HIS HONOUR: The plaintiff Roads and Maritime Services is a New South Wales statutory corporation and is a party to a transaction whereby the first defendant Transurban CCT Pty Ltd, and the second defendant Transurban CCT Nominees Pty Ltd in its own capacity and as trustee of the Transurban CCT Trust, have acquired the Cross City Tunnel concession. Pursuant to one of the transaction documents called the Cross City Tunnel Project-RMS Security Deed dated 24 June 2014, the defendants have granted security interests in essentially all their assets to the plaintiff.
On 4 July 2014, the plaintiff's solicitors procured those interests to be registered on the Personal Property Securities Register. However, on or about 13 August 2014, the plaintiff's solicitors became aware of potential deficiencies with those registrations, in that they were registered against the names and ACNs of each of the first defendant and the second defendant but not against the ABN of the trust of which the second defendant was a trustee, and they were registered under a single registration against both the company and the trustee rather than under separate registrations in circumstances where the company and the trustee have joint ownership over some but not all of the collateral.
In order to address the potential defects, the plaintiff's solicitors arranged for a separate registration of the security interests insofar as they relate to the assets of the trust to be recorded on the PPSR against the ABN of the trust on 13 August 2014, and for two new and separate registrations of those interests to be recorded on the PPSR, one against the name and ACN of the company and the other against the name and ACN of the trustee on 14 August 2014.
13 and 14 August 2014 are more than 20 days after the date provided by (Cth) Corporations Act 2001, s 588FL, within which a security interest is to be registered. By the present application the plaintiff seeks to fix 14 August 2014 as the later time for the purposes of s 588FL(2)(b)(iv) for registration.
The extent to which the defects mentioned would affect the validity of the registration is not clear and does not need to be resolved on this application. In particular, there is a suggestion made by the Walrus Committee in its submissions to the Attorney General with respect to the review of the (Cth) Personal Property and Securities Act 2009 that:
In the market under the current system there are differing views as to when multiple grantors can comprise a single grantor for the purposes of a registration. On one view, this can only be the case where the security interest is granted jointly. Accordingly, if the security interest is granted individually (even under a single agreement), each grantor of the security interest comprises a separate grantor and so a separate registration for each of them will be required. The "add grantor" function on the PPSR adds to the confusion. This should be clarified.
As I have said, it is unnecessary to resolve on this application whether and to what extent there are in fact defects in the registration. What is presently sought is in effect the cure of any such defects as there might be.
The effect of s 588FL(2) is that when a company is being wound up, an administrator has been appointed, or a deed of company arrangement executed, any PPSA security interest which was perfected, registered or enforceable against a third party after the latest of three months before the critical time, or 20 days after the security agreement came into force, or such later time as the Court may fix under s 588FM, vests in the company for the benefit of creditors generally and the secured creditor loses the benefit of the security [In the Matter of Cardinia Nominees Pty Ltd [2013] NSWSC 32, [11]; Re Black Opal IP Pty Ltd (subject to Deed Of Company Arrangement) [2013] NSWSC 1225, [6]; In the Matter of Appleyard Capital Pty Ltd; 123 Sweden AB v Appleyard Capital Pty Limited [2014] NSWSC 782, [8]]. Provision for fixing such a later time is made by s 588FM, which confers on the Court a discretion to fix a later time if satisfied of any one of three grounds, namely that the failure to register the collateral earlier was accidental or was not of such a nature to prejudice the position of creditors or shareholders, or that on other grounds it is just and equitable to do so. The section also permits the Court to make the orders on terms and conditions.
For the purposes of s 588FM(2)(a)(i), "inadvertence" has been interpreted to include failure to advert to or understand the requirement for registration within the specified period, an innocent error in the sense of failure to register through ignorance of the legal requirement to do so, or of the consequences of not doing so [Appleyard Capital, [10], and the cases there cited]. In this case, it is apparent that a bone fide attempt to register the security interests was made on 4 July 2014 and that the potential deficiencies - which, as I have said, are not clearly deficiencies - came to notice of the plaintiff's solicitors on about 13 August 2014 when the consultant who had carriage of the matter learnt of his firm's preferred practices in respect of such registrations. I am amply satisfied that the failure to register earlier was due to inadvertence or some other sufficient cause.
The jurisdiction to make the order sought is thus enlivened, and the question then is whether as a matter of discretion the order sought should be made, and if so on what terms. I explained the effect of such an order and how that informed the relevant considerations in Appleyard Capital. In particular, secured creditors are not affected by an order made under s 588F and thus there is no need to make an order or impose a condition in that respect, despite the earlier practice in some quarters of imposing a so-called Joplin condition.
On the other hand, the interests of unsecured creditors are a relevant consideration, since in the only event that will make the order sought of practical importance they will be deprived of the benefit of having the security vest in the company and it will instead be preserved for the benefit of the unsecured creditors. Thus it is relevant to consider the financial position of the company, because if the company is shown to be financially secure and it is unlikely that a "critical day" will arise in the foreseeable future and solvency is established, that is likely to be the end of the matter. On the other hand, where the Court cannot be satisfied that there is no risk that unsecured creditors could be adversely affected, they are entitled to be heard against the making of the order, although that may be sufficiently achieved, depending on the degree of risk involved, by suspending the operation of the order or imposing a term reserving leave to apply to set it aside in the event of a liquidation or administration [Appleyard Capital, [25]].
