FEDERAL COURT OF AUSTRALIA
P.T. Limited (trustee), in the matter of Pinelake Ribbon Retail Pty Limited [2024] FCA 355
ORDERS
DATE OF ORDER: | 5 April 2024 |
THE COURT ORDERS THAT:
1. Pursuant to r 1.8 of the Federal Court (Corporations) Rules 2000 (Cth) (Rules), service of the originating process and other documents, as required by r 2.4(2) of the Rules, be dispensed with.
2. Pursuant to s 588FM of the Corporations Act 2001 (Cth) (Corporations Act), 20 March 2024 is fixed as the time for the plaintiff to register Personal Property Securities Register Registration Number 202403200083869 (New Registration) for the purposes of s 588FL(2)(b)(iv) of the Corporations Act.
3. Liberty be reserved to any liquidator, administrator or deed administrator of the defendant to apply to discharge or vary Order 2 of these orders, if any winding up of the defendant occurs, or an administrator is appointed to the defendant under ss 436A, 436B or 436C of the Corporations Act, or the defendant executes a deed of company arrangement within 6 months of the date that the New Registration was registered on the Personal Property Securities Register.
4. No order as to costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
HALLEY J:
A. INTRODUCTION
1 On 5 April 2024, I made orders pursuant to s 588FM of the Corporations Act 2001 (Cth) (Act) on the application of the plaintiff, P.T. Limited ABN 67 004 454 666, in its capacity as trustee of the Ribbon Security Trust, for the fixing of a “later time” for the purposes of s 588FL(2)(b)(iv) of the Act, for the registration on the Personal Property Securities Register (PPSR) of a certain security interest of the plaintiff registered on 20 March 2024.
2 The defendant did not appear at the hearing on 5 April 2024 but informed the plaintiff that it consented to the orders sought by the plaintiff.
3 These are my reasons for making those orders.
B. EVIDENCE AND BACKGROUND
4 The plaintiff relied on affidavits from (a) Gareth Munnick, a senior manager at the parent company of the plaintiff, (b) Cameron Cheetham, a partner of Corrs Chambers Westgarth (Corrs), the solicitor on the record for the plaintiff, and (c) Simon Reid, a partner of Corrs, who acted for the plaintiff in connection with the financing transaction, which is now the subject of this application for orders pursuant to s 588FM of the Act.
5 In or about April 2021, the plaintiff was engaged by an underlying financier to act as a security trustee in respect of a secured lending transaction, pursuant to which it entered into a “Security Trust Deed” dated 9 April 2021.
6 Under the Security Trust Deed, the plaintiff agreed to hold the “Security Trust Fund” as a security trustee on trust for the named beneficiaries, to service, among other things, amounts owing under certain “Finance Documents”.
7 At the request of the defendant, on or about 9 October 2023, the defendant acceded to the Security Trust Deed as an obligor (Accession Transaction).
8 The Accession Transaction required the defendant to enter into a General Security Deed (GSD) whereby the plaintiff was granted a security interest in the “Secured Property” (which took the form of an “all present and after-acquired personal property” security interest).
9 The amount secured under the GSD is approximately $440 million.
10 On or about 19 September 2023, the plaintiff engaged Corrs to advise it in respect of the Accession Transaction.
11 Mr Reid gave evidence that the standard practice of Corrs is to:
(a) make any necessary or desirable registration on the PPSR in respect of any security interest(s) arising from the transaction for the purposes of or within the meaning of the PPSA; and
(b) when registering a financing statement on the PPSR in connection with a security interest which has been granted over assets of a trust, to lodge the registration against the trustee ACN, and, where that trust has an ABN, also to lodge the registration against the ABN as the grantor identifier in relation to the trust.
12 The emails attached to Mr Reid’s affidavit make plain that the solicitor responsible for the registration of the security interest of the plaintiff on the PPSR only gave instructions to a paralegal to register the defendant as the “Grantor company name” and “ACN 642 069 403” as the “Identifier”. The solicitor did not instruct the paralegal to register also “Pinelake Ribbon Retail Unit Trust” as the “Grantor company name” and “ABN 92 413 199 344” as the “Identifier”, which were the details of the Grantor under the GSD.
13 On 20 March 2024, Corrs discovered in the course of reviewing the PPSR on a related transaction that the security interest arising under the GSD had not been registered against the Pinelake Ribbon Retail Unit Trust. Later that day, Corrs arranged for a new registration to be entered against the ABN of the Pinelake Ribbon Retail Unit Trust on the PPSR (new registration).
C. STATUTORY PROVISIONS AND LEGAL PRINCIPLES
14 Unless a security interest created by a security agreement is registered within 20 business days of the agreement coming into force, the security interest will not prevail over unsecured creditors if the company over which the security interest is taken goes into liquidation or administration within six months after it is registered. In those circumstances, the security interest vests in the company for the benefit of all creditors: s 588FL(2)(b)(ii), (4) of the Act; Personal Property Securities Act 2009 (Cth), s 267; Re Appleyard Capital Pty Ltd; 123 Sweden AB v Appleyard Capital Pty Ltd (2014) 101 ACSR 629; [2014] NSWSC 782 at [13] (Brereton J).
15 Section 588FM of the Act, however, provides:
Extension of time for registration
(1) A company, or any person interested, may apply to the Court (within the meaning of section 58AA) for an order fixing a later time for the purposes of subparagraph 588FL(2)(b)(iv).
…
(2) On an application under this section, the Court may make the order sought if it is satisfied that:
(a) the failure to register the collateral earlier:
(i) was accidental or due to inadvertence or some other sufficient cause; or
(ii) is not of such a nature as to prejudice the position of creditors or shareholders; or
(b) on other grounds, it is just and equitable to grant relief.
(3) The Court may make the order sought on any terms and conditions that seem just and expedient to the Court.
16 In summary, the Court may make an order fixing a subsequent date under s 588FM(2) if it is satisfied that:
(a) the failure to register the collateral earlier was accidental or due to inadvertence or some other sufficient cause;
(b) there is no prejudice to the position of creditors; or
(c) it is otherwise just and equitable to grant relief.
17 The three grounds are not cumulative. It is sufficient if any one of those grounds can be satisfied.
18 An order pursuant to s 588FM, fixing a subsequent registration time for a PPSA security interest, avoids the PPSA security interest vesting in the company: s 588FL(2)(b)(iv) of the Act.
19 As I explained in Gemi 143 Pty Ltd v The Gosford Pty. Limited (Receivers and Managers Appointed), in the matter of The Gosford Pty. Limited [2023] FCA 1375 at [17]:
The reference to “inadvertence” in s 588FM(2)(a)(i) can include a failure to advert to or understand the legal requirements for registration: Elimatta Pty Ltd v NT Bullion Pty Ltd, in the matter of NT Bullion Pty Ltd [2021] FCA 1416 at [5] (Yates J). The concept of “inadvertence” encompasses innocent human error, lack of oversight, an active but incorrect consideration of a requirement, a failure to turn one’s mind to the requirement or a failure to appreciate the true significance of non-compliance with a requirement, so long as such a failure is not intended to flout, or is recklessly indifferent to proper compliance: Bluewaters Power 1 Pty Ltd v The Griffin Coal Mining Company Pty Ltd [2019] WASC 438 at [40] (Vaughan J), citing National Australia Bank Limited v Davis & Waddell (Vic) Pty Ltd [2003] VSC 1 at [65] (Hansen J); ACE Funding Ltd [2003] FCA 59 at [8] (Conti J); Commonwealth Bank of Australia v HM Aircraft Holdings Pty Ltd [2021] FCA 447 at [64] (Beach J).
20 An extension order under s 588FM(2) may operate to the detriment of unsecured creditors if the grantor of the security goes into liquidation or administration within six months of the security interest being perfected because the order would prevent the security interest otherwise vesting in the grantor for their benefit: Elimatta Pty Ltd v NT Bullion Pty Ltd, in the matter of NT Bullion Pty Ltd [2021] FCA 1416 at [6] (Yates J).
21 Item 1.5 of Sch 1 of the Personal Property Security Regulations 2010 (Cth) provides:
1.5 Secured party or grantor is a trustee
(1) For items 1 and 2 of the table in subsection 153(1) of the Act, this clause applies if the secured party or grantor is:
(a) a body corporate that is a trustee of a trust that:
(i) has an ABN; and
(ii) does not have an ARSN; or
(b) any other trustee of a trust.
(2) The details mentioned in each item of the table, from the source mentioned for the item, are prescribed for the trustee mentioned in the item.
(3) For subclause (2), the prescribed details are:
(a) or a trustee that is an individual—the details mentioned in the item of the table in clause 1.2 that:
(i) applies to the trustee; and
(ii) has the lowest item number; and
(b) in any other case—the details mentioned in the item of the table that:
(i) applies to the trustee; and
(ii) has the lowest item number.
(4) In this clause:
trustee details means:
(a) the ABN allocated to the enterprise carried on by the trust; or
(b) the ACN or ARBN allocated to the trustee; or
(c) the name of the trust or trustee.
(5) Item 1 of the table applies only to a registration by the Registrar under subsection 333(2) of the Act.
Item | Trustee | Details | Source |
1 | Trustee of a trust for which details have been included on the transitional register, for a migrated security interest | Trustee details, as recorded on the transitional register | Transitional register |
2 | Trustee of a trust that holds or has an interest in collateral in the course of, or for, an enterprise that has been allocated an ABN | ABN | Australian Business Register |
3 | Trustee of any other trust | Trustee details mentioned in paragraph (3)(a) | Source mentioned in paragraph (3)(a) |
D. CONSIDERATION
22 The new registration was not made within the 20 business days’ time period specified in s 588FL(2)(b)(ii) of the Act.
23 I was satisfied, however, that each of three factors in s 588FM necessary to fix a later time period, for the purposes of s 588FL(2)(b)(iv), was satisfied in this case.
24 First, I am satisfied that the failure to lodge a financing statement against the ABN of the trading trust was accidental or due to inadvertence for the purposes of s 588FM of the Act. The failure was inconsistent with Corrs’ standard practice in respect of PPSA and PPSR compliance. The failure arose because that standard practice was not complied with on 9 October 2023, when the financing statement was registered on the PPSR. The registration was only lodged on the PPSR against the ACN of the defendant trustee and not the ABN of the trading trust.
25 The failure was not discovered by the plaintiff’s solicitors until 20 March 2024, where the solicitors now on the record took immediate steps to rectify the situation.
26 Second, I was satisfied that the extension orders sought by the plaintiff were not of such a nature as to cause prejudice to the position of creditors or shareholders within the meaning of s 588FM(2)(a)(ii) of the Act. As Brereton J stated in Appleyard Capital at [15], orders pursuant to s 588FM of the Act have no effect on the priority of the underlying security interest.
27 As to potential prejudice to unsecured creditors or shareholders, applications of this kind are commonly granted with the condition that liberty be reserved to any liquidator, administrator or deed administrator of the defendant to apply to discharge or vary the order made pursuant to s 588FM if the defendant was subsequently wound up, an administrator was appointed pursuant to s 436A, s 436B or s 463C of the Act or the defendant executed a deed of company arrangement within six months of the date that the new registration was registered on the PPSR.
28 The use of this type of condition was considered by Ward CJ in Eq (as her Honour then was) in Re Psyche Holdings Pty Ltd [2018] NSWSC 1254, where her Honour relevantly stated at [42]:
In this case, there is no evidence of the financial position of the defendant. However, even if the defendant is facing imminent insolvency or is actually insolvent, this will not be determinative of the exercise of the Court’s discretion (Re Apex Gold Pty Ltd [2013] NSWSC 881; Re Carpenter International Pty Ltd [2016] VSC 118 at [217]). It has been said that a “dominant factor” in favour of the Court exercising its discretion is that a search of the register in respect of the grantor, after the initial defective registration, would have disclosed the relevant security interest (Transurban CCT Pty Ltd at [14]). This is true of the present case, where no creditors could have dealt with the defendant on the faith of the register believing that the plaintiff's security interest did not exist or had not been registered. Accordingly, I considered that it was sufficient, in order to protect the interests of the unsecured creditors, for the relief sought to be granted but to reserve leave to enable them to be heard in the event of an insolvency event transpiring within the six month period (in other words to impose a Guardian Securities condition on the grant of relief).
29 In circumstances where liberty to apply is reserved, even in the unlikely event of any relevant prejudice being suffered by creditors or shareholders of the defendant, the relief sought by the plaintiff would not preclude them from ventilating that prejudice.
30 Third, I was satisfied that it would be just and equitable to make orders extending the time for registration of the plaintiff’s security interests because the failure of the plaintiff to obtain the orders sought may render their security interest ineffective should an external administrator be appointed, for no reason other than their accident or inadvertence and in circumstances where there was unlikely to be any prejudice to any other party.
E. DISPOSITION
31 For the foregoing reasons, I made orders in the form sought by the plaintiff pursuant to s 588FM(2) of the Act.
I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Halley. |
Associate:
