by an order nunc pro tunc of accrued statutory rights in the nature of property rights. These rights over the property the subject of the charge accrued because until the order of the court the charge was void, and so the property the subject of the charge fell into the general assets of the company to be administered pursuant to the statutory regime. 134 It would appear that by early November 1975 the then government had ready for introduction a National Companies Bill: see Mr Lionel Bowen (the member for Kingsford-Smith) speaking in the House of Representatives on 18 November 1976 (Hansard 1976 vol 102 p 2852). This proposed bill was brought forward by the then opposition in 1976 as a private member's bill as the National Companies Bill. This 1976 Bill was voted down at the second reading stage. The 1976 Bill brought forward the recommendations of the Eggleston Committee on registration of charges. Clauses 214 to 227 dealt with registration of charges. 135 Subclause 216(1) commenced as follows: Subject to this section, the provisions of this Division relating to notice and registration of charges apply to and in relation to the following charges created, whether at law or in equity, by a company (including a company in the capacity of a trustee) and do not apply to or in relation to any other charges: The clause then identified more fully what charges were covered. Nothing was said about the charge, being void. 136 Clause 217 required that a corporation lodge, within 28 days of the creation of the charge, a relevant notice. 137 Clause 221 dealt with priorities. Relevantly, subcl 221(1) stated as follows: Subject to this section and to any other Act the priorities of charges on the property of a corporation in relation to each other and in relation to other interests in the same property are as set out in Schedule 7. 138 Schedule 7, relevantly, included the following:

1. A registered charge on property of a corporation has priority over - … (d) any right of an execution creditor in relation to the property, where the charge was registered before the execution was levied; and (e) a claim of the liquidator of the company in relation to the property if - (i) notice in respect of the charge was lodged with the Commission under section 217 or 218, whichever was appropriate, within the time required by that section or at least 6 months before the commencement of the winding up; and (ii) the claim of the liquidator does not have priority under Part X over the registered charge. 139 (The reference to Part X was to the "claw-back" or avoidance provisions after winding up.) There was no provision for extension of time. Thus, once winding up occurred, the charge was postponed to the liquidator, unless notice of it had been filed in the time provided for by the relevant section, or if notice had been filed outside that time, unless six months had elapsed from the time notice was filed before the commencement of the winding up. 140 In 1980, a Companies Bill was prepared by the Commonwealth government as an exposure draft, which, with some modifications, was based on the 1976 bill. The history of the changes to this point was set out at pp 35-36 of Messrs Paterson and Ednie's Guide to Companies Bill 1980 Exposure Draft (1980, Butterworths) as follows (the reference to the 1975 Bill can be taken as a reference to the 1976 Bill referred to above): Division 9 - Registration of Charges Division 7 of Part iv of the existing companies legislation (ss 100-110) deals with the registration of company charges. Those provisions were considered in the Seventh Interim Report of the Eggleston Committee. Three of the more significant changes proposed in that report were as follows: (a) A charge or shares in a subsidiary company or on certain shares in other corporations should be subject to the registration requirements: Report para 42. (b) A system of priorities should be substituted for the provisions making charges invalid if not registered within 30 days after creation: Report para 45. (c) A charge should only have to be registered in the Australian jurisdiction of incorporation in the case of a company incorporated in Australia: Report paras 20 and 21. The recommendations contained in the Seventh Report were picked up, with modifications, in the National Companies Bill 1975 relating to charges: see cll 214 to 277 of the 1975 Bill. The registration of charges provisions contained in this Bill, the National Companies Bill 1980, are based on the 1975 Bill provisions modified to take into account: (a) recommendations contained in Sir Richard Eggleston's supplementary report that had not already been covered (that supplementary report dealt with the question of what, if any, exemptions should be granted from the registration of charges requirements in relation to securities given by dealers in the money market) (b) comments received from outside commercial lawyers on the 1975 Bill; and (c) the fundamental differences between a single National Companies Bill 1975 and the co-operative companies legislation which recognizes the separate State and Territory jurisdictions. 141 Later in 1980, after comment from the public on this first exposure draft, another bill, also called the Companies Bill 1980, was introduced into the Commonwealth Parliament on 27 August 1980. 142 Some changes were made to the structure and terms of the exposure draft of April 1980. Once again, the provision requiring notice and registration (cl 202) listed the various applicable charges but said nothing as to any voidness of the charge. Clause 203 dealt with the lodgment of notices and the time therefor. Clause 206 dealt with priorities and made schedule 5 applicable. Schedule 5 contained the following concerning priority and liquidators:

Judicial interpretation of the new Australian provision 164 The differences between ss 100 and 106 of the Uniform Companies Acts and s 205 of the 1981 Codes were discussed in a number of cases: see, for example, McLelland J (as his Honour then was) in Enterprise Colorvideo Productions Pty Ltd v Corporate Affairs Commission [1984] 1 NSWLR 223 and in Re Application of Guardian Securities Ltd [1984] 1 NSWLR 95. 165 In Re Application of Guardian Securities, McLelland J referred to the position of unsecured creditors and to the practice in Australia of recognising the legitimate interests of unsecured creditors in the question of the extension. He also referred to the practice of leading evidence of the financial position of the company, of the question of outstanding judgments and of the pendency of any winding up application. His Honour referred to mechanisms whereby the position of unsecured creditors was recognised, including the reservation order in In re A Limited Company, Re Cinema Art Films and In re L H Charles & Co and the deficiencies pointed out in Wilde v Australian Trade Equipment Co Pty Ltd. McLelland J was of the view that the practice of requiring evidence of solvency and, in its absence, of adopting some procedure to protect the unsecured creditors should continue under the 1981 Code. The order made by McLelland J preserved the position of any official manager or liquidator appointed within six months in the following terms: Reserve liberty to the company or any liquidator, official manager or creditor of the company to apply to discharge or vary this order in the event that any winding up of the company commences, or any official manager of the company is appointed, within six months of the date of lodgment under the Code, s 201, of notice in relation to the said respective charges; … 166 This protection for any official manager or liquidator within the coming six month period is consistent with the balance of his Honour's reasons which (in accordance with the history of the previous provisions) appear to recognise the importance of the events of the appointment of the official manager or liquidator to the position of unsecured creditors. Without the reservation in the order there could be satisfaction of par 205(1)(c)(i) (the "relevant period" including the period extended by the Court); but his Honour was of the view that without evidence of solvency, a period of six months should be placed in the condition as it would exist for the purposes of par 205(1)(c) (ii) if notification out of time was simply made without any extension application. That is, in circumstances where solvency was not proved, the Court approval contemplated by par 205(1)(c)(i), incorporating subs 205(2), should not improve the applicant's position beyond that found in par 205(1)(c)(ii). 167 The reasons of McLelland J in Re Application of Guardian Securities are consistent with a view that the extension of the period by the Court contemplated by par 205(1)(d) and subs 205(2) for the purposes of par 205(1)(c)(i) was an extension granted before the date of appointment of an official manager or of the commencement of winding up; though, it should be said, his Honour was not directing himself to this question. Later, however, in Re Drum Reconditioners (NSW) Pty Ltd (1992) 10 ACLC 322 in dealing with s 266 of the Corporations Law and in dealing with circumstances where winding up had not intervened, after discussing the interests and position of unsecured creditors, McLelland J said (at 324): I should add that where notice of a charge has in fact been lodged, and an application for extension of time has been made, well before any resolution or application for winding up, I would not regard a subsequent winding up as necessarily constituting a substantial impediment to the making of an order for extension of time, if the making of such an order were otherwise justified. This reflects a view of his Honour contrary to the view that I have said that I prefer. 168 Apart from Wallace J in J J Leonard Properties Pty Ltd v Leonard (WA) Pty Ltd (No 2) (1987) 13 ACLR 77 at 83, no court in Australia at first instance or on appeal has approached the matter on the basis of the limitation to the scope of operation of s 205 or s 266 of the Corporations Law which I favour. Most cases have assumed a continued role for an application under subs 205(3) of the 1981 Code or subs 266(4) of the Corporations Law. In some cases the point can be seen as clearly having been taken in argument and rejected: Douglas-Brown as liquidator of De Barros Nominees Pty Ltd (in liq) v Standard Chartered Finance Ltd (1990) 8 ACLC 993, 999 (per Malcolm CJ and Rowland J), Re Freightlines Northern Territory Pty Ltd (in liq) [2000] 2 Qd R 384, 389 (per Thomas JA sitting at first instance) and National Australia Bank Ltd v Davis & Waddell (Vic) Pty Ltd (2003) 44 ACSR 296, 312 [74] (per Hansen J). Other cases proceed upon the clear basis that the intervention of winding up does not signal the end of the scope of operation of subs 205(3) or 266(4): see, for example, Campbell Finance Pty Ltd v Vivstan Packaging (Aust) Pty Ltd (in liq) [1998] 2 VR 340 (per Batt J), Re Fairline Furniture (Aust) Pty Ltd (in liq) (1988) 12 ACLR 787, (per Murray J), Re Lloyd Anthony Furniture Pty Ltd; Ex parte Walker (1996) 19 ACSR 478 (per Branson J), Morris v Woodings (1997) 25 ACSR 636 (per Wheeler J), Sanwa Australia Finance Ltd v Ground-Breakers Pty Ltd (in liq) (1990) 2 ACSR 692 (Queensland Full Court), Vector Capital Ltd v SNS Software Network Systems Pty Ltd (1988) 12 NSWLR 1 (per Needham J), Citibank Ltd v Linput Pty Ltd (in liq) (1991) 9 ACLC 1131 (per McKenzie J) and Rynmarc Pty Ltd v Classic Ergonomic Chairs Pty Ltd (1994) 12 ACLC 1038 (per Underwood J). 169 It should be noted that on the appeal in JJ Leonard, Wallace J examined s 205 and noted the difference in terms of structure from the previous sections. Wallace J was of the opinion that the relevant events provided for in pars 205(1)(a) and (b) were critical: if at the relevant times contemplated by pars 205(1)(a) and (b), the circumstances contemplated by par 205(1)(c) were not satisfied, then any application under subs 205(3) was futile. His Honour said the following (at 83): It will immediately be seen that once a resolution is passed for the winding up of a company or an official manager is appointed a registrable charge on any property of the company is void as against the liquidator or official manager unless a notice in respect of the charge was lodged with the Commission under s 201… within the relevant period ie, 45 days, from the creation of the charge or not later than six months before the commencement of the winding up or the appointment of the official manager, as the case may be. In other words as at the date of an order winding up a company a registrable charge will be void unless there is compliance with either of the limbs of s 205(1)(c). Accordingly there would be nothing to be gained by seeking an extension of time in which to lodge a notice in respect of a charge pursuant to s 205(3) once for example a winding up order had been made. And this is how his Honour saw it. Apart altogether from the position of the unsecured creditors to have acceded to the appellant's claim for rectification would have resulted in the need to file a fresh notice and debenture - this time containing the relevant charging provisions. In other words an exercise in futility. 170 I do not agree that this is how Kennedy J (the judge at first instance) approached the matter; nevertheless, I respectfully agree that this was the correct approach to the new terms and structure of the Code. The statute did away with a voiding effect prior to the winding up and official management, priorities being governed by date of registration; but as at the occurrence of those events the charge was void as a security as against the liquidator or official manager unless certain events had occurred or certain circumstances obtained, as set out in the balance of subs 205(1). After the two events contemplated by pars 205(1)(a) and (b), subs 205(3) had no role to play. 171 Not only is the course of authority (apart from Wallace J in JJ Leonard) contrary to the view I hold, various Parliaments have largely re-enacted s 205 in s 266 of the Corporations Law and s 266 of the Corporations Act on the foundation of this body of jurisprudence. These matters not only affect how I should approach the implementation of any view that I have as to the proper construction of s 266 of the Corporations Act, but they may also affect the proper construction of s 266 itself. It is relevant to consider, in relation to the intended meaning of s 266 of the Corporations Act, whatever may be seen to have been the preferable construction of s 205 of the 1981 Code, that various Parliaments, including the Commonwealth Parliament in 2001, have re-enacted largely the same provision in the context of this well known jurisprudence: (see generally Pearce and Geddes Statutory Interpretation in Australia (5th Ed at 82-87). 172 It is unnecessary to express a view on how the passing of the later legislation might affect the proper construction of the Corporations Act, since even if these considerations were inadequate for me to conclude that the proper construction of s 266 of the Corporations Act was different to my preferred view of the meaning of s 205 of the 1981 Code, I would not be willing to decide this appeal on that basis. The High Court made clear in Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485 at 492 that an intermediate court of appeal should not depart from an interpretation placed on uniform national legislation by another Australian intermediate appellate court unless convinced that that interpretation is plainly wrong. What the phrase "plainly wrong" means in any given circumstance is not always easy to judge. In areas of statutory construction and interpretation minds often differ. Once a view is reached, the attributes and correctness of that view often appear strongly to the holder of the view. Branson and Finkelstein JJ put the matter as follows in Telstra Corporation Ltd v Treloar (2000) 102 FCR 595, 602-3 at [27] and [28]. The problem is very real when what is at issue is the construction of a statute. For one thing, statutory language is often ambiguous. Courts can struggle to determine the legislative intent. It is often impossible to discover any legislative intent. In many instances the generality of the statutory language is deliberate and allows the courts to develop a body of law to fill the gaps. This may lead to disagreement among judges about what the statute means. It would be sound policy that once that intent has been discerned by an appellate court then that should be the end of the matter. The view which we prefer is that unless an error in construction is patent, or has produced unintended and perhaps irrational consequences not foreseen by the court that created the precedent, the first decision should stand. In other areas of the law a precedent may be reconsidered if its underlying reasoning is outdated or is inconsistent with other legal developments. Perhaps, with some modification, in some instances these factors could also be applied to cases concerned with the construction of statutes. Accordingly, we venture to suggest it would be on a rare occasion that an intermediate appellate court (contrast the position of the High Court, as to which see Babaniaris v Lutony Fashions Pty Ltd (1987) 163 CLR 1) will allow an issue concerning the construction of a statute, past and closed and especially a repealed statute, to be thrown open producing as it clearly will, uncertainty, disruption to the conduct of affairs, a sense of grievance in those who may consequently receive treatment less favourable than that received by others under the same statute and additional cost and expense. In this case, the number of individuals who will relevantly be affected by the construction of the statute may be assumed to be, by reason of the passage of time, relatively small. 173 Whilst I am of the view that the history leading up to, and the secondary material surrounding, the 1981 Code were such that the proper construction of s 205 of the 1981 Code was that once winding up or official management intervened no statutory role for any court extension was contemplated by subs 205(1) and (2), I am not prepared to conclude that the contrary view is patently or plainly wrong. The contrary view has been expressed, if I may respectfully say so, by judges of great learning and experience. 174 Whilst I am mindful of the position of the litigants before the Court and their interest in seeing the result of the appeal determined according to the views of those who heard the appeal, it should not be forgotten that the case was fought below, and the appeal was brought to this court, on the foundation that the intervention of winding up did not remove the role of the court under subs 266(4) as relevant to the operation of subs 266(1) and (2). 175 In these circumstances, and following, as I must, what the High Court said in Marlborough Gold Mines, I proceed to decide the appeal on the basis that the intervention here of the administration of the Company under Part 5.3A of the Corporations Act did not exhaust the role of subs 266(4) and the Court retained the power to extend time, relevantly, for the purposes of par 266(1)(c)(i), subs 266(2) and par 266(1)(d).

The second question of construction: Is the charge void at the critical day pending an order under subs 266(4)? 176 This issue was of primary significance to the submissions of the parties. The correct answer to it affects, importantly, the character and the context of the exercise of the discretion within subs 266(4). Indeed, the answer to this question provides the tool to rationalise the widely differing exercises of discretion displayed by courts in Australia since 1981: cf Gough Company Changes (2nd Ed) at p775. The course of authority since the early twentieth century described above is relevant to this question. 177 Mr Macfarlan QC, who appeared with Mr Castle for GE, submitted that (in relation to s 266 of the Corporations Act, but his submissions could be applicable to s 205 of the 1981 Code and s 266 of the Corporations Law) subs 266(1) provides for the voidness of charges only unless circumstances thereinafter referred to did not occur. On the occurrence of one of the events in pars 266(1)(a), (b) and (ba) of the Corporations Act, the existence of a possibility of a later court order under subs 266(4) for the purposes of par 266(1)(c)(i), subs 266(2) and par 266(1)(d) meant that it could not be concluded at that time (the critical day) that the charge was void. For instance, if, at the critical day, a court was reserved on an extension application it could not be said that the charge was void awaiting nunc pro tunc remedying and validation by force of the court order. That would, it was conceded, have been the position under earlier legislation before the 1981 Code; but under ss 205 and 266, it was submitted, no avoidance occurs unless (not 'unless and until' or 'until') certain circumstances can be said not to exist. If one is to construe the references to court extension in subss 205(2) and 266(2) and pars 205(1)(d) and 266(1)(d) as encompassing future orders (whether in proceedings commenced or not) the consequence, it was said, is that one cannot say at the critical day that the charge is void merely because the relevant court order has not yet been made. 178 Mr Macfarlan referred in particular to what Needham J said in Vector Capital at 6, where his Honour, after discussing the differences between the 1981 Code and earlier legislation, said the following: I think that these differences, as I have said, are significant. The power of the court - s 106 of the Act, s 205(3) of the Code - is expressed in similar terms, but it bears in each case upon legislative provisions having those significant differences. For example, the strong argument, under the previous legislation, that an order extending time for registration of the charge should not, except in the most extraordinary circumstances, be made when a winding up commences because the effect of the winding up is to give the unsecured creditors a beneficial interest in the assets of the company, must be considerably weakened in the case of the provisions of the Code because of the existence of s 205(1)(d). That subsection envisages registration after the commencement of a winding up provided it is within forty-five days of the creation of the charge or within the period for registration as extended by the Court under s 205(3). The legislation treats the rights of unsecured creditors to an interest in the assets of the company as being expressly subject to the Court's power to extend time. [emphasis added] 179 Whether or not Vector Capital is authority for the proposition as enunciated by Mr Macfarlan need not be decided. If, however, this underpinning submission is correct, it undermines entirely what might be termed the strict or narrow approach to the exercise of discretion exhibited in the reasons of the Court of Appeal delivered by Lord Brightman in In re Ashpurton, the Full Court in Douglas-Brown, Batt J in Campbell Finance, Wheeler J in Morris v Woodings, and Branson J in Re Lloyd Authority Furniture. If, in circumstances of a winding up, when the court is considering the matter the charge is not void the property the subject of the charge has not fallen into the statutory regime described by Buckley J in In re Anglo-Oriental Carpet Manufacturing. On this view, the winding up of the company and its state of solvency are relevant but by no means determinative, or even dominating, factors. On this view, to grant the extension is not to destroy crystallised rights of unsecured creditors over the property covered by the void charge, because the charge is not void unless the order for extension is refused. 180 This view of the change in the Code informed the approach of Needham J in Vector Capital and Hansen J in NAB v Davis & Waddell. In these cases, and in other cases such as the Full Court of the Queensland Supreme Court in Sanwa, Thomas JA in Re Freightlines Northern Territory, and Murray J in Re Fairline Furniture the enquiry as to the existence of "exceptional circumstances" was a broad one with the question of whether the making of the order was "just and equitable" more prominently in view. The winding up of the company was one, but only one, of the relevant factors, and by no means determinative or overwhelming. 181 There are, it seems to me, significant difficulties with this construction of s 266. Its acceptance would mean that the statute is providing for a state of uncertainty as to the immediate status of the charge for an indeterminate length of time as and from the "critical day" including the commencement of statutory management of the company (either by a liquidator or administrator) in which early clarity of position is of importance, and in the case of an administrator, of critical importance. The charge is not void, but it cannot be said to be valid until the circumstances satisfying "unless" can be seen to be present. A construction of an Act which does not make clear, for instance, whether a liquidator or a receiver may take possession of assets on a particular day and keeps that judgment in abeyance for an indefinite period of time until a court decides an application under subs 266(4) is to be rejected, unless the words and context compel such an impractical result. They do not. 182 The section commences with the word "Where". That preposition relates to events whose occurrence is later marked in subs 266(8) by the phrase the "critical day". A temporal element in the word "Where" can be seen. That assists in seeing the word "unless" used as "unless and until". This is not to imply anything into s 266, but it is to give the section a temporal content, in particular in the words "Where" and "unless". So viewed, the charge is void unless and until a later court order under subs 266(4) feeds the circumstances in par 266(1)(c)(i), through subs 266(2), or in par 266(1)(d), thereby validating the charge. True it is, as Needham J said in Vector Capital at 6: The legislation treats the rights of unsecured creditors to an interest in the assets of the company as being expressly subject to the Court's power to extend time. However, that was always the case. Section 14 of the 1900 Act was subject to the validating effect (by a nunc pro tunc extension of time) of s 15. 183 This does not mean that the charge is void if the 45 day period, or an extension period already provided for by an order of the court, is yet to expire on the critical day. In such a case the validity of the charge is contemplated by the section. The certainty required at the critical day is not compromised by that degree of suspense. Such charges are valid and will remain so unless a notice is not lodged within that time. This operation of par 266(1)(d) does not, however, cause a structurally different approach to be undertaken to the balance of the operation of the section in avoiding charges at the critical day. I do not agree that this aspect of par 266(1)(d) (as par 205(1)(d) of the 1981 Code) weakened the consequences of the avoidance of the charge as at the critical day as described by Needham J in Vector Capital at 6. 184 If s 266 be so construed, some degree of certainty is given to the liquidator or administrator. At least he or she knows who may take possession of the asset in question, and that the receiver or secured creditor must go to the court to make out a case for an order under subs 266(4). 185 Whilst this view is not my preferred view of the section (see above), it does give some effect to the emphasis in the Eggleston Committee's Report on the criticality of the intervention of the events in pars 205(1)(a) and (b) of the 1981 Bill and Code.

The third question: What is the applicable principle in exercising the discretion under subs 266(4) where an event contemplated by pars 266(1)(a),(b) and (ba) has occurred. 186 The answer to the second construction question provides an important element to understanding the scope of the task in subs 266(4), in particular where an event contemplated by pars 266(1)(a), (b) and (ba) has occurred. 187 Subsection 266(4) provides for a broad judicial discretion informed, at least at one level, by what is "just and equitable". On numerous occasions the High Court has made clear that judicial discretions entrusted to courts are to be read liberally for the purpose intended by the statute in question and are not to be constrained or limited by glosses or implications not found in the relevant statute: see CDJ v VAJ (1998) 197 CLR 172 at 201; The Owners of the Ship 'Shin Kobe Maru' v Empire Shipping Company Inc (1994) 181 CLR 404 at 421; PMT Partners Pty Ltd (in liquidation) v Australian National Parks and Wildlife Service (1995) 184 CLR 301 at 313 and 316; Knight v FP Special Assets Ltd (1992) 174 CLR 178 at 205; FAI General Insurance Co Ltd v Southern Cross Exploration NL (1988) 165 CLR 268 at 290; David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265 at 275-76; Emanuelev Australian Securities Commission (1997) 188 CLR 114 at 136-37; Oshlack v Richmond River Council (1998) 193 CLR 72 at 81; Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1 at 56-7; Abebe v Commonwealth (1999) 197 CLR 510 at 586-87; Re JJT; Ex parte Victoria Legal Aid (1998) 195 CLR 184 at 201; Commonwealth v SCI Operations Pty Ltd (1998) 192 CLR 285 at 301; Eastman v R (2000) 203 CLR 1 at [81]; Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270 at [17]; and Gerlach v Clifton Bricks Pty Ltd (2002) 188 ALR 353 at [14] 188 That guiding principle, however, does not alter the fact that the court will be called on to exercise the power in subs 266(4) in many different circumstances. Some only of those circumstances are referred to in pars 266(1)(a), (b) and (ba). In those circumstances, the court will approach the exercise of the power with a recognition of the consequences of the occurrence of the relevant event in pars 266(1)(a), (b) and (ba). 189 The first matter to be borne in mind is that the Parliament has provided that the charge be rendered void. That is the case in respect of the intervention of winding up, administration and the execution of a deed of company arrangement. 190 In circumstances where winding up has intervened, that means that at the time the court is examining the matter, the property the subject of the charge has fallen under the control of the liquidator to be dealt with according to the statutory regime built around s 501 of the Corporations Act. 191 The effect of the equivalents of s 501 of the Corporations Act and the scheme for winding up in insolvency under legislation prior to 1989 (in England) and prior to 1981 (in Australia) was viewed unanimously by the courts as virtually fatal to any application. The general body of creditors was protected by the usual In re Joplin Brewery proviso. Expression of a like view has fallen from a number of judges in Australia since 1981, including Malcolm CJ and Rowland J in Douglas-Brown, Batt J in Campbell Finance, Wheeler J in Morris v Woodings and Branson J in Re Lloyd Anthony Furniture. 192 These cases, as does In re Ashpurton, express what of course must be a discretion (since that is the command of the legislature) in terms of "exceptional circumstances". Properly understood, this is not to engraft a limitation or implication on to subs 266(4) impermissibly contrary to the High Court cases referred to above, but it is merely to recognise that if winding up has occurred, the general creditors have statutory rights of the kind discussed by Buckley J in In re Anglo-Oriental Carpet Manufacturing and that if those rights are to be vanquished by the exercise of the power, circumstances sufficient to justify that consequence must be shown. The "exceptional circumstances" are circumstances sufficient to justify that outcome. 193 This has not, however, been a uniform approach in Australia since 1981. All the authorities in Australia since 1981, which assume the existence of the relevant power of the court after the intervention of winding up, used language containing expressions of the need for "exceptional circumstances". It is fair to say, however, that the individual exercises of discretion, both refusing to exercise and exercising the power, display a huge difference in approach. In my view, they also betray an underlying difference in principle. 194 Though not clearly expressed in all cases, underlying the difference of approach are competing views as to the importance of the effect of winding up. If the effect of winding up under the Code, the Corporations Law and Corporations Act was of the same nature as under the previous legislation in respect of the property the subject of the charge, it would be difficult to resist the conclusions that the stricter approach, reflected in the views of, amongst others, Malcolm CJ and Rowland J, Batt J, Wheeler J and Branson J, should be followed and that a number of the reported cases were, arguably, wrongly decided. If the effect of non or late notification under ss 205 and 266 at the point of winding up was to avoid the charge and thus bring the property the subject of the charge within the purview of the statutory regime created for the benefit of all unsecured creditors, an extension of time would have the effect of destroying crystallised rights. That was how the Australian provisions before 1981 and the English provisions before 1989 operated. That was why the "usual proviso" protected unsecured creditors if a winding up intervened before registration. 195 The task is to give effect to subs 266(4). The discretion may be exercised if the events in pars (a) and (b) in subs 266(4) are, or are not, present, or in circumstances which, "on other grounds", make it "just and equitable" to grant relief. One does not engraft a rule on to that section that in certain circumstances (for instance after a winding up) some different test applies. The discretion is a broad one, but it comes to be exercised in the circumstances which have happened. 