UNDERWOOD J This is an application for an order pursuant to the Corporations Law, s266(4). The applicant, Rynmarc Pty Ltd, is the holder of a charge executed by the respondent, Classic Ergonomic Chairs Pty Ltd. The latter is now in liquidation. The Corporations Law, s263(1) provides that "where a company creates a charge, the company shall ensure that there is lodged, within 45 days after creation of the charge a notice in the prescribed form setting out (certain particulars) ... and ... the instrument ... or a copy of the instrument ..." There was non-compliance with that subsection. The notice and a copy of the charge were not lodged until after the expiration of the 45 day period. Consequently, by virtue of the Law, s266(1) and (2), the applicant's charge is void against the respondent's liquidator, unless the court extends the time for lodgement as it is empowered to do by s266(4) which provides:

"The Court, if it is satisfied that the failure to lodge a

notice in respect of a charge, or in respect of a variation

in the terms of the charge, as required by any provision of

this Division:

(a) was accidental or due to inadvertence or some other

sufficient cause; or

(b) 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, may, on the application of the company or any person

interested and on such terms and conditions as seem to the

Court just and expedient, by order, extend the period for

such further period as is specified in the order."

2. The respondent manufactured modern office chairs and equipment in Tasmania and Queensland. Mr Higgs was a director of the applicant company. Notwithstanding that the respondent's profit and loss statement for the year ended 30 June 1992, showed an operating loss of $347,522 and, in the later opinion of the liquidator was then insolvent, Mr Higgs considered that the respondent company was a worthwhile investment. He thought that the respondent had good prospects and potential provided it received an infusion of capital and better management. Accordingly, in mid 1992 the applicant acquired 20 per cent of the respondent's shares. It was agreed between the two companies that the applicant would provide the services of Mr Higgs to the respondent for a fee. During 1992 the applicant made the following loans to the respondent:

21/7/92 $25,000

13/4/92 $5,000

?/9/92 $55,000 (Mr Higgs was unable to be more specific

about this date)

1/10/92 $30,000

2/10/92 $20,000

8/10/92 $15,000

Total $150,000

3. No security was taken for any of these loans when they were made. Despite these injections of cash, the respondent continued to trade badly and by Christmas 1992, the respondent's managing director was removed and Mr Higgs made its manager. I accept Mr Higgs' evidence that thereafter the fortunes of the respondent showed a marked improvement until September 1993 when it lost a major government contract.

CIRCUMSTANCES LEADING UP TO THE CREATION OF THE DEBENTURE

4. Early in 1993, Mr Higgs decided that the applicant should lend the respondent an additional $40,000. However he was concerned that by this stage, there were unsecured trade creditors to a total value in the vicinity of $150,000, the ANZ Bank had a floating charge over all the assets of the company and the applicant's past loans were unsecured. Mr Higgs discussed the situation with the ANZ Bank and a Mr Bowling whom I infer had a substantial interest in the respondent. The affidavit material discloses that "G A and M A Bowling" (whom I will assume are husband and wife) owned a house in Queensland. It was mortgaged to the ANZ Bank to better secure the Bank's advances to the respondent company. As a result of Mr Higgs' negotiations, the ANZ Bank agreed to fix its priority at $188,000 and to release the respondent's book debts from its floating charge. Mr and Mrs Bowling agreed to give the applicant a second mortgage over their house in Queensland.

5. The applicant's solicitor was Mr Swan of Devonport. Mr Higgs instructed Mr Swan that the applicant wanted to lend the respondent a further $40,000 but would not do so until it had security for the repayment of this sum, past advances and any future loans that might be made. He instructed Mr Swan to arrange for the registration of a second mortgage over Mr and Mrs Bowling's house in Queensland and to obtain a floating charge over the book debts of the company. Mr Swan accepted these instructions and prepared a document called "mortgage debenture". Some time prior to 26 March 1993 Mr Swan sent the mortgage debenture to Mr Higgs with the request that he arrange for its execution by the respondent. This was done and it was returned to Mr Swan. On 17 March 1993, Mr Swan instructed his Queensland agents "to draw the Bowling mortgage and to advise of the stamp duty implications in Queensland." The agents acted with expedition. A mortgage was drafted, the draft approved by Mr Swan and the original executed by Mr and Mrs Bowling within a few days. The Queensland solicitors advised Mr Swan that pro rata assessment of duty may be a possibility but, according to Mr Swan's affidavit, "the statutory provisions were unclear as to the precise position in these circumstances." On 24 March 1993 the ANZ Bank advised that it was ready to implement its part of the arrangement. On 16 March 1993, the applicant lent the respondent a further $40,000. I find that at the time it did so, Mr Higgs erroneously believed the applicant was a secured creditor by way of floating charge over the respondent's book debts and a second mortgage over the property in Queensland.

6. The evidence is such that I am unable to find precisely when the charge was executed, although I am satisfied that it was some time during the second half of March 1993. The mortgage debenture was originally dated 26 March 1993 by Mr Swan, but as will be seen, he altered that date. In his evidence, Mr Swan said that he could not remember when he received the duly executed debenture, but agreed that by mid March he had sent it to Mr Higgs with the request that he get the respondent to execute it. He also agreed that he had it back by the end of April at the very latest. As it was originally dated 26 March 1993 in Mr Swan's handwriting, I find that by that date it had been executed and in his possession. That finding is consistent with the evidence of Mr Higgs which I accept. Assuming then, that it was executed on 26 March 1993, the date for lodgement of notice with the Australian Securities Commission expired on 10 May 1993.

7. Mr Swan did nothing until 28 May 1993 on which day:

1 he delivered the priority agreement to the ANZ Bank,

2 he received from the Bank a discharge of its debenture

over the respondent's book debts,

3 he sent the original loan agreement and the debenture to

the Commissioner of Stamp Duties, and

4 went on holiday.

8. In his letter to the Commissioner Mr Swan said that there was a collateral second mortgage in Queensland and asked for an assessment of the enclosed documents. He also asked for advice "whether procedure exists for us to arrange for a refund of the stamp duty paid in Queensland ..."(sic).

9. Mr Swan remained away from his office until 7 June 1993. On his return he saw a letter dated 1 June 1993 from the Commissioner of Stamp Duties in which he raised some queries. Mr Swan did nothing about this until 21 June 1993 when he wrote to Mr Higgs advising that the Commissioner wanted a statutory declaration of value of assets. By 29 June 1993 Mr Swan was in possession of sufficient information to answer the Commissioner's requisitions but he did nothing with it. On 14 September 1993, Mr Swan received a letter from the Commissioner of Stamp Duties reminding him that the requisitions of 1 June 1993 remained unanswered. Mr Swan continued to do nothing.

10. After the loss of the government contract in September 1993, the respondent traded badly and on 8 November 1993 Mr Higgs met with officers of the ANZ Bank. They requested the appointment of an administrator. The next day, Mr Higgs telephoned Mr Swan and instructed him to convene a meeting of directors to discuss the financial circumstances of the respondent. Mr Swan told Mr Higgs that he had to swear a statutory declaration for the Commissioner of Stamp Duties. Some time that day, Mr Swan was told that the likelihood was that an administrator of the respondent would be appointed because it was in financial trouble.

11. On 10 November 1993 Mr Andrew Crawford, accountant of Launceston, met with the respondent's directors. The preceding day, in anticipation of the meeting, he searched the records of the Australian Securities Commission and found that the ANZ Bank held a registered charge with respect to all the assets of the company except the book debts, and mortgages over "houses owned by two of the directors of the company". He ascertained that the respondent's then indebtedness to the ANZ Bank was in the order of $285,000. As a result of a discussion between Mr Crawford and officers of the ANZ Bank, the former believed that the applicant had a charge over the respondent's book debts but knew from his searches, that it was not registered. On 12 November 1993, he sought advice about this from Mr McElwaine, solicitor of Zeeman Kable and Page.

12. Meantime, Mr Swan galvanised himself into action. The same day that he spoke to Mr Higgs on the telephone, he got the statutory declaration signed and sent off to the Commissioner of Stamp Duties together with a copy of the Queensland mortgage. The next day, 10 November 1993, he prepared three copies of a letter addressed to the directors of the respondent company pointing out that the respondent owed the applicant approximately $185,000 and stating that the loan was secured by a debenture charge over all the present and future book debts of the respondent. The letter concluded:

"We hereby give notice on behalf of Rynmarc Pty Ltd of its

immediate intention to claim all debtors of Classic

Ergonomic Chairs Pty Ltd pursuant to the terms of the

debenture charge and that this strategy will be maintained

until our client's debt is reduced to an amount not

exceeding $65,000."

13. The same day that letter was written, the assessor of Stamp Duties assessed the mortgage debenture. On 15 November 1993 the assessed stamp duty was paid and the appropriate notice lodged in the office of the Australian Securities Commission.

14. In his oral evidence, Mr Swan said that throughout the period prior to lodgement, he was unaware of the legislative requirement that notice of the charge be lodged within 45 days of its creation. I accept that evidence. However, he said that he was aware of a need to register the charge and stated variously, that he believed that this should be done "as soon as practicable", "soon" and when pressed with respect to the facts of this particular case, said it should have been registered not later than April 1993. He said that although he was not aware of a time limit for registration, he was generally aware that a failure to register a charge "may have adverse consequences for (his) client". During the period of delay Mr Swan said that he was very busy at work and that for one reason or another, he was understaffed. He denied that the file was in the "too hard basket". He said that he did not overlook the file. He agreed that throughout the whole of the period he was aware of the need to answer the requisitions from the Commissioner of Stamp Duties, to get the documents assessed and stamped and to register the charge. Throughout the whole period he was conscious not only that these things had to be done, but also that he was not doing them. He said that he knew of the consequences of not attending to these matters "in a vague way". Counsel for the applicant aptly used the word "paralysis" to describe Mr Swan's conduct throughout the period of delay. I find that at least during the latter half of the period of delay, the applicant's solicitor was continuously conscious of a requirement to forthwith register the debenture but failed to do so because of some inexplicable inability to motivate himself to take the necessary steps.

15. On 11 November 1993, Mr Crawford had several discussions with Mr Swan in the course of which Mr Crawford said that he was considering accepting appointment as administrator of the respondent, that he had heard that the applicant had a charge over the respondent's book debts but that such charge was not registered. Mr Crawford told Mr Swan that he believed the charge was therefore unenforceable against him if he became administrator. Curiously, Mr Swan did not look up the relevant provisions of the Corporations Law notwithstanding this conversation.

16. By letter dated 12 November 1993, Mr McElwaine confirmed oral advice he had given Mr Crawford that the applicant's debenture was void against him as administrator for want of lodgement of the statutory notice. At Mr Crawford's request, Mr McElwaine approached the ANZ Bank to see if it would agree to Mr Crawford dealing with the assets that were the subject matter of its charge. The Law, s442C(1) and (2) prohibits an administrator from disposing of company property that is subject to a charge without (inter alia) the chargee's consent. The Bank gave its consent and Mr McElwaine so informed Mr Crawford on 18 November 1993. That day, the directors of the respondent appointed Mr Crawford administrator of the company. With respect to that appointment, Mr Crawford's unchallenged affidavit evidence is as follows:

"10 I would not have accepted appointment as administrator

of the company unless I was satisfied of the following

matters:-

(a) That the purported Charge over the book debts in favour

of Rynmarc Pty Ltd not be enforceable against me either in

my capacity as administrator or subsequently as liquidator.

This is because my concerns were that there may not have

been sufficient assets to pay the costs of the

administration and liquidation should the charge be

enforceable and that in turn this may prejudice the claims

of other creditors.

(b) That the ANZ Bank would consent to me dealing with the

whole of the assets of the company notwithstanding that some

of those assets were subject to the Charge.

(c) That the ANZ Bank confirmed that it did not claim any

interest in the book debts.

11 As at 18th November 1993 I was satisfied of each of the

above matters and I therefore accepted appointment as

administrator."

17. The Law, Pt5.3A, entitled "ADMINISTRATION OF A COMPANY'S AFFAIRS WITH A VIEW TO EXECUTING A DEED OF COMPANY ARRANGEMENT", came into operation on 23 June 1993. Its objective is spelled out by s435A in the following terms:

"The object of the Part is to provide for the business,

property and affairs of an insolvent company to be

administered in a way that:

(a) maximises the chances of the company, or as much as

possible of its business, continuing in existence; or

(b) if it is not possible for the company or its business to

continue in existence results in a better return for the

company's creditors and members than would result from an

immediate winding up of the company."

18. Section 436E obliges the administrator to convene a meeting of creditors within five business days of the commencement of the administration. Mr Crawford convened such a meeting on 25 November 1993. By letter dated 23 November 1993, Mr Swan wrote to "the Administrator" of the respondent advising that the debenture was registered and enclosed a copy of the certificate of registration which disclosed the date of registration of the notice as 15 November 1993. By this letter, Mr Swan advised that the indebtedness to the applicant was $186,378.59 and that, "our client forthwith intends to make demand on Classic Ergonomic Chairs Pty Ltd with respect to the book debts of that company until our client's loan is repaid in full."

19. On 29 November 1993, Mr Swan received a response to this letter from Mr McElwaine acting as solicitor to the administrator. It said in part:

"Your client's charge is void as against our client. That

is, it was not registered, nor was notice lodged, within

either of the time periods set forth in Section 266 of the

Corporations Law. We note, in particular, the provisions of

Section 266 apply to administrators by virtue of the

Corporate Law Reform Act 1992.

Hence your client's security has no effect upon the

administrator or his activities."

20. Mr Swan still did not look up the relevant provisions of the Corporations Law. Instead, he consulted another solicitor in Devonport who was unable to assist. On 6 December 1993, Mr Swan sought advice from Mr Whitehouse, solicitor of Messrs Murdoch Clarke Cosgrove and Drake. He got that advice on 14 December 1993. It was to the effect that the debenture was void against the administrator but that this Court had a power to extend the time for lodgement and if it did, the debenture would be effective against the administrator. Mr Whitehouse also advised Mr Swan to contact his insurers. For some reason Mr Whitehouse was unable to accept instructions to make an application for an extension of time.

21. The same day that Mr Swan received this advice, the creditors of the respondent held a meeting convened by the administrator in accordance with the Law, s439A(1). At that meeting, the creditors accepted Mr Crawford's advice that the company was insolvent and should be wound up. The creditors so resolved pursuant to s439C(c) and, by virtue of s446A(4)(a), Mr Crawford became the liquidator.

22. It was clear to Mr Crawford from the commencement of the administration on 18 November 1993 that the company was insolvent and would have to be wound up, and on that day he commenced realisation of the respondent's assets. Some time after the receipt of Mr Whitehouse's advice on 14 December 1993, Mr Swan told Mr Higgs that the applicant would have to make this application. I infer that it was agreed between Mr Higgs and Mr Swan that the latter would find a solicitor to do this. However, apart from again speaking to the Devonport solicitor who was still unable to assist, Mr Swan did nothing until 24 December 1993. That day, he wrote to Mr McElwaine advising that it was the respondent's intention to apply for an extension of time. The same day Mr McElwaine replied by facsimile in the following terms (formal parts omitted):

"We have your letter of 22nd December.

We do not accept that there is any basis to apply pursuant

to Section 266(4) of the Corporations Law.

We will accept service of any proceedings which you see fit

to issue. If there is any delay in the issue of those

proceedings then we will use such delay to our client's

advantage."

