Seed Corporate Finance Pty Ltd v Savvytel Pty Ltd

REASONS FOR JUDGMENT 1 The plaintiff, Seed Corporate Finance Pty Limited (Seed),seeks declarations and other relief in relation to the lodgement with Australian Securities and Investment Commission (the Commission) of a deed of charge in favour of Seed executed by the defendant, Savvytel Pty Limited (Savvytel), on 14 January 2010 (the Charge). Seed seeks a declaration that s 263 of the Corporations Act 2001 (Cth) (the Corporations Act) has been complied with in relation to the Charge and, for more abundant caution, seeks an order under s 266(4) of the Corporations Act. 2 Section 263(1) of the Corporations Act provides that, 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, together with the instrument creating the charge or a verified copy of the instrument creating the charge. Section 266(1) of the Corporations Act relevantly provides that, in certain circumstances, a registrable charge on property of a company is void as a security on that property as against a liquidator, an administrator or an administrator of a deed of company arrangement, as the case may be, unless a notice in respect of the charge was lodged under s 263 within the relevant period, or at least six months before the critical day. 3 The critical day would be the day of the appointment of a liquidator or an administrator of the company. The relevant period is, for present purposes, the period of 45 days specified in s 263(1) of the Corporations Act, or the period of 45 days as extended by the Court under s 266(4). Under s 266(4), the Court may extend the period of 45 days, if it 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. 4 Seed describes itself as a "credit aggregator", meaning that it obtains funds from lenders, and then lends the funds to its clients by way of credit facility. In January 2010, Seed received an application for a credit facility in the sum of $250,000 from Savvytel. On 14 January 2010, Seed wrote to Savvytel approving the application. The security for the credit facility was to be a first registered fixed and floating charge over the assets of Savvytel, together with a guarantee by another company. On the same day, a credit facility was entered into between Seed and Savvytel. Finally, on the same day, the Charge was executed by Savvytel in favour of Seed. The Charge was a fixed charge in respect of certain assets, and a floating charge on the rest of Savvytel's assets. 5 In order to comply with s 263(1) of the Corporations Act, notice of the relevant particulars and the Charge or a certified copy of it, should have been lodged with the Commission within 45 days of 14 January 2010. That period expired on 28 February 2010, which was a Sunday. The notice of the relevant particulars and the Charge itself were lodged with the Commission on Monday, 1 March 2010. Both Seed and Savvytel are concerned that there may be some doubt as to whether s 263 has been complied with. The concern is generated by the effect that s 266 would have, if s 263 was not complied with. 6 It is clear from the terms of s 36(1) of the Acts Interpretation Act 1901 (Cth) (the Interpretation Act) that the period of 45 days expired on 28 February 2010. Section 36(1) provides that, where in an Act any period of time, dating from a given day, act or event is prescribed or allowed for any purpose, the time is to be reckoned exclusive of that day, or of the day of such act or event. The effect of that provision can be countered by a contrary intention. There is, however, no contrary intention contained in the Corporations Act. However, under s 36(2) of the Interpretation Act, where the last day of any period prescribed or allowed by an Act for the doing of anything falls, relevantly, on a Sunday in the place in which the thing is to be or may be done, the thing may be done on the first day following that is not a Saturday, a Sunday or a public holiday or bank holiday in that place. 7 It appears to me to be clear that the period of 45 days was, in effect, extended in the present case until 1 March 2010. Accordingly, it would be appropriate to make a declaration that there has been compliance with s 263(1) of the Corporations Act, for the purposes of s 266(1) of the Corporations Act, in relation to the Charge. However, for more abundant caution, Seed seeks an order under s 266(4) extending the period to the extent it is necessary to 1 March 2010. 8 Mr Shaneel Mudaliar is a director of Seed. He had the carriage of the arrangements with Savvytel. Mr Mudaliar was aware, when the Charge was created, of the requirement that it be lodged with the Commission within 45 days after its creation. On 15 January 2010, Mr Mudaliar spoke to an officer of the Commission and was informed that he needed to lodge a Form 309 as well as a Form 350 in order to comply with s 263. Form 309 is a form of notification of details of a charge. Form 350 is a certificate of compliance with stamp duties law. Under the terms of the arrangements between Seed and Savvytel, Savvytel was liable to pay the costs of the creation of the Charge, together with any stamp duty payable in respect of the Charge. On 12 February 2010, Savvytel paid to Seed the costs, charges and expenses of registering the Charge, together with the amount of the stamp duty. 9 On 15 February 2010, Mr Mudaliar lodged the Charge with the Parramatta office of the Office of State Revenue for the purposes of having it assessed for duty and for the payment of duty. While the Office of State Revenue provided Mr Mudaliar with a receipt, for some reason it was apparently impossible for the Office of State Revenue to assess and stamp the Charge on the spot. After some negotiation and telephoning over a number of days, the Office of State Revenue finally condescended to deliver the Charge to Mr Mudaliar, duly stamped. Thus, on 25 February 2010, Mr Mudaliar was informed that the Charge would be available for collection on 1 March 2010. Mr Mudaliar collected the Charge, duly stamped, on that day and lodged it with the Commission, together with a completed Form 309 and completed Form 350. 10 It was Mr Mudaliar's understanding, when he lodged the documents, that he was lodging the Charge within the 45-day period because the last day had expired on a Sunday and he was lodging it on the first business day following that day. He was unaware that there is a mechanism in place with the Commission whereby a charge may be lodged for registration under s 263 prior to the completion of the formality of stamping. As I have said, I am satisfied that the lodgement on 1 March satisfied the requirements of s 263 for the purpose of s 266. However, I am disposed to make an order under s 266(4) to the extent that it may be necessary. I am satisfied in the circumstances that, if there was a failure, it was accidental and due to inadvertence. I am also satisfied that it is just and equitable that any relief necessary should be granted. 11 It is usual in cases where an order is made under s 266(4) extending the time to lodge documents to ensure that no other party is prejudiced. That seems highly unlikely in the present circumstances. However, both Seed and Savvytel are content for such orders to be made. While Savvytel did not appear on the hearing of the application, there is evidence before me that Savvytel consents to the making of the orders sought by Seed. 12 A further complication is that, on 21 May 2010, notice of a further charge given by Savvytel to Ittex Pty Limited was lodged with the Commission. I am satisfied that Ittex Pty Limited is aware of this application, and there is evidence that it consents to the orders sought by Seed. Nevertheless, it is appropriate, as a condition of making an order under s 266(4), that liberty be reserved to any creditor or administrator or liquidator of Savvytel to apply to discharge or vary any order that is made and the order should be without prejudice as to the rights of any person as a consequence of any dealing with any property the subject of the Charge on 1 March 2010. I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.