Metcash Trading Limited v 8 Nai Investments Pty Limited; in the matter of 8 Nai Investments Pty Limited

REASONS FOR JUDGMENT 1 This is an application by Metcash Trading Limited ("Metcash") for an order under s 266(4) of the Corporations Act 2001 (Cth) extending the time for lodgement of a notice of charge created on 24 June 2011. The evidence establishes that the charge was lodged with ASIC on 31 August 2011. However, the charge was lodged 23 days after the period allowed by s 263 for the lodgement of the charge. The reasons for the failure to lodge the charge within the time prescribed by the Act are explained in the affidavit of Mr Michael Milnes sworn on 27 October 2011. Mr Milnes' affidavit and the documents exhibited to it explain the nature of the business of Metcash and the relevant background facts. 2 Metcash conducts the business of supplying groceries to independent supermarkets. Its standard terms and conditions include a requirement for the grant of security by the supermarket to secure repayment of any debt which arises by reason of the supply of stock. 3 The Defendant, 8 Nai Investments Pty Limited ("8 Nai"), conducts an IGA supermarket at McEvoy Street, Alexandria. 8 Nai granted a fixed and floating charge in the standard terms to Metcash on 24 June 2011. The charge is a fixed and floating charge which secures the performance of the obligations of 8 Nai to Metcash on any account whatsoever. As Mr Milnes observes in his affidavit, the purpose for the charge was to give effect to Metcash's usual business terms, which require security for the provision of stock to 8 Nai's supermarket. 4 The reason why the charge was not registered within the prescribed time is explained in paragraphs 19 to 23 of Mr Milnes' affidavit and in particular in a number of emails to which I was taken this afternoon. The effect of the evidence is that an officer of Metcash, who occupies a relatively junior position in relation to the registration of securities, handled the matter. She was under the mistaken belief that Metcash had agreed to defer the registration of its charge until another charge thought to be granted by 8 Nai to Bankwest was registered. It was not until after the last day for registration of the charge that Mr Sutherland, the Deputy General Legal Counsel of Metcash, realised that the charge had not been registered and the consequences of that fact. Mr Sutherland directed the immediate registration of the charge and the charge was registered with ASIC on 31 August 2011, albeit 23 days after the prescribed date. Mr Milnes' affidavit makes it clear that 8 Nai is presently in default of its obligations under the charge. 5 The affidavit does not provide any detail as to the financial position of 8 Nai, but, as Mr Golledge submits, it would be difficult for a chargee in the present position to provide evidence as to the financial position of the company. The position is exacerbated in the present case because 8 Nai does not appear on the present application. Nevertheless, emails from the solicitors for 8 Nai demonstrate that 8 Nai does not oppose the order which is sought this afternoon and that is a matter to be taken into account on the present application. 6 It appears from Mr Milnes' affidavit that Metcash wishes to appoint receivers to the business of the IGA supermarket conducted by 8 Nai because Metcash is currently owed an amount of approximately $191,000 in respect of goods supplied to 8 Nai, the indebtedness for which would be secured by the charge. The court's power to make an order under s 266(4) is conditioned upon the existence of the jurisdictional facts stated in that subsection. 7 The subsection states two jurisdictional facts in paragraph (a) and (b). It is not clear whether a third matter, namely, that it is "just and equitable" to make an order, is the statement of a jurisdictional fact or a statement of the basis upon which the discretion is to be exercised. 8 The scope of the power was considered in some detail by a Full Court in Hewlett Packard Australia Pty Limited v Capital Finance Pty Limited (2003) 47 ACSR 589 ("Hewlett Packard"). There the court was considering the exercise of the power in circumstances where the company had gone into administration under Part 5.3A of the Act prior to the date of the application to the court to exercise the power under s 266(4). The separate judgments of Branson J and Allsop J make it clear that the discretion conferred by s 266(4) is a broad one. However, as Branson J observed at [29], the court would ordinarily require some evidence as to the financial position of the company. 9 It seems to me that, in the present case, the evidence establishes that the failure to register the charge within the prescribed time was "accidental" or due to "inadvertence" within the meaning of s 266(4). What is established in the present case is that although the person who I have described as a junior officer took a deliberate decision not to register the charge with ASIC until she was provided with information that a charge to Bankwest had been registered, she did not advert to the significance of the failure to register the charge within the 45-day period prescribed by the Act. Thus her actions were not deliberate in the sense that she was intending to flout the 45-day period. That is to say, not knowing all of the consequences of a particular action may, as this case illustrates, still amount to inadvertence. 10 It seems to me that the position in the present case is analogous to that which arose in the decision of National Australia Bank Ltd v Davis & Waddell (Vic) Pty Ltd (2003) 44 ASCR 296. In that case, the officers of the bank wrongly believed that the charge could not be registered without the completion of certain documentation and that the bank would incur penalties for late registration. They did not realise that the failure to register the charge rendered it void against the liquidator. Thus the decision of the bank officers was deliberate in that they thought they could defer lodging the charge for registration, but it was inadvertent because they did not appreciate the consequences of their failure to register the charge within the period of 45 days after its execution. 11 More recently in Dempsey Resources Pty Ltd v Continental Coal Ltd [2009] FCA 1157, Gilmour J considered the meaning of "inadvertence" in the context of an application under s 266(4). Although his Honour endeavoured to give some meaning to the language of the section, the application was made on facts which are different from the present. I do not think that his Honour's observations assist in the present matter but that is not to say that his Honour was incorrect in the approach that he took in that case. 12 I have taken into account the fact that I do not have evidence as to the full financial position of 8 Nai. Notwithstanding the observations made in Hewlett Packard, it seems to me that the position is sufficiently covered by making an order in the terms proposed by Mr Golledge which will reserve liberty to any administrator, liquidator or unsecured creditor of 8 Nai to apply to discharge or vary the order extending the date for lodgement of the charge. 13 That is the approach which has been taken in a number of recent cases where the circumstances precluded the party seeking the extension from supplying the court with information as to the financial position of the company: see Panadell Architectural Cladding Systems Pty Ltd v Panadell Industries Pty Ltd [2010] FCA 511 at [16] per Emmett J; see also Seed Corporate Finance Pty Ltd v Savvytel Pty Ltd [2010] FCA 733. 14 The terms of order 3 proposed by Mr Golledge make it clear that the orders which I will make preserve the position of unsecured creditors and the order extending the date for registration of the charge would not operate so as to affect any question of priorities which would arise in the event that another charge was registered during the period between 8 August and 31 August 2011. 15 Accordingly I propose to make orders in terms of paragraphs 1, 2 and 3 of the short minutes of order. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson.