Federal Court of Australia RnD Funding Pty Limited v Goldus Pty Limited (Subject to a Deed of Company Arrangement) [2021] FCA 1096 File number: NSD 461 of 2020 Judgment of: COLVIN J Date of judgment: 10 September 2021 Catchwords: CORPORATIONS - application by cross-claimant for declaratory relief as to security interest in mining equipment claimed to be in possession of cross-defendants - where cross-claimant claims substantial funds owed to it by owner of property secured under general security deed - where owner of property in default under general security deed - whether mining equipment subject to security - where cross-claimant registered security interest - whether security interest defeated by purported sale of mining equipment - whether mining equipment form fixture to land - declarations made Legislation: Mining Act 1971 (SA) ss 57, 86 Personal Property Securities Act 2009 (Cth) s 43, Part 2.5 Cases cited: Goldus Pty Ltd (Subject to a Deed of Company Arrangement) v Cummins (No 3) [2021] FCA 388 Goldus Pty Ltd (Subject to a Deed of Company Arrangement) v Cummins (No 4) [2021] FCA 1095 TEC Desert Pty Ltd v Commissioner of State Revenue [2010] HCA 49; (2010) 241 CLR 576 Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 25 Date of hearing: 19 April 2021 Counsel for the Cross-Claimants: Mr DL Cook SC Solicitor for the Cross-Claimants: MathasLaw Counsel for the Cross-Defendants: The Cross-Defendants did not appear ORDERS NSD 461 of 2020 BETWEEN: RND FUNDING PTY LIMITED (ACN 612 200 183) First Cross-Claimant AUSTRALIAN MINING PTY LTD (ACN 000 184 985) Second Cross-Claimant AND: GOLDUS PTY LIMITED (SUBJECT TO A DEED OF COMPANY ARRANGEMENT) First Cross-Defendant RONCANE PTY LIMITED Second Cross-Defendant SYNERGY METALS GROUP PTY LIMITED Third Cross-Defendant order made by: COLVIN J DATE OF ORDER: 10 september 2021 THE COURT DECLARES THAT: 1. The property listed in the Schedule to these orders is property in which the first cross-claimant has a security interest by reason of the terms of the General Security Deed entered into between the first cross-claimant and Australian Tailings Group Pty Ltd (in liquidation). 2. The property listed in the Schedule is not the property of any of the cross-defendants. 3. The Court notes that the declarations bind only the parties to these proceedings and do not affect the rights of any other person not a party to these proceedings. THE COURT ORDERS THAT: 4. The application by the cross-claimants for orders in relation to the property listed in the Schedule be allowed. 5. Within 10 days of the making of these orders, the first and third cross-defendants do deliver up to the first cross-claimant or to receivers and managers appointed by the first cross-claimant to Australian Tailings Group Pty Ltd the property listed in the Schedule or do forthwith provide such reasonable access to any land or premises where that property is situated as may be necessary in order for those parties to take the property into their possession. 6. There be liberty to the first cross-claimant to apply for such further orders as may be necessary or appropriate in order to effect the delivery up of the property listed in the Schedule. 7. Within 30 days of the making of these orders, there be liberty to the first cross-claimant to apply for such further relief as it considers is appropriate on its cross-claim by filing a minute of such further orders. 8. Within 30 days of the making of these orders, the cross-claimants shall file a minute of any orders as to costs that they seek together with any affidavits in support of those cost orders. 9. If a minute of further orders as to relief or a minute of orders as to costs or both is filed by the cross-claimants then the matter be listed for a case management hearing. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. Schedule Item Property (1) Rolls crusher as depicted in photograph at page 19 of the affidavit of Mr Wood dated 2 December 2020 and received as exhibit A (Affidavit); (2) Water cart (1999 Mack Prime Mover Tupper Truck with Water Cart) VIN 6FMJ25J31AXB05445; (3) Gold plant and other equipment as depicted in the photographs at pages 22 to 25 of the Affidavit; (4) Forklift SYD as depicted in the photograph at page 27 of the Affidavit; (5) Pallet racking as depicted in the photographs at pages 29 and 30 of the Affidavit; (6) Genset C275 as depicted in the photographs at page 32 of the Affidavit; (7) Regent motor pumps as depicted in the photographs at pages 33 and 34 of the Affidavit; (8) Volvo dump truck VIN 55350V11569; (9) ATG