Was the security interest perfected by registration and by no other means?
31 Reviewing the background facts in light of the relevant legislation, the reason for the parties' concern in this case is clear. The applicant's security interest in respect of assets of the company was created on or about 24 December 2013 and registered on 19 May 2014, almost five months later. It follows that the security interest was registered more than 20 days after the agreement was made giving rise to the security interest (as contemplated by s 588FL(2)(b)(ii) Corporations Act).
32 Further, the company entered voluntary administration on 26 May 2014, almost exactly five months after the security interest was created. This was the date on which date the administration began within the meaning of s 513C of the Corporations Act (and which was also the "critical time" within the meaning of s 588FL(7)). The appointment of the administrator was an event contemplated by s 588 FL(1)(a)(ii) of the Corporations Act (as well as s 267(1)(a)(ii) PPSA). It was certainly registered within six months before commencement of the administration and the "critical time" (as contemplated by s 588FL(2)(b)(i) Corporations Act). No later time for registration was ordered by the Court under s 588FM of the Corporations Act.
33 It follows that the applicant's security interest is potentially subject to s 588FL(2) and s 588FL(4) of the Corporations Act.
34 Because of the time at which the security interest was registered relative to the commencement of the voluntary administration of the company, unless the applicant can establish that the security interest was not perfected only by means of registration, the security interest will vest in the company and the applicant will be an unsecured creditor by operation of s 588FL of the Corporations Act (potentially s 267A(1) PPSA is also relevant, however I note that the submissions have focussed on s 588FL and it is this section to which I will turn).
35 The substance of the applicant's case is that because the relevant security interest was perfected by attachment and enforceability and effective registration, the circumstances have taken the method of perfection outside the parameters of s 588FL(2)(a)(ii). They support this contention by submitting that attachment and enforceability are not always necessary for perfection, and that an example of this is in respect of temporary perfection of which attachment and enforceability are not necessarily elements.
36 In my view the position adopted by the applicant in this proceeding is misconceived and misapprehends the meaning and purpose of both s 21(1) of the PPSA and s 588FL(2) of the Corporations Act. That this is so becomes obvious once the sections are examined carefully.
37 It is clear that unless the perfection is of a temporary nature or by effect of a provision other than s 21 of the PPSA as contemplated by s 21(1)(a) of the PPSA, attachment and enforceability (as described in s 21(1)(b)(i) and (ii)) are mandatory prerequisites to perfection of a security interest. Section 21(1)(b) specifically states that all of the elements therein must be satisfied, namely the security interest must be:
attached to the collateral (s 21(1)(b)(i)), and
enforceable against a third party (s 21(1)(b)(ii)), and
section 21(2) applies (s 21(1)(b)(iii)).
38 Section 21(2) sets out alternative options of means of perfection of the security interest referable to registration, or possession, or control but only once s 21(1)(b)(i) and (ii) are satisfied.
39 To the extent that the applicant's submission contemplates that attachment and enforceability are not fundamental pre-conditions to perfecting a security interest in all cases other than cases of temporary perfection, and that the perfection of a security interest by attachment, enforceability and registration is somehow a process out of the ordinary such that s 588FL(2) and (4) are irrelevant in this case, it is wrong.
40 As is made clear by s 21(1)(b) and s 21(2) of the PPSA, once a security interest has attached to and is enforceable against collateral, the means by which perfection of the security interest is completed may vary. One means is by registration of the security interest. Another means is by possession of the collateral by the secured party. A third means of perfection is by control (but only in relation to certain types of collateral).
41 It follows that when s 588FL(2)(a)(ii) refers to "the security interest [being] perfected by registration, and by no other means" that section is distinguishing "registration" as a means of perfection from "possession" and/or "control". Section 588FL(2)(a)(ii) is not distinguishing "registration" from "attachment" and/or enforceability". Indeed Note 4 to s 588FL(2) specifically states that the PPSA provides for "perfection by registration, possession or control, or by force of that Act (see s 21 of that Act)".
42 In relation to the applicant's submissions concerning temporary perfection, I note that the PPSA allows "temporary" perfection in limited circumstances where the security interest is not registered, or the collateral is not in the possession or control of the secured party. As explained in detail by Professor Duggan and Associate Professor Brown in Australian Personal Property Securities Law (LexisNexis, 2012) at 108-109 provisions in the PPSA providing for temporary perfection include:
Section 22(2)-(4) which apply where a secured party takes a security interest in goods in the possession of a bailee. The security interest is temporarily perfected for up to five days from the date the bailee issues a negotiable document of title to the goods until the secured party takes possession of the document.
Section 33 which gives a secured party a grace period to perfect its security interest in proceeds of the collateral.
Section 34 which applies where collateral is transferred from one grantor to another.
Section 35 which applies where a security interest in goods or the document of title to goods was perfected by possession but the secured party returns the collateral to the grantor so that the goods can be sold.
Section 36 which applies where a security interest in a negotiable instrument or investment instrument was perfected by possession or control, and allows a secured party to give up possession or control for up to five business days to permit certain dealings with the instrument.
Section 38 which applies where goods are returned or repossessed and gives a transferee of accounts or chattel paper a deemed security interest for up to five days after the goods are returned or repossessed.
Section 39 which gives a secured party a grace period to perfect its security interest in Australia where tangible collateral subject to a foreign security interest is moved to Australia.
Section 40 which gives a secured party a grace period to perfect its security interest in Australia where intangible or financial property is subject to a foreign security interest and the grantor relocates to Australia.
43 These are clearly very limited circumstances, usually of limited duration, pending steps taken by the grantor and the secured party to ensure perfection of the security interest by registration, possession or control within the meaning of s 21 of the PPSA. There is no suggestion that these exceptional forms of perfection are applicable in this case, or any reason why the provisions for temporary perfection should influence the interpretation of s 21(1) of the PPSA or s 588FL of the Corporations Act.
44 I note that the learned authors of Austin RP and Black AJ, Annotations to the Corporations Act (LexisNexis, subscription service) state at 83,615:
Section 588FL(4) applies if a security interest is perfected at the relevant time by registration, and not to the perfection of the security interest by possession, control or temporary perfection which are unaffected by the section by reason of s 588FL(2)(a)(ii).
45 In my view this statement clearly and correctly states the law.
46 Finally the applicant has referred me to a number of cases relating to interpretation of legislation including Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; Certain Lloyd's Underwriters Subscribing to Contract No IH00AAQS v Cross (2012) 248 CLR 378; Rail Corporation New South Wales v Brown (2012) 82 NSWLR 318. In Project Blue Sky McHugh, Gummow, Kirby and Hayne JJ said:
69. The primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute. The meaning of the provision must be determined "by reference to the language of the instrument viewed as a whole". In Commissioner for Railways (NSW) v Agalianos, Dixon CJ pointed out that "the context, the general purpose and policy of a provision and its consistency and fairness are surer guides to its meaning than the logic with which it is constructed". Thus, the process of construction must always begin by examining the context of the provision that is being construed.
70. A legislative instrument must be construed on the prima facie basis that its provisions are intended to give effect to harmonious goals. Where conflict appears to arise from the language of particular provisions, the conflict must be alleviated, so far as possible, by adjusting the meaning of the competing provisions to achieve that result which will best give effect to the purpose and language of those provisions while maintaining the unity of all the statutory provisions. Reconciling conflicting provisions will often require the court "to determine which is the leading provision and which the subordinate provision, and which must give way to the other". Only by determining the hierarchy of the provisions will it be possible in many cases to give each provision the meaning which best gives effect to its purpose and language while maintaining the unity of the statutory scheme.
71. Furthermore, a court construing a statutory provision must strive to give meaning to every word of the provision. In The Commonwealth v Baume Griffith CJ cited R v Berchet to support the proposition that it was "a known rule in the interpretation of Statutes that such a sense is to be made upon the whole as that no clause, sentence, or word shall prove superfluous, void, or insignificant, if by any other construction they may all be made useful and pertinent".
(Footnotes omitted.)
47 In this case however it is the interpretation urged by the applicant in this case which is contrary to the plain words of s 588FL of the Corporations Law and s 21 of the PPSA. There is no conflict between these or any other provisions of either statute requiring reconciliation such that it is necessary for the Court to embark upon a statutory construction exercise of the kind explained in Project Blue Sky. Rather, an examination of the relevant legislation and its purpose militates against the interpretation advanced by the applicant, because the applicant's interpretation robs s 588(2) and (4) of the Corporations Law of their natural meaning or indeed any practical effect where no example was advanced of perfection being achieved by registration alone in the absence of attachment and enforceability.
48 The purpose of the provisions in contention is clear. Section 588FL was inserted into the Corporations Act to prevent security interests being granted fraudulently by corporations with knowledge of an imminent administration, liquidation or deed of company arrangement, and to avoid property falling into the estate of a trustee or administrator or otherwise being claimed by unsecured creditors (Explanatory Memorandum, Personal Property Securities (Corporations and Other Amendments) Bill (Cth) 2010 cl 6.2).
49 Similarly the terms of s 21(1)(b) of the PPSA are unambiguous - attachment and enforceability plus one of the final means set out in s 21(2) of the PPSA (namely registration or possession or control) are necessary requirements for perfection of a security interest. This is apparent from the Outline of the Replacement Explanatory Memorandum, Personal Property Securities Bill (Cth) 2009 which states:
Perfection would occur when a security interest attaches to personal property and the secured party takes possession and/or control of the property or registers it on the PPS Register. The Bill would also provide short term 'temporary perfection' following certain events involving the collateral.
50 Similarly clause 2.25 of the Replacement Explanatory Memorandum states:
Possession and control of personal property would be important as two of the four ways of perfecting a security interest.
51 The applicant has not attempted to make a case that the relevant security interest in this case has been perfected by possession of the collateral or control of collateral identified in s 21(2). The claimed perfection is not temporary. The only means by which the security interest was perfected in this case was by registration.
52 It follows that, in the circumstances, the security interest is not valid and enforceable against the respondent.