JACKMAN J
1 In this matter, Mr Jahani and Mr Hodgson (Receivers) are the receivers of Revroof Pty Ltd (receivers and managers appointed) (administrators appointed) (Revroof) together with two other related companies, Painted Steel Technologies Pty Ltd (receivers and managers appointed) (administrators appointed) (PST) and Nexteel Pty Ltd (receivers and managers appointed). They were appointed as receivers by Cash Flow Finance Australia Pty Ltd (which I refer to by its business name of Earlypay).
2 The Receivers seek orders:
(a) pursuant to s 420B of the Corporations Act 2001 (Cth) (the Act), permitting them to sell assets over which they are appointed, where there may be an issue as to the priority of the security interests pursuant to which the Receivers were appointed;
(b) to the extent necessary, pursuant to s 588FM of the Act, extending time for registration of certain security interests granted during the receivership and after the appointment of administrators; and
(c) consequential relief.
3 On 6 December 2022, Revroof and PST appointed Mr Franklin and Mr Allen (Administrators) as administrators pursuant to s 436A of the Act. The Receivers were appointed to Revroof and PST several weeks later on 23 December 2022, and to Nexteel on 22 February 2023.
4 Revroof was part of a group of companies, sometimes described as the Revroof Group, which manufactures a wide array of steel-based products including roof sheeting, wall cladding, sheet metal, gutters and verandas. Its head office is in Adelaide with premises in South Australia, Western Australia and Victoria.
5 In late 2021, Earlypay provided finance to Revroof and PST by several financing agreements, including an invoice finance facility, a trade finance facility and an equipment finance facility. To secure its obligations under those facilities, Revroof and its associated entities provided security to Earlypay by way of general security deeds and a deed of cross-collateralisation. Revroof has also provided securities to a number of other parties, including the defendants to these proceedings.
6 Following the appointment of the Administrators, Earlypay provided finance facilities to the Administrators to fund the payment of debts, expenses and liabilities incurred by the Administrators in the performance of their functions and powers as administrators of Revroof and PST. Following their appointment, the Receivers formed the view that to maximise options for the best recovery outcome, it was necessary to conduct an expedited sale process of the businesses of Revroof and PST, trading the businesses while that process was undertaken.
7 Following a marketing campaign and expression of interest process, and the receipt of non-binding indicative offers, on 20 February 2023 the Receivers entered into an Asset Sale Deed with Revolution by DG Pty Ltd (Design Group). The Asset Sale Deed was varied on 17 April 2023 to take into account, amongst other things, certain obligations in relation to the assignment of intellectual property held by Nexteel. The Asset Sale Deed was further varied on 5 May 2023. The sale agreement requires, in effect, that Revroof convey, amongst other things, plant and equipment, stock, intellectual property, business records, telephone and facsimile numbers and goodwill. The Asset Sale Deed is conditional on an order being made for the sale to proceed pursuant to s 420B of the Act.
8 It is common ground between the parties that each of the defendants holds security over some or all of those assets. Further, Revroof, Earlypay and each of the defendants are party to either one or two deeds of priority. The parties are in dispute as to the operation of those documents and the order of priority of payment between those parties.
9 The dispute before the Court arises in circumstances where the Receivers wish to cause Revroof to complete its obligations under the Asset Sale Deed as varied. In order to do so, they are required to convey clear title to Revroof's assets. At the time of filing the originating process, none of the defendants except the first defendant (Taminga Street Investments Pty Ltd) had consented to release their securities and, on that basis, this application was made. The fifth defendant (ITC Manufacturing Pty Ltd) has entered a submitting appearance save in respect of costs. The other defendants have now indicated their consent to the orders sought under s 420B of the Act.
10 The Receivers have negotiated with certain other secured creditors to accept a compromise of the amounts paid by them upon completion of the Asset Sale Deed. The Receivers then propose, subject to the Court granting the relief claimed by them in these proceedings, to hold in their solicitors' trust account the net sale proceeds to allow determination of the priority dispute between the parties to this proceeding.
11 I am satisfied that the asset sale, pursuant to the Asset Sale Deed, is in the best interests of Revroof's creditors and, in circumstances where it is necessary that relief pursuant to s 420B of the Act be granted in order for that sale to complete, it follows that that relief is also in the best interests of creditors. It also follows that the sale and disposal of the property under that order will not unreasonably prejudice any creditors. On the contrary, the orders proposed by the Receivers contemplate that the net sale proceeds be held in trust, pending determination of the priorities dispute and claims made to them.