196 If a winding up has intervened, the rights of creditors of a statutory and quasi-proprietorial kind have crystallised. Over a century of authority recognises the character and importance of that circumstance. In circumstances of the intervention of a winding up, whilst the cases have used the phrase "exceptional circumstances", the appropriate way of expressing the matter conformably with the width of the discretion, is to say that it is to be exercised in the recognition of intervening rights of all creditors, the nature of which rights has been described by courts without debate for over a century. These rights arise because of the avoiding effect of s 266. The ex post facto validation of the charge and the consequent destruction of the creditors' rights are possibilities, as they always were; but the circumstances would need to be sufficient to warrant the destruction of crystallised rights in the nature of property over the property the subject of the charge. To say that the intervention of a winding up is but one factor to take into account is apt to deflect attention from these considerations involving the consequences of winding up. 197 To the extent that cases such as Vector Capital, Sanwa, NAB v Davis & Waddell and Re Freightlines refer to a more "inflexible" or "rigid approach" in England in this regard, as not being relevant to the operation of s 205 of the Code, s 266 of the Corporations Law or s 266 of the Corporations Act, I respectfully disagree. Cases such as In re Ashpurton in England and Douglas-Brown in Australia correctly identify the important consequences of winding up. They are in accordance with an unquestioned and uniform judicial approach throughout the whole of the twentieth century to the effect of winding up on creditors' rights. As I have said, they do not impermissibly fetter the discretion or engraft a limitation on it. Rather, they recognise, consequent upon the avoidance of the charge by operation of the statute, the statutory rights of all unsecured creditors crystallising over property falling within the unsecured assets upon winding up and the need for circumstances to exist which would warrant the destruction of these rights. 198 The intervention of a winding up is only one of the events in pars 266(1)(a), (b) and (ba). The legislature has equated the events in (b) and (ba) with (a) in terms of their effect. That is not to say, however, that the occurrence of the events in (b) and (ba) creates statutory rights in creditors identical to those crystallised upon a winding up. The purpose and conduct of an administration are obviously different from a winding up. The role of the administrator is not to distribute and apply the existing assets of the company for the benefit of the existing creditors (cf 501) but, in the terms of s 437A: (1) While a company is under administration, the administrator: (a) has control of the company's business, property and affairs; and (b) may carry on that business and manage that property and those affairs; and (c) may terminate or dispose of all or part of that business, and may dispose of any of that property; and (d) may perform any function, and exercise any power, that the company or any of its officers could perform or exercise if the company were not under administration. (2) Nothing in subsection (1) limits the generality of anything else in it. 199 This statutory form of management of the affairs of the company is for the benefit of all concerned: see s 435A. During administration, the company's assets receive a degree of protection from creditors: see Division 6. One outcome may be a deed of company arrangement. This affects the property of the company: par 444A(4)(a) and s 444E. Although it is not apt to equate the position of unsecured creditors after the events in pars 266(1)(b) and (ba) with the position of unsecured creditors after the event in par 266(1)(a), the creditors should be seen as having the benefit of an expeditious regime for independent control of the company and its assets conformable with the provisions of Part 5.3A. That can also be seen in the light of the historical approach in Australian courts (to the contrary of the approach of the English courts between 1933 and 1967 or 1983) of viewing the interests of unsecured creditors as relevant to the grant of an extension in circumstances of doubtful solvency or insolvency: see In re Flinders Trading and Re Dudley Engineering. 200 The above is the broad context in which the discretion in subs 266(4) should be approached. The power is a widely expressed one, but it must be exercised bearing in mind the effect of the occurrence of the events in pars 266(1)(a), (b) and (ba) and the rights, obligations and statutory schemes created by the Corporations Act, if the events referred to in pars 266(1)(a), (b) and (ba) have occurred. 201 The discussion by Millet J in In re Barrow Borough Transport Ltd [1990] 1 Ch 227 at 235-36, in the context of an extension application before the legislative changes of 1989, though in respect of the English legislation, helpfully, if I may respectfully say so, discusses the relevance of the occurrence of administration and the different matters which may be thrown up for consideration in an extension application. If reconstruction is capable of being achieved, there may be no reason to deny an extension; if reconstruction is unlikely, insolvency looms, at the very least. In this latter circumstance, given that creditors cannot, without following the scheme of Part 5.3A, wind the company up, there may be every reason, in a given set of circumstances, for a court to view the matter in a way analogous to the way it would view the matter had winding up intervened: that crystallised rights of creditors would shortly intervene, and recognising that without administration (the efficacy of which is not to be undermined) such rights may well already have intervened. If rehabilitation is not possible, in any particular circumstance, there may be a significant risk of impending crystallisation or falling in of the creditors' rights in a winding up. The degree of likelihood and imminence of that eventuality will be a relevant, and likely powerful, consideration. There are a multitude of factual circumstances which might attend an assessment of what is "just and equitable" for the purposes of subs 266(4) if administration, but not winding up, has intervened. Consideration of whether, and the extent to which, particular aspects of the conduct of, and facts surrounding, an administration are relevant to the exercise of the discretion should await the resolution of real controversies. No particular aspect of this administration was said to be relevant to the exercise of discretion here. 202 The above is not inconsistent with an otherwise unchallenged view of an intermediate court of appeal. The authorities do not speak with one voice on this subject matter. A number of decisions, JJ Leonard, Douglas-Brown and Campbell Finance among them, proceed upon the basis that the change to creditors' rights discussed by Buckley J in In re Anglo-Oriental Carpet Manufacturing is still a relevant analysis. Others, such as Sanwa, prefer the approach of Needham J in Vector Capital, part of which approach was the recognition by Needham J (at 6) of the weakening of what might be called the traditional approach by the presence of par 205(1)(d). 203 As I have earlier stated, I do not think that the structure of s 266 of the Corporations Act (or ss 205 and 266 of the Code and Corporations Law, respectively) is (or was) such as to remove the relevance of the approach of Buckley J in In re Anglo-Oriental Carpet Manufacturing,in this respect, if winding up had intervened.

