Kaizen Global Investments Limited, in the matter of Australia New Agribusiness & Chemical Group Limited (in liq) v Australia New Agribusiness & Chemical Group Limited

GRAHAM ROBERT KILLER (AS JOINT AND SEVERAL LIQUIDATOR OF AUSTRALIA NEW AGRIBUSINESS & CHEMICAL GROUP LIMITED (IN LIQ) (ACN 142 976 065)) (and another named in the Schedule) Third Defendant

JUDGE: MOSHINSKY J DATE OF ORDER: 28 APRIL 2017

1. The application be dismissed.
2. By 4:00 pm on 5 May 2017, each party file and serve a written submission (of no more than two pages) on costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Introduction 1 The plaintiff (Kaizen) seeks an order, pursuant to s 588FM of the Corporations Act 2001 (Cth), fixing a later time for registration of a share mortgage on the Personal Property Securities Register (PPSR). 2 Kaizen is a company based in the United Arab Emirates. In December 2015, Kaizen agreed to advance $5 million to the first defendant (ANB), an Australian public company. As security for the loan, ANB agreed to provide a share mortgage over shares it held in Australia Venus Resource Pty Ltd (Venus), also an Australian company. 3 On 11 December 2015, the share mortgage between ANB as mortgagor and Kaizen as mortgagee (the Share Mortgage) came into force. The Share Mortgage was not registered on the PPSR within 20 business days (ie, by 12 January 2016). 4 On 10 March 2016, Kaizen became aware of the need to register the Share Mortgage on the PPSR in order to perfect its security interest. 5 On 12 April 2016, the Share Mortgage was registered on the PPSR. 6 On 20 April 2016, administrators were appointed to ANB. Subsequently, on 23 August 2016, ANB went into liquidation. 7 Kaizen seeks an order, pursuant to s 588FM, that 12 April 2016 be fixed as the time for Kaizen to register on the PPSR collateral registration number 201604120063873 for the purposes of s 588FL(2)(b). In the absence of such an order, the effect of s 588FL of the Corporations Act in the circumstances is that the Share Mortgage will vest in ANB; in other words, the security interest will be ineffective. 8 The first defendant is ANB. The second, third and fourth defendants (Michael Gerard McCann, Graham Robert Killer and Anthony James Jonsson) are the joint and several liquidators of ANB. The defendants oppose the application. They contend that the discretion to fix a later time should not be exercised in all the circumstances. They rely, in particular, on the following facts and matters: (a) the length of Kaizen's delay in registering the Share Mortgage; (b) ANB is insolvent and in liquidation; (c) unsecured creditors whose claims arose before and after the date on which registration ought to have occurred would be significantly prejudiced; (d) the Share Mortgage was registered at a time when ANB was insolvent and after concerns had arisen about ANB's financial viability; (e) an officer of ANB assisted Kaizen to register the Share Mortgage which, it is contended, was in breach of her fiduciary and statutory duties; and (f) the conduct of the officer was uncommercial, unreasonable and preferential from the perspective of ANB. 9 The application raises two principal issues: first, whether the power to fix a later time under s 588FM of the Corporations Act is enlivened; and secondly, if so, whether the discretion should be exercised to fix a later time. 10 For the reasons that follow, I have concluded that the power to fix a later time is enlivened, but that the discretion should not be exercised to fix a later time in the circumstances of the present case.

The hearing 11 At the hearing of the application, Kaizen relied on an affidavit of Huan Liu (Mr Liu) dated 9 September 2016. Mr Liu is a shareholder and director of Kaizen, and a director of Venus. Kaizen also tendered in evidence a letter dated 1 September 2016. 12 The defendants relied on three affidavits of Mr McCann (dated 12 October, 23 November and 2 December 2016 respectively). The defendants also relied on an affidavit of Scott David Guthrie, a solicitor, dated 17 January 2017. 13 There was no cross-examination of the deponents. The facts and matters set out in the affidavits are therefore accepted. The background facts set out below are drawn from the affidavit evidence. 14 In Mr McCann's affidavit dated 23 November 2016, he states that he gives notice pursuant to the Evidence Act 1995 (Cth) that he does not intend to call Yi Yang (Ms Yang) as a witness, but instead seeks to rely on a transcript of a public examination of her and certain documents she produced at the examination, on the basis that calling her as a witness would cause undue expense or delay. (Ms Yang's roles are referred to below.) Although Mr McCann's affidavit refers to s 68 of the Evidence Act, it would appear that he intended to refer to s 67, which deals with the giving of notice for the purposes of (among other provisions) s 64(2). No objection was filed under s 68. It follows that the hearsay rule does not apply to the transcript of Ms Yang's examination and the other documents annexed to Mr McCann's affidavit: Evidence Act, s 64(2). At the hearing, no objection was taken to the defendants' reliance on these documents.

Background facts 15 Kaizen is an investment company headquartered in the United Arab Emirates. As noted above, Mr Liu is a director of Kaizen. Kaizen has two shareholders: Mr Liu and Govind Gupta. Amit Gupta is Kaizen's Chief Executive Officer. Kaizen's Chief Financial Officer is Najmuddin Bhavnagarwala (Mr Bhavnagarwala). Kaizen has investments in Venus. 16 ANB was incorporated on or about 3 May 2010. As at the date of the appointment of the administrators, it was a publicly listed company on the Australian Stock Exchange. ANB has five directors, all of whom are Chinese nationals. Ms Yang was ANB's company secretary from 9 February 2011 to 4 May 2016, when she gave notification of her resignation or retirement. Yinan Zhang (Mr Zhang) is ANB's Chief Executive Officer. ANB's principal place of business is located at Eight Mile Plains in Queensland. 17 ANB is a holding company that does not trade in its own right. Since its incorporation in 2011, ANB has pursued an interest in phosphate mining through the shares it holds in Venus. ANB holds interests in several companies, including: (a) Venus; (b) Apollo Fertiliser Queensland Pty Ltd (in liq), which conducted fertilizer manufacturing operations in Australia and China; and (c) Australia Mercury Glass Pty Ltd, which conducts glass processing operations. 18 Venus conducts coal and phosphate mining operations and holds 12 phosphate tenements in Queensland. Venus was incorporated on or about 21 January 2013. Upon incorporation, ANB held 100% of the shares in Venus. ANB currently holds 49% of the shares in Venus. Ms Yang is a director of Venus. Li Jianwei (Mr Li) is the Chief Executive Officer of Venus. 19 In November 2015, Mr Liu received a call from Mr Li. Mr Li told Mr Liu that Mr Zhang would like to meet with Mr Liu to discuss ANB's financing requirements. Mr Liu said that he was scheduled to travel to Hong Kong in the second week of November 2015, and could meet Mr Zhang there. 20 On or about 16 November 2016, Mr Liu met Mr Zhang at a hotel in Hong Kong. At the meeting, they discussed the status of the mining development of Venus and the "path forward". Mr Zhang then said that ANB was completing a restructure and needed further funding for liquidity until the restructure was complete. Mr Zhang asked if Kaizen could provide ANB with short term funding. Mr Liu asked what ANB would provide by way of security for the loan. Mr Zhang said that ANB had a 49% shareholding in Venus which could be mortgaged to Kaizen. Mr Liu said that, subject to discussion with his "partners" at Kaizen, Kaizen was prepared to provide a loan to ANB on the following terms: (a) Kaizen would advance the following amounts: a first payment of $5 million on or about 10 December 2015; and a second payment of $2 million by no later than 1 March 2016, conditioned on Kaizen being satisfied of ANB's use of the funds and there being no event of default; (b) ANB would repay the loan by 1 June 2016 including interest applied at a rate of 7.5% per annum; and (c) Kaizen would take a charge over ANB's 49% ordinary shareholding in Venus (Venus Shares) as security for the loan. 21 On or about 21 November 2015, Ms Yang emailed to Mr Liu draft copies of a loan agreement and share mortgage (the Transaction Documents). These documents were prepared by ANB's lawyers, Colin Biggers & Paisley. 