Federal Court of Australia Tucker, in the matter of Vector Resources Limited [2021] FCA 112 File number: WAD 26 of 2021 Judgment of: MCKERRACHER J Date of judgment: 16 February 2021 Date of publication of reasons: 17 February 2021 Catchwords: PRACTICE AND PROCEDURE – service of process outside the jurisdiction – whether applicants have satisfied the requirements for leave under r 10.43 of the Federal Court Rules 2011 (Cth) – whether a prima facie case is established – where applicants contend that enforcement under an escrow deed is prevented by the appointment of administrators to the company – where final relief would be sought on an urgent basis if leave granted for service out Legislation: Corporations Act 2001 (Cth) ss 5(4), 9, 51, 51A, 51D, 180, 181, 182, 183, 437D, 440B, 1337B Insolvency Practice Schedule (Corporations) 2016 Sch 2, ss 90-15, 90-15(1) Judiciary Act 1903 (Cth) s 39B(1A)(c) Personal Property Securities Act 2009 (Cth) ss 6, 10, 12, 19(2), 21, 21(2)(a), 21(2)(b), 21(2)(c), 24(6), 27, 27(2), 27(3), 207, 240(1), 240(4), 235(3), 267 Federal Court (Corporations) Rules 2000 (Cth) r 2.7 Federal Court Rules 2011 (Cth) rr 10.42, 10.43, 10.43(1)(c), 10.43(2), 10.43(3), 10.43(4), 10.43(7) Rules of the Supreme Court 1971 (WA) O 10 r 1 Cases cited: Dalian Huarui Heavy Industry International Co Ltd v Clyde & Co Australia [2020] WASC 132 Gas Sensing Technology Corporation v ProX Pty Ltd [2019] WASC 10 Re Hawden Property Group Pty Ltd (in liq) [2018] NSWSC 481 Kent v Lechmere Financial Corporation [2002] WASC 75 PCH Offshore Pty Ltd v Dunn [2009] FCA 553 Perdaman Chemicals and Fertilisers Pty Ltd v ICICI Bank Ltd [2013] FCA 175 Waller v Freehills (2009) 177 FCR 507; [2009] FCAFC 89 Division: General Division Registry: Western Australia National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 81 Date of hearing: 16 February 2021 Counsel for the Applicants: Mr CK Pearce Solicitor For the Applicants: Blackwall Legal LLP ORDERS WAD 26 of 2021 IN THE MATTER OF VECTOR RESOURCES LIMITED (ADMINISTRATORS APPOINTED) ACN 107 541 453 RICHARD SCOTT TUCKER AS JOINT AND SEVERAL ADMINISTRATOR OF VECTOR RESOURCES LIMITED (ADMINISTRATORS APPOINTED) (ACN 107 541 453) First Applicant BENJAMIN FORSTER CARRUTHERS AS JOINT AND SEVERAL ADMINISTRATOR OF VECTOR RESOURCES LIMITED (ADMINISTRATORS APPOINTED) (ACN 107 541 453) Second Applicant VECTOR RESOURCES LIMITED (ADMINISTRATORS APPOINTED) (ACN 107 541 453) Third Applicant order made by: MCKERRACHER J DATE OF ORDER: 16 FEBRUARY 2021 THE COURT ORDERS THAT: 1. Pursuant to r 10.43 of the Federal Court Rules 2011 (Cth), the Applicants are granted leave to serve an originating process in substantially the form annexed as 'JRS-1' to the affidavit of Jonathan Rex Shepherd (sworn 12 February 2021) on the following prospective defendants in foreign countries: (a) Mongbwalu Goldfields Investments Limited (Registered No. 133304), being a company incorporated in the Republic of Seychelles; (b) Mongbwalu Goldfields Investments Holdings 6 Limit (Registered No. 1571486), being a company incorporated in the British Virgin Islands; and (c) Harneys Corporate Services Limited (Registered No. 1006316), being a company incorporated in the British Virgin Islands. Such service on each of the prospective defendants identified above to be effected in accordance with a convention, the Hague Convention or the law of the foreign country by the methods more specifically explained by Counsel for the Applicants at the hearing held on 16 February 2021 from 2.30 pm (Perth time). 2. Costs of the application be costs in the administration of the Third Applicant. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT MCKERRACHER J: 1 The Applicants apply urgently and ex parte for leave to serve a separate proposed originating process (Ultimate Proceeding) outside Australia. The Applicants are the prospective plaintiffs in the Ultimate Proceeding. The First and Second Applicants are the voluntary administrators (Administrators) of the Third Applicant (the Company). For the following reasons, I consider that the service out orders should be granted. 2 The application is supported by expansive affidavit evidence which is intended to establish for present purposes that the Company purchased shares (Shares) in the prospective second defendant to the Ultimate Proceeding (MGIH6) (a company incorporated in the British Virgin Islands) from the prospective first defendant to the Ultimate Proceeding (MGI) (a company incorporated in the Republic of Seychelles) and entered into a security arrangement by which the prospective third defendant to the Ultimate Proceeding (Harneys) (another company incorporated in the British Virgin Islands) would hold, and now does hold, documents in escrow to effect a transfer of the Shares back to MGI in certain circumstances (Escrow Arrangement). In addition to holding the escrowed documents, Harneys is also said to be 'the registered agent' of MGIH6. 