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

Introduction 1 The first plaintiffs, Mr Hutton and Mr Caddy (Receivers), are the receivers and managers of the second to seventh plaintiffs (Companies), each of which is a member of the "Caydon Property Group" (Caydon Group). 2 By an Originating Process filed on 30 June 2023 (Originating Process), the Receivers sought an order under s 588FM(1) of the Corporations Act 2001 (Cth) (Act) fixing 17 July 2023 as the "later time" for the purpose of s 588FL(2)(b)(iv) of the Act (which relates to the vesting of Personal Property Securities Act 2009 (Cth) (PPSA) security interests in the event of non-registration within specified time periods). The order was sought in respect of the security interests arising under a general security deed that was executed by the Companies on 19 June 2023 (Receivership General Security Deed). Ancillary relief was sought regarding the provision of notice of the proposed order to the creditors of the Companies and the confidentiality of aspects of the evidence filed by the Receivers. 3 The application was made in circumstances where: (a) The Receivers have taken steps to refinance the Companies' borrowing arrangements, which has required the provision of replacement security over personal property of the Companies by way of the Receivership General Security Deed. (b) The lenders that required provision of the security granted by the Companies under the Receivership General Security Deed seek to avoid any prospect of that security vesting in the Companies by reason of s 588FL(2)(b)(iv) of the Act. This Court has addressed that prospect by making an order under s 588FM(1) of the Act fixing a date by which time a registration of the subject security interests on the Personal Property Securities Register (PPSR) will be effective to avoid the vesting of the security interests: Revroof Pty Ltd (receivers and managers appointed) (administrators appointed) v Taminga Street Investments Pty Ltd [2023] FCA 543 (per Jackman J) (Revroof); Cathro, in the matter of Cubic Interiors NSW Pty Ltd (in liq) [2023] FCA 694 (per Cheeseman J) (Cubic Interiors). (c) It is a condition of the contractual arrangements entered into in respect of the refinancing that an order be obtained under s 588FM of the Act extending the time for registration of the security granted by the Companies under the Receivership General Security Deed. (d) In Revroof and Cubic Interiors, Jackman J and Cheeseman J respectively determined that, despite Federal Court authority in which relief equivalent to that sought by the Receivers has been granted, the principal order sought by the Receivers in this proceeding was not strictly necessary. Despite that conclusion, in the absence of an intermediate appellate authority on the point, Jackman J in Revroof and Cheeseman J in Cubic Interiors, found that there was utility in making an order under s 588FM of the Act, albeit prefaced with the words, "to the extent that it is necessary".

Background 4 The plaintiffs relied on the affidavit of Mr Hutton affirmed on 29 June 2023 (Hutton Affidavit). As one of the two joint and several receivers and managers of the second to seventh plaintiffs, Mr Hutton deposed to the circumstances giving rise to the application. 5 On 29 July 2022, the Receivers were appointed to the Companies by secured creditors of the Companies, who were described in the Hutton Affidavit as the "OCP Lenders". The OCP Lenders comprise OL Master (Singapore Fund 1) Pte Limited, Orchard Landmark II (Singapore Fund 1) Pte Limited and OCP Asia Fund III (SF1) Pte Limited. 6 Each of the Companies is a corporate trustee. The Companies are part of the Caydon Group. The Caydon Group undertakes various medium to large scale residential and commercial development projects in Victoria, New South Wales, Queensland and in the United States of America. The OCP Lenders are, by value, the largest secured creditors of the Caydon Group. 7 The Companies are also in liquidation. On 25 July 2022, Malcolm Kimball Howell (Liquidator), was appointed as liquidator of the Companies, along with other companies within the Caydon Group pursuant to s 491 of the Act. 8 The function of each of the Companies is to serve as a property-holding entity in respect of a particular Caydon Group development. 9 Since 1 August 2022, the Receivers have been carrying on the business of the Companies and have had effective control of the operations of the Caydon Group. The Receivers have sought to complete the various projects of the Caydon Group on a "business-as-usual" basis and, in parallel, realise unsold apartments, commercial premises and retail premises still owned by the Companies (Residual Stock). In the Hutton Affidavit, Mr Hutton deposed that, if the current indicative sales rates were achieved, he believed that the residential apartments forming part of the Residual Stock would be sold by December 2024, with the amounts owing under the Companies' current financing arrangements (New RSF Facility Agreement) being repaid by as early as September 2024. 10 The Hutton Affidavit provides a detailed account of the financing arrangements of the Caydon Group at the time of the Receivers' appointment, which entailed "senior" (or first-ranking) debt, "mezzanine" (or second-ranking) debt and some "junior" or "subordinated" debt. The mezzanine debt was primarily provided by the OCP Lenders. 11 Mr Hutton deposed that, at the time of the Receivers' appointment, it became apparent that the Caydon Group's financing arrangements were complex and needed to be restructured to enable an orderly and efficient process for the realisation of the Caydon Group assets. One feature of the existing finance arrangements was that, from 31 July 2023, under a standstill agreement entered into on 29 July 2022 with senior lenders under the "Existing RSF Facility Agreement", in the absence of payment of all amounts owing, lenders would be entitled to charge default interest rates and take enforcement action over the assets of the Companies (and other entities). Mr Hutton deposed that he formed the view that alternative finance would likely be able to be obtained on better economic terms from other lenders in the market. Mr Hutton also deposed that it was his view that the Residual Stock would remain unsold by the date of expiration of the standstill agreement (31 July 2023). This necessitated additional sources of funding to facilitate the orderly realisation of the Company's Residual Stock. 12 On 1 November 2022, the Receivers were able to agree an acceptable term sheet with lenders described in the Hutton Affidavit as the "New RSF Lenders". One of the requirements of the New RSF Lenders was cross-collateralisation of the security to be granted by the Companies under the proposed refinancing arrangements, which required the entry by the Companies into a general security deed (ultimately taking the form of the Receivership General Security Deed). Mr Hutton deposed that it was his assessment that the interests of the Companies were served by meeting that request, as the proposed new financing arrangements were comparatively more favourable to the Companies' then existing arrangements. 13 The Hutton Affidavit details the benefits that the Companies will derive by entry into the New RSF Facility Agreement. The principal benefits are more favourable interest rates, a revised deadline for payment (31 December 2024, which aligns with the anticipated date for sale of the Residual Stock) and avoiding the prospect of costs and disruption being occasioned by enforcement action being taken on or from 31 July 2023. Mr Hutton deposed that it was his assessment that creditors of the Companies generally will benefit from the new finance arrangements, which will also confer indirect benefits on the broader Caydon Group. 14 The security interests arising from the Receivership General Security Deed were registered on the PPSR on 26 June 2023. Mr Hutton deposed that he understood there was some risk that, in the absence of a Court order under s 588FM of the Act, the security granted by the Companies under the Receivership General Security Deed would, regardless of that registration, automatically vest in the Companies pursuant to s 588FL(4)(b) of the Act. 15 Further, the terms of the agreements giving effect to the new finance arrangements make it a condition precedent to their effectiveness that an order under s 588FM of the Act be obtained: cl 2.1(k) of the Amendment and Restatement Deed dated 19 June 2023, described in the Hutton Affidavit as the "New RSF Amendment and Restatement Deed".