22 Mr Bhavnagarwala, Kaizen's Chief Financial Officer, was responsible for overseeing the finalisation of the Transaction Documents and ensuring that the payments were made. 23 Kaizen obtained advice in relation to the Transaction Documents from the law firm, Forrest Advisers DMCC in the United Arab Emirates. The firm completed its review of the draft loan agreement on or about 29 November 2015. Forrest Advisers DMCC did not provide any advice regarding the compatibility of the Transaction Documents with Australian law, this being, according to Mr Liu, "outside their competency". Instead, the firm suggested to Kaizen that the Transaction Documents be reviewed by Australian counsel for that purpose. However, Kaizen did not engage Australian lawyers to do so. 24 Mr Liu gave evidence in his affidavit that, "[s]ince [ANB's] Australian lawyers prepared the Transaction Documents, I considered that they would have ensured that the Transaction Documents were compatible with Australian laws. [Kaizen] accordingly did not seek advice from Australian lawyers". 25 On or about 10 and 11 December 2015, Kaizen and ANB executed the Transaction Documents, namely: (a) a loan agreement dated 10 December 2015 (the Loan Agreement); and (b) the Share Mortgage, which is undated but was executed on 11 December 2015. 26 In relation to the Loan Agreement, I note that clause 3.1 (Commitment) states that "[s]ubject to execution of the Security Deed, the Lender agrees to make the Loan to the Borrower …". The reference to the "Security Deed" is to the Share Mortgage. 27 The following aspects of the Share Mortgage may be noted. Clause 3.1 (General representations and warranties) includes a representation and warranty by the Borrower (ANB) that: (d) (documents effective) this document constitutes its legal, valid and binding obligations, enforceable against it in accordance with its terms (except to the extent limited by equitable principles and laws affecting creditors' rights generally), and the Mortgage is an effective Security Interest over the property that is stated to be subject to it with the priority that it contemplates; (Second emphasis added.) 28 Further, clause 12.6 (Further steps) is in the following terms: Each party agrees to do all such things and sign all such documents, instruments, transfers and other documents as may be necessary or desirable to give full effect to the provisions of this document and any transactions contemplated by it. 29 The transaction described above was the first time that Kaizen or Mr Liu had dealt with any type of security interest in Australia. Mr Liu deposes in his affidavit that he is now aware that the Share Mortgage gave rise to a security interest under the Personal Property Securities Act 2009 (Cth) and that it had to be perfected. Mr Liu continues: However, at the time the Transaction Documents were executed, neither [Kaizen] nor I was aware of those matters or that:- (a) under Australian law, the Security Interest must be perfected [in] order to avoid it vesting in the event of [ANB] entering voluntary administration or liquidation; and (b) if [Kaizen] was to perfect the Security Interest by way of registration, there was a prescribed time frame in which to do so. 30 On 20 December 2015, Kaizen transferred $5 million to ANB pursuant to the Loan Agreement. 31 The accounts of ANB indicate that, on 29 December 2015, ANB transferred $4.6 milion to Venus. Ms Yang was asked about this transfer during her public examination. She said that she was not told of this transfer and did not know the reason for it, despite being the sole director of Venus at that time (CB 686-688). 32 On 12 January 2016, the 20 business day period under s 588FL(2)(b) of the Corporations Act expired. 33 On or about 10 March 2016, Mr Liu travelled to Hong Kong for business purposes, including meeting with Mr Zhang to discuss ANB's repayment prospects. Mr Liu met with Mr Zhang at a hotel. Mr Liu states in his affidavit: I asked Zhang whether [ANB] had formally registered the Share Mortgage with any Australian authority. Zhang said that … there is a requirement to register the Share Mortgage on the Personal Property Securities Register (PPSR), but that it was [Kaizen's] responsibility. Until that conversation with Zhang, I had not heard of the PPSR. I did not know anything about it. Zhang did not say anything about the time frame for registration of the Share Mortgage or the consequences of failing to register the Share Mortgage on the PPSR. 34 The above passage reads as though Mr Liu initiated the conversation about registration of the Share Mortgage. This seems surprising given Mr Liu's lack of knowledge of the need to register the Share Mortgage, referred to in [29] above. It may that the above passage is poorly expressed, and that it was in fact Mr Zhang who raised the topic of registration. Or it may be that Mr Liu was aware of the need to register such a security in some countries and, for this reason, asked the question of Mr Zhang. As there was no cross-examination, and there is no other evidence bearing on the matter, I am unable to take this issue any further. In any event, I accept that Mr Liu only became aware of the need to register the Share Mortgage in Australia on 10 March 2016. I am also prepared to accept that the company, Kaizen, only became aware of the need to register the Share Mortgage on that date, although there is no direct evidence from other people at Kaizen (such as Mr Bhavnagarwala) involved in the finalisation of the Transaction Documents. Mr Liu gives hearsay evidence that he has made enquiries of Mr Bhavnagarwala and Mr Amit Gupta and, based on Mr Liu's own knowledge and those enquiries, he believes that Kaizen was not aware of the requirement to register the Share Mortgage on the PPSR until 10 March 2016. No objection was taken to this part of Mr Liu's evidence. Mr Liu also gives evidence that "I believe [Kaizen] only became aware of the consequences for failing to do so after [Kaizen] consulted Hall & Wilcox on about 20 April 2016". It seems surprising, on the face of things, that no one at Kaizen became aware of the consequences of non-registration until some eight days after the Share Mortgage was registered. Nevertheless, this evidence was not challenged and no objection was taken to it. I therefore accept this evidence. (Where Mr Liu in his evidence refers to the "requirement to register" the Share Mortgage, I take him to be referring to the need to register the Share Mortgage in order to avoid it vesting in the event of ANB entering administration or liquidation: see [29] above. It will be convenient to use the expression "requirement to register" in this sense later in these reasons.) 35 Mr Liu states in his affidavit that, since he did not know any Australian lawyers, he asked Mr Zhang to recommend a firm who could assist Kaizen to register the Share Mortgage. Mr Liu said that he would be coming to Australia by April, and so asked if the necessary work could be completed by that time. Mr Zhang said that he would provide a recommendation on an Australian law firm. 36 On 1 April 2016 (10:48 am), Ms Yang sent an email to Brent Van Staden of Colin Biggers & Paisley. She asked him to let her know if the "shares" had been registered by Kaizen. Mr Van Staden sent an email at 11:08 am the same day stating that the security had not been registered. He added: "This does not mean that the security is invalid, but it means that Kaizen will arguably lose priority if ANB goes into administration." Ms Yang responded at 12:00 pm that day: "We cannot register from our end?" Mr Van Staden replied at 12:19 pm: It may be possible to register the security from our end, but we would need authority from Kaizen to show that we act for them. Further, registration will not be valid against a liquidator of ANB for a period, if any external administration of ANB is imminent. A concern is whether the directors of ANB will be satisfied that doing so, which seems to benefit Kaizen to the detriment of ANB, is a legitimate exercise of the directors' powers. By the same token, we are concerned whether undertaking such a registration places us in a conflict of interest with ANB, as we would appear to be acting contrary to ANB's interests. 