Perpetual Trustee Company Limited, in the matter of Perpetual Trustee Company Limited [2010] FCA 357

REASONS FOR JUDGMENT 1 Perpetual Trustee Company Limited (Perpetual) has applied for an order under s 266(4) of the Corporations Act 2001 (Cth) (the Act), extending the time for lodgement of a notice concerning acquisition of property subject to a charge. In order to put the application in its statutory context, it is necessary to say something about the operation of Part 2K.2 of Chapter 2K of the Act. 2 Under s 263(1)(a), where a company creates a charge, the company must ensure that there is lodged, within 45 days after the creation of the charge, a notice in the prescribed form setting out certain particulars. Under s 264(1), where a company acquires property that is subject to a charge that would have been registrable when it was created if it had been created by a company, the company must, within 45 days after the acquisition of the property, ensure that there is lodged a notice in the prescribed form in relation to the charge, setting out the name of the company, the date on which the property was so acquired, and otherwise complying with the requirements of s 263(1)(a). 3 Section 266(1) of the Act provides that where: · an order is made, or a resolution is passed, for the winding up of a company; or · an administrator of a company is appointed; or · 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, or the deed's administrator, as the case may be, unless a notice in respect of the charge was lodged under s 263 or s 264, as the case requires, within the relevant period, or at least six months before the critical day. 4 Under s 266(2)(c), the reference to the relevant period is to be construed as a reference, in relation to a charge to which s 264 applies, the period of 45 days after the chargee becomes aware that the property has been acquired by a company. Under s 266(8), critical day in relation to a company, means: · if the company is being wound up, the day when the winding up began; · if the company is under administration, the s 513C day in relation to the administration; or · if the company has executed a deed of company arrangement, the s 513C day in relation to the administration that ended when the deed was executed. The s 513C day is the day on which the relevant administration began. 5 However, under s 266(4), if the Court is satisfied that the failure to lodge a notice in respect of a charge: · was accidental or due to inadvertence, or some other sufficient cause, or · 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, the Court may, by order, extend the period for such further period as is specified in the order. 6 Under s 268 of the Act, where, after a registrable charge on property of a company has been created, a person other than the original chargee becomes the holder of the charge, the person who becomes the holder of the charge must, within 45 days after he, she or it becomes the holder of the charge, lodge a notice stating that he, she or it has become the holder of the charge, and give the company a copy of the notice. 7 The HBS Trust No. 1 was created pursuant to the terms of a Master Trust Deed of 21 June 2000. The parties to the Master Trust Deed were Heritage Building Society Limited (Heritage), HBS Custodian Pty Ltd (HBS) and SG Australia Asset Management Company Pty Ltd (Asset Management Company). By clause 2.1 of the Master Trust Deed, Asset Management Company was appointed, and agreed to act, as trustee. By clause 3.1, Asset Management Company agreed to hold each part of each trust and each asset of each trust on trust for the relevant beneficiary and subject to the terms and conditions of the Master Trust Deed. By clause 3.2, HBS may at any time create a trust by lodging with the trustee a duly completed and executed Notice of Creation of a Trust. 8 By clause 10.1, the trustee of a trust could borrow, for the purposes of, or in connection with the making of, investment in, acquisition of, or funding of assets, underlying mortgage loans and mortgage loan securities. Mortgage Loan is defined in the Master Trust Deed as including the rights constituted upon acceptance of standard loan offers for residential mortgage loan products. Provision is made for an offer by Heritage to sell an equitable interest in mortgage loans or mortgage loan securities to the trustee of a trust by delivering a Series Notice, which may be accepted by that trustee. 9 Thus, the principal assets of a trust established under the Master Trust Deed comprise a pool of home loans and associated mortgages under which Heritage is the lender or originator. Asset Management Company purchased from Heritage an equitable assignment of the rights under such home loans and mortgages and issued debt instruments (Notes), in order to fund those purchases. 10 Under the Master Trust Deed, the trustee of a trust receives income in the form of payments of interest and repayments of principal by borrowers under the relevant home loans. The trustee of the trust applies the income, each month, in accordance with a cashflow allocation methodology set out in the Series Notice. In broad terms, that involves paying the expenses of the relevant trust, paying interest and re‑paying principal on the Notes and paying the surplus to the beneficiary named in respect of the relevant trust. 11 Simultaneously with, or immediately after the creation of the HBS Trust No. 1, Asset Management Company, as trustee, charged the present and future assets of the HBS Trust No. 1. The charge was created by Security Trust Deed, which is dated 21 June 2000. The parties to the Security Trust Deed were Asset Management Company, SG Australia Custodian Company Pty Limited (the Custodian Company) and HBS as Chargor, Security Trustee and Manager respectively (the Charge). The present application is made in respect of the Charge created by the Security Trust Deed. Under the terms of the Security Trust Deed, the Custodian Company held the benefit of the charge on trust for a number of persons referred to as Chargees. Those persons include the holders of Notes issued by Asset Management Company as trustee of the HBS Trust No. 1. 