3 In September 2020, MGI issued a notice of breach on the Company. The breach notice pertained to certain clauses of the Share Sale and Purchase Agreement (SSPA) through which the Company had purchased the Shares. The breach notice indicated that unless the purported breach was rectified, MGI would take steps to enforce and protect its rights under the SSPA, including having recourse to the Escrow Arrangement by instructing Harneys to release the documents held. In October 2020, the Company obtained an injunction from the Eastern Caribbean Supreme Court restraining Harneys from releasing the escrowed documents. That injunction lapses on 25 February 2021. Upon a grant of leave for service out, the Applicants intend to apply to this Court on an expedited basis for final relief in the form of declarations that, by virtue of the Company's administration, the security interest created by the Escrow Arrangement vests in the Company. Alternatively, it will argue that the prospective defendants cannot enforce the Escrow Arrangement during the administration of the Company. Injunctions are also sought to this effect. 4 Even though the Shares are property of the Company located outside Australia, the Applicants contend that certain provisions of the Corporations Act 2001 (Cth) and the Personal Property Securities Act 2009 (Cth) (PPSA) apply on their terms to the property in the following manner: (a) the Escrow Arrangement is a security interest within the meaning of the PPSA; (b) the PPSA further operates to vest that security interest in the Company through lack of perfection; and (c) alternatively, at the least, the moratorium provisions in s 440B of the Corporations Act apply to prohibit enforcement of the security interest during the voluntary administration of the Company. REQUIREMENT FOR LEAVE 5 By r 2.7 of the Federal Court (Corporations) Rules 2000 (Cth), an originating process once issued must be served on the defendants. Under r 10.43 of the Federal Court Rules 2011 (Cth), an originating application served on a person in a foreign country is effective only if: 10.43 Application for leave to serve originating application outside Australia (1) Service of an originating application on a person in a foreign country is effective for the purpose of a proceeding only if: (a) the Court has given leave under subrule (2) before the application is served; or (b) the Court confirms the service under subrule (6); or (c) the person served waives any objection to the service by filing a notice of address for service without also making an application under rule 13.01. Note: A respondent may apply to set aside an originating application or service of that application—see rule 13.01. (2) A party may apply to the Court for leave to serve an originating application on a person in a foreign country in accordance with a convention, the Hague Convention or the law of the foreign country. (3) The application under subrule (2) must be accompanied by an affidavit stating: (a) the name of the foreign country where the person to be served is or is likely to be; and (b) the proposed method of service; and (c) that the proposed method of service is permitted by: (i) if a convention applies—the convention; or (ii) if the Hague Convention applies—the Hague Convention; or (iii) in any other case—the law of the foreign country. (4) For subrule (2), the party must satisfy the Court that: (a) the Court has jurisdiction in the proceeding; and (b) the proceeding is of a kind mentioned in rule 10.42; and (c) the party has a prima facie case for all or any of the relief claimed in the proceeding. Note 1: The law of a foreign country may permit service through the diplomatic channel or service by a private agent—see Division 10.5. Note 2: Rules 10.63 to 10.68 deal with service of local judicial documents in a country, other than Australia, that is a party to the Hague Convention. Note 3: The Court may give permission under subrule (4) on conditions—see rule 1.33. (5) A party may apply to the Court for leave to give notice, in a foreign country, of a proceeding in the Court, if giving the notice takes the place of serving the originating application. (6) If an originating application was served on a person in a foreign country without the leave of the Court, a party may apply to the Court for an order confirming the service. (7) For subrule (6), the party must satisfy the Court that: (a) paragraphs (4)(a) to (c) apply to the proceeding; and (b) the service was permitted by: (i) if a convention applies—the convention; or (ii) if the Hague Convention applies—the Hague Convention; or (iii) in any other case—the law of the foreign country; and (c) there is a sufficient explanation for the failure to apply for leave. (emphasis added.) JURISDICTION OF THE COURT – r 10.43(4)(a) 6 In the Ultimate Proceeding, the Applicants propose to seek orders confirming the operation of the Corporations Act and the PPSA over the Shares and the Escrow Arrangement under s 90-15 of the Insolvency Practice Schedule (Corporations) 2016 (being Sch 2 to the Corporations Act). 