In the matter of Antqip Hire Pty Ltd (in liq) [2021] NSWSC 1122 - NSWSC 2021 case summary — Zoe

NSWNSWSC

In the matter of Antqip Hire Pty Ltd (in liq) [2021] NSWSC 1122

[2021] NSWSC 1122

Supreme Court of NSW|2021-07-28|Before: Brereton JA

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At a glance

Source facts

Court

Supreme Court of NSW

Decision date

2021-07-28

Before

Brereton JA

Catchwords

123 Sweden AB v Appleyard Capital Pty Ltd (2014) 101 ACSR 629
(1996) 22 ACSR 109 Cardinia Nominees Pty Ltd, In the matter of [2013] NSWSC 32 Carpenter International Pty Ltd (admins apptd), Re (2016) 51 VR 190
111 ACSR 477
[2016] VSC 118 Carter v New Tel Ltd (in liq) (2003) 44 ACSR 661

Source

Original judgment source is linked above.

Catchwords

123 Sweden AB v Appleyard Capital Pty Ltd (2014) 101 ACSR 629(1996) 22 ACSR 109 Cardinia Nominees Pty Ltd, In the matter of [2013] NSWSC 32 Carpenter International Pty Ltd (admins apptd), Re (2016) 51 VR 190111 ACSR 477[2016] VSC 118 Carter v New Tel Ltd (in liq) (2003) 44 ACSR 661(1999) 32 ACSR 573[1999] QSC 209 Hewlett Packard Australia Pty Ltd v GE Capital Finance Pty Ltd (2003) 135 FCR 20647 ACSR 5892 All ER 85 Kaizen Global Investments Ltd v Australian New Agribusiness & Chemical Group Ltd (in liq) (2017) 120 ACSR 220[2017] FCA 431 K J Renfrey Nominees Pty Ltd (atf Renfrey Family Trust) v OneSteel Manufacturing Pty Ltd (subject to deed of company arrangement) (2017) 120 ACSR 117Ex parte Greenwood (1874) 9 Ch App 511 Leslie Homes (Aust) Pty Ltd, Re (1984) 8 ACLR 1020QCA 27 Northern Managed Finance Pty Ltd v 4 in 1 Wyoming Pty Ltd (2017) 120 ACSR 167[2017] NSWSC 407 OneSteel Manufacturing Pty Ltd (admins apptd), In the matter of (2017) 93 NSWLR 611118 ACSR 307[2017] NSWSC 21 Quality Blended Liquor Pty Ltd, Re [2015] 2 Qd R 381(2014) 102 ACSR 451[2014] QSC 234 Sanwa Australia Finance Ltd v Ground-Breakers Pty Ltd (in liq) [1991] 2 Qd R 456

Judgment (15 paragraphs)

[1]

Background

The Companies were engaged in the business of hiring equipment. Their sole director Mr Tony Russell caused them to go into voluntary administration on 3 February 2014. On 28 February 2014, the administrators circulated a report to creditors, including the Deputy Commissioner for Taxation. On or about 1 March 2014, the Commissioner proved in the administrations, for a debt of $4,884,523.48.
On 4 April 2014, the administrators circulated a supplementary report to creditors, in which it was assessed that the ATO's claim at $3,680,484, comprising $1,781,864 for unpaid superannuation guarantee charge in relation to Antqip Hire, which claim was entitled to priority under CORPA, s 556(1)(e), and $1,898,620 in respect of GST and PAYG (which was not entitled to priority). The supplementary report analysed a number of scenarios, including under proposed DoCAs and in the event of liquidation. Under the DoCAs, in the case of Antqip Hire, a deed fund of $400,000 was to be constituted, payable as to $150,000 within one month, and as to $250,000 over fifty months commencing six months after execution, from the profits of a related entity, Antqip Plant Hire Pty Ltd ("APH"). Although the deed fund would be exhausted by the ATO's priority claim, it was estimated that it would receive a greater dividend in respect of it under the DoCA than upon liquidation. In the case of Antqip, a deed fund of $3,100,000 was to be constituted, payable as to $750,000 within one month, and as to $2,350,000 over fifty months commencing six months after execution, from the profits of APH. It was estimated that while on liquidation ordinary unsecured creditors would receive a dividend between nil and 9 cents in the dollar, under the DoCA they would receive 21 cents in the dollar. The administrators recommended that the creditors approve the Companies entering into proposed DoCAs.
On or about 8 May 2014, the creditors resolved that the Companies enter into the DoCAs, and in due course the Companies did so. Consequent thereon, the administrators became Deed Administrators.
When they went into administration, the Companies were indebted to Bibby, which held security for its debts. Under the DoCAs, Bibby was an "excluded secured creditor", with the consequence that it was not entitled to share in the deed fund, but its remedies as a secured creditor were preserved.

[2]

The Deed of Charge and the 2014 Registrations

The Deed of Charge of 26 October 2014 in favour of National secured loan funds which were applied to refinance the loans from Bibby. Although the DoCAs each contained a provision to the effect that the Company must not charge, encumber, or dispose of any property other than in the ordinary course of business without the written permission of the deed administrator, there is no evidence of any such written permission. However, it is clear that the deed administrators were aware of and did not object to the transaction, apparently regarding it as "in the ordinary course of business" on the basis that it did no more than refinance the existing secured debt and did not adversely affect the position of unsecured creditors.
On 27 October 2014, PPSR financing statements were lodged by Bransgroves, the solicitors then acting for National, in respect of the security interests created by the Deed of Charge. As a result, numerous PPSR registrations were effected. They fall into three categories. The first category, which comprised most of the registrations, were in respect of collateral identified in each case as a specific item in the class "other goods and motor vehicle". They specified a registration start time on 28 October 2014, with "no stated end time". They identified the secured party's address for service as Paul Reese, then of Bransgroves. The second category of registrations were also in respect of collateral identified in each case as a specific item in the class "other goods and motor vehicle". They specified a registration start time on 19 November 2014 and end time on 19 November 2021, that is to say a period of seven years, and provided as the address for service Sonya Wilcan, at "NWC Finance". Ms Wilcan was an employee of National. The third, and for present purposes most relevant category, comprised a single registration - the Original AllPAP 6615 Registration. It was in respect of "all present and after-acquired property" of the Companies, and had a start time on 27 October 2014 and an end time on 27 October 2017 - a period of three years. The address for service was Katie.B@Bransgroves.com.au.
On 4 November 2014, Mr Reese sent an email to Ms Wilcan, as follows (emphasis added): "Hi Sonya, Could you please let me know what funds remain available to the borrower in this matter. Unfortunately the PPSR registrations done on this matter have attracted a cost of $50,000!!!!!!!!!!!!! (unfortunately it is not a joke). The reason for this is, due to the number of them (270 odd), Katie outsourced the work and did all registrations with a no end date. This somehow attracted a charge of $200 plus gst per registration. The normal cost for seven years' registration for this amount of PPSR is about $3K. I think we should be able to decrease the cost to about $35K. I obviously don't want to be personally liable for all $35K (which is what happens here) but have resigned myself that I most likely will. I was wondering what your thoughts were with respect to paying the costs. There are a few suggestions I have to pay the costs: 1. I pay the entire amount personally due to our error at Bransgroves; or 2. I pay half (or any other amount that is fair) and the borrower pays the other half; or 3. The borrower pays the entire amount in which case his debt increases by about $34K."

[3]

The 2019 Registrations

The Original AllPAP 6615 Registration expired on 27 October 2017. There is nothing to suggest that anyone in National's camp adverted to this, and it is in the ordinary course of things that no-one would have done so, given the circumstances in which it had been registered contemporaneously with numerous other registrations which had either seven-year or open-ended end dates.
Mr Morello, a director of National, deposed that on or about 8 October 2018, he began to become concerned that it might be necessary to enforce National's security in respect of the Companies, and so he instructed ERA Legal ("ERA"), solicitors, to obtain the file in relation to the loans from National's previous solicitors. In January 2019, the Companies defaulted in respect of their interest obligations to National. In about April 2019, National instructed ERA to advise on and assist in respect of the defaults, including as to recovery options against the borrowers and the guarantors. ERA undertook PPSR searches on 2 April 2019. Having reviewed them, on 18 April 2019 ERA ascertained that there was no extant AllPAP security registration in favour of National over the property of the Companies, as the Original AllPAP 6615 Registration had lapsed on 27 October 2017. ERA informed National of this that day. Mr Morello deposed: "When I was told that I was astounded because it was always my belief that the plaintiff had registered all present and after-acquired property security interests registered on the PPSR with no expiry dates."
Mr Morello also deposed: "I do not know why Bransgroves only registered, or instructed the initial AllPAP registration for three years. Had I been made aware that the registration had an expiry time, I would have taken immediate action to renew the initial AllPAP registration before their expiry date in order to extend them."
19 April 2019 was Good Friday, and 22 April 2019 Easter Monday. On 23 April 2019, ERA created a new "secured party" for National on the PPSR, and on 24 April 2019 lodged the two 2019 AllPAP registrations (numbered 2781 and 2907) the subject of the present application.
Mr Morello deposed that National did not immediately apply for an extension of time for the 2019 Registrations, as it considered that its position was protected by the extant other goods and motor vehicle registrations, that the Companies had not traded since entering into the DoCAs, and that there was not a significant risk of the AllPAP securities vesting, as it did not foresee the Companies going into liquidation or administration as they were subject to the DoCAs. Mr Anderson, solicitor of ERA, deposed that he advised Mr Morello that the 2019 Registrations, coupled with the extant other goods and motor vehicle registrations, protected National's interests. It had not occurred to him prior to 27 May 2019 that there was any risk of the 2019 Registrations vesting under s 588FL, because he perceived no risk of the Companies being placed into liquidation or administration, as both were subject to a DoCA and not trading.

[4]

Liquidation

Both Companies went into voluntary liquidation as a result of a resolution passed on 27 May 2019, when the Liquidators were appointed. By this time, National's secured debt had increased to $7,040,219. On 28 May 2019, National appointed receivers of all of the property of the Companies the subject of the PPSR registrations.
Mr Anderson deposed that even after becoming aware that the Companies had gone into liquidation, he did not give advice to bring an application for an extension of time, because the Companies remained subject to the DoCAs, and so far as he was aware had no other assets, so that there appeared to be no utility in obtaining an extension. However, on 27 June 2019, Mr Anderson was informed that proceedings had been commenced by the Liquidators seeking to set aside the DoCAs ("the DoCA Proceedings"). As an excluded secured creditor, National had no claim on the deed funds, comprising $1,828,323 in relation to Antqip and $41,788 for Antqip Hire, but if the DoCAs were set aside, those funds would become assets of the Companies in liquidation and caught by the Deed of Charge. He then considered it prudent to commence the present proceedings, pending the determination of the DoCA Proceedings. The originating process was filed on 22 October 2019.
The DoCA Proceedings, in which the Liquidators sought orders confirming the validity of their appointment, terminating the DoCAs, and requiring the deed funds to be paid to the Liquidators, were heard before Rees J on 23 October 2019 and determined on 5 May 2020, when her Honour declared that the appointment of the Liquidators was valid, and that the deed funds had vested in the Liquidators. [1] The practical consequence of National's application, if successful, is that the proceeds of the deed funds, having vested in the Liquidators as a result of the liquidation, would now be available to, and exhausted by, National, whereas previously, as an "excluded secured creditor", it had no recourse to the deed funds, which were solely for the benefit of the unsecured creditors.

[5]

Leave to proceed: CORPA, s 500(2)

As the companies are in liquidation, the plaintiff sought leave to proceed against them, pursuant to CORPA, s 500(2). It is unnecessary to resolve whether leave is required, in the sense that this is a "proceeding" of the kind contemplated by s 500. Assuming that it is, where leave is sought by a secured creditor it is not for the Court to exercise some sort of general discretionary judgment, nor to consider what course of action will best serve the interests of creditors generally and shareholders, but leave is granted "as of right". [2] The Liquidators did not appear to oppose leave, which should be granted, [3] insofar as it is required.

[6]

The statutory provisions: CORPA, ss 588FL, 588FM

CORPA, s 588FL, has the effect that certain (CTH) Personal Property Securities Act 2009 ("PPSA") security interests granted by a company vest in the company if a relevant insolvency event (an order or resolution for winding up, the appointment of administrators, or the execution of a DoCA) occurs, and the security interest has not been registered earlier than six months before the commencement of the winding up or administration, or within twenty business days after it was granted: (1) This section applies if: (a) any of the following events occurs: (i) an order is made, or a resolution is passed, for the winding up of a company; (ii) an administrator of a company is appointed under section 436A, 436B or 436C; (iii) a company executes a deed of company arrangement under Part 5.3A; and (b) a PPSA security interest granted by the company in collateral is covered by subsection (2). Note: A security interest granted by a company in relation to which paragraph (a) applies that is unperfected at the critical time may vest in the company under section 267 or 267A of the Personal Property Securities Act 2009. (2) This subsection covers a PPSA security interest if: (a) at the critical time, or, if the security interest arises after the critical time, when the security interest arises: (i) the security interest is enforceable against third parties under the law of Australia; and (ii) the security interest is perfected by registration, and by no other means; and (b) the registration time for the collateral is after the latest of the following times: (i) 6 months before the critical time; (ii) the time that is the end of 20 business days after the security agreement that gave rise to the security interest came into force, or the time that is the critical time, whichever time is earlier; (iii) if the security agreement giving rise to the security interest came into force under the law of a foreign jurisdiction, but the security interest first became enforceable against third parties under the law of Australia after the time that is 6 months before the critical time - the time that is the end of 56 days after the security interest became so enforceable, or the time that is the critical time, whichever time is earlier; (iv) a later time ordered by the Court under section 588FM. … (4) The PPSA security interest vests in the company at the following time, unless the security interest is unaffected by this section because of section 588FN: (a) if the security interest first becomes enforceable against third parties at or before the critical time - immediately before the event mentioned in paragraph (1)(a); (b) if the security interest first becomes enforceable against third parties after the critical time - at the time it first becomes so enforceable. Note: For the meaning of critical time, see subsection (7).

[7]

The "critical time"

The "critical time" is an important integer in determining whether a particular security interest is "covered by subsection (2)" for the purposes of s 588FL(1)(b). In s 588FL(7), "critical time" is defined as follows: critical time, in relation to a company, means: (a) if the company is being wound up - when, on a day, the event occurs by virtue of which the winding up is taken to have begun or commenced on that day under section 513A or 513B; or (b) if the company is under administration or is subject to a deed of company arrangement - when, on a day, the event occurs by virtue of which the day is the section 513C day for the company.
Read in the context of s 588FL(1)(a), which contemplates three classes of triggering insolvency events - an order or resolution for the winding up of a company, the appointment of an administrator, and the execution of a DoCA - s 588FL(7) deals with the first of those events (winding up) in para (a) of the definition; and the other events (administration and execution of a DoCA) in para (b). In the present case, because the Companies are being wound up, it is para (a) that applies. The effect of the definition in s 588FL(7)(a) is that, for a company that is being wound up, the "critical time" is a time on the day upon which the winding up is taken to have begun or commenced under section 513A or 513B. Section 513A applies to windings up ordered by the Court and is not presently relevant. Section 513B applies to voluntary windings up, and relevantly provides as follows: Where a company resolves by special resolution that it be wound up voluntarily, the winding up is taken to have begun or commenced: … (b) if, immediately before the resolution was passed, the company was under administration - on the section 513C day in relation to the administration; or (c) if, immediately before the resolution was passed, a deed of company arrangement had been executed by the company but had not yet terminated - on the section 513C day in relation to the administration that ended when the deed was executed; or … (e) otherwise - on the day on which the resolution was passed.
As, immediately before the winding up resolution was passed on 27 May 2019, a deed of company arrangement had been executed by the Companies and had not yet terminated, it is para (c) that is applicable. It in turn refers to "the section 513C day in relation to the administration that ended when the deed was executed". Section 513C relevantly provides as follows: The section 513C day in relation to the administration of a company is: (a) if, when the administration began, a winding up of the company was in progress - the day on which the winding up is taken because of this Division to have begun; or … (b) otherwise - the day on which the administration began.

[8]

Does s 588FL apply to security interests granted after the critical time?

In that context, the question arises whether s 588FL applies to a security interest that is granted after the "critical time".
A security interest is covered by s 588FL(2) if the requirements of paras (a) and (b) are satisfied. Paragraph (b) is concerned with the timeliness of registration. Paragraph (a) has the effect that a security interest will be covered if it is enforceable against third parties, and perfected by registration (and by no other means), at the critical time, or, if it arises after the critical time, then when it arises. Thus the provision is to be applied as at two different times, according to whether the security interest arises before or after the "critical time": if before, as at "the critical time", and if after, as at the time "when the security interest arises".
In In the matter of OneSteel Manufacturing Pty Ltd (admins apptd), [10] I held that an order under s 588FM only immunised a perfected security interest from vesting under s 588FL(4). I said: [11] "[69] An order under s 588FM provides relief from the consequences of failure to register a security interest within time, with the consequences that a security interest is no longer in jeopardy of being vested in the grantor, in case of an insolvency event, on account of its belated registration. The effect of such relief is that should an insolvency event occur within six months of actual registration, although the security interest would otherwise vest in the grantor under s 588FL(4) because of its belated registration, it will not vest under that provision. However, an order under s 588FM fixes a later time only "for the purposes of subparagraph 588FL(2)(b)(iv)". An order under s 588FM does not resurrect a security interest which has vested in the grantor for a reason other than late registration. In other words, it serves to immunise the relevant security interest only against the consequences of what would otherwise be late registration. [70] In this respect, it is notable that such relief is available only in respect of a security interest that has been perfected as at the "critical time". Together, s 588FL(1) and (2) mean that s 588FL applies only to a security interest that "at the critical time" is enforceable against third parties and "is perfected by registration, and by no other means". Alleasing's submission that the phrase is perfected by registration means "is capable of being perfected" must be rejected. The opening words of s 588FL(2)(a) - "at the critical time, or, if the security interest arises after the critical time, when the security interest arises" - indicate that the security interest must have the status of being perfected at that time. Moreover, pursuant to CORPA s 588FK, the term "is perfected" has the same meaning in CORPA as in the PPSA, where s 21 uses the present tense in the same way: … [72] That s 588FM is concerned only to provide relief from the consequences of belated registration of perfected interests, and is not concerned with unperfected interests, is reinforced by the note to s 588FL(1), which is to the effect that a security interest granted by a company which has an insolvency event, that is unperfected at the critical time, may vest in the company under PPSA s 267 or s 267A. [73] Section 588FM provides a means for obtaining relief from the consequences of belated registration of security interests granted by companies. Notably, it applies only to interests granted by companies. However, s 267, which vests unperfected security interests, applies to interests granted by individuals as well as those granted by companies. It would be discordant if a vesting under s 267 were amenable to cure by relief under s 588FM where the grantor was a company, but not otherwise. [74] Accordingly, an order under s 588FM does not immunise an unperfected security interest from vesting under s 267(2), but only a perfected security interest from vesting under s 588FL(4)."

[9]

Alternatively, would it be just and equitable to fix a later time?

Lest I be wrong in that conclusion, it is appropriate to consider the application for an order under s 588FM on the alternative basis that the security interests are caught by s 588FL, as security interests arising after the critical time.
On this hypothesis, the security interests, having arisen after the critical time, vested in the Companies by operation of s 588FL(4)(b) when they first became enforceable against third parties. Under PPSA, s 20, a security interest is enforceable against a third party in respect of particular collateral only if (a) the security interest is attached to the collateral, and (b) either the secured party possesses the collateral, or the secured party has perfected the security interest by control, or a security agreement that provides for the security interest covers the collateral in accordance with sub-s (2). Subsection (2) provides that a security agreement covers collateral if it is evidenced in writing signed, or adopted or accepted, by the grantor, and the writing contains, inter alia, a statement that a security interest is taken in all the grantor's present and after-acquired property.
As value was given for the security interest, and the Companies had rights in the collateral, the security interest would apparently have attached when it was granted. The Deed of Charge is in writing, and is expressed to be "a fixed charge over all the Debtor's present and future estate, right title and interest in" the "Charged Assets", and "a floating charge over any of the Charged Assets which is not subject to the Fixed Charge", and the "Charged Assets" comprise: "all of the debtor's property, privileges, rights and other assets whether: (a) owned at present or acquired in the future; or (b) held legally or beneficially; or (c) jointly or severally with another party; or (d) beneficially or on trust; or (e) any combination of these."
That is a statement to the effect contemplated by s 20(2)(b)(ii), that a security interest is taken in all the grantor's present and after-acquired property. Accordingly, the security interest became enforceable against third parties when it was granted. It follows that, on this hypothesis, the security interest vested in the company immediately upon the charge being granted. This analysis is consistent with that of Davies J in K J Renfrey, holding that where a security interest is registered after the commencement of the winding up or appointment of administrator as the case may be, it would vest in the company on creation, even if registered within twenty business days after the security agreement came into force, unless an order was made under s 588FM. [26]

[10]

Alternatively, inadvertence and absence of relevant prejudice?