12 In March 2005, steps were taken to replace Asset Management Company and the Custodian Company. Four instruments dated 7 March 2005 were executed, being: · Deed of Retirement and Appointment of Security Trustee, · Deed of Appointment of Security Trustee, · Deed of Retirement and Appointment of Trustee and · Deed of Appointment of Trustee. 13 Under the first instrument, P.T. Limited (P.T.) replaced the Custodian Company as trustee of the Security Trust established under the Security Trust Deed. By the operation of s 9 of the Trustee Act 1925 (NSW) the assets of the Security Trust, and in particular the benefit of the charge, were vested in P.T. Under the third instrument, Perpetual replaced Asset Management Company (which had changed its name to SG Australia Transaction Management Pty Limited) as trustee of HBS Trust No. 1. By the operation of s 9 of the Trustee Act, the assets of HBS Trust No. 1 were vested in Perpetual. Thus there was a transfer of both the benefit of the Charge and the property the subject of the Charge. 14 The transfers took effect on 14 March 2005. Notice under section 268 of the Act was duly given. However, no notice was given pursuant to s 264. It is the failure to give notice under s 264 that gives rise to the present application. 15 Messrs Allens Arthur Robinson, solicitors, acted on behalf of Société Générale and related entities in relation to the establishment of the HBS Trust No. 1 in 2001. Mr Mark Wormell was the partner of the firm who had carriage of that matter. Allens Arthur Robinson also acted in relation to the transactions involving the replacement of Asset Management Company and the Custodian Company in 2005. Allens Arthur Robinson were responsible for ensuring that the forms necessary to protect the interests of the holders of Notes in respect of the HBS Trust No. 1 were prepared and lodged with Australian Securities and Investments Commission (the Commission). 16 Mr Wormell intended that a notice under s 264 would be lodged. However, an employed solicitor, Mr Foh Lin Lim (Mr Lim), working under the direction of Mr Wormell, had the actual carriage of the documentation. Mr Lim is no longer employed by Allens Arthur Robinson. Mr Lim prepared a memorandum in which he expressed the opinion that the change of trustee did not create a new charge and that there was no specific provision which required the Charge to be registered with the Commission again. He expressed the view that, although there was a change in trustee, the Charge remained one granted by the same trustee over the same property. He considered that it was relevant that it was only the entity acting as trustee that had changed. 17 Mr Wormell, although he had primary responsibility, was not aware of the approach taken by Mr Lim until quite recently. The failure to lodge a notice under s 264 was rectified on 9 December 2009, very soon after Mr Wormell became aware of the omission. 18 Perpetual has not granted any other charge over the assets of HBS Trust No. 1. Accordingly, there is no prospect that a subsequent chargee would be prejudiced by the extension of time now sought by Perpetual. 19 The creditors of Perpetual may be divided into several categories. The first category consists of those who are creditors in some capacity other than as trustee of HBS Trust No. 1. Secondly, there are creditors who have dealt with Perpetual in its capacity as trustee of HBS Trust No. 1 and whose debts are secured under the Charge. The third category is creditors who have dealt with Perpetual in its capacity as a trustee, but whose debts are not secured under the Charge. 20 So far as the first category of creditors is concerned, there could be no prejudice to them, because the property the subject of the charge would not be available for distribution to them upon the winding up of Perpetual. There may be an exception if Perpetual had met expenses of HBS Trust No. 1 out of its own pocket, since its right to be indemnified would be available to general creditors. However, no trust expenses have been met out of Perpetual's own pocket. 21 Creditors of Perpetual whose debts are secured by the Charge could suffer no prejudice by the extension. Accordingly, they do not require further consideration. 22 So far as the third category is concerned, being unsecured creditors of Perpetual as trustee of HBS Trust No. 1, there is, theoretically, a possible prejudice. Such creditors may have a right to be subrogated to Perpetual's right to be exonerated out of the assets of HBS Trust No. 1. However, the evidence indicates that all of the debts currently owed to such creditors were incurred after notice of the Charge was lodged on 9 December 2009. Upon enforcement of the Charge, Perpetual's claim to be indemnified for trust expenses would rank ahead of repayment of the Notes under the provisions of the Security Trust Deed. All of the unsecured debts of HBS Trust No. 1 are in the nature of expenses incurred in administering the Security Trust. The debts owed to those creditors would therefore be repaid in full. Further, if HBS Trust No. 1 is treated as a separate entity, there is no suggestion of insolvency on the part of that separate entity. 23 I am satisfied that the failure to lodge a notice under s 264, if one was required, was accidental, or at least due to inadvertence. I am also satisfied that the failure is not of a nature that would prejudice the position of creditors of Perpetual. 24 It is not uncommon, where relief is granted under s 266(4), for conditions to be imposed along the lines that the order extending time is to be without prejudice to the rights of persons who had dealings with any property that is the subject of the charge, between the time of its creation and the date when the relevant notice is given. It is also common to reserve liberty to any liquidator, administrator or creditor to apply for an order discharging or varying the order extending time. The balance sheet of Perpetual as at 30 June 2009 shows that it has net assets of nearly $37 million and, for the period ended 30 June 2009, its net profit after tax was nearly $14 million. Having regard to the financial position of Perpetual, I do not consider that such conditions are necessary. 25 In all of the circumstances, I consider that it is appropriate to grant relief under s 266(4) as sought by Perpetual. I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.