12 Orders are also sought pursuant to s 424 of the Act, which provides that a controller of property of a corporation (that expression including the Receivers) may apply to the Court for directions in relation to any matter arising in connection with the performance or exercise of any of the controller's functions and powers as controller. As Rees J said in In the matter of i-Prosperity Waterside Rhodes Pty Ltd in its own capacity and as trustee for the i-Prosperity Waterside Rhodes Unit Trust [2021] NSWSC 1065 at [6], the power to give directions under s 424 is a broad one intended to facilitate the work of controllers, and should be interpreted as widely as possible to give effect to that intention. At [8] and [9], Rees J observed that it may be particularly appropriate for directions to be sought where a controller intends to sell property to an associate or an entity that may be seen as having some connection with the controller.
13 In the present case, the Receivers seek directions that they are justified in applying $5,416,926 out of the proceeds of any sale pursuant to the Asset Sale Deed in payment of amounts claimed by equipment financiers and in consideration of releases and discharges of those parties' security interests against Revroof. One of the intended recipients of payment of those funds is Earlypay, being the company which appointed the Receivers, and it is appropriate that the direction be sought in those circumstances. In light of the steps taken by the Receivers to negotiate with those parties and, in respect of parties other than Earlypay, in light of the substantial discounts which the Receivers have negotiated, the Receivers submit and I accept that a direction in the nature of that claimed by them is appropriate.
14 The Receivers also seek orders, to the extent necessary, pursuant to s 588FM of the Act, fixing time for registration in respect of the security interests granted on 24 December 2022 following appointment of the Receivers to Earlypay (R&M Securities). The critical time under s 588FL was the date of appointment of the Administrators, being 6 December 2022, several weeks before the grant of the R&M securities on 24 December 2022.
15 The order sought is prefaced by the words, "to the extent necessary." The conditionality of the order sought arises following the judgment of Brereton JA in In the matter of Antqip Hire Pty Ltd (in liq) [2021] NSWSC 1122. At [41], his Honour posed the question: "Does s 588FL apply to security interests granted after the critical time?" His Honour answered that question in the negative in a detailed and thorough analysis from [41] to [63]. In the course of that reasoning, his Honour observed the difference between an interest "arising" and "being granted", and also gave consideration to the harmonious operation of ss 588FL and 588FM with provisions dealing with the avoidance of dispositions after the commencement of the winding up (at [59]), and also the provisions contained in ss 267 and 267A of the Personal Property Securities Act 2009 (Cth).
16 At [60] and following, Brereton JA observed that there have been a number of cases in the Federal Court which have held, or proceeded on the assumption, that s 588FL applies to security interests that are granted after the critical date. As his Honour observed at [62], none of those decisions bound him and there was no appellate decision on the point. His Honour also observed that none of the Federal Court decisions on the question had considered the distinction between "grant" and "arises", and more importantly none considered the interrelationship between s 588FL of the Act, on the one hand, and s 468 of the Act and ss 267 and 267A of the Personal Properties Securities Act 2009, on the other hand. Accordingly, at [63] Brereton JA held that s 588FL does not apply to security interests granted by a security agreement made after the critical time, and it followed that s 588FL(2) did not cover the plaintiff's security interests. Accordingly, there was no need for, nor utility in, an order under s 588FM fixing a later time for the purposes of s 588FL(2)(b)(iv).
17 I respectfully agree with the reasoning of Brereton JA in that case, and I find his Honour's analysis compelling. However, that reasoning is inconsistent with a considerable body of Federal Court authority which preceded Brereton JA's decision, and is also inconsistent with subsequent Federal Court decisions in which, regrettably, the Court was not given reference to Antqip and Brereton JA's reasoning: Park (Administrator), in the matter of Ellume Limited (Administrators Appointed) v Evangayle Pty Ltd (Trustee) [2022] FCA 1102 at [38]-[41] (Downes J); Birch, in the matter of Geelong Fire Services Pty Ltd (Administrators Appointed) [2022] FCA 963 at [28]-[30] (Moshinsky J).
18 It remains the position that there is no intermediate appellate authority on the point. I do not regard myself as bound by single instance decisions by other members of this Court, however I recognise that there is a possibility that at some point in the future an appellate court may decide that those Federal Court authorities are correct rather than the reasoning of Brereton JA, which I have found compelling. In those circumstances, there is utility in making the order sought pursuant to s 588FM. However I will preface that order with the words, "to the extent that it is necessary," noting that I do not regard the order as being necessary, just as Brereton JA did not regard the order in the case before him as being necessary.
19 For those reasons I will make orders in accordance with the draft orders which have been handed to me, and which I will initial and date and place with the papers.
I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jackman.