Although, for the reasons given above, it is clear that the "critical time" was 3 February 2014, the application was argued as if the critical time was when the winding up resolution was passed on 27 May 2019. For the sake of completeness I will address, albeit less comprehensively than might otherwise have been appropriate, the issues that were argued on that (incorrect) approach.
On that assumption, then at the assumed critical time the security interest was perfected by registration - being the new 2019 Registrations - but the registration time was later than six months before the assumed critical time, and later than twenty business days after the security agreement came into force. Proceeding on the relevant assumptions, then, the latest time at which registration could have taken place without falling within s 588FL(2) would have been six months before the winding up resolution, which is to say before 27 November 2018. That is the context in which the plaintiff had to show, to obtain relief under s 588FM, that the failure to register the collateral earlier (relevantly, before 27 November 2018), was accidental or due to inadvertence or some other sufficient cause (s 588FM(2)(a)(i)); or was not of such a nature as to prejudice the position of creditors or shareholders (s 588FM(2)(a)(ii)); or alternatively that on other grounds it was just and equitable to grant relief (s 588FM(2)(b)).

[11]

Inadvertence

In Appleyard, it was said: [45] "For the purpose of s 588FM(2)(a)(i), "inadvertence" includes failure to advert to or understand the requirement for registration within the specified period, and innocent error in the sense of failure to register through ignorance of the legal requirement to do so, or of the consequence of not doing so."
Reference has been made, above, [46] to excerpts from the evidence of Mr Morello, which to my mind plainly establish that National did not advert, prior to April 2019, to the circumstance that the Original AllPAP 6615 Registration had lapsed, and when they did realise it, acted promptly to effect the new 2019 Registrations. In other words, the failure to make the new 2019 Registrations before November 2018 was attributable to inadvertence.
The Commissioner submitted, in substance, that there was insufficient explanation as to why the Original AllPAP 6615 Registration had been for three years only. It was submitted that there was no evidence that National relied on the statement in the email of 4 November 2014 that all the registrations had been "with no end date", and that in any event the registration to which that email referred did not in fact include the Original AllPAP 6615 Registration. First, this submission misses the point: the question is not why the original registration was for only three years, but why the new 2019 Registrations were not made before 27 November 2018. Secondly, in the course of cross-examination, Mr Morello repeatedly maintained, credibly, that he had simply trusted his solicitor to do what was appropriate.
The Commissioner also submitted that there was no explanation as to why action was not taken earlier, despite concerns about potentially needing to rely on the security arising from late 2018. However, it is not apparent why a secured party in National's position, believing that it had a valid and enforceable security, would upon considering recovery options necessarily or immediately conduct a PPSR search to ascertain whether its security was still registered.
In my view, the circumstances as a whole speak very loudly of National simply not adverting to the circumstance that the Original Registration had lapsed, until April 2019. There is, frankly, no other sensible explanation. Had National adverted to the circumstance that the Original Registration had lapsed, then when it became concerned about its position in or about late 2018, it would have made a new registration, just as it did, promptly, when it discovered the position in April 2019.

[12]

Absence of relevant prejudice

The second ground for relief is that the failure to register the collateral earlier is not of such a nature as to prejudice the position of creditors or shareholders. The prejudice contemplated by this provision is prejudice from the failure to register earlier - not prejudice from making the order. [47] In Accolade Wines, it was explained that the prejudice referred to in s 588FM(2)(a)(ii) being the prejudice to the position of creditors or shareholders from "the failure to register the collateral earlier" - in other words, prejudice attributable to not making a timely registration - to evaluate such prejudice for the purposes of s 588FM one compares the position of the creditors if an extension is granted, with their position if there had been an effective timely registration, and often there will be no difference. [48] That is different from the prejudice arising from "extending the period".
It is not apparent how shareholders, or creditors generally, or the Commissioner in particular, were prejudiced by the failure to register the security interest earlier, and in particular, before 27 November 2018. In this case, the Commissioner's debt had accrued, and was converted into a proof in the deed administration, as were the debts of the other creditors, before the security was created. It is just not apparent how registering the security interest earlier - or more accurately, reregistering it after the initial registration lapsed - could have made the slightest difference to the position of creditors generally, or the Commissioner in particular. This is not a case in which creditors traded with the companies during the time that the security interest was unregistered, let alone on the basis that the Companies' assets were not encumbered. When expressly asked, Counsel for the Commissioner could not identify any way in which timely registration (before 27 November 2018) would have resulted in any improvement in the position of creditors generally, or the Commissioner in particular.
I am satisfied that the failure to register the collateral earlier was not such as to prejudice the position of creditors or shareholders.

[13]

Discretion

Those findings enliven the discretion to grant relief, in the sense that once inadvertence, or absence of relevant prejudice, is established, the Court may grant relief, but retains a discretion. Relevant considerations include delay, and prejudice, in particular to the position of unsecured creditors and shareholders.
The earlier discussion of questions of delay and prejudice is equally applicable here and produces the same conclusion: those discretionary considerations do not incline me to decline relief.
Accordingly, if the case were to be resolved on the basis argued, which assumed that the critical time was 27 May 2019, I would make an order under s 588FM fixing 24 April 2019 - the time of the 2019 Registrations - as the registration time.

[14]

Conclusion

My conclusions may be summarised as follows:
Because the Companies are being wound up, and prior to the winding up resolution were subject to DoCAs which had not been terminated, CORPA, ss 588FL(7)(a), 513B, and 513C, have the effect that the critical time was the day on which the administration, which ended when the DoCA was executed, began, namely 3 February 2014, when the winding up of the Companies is taken to have begun or commenced.
CORPA, s 588FL, does not apply to security interests granted by a security agreement made after the critical time. It follows that s 588FL(2) does not apply to the plaintiff's security interests. There is no need for, nor utility in, an order under s 588FM fixing a later time for the purposes of s 588FL(2)(b)(iv).
On the alternative hypothesis that the security interests are caught by s 588FL, as security interests arising after the critical time, they vested in the Companies upon their creation. In circumstances where the security interest granted to National was in substitution for a pre-existing interest held by Bibby, where the debt to National refinanced debt previously owed to Bibby, where the transaction was notified by the deed administrators to creditors, who did not object, where it is unthinkable that National would have made the advance without the security, where it is not apparent that the substitution of one secured creditor for another prejudiced the position of the unsecured creditors in any way, and where making an order under s 588FM would leave the unsecured creditors in no different a position to that which would have obtained had Bibby remained the "excluded secured creditor", while not making the order would give unsecured creditors an unintended windfall, to the detriment of the secured creditor, purely as a result of its having taken the security after the administration commenced, when all intended that it have that security, it would be just and equitable, within s 588FM(2)(b), to validate it by fixing 24 April 2019 - the time of the 2019 Registrations - as the registration time.
On the further alternative hypothesis, which was the basis on which the case was chiefly though incorrectly argued, that the critical time was 27 May 2019, when the winding up resolution was passed, I am comfortably satisfied that the failure to (re)register its security interest before 27 November 2018 was due to inadvertence, in that no-one on behalf of National adverted to the circumstance that the Original AllPAP Registration had lapsed. I am also satisfied that the failure to register the collateral earlier was not such as to prejudice the position of creditors or shareholders; their position is no different to what it would have been had the security interest been registered before 27 November 2018. Such delay as there has been in registration, or in bringing the proceedings, has not operated to the prejudice of shareholders or unsecured creditors. While granting relief will adversely affect unsecured creditors, by removing from the divisible property of the company and effectively exhausting the deed funds, that is not a consequence of any failure to register the security interest promptly. Making an order under s 588FM would leave the unsecured creditors in no worse a position than would have obtained had National re-registered its interest before 27 November 2018, whereas not making the order would give unsecured creditors an unintended windfall, to the detriment of the secured creditor. In circumstances where there is nothing to suggest that the passage of time has resulted in relevant prejudice to creditors, and where the only "prejudice" is that they will be deprived of the windfall that would accrue to them if National were unsecured, I would not decline relief as a matter of discretion. On this hypothesis also, I would make an order under s 588FM fixing 24 April 2019 as the registration time.