37 On or about 2 April 2016, Mr Zhang informed Mr Liu on a telephone call that ANB's financial report for the year ending 31 December 2015 had been published on the website of the Australian Stock Exchange (ASX). Mr Liu accessed the financial report on the ASX's website. Having done so, Mr Liu formed the view that ANB would be unable to repay Kaizen in accordance with the terms of the Loan Agreement. Accordingly, he informed Mr Zhang on a telephone call that Kaizen would not provide the second payment of the loan. Kaizen later sent a letter to ANB to advise that the final drawdown of the loan would not be advanced. 38 In relation to ANB's financial report for the year ended 31 December 2015, I note the following: (a) Under the heading "Financial Performance" on page 2, it states that ANB incurred a loss of $8,766,027 in 2015 from its continuing operations. (b) The consolidated statement of financial position as at 31 December 2015 indicates that ANB had total current assets of $7,831,648, compared with total current liabilities of $13,094,944. (c) Note 1 to the consolidated financial statements includes a passage, under the heading "Going concern", stating that the consolidated entity incurred a net loss of $9,115,418 for the year ended 31 December 2015. It also states that the ability of the ANB group to continue as a going concern is principally dependent upon one or more of the following: the ability of the ANB group to sell its 49% interest in Venus; the ability of the group to meet its forecast sales volumes of fertiliser; and the continued support of current financiers and shareholders. It further states: "These conditions give rise to material uncertainty which might cast significant doubt over the consolidated entity's ability to continue as a going concern." 39 On 5 April 2016, Colin Biggers & Paisley contacted Mr McCann to discuss his potential appointment as a voluntary administrator to one of their clients. I infer that the client was ANB, given that Mr McCann was subsequently appointed as an administrator of ANB. 40 On or about 5 April 2016, Ms Yang contacted Mr Liu and said that ANB's lawyers had referred Kaizen to Hall & Wilcox to assist with registering the Share Mortgage. Mr Liu asked Ms Yang to contact Hall & Wilcox on behalf of Kaizen and request that they take the necessary steps to register the Share Mortgage as soon as possible. Accordingly, Ms Yang, on behalf of Kaizen, engaged Hall & Wilcox. 41 On or about 8 April 2016, Ms Yang contacted Mr Liu and said that she had asked Hall & Wilcox to register the Share Mortgage on the PPSR. Ms Yang also said that she would obtain a blank signed share transfer form and a share certificate of ANB's shareholding in Venus to give to Kaizen (which she subsequently did). Mr Liu said to Ms Yang that he could collect the documents during an upcoming visit to Brisbane for a directors meeting of Venus. 42 On or about 9 April 2016, Mr Liu travelled from Hong Kong to Brisbane for the purpose of attending a board meeting of Venus, and also to meet with Mr Zhang to discuss how ANB could repay the loan. 43 On 12 April 2016, Hall & Wilcox registered the Share Mortgage on the PPSR on behalf of Kaizen. 44 On 20 April 2016, Messrs McCann, Killer and Jonsson were appointed as joint and several administrators of ANB. 45 The administrators circulated a 'Report to Creditors' dated 11 August 2016. 46 On 23 August 2016, the creditors resolved to wind up ANB and Messrs McCann, Killer and Jonsson became its joint and several liquidators. 47 On 20 September 2016, Kaizen commenced this proceeding. 48 Subject to this application, ANB's only secured creditor is China Construction Bank Corporation (CCBC). CCBC provided a bank guarantee for $793,000 to the Queensland Government in respect of an environmental authority relating to Venus's phosphate mining tenements. ANB provided security over a cash deposit account. That security interest was registered on the PPSR on 12 April 2016 (the same day as the Share Mortgage was registered). The amount held in the cash deposit account as security for CCBC (as at the date of the Report to Creditors) was $862,271. Thus, it appears that CCBC is fully secured. 49 Mr McCann's first affidavit deals, among other things, with the impact on ANB's creditors if Kaizen's application for an extension of time is granted. Annexed to that affidavit is a copy of the MYOB reports for ANB's trade creditors incurred in the period from 8 January 2016 to 20 April 2016 (the Relevant Period). The MYOB reports show that, for the Relevant Period: (a) approximately $321,000 (excluding GST) of debts were incurred; (b) approximately $251,000 (excluding GST) of debts were paid; and (c) approximately $70,000 (excluding GST) of debt was unpaid. 50 ANB incurred the following other liabilities in the Relevant Period: (a) employee entitlements; (b) superannuation; (c) payroll tax; and (d) goods and services tax. 51 The majority of ANB's debts that were outstanding as at 20 April 2016 were incurred before the commencement of the Relevant Period. These included debts incurred to Venus's and ANB's landlord. 52 Annexed to Mr McCann's first affidavit are two 'estimated outcome statements'. The first statement sets out the estimated outcome if Kaizen's security is not valid and the Court does not grant an order fixing a later time for registration of the Share Mortgage; the second statement sets out the estimated outcome if Kaizen's security interest is valid and an order fixing a later time is granted. 53 Mr McCann states in his first affidavit that, based on the first and second estimated outcome statements, and subject to the value of the Venus Shares and other recoveries by the liquidators, he believes that the impact on unsecured creditors of the Court granting the relief sought by Kaizen "may be between 21 cents in the dollar or nil". He continues: 33. Under an optimistic scenario, ANB's unsecured creditors will be paid in full and there will be no adverse consequences for unsecured creditors if [Kaizen's] security interest is valid and an extension of time is granted. 34. Under a pessimistic scenario, ANB's unsecured creditors will not be paid in full and they could be adversely affected by approximately 21 cents in the dollar to nil if [Kaizen's] security interest is valid and an extension of time is granted. 54 In Mr McCann's affidavit dated 2 December 2016, he refers to a potential claim against ANB by Dawei (aka David) Huang (Mr Huang) for breach of its disclosure obligations. Correspondence annexed to the affidavit indicates that: (a) Mr Huang purchased shares in ANB in April 2016; (b) Mr Huang is concerned that ANB may have already been insolvent at the time he purchased his shares; (c) Mr Huang considers ANB failed to disclose information to investors and potential investors in accordance with its legal obligations; and (d) Mr Huang is considering engaging a lawyer to act on his behalf. 55 Mr McCann states in that affidavit that the liquidators have not received correspondence from any other shareholders of ANB asserting a claim against ANB, but the liquidators cannot rule out the possibility of such claims being made. Mr McCann refers to: the disclosure obligations of ANB under the ASX Listing Rules; the announcements made by ANB to the ASX for the period between 1 January 2016 and 20 April 2016; and other public statements made by ANB in that period. He then states: In my view, there is a risk that ANB shareholders, including Huang, may make a claim against ANB on the basis that ANB failed to comply with its disclosure obligations, or otherwise made false or misleading disclosures, under Listing Rules 3.1 and 3.1A of the ASX Listing Rules and Guidance Note 8. Any successful claim would elevate those shareholders to the status of unsecured creditors of ANB. 56 Kaizen tendered a letter dated 1 September 2016 from Hall & Wilcox (solicitors for Kaizen) to DibbsBarker (solicitors for the liquidators of ANB). Among other things, the letter stated under the heading "No relevant prejudice" that: If your client considers that any creditor (or shareholder) would suffer prejudice by reason of an extension being granted, we invite you to provide details of the creditors and how they would suffer prejudice. 57 In light of that letter, it is relevant to note that there is no evidence that any unsecured creditor searched the PPSR in the period between 12 January 2016 and 12 April 2016 and relied on the absence of registration.

Applicable principles 58 The plaintiff, Kaizen, seeks an order pursuant to s 588FM of the Corporations Act fixing a later time for the purposes of s 588FL(2)(b) of that Act. These provisions were introduced by the Personal Property Securities (Corporations and Other Amendments) Act 2010 (Cth). The expression "PPSA security interest", which is used in these provisions, is defined as meaning a security interest within the meaning of the Personal Property Securities Act and to which that Act applies, other than a transitional security interest within the meaning of that Act: Corporations Act, s 51. (It is common ground that the Share Mortgage is a PPSA security interest.) 59 Section 588FL relevantly provides as follows: (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). (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. … (7) In this section: 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) in any other case - when, on a day, the event occurs by virtue of which the day is the section 513C day for the company. (Notes omitted.) 60 Broadly, the cumulative effect of s 588FL(1), (2) and (4) is that, in circumstances where a company is being wound up, an administrator has been appointed, or a deed of company arrangement executed, any PPSA security interest that is perfected by registration and enforceable against third parties, which was registered after the latest of six months before the critical time, 20 business days after the security agreement came into force, or a later time ordered by the Court under s 588FM, vests in the company over whose assets the security interest was granted. (It is common ground that the "critical time" in the present case is 20 April 2016, when the administrators were appointed to ANB.) 61 Section 588FM provides as follows: (1) 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). (2) On an application under this section, the Court may make the order sought if it is satisfied that: (a) the failure to register the collateral earlier: (i) was accidental or due to inadvertence or some other sufficient cause; or (ii) is not of such a nature as to prejudice the position of creditors or shareholders; or (b) on other grounds, it is just and equitable to grant relief. (3) The Court may make the order sought on any terms and conditions that seem just and expedient to the Court. (Note omitted.) 62 The purpose and effect of an order under s 588FM(2) was helpfully explained by Brereton J in Re Appleyard Capital Pty Ltd; 123 Sweden AB v Appleyard Capital Pty Ltd (2014) 101 ACSR 629 (at [13]): … If the collateral is registered within 20 days after the security agreement comes into force, the security interest prevails over the interest of unsecured creditors, even if the company goes into liquidation or administration within 6 months. However, if it is not registered within that period, and the company goes into liquidation or administration within 6 months after it is registered, then the security interest vests in the company for the benefit of creditors generally - unless a later time is fixed under s 588FM. In other words, the effect of not registering within 20 days is to expose the secured creditor to the loss of its security if the company goes into liquidation within 6 months of the actual date of registration, when otherwise the security would have been effective even in the event of liquidation or administration within 6 months. Essentially, the purpose and effect of an order under s 588FM is to avoid the vesting of the security interest in the company if it goes into liquidation or administration within 6 months after the actual date of registration, and thereby preserve the secured creditor's security, to the necessary detriment of the unsecured creditors for whose benefit the security interest would otherwise vest in the company. The only utility of such an order is in the event that the company does go into liquidation or administration within 6 months. 63 Brereton J also explained that a s 588FM order has no effect on the priority of security interests registered before the plaintiff's charge inter se, as their priorities are established under Pt 2K.3 (at [15]). However, a s 588FM order operates to the detriment of unsecured creditors, if the company goes into liquidation or administration within six months, because it avoids the consequence that the security interest would otherwise vest in the company for their benefit (at [16]). 64 It is common ground that, where the security interest has been registered before the critical time, as is the case here, the Court has power to fix a later date for the purposes of s 588FL(2)(b), notwithstanding that the application for an order fixing a later time is made after the mortgagor company has gone into administration or liquidation. 65 It may also be noted that, where the PPSA security interest has been registered before the critical time, it is not necessary to address the application of s 267 of the Personal Property Securities Act, which operates to vest an unperfected security interest (ie, a security interest that was unperfected at the critical time) in the grantor in specified circumstances. I note, for completeness, that the position regarding an unperfected security interest was considered by Brereton J in In the matter of OneSteel Manufacturing Pty Ltd (administrators appointed) [2017] NSWSC 21. In that case, Brereton J held that s 588FM is concerned only to provide relief from the consequences of the belated registration of perfected interests, and is not concerned with unperfected interests (at [72]-[74], [82]). 66 Of the alternative grounds set out in s 588FM(2), it is sufficient for present purposes to focus on "inadvertence". There was no real issue as to the meaning of "inadvertence". It is convenient to refer to the following statement of Brereton J in Re Appleyard at [10]: 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 consequences of not doing so: Sanwa Australia Finance Ltd v Ground-Breakers Pty Ltd (in liq) [1991] 2 Qd R 456; (1990) 2 ACSR 692; Campbell Finance Pty Ltd v Vivstan Packaging (Aust) Pty Ltd (in liq) [1998] 2 VR 340; (1996) 22 ACSR 109; Freightlines Northern Territory Pty Ltd [2000] 2 Qd R 384; (1999) 32 ACSR 573; [1999] QSC 209 at [12]-[13]; In Cardinia Nominees at [14]-[16]. 67 If the Court is satisfied that one of the grounds in s 588FM(2) is established, the Court has a discretion to make an order fixing a later time for the purposes of s 588FL(2)(b). There is no issue between the parties that the length of the delay prior to registration of the security interest in the collateral is a relevant discretionary factor: see, eg, In the matter of Cardinia Nominees Pty Ltd [2013] NSWSC 32 at [18] and cases there cited. 