Kirkalocka Gold SPV Pty Ltd (Receivers and Managers Appointed) v Zenith Pacific

AND BETWEEN: ZENITH PACIFIC (KLK) PTY LTD (ACN 630 653 468) Cross-Claimant

AND: KIRKALOCKA GOLD SPV PTY LTD (SUBJECT TO A DEED OF COMPANY ARRANGEMENT) (ACN 626 160 816) Cross-Respondent

order made by: BESANKO J DATE OF ORDER: 29 April 2024

1. The Originating application be dismissed.
2. The Cross-claim be upheld.
3. The parties be heard as to the appropriate orders. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Introduction 1 This is a proceeding instituted by Kirkalocka Gold SPV Pty Ltd (Receivers and Managers Appointed) (Administrators Appointed) (Kirkalocka). Shortly after the proceeding had been commenced, Zenith Pacific (KLK) Pty Ltd (Zenith) was joined as a respondent to the proceeding. The relief sought by Kirkalocka in its Originating application is a declaration that it is the legal and beneficial owner of the "Zenith Power Plant" as defined in a certain agreement known as the Power Purchase Agreement and dated 11 February 2019 (PPA) and an order that the costs of the proceeding be paid out of the assets of Kirkalocka. Zenith subsequently filed a Notice of cross-claim in which it sought, relevantly, a declaration that it is the legal and beneficial owner of the items of plant and equipment located at the Kirkalocka Mine Site as defined in the Schedule attached to the Notice of cross-claim. The plant and equipment is the Zenith Power Plant. Zenith also sought an order that Kirkalocka deliver up possession of the plant to it and that Kirkalocka pay its costs of the cross-claim. 2 The parties are agreed that the Zenith Power Plant consists of the items set out in the Schedule to the Notice of cross-claim being the following: Engine Hall, Switchroom Building, two Zenith Sea Containers, Oil Tanks, Gas Engine Radiators and Exterior. It was also agreed that these items were personal property and not fixtures. 3 The resolution of these proceedings turns on the construction and application of certain sections of the Personal Property Securities Act 2009 (Cth) (the PPSA). In essence, the issues are whether Zenith had a "security interest" in the Zenith Power Plant on Kirkalocka's property by reason of s 12(1) or s 12(3) of the PPSA and, if so, whether that interest was perfected by Zenith before Kirkalocka went into administration on 1 May 2021. If not, then by reason of s 267(2) of the PPSA, the security interest of Zenith (assuming it had a security interest) vested in Kirkalocka. It is common ground that Zenith did not register a security interest in the Zenith Power Plant until 10 January 2022. If that is the decisive event, then Zenith has lost its security interest. Zenith claims that it is not because s 21 of the PPSA is engaged. In registering its interest, Zenith claimed "a PPS lease in connection with a power agreement dated 11th February 2019". 4 In oral submissions, counsel for Kirkalocka acknowledged difficulties in bringing his case within s 12(3) and said that he would not address the matter in his oral submissions and relied on his written submissions. 5 These two issues give rise to a number of sub-issues which I will identify after setting out the relevant statutory provisions.

The Relevant Statutory Provisions 6 The relevant statutory provisions are set out below. 12 Meaning of security interest (1) A security interest means an interest in personal property provided for by a transaction that, in substance, secures payment or performance of an obligation (without regard to the form of the transaction or the identity of the person who has title to the property). Note: For the application of this Act to interests, see section 8. (2) For example, a security interest includes an interest in personal property provided by any of the following transactions, if the transaction, in substance, secures payment or performance of an obligation: … (d) a conditional sale agreement (including an agreement to sell subject to retention of title); (e) a hire purchase agreement; … (3) A security interest also includes the following interests, whether or not the transaction concerned, in substance, secures payment or performance of an obligation: … (c) the interest of a lessor or bailor of goods under a PPS lease. … 13 Meaning of PPS lease (1) A PPS lease means a lease or bailment of goods: (a) for a term of more than 2 years; or (c) for a term of up to 2 years that is automatically renewable, or that is renewable at the option of one of the parties, for one or more terms if the total of all the terms might exceed 2 years; or (d) for a term of up to 2 years, or a lease for an indefinite term, in a case in which the lessee or bailee, with the consent of the lessor or bailor, retains uninterrupted (or substantially uninterrupted) possession of the leased or bailed property for a period of more than 2 years after the day the lessee or bailee first acquired possession of the property (but not until the lessee's or bailee's possession extends for more than 2 years). (2) However, a PPS lease does not include: (a) a lease by a lessor who is not regularly engaged in the business of leasing goods; or (b) a bailment by a bailor who is not regularly engaged in the business of bailing goods; or (c) a lease of consumer property as part of a lease of land where the use of the property is incidental to the use and enjoyment of the land; or (d) a lease or bailment of personal property prescribed by the regulations for the purposes of this definition, regardless of the length of the term of the lease or bailment. Bailments for value only (3) This section only applies to a bailment for which the bailee provides value. 19 Enforceability of security interests against grantors - attachment Attachment required for enforceability (1) A security interest is enforceable against a grantor in respect of particular collateral only if the security interest has attached to the collateral. Attachment rule (2) A security interest attaches to collateral when: (a) the grantor has rights in the collateral, or the power to transfer rights in the collateral to the secured party; and (b) either: (i) value is given for the security interest; or (ii) the grantor does an act by which the security interest arises. … 20 Enforceability of security interests against third parties General rule (1) A security interest is enforceable against a third party in respect of particular collateral only if: (a) the security interest is attached to the collateral; and (b) one of the following applies: (i) the secured party possesses the collateral; (ii) the secured party has perfected the security interest by control; (iii) a security agreement that provides for the security interest covers the collateral in accordance with subsection (2). Note: For possession and control of collateral, see Part 2.3 … 21 Perfection - main rule (1) A security interest in particular collateral is perfected if: (a) the security interest is temporarily perfected, or otherwise perfected, by force of this Act; or (b) all of the following apply: (i) the security interest is attached to the collateral; (ii) the security interest is enforceable against a third party; (iii) subsection (2) applies. (2) This subsection applies if: (a) for any collateral, a registration is effective with respect to the collateral; or (b) for any collateral, the secured party has possession of the collateral (other than possession as a result of seizure or repossession); or … (4) A security interest may be perfected regardless of the order in which attachment and any step mentioned in subsection (2) occur. (5) A single registration may perfect one or more security interests. 24 Possession Possession by one party exclusive of possession by others (1) A secured party cannot have possession of personal property if the property is in the actual or apparent possession of the grantor or debtor, or another person on behalf of the grantor or debtor. (2) A grantor or debtor cannot have possession of personal property if the property is in the actual or apparent possession of the secured party, or another person on behalf of the secured party. … 267 Vesting of unperfected security interests in the grantor upon the grantor's winding up or bankruptcy etc. Scope (1) This section applies if: (a) any of the following events occurs: … (ii) an administrator of a company or a body corporate is appointed (whether under section 436A, 436B or 436C of the Corporations Act 2001, under that section as it is applied by force of a law of a State or Territory, or otherwise); (iii) a company or a body corporate executes a deed of company arrangement (whether under Division 10 of Part 5.3A of the Corporations Act 2001, under that Division as it is applied by force of a law of a State or Territory, or otherwise); … (b) a security interest granted by the body corporate, company or bankrupt is unperfected at whichever of the following times applies: … (ii) in the case of a company or a body corporate to which subparagraph (a)(ii) or (iii) applies - when, on a day, the event occurs by virtue of which the day is the section 513C day for the company or body, within the meaning of the Corporations Act 2001 (including that Act as it is applied by force of a law of a State or Territory, or otherwise); … Note 1: For the meaning of company, see section 10. Note 2: See also Division 2A of Part 5.7B of the Corporations Act 2001. Security interest vested in grantor (2) The security interest held by the secured party vests in the grantor immediately before the event mentioned in paragraph (1)(a) occurs. … 7 In the Dictionary in the PPSA (s 10), "security interest" is defined as having the meaning given by s 12 and "possession" is defined as having a meaning as affected by s 24.