In this case, the highest the evidence reaches so far as the financial security or solvency of the defendants is concerned is a signed statement on behalf of each of them by a director, "We also confirm that each of the company, the trustee and the trust are in a positive net asset position." That, frankly, could mean anything so far as the asset position is concerned, from a surplus of assets of a very large amount, to a surplus of assets over liabilities of $1, or for that matter, 1 cent. There is nothing to make the Court any better informed on that issue. It also says nothing as to liquidity as opposed to a net asset position, nor as to the position of current assets versus liabilities (as distinct from total assets versus liabilities).
It is clear and not surprising that there are prior encumbrances to major banks registered on the PPSR. In those circumstances, I cannot be satisfied of solvency in the sense referred to in Investa Properties Ltd v Westpac Property Funds Management Ltd [2001] NSWSC 1089, [31]. That does not mean that I necessarily suspect, let alone find, that the companies are not solvent, but simply that the conditions for making an order without providing an opportunity for unsecured creditors to be heard are not satisfied.
In Appleyard Capital, I also discussed the significance of risk or prejudice to unsecured creditors and concluded that although the presence or absence of such prejudice was a relevant discretionary consideration, relevant prejudice was not necessarily established merely by showing that the dividend to unsecured creditors would be reduced if the security interests were not to vest in the company, as those creditors may well have been in no better position had the security interest been registered in a timely manner. The type of prejudice that is of particular relevance is prejudice attributable to delay in registration, rather than prejudice from making the order (which is inevitable). The period of delay in effecting registration is relevant, primarily because the shorter the delay the less likely that 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. The mere fact that if the extension is granted unsecured creditors will be deprived of the benefit of the security interest vesting in the company and thus receive less dividend is no objection to making an order.
In the present case, a dominant factor is that even if there be some defect in the registrations, a search of the register in respect of each of the defendants at any time from 4 July 2014 would have disclosed the relevant security interest. No-one could have dealt with the defendants on the faith of the register believing that the plaintiff's security interests did not exist or had not been registered. That is a most telling consideration. The application was then made promptly after suspicion of the relevant defects came to light.
Thus, while leave must be reserved to enable the unsecured creditors to be heard in the event of an insolvency event transpiring within the six month period, that will be sufficient protection of their interests.
As originally presented, the draft originating process did not name a defendant. In Appleyard Capital (at [34]), I spoke of the undesirability of applications of this kind being made ex parte. The effect of the order made is to take away from the company concerned the potential of having the security vest in it in certain events. That is not the type of order that can properly be made in ex parte proceedings, since the company's rights are unquestionably affected by it, even though at the time the effect is suffered the company may be in a different form, through the process of administration or liquidation. But until and unless the company goes into administration or liquidation the company represents the interests of its contributories and creditors and should be joined as a defendant to an application of this kind and given notice of it.
For that reason, the companies should be joined as defendants to the originating process. However, the companies have already been notified of the proceedings and have provided statements signed by a director to the Court that they do not oppose the grant of the relief sought and consent to a copy of their statement being tendered to the Court on the application. In those circumstances I am content to make the orders, notwithstanding that the originating process will not have been served on the companies and simply to reserve to the companies leave to apply to set the orders aside after service on them.
Upon the undertaking of Orfhlaith Maria McCoy to pay the appropriate filing fees I grant leave to Roads and Maritime Services to file an originating process in the form initialled by me, dated this day and placed with the papers, subject to the addition of Transurban CCT Pty Ltd ACN 16658448 as first defendant, and Transurban CCT Nominees Pty Ltd ACN 168538127 in its own capacity and as trustee of the Transurban CCT Trust as second defendant. I direct that the originating process be returnable instanter.
The Court orders that:
1. Pursuant to Corporations Act, s 588FM, 14 August 2014 be fixed as the later time for the purposes of s 588FL(2)(b)(iv) in respect of:
1. The collateral, being all the present and after all acquired property, no exceptions, referred to in registration number 201408140071478 in the register established under the (Cth) Personal Property Security Act 2009.
2. All the present and after acquired property, no exceptions, referred to in registration number 201408140071484 in the said register.
3. All the present and after acquired property, no exceptions, referred to in registration number 201408130067919 in the register.
1. In the event that within six months of 14 August 2014 a winding up of the defendants or either of them commences or an administrator of the defendants, or either of them, is appointed under Corporations Act, s 436A, 436B or 436C, or such defendant executes a deed of company arrangement, the liquidator, administrator, deed administrator and any unsecured creditor of such defendant has liberty to apply to discharge or vary order 1.
2. The defendants have liberty to apply within seven days of service on it of the originating process and this order to discharge or vary order 1.
These orders are to be entered forthwith.
[3]
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Decision last updated: 05 February 2015
Parties
Applicant/Plaintiff:
In the Matter of Appleyard Capital Pty Ltd;; 123 Sweden AB