7 The Applicants contend but it is unnecessary to decide, that orders under s 90-15 might conceivably be sought on an ex parte basis. However they acknowledge that it is appropriate that the prospective defendants have the opportunity to be heard in respect of the relevant issues. 8 In addition to declaratory relief, the Applicants also intend to seek injunctive relief which requires the prospective defendants to be parties. Further, including the prospective defendants as parties to the Ultimate Proceeding is likely to assist the Applicants (in the event the relief is ultimately granted) in obtaining assistance from a court in the British Virgin Islands to determine if necessary, whether or not to enforce any ruling. 9 By s 1337B of the Corporations Act, the Court has jurisdiction with respect to civil matters arising under the Corporations legislation. The relief sought in the Ultimate Proceeding is an order under s 90-15 of the Insolvency Practice Schedule which is a matter arising under the Corporations legislation. The Court's jurisdiction under s 90-15(1) of the Insolvency Practice Schedule is wide. The provision allows the Court to make such orders as it thinks fit in relation to the external administration of a company. The power under s 90-15(1) is wider than previous sections of the Act and accommodates the determination of third-party substantive rights: Re Hawden Property Group Pty Ltd (in liq) [2018] NSWSC 481 (at [6]-[8]). 10 To the extent that the PPSA jurisdictional provisions are relevant, the Court also has jurisdiction under s 207 of the PPSA to hear matters arising under the PPSA (defined in more detail as a 'PPS matter' in s 206 of the PPSA). 11 Furthermore, s 39B(1A)(c) of the Judiciary Act 1903 (Cth) confers original jurisdiction on this Court in any matter 'arising under the laws made by Parliament, other than a matter in respect of which a criminal prosecution is instituted or any other criminal matter'. 12 The question whether the Court has jurisdiction may also be affected by the facts which are relied upon to establish there is a prima facie case. Accordingly, while it is clear that the Court has jurisdiction with respect to the statutes from which the Applicants seek their relief, it will be necessary to briefly return to the issue of jurisdiction following consideration of whether there is a prima facie case for relief. DOES THE ULTIMATE PROCEEDING FALL WITHIN r 10.42? – r 10.43(4)(b) 13 Rule 10.42 sets out the kinds of proceedings in which an originating application may be served outside Australia. The Applicants contend the Ultimate Proceeding falls under Item 14. It is unnecessary to consider any other items in r 10.42. 14 Item 14 of r 10.42 provides for service out in a '[p]roceeding in relation to the construction, effect or enforcement of an Act, regulations or any other instrument having, or purporting to have, effect under an Act.' 15 The Ultimate Proceeding is an application for orders under s 90-15 of the Insolvency Practice Schedule for orders about the construction, effect and enforcement of the Corporations Act and the PPSA. Consequently I accept that the Ultimate Proceeding falls within the jurisdictional condition in Item 14 of r 10.42. A PRIMA FACIE CASE? – r 10.43(4)(c) 16 As foreshadowed above, the Applicants' case relies on various provisions of the PPSA and s 440B of the Corporations Act to assert that the Escrow Arrangement cannot be enforced against the Company during its administration (moratorium argument) and further, that the security created by the arrangement in fact vests in the Company by virtue of the administration (vesting argument). Given the steps in the analysis, it is necessary to set out the Applicants' contentions in some detail. 17 The moratorium argument for the relief sought relies on s 440B of the Corporations Act which relevantly provides as follows: 440B Restrictions on exercise of third party property rights General rule (1) During the administration of a company, the restrictions set out in the table at the end of this section apply in relation to the exercise of the rights of a person (the third party) in property of the company, or other property used or occupied by, or in the possession of, the company, as set out in the table. Note: The property of the company includes any PPSA retention of title property of the company (see section 435B). … Possessory security interests—continued possession (3) If a company's property is subject to a possessory security interest, and the property is in the lawful possession of the secured party, the secured party may continue to possess the property during the administration of the company. Restrictions on exercise of third party rights Item If the third party is … then … 1 a secured party in relation to property of the company, and is not otherwise covered by this table the third party cannot enforce the security interest. 