The Particular Issues which Arise 8 Kirkalocka claims that the PPA provided for a "security interest" within s 12(1) or s 12(3). Further, it made particular reference to the examples in paragraphs (d) and (e) of s 12(2) as giving colour to the scope of s 12(1). It submitted that the arrangement between the parties as reflected in the PPA was "closely" akin to a hire purchase agreement, if not such agreement counsel also relied heavily on the reference in s 12(2)(d) to retention of title. In oral submissions, the main focus of Kirkalocka's argument was the presence of a retention of title clause. 9 With respect to s 12(3)(c), there is an issue as to whether there was a lease or bailment between Zenith and Kirkalocka which dispute centred on which party was in possession of the Zenith Power Plant. As to whether the lease or bailment was a PPS lease, there is an issue as to whether Zenith was or was not regularly engaged in the business of leasing goods within s 13(2)(a) of the PPSA. It is unclear to me whether there is an issue as to whether, assuming there was a bailment, it was a bailment for value within s 13(3). I will deal with that issue in any event. 10 As I have said, there is also an issue as to whether, by reason of ss 19 and 21, Zenith's security interest was perfected before 1 May 2021. Section 24(1) and (2) are relevant to that issue. Those subsections provide for "possession" to mean both actual and apparent possession. I did not understand Kirkalocka to suggest that the reference to apparent possession in the definition was relevant to the issue of whether there was a "security interest" within either s 12(1) or 12(3) of the PPSA. In other words, the issue of apparent possession was only raised in connection with the issue concerning the perfection of the security interest under s 21 of the PPSA. I think that approach is correct for the following reasons. First, neither s 12(1) nor s 12(3) uses the word "possession". Secondly, at least as far as s 12(3) is concerned, there is a reference to a lease or bailment. Neither of these terms are defined in the Dictionary in the PPSA and would be given their meaning at common law which does not include apparent possession. Thirdly, as far as s 12(1) is concerned, I have found that that subsection is engaged even though I have also found that at all material times, Zenith was in possession of the Zenith Power Plant. Finally, as I will explain in connection with my discussion of s 21, I have found that at all material times, Zenith was in actual and apparent possession of the Zenith Power Plant.

The Relevant Provisions of the Power Purchase Agreement 11 The parties to the PPA are Zenith and Kirkalocka. The consideration provided by Zenith under the PPA included the performance in two stages of the Works (as defined in the PPA) at the Power Station Site. The Works were defined as follows: … means the design, construction, installation and commissioning of the power generation equipment and other plant and equipment comprising the Zenith Power Plant to be performed by Zenith under this Agreement, and as described in the Scope of Works. 12 The "Power Station Site" is defined to mean the area of the Site designated by the Buyer (Kirkalocka) as the location for the Zenith Power Plant and so noted on the Site Map. The Site is the Kirkalocka site for the Kirkalocka Gold Project (which includes the Power Station Site). Stage 1 of the Works involved the supply and installation of two Jenbacher J620-J101 gas generators and two MTU 20V4000G62 diesel generators, with a total power site installed rating of 11,120kW and all associated plant and equipment at the Power Station Site as fully described in Schedule Two. Stage 2 of the Works Development was the supply and installation of either (as determined by Zenith in its sole discretion) one Jenbacher J620-J101 gas generator with a total site installed rating of 3,360 kW or two Siemens SEG-86EM gas generators with a total site installed rating of 4,022 kW and all associated plant and equipment at the Power Station Site as fully described in Schedule Two. The term of the agreement was a period of 10 years. 13 Zenith was to operate and maintain the Zenith Power Plant for the efficient generation of the Kirkalocka electricity from the Zenith Power Plant. 14 "Buyer Electricity" is a reference to Kirkalocka's electricity and means electricity generated by Zenith from the Zenith Power Plant and supplied into the Distribution System at the Electricity Delivery Points pursuant to the PPA. "Buyer Infrastructure" is a reference to Kirkalocka and means the whole or any part of Kirkalocka's mining and processing plant, including water production, HV-LV Distribution System and all related infrastructure, plant and equipment at the Site. 15 The consideration to be provided by Kirkalocka included the payment by Kirkalocka of the "Charges" to Zenith in consideration for the performance by Zenith of the obligations under the PPA, including the supply of Buyer Electricity (i.e., Kirkalocka). Charges means the "Stage 1 Charges, or the Stage 2 Charges, as the context requires". The Stage 1 Charges consisted of a Capacity Charge of $89,058 per month and an Energy Charge of 2.05 c/kWh of the Buyer Electricity supplied to Kirkalocka in the relevant month. The Stage 2 Charges consisted of Capacity Charge of $141,822 per month and an Energy Charge of 2.05 c/kWh of the Buyer Electricity supplied to Kirkalocka in the relevant month. Zenith was to commence carrying out the Works seven days after the execution of the PPA and it was required to perform the Works in accordance with the PPA, all applicable Laws and Governmental Approvals, and in accordance with Good Engineering and Operating Practice. The Stage 2 Development and associated works were not required to be completed before 31 May 2020. 16 Kirkalocka is the owner of the Site or had the right to occupy the Site pursuant to a mining lease. Kirkalocka is permitted to and, by the PPA, grants to Zenith and its Personnel, a non-exclusive and non-assignable license to occupy the Site and roadways required to access the Site during the Term to enable Zenith to perform the Works to operate and maintain the Zenith Power Plant and to produce Buyer Electricity. Nothing in the PPA conferred on Zenith any rights as a tenant of Kirkalocka, or created the relationship of landlord and tenant between Zenith and Kirkalocka or the owner of the Site. Kirkalocka was required to give Zenith and its Personnel access to the Site and to roadways required to access the Site from the date of the PPA. 17 As far as the title to the power station was concerned, nothing in the PPA was to operate so as to transfer title to, or grant any interest in, the Kirkalocka Infrastructure to Zenith and, subject to the Purchase Right in clause 7 which is discussed below, nothing in the PPA was to operate to transfer title to, or grant any interest in, the Works or the Zenith Power Plant to Kirkalocka. 18 The Stage 1 Development Completion Date involved the performance of the Works by Zenith so that the Stage 1 Development Completion Date occurred on or prior to the Target Stage 1 Commencement Date which was 15 September 2019, subject to adjustment under various clauses of the PPA. 19 The Demobilisation Payment was the quantum equal to the reasonable and proper charges to be incurred by Zenith in the decommissioning and removal of the Zenith Power Plant and its transport to a facility in Perth, Western Australia, and the reasonable rehabilitation of the Power Station Site to the condition reasonably requested by Kirkalocka. The Demobilisation Payment also included a payment of 10% to remunerate Zenith "for the management and supervision of such demobilisation". 20 As previously noted, Kirkalocka was given a Purchase Right with respect to the Zenith Power Plant. It had the right to elect to purchase all of the assets which constituted the Zenith Power Plant in the following circumstances: (1) where Kirkalocka gave notice of early termination of the PPA; (2) where Kirkalocka became entitled to terminate the PPA under the agreement for a default by Zenith that had not been remedied; (3) where an event of Force Majeure occurs; and (4) if Kirkalocka wished to exercise the right and was entitled to do so, it may give a notice to Zenith requiring the sale of the assets which then constituted the Zenith Power Plant. 