68 However, the parties differ as to the significance of the winding up of the mortgagor company on the exercise of the discretion. Kaizen submits (at least in its written submissions) that the liquidation of the company is not a relevant factor in the exercise of the discretion. In contrast, the defendants submit that the authorities in relation to the former provisions, such as Hewlett Packard Australia Pty Ltd v GE Capital Finance Pty Ltd (2003) 135 FCR 206 and Craig Mostyn & Co Pty Ltd v Old Valley Pty Ltd (in liq) (2004) 139 FCR 477, highlight the relevance and importance of the intervention of insolvency to the exercise of the discretion. It is necessary, therefore, to analyse the relevant cases in some detail, including those concerning s 588FM's predecessor provision, namely s 266(4) of the Corporations Act. 69 In order to provide context for the consideration of the cases that follows, it is useful to set out the relevant parts of s 266 (as considered by the Full Court of this Court in Hewlett Packard): (1) Where: (a) an order is made, or a resolution is passed, for the winding up of a company; or (b) an administrator of a company is appointed under section 436A, 436B or 436C; or (ba) a company executes a deed of company arrangement; a registrable charge on property of the company is void as a security on that property as against the liquidator, the administrator of the company, or the deed's administrator, as the case may be, unless: (c) a notice in respect of the charge was lodged under section 263 or 264, as the case requires: (i) within the relevant period; or (ii) at least 6 months before the critical day; or (d) in relation to a charge other than a charge to which subsection 263(3) applies - the period within which a notice in respect of the charge (other than a notice under section 268) is required to be lodged, being the period specified in the relevant section or that period as extended by the Court under subsection (4), has not ended at the start of the critical day and the notice is lodged before the end of that period; or … (2) The reference in paragraph (1)(c) to the relevant period is to be construed as a reference to: (a) in relation to a charge to which subsection 263(1) applies - the period of 45 days specified in that subsection, or that period as extended by the Court under subsection (4) of this section; or … (4) The Court, if it is satisfied that the failure to lodge a notice in respect of a charge, or in respect of a variation in the terms of a charge, as required by any provision of this Part: (a) was accidental or due to inadvertence or some other sufficient cause; or (b) is not of a nature to prejudice the position of creditors or shareholders; or that on other grounds it is just and equitable to grant relief, may, on the application of the company or any person interested and on such terms and conditions as seem to the Court just and expedient, by order, extend the period for such further period as is specified in the order. … (8) In this section: critical day, in relation to a company, means: (a) if the company is being wound up - the day when the winding up began; or (b) if the company is under administration - the section 513C day in relation to the administration; or (c) if the company has executed a deed of company arrangement - the section 513C day in relation to the administration that ended when the deed was executed. 70 In Hewlett Packard, the Full Court, by a majority comprising Branson J and Allsop J (as his Honour then was), with Whitlam J dissenting, held that the intervention of the administration of the company under Pt 5.3A did not exhaust the role of s 266(4) and the Court retained the power to extend time for the purposes of s 266(1) and (2). The majority so held because this was consistent with the interpretation of uniform national legislation by other courts, including intermediate appellate courts, and such an established line of authority should only be disturbed by the High Court (at [24], [59], [175]). 71 Branson and Allsop JJ also considered the principles applicable to the exercise of the Court's discretion to extend the period within which a notice in respect of a registrable charge was required to be lodged. At first instance, the primary judge had granted the application for an extension of the period, subject to a condition designed to alleviate prejudice to unsecured creditors: Re Daisytek Australia Pty Ltd (admin apptd) (2003) 46 ACSR 424. Branson and Allsop JJ held that the primary judge had not erred in so deciding. It is convenient to commence with the judgment of Allsop J, with whom Branson J expressed agreement in relevant respects, as indicated below. 72 Allsop J considered the applicable principles in exercising the discretion under s 266(4) where an event contemplated by s 266(1)(a), (b) or (ba) had occurred at [186]-[203]. This section of his Honour's reasons needs to be read in the context of the earlier sections of those reasons, which considered in detail the legislative history and case law of the relevant provisions in the course of considering the first question of construction that arose in the appeal, namely whether there was power for the Court to make an order under s 266(4) after the "critical day". In relation to the discretion, his Honour stated (at [187]) that s 266(4) provided for a broad judicial discretion informed, at least at one level, by what is "just and equitable"; and that, on numerous occasions, the High Court had made clear that judicial discretions entrusted to courts are to be read liberally for the purpose intended by the statute in question and are not to be constrained or limited by glosses or implications not found in the relevant statute. At [189]-[196], his Honour referred to the potential significance of the occurrence of the winding up of a company on the exercise of the Court's discretion. His Honour stated: 189 The first matter to be borne in mind is that the Parliament has provided that the charge be rendered void. That is the case in respect of the intervention of winding up, administration and the execution of a deed of company arrangement. 190 In circumstances where winding up has intervened, that means that at the time the court is examining the matter, the property the subject of the charge has fallen under the control of the liquidator to be dealt with according to the statutory regime built around s 501 of the 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 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 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 Re Anglo-Oriental Carpet Manufacturing [[1903] 1 Ch 914] 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. (Emphasis added.) 73 After referring to the case law in Australia since 1981, and differences in approach, his Honour continued: 195 The task is to give effect to s 266(4). The discretion may be exercised if the events in paras (a) and (b) in s 266(4) are, or are not, present, or in circumstances which, "on other grounds", make it "just and equitable" to grant relief. One does not engraft a rule on to that section that in certain circumstances (for instance after a winding up) some different test applies. The discretion is a broad one, but it comes to be exercised in the circumstances which have happened. 196 If a winding up has intervened, the rights of creditors of a statutory and quasi-proprietorial kind have crystallised. Over a century of authority recognises the character and importance of that circumstance. In circumstances of the intervention of a winding-up, whilst the cases have used the phrase "exceptional circumstances", the appropriate way of expressing the matter conformably with the width of the discretion, is to say that it is to be exercised in the recognition of intervening rights of all creditors, the nature of which rights has been described by courts without debate for over a century. These rights arise because of the avoiding effect of s 266. The ex post facto validation of the charge and the consequent destruction of the creditors' rights are possibilities, as they always were; but the circumstances would need to be sufficient to warrant the destruction of crystallised rights in the nature of property over the property the subject of the charge. To say that the intervention of a winding up is but one factor to take into account is apt to deflect attention from these considerations involving the consequences of winding up. 74 His Honour also made the point that, although the legislature has, in the terms of the legislation, equated the effect of winding up with the occurrence of the events referred to in paragraphs (b) and (ba) of s 266(1) (ie, the appointment of administrators or the execution of a deed of company arrangement), this is not to say that the occurrence of the events in (b) and (ba) creates statutory rights in creditors identical to those crystallised upon a winding up (at [198]-[199]). Referring to the judgment of Millett J in In re Barrow Borough Transport Ltd [1990] Ch 227 at 235-236, Allsop J referred to the relevance of the occurrence of administration and the different matters which may be thrown up for consideration in an extension application (at [201]). For example, if reconstruction is capable of being achieved, there may be no reason to deny an extension. If reconstruction is unlikely, however, then insolvency looms, at the very least. In this latter scenario, there may be every reason for the Court to view the matter in a way analogous to the way in which it would view the matter had winding up intervened. 