FEDERAL COURT OF AUSTRALIA

Dempsey Resources Pty Ltd v Continental Coal Ltd [2009] FCA 1157

CORPORATIONS - extension of time for lodging change of details of a charge - s 264(4) Corporations Act 2001 (Cth) - failure due to inadvertence - short delay - remedial steps taken promptly - extension granted.

Corporations Act 2001 (Cth), ss 262(1), 266(3), (4)(a), 268(2)     

Hewlett-Packard Australia Pty Ltd v Exceed Pty Ltd (2004) 48 ACSR 670

Investa Properties Ltd v Westpac Property Funds Management Ltd (2001) 40 ACSR 124

National Australia Bank Ltd v David & Waddell (Vic) Pty Ltd (2003) 44 ACSR 296

Re Kris Cruisers Ltd [1948] 2 All ER 1105

Sanwa Australia Finance Ltd v Ground-Breakers Pty Ltd (in liq) [1991] 2 Qd R 456

Standard Chartered Finance Ltd v De Barros Nominees Pty Ltd (in liq) (1988) 7 ACLC 15

Vector Capital Ltd v SNS Software Network Systems Pty Ltd (1988) 12 NSWLR 1     

DEMPSEY RESOURCES PTY LTD (ACN 100 305 486), PERPETUAL CORPORATE TRUST LIMITED (ACN 000 341 533) and LINQ FINANCE NO 2 PTY LTD (ACN 134 962 182) v CONTINENTAL COAL LTD (ACN 009 125 651)

WAD 153 of 2009

GILMOUR J

12 October 2009

PERTH

THE COURT ORDERS THAT:

1.         The period for lodging a notice of change of details of a charge with the Australian Securities and Investments Commission in respect of:

            (a)        the Increase of Commitment Deed dated 20 April 2009 entered into by the defendant, the first-named plaintiff and the third-named plaintiff be extended to 29 July 2009; and

            (b)        the Increase of Commitment Deed dated 5 June 2009 entered into by the defendant, the second-named plaintiff and third-named plaintiff be extended to 29 July 2009.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

REASONS FOR JUDGMENT

Relief sought

1                          The plaintiffs’ application is for ordersto extend time for the lodging of notices of change of details of a charge in respect of certain charges (Notices) with the Australian Securities and Investments Commission (ASIC).    

2                          The Notices pertain to:

(a)        the Increase of Commitment Deed dated 20 April 2009 entered into by Continental, Dempsey and LinQ Finance respectively (Dempsey ICD); and

(b)        the Increase of Commitment Deed dated 5 June 2009 entered into by Continental, Perpetual and LinQ Finance (Perpetual ICD).

3                          The application is supported by the affidavits of Jason Paul Brewer duly authorised by LinQ Finance No 2 Pty Ltd (LinQ Finance) and Simon Francis Durack each sworn on 26 August 2009 and Johan Chui Shan Yin sworn on 17 September 2009.  Mr Brewer has beena director of LinQ Corporate since 20 July 2009.  Prior to this, from April 2008 he was the General Manager of LinQ Corporate.  He is also the General Manager of LinQ Capital and has been so since April 2008.  

4                          Mr Durack has been a director of the third-named plaintiff, LinQ Finance since 16 January 2009 and is responsible for its day to day administration, which includes keeping the filing of material documents up to date.  He is also the Company Secretary of all the other LinQ group of companies, including LinQ Capital Ltd and LinQ Corporate Pty Ltd. Additionally, he is a non-executive director of the defendant, Continental Coal Ltd (Continental). 

5                          Mr Yin is a solicitor employed by the plaintiffs in assisting the conduct of the matter. 

6                          LinQ Corporate carries on the business of providing corporate advisory services, among other things, to mining companies and assists such companies with obtaining finance and raising capital. 

7                          Perpetual Corporate Trust Limited (Perpetual) is the custodian of the LinQ Resources Fund, an investment fund.  Perpetual holds the assets of the LinQ Resources Fund and deals with them as instructed by LinQ Capital.  LinQ Capital is the responsible entity of the LinQ Resources Fund and it manages the assets in the LinQ Resources as part of its business of investing funds by way of providing finance to mining companies. 