21 The purchase price for the Zenith Power Plant was set out as Item 13 of Schedule One to the PPA. It varied from month to month. The purchase price is shown with respect to the period from Month 1 to Month 123. The opening purchase price is $8,217,000 and the purchase price at Month 121 is zero. That is 10 years and the Term of the PPA. Other than a period between about Month 13 and Month 39, the purchase price reduces on a regular basis. I was told without objection that the reasons for the rise in the purchase price was the start of Stage 2 Works and an amendment to the PPA. 22 If Kirkalocka did not elect to purchase the Zenith Power Plant, then Zenith was required as soon as reasonably practicable to demobilise the Zenith Power Plant and remove its equipment from the Power Station Site and rehabilitate the Power Station Site to the condition reasonably required by Kirkalocka. Kirkalocka was required to pay Zenith the Demobilisation Payment unless the agreement was terminated as a result of Zenith's Default. 23 The PPA required Zenith on and from the Stage 1 Commencement Date and for the duration of the Supply Period, to continuously supply Kirkalocka's Infrastructure with the Buyer Electricity in such amounts as are required by Kirkalocka. In return, with effect from the Stage 1 Commencement Date and throughout the Supply Period, Kirkalocka agreed to pay the Charges and any other amounts which were payable under the agreement to Zenith in the amounts and in the manner specified in the PPA. Significantly, the Capacity Charge was to continue to be payable throughout the Term even when the Zenith Power Plant was disconnected from Kirkalocka's Infrastructure. The Energy Charge was not to continue to be payable where any disconnection occurred. The amount of Energy Charge was calculated by reference to the amount of electricity Zenith supplied to Kirkalocka, whereas the Capacity Charge was a fixed amount. By the end of the Term, Kirkalocka could "purchase" the Zenith Power Plant for nothing. 24 Zenith and its Personnel and the Zenith Finance Parties were entitled to access the Site, but were required to keep to accessways identified by Kirkalocka and observe all Site safety and security procedures, manuals, guidelines and practices as Kirkalocka may require. The PPA also identified certain product safety requirements which must be complied with by Zenith. 25 In terms of Kirkalocka's access to the Zenith Power Plant, Zenith was required to give it reasonable access for such purposes and at such times as may be agreed between the parties. For the purposes of enabling Kirkalocka to respond to emergencies in Kirkalocka's Infrastructure operations, Zenith agreed to grant Kirkalocka effective control and access to the circuit breakers and associated isolators of any supply feeder in the Zenith Power Plant subject to the fact that such control and access was granted only to the Personnel of Kirkalocka who were duly trained and authorised by Zenith in such switching procedures. Zenith gave Kirkalocka a warranty that from the Stage 1 Commencement Date that it (Zenith) would have full, unencumbered title to each generator and item of plant and equipment required for the Stage 1 Development and from the Stage 2 Commencement Date, it (Zenith) would have full, unencumbered title to each generator and item of plant and equipment required for the Stage 2 Development . 26 There was a Termination Payment and a Demobilisation Payment payable by Kirkalocka to Zenith where Zenith terminated the PPA for Kirkalocka's default, or insolvency. 27 The PPA provided Kirkalocka with the right to enter into possession of, operate and maintain, the Zenith Power Plant and to undertake Step-In Works in accordance with the PPA. This right arose if Zenith was in default and such default continued. The PPA provided that upon exercising the Step-In Right, Kirkalocka would assume, and Zenith would give Kirkalocka, "possession of the Zenith Power Plant to the extent reasonably necessary to enable the Buyer [Kirkalocka] to exercise the Step-In Right". The PPA provided that during the exercise of its Step-In Right, Kirkalocka was required, so far as practicable, "having regard to the condition of, and the extent to which the Buyer [Kirkalocka] has assumed possession of, the Zenith Power Plant …". 28 The PPA provided with respect to the PPSA, and to the extent that the law permitted, certain sections were sections of the Act Zenith need not comply with and certain sections were excluded. If the PPSA was amended after the date of the PPA, Kirkalocka and Zenith may agree to not comply with or to exclude other provisions of the PPSA. Zenith was given the right to notify Kirkalocka that any of the provisions were excluded, or that Zenith need not comply with any of the provisions.

Analysis 29 Before dealing with the three issues previously identified, it is convenient to address an issue which is relevant to all three issues. That issue is which party had possession of the Zenith Power Plant whilst the PPA was in place.

Possession of the Zenith Power Plant 30 Kirkalocka submitted that the requirement that it have the means and mentality of some immediate control is made out, having regard to its control of the Site where the Zenith Power Plant was installed and the fact that under clause 13 of the PPA, Kirkalocka was entitled to reasonable access to the Zenith Power Plant and effective control of and access to the circuit breakers and associated isolators of any supply feed in the Zenith Power Plant for the purpose of enabling Kirkalocka to respond to emergencies in its operations. Kirkalocka submitted that the appropriate inference is that the engine hall, the switchroom building and the sea containers were locked for safety reasons and locking those buildings and equipment did not evince an intention on the part of Zenith to exclude Kirkalocka from the Zenith Power Plant. 31 Kirkalocka relied on the following provisions in the PPA with respect to the issue of which party had possession of the Zenith Power Plant. 32 First, it relied on the provision in the PPA which provided that Zenith could not sell electricity from the power plant to a third party without Kirkalocka's consent and submitted that by installing and keeping the power plant on the Site where it was used to supply electricity to Kirkalocka, Zenith delivered the power plant into Kirkalocka's possession. Kirkalocka also relied on the fact that under the PPA, it granted to Zenith and its Personnel a non-exclusive and non-assignable license to occupy the Site to enable Zenith to perform the Works, operate and maintain the power plant, and produce electricity. Furthermore, when on site, Zenith's Personnel were subject to Kirkalocka's control and procedures. In this respect, Kirkalocka relied on the fact that although Zenith, its Personnel and the Zenith Finance Parties were entitled to access the Site, in gaining such access, they had to at all times keep to accessways designated by Kirkalocka and observe all Site safety and security procedures, manuals, guidelines and practice as Kirkalocka may reasonably require. It also relied on the fact that Zenith was required to comply with various product safety requirements and the fact that if required to do so by Kirkalocka, Zenith and persons for whom it is responsible or over whom it is capable of exercising control, shall wear or carry at all times whilst on or entering the Site, or Kirkalocka's premises, badges or passes issued by Kirkalocka's representative for the purpose of identification. Kirkalocka also relied on the fact that the PPA provided that it was to have reasonable access to the power plant site for such purposes and at such times as may be agreed between the parties and that Zenith agreed to grant to it effective control and access to the circuit breakers and associated isolators of any supply feeder in the power plant for the purposes of responding to emergencies. 