FEDERAL COURT OF AUSTRALIA

BMW Australia Finance Limited v @Civic Park Medical Centre Pty Ltd as trustee for @Civic Park Medical Centre Unit Trust [2019] FCA 999

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to section 293(1)(a) of the Personal Property Securities Act 2009 (Cth) (PPSA), the number of business days set out in section 62(3)(b) of the PPSA be extended by the necessary number of business days such that the Personal Property Securities Register registration numbers contained in exhibit 1 fall within the time period prescribed by section 62(3)(b) of the PPSA as extended by this order.

2.    The question of costs is stood over to 25 June 2019 for case management hearing at 9:30am.

3.    The exhibits be returned and retained by the Plaintiff’s solicitors for a period of no less than 6 months.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

JAGOT J:

1    On 31 May 2019, I made orders under s 293(1) of the Personal Properties Securities Act 2009 (Cth) (the Act) extending the number of business days set out in s 62(3)(b) of that Act such that the Personal Property Securities Register (PPSR) registration numbers contained in Exhibit 1 fall within the extended time period.

2    Section 293(1) provides that on application, a court may make an order extending the number of business days in a period specified in the following provisions if the court is satisfied that it is just and equitable to do so. One of the following provisions is s 62(3)(b). Section 62(1) explains that:

This section sets out when a perfected purchase money security interest that is granted by a grantor in collateral or its proceeds has priority over a perfected security interest that is granted by the same grantor in the same collateral, but that is not a purchase money security interest.

3    Section 62(3)(b) provides that a purchase money security interest has priority if, relevantly, the purchase money security interest is perfected by registration before the end of 15 business days after, for goods, the day the grantor, or another person at the request of the grantor, obtains possession of the property and, for any other property, the day the interest attaches to the property.

4    The circumstances in which the applicant sought the orders and the reasons supporting the making of the orders were set out in its comprehensive written submissions. The plaintiff provides finance to its customers who acquire motor vehicles. In so doing, it takes a security interest over the motor vehicle as referred to in s 12 of the Act and holds a purchase money security interest as defined in s 14(1)(b) of the Act. Each customer, by this process, also agreed to ensure that whatever interest the plaintiff took was properly perfected by the imposition of positive duties in the various agreements by which financing was provided.

5    Since the commencement of the Act, the plaintiff has used computer software to record information about each financing contract, with the system design operating to ensure that for every new contract a financing statement would be lodged for the purpose of registration on the PPSR. In or about October 2017 the plaintiff discovered a potential problem with its system when a liquidator asserted that the plaintiff’s registration was insufficient or defective to obtain the priority. The subsequent investigation revealed the existence of this problem extended to other registrations. The problem concerns the position when the grantor of the security interest was a trustee. By s 153, a financing statement has to contain certain information including, relevantly, the grantor’s details as prescribed by the Personal Property Securities Regulations 2010 (Cth) (the Regulations). By Sch 1 item 1.3 to the Regulations, the required grantor detail for a corporation is its ACN. By item 1.5, where the body corporate acts as the trustee of a trust, the required grantor detail is the ABN of the trust.

6    The plaintiff began a process of reviewing and lodging a series of remedial registrations to correct the errors in the grantor details. That process has taken significant time given the number of registrations potentially affected. The plaintiff recognised that delay is a relevant consideration for its application but pointed to the fact of the number of affected registrations, the time necessary to review them and to lodge remedial financing statements, and the fact that at all times a registration appeared on the PPSR albeit, in affected matters, with the ACN of the company as corporate trustee rather than the ABN of the trust. Accordingly, the plaintiff submitted that:

For those reasons, whilst delay might present difficulties to an applicant in certain cases, delay, in and of itself, would not prevent a Court granting the relief sought in these Proceedings particularly in circumstances where:

a.    the original registrations attended to by the Plaintiffs (notwithstanding their potential shortcomings) would have very likely put a third-party searcher on notice of the relevant Plaintiff’s interests in any event; and

b.    critically, all relevant parties who could have relied on the PPSR as it appeared prior to the new registrations or otherwise been prejudiced by the application have been served with the application and have elected not to oppose the relief now sought .

7    Orders for substituted service by the plaintiff on the defendants were made. Evidence of the process by which service was effected as required was in evidence.

8    In making an order under s 293(1), s 293(3) provides that:

…the court must take into account the following:

(a)    whether the need to extend the period arises as a result of an accident, inadvertence or some other sufficient cause;

(b)    whether extending the period would prejudice the position of any other secured parties or other creditors;

(c)    whether any person has acted, or not acted, in reliance on the period having ended.

9    I accept that the need to extend the period has resulted from inadvertence. Those within the plaintiff did not know that the financing statement details had to include the ABN of the trust rather than the ACN of the corporate trustee.

10    I also accept that at all times a financing statement had been lodged. Further, but for the potential defect in the grantor’s details, the plaintiff’s security interest would take priority. In Re Accolade Wines Australia Ltd [2016] NSWSC 1023 at [29] Brereton J explained that “the essential purpose of granting an extension is to reinstate the priority to which a PMSI [purchase money security interest] would otherwise be entitled over prior AllPAPs [security interests over all present and after acquired property] (as it will in any event have priority over later AllPAPs), and thus in any case in which the remedy is of any practical utility, there will be prejudice to a prior AllPAP holder”. As put by the plaintiff, it necessarily follows that it is neither required nor possible in most cases for a person in the plaintiff’s position to prove lack of any prejudice to other secured parties as a consequence of the grant of the order. Instead the Court has accepted, as in Accolade Wines at [52], that it is not unreasonable for the forensic burden of setting aside or varying the order to be borne by any AllPAP holder who wishes to contend unacceptable prejudice.

11    The current case, if anything, presents a more compelling reason for relief than in Accolade Wines. In particular, the application has not been made ex parte. The application was served on the defendants, and none have come forward to complain of prejudice. As noted in Accolade Wines at [52], the only real prejudice must be characterised as losing a windfall obtained through another’s inadvertence.

12    It is unnecessary to consider the plaintiff’s further analysis showing that in three quarters of the cases there could be no relevant prejudice because the plaintiff’s transaction simply post-dates the decision to take an AllPAP over the relevant first defendant.

13    For these reasons I was satisfied that the orders sought should be made.

Associate:

Dated:    25 June 2019