8                          Continental has not entered an appearance.  In a letter dated 15 September 2009 from Ms Jane Flegg, co-company secretary of Continental, addressed to Mr Yin advised that Continental would not oppose this application; would not appear if there was a hearing; and would not oppose the application being heard on the papers. 

9                          In January 2009 LinQ Capital decided to lend Continental $6 million (Continental Deal), and Perpetual was instructed accordingly.  A Loan Facility Agreement (Facility Agreement) dated 19 January 2009 was entered into between Continental, LinQ Finance and LinQ Capital.  Dempsey and Perpetual has given LinQ Finance authority to act on its behalf in this application according to an undated authority provided on 30 September 2009 and the Loan Facility Agreement.

10                        LinQ Finance is the Facility Agent and Security Trustee for the Continental Deal. It acts as agent for each financier and is responsible for administering the loans and acting as a conduit for all payments.  It holds the security on trust for the benefit of the financiers and enforces those security agreements at the directions of the financiers.

11                        At the same time the Facility Agreement was entered into, Continental and LinQ Finance entered into three security agreements (Security Agreements) dated 16 January 2009 being: a deed of charge between Continental and LinQ Finance; Security Cession and Pledge Agreement between Continental and LinQ Finance (the Facility Agent); and Security Cession and Pledge Agreement between Continental and LinQ Finance. 

12                        The Security Agreements secure money owed to LinQ Finance under, inter alia, the Facility Agreement.  

13                        On or about 3 April 2009, an amendment deed (Amendment Deed) was prepared to create an easier mechanism to facilitate the participation of new financiers.  The Total Commitment Amount (as defined in the Amendment Deed) was able tobe increased by the execution of an Increased Commitment Deed. 

14                        On 20 April 2009, Dempsey executed the Dempsey ICD which makes it a financier under the Facility Agreement.  The Perpetual ICD was dated 5 June 2009 to reflect when the funds were advanced by Perpetual.  The Increased Commitment Deeds and their relevant ASIC Forms 311B were not lodged with ASIC until 29 July 2009.

Reasons for the application

15                        Chapter 2K of the Corporations Act 2001 (Cth) (the Act), comprising ss 261-282, contains provisions requiring the registration of company charges and the powers of ASIC to exempt persons from compliance with certain provisions as well as determining the priorities of registrable charges.

16                        Section 262(1) of the Act identifies the charges required to be registered.  Section 262(2) of the Act specifies the types of charges that do not require registration.

17                        Section 268(2) of the Act provides that where there is a variation in the terms of the charge having the effect of increasing the liabilities secured thereby; or prohibiting or restricting the creation of subsequent charges on the property, then the company which created the charge is obliged to lodge a notice of such variation within 45 days of the variation having been made.  It is on this basis that the Notices should have been lodged.

18                        Failure to register does not automatically destroy the security.  However, by virtue of s 266(3) of the Act, it does render the charge void as a security as against the liquidator or administrator of the company or the administrator of a deed of company arrangement.  The charge is otherwise a valid security but, in certain circumstances, it is postponed in priority in favour of a registered charge.  The rules as to priority are set out in ss 280-282 of the Act.

The grounds of the application

19                        The application is made under s 266(4)(a) of the Act which, relevantly, gives the Court a discretion to extend the period for lodging a notice of a charge if it is satisfied that the failure to lodge a noticein respect of a charge, or in respect of a variation in the terms of a charge, was due to inadvertence.

20                        The period of delay in lodging the Notice is relevant to the exercise of discretion.  In Standard Chartered Finance Ltd v De Barros Nominees Pty Ltd (in liq) (1988) 7 ACLC 15 Pidgeon J held that the 2 months between the date on which the Notice in question ought to have been lodged and the date on which the Notice was lodged to be a short period. The short period that had elapsed influenced Pidgeon J’s discretion to extend the time for registering the Notice.

21                        Remediation of the default within a reasonable time is a relevant factor which will influence the Court to exercise its discretion: Sanwa Australia Finance Ltd v Ground-Breakers Pty Ltd (in liq) [1991] 2 Qd R 456 at 466(b).

22                        The fact of solvency and that no other charges are registered is also relevant.  It was held in Investa Properties Ltd v Westpac Property Funds Management Ltd (2001) 40 ACSR 124 at [31] that:

If there is no hint of any possibility of winding up or administration and it is shown that there exists no other chargee occupying a position actually or potentially adversely affected by the system of priorities under Pt 2K.3, it is open to the court to conclude that late lodgment (that is, lodgment outside the 45 days) will not disturb or affect accrued or accruing rights meriting consideration. And that, in such a case, will normally be the end of the matter.

23                        The failure to lodge a Notice due to inadvertence is of considerable importance in the exercise of the Court’s discretion: Vector Capital Ltd v SNS Software Network Systems Pty Ltd (1988) 12 NSWLR 1 at 8.

24                        Inadvertence is ‘the fact or habit of being inadvertent; want of advertence, failure to observe or pay attention; inattention’: National Australia Bank Ltd v David & Waddell (Vic) Pty Ltd (2003) 44 ACSR 296 at 308 or ‘not [being] properly attentive’: Hewlett-Packard Australia Pty Ltd v Exceed Pty Ltd (2004) 48 ACSR 670 at 678.

25                        A circumstance of a similar nature has, correctly in my respectful opinion, been held to constitute ‘inadvertence’ in this context: Re Kris Cruisers Ltd [1948] 2 All ER 1105.  In that case the failure to lodge Notice of a charge arose where the chargee’s solicitors and the company secretary each mistakenly thought that the other was attending to the registration has been held to be ‘inadvertence’. 

Dempsey ICD

26                        Mr Brewer gave the Dempsey ICD to Mr Durack expecting Mr Durack to execute it on behalf of LinQ Finance and register the relevant Notice with ASIC. 

27                        However, Mr Brewer did not specifically instruct Mr Durack to do any of these things.  He ought to have made it clear what he wanted Mr Durack to do. 

28                        As was routine for Mr Durack, he did not look at the Dempsey ICD nor did he execute it on behalf of any companies before he put the Dempsey ICD away in a secure file.

29                        Mr Durack did not think to register the relevant Notice with respect to the Dempsey ICD with ASIC as he believed that registration would be taken care of by the person with the conduct of the matter, namely, Mr Brewer.  He ought to have satisfied himself that this, in fact, was the case. 

30                        The Dempsey ICD was executed and Notice was lodged with ASIC as soon as Mr Brewer realised the oversight.  

31                        I find that the failure to lodge the Notice with respect to the Dempsey ICD was due to inadvertence, in part by Mr Brewer and in part by Mr Durack.  Each mistakenly thought that the other was attending to the registration. 

Perpetual ICD

32                        At the time Perpetual advanced funds to Continental, Mr Brewer was busy organising an equity raising.  As a result, the Perpetual ICD was not executed nor was the relevant Notice lodged with ASIC at this time.  

33                        The Perpetual ICD was executed and the relevant Notice was lodged with ASIC as soon as Mr Brewer realised his oversight.

34                        I find that the failure to lodge the Notice with respect to the Perpetual ICD was due to inadvertence on the part of Mr Brewer.

The Court’s discretion

35                        The question of whether a Court will exercise its discretion under s 266(4)(a) of the Act will depend on the facts and circumstances of each individual case: National Australia Bank Ltd v David & Waddell (Vic) Pty Ltd (2003) 44 ACSR 296. 

36                        The Notice of the Perpetual ICD was lodged 9 days after it should have been.  The Notice with respect to the Dempsey ICD was lodged 55 days after it should have been.  These, in the circumstances, are very short periods of time which, in my view, favour an exercise of discretion to grant the orders sought. 

37                        Continental’s balance sheet, as at 30 June 2009, shows net assets of $7,269,734.

38                        An ASIC search of Continental shows that it is not in any form of external administration. It also shows that there were no charges registered in 2009 other than those in favour of LinQ Finance being the Security Agreements.   

39                        Remedial steps were taken promptly.  Mr Brewer took steps to execute and register the Notices as soon as he became aware of the oversight.

40                        The failure in each case to lodge the Notice was inadvertent.

Conclusion

41                        For these reasons I would make the orders sought in the plaintiffs’ application.

Associate:

Dated:         12 October 2009