33 Kirkalocka referred to two matters in support of its argument. First, in South Staffordshire Water Company v Sharman [1896] 2 QB 44, an action in detinue between the possessor of land and the finder of two rings on the land, Lord Russell of Killowen CJ said that generally speaking, the possessor of land is entitled as against the finder, to chattels found on the land. His Lordship said the following (at 46): … but under the circumstances, can it be said that the Minster Pool and whatever might be in that pool were not under the control of the plaintiffs? In my opinion, they were. The case is like the case, of which several illustrations were put in the course of the argument, where an article is found on private property, although the owners of that property are ignorant that it is there. The principle on which this case must be decided, and the distinction which must be drawn between this case and that of Bridges v Hawkesworth, is to be found in a passage in Pollock and Wright's Essay on Possession in the Common Law, p. 41: "The possession of land carries with it in general, by our law, possession of everything which is attached to or under that land, and, in the absence of a better title elsewhere, the right to possess it also. And it makes no difference that the possessor is not aware of the thing's existence … It is free to any one who requires a specific intention as part of a de facto possession to treat this as a positive rule of law. But it seems preferable to say that the legal possession rests on a real de facto possession, constituted by the occupier's general power and intent to exclude unauthorised interference." (Citation omitted.) 34 Secondly, in the context of attempting to rebut Zenith's argument that its Personnel locked elements of the power plant (including the engine hall and the switchroom building) and retained the keys, Kirkalocka submitted that possession of a key to a container holding goods does not inevitably amount to possession of the goods themselves because, in some cases, there is no accompanying intention to exercise control and dominion over, and exclude others from, the goods. Kirkalocka referred to Collector of Customs (NSW) v Southern Shipping Company Ltd [1962] HCA 20; (1962) 107 CLR 279 which was followed in Management 3 Group Pty Ltd (in Liq) v Lenny's Commercial Kitchens Pty Ltd (No 2) [2011] FCA 663; (2011) 281 ALR 482 at [83] per Dodds-Streeton J. In the High Court case, the defendant took delivery of a quantity of excisable tobacco at a wharf in Sydney for shipment to Hobart. The goods were put in a store on the wharf. After the store had been locked, the keys had, in accordance with usage, been lodged in the Customs Office and were not available to the defendant. The store was broken into by thieves and 40 cartons of tobacco were stolen. The High Court held that the placing of the key in the Customs Office was for safekeeping and did not place the Customs Office in possession of the goods in lieu of the defendant. That was a different case from the present case where the significance of the key was to protect the goods. It is evidence that Zenith intended to exercise control and dominion over, and exclude others from, the goods. 35 Kirkalocka sought to rely on the proposition that it is not necessary that possession be exclusive in order to give rise to a bailment (Bredenkamp v Gas Sensing Technology Corporation, in the matter of Welldog Pty Ltd (In Liq) (Receivers and Managers Appointed) [2017] FCA 1065 at [64]-[65]). Kirkalocka sought to rely on two statements in Palmer N, Palmer on Bailment (3rd ed, Sweet & Maxwell, 2009). The first is to the effect that possession need not imply an immediate physical custody, provided the bailee enjoys both the means and the mentality of some immediate control (at 1-133). Kirkalocka also relies on a statement that possession is a ductile and intuitive concept (at 1-134). 36 Zenith, on the other hand, submitted that Kirkalocka's argument rose no higher than that because Kirkalocka controlled access to the Mine Site generally and visitors to the Site were required to "sign in" at the main administration office, then Kirkalocka was in possession and, therefore, the bailee of everything that Zenith (and presumably any one else) ever brought onto the Site. That, it submitted, cannot be right. 37 Leaving aside a statutory provision that provides for a particular definition of possession, possession means actual possession which can include possession by a party's agent, or constructive possession where there is an immediate right to possession. Possession through an agent or an immediate right to possession was not argued by Kirkalocka and, in my view, rightly so. There is no suggestion in this case that a person or entity, other than Zenith or Kirkalocka, was a third party in possession, on behalf of Kirkalocka, of the Zenith Power Plant. Nor is there any suggestion that there were circumstances or events after the execution of the PPA that gave Kirkalocka an immediate right to possession. 38 In Strange Investments (WA) Pty Ltd v Coretrack Ltd [2014] WASC 281; (2014) 107 IPR 102 (Strange Investments), Pritchard J discussed the various types of possession. Possession called actual or de facto possession usually requires possession of the good, plus the intention to possess that good, that is, to exclude others from the exercise of control over it. There are two situations where a person who does not actually have physical possession of a good may nevertheless be in possession if he or she has control over that good together with the requisite intention. This is sometimes referred to as legal possession or constructive possession. In the alternative, a person may not have actual possession, but may have a right to immediately acquire physical possession, which is referred to as a right to possession. 39 I turn now to consider the matters relevant to whether Zenith or Kirkalocka had actual possession of the Zenith Power Plant. 40 In my view, the provisions in the PPA are to the effect that Zenith, not Kirkalocka, had possession of the Zenith Power Plant. I identify the most important of those provisions. Under clause 3.1 of the PPA, Zenith was to supply, instal, operate and maintain the Zenith Power Plant on the Power Station Site. Clause 3.4(a) provided that Zenith was to be granted access to the Site from the date of the agreement and clause 3.3(b) provided that Zenith had a non-exclusive and non-assignable license to occupy the Site during the term of the PPA. Clause 3.5 provided that nothing in the PPA "shall operate to transfer title to, or grant any interest in, the Works or the Zenith Power Plant to the Buyer [Kirkalocka]" except as provided by the option to purchase clause. Clause 13(a) provided that Kirkalocka may have reasonable access to the Power Station Site for such purposes and at such times as may be agreed between the parties. Clause 13(b) provided that in the case of emergencies, Zenith granted Kirkalocka effective control of and access to the circuit breakers and associated isolators of any supply feeder to such Personnel of Kirkalocka who are duly trained and authorised by Zenith in such switching procedures. 41 Clause 23 provided for what was called a Step-In Right. This was a right in Kirkalocka in the case of default by Zenith to take possession of the Zenith Power Plant to the extent reasonably necessary to enable Kirkalocka to exercise the Step-In Right. During the exercise of a Step-In Right and, so far as practicable, having regard to the condition of, and the extent to which Kirkalocka has assumed possession of the Zenith Power Plant in accordance with the provisions of the PPA, Kirkalocka was to act in a particular way (emphasis added). These provisions in the PPA support the conclusion that it was Zenith which had and retained possession of the Zenith Power Plant throughout the term of the agreement. The way in which the Zenith Power Plant was operated as deposed by Mr Vaughan and Mr Cooper, including locking the doors to the Zenith Power Plant, requiring visitors to the Zenith Power Plant to sign in and the wearing of Zenith uniforms, is consistent with a conclusion that Zenith had possession of the Zenith Power Plant and retained that possession throughout the operation of the PPA.