23. Between 18 December 1993 when he was appointed liquidator, and the close of business on 24 December 1993, Mr Crawford received payments from debtors in the sum of $84,747.50, sold plant for $25,000 and received $3,237.40 of other money on behalf of the respondent. Out of the total of $112,984.90 he paid $5,428.68 to discharge sundry liabilities incurred by or on behalf of the respondent. During this period viz, before receipt of advice from Mr Swan that an application for an extension of time would be made, all the credits and all the debits were made to the same account.

24. On 24 December 1993, Mr McElwaine wrote to Mr Crawford advising that he had received a letter from Mr Swan stating that an application for an extension of time would be made. Mr McElwaine advised Mr Crawford that his "firm view was that any such application is doomed to failure". However, the advice contained a caution that thereafter, any amounts received by way of book debts should be kept in a separate trust account. This advice was accepted and, apart from some confusion during the holiday period from 24 December 1993 to 12 January 1994, followed by Mr Crawford.

25. Even after allowing for the intervention of the holiday period (a state of affairs acknowledged by the Rules of Court, O79, r4(1) which prohibits service of any proceedings between 23 December and 14 January in any year), Mr Swan did nothing in response to Mr McElwaine's faxed advice on 24 December 1993 that delay in the making of this application would be used to Mr McElwaine's client's advantage. On 25 January 1994 Mr McElwaine again wrote to Mr Swan:

"We refer to our fax of 24th December. We note that you

have not:

1 Issued and served us with any proceedings;

2 Responded to our letter.

The administrator cannot be left in limbo forever. He has

debts to pay in the course of the administration. He

expressly reserves against you and your client any claims

for damages which he may suffer by reason of your delay in

bringing the foreshadowed application.

Unless you either:

1 Serve us with your application or;

2 Tell us that your client will not be making any such

application

by the close of business on Friday 28th January, we will

advise our client to make an application for administrators

directions pursuant to the Corporations Law with the intent

of disposing of your client's unfounded claims once and for

all."

26. On 8 February 1994 Mr Swan instructed the applicant's present solicitors to apply for an extension of time. This application was filed on 23 February 1994, over 8 months after the time for lodgement had expired, more than 3 months after notice of the debenture was lodged and over 2 months after the creditors had resolved to put the respondent into liquidation.

27. During the period 23 December 1993 to 23 February 1994, Mr Crawford received $15,032 by way of payment of book debts, realised $11,433 from the sale of assets and received $1,222.66 of other monies on behalf of the respondent, a total of $27,687.66. During the same period, Mr Crawford paid out $46,488.62. (The last payment of rent was in fact made on 25 February 1994). By par30 of his affidavit Mr Crawford deposes:

"30 If Rynmarc Pty Ltd is granted an extension to register

its Charge then I will be faced with the following

difficulties:-

(a) Between 18 November 1993 and 24th December 1993 I

collected $84,747.50 worth of book debts and for the same

period I have paid out $5,428.68. During this period with

respect to payments I did not distinguish between monies

sourced from debtors and monies from other sources;

(b) Between 18th November 1993 and 24 November 1993 I

incurred liabilities to the following persons and

businesses, at a time when I drew no distinction between

monies received from debtors of the company and monies

received from other sources:

(The deponent sets out a list of payments made and the dates

on which each were made totalling $4,555.30).

(c) I will, necessarily, have dealt with monies which will

now be declared to have formed part of the security of

Rynmarc Pty Ltd when in fact at the time I dealt with those

monies they were not the subject of any security in favour

of Rynmarc Pty Ltd."

28. The question for determination is whether in all those circumstances, an order should be made pursuant to the Corporations Law, s266(4) for an extension of time from 10 May 1993 until 15 November 1993, a period slightly in excess of six months.

WAS THE FAILURE TO LODGE ACCIDENTAL, OR DUE TO INADVERTENCE OR DUE TO SOME OTHER SUFFICIENT CAUSE?

29. Counsel for the applicant submitted that Mr Swan's ignorance of the requirement to register the debenture mortgage within the prescribed time was due to inadvertence within the meaning of s266(4). In support he relied upon the decision of the Full Court of Queensland, Sanwa Australia Finance Ltd v Ground-Breakers Pty Ltd (in liq) (1991) 2 Qd R 456. In that case, Kelly SPJ (with whose reasons for judgment the other members of the court agreed) said at 461:

"The question of whether an omission to carry out a

statutory obligation because of ignorance of the law may

amount to inadvertence has been considered by courts on

several occasions and the weight of authority is that it may

do so."

30. Whether in any case an omission to comply with a statutory obligation is due to inadvertence is of course, a question of fact. Sanwa's case concerned four Bills Of Sale. Notices, required by the Companies (Queensland) Code, s201(1), were not given until after the expiry of the 45 day period. In the case of the first and fourth security, the Bills of Sale were not sent by the appellant finance company to its solicitors for registration until after expiration of the 45 day period. The company had a procedural manual which directed that documents such as these Bills of Sale needed to be registered "as soon as possible following settlement." No officer in the appellant company was aware of the requirements of the Code with respect to the lodgement of notices. The weight of authority to which Kelly SPJ referred was Re Dudley Engineering Pty Ltd (1968) 1 NSWR 483, Nichol v Fearby, Nichol v Robinson (1923) 1 KB 480 and In Re Jackson and Co Ltd (1899) 1 Ch 348. Analysis of these cases shows that in each of them the failure to comply with a statutory obligation was due to ignorance of the existence of the relevant statutory obligation. In other words, in each case the reason for the failure to "advert" or, to use the primary meaning of the word in the Oxford English Dictionary (1 edn), "failure to observe or pay attention" to registration was ignorance of the law. With great respect to Kelly SPJ, I do not understand how, "ignorance of the law may amount to inadvertence". Although it may be said that each is a condition of the mind, the former cannot amount to the latter; it can only be a reason for the latter. I understand his Honour to be saying that the weight of authority is that even if the failure to pay attention to compliance with a statutory obligation is due to ignorance of the existence of that obligation, such failure is capable, depending upon the facts of the case, of constituting inadvertence within the meaning of the statutory provision. Such ignorance may be the cause of the failure to advert to the statutory requirement. In this sense, I would respectfully adopt what his Honour says and the authorities upon which he relies. This point was made in Hamilton v Property Investments Ltd (1983) WAR 317 where the Full Court said at 320:

"That (Re Jackson and Co Ltd) case was concerned with the

omission to file a contract as required by s25 of the

Companies Act 1867. The contract was not filed because

those who were required to do so were 'ignorant of the

provisions of the Act of 1867' and it was for that reason

that 'I think I can fairly say that the omission to file the

necessary contract was due to inadvertence' (at 315) of the

report. That was a case of not directing one's mind to the

doing of an act because of ignorance that the act was

required to be done. The ignorance provides the reasons for

'not properly attentive' which is the primary meaning of the

word 'inadvertent'."

31. In that case the Full Court held there was no inadvertence in that sense because the respondent intended to do precisely what it did do and the fact that it did not appreciate that it was thereby committing an offence did not mean that what was done was due to inadvertence.

32. In the present case, Mr Swan was ignorant of the statutory obligation to lodge notice of the charge within the 45 day period, but was aware of a statutory obligation to register the charge "as soon as practicable" or "soon" or "not later than the end of April 1993." Had his omission to register persisted for only a short time after the execution of the charge, it might be said that such omission was due to inadvertence caused by ignorance of the statutory obligation to register within 45 days. However, it persisted for a lot longer than that. I find that from the middle of 1993 Mr Swan was continually conscious of the need to register the charge. His failure to do so was due to some inexplicable paralysis of mind and not due to ignorance of the 45 day time limit. Ignorance of the law formed no part of the reason for failure to register. Failure to lodge notice of the charge was not due to inadvertence. Mr Swan adverted to the need to register throughout the period of delay but did not get around to doing it.

33. Clearly the failure to register within the 45 day period was not accidental and I shall return to the question of "sufficient cause" shortly.

WAS THE FAILURE TO LODGE NOT OF A NATURE TO PREJUDICE THE POSITION OF CREDITORS OR SHAREHOLDERS?

34. The applicant who seeks to invoke the jurisdiction carries the onus of establishing that the failure to lodge notice within the prescribed time was not of a nature to prejudice the position of creditors or shareholders. There is no suggestion that any shareholder was so prejudiced. There is no evidence that any creditor did or did not search the Register and, on finding that the respondent's book debts were not the subject of any charge, became a creditor.

35. In the events that have happened viz, the winding up, it seems to me that the failure to lodge notice within the time prescribed is of a nature to benefit all creditors except the applicant and Mr Crawford. Unless this Court extends the time, the failure to lodge notice has resulted in the book debts being available for all the creditors of the respondent and not just the applicant. It is the making of an order extending the time for lodgement that will be of a nature to prejudice those creditors, not the failure to lodge notice within the time required. However, Mr Crawford is also a creditor of the respondent. He became a creditor just three days after lodgement of notice of the charge. I cannot be satisfied that failure to lodge that notice on or before 10 May 1993 did not prejudice his position. By pars10 and 11 of his affidavit, set out earlier in these reasons, he deposed to the fact that it did prejudice his position and that deposition has not been challenged.

36. This basis for the exercise of the general discretion falls to be considered along with the ground "some other sufficient cause" in par(a) and both obviously overlap the general discretion conferred by the use of the expression "may ... extend the period ..." and both require the court to consider whether the failure to comply with the requirement was due to accident or inadvertence and whether the failure to lodge and/or the granting of the application is or will be of a nature to prejudice creditors or shareholders. Indeed, it is hard to regard the practical effect of the whole of s266(4) as doing any more than conferring a general discretion to extend the period taking into account (inter alia) the matters specifically referred to in pars(a) and (b).

37. In Vector Capital Ltd v SNS Software Network Systems Pty Ltd (1988) 6 ACLC 280 Needham J noted some distinctions between the Companies Act (NSW) 1961, Div7, PtIV and the Companies (NSW) Code, s205 now enacted in the Law, Pt3.5 Div2 . He did so because cases decided under the former legislation had consistently held that where liquidation intervenes between the date of creation of a charge and an application to extend time there must be substantial or extraordinary reason for the court to extend time. See for example Re Flinders Trading Co Pty Ltd (1978) CLC 40-382 at 29,751; Scarfe Steel Supplies Pty Ltd v SMP Pty Ltd and Ors (1980) CLC 40-662. Needham J held that although liquidation was a relevant matter, insolvency or commencement of winding up or appointment of an official manager before an application for an extension of time is heard or made, is no longer a factor necessarily fatal to an application to extend time. His Honour summarised the differences between the 1961 legislation and the relevant provisions of the New South Wales Code at 284 as follows:

"(1) that notice of a charge may be lodged at any time and,

if in proper form, will be registered with full effect

unless, it having been lodged outside the permitted time (45

days or such additional time as the court orders), winding

up of the chargor is commenced or an official manager is

appointed within six months of the lodgement of the notice,

in which case the charge 'is void as a security on (any

property of the company) as against the liquidator or

official manager';

(2) that, ... the fact that a winding up commences or the

appointment of an official manager takes place before the

expiration of the prescribed time for lodgement is not

effective to invalidate the charge ...;

(3) that sec 204 and the Fifth Schedule regulate the

priorities of registered and unregistered charges inter se;

(4) the avoidance of the charge is not an avoidance 'against

... any creditor of the company' - sec 100(1) of the 1961

Act."

