Federal Court of Australia

Adia Venture Ltd v Traffic Technologies Ltd [2025] FCA 564

ORDERS

THE COURT ORDERS THAT:

1.    The name of the First Plaintiff is amended to ADIA VENTURE LIMITED (HONG KONG REGISTRATION NUMBER 767223321).

2.    The Plaintiffs’ have leave pursuant to section 440D of the Corporations Act 2001 (Cth) (the Corporations Act) to commence and proceed with the proceeding against the First Defendant.

3.    Pursuant to section 588FM of the Corporations Act, 18 November 2024 is fixed as the time for registration of the Plaintiffs’ security interest pursuant to registration number 202411180056932.

4.    The Second Defendants are to take steps to cause notice of these orders to be given, within one business day of the making of these Orders to:

(a)    Where the First Defendant has an email address for a creditor, by notifying each such creditor, via email of the making of the Orders;

(b)    Where the First Defendant does not have an email address, by publishing the Orders on the website maintained by the Second Defendants; and

(c)    The Australian Securities and Investments Commission, by its email address.

5.    Any person who can demonstrate a sufficient interest to vary or discharge Order 2 of these Orders (including any creditor of the First Defendant) has liberty to apply to the Court within 28 days of the date of these orders and on two business days’ written notice to the parties to these proceedings.

6.    The Defendants’ costs be costs in the administration of the First Defendant.

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

REASONS FOR JUDGMENT

O’CALLAGHAN J:

Introduction

1    This is an application which came before me as the Commercial & Corporations Duty judge. By it, the plaintiffs apply for an order pursuant to s 588FM of the Corporations Act 2001 (Cth) (the Act) fixing 18 November 2024 as the time for the registration of their security interest in the assets of the defendants for the purposes of s 588FL(2)(b)(iv). The first defendant is in administration, so the plaintiffs also seek leave pursuant to s 440D of the Act.

2    Ms V E Bell of counsel appeared for the plaintiffs and read the affidavits of Mr Cheung and Ms Wookey, both affirmed 26 May 2025.

3    Mr J L Evans KC, who appeared for both defendants (i.e. the company in administration and its administrators), applied for an adjournment of this application on the basis that the defendants had not been given sufficient time to consider it and because the application could be dealt with more efficiently in the next little while (including by being dealt with at the same time as any application the administrators may choose to bring under ss 442C, 447A or 447C of the Act).

4    I declined to accede to the adjournment application and made the orders set out above. These are my reasons.

Background

5    The plaintiffs, Adia Venture Limited and Season Components Company Limited (SCC) are both companies registered in Hong Kong. They are part of a corporate group of companies referred to as the Season Group. The Season Group is a vertically integrated electronic manufacturing services provider which manufactures and supplies traffic lights and street lights from Malaysia and China.

6    The Season Group supplied components to the first defendant, Traffic Technologies Ltd (administrators appointed) (TTI) and two of its subsidiaries (together, the TTI Group) for the production of traffic management and safety products.

7    As well as supplying componentry to the TTI Group, Adia agreed to provide US$3 million in financial accommodation to TTI under a convertible note deed poll dated 28 August 2024 (Deed Poll), which was secured by a general security interest over all of TTI’s present and after acquired property (TTI AllPAAP Security). The TTI AllPAAP Security was granted pursuant to a general security deed dated 28 August 2024 (GSD).

8    Pursuant to clause 2.1 of the GSD, TTI granted a security interest over all of its present and after-acquired property to secure payment of the “Secured Money”. “Secured Money” was defined in clause 1.1 of the GSD as:

… all money and amounts (in any currency) that the Grantor [i.e. TTI] is or may become liable to pay under or in connection with, or as a result of a breach of or default under, a Transaction Document, whether:

(a)     present or future, actual, prospective or contingent and at any time ascertained or unascertained; or

(b)     as principal, interest, Tax, Loss, fee, indemnity, guarantee or liquidated or unliquidated damages (whether for breach of contract or tort or incurred on any other grounds).

It includes money and amounts:

(c)     owed or incurred by, or on account of, the Grantor:

(i)     whether alone or not and in any capacity (as principal debtor, surety or otherwise); and

(ii)     whether or not the Grantor has a right of indemnity; and

(d)     owed to or incurred for the account of the Grantor (whether alone or not and in any capacity) or to any agent of the Secured Party (whether disclosed or not) before or after the date the Convertible Note Deed Poll directly or as a result of:

(i)     the assignment or transfer of any debt or liability of the Grantor whether or not:

(A)     the assignment was before, at the same time as, or after the date of the Convertible Note Deed Poll;

(B)     the Grantor consented to or was aware of the assignment; or

(C)     the transferred obligation was secured before the assignment; or

(ii)     any other dealing with any debt or liability of the Grantor.

9    Ms Wookey, a partner of Thomson Geer, acted for the plaintiffs in relation to the transaction, including advising on the GSD and other transaction documents. She swore in her affidavit that although it is her usual practice to register all security interests on the Personal Property Securities Register (PPSR) as early as possible, she does not recall instructing a team member to attend to the registration of the TTI AllPAAP Security. I accept that evidence.

10    On 28 August 2024, TTI also entered into a priority deed with TTI’s secured creditors, Earlypay Cashflow Finance Pty Ltd (Earlypay) and First Samuel Limited (First Samuel) pursuant to which the TTI AllPAAP Security would be first-ranking.

11    As at 28 August 2024, being the date the TTI AllPAAP Security was granted, the only general security interests granted against TTI were:

(a)    PPSR registration 201910170061248, in favour of First Samuel, registered on the PPSR on 17 October 2019; and

(b)    PPSR registrations 202212120047572 and 202212120047909, in favour of Earlypay, each registered on the PPSR on 12 December 2022.

12    On 28 August 2024, TTI and certain of its subsidiaries also entered into a master services agreement and a side letter to that agreement pursuant to which:

(a)    the Season Group agreed to provide 90-day payment terms to TTI; and

(b)    TTI granted a guarantee and indemnity, supported by the TTI AllPAAP Security, in respect of the obligations of certain subsidiaries to which SCC was proposing to supply componentry.

13    The issue of the convertible notes under the Deed Poll required approval of TTI’s shareholders. That approval was obtained on 9 October 2024, and the notes were issued on 16 October 2024.

14    On 20 November 2024, Adia agreed to provide a term loan in the amount of AU$1.2 million to TTI pursuant to a loan agreement (November 2024 Loan). The November 2024 Loan was secured by the TTI AllPAAP Security.

15    At the time the November 2024 Loan was being documented, Ms Wookey deposed that she instructed a member of her staff to obtain an updated search of the PPSR which showed that:

(a)    no financing statement had been registered against TTI in relation to the TTI AllPAAP Security; and

(b)    no other security interests had been registered against TTI on the PPSR since the GSD had been executed and the TTI AllPAAP Security granted on 28 August 2024.

16    Ms Wookey swore, and I accept, that this was the first time she became aware that she had failed to ensure that the TTI AllPAAP Security had been registered, and that a member of her staff immediately registered the TTI AllPAAP Security against TTI on 18 November 2024. Ms Wookey deposed that at that time she did not give consideration to the potential for the TTI AllPAAP Security to vest in TTI under s 588FL of the Act.

17    On 10 February 2025, Adia agreed to provide a second term loan in the amount of US$2 million to TTI pursuant to a loan agreement (February 2025 Loan). The February 2025 Loan was also secured by the TTI AllPAAP Security.

18    On 23 April 2025, the second defendants, Messrs Glenn Franklin and Jason Stone were appointed as joint and several administrators to TTI.

19    On 12 May 2025, the administrators’ solicitors wrote to Thomson Geer advising that, in their view, the TTI AllPAAP Security had vested in TTI pursuant to s 588FL of the Act. Ms Wookey deposed that she immediately conducted a full review of the matter and instructed her staff to prepare this application.

The law

20    In circumstances where there is an order or resolution for the winding up of a company, an administrator is appointed or a deed of company arrangement executed, any security interest which has not been registered on the PPSR within the time period set out in s 588FL(2) of the Act will vest in the company.

21    Section 588FL(2)(b) provides that where a security interest is enforceable against third parties and is perfected by registration, and by no other means, the registration time for the collateral is after the latest of the following times:

(i)     6 months before the critical time;

(ii)     the time that is the end of 20 business days after the security agreement that gave rise to the security interest came into force, or the time that is the critical time, whichever time is earlier;

…

(iv)     a later time ordered by the Court under section 588FM.

22    Section 588FM of the Act 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)     it 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.

23    The power conferred under s 588FM is discretionary. Factors which may impact the exercise of the court’s discretion include delay and the presence or absence of prejudice to creditors or shareholders.

24    In order for an extension of time to be granted, the solvency of the company under administration and the likelihood of its solvency being maintained into the foreseeable future are factors to be taken into consideration. See Bluewaters Power 1 Pty Ltd v Griffin Coal Mining Company Pty Ltd [2019] WASC 438 at [54] (Vaughan J); Re Cardinia Nominees Pty Ltd [2013] NSWSC 32 at [20] (Black J); Re Guardian Securities Ltd [1984] 1 NSWLR 95 at 97–98 (McLelland J); Bevillesta Pty Ltd v Imagine UN Ltd [2009] VSC 50; (2009) 69 ACSR 574 at 579 [28] (Robson J); and Re Appleyard Capital Pty Ltd [2014] NSWSC 782; (2014) 101 ACSR 629 at 638 [25]–[26] (Brereton J). Absent evidence of solvency, steps are usually taken to preserve the interests of unsecured creditors by reserving liberty to apply to any external administration appointed within six months of the date on which registration for the security interest is fixed.

25    In this case, Ms Bell relied on two grounds under s 588FM to support the plaintiffs’ application, viz:

(1)    the failure to register the collateral earlier was accidental and due to inadvertence (s 588FM(2)(a)(i)); and

(2)    the orders sought will not prejudice the position of creditors or shareholders of the defendants (s 588FM(2)(a)(ii)).

Inadvertence

26    The cases have in some instances sought to define the meaning of the ordinary English word “inadvertence”. In Re Accolade Wines Australia Ltd [2016] NSWSC 1023 at [14], Brereton J said that “‘inadvertence’ includes failure to advert to or understand the requirement for registration within the specified period, and innocent error in the sense of failure to register through ignorance of the legal requirement to do so, or of the consequences of not doing so”.

27    In Bluewaters at [40], Vaughan J observed that “inadvertence … is concerned with human error or oversight or being ‘not properly attentive’”.

No prejudice to creditors or shareholders

28    The cases say that the relevant type of prejudice is the prejudice attributable to the delay in registration, rather than prejudice from making the order. See, for example, Accolade Wines at [18] (Brereton J). Further, as Brereton J said in Appleyard Capital at 640 [30], “relevant prejudice is not necessarily established merely by showing that the dividend to unsecured creditors will be less if the security interest does not vest in the company”.

29    Secured creditors are not affected by an order made under s 588FM. It is the interests of unsecured creditors which are a relevant consideration because, as Brereton J said in Re Transurban CCT Pty Ltd [2014] NSWSC 1909 at [10]:

[I]n the only event that will make the order sought of practical importance they will be deprived of the benefit of having the security vest in the company and it will instead be preserved for the benefit of the unsecured creditors. Thus it is relevant to consider the financial position of the company, because if the company is shown to be financially secure and it is unlikely that a “critical day” will arise in the foreseeable future and solvency is established, that is likely to be the end of the matter.

30    In considering the potential impact on unsecured creditors attributable to the delay in registration, courts have considered whether there were any other registered AllPAAP securities which would have been apparent to an unsecured creditor searching the PPSR. See, for example, Vaughan J in Bluewaters at [61]: “[i]t is unlikely that any unsecured creditors would have dealt with the defendant company on the basis that the relevant collateral affected … was encumbered”.

Discretionary factors

31    As Vaughan J observed in Bluewaters at [53]:

The significance of the passing of time is mainly related to the possibility that others will have dealt with the company on a basis that the collateral was unencumbered. For example, unsecured creditors may be detrimentally affected by the delay in registration if they traded with the company of [sic] the face of the register that showed no security interest.

(Citations omitted.)

32    As Ms Bell said in her submissions, there are a number of cases where orders have been made under s 588FM in circumstances where the delay has exceeded 12 months. See, for example, Re Psyche Holdings Pty Ltd [2018] NSWSC 1254 and Re Amotran Pty Ltd [2017] VSC 637.

Consideration

33    The TTI AllPAAP Security ought to have been registered on the PPSR by 28 August 2024 but was, instead, registered on 18 November 2024.

34    The plaintiffs’ position was that the failure to register the TTI AllPAAP Security within 20 business days was accidental and inadvertent, and that the orders sought would not prejudice creditors or shareholders.

Inadvertence

35    Ms Wookey swore that the failure to register the TTI AllPAAP Security was a wholly inadvertent error and omission. In his oral submissions, Mr Evans conceded that the inadvertence of the error was “clearly satisfied” on the face of the material. See transcript at page 9.

36    In light of that concession, I was satisfied that the failure to register the TTI AllPAAP Security had been due to inadvertence.

No prejudice to creditors

37    Ms Bell accepted that the delay in registration had the potential to impact unsecured creditors who may have dealt with the company on the basis that its assets were unencumbered. But, as she submitted, in this case any unsecured creditors who transacted with TTI would have been able to ascertain from the PPSR that TTI had granted general security interests over all of its present and after acquired property for the benefit of First Samuel and Earlypay. Accordingly, the potential for unsecured creditors to have been impacted by the approximate six-week delay in registering the TTI AllPAAP Security on the PPSR was significantly diminished.

38    Ms Bell also referred to a letter dated 26 May 2025 from the solicitors for the defendants (Madgwicks Lawyers) to the solicitors for the plaintiffs (Thomson Geer), which relevantly stated as follows:

Your Clients: Season Components Company Limited and Adia Venture Limited (collectively, Secured Party)

We refer to your letter of 16 May 2025 and respond as follows:

1.     Our clients have now entered a Terms Sheet (Terms Sheet) with a third party with respect to the acquisition by that third party of the assets of Traffic Technologies Ltd (TTL) and its various subsidiaries (collectively, TTL Group).

…

6.     There are likely to be significant liabilities of TTL that are priority in nature. Moreover, the Administrators will also have appropriate statutory and equitable liens over the assets and property of TTL including, but not limited to liens under section 443A of the Corporations Act, in equity and under the principles of Re Universal Distributing Co Ltd (In Liq) (1933) 48 CLR 171, the effect of which being that it is very unlikely that any surplus funds would be available to the Secured Party, even assuming it has a valid and enforceable security interest over the assets of TTL.

…

8.     Despite our current views regarding the validity of the security registration of the Secured Party, pending an agreement between the Administrators and the Secured Party or a court order regarding the validity of the Secured Party’s security registration, our clients are presently minded to agree to set aside in a trust account the amount of $150,000 from the sale proceeds representing, in their view, a generous allocation of the purchase price to the assets of TTL. This would be done on the agreement that the Secured Party provides a release and discharge of the Sale Assets from the Secured Party’s security registration upon request by the Administrators which is likely to be done in the next fortnight. We believe that this proposal represents appropriate arrangements under section 442C(3) of the Corporations Act to “protect adequately the interests of the Secured Party”, should an application under section 442C become necessary.

(Emphasis added.)

39    The defendants’ statement that it is “very unlikely” that the plaintiffs will receive any surplus funds from the proposed sale (even on the assumption that the plaintiffs are secured creditors) provides a strong basis for inferring that unsecured creditors are even less likely to receive funds from any such sale. This inference is not altered by the defendants’ proposal to set aside, in a trust account for the benefit of the plaintiffs, the relatively meagre amount of $150,000 from any prospective sale proceeds.

40    It follows that any delayed registration by the plaintiffs (which would occur upon the making of the orders sought) would be unlikely to prejudice the position of any creditors.

Whether adjournment is appropriate

41    In his oral submissions, Mr Evans submitted that the substantive hearing of the plaintiffs’ application should be adjourned to give the administrators more time to consider various matters which may go to the court’s exercise of discretion under s 588FM of the Act, alongside any further applications that they may choose to bring.

42    This submission was made on the purported basis that “it was, in fact, only two days ago that the making of this application was foreshadowed, and that’s one reason why [the defendants were] running somewhat behind”. See transcript at page 6.