A PPS within s 12(3)(c) 42 It is convenient to deal with this specific provision before turning to the general provision, that is, s 12(1). 43 As I have said, with respect to s 12(3)(c) of the PPSA, "the interest of a lessor or bailor of goods under a PPS lease", Kirkalocka made written submissions, but in his oral submissions, counsel for Kirkalocka acknowledged that the control measures under the PPA, "complicate this question somewhat". Counsel for Kirkalocka indicated that its primary argument was in respect of the retention of title and the "style" of a hire purchase agreement and that Kirkalocka rested on its written submissions with respect to s 12(3)(c) and a PPS lease. 44 With respect to a bailment as referred to in s 12(3)(c), there is no dispute between the parties that the common law definition applies (see De Bourbel Pty Ltd (in liq) v Distilleria Pty Ltd [2023] SASC 88 at [420]). The essence of bailment is that there is a transfer of possession of the relevant goods from the bailor to the bailee (Hobbs v Petersham Transport Co Pty Ltd [1971] HCA 26; (1971) 124 CLR 220 at 238 per Windeyer J; Palmer on Bailment at 1-001). The requirements for possession to be established were considered by Edelman J in Hocking v Director-General of the National Archives of Australia [2020] HCA 19; (2020) 271 CLR 1 at [206] (see also Strange Investments at [76]-[77] and [80]). 45 In my view, Zenith's approach to s 12(3)(c) is correct because a feature of bailment is the possession of the goods in question and the ability to prevent third parties, including the bailor, from interfering with the possession of the bailee. That is not present in this case because the lessor or bailor itself is in possession of the goods as I have explained. 46 In those circumstances, I do not need to consider the other two issues with respect to s 12(3)(c) and the definition of a PPS lease, namely, whether Zenith, a special purpose vehicle, created to deal only with the Kirkalocka Gold Project, was not a bailment (assuming it was a bailment), by a bailor who is regularly engaged in the business of the bailment of leasing goods and a bailment for which the bailee provided value. 47 In case this matter goes further, I will indicate my views on these two issues. 48 I would decide the first issue in favour of Zenith and the second issue in favour of Kirkalocka. 49 In relation to the first issue, there can be no dispute that Zenith was engaged in a business which involved the building, ownership and operation of the Zenith Power Plant. This was one of the businesses of the Zenith Group, the other being the management, operation and maintenance of power stations on the sites of clients. The question then is whether Zenith was regularly engaged in the business of bailing goods. I do not think that can be said of Zenith which was only engaged in one project involving the building, ownership and operation of a power plant. The only way that conclusion can be avoided is by considering that it is appropriate to approach the matter by reference to the Zenith Group of Companies as a whole. I do not think that is possible in circumstances in which Zenith is a separate corporate entity and the question is whether it was regularly engaged in the business of leasing goods. 50 Again, assuming that there was a bailment, I consider that Kirkalocka provided value. Kirkalocka was paying, not only Energy Charges for the electricity it provided, but Capacity Charges which were payable even during periods where electricity was not being supplied by the Zenith Power Plant. 51 In conclusion, Zenith did not have a security interest by reason of s 12(3)(c) of the PPSA.

A Transaction within s 12(1) 52 I begin by identifying a number of general propositions of law which I did not understand to be in dispute. 53 The concept of a "security interest" under the PPSA is more than a mere grouping of a range of relationships arising under the general law. The effect of the PPSA is to grant a distinct security interest which the section provides is an interest in personal property "provided for" by a transaction and without regard to the form of the transaction or the identity of the person who has title to the property (Gold Valley Iron Pty Ltd (in liq) v OPS Screening & Crushing Equipment Pty Ltd [2022] WASCA 134 (Gold Valley Iron) at [251] per Vaughan JA). In Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd [2014] VSCA 326; (2014) 49 VR 86 (Dura), the definition was described by Santamaria JA, with whom Maxwell P and Whelan JA agreed, as a "functional" definition. I gather his Honour means by this a definition designed or adapted primarily to perform some operation or duty. Section 12(1) directs attention to two matters and they are whether there is an interest in personal property provided for by a transaction and whether, in substance, the interest in personal property secures payment or performance of an obligation (Gold Valley Iron at [189] per Buss P and Murphy JA). Whether the second element is satisfied raises a question of the characterisation of the transaction to which the parties have agreed. It is not merely a question of the intention of the parties and it is not merely a question of interpretation (Gold Valley Iron at [198] per Buss P and Murphy JA). The subsection provides that one is directed to consider whether the transaction in substance secures payment or performance of an obligation and that is to be done without regard to the form of the transaction or the identity of the person who has title to the property. The requirement is to disregard form and naturally invites consideration of the commercial or economic substance of the transaction and a consideration of the way in which the transaction works or operates (Gold Valley Iron at [197] per Buss P and Murphy JA; at [257] per Vaughan JA). Although s 12(1) refers to a transaction, where the transaction is created by a written agreement, the provision of the agreement must be construed for the purpose and in the course of ascertaining the substance of the transaction (Gold Valley Iron at [114] Per Buss P and Murphy JA). 54 The word "interest" in personal property is defined in the Dictionary in the PPSA to include a right in the personal property. The term "security agreement" is defined to mean an agreement or act by which a security interest is created, arises or is provided for, or writing evidencing such an agreement or act. 55 In order for a transaction to give rise to a security interest in substance, there must be something to create an interest that is enforceable in the event of non-payment or non-performance of the obligation (Gold Valley Iron at [263] per Vaughan JA; Dura at [107] per Santamaria JA). Ordinarily, the concept of a security interest under the PPSA covers a situation where one person (the secured party) has an interest in some personal property in another's possession to assure or support the payment or performance of an obligation (Gold Valley Iron at [259] per Vaughan JA). The requirement in s 12(1) that the interest in personal property be "provided for" by a transaction is different and wider than words such as "created" or "arising" used in other parts of the PPSA (see, for example, s 8(1)(a), (b), (c), (g), the definition of "security agreement" and s 73(1) and s 73(2) and Central Cleaning Supplies (Australia) Pty Ltd v Elkerton (in his capacity as joint and several liquidator of Swan Services Pty Ltd (in liq)) [2015] VSCA 92; (2015) 321 ALR 181 (Central Cleaning Supplies) at [27]-[20]). In Central Cleaning Supplies, the appellant was the supplier of cleaning equipment to a purchaser. The invoice contained a statement that the subject of the sale would remain the property of Central until the purchase price had been paid to Central Cleaning Supplies in full. In the course of the Full Court's reasons, the Court said (at [16]): One of the examples given in s 12(2) - by subpara (d) - is "a conditional sale agreement (including an agreement to sell subject to retention of title)". Plainly enough, each contract between Central and Swan for the sale and supply of particular equipment was "an agreement to sell subject to retention to title". It was, moreover, a transaction of the requisite character, because in substance the retention of title by Central secured payment of the purchase price by Swan. Thus, the interest in the goods "provided by" that transaction was a "security interest" within the meaning of s 12(1). 56 In Gold Valley Iron, Vaughan JA said (at [363]): The single most important feature is the option to purchase. When the nature and structure of the option to purchase is understood it becomes apparent that in substance the hire agreements are a secured sales transaction. The transaction takes its legal form as a title-retention device for security purposes. The implications of the option to purchase are supported by a number of other features of the hire agreement. The contrary factors are peripheral indicia which do not detract from the conclusion that the transaction serves the function of securing the payment or the performance of an obligation as inheres from the option to purchase in the circumstances of the hire agreements. Gold Valley Iron involved an agreement for the hire of mining equipment. The hire agreements were dated 13 December 2019 and involved the respondent in that case agreeing to hire to the first appellant mining equipment owned by the respondent for at least 10 continuous months. On 17 February 2020, the first appellant was placed into voluntary administration. On 19 March 2020, the first appellant was placed into liquidation and the second and third appellants were appointed its joint and several liquidators. After the first appellant was placed into liquidation, the respondent demanded that the appellants return or release the mining equipment to the respondent. The appeal to the Western Australian Court of Appeal was allowed. 