38. This case was considered in some detail by the Full Court of Western Australia in Douglas-Brown as liquidator of De Barros Nominees Pty Ltd (in liq) v Standard Chartered Finance Ltd (1980) 8 ACLC 993. Malcolm CJ and Rowland J (with whose reasons the other member of the court agreed) said at 998 that the observation of Needham J in Vector Capital at 285 to which I have referred, was "strictly correct, although the authorities which are persuasive at the level of the Court of Appeal and the South Australian Full Court, would suggest that an extension of time will almost invariably be refused after the commencement of a winding up and will only be granted in exceptional circumstances". The reason for this is apparent from the judgment of Buckley J in Re Anglo-Oriental Carpet Manufacturing Co (1903) 1 Ch 914 in which he held at 918 that upon the commencement of the winding up the undertaking and the assets pass into the control of the liquidator whose duty it is to convert them into money and pay creditors existing at that date. His Honour said that "the assets have been said to have been impressed in the hands of the liquidator with a statutory trust in favour of the creditors." In De Barros Nominees Pty Ltd Malcolm CJ and Rowland J referred to the judgment of Buckley J and said at 997:

"If no application to extend time is made prior to the

actual date of winding up, then, on the making of the order

winding up the company, the assets are impressed with that

trust in the hands of the liquidator. The only way in which

sec 205(1)(d) can then have any operation is if the notice

was in fact lodged without an order prior to the date of the

commencement of the winding up. If it was so lodged then

that is a circumstance which can be taken into account by

the Judge when exercising his discretion. That is

consistent with the decision and reasons of Needham in

Vector Capital Ltd v SNS Software Network Systems Pty Ltd

(1988) 6 ACLC 280."

39. I respectfully adopt that passage in their Honours' reasons. The intervention of winding up between the creation of the charge and the application to extend the time for lodgement of a notice is an important factor against exercising the discretion in favour of the applicant even though lodgement occurred before the winding up, because an order extending the period will assist the applicant creditor over the other unsecured creditors. There are other factors:

- the lodgement occurred only three days before commencement

of administration and only because administration and

liquidation was imminent.

- the period of delay was substantial.

- the explanation for delay before lodgement was far from

satisfactory.

- there was no explanation for most of the period of delay

between lodgement and this application being made, during

which period the respondent was on notice that prejudice was

occurring or might occur.

- delay in making the application has resulted in the

liquidator dealing with property which, if this application

is granted, belongs to the applicant.

- at all material times the company was insolvent.

- there is no evidence tending to suggest that the book

debts would not have existed or would have been

substantially less in value had the loans not been made.

- until March 1993 the applicant was content to be an

unsecured creditor to the extent of $150,000.

40. In all those circumstances the applicant has failed to make out a sufficient case for the exercise of the statutory discretion in its favour.

41. The application was argued on the basis that the applicant was the holder of a floating charge over the book debts of the company and I have decided it on that basis. However, I have grave doubts as to whether this is so. The debenture is expressed to be a "charge over all and singular (the respondent's) undertaking and all its book debts whatsoever and wheresoever both present and future after the date upon which the security hereby crystallises (hereinafter referred to as the 'mortgaged assets')." When counsel for the applicant's attention was drawn to this contradictory form of expression he was unable to offer any satisfactory interpretation other than to suggest that the words "after the date upon which the security hereby crystallises" should be ignored. Further perusal of the debenture shows that it gets worse rather than better. Clause 12 reads:

"The charge hereby created shall operate as a fixed charge

as regards all books of account vouchers and other documents

relating in any way to the business transactions of the

Mortgagor and all book debtors and documents evidencing

title to or right to possession of any such book debtors at

any time deposited with or which under this security are

required to be deposited with the Mortgagee by the Mortgagor

and the property mentioned in any such documents so that the

Mortgagor shall not be at liberty to create any mortgage or

charge in priority to or parri passu with or subsequent to

this security or to make any assignment of its book debts or

any of them except with the consent in writing of the

Mortgagee."

42. Insofar as sense can be made of that clause it would appear that the debenture is a fixed charge over the book debts of the respondent but the description of the mortgaged assets is such that is it is difficult to make out when it was fixed. Counsel for the applicant was unable to submit to the contrary when his attention was drawn to cl12. However whether the charge was fixed or floating at the time of its creation, the case is not one appropriate for an order extending the period so it is unnecessary for me to consider the terms of the debenture any further.