The fourth and fifth questions: Whether the primary judge erred in his approach and if he did whether this Court should exercise the discretion in a different way. 204 The appellant criticised the reasons of the primary judge saying that they did not reveal the principle which his Honour applied. I do not agree. His Honour expressed the view that the starting point was a recognition that the charge was void. After surveying the facts, his Honour recognised that he could discount the likelihood of rehabilitation, and that liquidation or a deed were the likely outcomes. (In fact winding up in insolvency occurred after his Honour made the orders.) 205 His Honour stated at [16]: …The intention of the legislature expressed in s 266(1) is that void securities should not disturb insolvent administration, whether by way of liquidation or deed of company arrangement, company administration being a precursor to each. This reflects what was described by Menzies J (a master of company law) as: '… a deeply rooted principle of company law that, when liquidation has commenced, one creditor should not be assisted by the Court to improve its position vis-ŕ-vis other creditors.' (Commercial Banking Co of Sydney Ltd v George Hudson Pty Ltd (in liquidation) (1973) 131 CLR 605 at 613). Section 266 has a long pedigree, both in Australia and in the United Kingdom, although not, of course, in relation to the new form of company administration, although it did apply in relation to its predecessor, official management. This passage recognises (correctly) not only the void status of the charge at the time of hearing, but also the need to recognise the relevant statutory regimes of winding up and administration in the exercise of the discretion and the deeply rooted principle (subject to the statute) of equality of status of creditors in insolvent administration. 206 After referring to the history of, and practice in relation to, provisions of this type, and after noting the earlier firm practice of refusal of an extension once winding up intervened, and the decision of Needham J in Vector Capital, his Honour approached the matter as follows at [20]: …Generally speaking, it is accepted that once winding up intervenes the secured creditor is required to show exceptional circumstances before time will be extended. That view was said by Hansen J to be consistent with the balance of the authorities in his recent comprehensive review of them (National Australia Bank Ltd v Davis & Waddell (Vic) Pty Ltd 44 ACSR 296 at [77]). That review identifies the relevant authorities. It is not for a single judge to endeavour to rationalise them all. It is fair to say that the actual decision in that case (and in some others relied upon by counsel for GE) indicates a more benign view of what might constitute "exceptional circumstances" than has been taken by some other judges. 207 I take his Honour in this passage not to be adopting a "more benign view" of "exceptional circumstances". His Honour clearly was of the view that the charge (until any order) was void and was clearly moved by the views of Menzies J in Hudson's case. Whilst his Honour did not express the matter quite as I have above, the use of the phrase of some currency, "exceptional circumstances", the recognition of the voidness of the charge and the recognition and application of Hudson's case lead me to conclude that his Honour was approaching the exercise of the discretion in a manner substantially as required by the statute and as discussed at [186] to [204] above. This is illustrated by what his Honour said at [21]: …As counsel for Hewlett Packard correctly put, the starting point is that the security is void. In my opinion, the approach should be the same where there is the intervention of administration. As I have said, for all practical purposes, some form of insolvency administration will follow this administration, and it is clear from s 266(1) that the security is avoided equally against the scheme administrator as it is against a liquidator. Although care needs to be taken in considering United Kingdom authorities because of the different statutory regimes and the rather more inflexible approach prevailing there on winding up, there is enough similarity to make persuasive the analysis by Millett J in In re Barrow Borough Transport Ltd [1990] 1 Ch 277, particularly at 235. 208 I do not think that his Honour's reference to the review of the authorities by Hansen J in NAB v Davis & Waddell (see [21] of the primary judge's reasons) and his Honour's reference to the "more inflexible approach" of the English authorities gainsays the conclusion referred to at [208] above. 209 His Honour's exercise of discretion was attacked on a number of bases by the appellant. First, it was said that his Honour did not adopt a requirement of "exceptional circumstances". For the reasons I have given, his Honour was not required to do so in terms. Nevertheless, as I have said, his Honour did use that phrase in a context which leads me to conclude that in substance he approached the matter in accordance with the manner required by the statute. 210 Secondly, it was said that there were no exceptional circumstances, beyond the matters reflected in paras (a) and (b) in subs 266(4), which the appellant characterised as only preconditions or a gateway to the exercise of the discretion, not matters relevant to the exercise of the discretion. I think that this submission illustrates the danger of using phrases such as "exceptional circumstances" as a surrogate for the terms of subs 266(4). So used by the appellant, it created a separate and distinct test, applied later in time to the enquiries referred to in paras (a) and (b) in subs 266(4). To do so is to rewrite the provision by adding a separate integer and making irrelevant to the consideration of that integer the matters relevant to paras (a) and (b) of subs 266(4). That is impermissible. 211 This attack by the appellant can also be seen as one which stated that if the exercise of the power were approached according to principle, no judge could have exercised it as the primary judge did. Expressed by the appellant, this submission was that there were, and could be seen to be, no exceptional circumstances. I would prefer to express this putative criticism by saying that no judge, understanding the approach which I have described, could have reached the conclusion his Honour did. I disagree. Winding up had not intervened, though its occurrence was a distinct possibility. There was plainly innocent inadvertence and some promptitude in application. The assets of the Company reflected, in significant part, the accommodation provided, which would not have been provided without security. A condition providing some cushioning of the effect of the order on the general creditors was attached. No particular prejudice based on reliance on the register was pointed to. No particular aspect of the administration in question was pointed to as militating against the exercise of the discretion. Whilst others may have exercised the discretion differently, in particular because of the apparent insolvency of the Company, I do not think that, approaching the matter as I have described, such a result was beyond the reasonable and proper exercise of discretion. 212 The appellant also submitted that the primary judge erred: …in failing to have any or any sufficient regard to the fact that GE was likely to still receive 100 cents in the dollar as an unsecured creditor for its indebtedness even if the application to extend time failed and Daisytek went into liquidation; This proposition was founded on what was said to be the effect of the subordination deed. No relevant error is shown by this submission. It may be that, as submitted, the deed is not able to be challenged in any way; but his Honour was not in a position to assess the worth of the Texan parent's claims against the Company and the related company, which claims would provide the value to GE through the subordination deed. His Honour was perfectly entitled to say, as he did at [7]: Factors which complicate the situation are the arrangement for capitalisation of inter-company debt and the effect of the subordination deed between (inter alia) GE and Daisytek Inc as to the subrogation of GE in relation to that debt. It is submitted that the subordination deed is not affected by the failure to notify the charge. I cannot determine those issues in this proceeding and, in any event, the resolution of them will depend upon commercial as well as legal considerations. 213 The appellant also said that his Honour erred: …in failing to have regard to the potential and actual prejudice to unsecured creditors by reason of the granting of the extension of time sought by GE; 214 It is true that there was material to show that there would be a reduced recovery for unsecured creditors if the extension was granted, even with the condition. His Honour said at [22]: Counsel for GE referred to a number of considerations which indicated that … there were no circumstances pointing to … any prejudice to creditors beyond that occasioned by the default itself. That is substantially correct. … 215 However, that expression of view of lack of prejudice was directed to a wider question, which was made clear by the following sentence: …In particular, the security relates to current advances which, apart from the revenue losses which were being incurred, should have been reflected in current assets such as stock on hand or receivables. … 216 I cannot conclude that the primary judge failed to appreciate from the material before him that the unsecured creditors would receive a lower dividend if the extension were granted. Nor was the failure to treat that as determinative fatal to the exercise of the discretion. Crystallised rights on a winding up had not intervened; and in all the circumstances, as I have said, the ultimate exercise of discretion was one which can be seen as reasonably open. 217 I would not interfere with the exercise of the discretion. I would therefore dismiss the appeal. 218 In these circumstances it is unnecessary to deal separately with the issues raised in the amended notice of contention. In any event, I have, in substance, dealt with them in dealing with the second and third questions above.