2 a secured party in relation to a possessory security interest in the property of the company the third party cannot sell the property, or otherwise enforce the security interest. … 18 The vesting argument for the relief sought relies primarily on s 267 of the PPSA: 267 Vesting of unperfected security interests in the grantor upon the grantor's winding up or bankruptcy etc. Scope (1) This section applies if: (a) any of the following events occurs: … (ii) an administrator of a company or a body corporate is appointed (whether under section 436A, 436B or 436C of the Corporations Act 2001, under that section as it is applied by force of a law of a State or Territory, or otherwise); … (b) a security interest granted by the body corporate, company or bankrupt is unperfected at whichever of the following times applies: … (ii) in the case of a company or a body corporate to which subparagraph (a)(ii) or (iii) applies—when, on a day, the event occurs by virtue of which the day is the section 513C day for the company or body, within the meaning of the Corporations Act 2001 (including that Act as it is applied by force of a law of a State or Territory, or otherwise); … (2) The security interest held by the secured party vests in the grantor immediately before the event mentioned in paragraph (1)(a) occurs. … Is the Escrow Arrangement a 'security interest' 19 To make good its case under s 267 of the PPSA or s 440B of the Corporations Act the Applicants need to demonstrate that the Escrow Arrangement is prima facie a security interest. 20 A 'security interest' for the purposes of s 440B of the Corporations Act is defined in s 51A of the Corporations Act as: (a) a PPSA security interest; or (b) a charge, lien or pledge. 21 A 'PPSA security interest' is defined in s 51 of the Corporations Act as a security interest within the meaning of the PPSA and to which that Act applies. Under s 6 of the PPSA, that Act applies to a security interest in goods or financial property if, inter alia, the grantor is an 'Australian entity'. Relevantly, the Company is an Australian entity under s 10 of the PPSA. 22 A security interest is defined under s 12(1) of the PPSA as: an interest in personal property provided for by a transaction that, in substance, secures payment or performance of an obligation (without regard to the form of the transaction or the identity of the person who has title to the property). 23 In this case, the Applicants have provided a draft affidavit of the Second Applicant, Mr Carruthers (Draft Carruthers Affidavit) which annexes an Escrow Deed which appears to provide for the Escrow Arrangement in respect of the Company's Shares in MGIH6. The Escrow Arrangement provides MGI with both a legal right and the practical ability to have the Shares transferred to it in order to secure the Company's performance of obligations under the SSPA. A copy of the SSPA, which the parties entered into on 10 July 2018 is also annexed to the Draft Carruthers Affidavit. 24 The Shares are, as defined in s 10 of the PPSA: (a) 'personal property'; (b) 'investment instruments'; and (c) consequently also 'financial property'. 25 The Applicants therefore contend, that on a proper reading of s 12 of the PPSA, the Escrow Arrangement is a security interest in the Shares (Security Interest) granted by the Company in favour of MGI. In similar but not identical scenarios, Kenneth Martin J in the Supreme Court of Western Australia has recently considered questions about the application of s 12 to funds (rather than transfer documents) held in escrow by an independent third party: Dalian Huarui Heavy Industry International Co Ltd v Clyde & Co Australia [2020] WASC 132 (at [210]-[219]); Gas Sensing Technology Corporation v ProX Pty Ltd [2019] WASC 10 (at [259]-[271]). 26 The Applicants note that if it is ultimately concluded that the Security Interest vested in the Company pursuant to s 267 of the PPSA, then the application of the moratorium in s 440B of the Corporations Act will be of little consequence. However, until the vesting question is determined, the Applicants say the Security Interest cannot be enforced during the voluntary administration of the Company by reason of the moratorium provided by s 440B. 27 In Dalian, Kenneth Martin J said (at [251]): Clearly, a strong status quo asset protective legislative intent during any administration underlies s 440B (and, indeed, the whole of Pt 5.3A of the Corporations Act). That objective must be fully recognised and respected, so far as the text permits. Section 440B is a provision that seeks to deliver a status quo retention over the corporation's property while an administration unfolds. To that end, the terminology used describing the items in the s 440B table is extraordinarily wide. 28 There is a relevant restriction in s 440B Item 1 of the table (set out above (at [17]), which provides that 'if the third party is a secured party in relation to property of the company, and is not otherwise covered by this table, then the third party cannot enforce the security interest'. 29 Whilst the Applicants say that the Security Interest is not a 'possessory' security interest within the meaning of s 51D of the Corporations Act (that is, not an interest to which Item 2 of the table applies), that question does not need to be determined for the purpose of this part of the application because the prohibition on enforcing the Security Interest applies in either event. Is the enforcement right restricted? 30 The next issue is whether the proposed enforcement action by MGI is enforcement for the purposes of s 440B, specifically Item 1 of the table. The term 'enforce' in relation to a security interest in property of a company under administration is defined in s 9 of the Corporations Act and relevantly includes to: (a) enter into possession, or assume control, of such property for that purpose; or (b) exercise, in relation to property as the secured party a right, power or remedy existing because of the security interest, arising under an agreement or instrument relating to the security interest, or in any other way. 31 As set out in the Draft Carruthers Affidavit, MGI gave notice to the Company stating that the Company was in breach of the SSPA and that MGI intended to cause Harneys to effect a transfer of the Shares to MGI in accordance with the Escrow Deed. 32 By doing so, MGI would appear to be seeking to enforce its Security Interest by way of assuming control of the Shares for that purpose or by exercising its power or remedy that exists because of the Security Interest, arising under the Escrow Deed. 33 Pursuant to Item 1 of the table in s 440B of the Corporations Act, the Applicants contend MGI is restricted from exercising its rights in that manner. Extra-territorial effect of s 440B 34 An important question is whether s 440B has extra-territorial effect such that MGI (a company incorporated in the Republic of Seychelles) is prohibited from effecting a transfer of the Shares in MGIH6 to MGI. 35 Section 5(4) of the Corporations Act provides that: 5 General territorial application of Act (4) Subject to subsection (8), each provision of this Act also applies, according to its tenor, in relation to acts and omissions outside this jurisdiction. 36 Subsection (8) relates to the operation in non-referring States and is not presently applicable. 37 The Applicants have not sourced any reported decisions considering the application of s 5(4) to s 440B. However in PCH Offshore Pty Ltd v Dunn [2009] FCA 553, Siopis J considered the meaning of the words 'according to its tenor' in s 5(4) of the Corporations Act with respect to the extraterritorial operation of different provisions, namely ss 180-183. At [11]-[12] his Honour said: 11 In my view, the tenor of the sections in question does not contain any limitations such as would cause me not to give effect to the clear words of s 5 of the Act. The language is plainly capable of applying to acts and omissions which have occurred outside of Australia. Further, that these sections of the Act are to be construed as operating outside of Australia, is consistent with the position which has been taken in the United States of America, where the extraterritorial operation of similar provisions in the securities legislation of the United States is justified on the grounds that breaches of duty overseas by officers of an United States corporation may have an adverse effect within the United States. In my view, similar policy considerations apply to Australian corporations and the duties owed by their officers. 12 Accordingly, in my view, notwithstanding that the alleged breaches of the Act are said to have occurred in Azerbaijan and Kazakhstan, they are allegations which are justiciable in this court because of the extraterritorial operation of those sections of the Act… 38 Similarly to the language of ss 180-183, the tenor of s 440B of the Corporations Act does not contain any limitations that would prevent the Court from giving effect to the clear words of s 5(4) of the Corporations Act. While any policy considerations would no doubt differ from those identified by Siopis J, the language used in the provision itself is said by the Applicants to explicitly define the extent of the foreign application of the moratorium in the following manner: (a) s 440B applies by the language in the table to a 'security interest'; (b) that phrase is defined in the Corporations Act with explicit reference to the PPSA and security interests governed by it (see [19]-[29] above); and (c) the PPSA itself deals clearly with the extent of its extra-territorial application (by applying only to property outside Australia where the grantor of the requisite security interest is located in Australia). 39 On that basis, it is certainly arguable that s 440B has extra-territorial operation over the Security Interest. Vesting of unperfected security interests – governing law 40 Having established that the PPSA applies to the Security Interest, there are nevertheless rules within that Act that deal with conflict of laws questions around the operation of security interests. 