[15]

Endnotes

In the matter of Antqip Hire Pty Ltd (subject to deed of company arrangement) (in liq) [2020] NSWSC 487 at [118] (Rees J) ("Antqip Hire").
MSI (Holdings) Pty Ltd (rec apptd) (in liq) v Mainstreet International Group Ltd [2013] 2 Qd R 253 at 257-258 [23]-[27] (Gotterson JA; White JA agreeing); QCA 27; South Australian Asset Management Corp v Sheahan (1995) 65 SASR 59 at 65-66; 17 ACSR 569 at 576 (Doyle CJ; Duggan J and Nyland J agreeing); Re Leslie Homes (Aust) Pty Ltd (1984) 8 ACLR 1020 at 1022 (McLelland J); 2 ACLC 554.
Cf In the matter of Duke Contracting Australia Pty Ltd [2017] NSWSC 767 at [9], [22] (Brereton J).
PPSA, s 21(2)(a).
PPSA, s 163(1)(a).
[2020] FCA 1692.
Blayney Crane Services at [76]-[78] (Gleeson J).
(2017) 120 ACSR 117; [2017] FCA 325.
Blayney Crane Services at [63] (Gleeson J).
(2017) 93 NSWLR 611; 118 ACSR 307; [2017] NSWSC 21 ("OneSteel").
OneSteel at 634 [69]-[70], 635 [72]-[74] (Brereton J).
K J Renfrey at 124 [15] (Davies J).
K J Renfrey at 124-125 [20] (Davies J).
K J Renfrey at 125-126 [24] (Davies J).
Blayney Crane Services at [79] (Gleeson J).
Re Carpenter International Pty Ltd (admins apptd) (2016) 51 VR 190 at 215 [94]-[95] (Cameron J); 111 ACSR 477; [2016] VSC 118 ("Carpenter").
PPSA, s 19(1).
PPSA, s 18(3).
See below at [70].
Carter v New Tel Ltd (in liq) (2003) 44 ACSR 661 at 665 [16]-[17] (Austin J); [2003] NSWSC 128. It is unnecessary to determine whether, if such an application were made, the Deed of Charge would be an exempt disposition, but as it appears that it was made "under" a DoCA, it would appear to be so.
[2016] FCA 972.
[2017] FCA 818 at [21] (Besanko J).
[2017] FCA 1144 at [60]-[64] (Markovic J).
[2019] FCA 35 at [65] (Greenwood J).
[2020] FCA 417 at [35] (Gleeson J).
K J Renfrey at 126-127 [26] (Davies J).
K J Renfrey at 127-128 [28]-[29] (Davies J).
OneSteel at 634 [69] (Brereton J).

Legislation Cited (2)

Personal Property Securities Act 2009(Cth)

Corporations Act 2001(Cth)

Cases Cited (30)

atter of [2013] NSWSC 32 Carpenter International Pty Ltd (admins apptd), Re (2016) 51 VR 190; 111 ACSR 477; [2016] VSC 118 Carter v New Tel Ltd (in liq) (2003) 44 ACSR 661; [2003] NSWSC 128 De Lage Landen Pty Ltd v Blayney Crane Services Pty Ltd, in the matter of Blayney Crane Services Pty Ltd [2020] FCA 1692 Dickerson, in the matter of McWilliam's Wines Group Ltd (admins apptd) (No 2) [2020] FCA 417 Duke Contracting Australia Pty Ltd, In the matter of [2017] NSWSC 767 Freightlines Northern Territory Pty Ltd (in liq), Re [2000] 2 Qd R 384; (1999) 32 ACSR 573; [1999] QSC 209 Hewlett Packard Australia Pty Ltd v GE Capital Finance Pty Ltd (2003) 135 FCR 206; 47 ACSR 589; [2003] FCAFC 256 Hill (admin) in the matter of Flow Systems Pty Ltd (admins apptd) [2019] FCA 35 J Leslie Engineers Co Ltd (in liq), In re [1976] 1 WLR 292; 2 All ER 85 Kaizen Global Investments Ltd v Australian New Agribusiness & Chemical Group Ltd (in liq) (2017) 120 ACSR 220; [2017] FCA 431 K J Renfrey Nominees Pty Ltd (atf Renfrey Family Trust) v OneSteel Manufacturing Pty Ltd (subject to deed of company arrangement) (2017) 120 ACSR 117; [2017] FCA 325 Korda, in the matter of Ten Network Holdings Ltd (admins apptd) (recs and mgrs apptd) [2017] FCA 1144 Liverpool Civil Service Association, In re; Ex parte Greenwood (1874) 9 Ch App 511 Leslie Homes (Aust) Pty Ltd, Re (1984) 8 ACLR 1020; 2 ACLC 554 Mentha, in the matter of Arrium Finance Ltd v National Australia Bank Ltd [2017] FCA 818 Mentha, in the matter of Arrium Ltd (admins apptd) [2016] FCA 972 MSI (Holdings) Pty Ltd (rec apptd) (in liq) v Mainstreet International Group Ltd [2013] 2 Qd R 253; QCA 27 Northern Managed Finance Pty Ltd v 4 in 1 Wyoming Pty Ltd (2017) 120 ACSR 167; [2017] NSWSC 407 OneSteel Manufacturing Pty Ltd (admins apptd), In the matter of (2017) 93 NSWLR 611; 118 ACSR 307; [2017] NSWSC 21 Quality Blended Liquor Pty Ltd, Re [2015] 2 Qd R 381; (2014) 102 ACSR 451; [2014] QSC 234 Sanwa Australia Finance Ltd v Ground-Breakers Pty Ltd (in liq) [1991] 2 Qd R 456; (1990) 2 ACSR 692 South Australian Asset Management Corp v Sheahan (1995) 65 SASR 59; 17 ACSR 569 Squadron Resources Pty Ltd v Highlake Resources Pty Ltd, in the matter of Highlake Resources Pty Ltd [2018] FCA 1292 Wiltshire Iron Co, Re; Ex parte Pearson (1868) LR 3 Ch App 443 Category: Principal judgment Parties: National Funding Group Pty Ltd (Plaintiff) Antqip Hire Pty Ltd (First Defendant) Antqip Pty Ltd (Second Defendant) Alan Walker and Ozem Kassem in their capacity as Liquidators of Antqip Hire Pty Ltd and Antqip Pty Ltd (Third Defendant) Deputy Commissioner of Taxation (Intervener) Representation: Counsel: M Cobb-Clark (Plaintiff) J Hidayat, solicitor (Defendants) P Afshar (Intervener)

[2017] VSC 637

[2020] VSC 874

[2016] VSC 118

[1999] QSC 209

[2014] QSC 234

(2016) 51 VR 190

(2003) 135 FCR 206

(2017) 93 NSWLR 611

(1995) 65 SASR 59

Cited By (5)