Sections 588FL and 588FM of the Act 16 Section 588FL of the Act specifies circumstances in which a "PPSA security interest" (as defined in s 51 of the Act) of a company which is being wound up, or is subject to administration or a deed of company arrangement or restructuring or a restructuring plan, will vest in the company for the benefit of creditors, with the result that the secured creditor will lose the benefit of the security. 17 Section 588FL(1)(b) provides that s 588FL will apply if a PPSA security interest granted by the company in collateral is covered by s 588FL(2). 18 Central to the operation of s 588FL(2) is the definition of "critical time": Cubic Interiors at [8]. Section 588FL(7) defines "critical time". In this case, the "critical time" is the date on which the Liquidator was appointed to the Companies: 25 July 2022. 19 A security interest will be covered by s 588FL(2) if the requirements of paras (a) and (b) are satisfied. The effect of s 588FL(2)(a) is 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": Re Antqip Pty Ltd (in liq) [2021] NSWSC 1122 (Re Antqip) at [42] (per Brereton JA). Section 588FL(2)(a) addresses the timeliness of registration of a security interest. It requires that the "registration time" be 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. 20 Section 588FM(1) provides that "A company, or any person interested, may apply to the Court (within the meaning of section 58AA) for an order fixing a later time for the purposes of subparagraph 588FL(2)(b)(iv)." 21 In this case, the relevant security interests were granted on 19 June 2023, being the date of the Companies' entry into the Receivership General Security Deed. Registration on the PPSR of those security interests occurred on 26 June 2023. This was within 20 business days of the day on which the security interests were granted. However, the security interests were granted after the Liquidator was appointed to the Companies on 25 July 2022. It follows that the security interests were granted after the "critical time". 22 There is uncertainty about the operation of s 588FL in the above circumstances. In Cubic Interiors, Cheeseman J described the alternative approaches to this issue as follows: The divergence in the authorities which is presently relevant is whether, for the purpose of s 588FL(1)(b) a PPSA security interest that is granted after the "critical time" is covered by s 588FL(2). As between the two lines of authority, it is common ground that s 588FL(2) may cover a security interest that arises after the critical time. The point of difference is as to whether s 588FL(2) can cover a security interest that is granted after the critical time. The first and earlier line of authority is to the effect that s 588FL(2) does cover securities granted after the critical time. No distinction is drawn between a security interest being "granted" and a security "arising". The second and more recent line of authority is that security interests that are granted after the critical time are not covered by s 588FL(2) because there is a distinction between the use of "granted" in s 588FL(1)(b) and "arises" in s 588FL(2)(a). Accordingly, a security interest which "arises" after the critical time will only be covered by s 588FL(2) if it was granted at or before the critical time. 23 If the "more recent line of authority" is correct, the primary relief sought by the Receivers in this proceeding is not strictly required, as the security interests arising under the Receivership General Security Deed were not granted at or before the "critical time" (ie, 25 July 2022). Both Cheeseman J in Cubic Interiors and Jackman J in Revroof have proceeded on the basis that the more recent line of authority is to be preferred. 24 As to the "earlier line of authority", in Cubic Interiors, Cheeseman J identified a series of Federal Court cases, commencing with K J Renfrey Nominees Pty Ltd (Trustee), in the matter of OneSteel Manufacturing Pty Ltd v OneSteel Manufacturing Pty Ltd [2017] FCA 325 (K J Renfrey), which were determined on the basis that s 588FL(2) of the Act covers PPSA security interests which were "granted" after the critical time. The cases following K J Renfrey include Korda, in the matter of Ten Network Holdings Ltd (admins apptd)(recs and mgrs apptd) [2017] FCA 1144; Hill (admin) in the matter of Flow Systems Pty Ltd (admins apptd) [2019] FCA 35; Dickerson, in the matter of McWilliam's Wines Group Ltd (admins apptd) (No 2) [2020] FCA 417; Park (Administrator), in the matter of Ellume Administrators Appointed) v Evangayle Pty Ltd (Trustee) [2022] FCA 1102; Birch, in the matter of Geelong Fire Services Pty Ltd (Administrators Appointed) [2022] FCA 963. 25 As Cheeseman J observed in Cubic Interiors at [10], the practical effect of this construction of s 588FL is as follows: …where a PPSA security interest is granted after the critical time, it will in every case be necessary to apply to the Court for an order extending the date by which registration must occur under s 588FM in order for the security holder to enjoy the benefit of the security (and to prevent it vesting in the company). That is because it is not possible for the security to be registered at the critical time (that is, at a time before it is granted). 26 The "second line of authority" commenced with the decision of Brereton JA in Re Antqip, which concluded that there was no need for, nor utility in, an order under s 588FM fixing a later time for the purpose of s 588FL(2)(b)(iv) of the Act in respect of security interests granted after the "critical time". In both Revroof and Cubic Interiors, the analysis in Re Antqip was described as "compelling": Revroof at [17]; Cubic Interiors at [55]. In Re Antqip, Brereton JA drew a distinction between a scenario where security interests were granted after the critical time and a scenario in which security interests were granted before the critical time but arose after the critical time. On the basis of a detailed analysis set out at [41]-[63] in Re Antqip, Brereton JA concluded that s 588FL applied to the latter but not the former scenario. The present case is an instance of the former scenario - that is, the security interests in this case were granted after the "critical time". 27 The Receivers contend that the reasoning of Brereton JA in Re Antqip, as endorsed in Revroof and Cubic Interiors, is to be preferred over the "earlier line of authority". On that contention, it would follow that, strictly, there is no need for an order under s 588FM fixing a later time for the purpose of s 588FL(2)(b)(iv) of the Act in respect of security interests granted after the "critical time". Notwithstanding this, because of the uncertainty that exists on the state of the authorities at present, the Receivers nevertheless sought an order under s 588FM of the Act, expressed to be made "to the extent necessary". That approach reflects the approach adopted by Jackman J in Revroof and Cheeseman J in Cubic Interiors, where an order in those terms was said to have utility where there is no intermediate appellate authority that serves to resolve the competing lines of authority: Revroof at [18]; Cubic Interiors at [86]. 28 In the present case, it is not necessary for me to express a concluded view as to whether I agree with the earlier or later line of authority. It is sufficient for me to state that I also consider Brereton JA's detailed analysis and conclusion in Re Antqip compelling. I agree with Jackman J in Revroof and Cheeseman J in Cubic Interiors that, in the absence of intermediate appellate authority on the point, there is utility in making an order under s 588FM of the Act which is expressed to be made "to the extent necessary". In this case, such an order has further utility because it is required as a condition precedent to the financing arrangements, as referred to at [15] above. 29 The principles that govern the making of a remedial order under s 588FM were expressed by Davies J in K J Renfrey at [28] as follows: 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. 30 In the present case, no creditor of the Companies will be prejudiced by the preservation of the security interests granted by the Receivership General Security Deed. As explained above, that security was granted almost a year after the winding up of the Companies and less than a month ago. It follows that the security interests were granted at a time when no creditors could have transacted with the Companies to their detriment because of a lack of awareness of the Receivership General Security Deed. 31 Further, the evidence of Mr Hutton is to the following effect: (a) Provision of the Receivership General Security Deed is in the best interests of the Companies and the Caydon Group as a whole. (b) The Receivership General Security Deed was executed as part of entry into the New RSF Facility Agreement, which provided various benefits to the Companies and, by extension, the Companies' creditors. Secured creditors of the Companies are content with the arrangements that include the entry into the Receivership General Security Deed, including as the "Existing RSF Lenders" will have their debt repaid. Unsecured creditors will not be prejudiced where those creditors can only have been dealing with the Companies on the basis that they are insolvent and being wound up. (c) The property of the Companies over which security has been granted under the Receivership General Security Deed is, in all material respects, the same property over which security was granted under the previous financing arrangements. As Mr Hutton deposed, "the security interests effectively replace certain of the security interests currently registered on the PPSR…in respect of facilities that will be on terms more favourable to the Receivership Entities [being the Companies]". 32 In light of the above, it is my opinion that an order in the terms sought by the Receivers is just and equitable. Further, for the reasons articulated by Jackman J in Revroof and Cheeseman J in Cubic Interiors, which I have identified above, it is my opinion that it is appropriate to make the orders sought by the Receivers to the extent necessary under s 588FM(1) of the Act.