41 Sections 240(1) and 240(4) of the PPSA relevantly provide as follows: 240 Governing laws—financial property and rights evidenced by letters of credit (1) The validity of a security interest in financial property … is governed by the law of the jurisdiction (other than the law relating to conflict of laws) in which the grantor is located when the security interest attaches, under that law, to the property. … (4) At a particular time, the perfection, and the effect of perfection or non-perfection, of a security interest in financial property … is governed by the law of the jurisdiction (other than the law relating to conflict of laws) in which the grantor is located at that time. (emphasis added.) 42 Under s 19(2) of the PPSA: 19 Enforceability of security interests against grantors—attachment … (2) A security interest attaches to collateral when: (a) the grantor has rights in the collateral, or the power to transfer rights in the collateral to the secured party; and (b) either: (i) value is given for the security interest; or (ii) the grantor does an act by which the security interest arises. 43 Under s 235(3) of the PPSA, a body corporate is located in the jurisdiction in which the body corporate is incorporated. 44 In applying those provisions to the facts of this proposed case the Applicants contend that: (a) the Company is and has always been incorporated in Australia; (b) arguably the Security Interest attached to the collateral when the Escrow Arrangement was brought into effect; and (c) consequently questions as to both the validity and perfection of the security interest are governed by the law applying in Australia. The rule in s 267 of the PPSA 45 Under s 267 of the PPSA, if a security interest granted by a company is unperfected at the time administrators are appointed to the company, then the security interest will vest in the grantor immediately before the appointment of the administrators. 46 Applying s 21 of the PPSA, the Security Interest is perfected if it has attached to the collateral, is enforceable, and the secured party has either: (a) registered the security interest on the Personal Property Securities Register (PPSR) (s 21(2)(a)); (b) taken possession of the personal property (s 21(2)(b)); or (c) taken control of the personal property (s 21(2)(c)) (because the Shares are an 'investment instrument'). Security interest is unperfected 47 For the reasons that follow, the Applicants contend that MGI has failed to perfect its Security Interest under s 21 of the PPSA either by registration, possession or control. Registration 48 As evidenced by the PPSR search annexed at 'BFC5' of the Draft Carruthers Affidavit, MGI has failed to register the Security Interest on the PPSR. Possession 49 Section 24(6) of the PPSA deals with possession of investment instruments which are certificated. It provides: Possession … Possession of investment instruments (6) … a person (the possessor) has possession of an investment instrument that is evidenced by a certificate if, and only if: (a) the certificate specifies the person who is entitled to the investment instrument; and (b) a transfer of the investment instrument may be registered on books maintained for that purpose by or on behalf of the issuer (or the certificate states that a transfer of the instrument may be so registered); and (c) any of the following applies: (i) the possessor has possession of the certificate; (ii) another person (other than the grantor or the debtor) has possession of the certificate on behalf of the possessor; (iii) the registered owner (who is not the grantor or debtor) of the investment instrument acknowledges in writing that he, she or it has possession of the investment instrument on behalf of the possessor. 50 The Shares (that is, the property over which the Security Interest subsists) are certificated. The documents held by Harneys do not include the share certificates in respect of the Shares, only a transfer, a resolution and a letter from Harneys as registered agent of MGHI6. 51 Consequently, the Applicants contend, MGI does not have possession of the Shares sufficient to perfect the Security Interest. I accept that this contention is arguable. Control 52 Section 27 of the PPSA deals with control of investment instruments. Section 27(2) provides that a person has control if they are registered as the owner of the investment instrument. MGI is not registered as the owner of the Shares. 53 Section 27(3) provides that: 27 Control of investment instruments … Control of investment instruments evidenced by certificates (3) A person (the controller) has control of an investment instrument that is evidenced by a certificate if: (a) the controller has possession of the instrument; and (b) the controller (or a person who has agreed to act on the instructions of the controller) is able to: (i) transfer the instrument to the controller, or to another person; or (ii) otherwise deal with the instrument. 54 The Shares are certificated as contemplated by that provision. However, MGI does not have possession of the Shares for the reasons already identified and consequently MGI is contended not to satisfy the criteria in s 27(3) of the PPSA to have control of the Shares. Security Interest vests in the company 55 It follows, the Applicants argue, that as MGI has failed to perfect its Security Interest in the Shares before the Administrators were appointed to the Company on 10 December 2020, pursuant to s 267 of the PPSA, MGI's Security Interest vested in the Company immediately before that appointment. Effectiveness of the Security Interest 56 Finally, the documents held by Harneys under the Escrow Deed include an undated but signed transfer of the Shares, a resolution authorising delivery of that transfer and (apparently) a letter from Harneys as registered agent of MGIH6, confirming it will register the transfer upon its release. 57 The Applicants raise an argument that any transfer effected by release of the escrowed documents would not be an effective transfer of the Shares, because of the operation of s 437D of the Corporations Act. The Applicants would of course be satisfied with that conclusion as it would have the same effect as the orders sought in these proceedings. 58 However, they say it appears likely that the effectiveness of the transfer will be accepted under the law of the British Virgin Islands notwithstanding the operation of s 437D. 59 Consequently, the Applicants proceed on the basis that, as a matter of fact, the Escrow Arrangement provides (absent the operation of the other issues raised) effective security over the Shares. 60 The Applicants intend to enquire as to the position of Harneys (the 'registered agent' of MGIH6) after commencement of the application. If sufficient comfort can be obtained that a transfer of the Shares will not be effected by reason of the operation of s 437D (or other relevant provisions in the event the Company falls into a different form of external administration) then orders 3 and 4 sought in the Ultimate Proceeding that would give effect to the vesting argument under s 267 of the PPSA may not be required. FURTHER CONSIDERATION OF JURISDICTION 61 The Applicants propose to seek primary orders in a declaratory form about the operation of the requisite provisions of the Corporations Act and the PPSA. 62 The Applicants contend that the jurisdiction under s 90-15 the Insolvency Practice Schedule extends to making injunctive orders – a contention which may be correct but is more challenging – but I am satisfied that the Court's jurisdiction extends to making declaratory orders about the operation of the relevant provisions. 63 Separate from the question whether the Court has jurisdiction under the Insolvency Practice Schedule to make orders in the ordinary course, the Applicants say specifically that the Court has a broader jurisdiction to make orders about the Shares notwithstanding they are located overseas and would affect overseas persons. 64 In this regard, the Full Court (Finn, Dowsett and Siopis JJ) considered the question of jurisdiction in Waller v Freehills (2009) 177 FCR 507. Having considered decisions of the English Court of Appeal in respect of the extraterritorial operation of the insolvency legislation there and its application to residents of offshore jurisdictions, the Full Court determined that it should authorise service of an examination summons overseas, saying (at [49]): It follows that legislation which operates extraterritorially may comprise a statutory source, other than the rules of court, which vests in a court a power to assert jurisdiction over non-residents. 65 In my view, given the manner in which the Corporations Act and the PPSA apply on their face (as described above), the Applicants have a prima facie case sufficient to give the Court jurisdiction over the property and the prospective defendants in respect of it. The case on the s 440B moratorium by reason of the voluntary administration is the less complex of the two cases. 66 But I consider for prima facie purposes so as to warrant service out, the threshold has been reached for both prospective cases. In saying that I firmly stress that I have reached no concluded view in the matter having heard only one side of the story, thus without the benefit of a contradictor if there is to be one. 67 As noted, there is an existing injunction in favour of the Applicants' position granted by the Eastern Caribbean Supreme Court which is currently scheduled to be discharged on 25 February 2021. 68 The Applicants seek to have at least some of the final relief granted by 25 February. As will be apparent from the foregoing, there are two aspects of the final relief sought by the Applicants which may have an effect on the position – there is a question whether the alleged security interest has vested (the more complicated question), and there is a question whether, even if the security interest has not vested, there is a moratorium preventing enforcement of the security during the Third Applicant's voluntary administration. 