57 I note the following passage in Palmer on Bailment: Conclusion 3-077 The law relating to the effectiveness of retention of title clauses is now reasonably clear in England and Wales. The following propositions are established by the cases: (1) "Simple" retention of title clauses whereby a seller retains legal title until payment of the price of the goods themselves are fully effective and do not require registration. … 58 Kirkalocka's contention is that there is a security interest within s 12(1) and/or s 12(3)(c) of the PPSA. I did not understand Kirkalocka to argue that the provisions of the PPA fell within any of the examples in s 12(2) and, in particular, a conditional sale agreement (including an agreement to sell subject to retention of title) or a hire purchase agreement. As I have said, Kirkalocka's case is that, although the provisions of the PPA do not amount to these type of agreements, the examples give colour to the scope of s 12(1), particularly the reference to retention of title and the fact, on Kirkalocka's submission, the PPA operates in a very similar fashion to a hire purchase agreement. 59 In the alternative, the PPA "provided for" a further interest in the Power Plant, namely, Zenith's interest as the bailer of the Power Plant. 60 Kirkalocka submitted that the PPA conferred on it an option to purchase the Power Plant and if that option was exercised such that the purchase occurred after more than 10 years of electricity being supplied, the Buy Out Price was $0. It submitted that thus described, the PPA gave rise to a transaction which was closely akin to a hire purchase transaction. Kirkalocka submitted that the real question is whether that transaction, in substance, secured payment or performance of an obligation. 61 Kirkalocka relied on the decision in Re Arcabi Pty Ltd (in liq); ex parte Theobold [2014] WASC 310; (2014) 288 FLR 236. The business of the company in that case included the storage and sale of rare coins and bank notes. Some of the goods were owned by third parties and were held by Arcabi pursuant to bail and consignment arrangements. The receivers and managers of the company sought directions from the Court under the Court's general power in s 424 of the Corporations Act 2001 (Cth) in relation to the controllers of the company profiting. Master Sanderson referred to s 12(1) and s 12(3)(b) of the PPSA which deals with the interest of a consignor who delivers goods to a consignee under a commercial consignment and the definition of a PPS lease within s 13. The Master said (at [20]): There are several factors accepted by overseas courts as indicia of when bailment arrangements secure payment or performance of an obligation. These include: (a) the bailment provides that the ownership of the goods will vest in the bailee on expiry of the bailment agreement; (b) the bailee has an obligation to purchase the goods or an option to purchase the goods or extend the term of the arrangement at a 'bargain' price such that it would be reasonable to expect the bailee to exercise the option; (c) the term of the arrangement is for a major part of the economic life of the goods; and (d) the minimum payments under the bailment amount to substantially all the capital cost of the goods. 62 Kirkalocka submits that the requirements in (b), (c) and (d) above are satisfied in this case. First, Kirkalocka had the option to purchase the Zenith Power Plant, including for $0 if the option was exercised after 10 years of Kirkalocka having paid the Charges. The decline in the Buy Out Price over time provided an economic incentive for Kirkalocka to see out the PPA. Secondly, the term of the PPA being 10 years, exceeded the useful economic life of the central components of the Power Plant, namely, the gas and diesel generators. Thirdly, even putting aside the adjustments to be made under the PPA, the Capacity Charges over the term of the PPA exceeded the market value of the Power Plant of $7.1 million (if relocated) or $8.2 million (if left remaining on the Site). The factual matters in the second and third propositions were asserted, but not proved with two paragraphs in Mr Stocks' affidavit being excluded. 63 Kirkalocka's key submission is that the PPA, in substance, secured payment or performance of Kirkalocka's obligation to pay to Zenith the Charges, including the Capacity Charge, the fixed nature of which indicates that it was intended, at least in part, to cover the capital cost of the Power Plant. It submits that properly analysed, the PPA, in substance, gave rise to a title retention device that secured Kirkalocka's obligation to pay the Charges. The references in the PPA to registration under the Personal Properties Securities Register (PPSR) support the proposition that Zenith had a security interest. 64 Kirkalocka advanced an alternative interest in the plant and equipment comprising the Zenith Power Plant. This interest is the retention of Zenith's legal title in the Zenith Power Plant. The submission is that in circumstances where, under the PPA, Zenith agreed, in effect, to supply and instal the Zenith Power Plant at the Site controlled by Kirkalocka and to operate the Zenith Power Plant to provide electricity exclusive to Kirkalocka, clause 3.5(b) was, in substance, a retention of title device, the effect of which was that title to the Zenith Power Plant only passed to Kirkalocka if it exercised its purchase option. Kirkalocka contended that Zenith's submission that it was the Termination Payment and not the option to purchase which secured its obligations should be rejected because it neglects to take into account that the Termination Payment and the option to purchase are linked. The terms of the PPA provided that the Termination Payment was only payable if Kirkalocka elected not to exercise the option to purchase. Together with the retention of title in clause 3.5(b), the two concepts worked in unison to secure performance of Kirkalocka's obligations under the PPA and, in particular, Kirkalocka's obligation to take electricity from Zenith and to pay the Charges. 65 Zenith advanced four reasons as to why the PPA did not create a "security interest" within the meaning of s 12(1) of the PPSA. 66 First, Zenith submits that its legal title to the plant and equipment derives from them being chattels and therefore arises under the general law and not pursuant to the PPA. Zenith provided an example: Zenith's legal title to the forklift does not arise from the fact that it was brought onto the Site for the purposes of the PPA. Legal title under the general law is not an interest to which the PPSA applies. Section 8 provides, relevantly, that the Act does not apply to a lien, charge, or other interest in personal property that is created, arises or is provided for by the operation of the general law. 67 Secondly, the PPA did not constitute a bailment of the plant and equipment by Zenith that gave Kirkalocka any possessory title to it. 68 Thirdly, Zenith never gave possession in the plant and equipment to Kirkalocka and, in those circumstances, the provisions of the PPA were different from a hire purchase agreement because in contrast with a hire purchase agreement, Kirkalocka never had possession of the Zenith Power Plant. In those circumstances, Kirkalocka's obligation to make payments under the PPA was not secured by Zenith's reversionary interest because legal title and possessory title were never separated. 69 Fourthly, the option to purchase does not secure Kirkalocka's obligations under the PPA. The PPA was for a term of 10 years. Kirkalocka submits that consistent with the usual measure of contract damages, that is to say, such sum as will put the plaintiff in the position as if the contract was performed, the parties agreed that if the PPA was terminated by Kirkalocka, then Kirkalocka would pay to Zenith the Termination Payment, the Demobilisation Payment and break costs as Zenith's sole and exclusive remedy. The parties agreed that the Termination Payment was a genuine pre-estimate of Zenith's loss and damage. In those circumstances, the performance of Kirkalocka's obligations under the agreement were secured by those contractual obligations. Whilst the Purchase Right under clause 7 could only be exercised by Kirkalocka, Zenith submitted that the Purchase Right did not operate as a conditional sale or "title retention device" because none of the incidents of ownership, that is to say, possession and control, accrued to Kirkalocka prior to the exercise of that right. 