75 Turning to the judgment of Branson J, her Honour said that, accepting that an extension of time can be granted after the occurrence of one of the events identified in s 266(1)(a), (b) and (ba), she agreed with Allsop J that there was no rule of law that constrained the exercise of the broad discretion conferred on the Court by s 266(4) to cases in which "exceptional circumstances" could be found. Referring to rules of practice that act as a guide in exercising the discretion, her Honour stated (at [28]): One such rule of practice or guide is that an extension of time "will almost invariably be refused after the commencement of a winding up and will only be granted in exceptional circumstances" (see Douglas-Brown v Standard Chartered Finance Ltd per Malcolm CJ and Rowland J at 998; see also Campbell Finance Pty Ltd v Vivstan Packaging (Aust) Pty Ltd (in liq) [1998] 2 VR 340 per Batt J; Morris v Woodings (1997) 25 ACSR 636 per Wheeler J; Re Lloyd Anthony Furniture Pty Ltd; Ex parte Walker (1996) 19 ACSR 478 per Branson J). This rule of practice reflects the fact that the validation of a charge that would otherwise be void against the liquidator will reduce the assets available to satisfy the claims of unsecured creditors. The chargee will thus be assisted by the court at the expense of the unsecured creditors. However, as Allsop J explains, "exceptional circumstances" in the above context are simply circumstances sufficient to justify defeating the rights of unsecured creditors, which they acquired when the liquidation commenced, in the assets the subject of the charge (see Re Anglo-Oriental Carpet Manufacturing Co [1903] 1 Ch 914 at 918). To put the matter another way, "exceptional circumstances" are simply circumstances sufficient to render it just and equitable to grant relief notwithstanding that the grant of relief will defeat rights of unsecured creditors. (Emphasis added.) 76 Her Honour considered, at [29]-[31], different scenarios in which an application for an extension of the period might be made. One was where the financial situation of the company was apparently secure; another was where the financial position of the company was insecure. Her Honour said that, if an application for an extension of time within which to lodge notice of a charge was made where one of the events referred to in s 266(1)(a), (b) or (ba) had occurred, "the starting position is that the security is void". Her Honour continued (at [31]): The fact that the legislature has provided for this starting position where one of the events referred to in s 266(1)(a), (b) or (ba) has occurred reflects, as it seems to me, recognition that each of those events requires a person external to the company to take control of the assets of the company. Those assets must be able to be identified by that person with certainty. However, since s 266(1) has no relevant operation in respect of solvent companies, the provision for voidness also reflects, as it seems to me, the critical interest of unsecured creditors in the assets of an insolvent or potentially insolvent company. Any grant of relief under s 266(4) will either immediately impact on the crystallised rights of unsecured creditors in those assets or impact on the administration of the company or of the deed of company arrangement in a way that is likely to be adverse to unsecured creditors. A determination that it is just and equitable to grant relief in such circumstances will require the identification of factors of sufficient significance to outweigh the adverse impact on unsecured creditors of the grant of relief. (Emphasis added.) 77 The principles applicable to s 266(4) were considered by French J (as his Honour then was) in Craig Mostyn & Co Pty Ltd v Old Valley Pty Ltd (in liq). In that case, the charge had been registered seven days later than the 45 day period for which the Corporations Act then provided. The company had later gone into liquidation. His Honour was satisfied that the case was one in which it was appropriate to grant the extension that was sought (at [2]). His Honour referred to Hewlett Packard at [49]-[51]. After referring to the reasons for judgment of Allsop J at [196], and the reasons of Branson J at [26], French J stated (at [52]-[53]): 52 It is necessary, in my opinion, to take care not to confer upon the "crystallised rights" of unsecured creditors a status and weight disconnected from the circumstances in which they came into being. In the case in which a chargee has advanced money to a failing company and has accidentally or inadvertently delayed, by a short time beyond the relevant period, to register the charge, the statutory rights of unsecured creditors, upon the commencement of the winding up, may be regarded as inflated by reason of that accident or inadvertence. The diminution by prompt judicial intervention, of what might be regarded as windfall elements of those rights, may be neither unfair nor inconsistent with the general policy of the law governing the winding up of companies and the rights of creditors. 53 Where a discretion is conferred upon the Court it is to be exercised in accordance with the terms and conditions and purposes of the Act conferring the discretion and not constrained by quasi-legislative thresholds. That is not to say that the established practice of the courts and their accumulated experience reflected in the course of many years of decision-making will not provide a guide to a sensible and principled approach to the exercise of the discretion in particular cases. On that established practice the extension of 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. (Emphasis added.) 78 In Bevillesta Pty Ltd v Imagine UN Ltd (2009) 69 ACSR 574, Robson J set out a summary of the principles applicable to the exercise of the discretion (at [28]). 79 As noted above, the current provisions - ss 588FL and 588FM - were introduced by the Personal Property Securities (Corporations and Other Amendments) Act 2010. It is apparent from the text of the provisions that they are designed to align the Corporations Act with the Personal Property Securities Act: see also the explanatory memorandum to the Personal Property Securities (Corporations and Other Amendments) Bill 2010 at [1.2]. While the new provisions contain textual and substantive differences reflecting the terms and structure of the Personal Property Securities Act, the grounds in s 588FM(2) are substantially the same as those in the predecessor provision, s 266(4). The explanatory memorandum indicates that, while it was proposed to replace Chapter 2K (Registration of company charges) because the Personal Property Securities Act provided for the registration of security interests in personal property, it was proposed to "retain provisions equivalent to sections 266 and 267 in Chapter 2K (which provide that charges are void against an administrator or liquidator in certain circumstances)" (at [1.2]). Although s 266(1) was expressed in terms of the registrable charge being "void … as against the liquidator, the administrator of the company, or the deed's administrator" and s 588FL(4) provides that the PPSA security interest "vests in the company", the broad effect is comparable, namely that the security interest is ineffective in the prescribed circumstances. Neither the text of the current provisions, nor the explanatory memorandum, suggests an intended departure from the principles applicable to the exercise of the discretion to extend the period of time for registration. 