Cross-Appeal 219 In the cross-appeal, GE complains about the attachment of the condition. The specific grounds were:

1. His Honour … erred in taking into account for the exercise of his discretion under section 266(4) of the Corporations Act 2001 (Cth) (the "Act") the potential for prejudice to occur to unsecured creditors in circumstances where there was no evidence led of actual prejudice.
2. His Honour erred in holding that an order to extend time for lodgment of the charge given by Daisytek Australia Pty Limited to the Cross Appellant ought be made on the terms of a condition that might alleviate potential prejudice to unsecured creditors and ought to have held that the extension order be granted in the circumstances of the present case without a condition, whether in terms of order 2 or otherwise. 220 Concern with the effect on creditors, in circumstances of the intervention of one of the events in pars 266(1)(b) and (ba) was plainly a relevant and appropriate consideration: Re Dudley Engineering, In re Flinders Trading and In re Ashpurton Estates. That the interests of creditors are relevant does not mean that they always legitimately demand protection. The closer the company is to insolvency and to being wound up may, in any given case, militate against the favourable exercise of the power. This is so, in large part, because the closer such possibilities are, the closer is the crystallisation of rights of creditors in the nature of property. The likelihood and imminence of such crystallisation is, and always has been seen in Australia to be, a significant consideration. The consideration relevant to unsecured creditors cannot be limited, a priori, to circumstances where specific prejudice from acting on the faith of an incorrect register can be shown. The possible considerations are broader and their assessment will depend on all the circumstances. The differences of view in In re Flinders Trading between the Master and Bray CJ, on the one hand, and Sangster J, Mitchell J and Walters J, on the other, reflect the possibilities of such divergence: cf Re Dudley Engineering. This is especially so in applications that must, of their nature, be brought on and disposed of with a degree of dispatch. The approach of his Honour at [22] was not one evincing any error, in particular in the following passage: It was argued for GE that no creditor has come forward and claimed actual prejudice through searching the Register, and also that most (if not all) of the ultimate unsecured creditors dealt with, or continued to deal with, Daisytek after notification was made. Whilst the interests of those who deal with a company during the period that the charge should have been notified but was not is a legitimate focus of attention, counsel for Hewlett Packard correctly submits that the grant of an extension of time affects the interests of unsecured creditors generally and that it is not possible, on an application of this kind, to require close proof of actual prejudice. 221 The condition attached was not foreign to the exercise of the discretion. It was directed, in a non-specific way, to alleviate the position, to a degree, of all creditors. The position of unsecured creditors was relevant. On the material before him, in particular in the light of the volume and velocity of trading, his Honour was unwilling to accept that some amelioration of the position of the unsecured creditors was not appropriate. That was a view which was open. 222 Further, GE itself propounded the condition. Reading the transcript and his Honour's reasons, I think it to be reasonably likely that GE would not have received the benefit of any order for extension from his Honour, if it had not proposed the condition. A refusal of the application was plainly open in the light of the financial circumstances of the Company and the intervention of administration. What really has to be submitted was that the primary judge was bound to exercise his discretion to allow the extension unconditionally, and any other course would necessarily have been erroneous. I cannot agree. It was plainly open to his Honour to dismiss the application. It was, also, open to his Honour to attach a condition (especially one propounded by GE) which was rationally founded by reference to the increase in the Company's liabilities since the time when notice should have been lodged, and which operated for the benefit of all creditors. 223 The cross-appeal should be dismissed also. 224 The orders that I would make are:
   1. The appeal be dismissed.
   2. The cross-appeal be dismissed.
   3. The appellant pay the costs of the respondents to the appeal.
   4. The cross-appellant pay the costs of the cross-respondents to the cross-appeal.

I certify that the preceding one hundred and eighty three (183) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Allsop.

Associate: Dated: 21 November 2003 Counsel for the Appellant: Mr B C Coles QC Mr D Pritchard

Solicitor for the Appellant: Henry Davis York

Counsel for the First Respondent: Mr R B S Macfarlan QC Mr T Castle

Solicitor for the First Respondent: Mallesons Stephen Jaques

Counsel for the Second Respondent: Mr M Cashion SC

Date of Hearing: 24 September 2003

Date of Judgment: 21 November 2003