Westpac Banking Corp v LOCM Pty Ltd (Administrators Appointed) [1997] FCA 1037

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY VG 3248 of 1997

BETWEEN: WESTPAC BANKING CORPORATION (ARBN 007 457 141)

Applicant

AND: LOCM PTY LIMITED (ADministrators appointed)

(ACN 070142 166)

Respondent

JUDGE(S): NORTHROP ACJ

DATE: 25 SEPTEMBER 1997

PLACE: MELBOURNE

REASONS FOR JUDGMENT This is an application brought by Westpac Banking Corporation under s 266(4) of the Corporations Law seeking an order extending the 45 day period within which the applicant was required to lodge a notice of particulars of a registerable charge under s 263(1) of the Corporations Law in respect of charge number 592605. The notice was in fact lodged and registered on 29 May 1997 but this was outside the 45 day period. The facts of this case are, in truth, very simple even though they do disclose a course of conduct by officers of the bank which was not of a standard that should have been applied by a company of the nature of Westpac Banking Corporation. The crucial facts are that in this case the company concerned, the respondent LOCM Pty Limited, gave a debenture charge in favour of the bank on 23 December 1996. For various reasons, which need not be gone into, it was required to re-issue that charge by a replacement charge which in fact was executed on 30 January 1997 but was dated 23 December 1996. It does not matter really which of the crucial dates is involved here, because in either event the particulars of the charge were not lodged for registration as required by s 263 within the 45 day period, see s 266. If the date 23 December 1996 is the crucial date the notice of the charge should have been lodged by 6 February 1997. If 30 January 1997 was the correct date notice of the charge should have been lodged by 16 March 1997. In fact, the notice was lodged and was registered on 29 May 1997. Once the notice of charge was registered, any person dealing with the company would have the opportunity of seeing the existence of the charge if a search were made. A person proposing to lend money to the company normally would make such a search and be made aware of the existing charge to the present applicant. It appears that on 30 July 1997 the administrators of the respondent were appointed under s 436A of the Corporations Law but it is not clear whether the basis of the appointment was that the directors of the company were of the opinion that the company was insolvent or was likely to become insolvent at some time in the future. In any event, presumably they passed the required resolution complying with s 436A(1) and the administrators were appointed with effect from 30 July 1997. The way things then stood, under s 266(1) of the Corporations Law, the charge in favour of the bank, the applicant, was void as against the company under administration. However power was conferred on the court by s 266(4) for the court to extend the time for lodging of the notice. The subsection provides:- "The Court, if it is satisfied that the failure to lodge a notice in respect of a charge, or in respect of a variation in the terms of a charge, as required by any provision of this Division: (a) was accidental or due to inadvertence or some other sufficient cause; or (b) 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, may, on the application of the company or any person interested and on such terms and conditions as seem to the Court just and expedient, by order, extend the period for such further period as is specified in the order." The applicant is relying on each of these three possibilities, that the failure to lodge was accidental or due to inadvertence, the first possibility; that the failure is not of a nature to prejudice the position of creditors or shareholders in the second possibility, and the third possibility is on other grounds it is just and equitable to grant relief. If any one of these possibilities is established the Court has a power to make the order sought and to impose conditions if it appears to the Court to be just and expedient to so order. In the present case the material before the court, in my opinion, shows that the failure to lodge the notice within the 45 days was accidental or was due to inadvertence by officers of the applicant. This is made very clear from the extensive affidavits which have been filed in support of the application. It was not until May 1997 that a more senior officer of the applicant became aware of the fact that the notice of charge had not been lodged for registration and speedily took steps to ake sure it was done. Thereafter another creditor was given security for money lent to the respondent company. Notice of this charge was lodged for registration but that creditor knew of the existence of the charge to the bank, the latter charge by that time having been registered. There is evidence to show that no creditor and no shareholder has suffered any prejudice resulting from the failure to lodge the charge by the bank until 29 May 1997. Put another way, there is no evidence to suggest that because the charge was not registered between the period of 6 February 1997 to 29 May 1997, any creditor or shareholder suffered any prejudice flowing from the failure to lodge the charge for registration. Thereafter, the administrators were appointed on 30 July 1997 and the application was made to this Court on 25 August 1997. It appears that at the time the application was made by the bank to the Court, the provisions of s 440D the Corporations Law, had not been complied. Subsequently the administrators have, by writing, confirmed that they consent to the applicant making the application under s 266(4) to extend the 45 day period by which it was due to lodge the notice of particulars of charge under s 266(1) of the Corporations Law in respect of charge number 592605 as presently registered at the Australian Securities Commission to 29 May 1997. The solicitor appearing for the company agrees this consent has been given and accordingly the Court is satisfied of the consent being given as required by s 490D of the Corporations Law. It appears that the discretion conferred by s 266(4) is unfettered even though the Court has power to impose conditions. There appears to be a number of authorities of various courts considering what type of matters should be taken into account in deciding whether to exercise the unfettered discretion in favour of a person interested, in this case the bank, who is seeking to gain the benefit of the security given by the charge. The facts of this case are fairly simple and straightforward despite the length of affidavits, and the Court has indicated it does find under s 266(4)(a) that the failure to lodge the notice of the charge for registration was due to inadvertence or was accidental. There is no suggestion of it being done intentionally or for any improper purpose. Therefore the Court is satisfied of the ground as specified in s 266(4)(a). Having regard to the fact that there is no suggestion or evidence of prejudice to any other person whether a creditor or shareholder, the Court is disposed to grant the order sought and to exercise its discretion in favour of the bank. The authorities referred to in the course of argument do not, in my opinion, detract from the view that I have formed that on the facts of this case there is any matter adverse to the granting of the order as sought. There is one matter of difference between the parties. That is that the respondent was seeking a condition to be imposed in relation to events that might occur at a meeting of creditors to be held subsequently to the appointment of the administrators, that is, the second creditors meeting. In my opinion, this is not a case where the Court should impose any conditions of that kind. This is a straight out case of an error being made through inadvertence, no prejudice being caused to any creditor or shareholder. In these circumstances the Court sees no reason why any conditions should be imposed on the granting of the orders sought by the applicant. Accordingly, the Court makes the order in the form of the application namely that pursuant to s 266(4) of the Corporations Law, the time for the lodging of notice of particulars of charge under s 266(1) of the Corporations Law in respect of charge number 592605 be extended to 29 May 1997. Prima facie, the applicant is seeking an indulgence. The indulgence has been granted and prima facie the respondent should have its costs of the application. I will order that the applicant pay the respondent's costs. I certify that this and the preceding four (4) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice R M Northrop