43    In a letter to Madgwicks Lawyers dated 16 May 2025, Thomson Geer relevantly stated as follows:

1.1     We are taking instructions in respect of the matters raised in your letter and the alleged impact on our clients’ Security Interest. For the avoidance of doubt, our clients do not accept that the Security Interest has vested in the Company pursuant to section 588FL of the Corporations Act 2001 (Cth) (Act).

…

1.4     We do not see on what basis the Security Interest vests in the Company in circumstances where the monies advanced under the Bridging Loans is secured by the Security Interest.

1.5     However, even in the event that your observations are correct (which is not accepted), our clients have strong grounds to obtain an order pursuant to section 588FM of the Act to extend the date for registration of the Security Interest and be reinstated as first-ranking secured creditor. We are instructed that, if necessary, our client will make an application to obtain orders protecting its first-ranking security interest in the Company.

1.6     An order can be made under section 588FM of the Act where:

(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.

1.7     The Court may make an order to extend the time for registration of the security after the Company has entered administration.

1.8     We are confident in our clients’ prospects of success on such an application in circumstances where:

(a)     Any delay in registering the Security Interest was purely the result of an accidental oversight or omission.

…

(b)     There was no prejudice to the position of any other creditors or shareholders by virtue of a delay/failure to register the collateral earlier.

…

1.9     By reason of the matters set out above, we are confident that the grounds of section 588FM(2)(a) are met, or that a Court will find it is just and equitable to fix a later time for registration of the security interest.

(Emphasis added.)

44    Mr Evans made the following submission in respect of that letter (see transcript at pages 16–17):

MR EVANS: … The point is that the relief is a function of the court’s exercising discretion, and what’s being done at this point is – this application has been made on literally 36 hours notice.

HIS HONOUR: So what do you say about the 16 May letter? It seems to - - -

MR EVANS: The 16 May letter, your Honour, I will say quite clearly – it says, “We deny that there is an obligation – that there is a problem.” So it says, paragraph 1.1:

Our clients do not accept that the security interest has vested.

And then it says, at 1.5:

Even if you are correct, our clients have strong grounds to obtain an order pursuant to section 588FM. We’re instructed that, if necessary, our client will make an application to obtain orders protecting its first-ranking security interest.

HIS HONOUR: Isn’t that giving it notice of their intention?

MR EVANS: Well, your Honour, it doesn’t say, “We’re going to make an application.” In fact, it says, “We don’t need to make an application, but if we do, then we will succeed.” That does not, with respect, say with any clarity whatsoever, “We’re intending to make this application.” They then make it. They serve us, on Monday morning, with a draft – they serve us, on Monday morning, with a draft, and our response is, “You have no urgency, and we should have time to consider the matters that go to the exercise of the discretion.” That’s really what it comes down to. And so there’s no prejudice to you from an adjournment. There’s potential prejudice, but not identified yet prejudice, to creditors. And - - -

HIS HONOUR: But there’s liberty to apply.

MR EVANS: Well, your Honour, that’s really what it probably comes down to …

45    Despite the defendants’ submission, I was satisfied that they had been given notice of the plaintiffs’ intention to file this application from at least as early as 16 May 2025.

46    I rejected the defendants’ request to adjourn the hearing of the plaintiffs’ application because:

(a)    the defendants have had sufficient notice of the plaintiffs’ intention to file this application;

(b)    the plaintiffs’ case for the relief it seeks is a strong one;

(c)    the orders sought would give any person with sufficient interest liberty to apply; and

(d)    if the administrators decide to bring an application under ss 442C, 447A and/or 447C of the Act, they are obviously at liberty to do so.

Disposition

47    In circumstances where:

(a)    the late registration of the TTI AllPAAP Security on the PPSR was due to a wholly inadvertent error by SCC’s solicitors; and

(b)    fixing 18 November 2024 as the time for registration for the purposes of s 588FL(2)(b)(iv) of the Act would not have impacted secured creditors and would have been unlikely to prejudice unsecured creditors,

it was appropriate that the relief sought by the plaintiffs be granted, together with leave to make this application under s 440D of the Act, and I made orders accordingly.

Associate:

Dated:    30 May 2025