ADG Digital Pty Ltd v Trigon Trading Pty Ltd

Carrafa, Gountzos & Lofthouse (as liquidators of Relux Commercial Pty Ltd (in liq)) & Anor v Doka Formwork Pty Ltd

K J Renfrey Nominees Pty Ltd (Trustee), in the matter of OneSteel Manufacturing Pty Ltd v OneSteel Manufacturing Pty Ltd

Revroof Pty Ltd (receivers and managers appointed) (administrators appointed) v Taminga Street Investments Pty Ltd

Her Honour added (emphasis added): [14] "[24] I should at this point also deal with paragraph [70] of Re OneSteel Manufacturing where Brereton J stated that the opening words of s 588FL(2)(a) - "at the critical time, or, if the security interest arises after the critical time, when the security interest arises" - indicate that the security interest must have the status of being perfected "at that time". Both parties argued that this passage supports the construction that both subparagraphs of s 588FL(2)(a) must be met at the time that the security interest arises. However, his Honour was there concerned with whether s 588FL applied to a security interest that had been defectively registered before the critical date. His Honour was not concerned with a security interest arising after the critical date. Contrary to the submissions of the parties, I do not think that the word "when" imports the requirement that a security interest must meet the requirements of both subparagraphs of s 588FL(2)(a) at the time that the security interest arises. The word "when" includes, in ordinary meaning, the meaning of "upon or after which; and then": Macquarie Dictionary 7th edition. Read in that way, the word "when" does not convey a requirement that the security interest be enforceable and perfected at the time that it arises but, rather, upon or after arising, the two requirements of enforceability and registration be met. Such a construction gives effect to the ordinary meaning of the word and has a coherence with the section as a whole, avoiding the anomalous result pointed out by Renfrey that s 588FL would only apply to security interests arising after the critical time but registered before they arise (if that be possible) and not to security interests arising after the critical time but registered after they arise. The section plainly contemplates that security interests arising after the critical time, which are thereafter registered, are within its scope and no logical reason is apparent for construing the provision in a way that would exclude from the scope of the section, security interests that arise after the critical time but which are only registered after they arose."

I agree with Davies J that s 588FL(2) can cover a security interest that arises after the critical time; as her Honour emphasised in K J Renfrey, the second limb of s 588FL(2)(a) expressly refers to the circumstance where "the security interest arises after the critical time". However, in my respectful opinion, there are difficulties in the reasoning in K J Renfrey which extends that to a security interest granted after the critical time, in the following respects (which relate to the portions emphasised in the above extracts from [20] and [24] of her Honour's judgment): 1. the reference to an interest that arises after the critical time does not indicate, textually or contextually, that that encompasses one that is granted after the critical time. Textually and contextually, the use of the past tense "granted" in s 588FL(1)(b) connotes a security interest that has already been granted when the relevant insolvency event in s 588FL(1)(a) occurs; 2. the concepts of "grant" in s 588FL(1)(b) and "arises" in s 588FL(2)(a) are not congruent, but distinct - as too is the concept of the time "the security agreement that gave rise to the security interest came into force" in s 588FL(2)(b)(ii); 3. if "when" is construed as it was, this would mean either that it had a different meaning in respect of security interests arising after the critical time, or that in respect of security interests arising before the critical time it permitted them to be perfected after the critical time, which is inconsistent with PPSA, s 267, for the reasons explained in OneSteel; 4. the suggested anomaly that s 588FL would only apply to security interests arising after the critical time but registered before they arise, and not to security interests arising after the critical time but registered after they arise, is in fact not anomalous, but is congruent with PPSA, ss 267 and 267A; and 5. the provision does not contemplate that security interests arising after the critical time can thereafter be registered, but that they are already registered when the security interest arises.

The PPSA recognises and makes provision for this eventuality (that is, attachment to after-acquired property) in the context of insolvency. The note to CORPA, s 588FL(1), draws attention to the effect of PPSA, ss 267 and 267A, which provide for the vesting in the grantor, upon a relevant insolvency event, of security interests that are unperfected at the critical time. Section 267 relevantly provides: Scope (1) This section applies if: (a) any of the following events occurs: (i) an order is made, or a resolution is passed, for the winding up of a company or a body corporate; (ii) an administrator of a company or a body corporate is appointed (whether under section 436A, 436B or 436C of the Corporations Act 2001, under that section as it is applied by force of a law of a State or Territory, or otherwise); (iii) a company or a body corporate executes a deed of company arrangement (whether under Division 10 of Part 5.3A of the Corporations Act 2001, under that Division as it is applied by force of a law of a State or Territory, or otherwise); … (iv) a sequestration order is made against a person (the bankrupt) under the Bankruptcy Act 1966; (v) a person (the bankrupt) becomes a bankrupt by force of section 55, 56E or 57 of the Bankruptcy Act 1966; and (b) a security interest granted by the body corporate, company or bankrupt is unperfected at whichever of the following times applies: (i) in the case of a company or body corporate that is being wound up - when, on a day, the event occurs by virtue of which the winding up is taken to have begun or commenced on that day (whether under section 513A or 513B of the Corporations Act 2001, under either section as applied by force of a law of a State or Territory, or otherwise); (ii) in the case of a company or a body corporate to which subparagraph (a)(ii) or (iii) applies - when, on a day, the event occurs by virtue of which the day is the section 513C day for the company or body, within the meaning of the Corporations Act 2001 (including that Act as it is applied by force of a law of a State or Territory, or otherwise); … (iii) in the case of a bankrupt - when a sequestration order is made against the bankrupt under the Bankruptcy Act 1966, or when he or she becomes a bankrupt by force of section 55, 56E or 57 of that Act. Note 1: For the meaning of company, see section 10. Note 2: See also Division 2A of Part 5.7B of the Corporations Act 2001. Security interest vested in grantor (2) The security interest held by the secured party vests in the grantor immediately before the event mentioned in paragraph (1)(a) occurs. Note: This subsection does not apply to certain security interests (see section 268).

In K J Renfrey, Davies J granted relief under s 588FM on the "just and equitable" ground. Her Honour said: [27] "[28] To make an order under s 588FM(2)(b), the Court must be satisfied that it is just and equitable to grant relief. The circumstances that would justify an order extending the time for registration on the just and equitable ground to avoid the operation of s 588FL(4) will depend upon the circumstances of each particular case. Some general observations can be made though. As the purpose and effect of an order under s 588FM is to avoid the vesting of the security interest in the company and preserve the secured creditor's security, it is relevant in determining whether it is just and equitable to fix a later time to consider the interests of the creditors: Re Appleyard Capital Pty Ltd (2014) 101 ACSR 629; [2014] NSWSC 782 (Re Appleyard Capital) at [29]-[30]. As Brereton J observed in Re Appleyard Capital at [30] whilst "the presence or absence of prejudice to unsecured creditors is a relevant discretionary consideration, relevant prejudice is not necessarily established merely by showing that the dividend to unsecured creditors will be less if the security interest does not vest in the company; the unsecured creditors may well have been in no different a position if the security interest had been timely registered". His Honour stated that the type of prejudice that is of particular relevance is prejudice attributable to the failure to effect registration earlier where the delay in the registration of the security interest causes prejudice to creditors who have transacted with the company to their detriment, being unaware of the creation of a security interest. In the present case, there was no delay in registration. [29] I am satisfied that it is just and equitable to fix a later time for the purposes of s 588FL(2)(b)(iv) of the Corporations Act. The security interests were created as part of a commercial settlement of a dispute between the administrators and Renfrey relating to security interests arising under an earlier hire services agreement that OneSteel and Renfrey entered into in 2013 in respect of certain plant and equipment that OneSteel uses at its site at Ardrossan in South Australia. Since OneSteel went into administration it has continued to use that plant and equipment in OneSteel's mining operations. It is the administrators' view that the continued hire of the plant and equipment is necessary for the continued operation of OneSteel's business and that the entry into the new agreement and OneSteel's agreement to do all things necessary for Renfrey to make a valid and effective PPSA registration is in furtherance of the objects of Part 5.3A of the Corporations Act. In those circumstances, it seems to me that it is just and equitable to fix a later time for the registration of the security interest. As registration was made promptly after entry into the new equipment hire services agreement, the prejudice to unsecured creditors to which Brereton J referred in Re Appleyard Capital does not arise in this case."