70 Zenith also submitted that the references in clause 28 of the PPA concerning the PPSA, are not determinative as to whether and, if so, in what respects the PPA creates security interests within the meaning of the PPSA. Zenith submitted that parties may and frequently do agree to facilitate the registration of interests under the PPSA in order to promote certainty and avoid disputation. 71 In Gold Valley Iron, Vaughan JA, after referring to the examples in s 12(2)(d),(e),(h) and (i) of the PPSA, said the following (at [271]-[273]): 271 With each of these examples there is no immediate passing of legal title (albeit that, with some of these transactions, an eventual passing of legal title is anticipated or at least possible). However, in each case there is a transfer of possession. As between conditional seller/purchaser, owner/hirer, consignor/consignee and lessor/lessee the latter takes possession of the goods. So these are transactions where one party (the creditor/seller) retains legal title but another party (the debtor) has possession and apparent ownership. 272 The operation of the PPSA in relation to such transactions is awkward and, to some extent, counter intuitive. It might be thought anomalous that the party in possession through a transaction by way of conditional sale, hire purchase, consignment or lease may provide for a security interest in the relevant goods in favour of the legal title holder. A non-owner debtor is providing for an interest in personal property in favour of the owner. So too it may seem anomalous to say that the secured party's interest in the goods (the secured party being the creditor/seller) is provided for by the transaction where the secured party owned the goods before the transaction and continues to hold legal title after the transaction. 273 One must, however, put aside preconceived notions based on the operation of the general law and instead apply oneself to the text and structure of the PPSA. Counsel referred to this passage whilst at the same time acknowledged that the concept that the owner of goods could be granted an interest in its own goods seem "counterintuitive". 72 The provisions of the PPA do not give rise to a conditional sale because Kirkalocka does not agree to purchase the goods, it has only an option to purchase the goods. The other matter is that possession of the Zenith Power Plant vested with Zenith and Kirkalocka never possessed the Zenith Power Plant. Nor do the provisions of the PPA give rise to a hire purchase agreement because it cannot be said that in a real sense Kirkalocka was using the Zenith Power Plant for the term of the PPA (see Bridge MG , Personal Property Law, (3rd ed, Oxford University Press, 2002) pp 40, 121, 135). There is also the matter already mentioned that I have found that Kirkalocka never had possession of the Zenith Power Plant. 73 The case involves some unusual circumstances. Had the Zenith Power Plant been in the possession of Kirkalocka, then subject to one matter, the case would have been relatively straightforward. There would have been a security interest in personal property being Zenith's legal title in the Zenith Power Plant and its ability to reclaim the plant on default by Kirkalocka in the performance of its obligations under the PPA or the exercise by Kirkalocka of its option to purchase. 74 The one matter is the argument that the claimed security interest is based on Zenith's legal title and this has the consequence that the PPSA does not apply because the interest in personal property "is created, arises or is provided for by operation of the general law" (see s 8(1)(c) of the PSSA). I reject this argument. The provision in the PPA which deals with title to the Zenith Power Plant (i.e., clause 3.5) is based on the assumption that Zenith retained the title and interest in the Works and the Zenith Power Plant, subject to Kirkalocka's exercise of the option to purchase and an assumption that Kirkalocka retains the title and interest in the "Buyer's [i.e., Kirkalocka] Infrastructure". I reject the argument because I consider that the words in s 12(1) "provided for" should be given a broad construction and Zenith's legal interest was not created or arose or provided for by operation of the general law. There were no Works or Zenith Power Plant prior to the PPA and by reason of the provisions of the general law. It was the PPA which provided that the Zenith Power Plant was not to be considered a fixture on the Site and that there was to be demobilisation of the Zenith Power Plant and its return to Perth, Western Australia should Kirkalocka not exercise the right to purchase. The legal interest did not precede the performance of the Works and therefore the construction of the Zenith Power Plant. 75 The question then comes down to whether the fact that at all times Zenith retained possession of the Zenith Power Plant means that it did not have a security interest within s 12(1) of the PPSA. I have given this matter anxious consideration. I was not referred to any authority directly on the point. I have concluded that possession or not, s 12(1) is wide enough to cover a situation such as the present, particularly where Kirkalocka by the end of the term, and assuming no early termination, would have paid off a substantial proportion of the value of the Zenith Power Plant and possibly more. 76 Zenith's interest in personal property is the legal interest with a retention of title clause which can be engaged should Kirkalocka not perform its obligations under the PPA, including its obligation to make payment of the Capacity Charges and the Energy Charges. I do not consider that the fact that the Termination Payment for Kirkalocka's default and which the parties agreed was a genuine pre-estimate of the loss and damage that would be suffered by Zenith for the early termination of the PPA makes any difference to the conclusion I have reached, particularly as I consider it clear that there would be a security interest had Kirkalocka had possession of the Zenith Power Plant and there is no apparent link between the issue of possession and the agreed quantum for loss and damage suffered as a result of a breach of the PPA. 77 In conclusion, Zenith had a security interest by reason of s 12(1) of the PPSA.

Perfection of the Security Interest 78 The date on which Kirkalocka went into administration was 1 May 2021. The date on which Zenith registered its security interest was 10 January 2022. Zenith did not perfect its security interest by registration. I did not understand Zenith to argue to the contrary. 79 Zenith has argued that its security interest was perfected prior to 1 May 2021 by reason of the operation of ss 19-21. The relevant parts of those sections are set out above (at [6]). 80 Zenith submitted first, that the security interest attached to the collateral for the purposes of s 19(2) of the PPSA on execution of a PPA or satisfaction or waiver of the conditions precedent in clause 2.2 when Kirkalocka obtained purchase rights in exchange for its promises to pay. Secondly, Zenith submitted that the security interest was enforceable against a third party within s 20(1) because the security had attached to the collateral (being the plant and equipment) and Zenith, as the secured party, was in possession of it. Thirdly, Zenith submitted that the security interest was perfected within the meaning of s 21(1) and s 21(2)(b) of the PPSA as at 1 May 2021 because Zenith was in possession of the plant and equipment other than as a result of seizure or repossession. There is a further subsection in the PPSA to be considered in connection with the issue of possession of the Zenith Power Plant. Section 24(1) and (2) of the PPSA provide that a secured party cannot have possession of personal property if the property is in the actual or apparent possession of the grantor or debtor, or another person on behalf of the grantor or debtor. A grantor or debtor cannot have possession of personal property if the property is in the actual or apparent possession of the secured party, or another person on behalf of a secured party. 81 Kirkalocka did not suggest that the elements of ss 19-21 were not established except for the requirement that Zenith be in the possession or apparent possession of the Zenith Power Plant. I have already found that the Zenith Power Plant was in the possession of Zenith. The actual possession requirement is satisfied and the critical issue is whether Zenith was in apparent possession of the Zenith Power Plant. Was it in the apparent possession of Zenith, or in the apparent possession of Kirkalocka? 