Confidentiality Order 33 Mr Hutton's affidavit evidence contains commercially sensitive information in Confidential Annexure "MRH-2" to the Hutton Affidavit (Confidential Material). The Receivers sought an order pursuant to s 37AF(1)(b) of the Federal Court of Australia Act 1976 (Cth) that the Confidential Material be protected from disclosure. Mr Hutton deposed to the Receivers having concerns that the Confidential Material is "highly sensitive and confidential". Along with contractual terms operating to prevent the disclosure of the Confidential Material, where the contents include market sensitive information regarding pricing and interest rates, the Receivers are concerned that any disclosure of such information will prejudice the Companies' ability to negotiate alternative financing arrangements (for instance, if the relief claimed via the application is not obtained). 34 I am satisfied, on the evidence, that it is appropriate to make the confidentiality orders sought by the Receivers.

Notice to potentially interested parties 35 The Originating Process contemplated the making of an order that creditors of the Companies be informed of the relief obtained. The Receivers proposed that this be achieved by the Receivers procuring that the Liquidator provide an agreed form of notice to those creditors. Where the Liquidator has contact details for creditors, this reflects a pragmatic approach to bringing the existence of the order to their attention. The proposed orders in the Originating Process would also grant any interested person liberty to apply in respect of such relief as is obtained by the Receivers. I agree that such orders as proposed are, in the circumstances, appropriate.

Disposition 36 I will make orders in the form proposed by the Receivers. I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Anderson.

SCHEDULE OF PARTIES VID 481 of 2023 Second Plaintiff CAYDON FLEMINGTON PTY LTD (ACN 168 896 580) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) IN ITS OWN CAPACITY AND AS TRUSTEE FOR THE CAYDON FLEMINGTON PROPERTY TRUST (ABN 31 151 840 118) Third Plaintiff CREMORNE COMMERCIAL NO 1 PTY LTD (ACN 605 088 113) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) IN ITS OWN CAPACITY AND AS TRUSTEE OF CREMORNE COMMERCIAL TRUST NO 1 (ABN 43 852 310 973) AND AS BARE TRUSTEE FOR CAYDON CREMORNE NO 1 PTY LTD (ACN 605 088 079) AS TRUSTEE FOR CREMORNE RESI TRUST NO 1 (ABN 57 654 280 292) Fourth Plaintiff CAYDON IVANHOE PTY LTD (ACN 600 144 009) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) IN ITS OWN CAPACITY AND AS TRUSTEE FOR THE CAYDON HEIDELBERG PROPERTY TRUST (ABN 32 714 203 300) Fifth Plaintiff MP COMMERCIAL NO 1 PTY LTD (ACN 605 707 784) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) IN ITS OWN CAPACITY AND AS TRUSTEE FOR THE MP COMMERCIAL TRUST NO 1 (ABN 43 629 916 180) Sixth Plaintiff MP COMMERCIAL NO 2 PTY LTD (ACN 605 707 793) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) IN ITS OWN CAPACITY AND AS TRUSTEE FOR THE MP COMMERCIAL TRUST NO 2 (ABN 46 736 326 719) Seventh Plaintiff MP COMMERCIAL NO 3 PTY LTD (ACN 605 707 800) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) IN ITS OWN CAPACITY AND AS TRUSTEE FOR THE MP COMMERCIAL TRUST NO 3 (ABN 19 151 169 864)