If (as is assumed for present purposes) s 588FL extends to security interests granted after the critical time, then the operation of s 588FM in that context is rather different from its operation in the context of security interests that have been granted and perfected before the critical time, where an order under s 588FM merely immunises such an interest from vesting under s 588FL(4) by reason of belated registration should an insolvency event occur. [28] The effect of ss 588FL and 588FM is that in the insolvent administration of companies, the Court's authority is required if a security interest is to be treated as valid which was (1) granted more than six months before the insolvency event, but not notified by registration until after six months; or granted within six months before the insolvency event, but not registered within twenty days; or (2) (on the relevant hypothesis) granted after the insolvency event. In the first case, the object is to require timely notification of the security interest, via the PPSR, so that those dealing with the company may ascertain that it has granted a security interest; this is achieved by vesting an interest that has not been the subject of a timely registration in the company if an insolvency event occurs, but in order to avoid injustice provision is made in s 588FM for an order immunising a security interest that has been perfected by registration before the critical time from vesting on account of not having been promptly registered by fixing a later time for registration. In the second case (on the relevant hypothesis), which is that presently relevant, the object is not to require timely notification, but to avoid the creation of security interests after the "critical date", regardless of whether and when they are registered; this is achieved by vesting the security interest in the company upon creation, but in order to avoid injustice, provision is made in s 588FM for an order validating the security interest, again by the (curious in this context) mechanism of fixing a later time for registration. In the presently relevant context of security interests that are granted after the critical time, s 588FM effectively provides a means for avoiding the vesting that would otherwise deprive them of practical effect, by permitting an order to be made which has the effect of validating what is otherwise a nugatory post-liquidation transaction, in a manner similar to a validating order under s 468(1). This difference in the operation of s 588FM in respect of a security interest granted after the critical time, and the fact that the mechanism of fixing a later registration time is a very strange way of achieving that result, in fact reinforces the view that s 588FL does not catch security interests granted after the critical date at all.

Making an order would undoubtedly adversely affect the interests of unsecured creditors. In the present case, the impact on unsecured creditors goes beyond merely removing from the divisible property of the Companies the property the subject of the charge. Under the DoCA, the deed funds were created to satisfy pro rata the claims of the unsecured creditors that proved in the administration whilst permitting the companies to return to trade. National, like its predecessor Bibby, being an "excluded secured creditor", had no claim to the deed funds while the DoCAs remained on foot. The effect of the appointment of liquidators was that the deed funds became divisible property, to which the secured creditor would now have access. Thus, upon liquidation, a fund which under the DoCAs was available only for the unsecured creditors, would be exhausted by the secured creditor. The position was summarised by Rees J in Antqip Hire as follows: [33] "Sadly for unsecured creditors, including the Australian Taxation Office (ATO) which is owed $10 million, I have concluded that the companies' appointment of liquidators was valid and the deed funds should be paid to the liquidators. This will be an unpalatable result for unsecured creditors, who either voted in favour of the DoCAs proposed by Mr Russell or have otherwise been bound by the DoCAs by force of the Corporations Act 2001 (Cth) for five years. The deed creditors have not got what they bargained for so long ago, which was a greater dividend than if they voted to place the companies into liquidation at the time. The wait has not been worth it as unsecured creditors would have received between 8 cents and 14 cents in the dollar if they had placed the companies in liquidation in 2014 but will likely receive nothing now. The deed proponent has effectively terminated the DoCAs for his own benefit, being to reduce his personal exposure to the secured creditor under his personal guarantee by remitting the deed fund to the secured creditor and leaving the unsecured creditors with nothing. A great deal of time and expense has been wasted in the meantime."