80 A number of cases have considered the discretionary considerations that inform the exercise of the discretion in s 588FM(2). These include: In the matter of Cardinia Nominees Pty Ltd; Re Enviro Pallets (NSW) Pty Ltd [2013] QSC 220; In the matter of Black Opal IP Pty Ltd ACN 151 765 356 (subject to Deed of Company Arrangement) [2013] NSWSC 1225; Re Appleyard; In the matter of Transurban CCT Pty Ltd and Transurban CCT Nominees Pty Ltd in its own capacity and as Trustee of the Transurban CCT Trust [2014] NSWSC 1909; Re Carpenter International Pty Ltd (2016) 307 FLR 37; and In the matter of Accolade Wines Australia Ltd [2016] NSWSC 1023. Most of the relevant cases have not involved a situation where the mortgagor company is in liquidation or administration or subject to a deed of company arrangement. In many cases, although an order was made fixing a later time for the purposes of s 588FL(2)(b), the order was made conditional on a future liquidator or administrator having leave to apply for the discharge or modification of the order, should the company within six months go into liquidation or administration or become subject to a deed of company arrangement (a so-called Guardian condition: see Re Application of Guardian Securities Ltd [1984] 1 NSWLR 95). The cases since the introduction of ss 588FL and 588FM do not suggest that these provisions effected a recalibration of the principles applicable to the exercise of the Court's discretion. To the contrary, they generally proceed on the basis that the principles discussed in the cases on s 266(4) remain relevant. 81 In Re Appleyard, Brereton J discussed the relevant considerations that inform the exercise of the discretion in s 588FM(2) at [13]-[31]. His Honour referred (at [22]-[23]) to the judgment of the Full Court in Hewlett Packard for the proposition that an order can be made even after liquidation, so long as the circumstances are such as to render it just and equitable to grant relief, notwithstanding that the grant of relief will defeat the rights of unsecured creditors. At [24], his Honour referred to the summary of principles set out by Robson J in Bevillesta Pty Ltd v Imagine UN Ltd. Brereton J also noted that Robson J had referred with approval to the remarks of Sangster J at first instance in In re Flinders Trading Co Pty Ltd (1978) 20 SASR 14 to the effect that the Court's concern for the position of unsecured creditors varied according to a scale whereby, at one end, where the position has been crystallised by a winding up order, the Court would generally not extend time; approaching that end, the Court would be reluctant to extend time if a winding up appeared to be imminent; and, at the other end, the Court would grant an extension if satisfied that the company was solvent. But between these points, the course was less clear. 82 Brereton J stated (at [25]) that the Australian authorities establish that the interests of unsecured creditors are a relevant consideration, so that the court must have regard to the financial position of the company as at the time of the application for extension; if the company is shown to be financially secure, then it is unlikely that a "critical day" will arise in the foreseeable future and the grant of relief will not likely affect any person adversely. His Honour continued (at [26]-[31]) as follows. I set out this passage in full as it was the focus of submissions by both parties. 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 6 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 6 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. (Emphasis added.) 83 Re Appleyard was not a case in which the company was in administration or liquidation, but there was a high degree of likelihood that the company was insolvent and would go into liquidation or administration within six months (at [32]). On the facts of the case, given the subsistence of two registered security interests during the period while the plaintiff's collateral remained unregistered, it seemed unlikely that unsecured creditors would have traded with the company on the faith that the collateral was unencumbered (at [33]). The Court granted the s 588FM application conditional on a future liquidator or administrator having liberty to apply for discharge or modification of the order: see the discussion in Duggan A and Brown D, Australian Personal Property Securities Law (2nd ed, LexisNexis Butterworths, 2016) at [13.17]. 84 The approach taken by Brereton J in Re Appleyard was followed by Cameron J in Re Carpenter International Pty Ltd at [235]. 85 I do not think there is a substantive difference between the statement of principles in Hewlett Packard and that in Re Appleyard. Indeed, Brereton J referred to and followed Hewlett Packard. His Honour did not express any disagreement with the principles stated in Hewlett Packard. If and to the extent that there is a difference between Hewlett Packard and Re Appleyard, I consider this to be a difference in emphasis only. In my view, the statement of principles in Hewlett Packard is of continuing relevance in relation to the current provisions, as there is no indication that the current provisions were intended to change the principles applicable to the exercise of the discretion. 86 In Re Enviro Pallets (NSW) Pty Ltd, an order was made pursuant to s 588FM fixing a later time for the purposes of s 588FL(2)(b) in circumstances where, following registration, the company had gone into administration and then liquidation. In relation to the exercise of the discretion, National Australia Bank Ltd v Davis & Waddell (Vic) Pty Ltd (2003) 44 ACSR 296 and Sanwa Australia Finance Ltd v Ground-Breakers Pty Ltd (in liq) [1991] 2 Qd R 456 were cited (at page 6), but there was no detailed discussion of the principles applicable to the exercise of the discretion. I note that neither the liquidator nor any unsecured creditor opposed the orders sought (at page 7). 87 In light of the above, I consider the following principles to be applicable to the exercise of the discretion in s 588FM(2) in circumstances where, subsequent to registration but before the Court is called upon to exercise the discretion, the mortgagor company has gone into liquidation or administration or has become subject to a deed of company arrangement: (a) An order pursuant to s 588FM(2) fixing a later time for the purposes of s 588FL(2)(b) can be granted after the occurrence of one of the events identified in s 588FL(1) (namely, the company going into liquidation or administration or becoming subject to a deed of company arrangement). (b) Section 588FM(2) confers a broad judicial discretion informed, at least at one level, by what is "just and equitable"; as such, it is to be read liberally for the purpose intended by the statute in question and is not to be constrained or limited by glosses or implications not found in the relevant statute: Hewlett Packard at [187]. (c) Generally, the principles developed in relation to the exercise of the discretion in former s 266(4) have continuing relevance in relation to the discretion in s 588FM to fix a later time for the purposes of s 588FL(2)(b). (d) In circumstances where the company has gone into liquidation or administration or become subject to a deed of company arrangement, there is no rule of law that constrains the exercise of the broad discretion conferred on the Court by s 588FM(2) to cases in which "exceptional circumstances" can be found: Hewlett Packard at [26], [192]. (e) 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: Hewlett Packard at [31]. (f) 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: Craig Mostyn & Co Pty Ltd v Old Valley Pty Ltd (in liq) at [53].