82 With respect to the concept of apparent possession referred to in s 24(1), Kirkalocka submitted that it had apparent possession of the Zenith Power Plant because a stranger walking past the Site immediately before Kirkalocka went into administration would have said that Kirkalocka had apparent possession of the plant and equipment comprising the Zenith Power Plant. In support of that proposition, Kirkalocka referred to Flown Pty Ltd (Administrators Appointed) v Goldrange Pty Ltd [2016] WASC 419; (2016) 316 FLR 81. That was a case in which the holder of the security interest had not registered the charge he had over the property in accordance with the PPSA. The first defendant claimed to have perfected its interest by possession, on the basis that he had affixed a notice on the premises stating that the re-entered the property. Master Sanderson found that the plaintiff retained possession of the plant and equipment. As part of his reasoning, the Master said (at [31]): … A stranger visiting the Drovers Marketplace sometime after 11.30 am on 15 July 2016 and walking passed the leased premises would have seen nothing out of the ordinary. The person would have said the tenant was apparently in possession of the fixture and fittings. They were not to know the first defendant was as a matter of law entitled to be in possession of the premises and as a consequence to be in possession of the fixtures and fittings. 83 Kirkalocka further submitted that, for the purpose of s 24 of the PPSA, apparent possession ought not to be construed in the common law sense identified by Pritchard J in Strange Investments, that is, it involves possession in fact without an intention to possess. The decision in Strange Investments did not concern the PPSA. Kirkalocka made reference to the Explanatory Memorandum for the PPSA as set out in the judgment of Markovic J in Knauf Plasterboard Pty Ltd v Plasterboard West Pty Ltd (In Liquidation) (Receivers and Managers Appointed) [2017] FCA 866; (2017) 254 FCR 559 at [130]. Kirkalocka referred to the statements that possession would not equate to the common law meaning of possession and that even if a secured party had actual possession of collateral, if it appears to be in the possession of the grantor or another person, the secured party would not have possession. Kirkalocka's submission is that apparent possession is not being used in any strict common law sense, but rather in a colloquial sense involving whether or not to the bystander it would appear that the relevant goods were in the possession of the grantor or the secured party as the case may be. 84 Zenith submitted that "apparent possession" means possession in fact and does not mean something that appears to a hypothetical observer with some unknown degree of knowledge. In any event, Zenith submitted that if an observer had gone onto the Site, what that person would have observed is that the switchroom had a large sign on it of "Zenith Pacific" and that the engine hall had a "No Unauthorised Personnel" sign. They would have observed that the Zenith Power Plant was staffed by a person wearing a Zenith uniform. If they had knocked on the door to seek to gain entrance, they would have been asked by Zenith to sign a visitor book. Zenith submitted that all of those matters are consistent with possession in fact and, to the extent a hypothetical observer is relevant to apparent possession, that is what they would see. What they would see standing at the front gate is simply irrelevant. 85 The word "apparent" is an ordinary English word which, in this context, means "seeming; ostensible: the apparent motion of the sun" (Macquarie Dictionary, 6th ed). 86 The word "possession" is defined in the Dictionary in the PPSA to have "a meaning affected by section 24". There is no definition in the Dictionary or s 24 of either "actual possession" or of "apparent possession". 87 I was not referred to any authority on the issue of apparent possession other than that to which I have already referred. I note that in Tyler ELG, Young PW and Croft CE, Fisher & Lightwood's Law of Mortgage (3rd Australian ed, LexisNexis Butterworths, 2014), the following passage appears at [5.43]: Section 24(1) provides that possession by the secured party of goods that are 'actual[ly] or apparent[ly]' in the possession of the grantor or debtor does not amount to 'possession' within the Act. 'Apparent possession' is a concept employed in the context of bills of sale, and suggests an objective standard; that is, who would a bystander believe to be in possession? See Robinson v Briggs (1870-1871) LR 6 Exch 1; Re Couston; Ex parte Watkins [1873] LR 8 Ch 520; Harris and Mirzai, above, p 126; Robert Nettlefold Pty Ltd v Schofield (1934) 29 Tas LR 93; cf Ramsay v Margrett [1894] 2 QB 18; French v Gething [1922] 1 KB 236; Koppel v Koppel [1966] 1 WLR 802. The main purpose of s 24(1) appears to be to ensure that secured parties disabuse others of the illusion of the grantor/debtor's apparent ownership: compare Charlesworth v Mills [1892] AC 231; Auckland Milk Co Ltd v Levy [1934] GLR 798; see also Plunketts Ltd v Harrods Ltd (in liquidation) (1942) 44 WALR 1 at 6-7. I have considered the cases referred to in that paragraph. I note that a number of them deal with the Bills of Sale Act 1878 (UK) and the doctrine of reputed ownership. 88 The extent to which the hypothetical observer may have a duty to inquire may be affected by the particular trade or occupation concerned. In re Couston, Ex parte Watkins (1873) LR 8 Ch 520, Lord Selborne LC said (at 528-529): The doctrine of reputed ownership does not require any investigation into the actual state of knowledge or belief, either of all creditors, or of particular creditors, and still less of the outside world, who are no creditors at all, as to the position of particular goods. It is enough for the doctrine if those goods are in such a situation as to convey to the minds of those who know their situation the reputation of ownership, that reputation arising by the legitimate exercise of reason and judgment on the knowledge of those facts which are capable of being generally known to those who choose to make inquiry on the subject. It is not at all necessary to examine into the degree of actual knowledge which is possessed, but the Court must judge from the situation of the goods what inference as to the ownership might be legitimately drawn by those who knew the facts. I do not mean the facts that are only known to the parties dealing with the goods, but such facts as are capable of being, and naturally would be, the subject of general knowledge to those who take any means to inform themselves on the subject. 89 The cases are of limited assistance because they were decided in a different context. 90 I do not think the concept of "apparent possession" means possession in fact, as Zenith argued, or that the issue is to be determined by reference to a hypothetical observer driving or walking past the Site as Kirkalocka contends. 91 A number of photographs were tendered showing the entrance to the Site, aspects of the inside of the Site and the outside of the Zenith Power Plant and the interior of buildings on the Zenith Power Plant site. The photographs were supplemented by evidence of various witnesses as to access to the Site and security measures for both the Site and the Zenith Power Plant site. In addition, there was an aerial photograph of the Site. 92 Some preliminary observations may be made. The Zenith Power Plant is on Kirkalocka's land. That is a significant starting point. Furthermore, there is a perimeter fence around the majority of the Site and where there is no fence, there is vegetation. A visitor to the Site must sign in before proceeding further into the Site. 93 The Site is a large one of some 2,000 acres and I was told that the Zenith Power Plant was deep into the Site. That matter and the photographs of the entrance to the Site lead me to conclude that the Zenith Power Plant could not be seen from the entrance to the Site. A visitor book was to be signed before entry into the Zenith Power Plant site and there were a number of "No Unauthorised Personnel" signs. The nature of the personal property in this case is unusual in that it consists of buildings and associated equipment. 94 I do not consider it is appropriate to place the hypothetical observer at the entrance or perimeter fence of the Site. The hypothetical observer must at least be able to see the personal property in issue. Driving past may be sufficient in the case of a small site where the goods are inside a building in the possession of the owner or occupier of those buildings. This case is, however, a very different case. If the hypothetical observer was inside the Site and was able to view the Zenith Power Plant from a reasonable distance, that observer would see the large Zenith Pacific sign on the building and I consider would conclude that Zenith was at least in the apparent possession of Zenith. The position is even stronger if it is appropriate to place the hypothetical observer in one of the buildings comprising the Zenith Power Plant because that person would see in large letters "Zenith Pacific" on the floor of the building and various other indications that Zenith was in possession. However, it is unnecessary to go that far, to reach the conclusion that Zenith was in apparent possession of the Zenith Power Plant. 95 In light of these conclusions, I find that Zenith was in possession and apparent possession of the Zenith Power Plant before Kirkalocka went into administration. It had perfected its security before that time.

Conclusions 96 For these reasons, the Originating application must be dismissed. I uphold the Cross-claim. I will hear the parties as to the appropriate orders. I certify that the preceding ninety-six (96) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Besanko.