At first sight, what her Honour described is a set of circumstances which might appear to involve prejudice to unsecured creditors. In one sense, it plainly does: their position will be significantly worse off should the order be made, with the effect that the charge is validated, than otherwise. However, as was pointed out in Appleyard, that is the inevitable the consequence of such an order in any case in which it matters: [34] "[26] But what is far less clear is the significance to be given, in a case where solvency is not established, and a fortiori where insolvency appears likely, to the circumstance that making an s 588FM order will adversely impact the interests of the unsecured creditors or, in the words of McLelland J in Guardian Securities, 'the principles that should guide the court in resolving any contest between the interests of the secured creditor and those of unsecured creditors': at 97. On the one hand, Hewlett-Packard demonstrates that it is open to make an order, notwithstanding detriment to the unsecured creditors. On the other, Flinders Trading Co holds that an order ought not be made in those circumstances, even on the ground of inadvertence, and in this respect, Flinders Trading Co was referred to with approval by Black J, obiter, in Cardinia Nominees (at [21] ), where his Honour said that an order for extension would not generally be made, even where it would merely put the secured creditor in the position in which it would have been had there been no inadvertence, if there was a danger that claims of unsecured creditors would not be met due to the insolvency, or likely insolvency of the company. Further, if the scale referred to by Sangster J and Robson J be the correct approach, an order would ordinarily be refused where insolvency appears likely. [27] However, on reflection, and with great respect, I do not think CBC v Hudson requires or supports the conclusion that Mitchell J derived from it; it required notice to and (implicitly) consideration of the interests of unsecured creditors, but not that they be determinative. Nor do I think that the prima facie requirement to register within time should be given such weight as Walters J suggested: it must be born in mind that the only utility of obtaining an extension is so that, in the event of liquidation or administration, the security interest will not vest in the company but persist for the benefit of the secured creditor to the prejudice of the unsecured creditors. An approach that regarded an adverse impact on the interests of unsecured creditors as practically conclusive would be inconsistent with the above-cited statements of three of the most eminent equity judges of this court of the last century in Limited Company per Long Innes J, in Dudley Engineering per Street J, and in Guardian Securities per McLelland J, and with the decision of the Full Federal Court in Hewlett Packard. Moreover, if the interests of the unsecured creditors were given such influence as Flinders Trading Co suggests, the jurisdiction created by the section would be devoid of practical utility, as the only cases in which an order would be made would be cases in which there was no need for one because the company was manifestly solvent, and would not go into administration or liquidation within six months. [28] In practice, the strictures of Flinders Trading Co have not been applied, and it has been commonplace, even when it appears that the company may be insolvent and liquidation or administration is imminent, to extend time subject to a 'Guardian Securities condition' reserving leave to any liquidator or administrator appointed within six months to apply to set the order aside. This course, or one similar to it, was taken in Limited Company per Long Innes J, where solvency was dubious; in L H Charles & Co per Clauson J, where liquidation was in contemplation; in Cinema Art Films per Myers CJ; in Guardian Securities per McLelland J, where there was 'no evidence whatsoever as to the solvency or otherwise of the company creating the charge' (at 98 ); and in Bevillesta per Robson J, where the evidence of solvency was inconclusive. In recent times in this court, such orders have been made in Cardinia Nominees per Black J, where again the evidence of solvency was inconclusive; in Re Apex Gold Pty Ltd [2013] NSWSC 881 per Hammerschlag J, where administration was imminent; and in Black Opal IP per Brereton J, where there was some but less than comprehensive evidence of solvency. [29] The purpose of giving the court a discretion to fix a later time is to relieve a secured creditor from the consequences of accident or inadvertence. In the event of insolvency this necessarily involves detriment to unsecured creditors who would otherwise benefit from the vesting of the security in the company. It would be contrary to the purpose of the section to treat the risk that unsecured creditors could be adversely affected by making an order as a dominant consideration. The fact that absence of prejudice to creditors is an alternative ground for relief [s 588FM(2)(a)(ii)] indicates that it was not intended that relief from accident or inadvertence be granted only where there is no prejudice to creditors, as Bray CJ observed in Flinders Trading Co (at ACLR 220). The cases to which I have referred show that, despite the majority view in Flinders Trading Co, courts have not infrequently been prepared to grant extensions of time, even in a context where liquidation or administration is in contemplation, though reserving leave to any liquidator or administrator to apply to set the order aside. [30] Thus, although I accept, as the authorities make clear, that the presence or absence of prejudice to unsecured creditors is a relevant discretionary consideration, relevant prejudice is not necessarily established merely by showing that the dividend to unsecured creditors will be less if the security interest does not vest in the company; the unsecured creditors may well have been in no different a position had the security interest been timely registered. The type of prejudice that is of particular relevance is prejudice attributable to the delay in registration, rather than prejudice from making the order (which is inevitable). This is the type of prejudice contemplated by the legislation (see s 588FM(2)(a)(ii), which refers to prejudice from the failure to register earlier, not from making the order), and referred to by Buckley J in Cardiff Workmen's Cottage Co; by Long Innes J in Limited Company (see also Flinders Trading Co at ACLR 225 per Bray CJ; at ACLR 234 per Mitchell J); and by McLelland J in Guardian Securities (at 98). The period of delay in effecting registration is relevant, because the shorter the delay the less likely that the failure to register within time will have had any impact. The significance of the passage of time is mainly related to the possibility of competing interests having arisen, in particular through others having dealt with the company on the footing that the collateral was unencumbered. [31] Accordingly, while the interests of unsecured creditors are relevant, the mere fact that if the extension is granted they will be deprived of the benefit of the security interest vesting in the company, and thus receive a lesser dividend, is no objection to making an order. It would be otherwise if the position of the unsecured creditors was detrimentally affected by the delay in registration, for example if they traded with the company on the faith of a register that showed no security interest."

Allsop J (as his Honour then was) said: [37] "[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 Act. [191] The effect of the equivalents of s 501 of the 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 s 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. … [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, while 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. … [200] The above is the broad context in which the discretion in s 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 s 266(1)(a), (b) and (ba) and the rights, obligations and statutory schemes created by the Act, if the events referred to in s 266(1)(a), (b) and (ba) have occurred."

The Commissioner invoked the judgment of Moshinsky J in Kaizen Global Investments Ltd v Australian New Agribusiness & Chemical Group Ltd (in liq), in which it was said (emphasis added): [40] "[90] The period of the delay in the present case - approximately three months - is significant. The period of 20 business days in which to register the Share Mortgage ended on 12 January 2016. The mortgage was not registered until 12 April 2016. Moreover, Kaizen did not move quickly once it became aware, on 10 March 2016, of the requirement to register the Share Mortgage on the PPSR. It did not register the Share Mortgage until 12 April 2016, some 33 days later. It was contended by Kaizen that this period was only 20 business days; the defendants contended that it was, in fact, 21 business days. Whether the period was 20 or 21 business days, the period of 20 business days prescribed by the legislation runs from the time when the relevant security agreement came into force, not from when the mortgagee became aware of the requirement to register. In circumstances where Kaizen had through inadvertence failed to register the Share Mortgage and later became aware of the requirement to register it, it was incumbent on Kaizen to move quickly to rectify the situation. However it did not do so. It took another 33 days to register the mortgage. I do not think a satisfactory explanation has been provided of why it took this long. [91] I am mindful that Kaizen is an overseas company and needed to engage an Australian lawyer to effect registration. But the evidence demonstrates that Kaizen had an investment in an Australian company (Venus) and Mr Liu travelled internationally. In this light, I do not think the task of engaging an Australian lawyer to effect registration was an overly onerous or time-consuming one. It is also true that Kaizen did not become aware of the time frame for registration or the consequences of registration until some time later. However, I do not think this assists its case. Having become aware, on 10 March 2016, of the requirement to register the Share Mortgage, I think it was incumbent on Kaizen to move quickly to do so, regardless of whether it knew the time frame for registration or the consequences of failing to register. In any event, it could have sought urgent advice about these matters, having become aware of the requirement to register, but it did not do so. … [93] Another factor to be taken into account is that the company, ANB, is now in liquidation. In these circumstances, the making of an order fixing a later time for the purposes of s 588FL(2)(b) will reduce the amount of funds available for distribution to unsecured creditors. While it is not necessary for Kaizen to show 'exceptional circumstances', a determination that it is appropriate to grant relief in such circumstances will require the identification of factors of sufficient significance to outweigh the adverse impact on unsecured creditors of the grant of relief. Consistently with established practice, an order fixing a later time in the case of an insolvent company or a company in liquidation is not lightly made and then generally upon conditions designed to minimise the risk of any unfair prejudice to any creditor. … [96] There is no evidence that any unsecured creditor, whose debt arose in the period between 12 January 2016 and 12 April 2016, searched the PPSR and relied on the absence of registration. In this sense, it has not been shown that any unsecured creditor was prejudiced by the delay in registration. I consider this to be but one factor to be taken into account in the exercise of the discretion. At times, the submissions on behalf of Kaizen seemed to suggest that prejudice of this type was the only relevant prejudice. I do not think this is correct. The cases discussed above indicate that this type of prejudice is of particular relevance, not that it is the only relevant prejudice. [97] As noted above, in circumstances where ANB is in liquidation, a determination that it is appropriate to grant relief will require the identification of factors of sufficient significance to outweigh the adverse impact on unsecured creditors of the grant of relief. Taking into account the matters discussed above, I do not think the circumstances are sufficient to make an order fixing a later time. The period of delay in registration was significant. While Kaizen was not aware of the need to register until 10 March 2016, it did not move quickly once it became aware of that requirement. Further, the failure to register occurred in circumstances where Kaizen had been advised to consult Australian lawyers in relation to the Transaction Documents but did not do so."