Application of principles to facts of present case 88 In the present case, I am satisfied that the failure by Kaizen to register the Share Mortgage within 20 business days was due to "inadvertence" within the meaning of the principles discussed above. Kaizen is an overseas company. Its principal officer, Mr Liu, gave unchallenged evidence that he only became aware of the need to register the Share Mortgage in Australia on 10 March 2016. Further, as indicated above, although there is no direct evidence from the other people at Kaizen involved in the finalisation of the Transaction Documents, I am prepared to accept that Kaizen only became aware of the need to register the Share Mortgage on that date. It is true that Kaizen's lawyers in the United Arab Emirates, Forrest Advisers DMCC, suggested that Kaizen obtain Australian legal advice on the Transaction Documents and Kaizen did not do so. While this shows carelessness in the protection of its own position, which may be relevant in the exercise of the discretion, it does not detract from the proposition that the failure to register the Share Mortgage was due to inadvertence on the part of Kaizen. Accordingly, the power to make an order fixing a later time for the purposes of s 588FL(2)(b) is enlivened. 89 I turn then to the exercise of the discretion in s 588FM(2). For the following reasons, I do not think it would be appropriate in the circumstances of this case to fix a later time (namely 12 April 2016) for the purposes of s 588FL(2)(b). 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 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. 92 The circumstances in which Kaizen failed to register the Share Mortgage within 20 business days include that Forrest Advisers DMCC had recommended that Kaizen have the Transaction Documents reviewed by Australian counsel to ensure their compatibility with Australian law. This was sensible advice and it was careless of Kaizen not to follow the suggestion. Had it done so, it is likely that the Share Mortgage would have been registered within the 20 business day period. 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. 94 Kaizen entered into the Loan Agreement on the basis that it would be secured by the Share Mortgage and, it may be inferred, would not have lent the $5 million to ANB without the provision of that security. In these circumstances, it may be said that the amount available for unsecured creditors has been enhanced by the loan being made (see Craig Mostyn & Co Pty Ltd v Old Valley Pty Ltd (in liq) at [52]). However, the position in this regard is far from clear. As noted above, $4.6 million was transferred from ANB to Venus (a company in which Kaizen held an interest) a few days after the loan was made. It may be inferred that this represented the majority of the loan funds. Remarkably, Ms Yang, who was both the company secretary of ANB and (at the time) the sole director of Venus, could not explain the reason for the transfer in her public examination. The defendants submitted that it was unclear whether the amount transferred to Venus would be recoverable. There is insufficient evidence to enable me to make a finding on this matter. In any event, in light of the evidence of Ms Yang at her public examination, I am concerned that the Court does not have a complete picture of the consequences of the loan transaction. In these circumstances, Kaizen has not established that the amount available for unsecured creditors of ANB has been enhanced by the loan. 95 In Kaizen's written submissions, it is submitted (at paragraph 46) that Kaizen and ANB bargained for the provision of the Share Mortgage as consideration for the advance of $5 million and "intended it to be registered". I have dealt with the first part of this submission in the preceding paragraph. In relation to the proposition that Kaizen intended the Share Mortgage to be registered, this does not reflect the evidence, if this submission is meant to relate to the time when the Transaction Documents were entered into. Indeed, Kaizen's case is that it was unaware of the requirement to register the Share Mortgage at the time it entered into the transaction and only became aware of this matter on 10 March 2016. In these circumstances, it is inconsistent to suggest that Kaizen intended the Share Mortgage to be registered. Insofar as it is submitted that ANB intended the Share Mortgage to be registered, it may be accepted that ANB warranted that the Share Mortgage was an effective security, with the priority that it contemplates, and agreed to do all such things and sign all such documents as may be necessary or desirable to give effect to the Share Mortgage (see [27]-[28] above). Thus, registration of the Share Mortgage was consistent with the terms of that document. However, this does not appear to be a material consideration for present purposes. 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. 98 A number of other arguments were raised by the defendants, but I do not find them to be of assistance in the exercise of the discretion. The defendants submitted that Ms Yang breached her duties as an officer of ANB in assisting Kaizen to register the Share Mortgage. The defendants rely on the following facts and matters: (a) on 1 March 2016, the second tranche of $2 million was due to be paid by Kaizen to ANB under the Loan Agreement; (b) on 1 April 2016, the audit report was published which raised concerns about ANB's viability; (c) on 1 April 2016, Mr Van Staden, a partner of Colin Biggers & Paisley, the solicitors for ANB, made clear to Ms Yang the potential for a conflict of interests to arise; (d) on 2 April 2016, Kaizen formed a view that ANB would not be able repay Kaizen in accordance with the terms of the Loan Agreement and Mr Liu telephoned Mr Zhang, a director of ANB, to notify him that Kaizen would not be providing the second tranche of funds; (e) from 5 April 2016, ANB was in contact with the administrators regarding an appointment; (f) despite the conflict advice, Ms Yang, as agent for Kaizen, engaged Hall & Wilcox, in order to attempt to perfect Kaizen's security interest by both control (over share certificates) and registration on the PPSR; (g) Ms Yang caused the company to pay $2,000 to Hall & Wilcox in respect of the costs of the PPSR registration fee from the company's funds and then requested that the trust account invoice be amended to reflect payment by Venus (from Kaizen); (h) on 14 April 2016, Kaizen sent a letter to ANB which provided that, having reviewed ANB's audit report, Kaizen was "not satisfied with ANB's current financial situation. Therefore the final drawdown of the loan [of $2 million] will not be advanced by the Lender"; and (i) on 20 April 2016, ANB appointed administrators. 99 The defendants contend that, in assisting Kaizen to register its security interest, Ms Yang was in a position of conflict of interest between: (a) her duties as an officer of ANB, including her duty to have regard to and not prejudice the interests of creditors; and (b) her duty as an agent of Kaizen in registering and seeking to perfect Kaizen's security interest. 100 The defendants contend that the steps taken by Ms Yang were such as to give rise to a "real risk" that creditors would, in an insolvency context, suffer "significant prejudice", such that the conduct was not in the interests of the company as a whole: see Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) (2012) 44 WAR 1 at [2031]-[2046] per Drummond AJA. The defendants submit that, subject to the Court granting Kaizen the relief that it seeks in this proceeding, the effect of Ms Yang's conduct will have been to the "significant prejudice" of unsecured creditors; if an order fixing a later time is made, the unsecured creditors will not share with Kaizen in the proceeds from the sale of the Venus Shares. 101 I do not think it is necessary to resolve the issues raised concerning Ms Yang's role because, in any event, for the reasons given above, I do not think it would be appropriate to fix a later time for the purposes of s 588FL(2)(b). I nevertheless make the following observations. In ordinary circumstances (that is, if ANB were not experiencing financial difficulties), I do not think there would necessarily be a conflict of interests for an officer of ANB to assist Kaizen to register the Share Mortgage. As set out above, ANB gave a warranty that the Share Mortgage was an effective security interest with the priority that it contemplates. Further, as set out above, each party agreed to do all such things and sign all such documents as may be necessary or desirable to give full effect to the Share Mortgage. Given these obligations, it is arguable that, even where ANB was experiencing financial difficulties, there was no conflict of interest for an officer of ANB to assist Kaizen with registration. It may be said that the actions of Ms Yang went beyond this, including using ANB's assets to assist with registration. I do not think the evidence is sufficient to enable a concluded view to be reached. In any event, even if there was a conflict of interests on the part of Ms Yang, it is not clear to me why this should be sheeted home to Kaizen for present purposes. 102 The defendants also contend that discretionary reasons for refusing the relief sought are that the registration occurred after: (a) concerns regarding ANB's viability had been raised; (b) Kaizen had failed to pay the second instalment of $2 million; and (c) administrators had been consulted and their appointment was imminent (such that, so it was submitted, a reasonable inference would be that the appointment was only delayed to assist Kaizen to register). 103 I think the evidence establishes that ANB was experiencing financial difficulties, and Kaizen was aware of this, as at 12 April 2016, when the Share Mortgage was registered. However, it is not clear to me that this provides an additional discretionary reason against making an order fixing a later time beyond those already referred to above. Kaizen, by registering the security interest on the PPSR, was merely perfecting a security interest that it had already been granted. It was entitled to register that security interest. The fact that it was aware of ANB's financial difficulties at the time it registered the security interest does not, to my mind, provide an additional reason for not making an order fixing a later time. 104 For the above reasons, I do not consider it appropriate to make an order fixing a later time for the purposes of s 588FL(2)(b) in the circumstances of this case.

Conclusion 105 It follows that the application is to be dismissed. The parties requested the opportunity to be heard on costs. I will therefore provide a short period of time for the parties to file and serve written submissions on costs. I certify that the preceding one hundred and five (105) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moshinsky.

SCHEDULE OF PARTIES VID 1124 of 2016 Defendants Fourth Defendant: ANTHONY JAMES JONSSON (AS JOINT AND SEVERAL LIQUIDATOR OF AUSTRALIA NEW AGRIBUSINESS & CHEMICAL GROUP LIMITED (IN LIQUIDATION) (ACN 142 976 065))