69 Even though the vesting and moratorium positions are framed in the alternative, it may be possible to determine the moratorium issue as a preliminary step which would be sufficient for the grant of order 1 (and possibly order 2) in the draft originating process. The questions relating to the vesting issue could then be determined over a longer period of time if necessary. 70 If the Applicants obtain relief on that issue by 25 February 2021, there are mechanisms to preserve the status quo for an additional period of time (whether through an extension of that injunction or otherwise). 71 If leave is granted and the prospective defendants require more time to conduct the proceedings, the prospective defendants may be prepared to provide undertakings that would allow for a less expedited timetable. 72 All these matters in relation to the future conduct of the proceeding are relevant only to the feasibility of relief, if there should be any which is by no means determined, within the very narrow time frame. SUPREME COURT POSITION 73 As a postscript, the Applicants disclose that they initially sought leave to serve an originating process equivalent to the draft for the Ultimate Proceeding in the Supreme Court of Western Australia. Master Sanderson (correctly) determined that leave should not be granted under the rules of that Court to serve the relevant proceeding out of the jurisdiction. 74 Whilst the Master has not issued written reasons, the Applicants understand on the basis of the observations of the Master during oral hearing on 11 February 2021, that the likely reason for refusal of leave is that the Ultimate Proceeding is not one in the list of so-called 'long arm' jurisdictional conditions in O 10 r 1 of the Rules of the Supreme Court 1971 (WA). Whilst the Applicants (as plaintiffs in the Supreme Court) sought to argue that that rule did not apply, the Court appears (with respect correctly in my opinion) to have had a different view. 75 In this Court, that difficulty does not arise. For the reasons stated above, the Ultimate Proceeding is of a type falling within the list of jurisdiction conditions in r. 10.42 of the Rules: see my discussion in Perdaman Chemicals and Fertilisers Pty Ltd v ICICI Bank Ltd [2013] FCA 175 (at [13-[15]); cf Kent v Lechmere Financial Corporation [2002] WASC 75. METHOD OF SERVICE 76 Rule 10.43(3) of the Rules requires that an application for service out must be accompanied by an affidavit stating: (a) the name of the foreign country where the person served is or is likely to be; and (b) the proposed method of service; and (c) that the proposed method of service is permitted by: (i) if a convention applies – the convention; or (ii) if the Hague Convention applies – the Hague Convention; or (iii) in any other case – the law of the foreign country. 77 Although the affidavit filed sets out the proposed method of service to satisfy the requirements of the Rules, it fell a little short of the requirements of the practice direction. This is presumably due to the urgency with which the application is brought and the need to bring the Ultimate Proceeding to the attention of the prospective defendants within a matter of days. At the hearing, I asked counsel to explain on the record exactly how services would be effected. He did so in a way which adequately met the requirements of the practice note given the urgent circumstances of the case. 78 With respect to MGIH6 and Harneys, companies incorporated in the British Virgin Islands, it is intended to effect service in accordance with local law. Section 101 of the British Virgin Island's Companies Act 2004 permits service of documents by leaving them at the company's registered office. The Applicants are also in introductory discussions with Harneys and it appears that it may be acceptable to it and MGIH6 for service to be effected by way of email which is permissible under British Virgin Island's law by consent. 79 MGI is a company incorporated in the Republic of Seychelles. The Applicants intend to effect service under local law or using the process established under the Hague Convention though it seems those avenues are not without their difficulties. The Applicants have however, contacted MGI's Australian solicitors to ascertain whether they are instructed to accept service and file a notice to satisfy r 10.43(1)(c). 80 Again, given the urgency with which the Ultimate Proceeding is to be brought, a further application for deemed or substituted service may be required. But that will be left for another day. CONCLUSION 81 For the reasons discussed above I was satisfied that the relief sought, as slightly varied, should be granted. I made orders accordingly yesterday afternoon. I certify that the preceding eighty-one (81) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice McKerracher. Associate: Dated: 17 February 2021