Trailer as depicted in the photograph at page 39 of the Affidavit; (10) Fuel tank as depicted in the photograph at page 40 of the Affidavit; (11) Dam liner as depicted in the photograph at page 59 of the Affidavit; (12) Franne Crane as depicted in the photograph at page 71 of the Affidavit; (13) Vehicles: (a) Registration: CSW23F; (b) Registration: CU96ZH; (c) Registration: BZ49JB; (14) XRF Analyzer Model: DPO-6000-CX-A-EN-SEP; and (15) Crown forklift Model: CD25TT4730. REASONS FOR JUDGMENT COLVIN J: 1 RnD Funding Pty Limited (RnD Funding) claims to be owed a substantial amount by Australian Tailings Group Pty Ltd (ATG). It claims that the funds are secured by the terms of an instrument described as a General Security Deed (Deed). 2 RnD Funding says that certain mining equipment owned by ATG and located on land the subject of mining tenements held by Goldus Pty Ltd (Goldus) is subject to its security. The tenements subsist over land in the vicinity of Teetulpa in the Flinders Ranges in South Australia. RnD Funding says that the equipment is in the possession of Goldus or Synergy Metals Group Pty Ltd (Synergy Metals). 3 ATG was formerly under the control of Mr John Hillam but is now in insolvent administration. Goldus and Synergy Metals have been and continue to be under the control of Mr Hillam. Claims have been made by Goldus and Synergy Metals to ownership of the mining equipment. RnD Funding maintains that the mining equipment is the subject of its security interest on the basis that ATG is the owner. 4 RnD Funding has appointed receivers and managers over the property of ATG in the exercise of its rights under the Deed. The basis for that appointment is established on the evidence. 5 A separate dispute has arisen between RnD Funding and Goldus concerning, amongst other things, the extent to which RnD Funding could, by the exercise of its security rights, take steps that might result in its making a claim to the mining tenements. Goldus commenced proceedings against various parties including RnD Funding in relation to that dispute. The claims by RnD Funding to the mining equipment (Equipment Claims) were then raised by way of cross-claim in those proceedings. The Equipment Claims were ordered to be determined separately to the issues the subject of the proceedings commenced by Goldus (and other parts of the cross-claim). By separate reasons to be published at the same time as these reasons, those other claims are determined: see Goldus Pty Ltd (Subject to a Deed of Company Arrangement) v Cummins (No 4) [2021] FCA 1095. 6 These reasons concern only the Equipment Claims. However, those claims were dealt with on the basis that the evidence that had been adduced in the other part of the proceedings formed part of the evidence in the cross-claim concerning the Equipment Claims. Therefore, the findings made in the separate reasons may be taken to be findings for the purposes of the Equipment Claims to the extent relevant. For that reason, it is not necessary to recount general matters of history. 7 The Equipment Claims concern 15 items of property. They are described in the following way by RnD Funding: (1) Rolls crusher; (2) Water cart; (3) Gold plant and equipment; (4) Forklift SYD; (5) Pallet racking; (6) Genset C275; (7) Regent motor pump; (8) Volvo dump truck; (9) ATG trailer; (10) Fuel tank; (11) Dam liner; (12) Franne crane; (13) Three vehicles used and out of warranty; (14) XRF Analyzer; and (15) Crown forklift. 8 Most of the items as so generally described are further identified by photographs or identifying information such as serial numbers or both. 9 When the Equipment Claims came on for hearing, counsel appeared for Goldus and sought an adjournment. I refused the adjournment application: Goldus Pty Ltd (Subject to a Deed of Company Arrangement) v Cummins (No 3) [2021] FCA 388. Counsel held no instructions to appear if the adjournment application was refused. In those circumstances, counsel was given leave to withdraw and the matter proceeded on the basis that there was no appearance for the cross-defendants as to the Equipment Claims. 10 Therefore, affidavits that had been filed by Mr Hillam concerning certain claims that were made to the mining equipment were not received into evidence because those affidavits were not read by counsel for RnD Funding and did not form part of the evidence in relation to the claims made by Goldus in that part of the proceedings that were determined separately. Therefore, I accept the submission that there is no evidence to support a claim advanced in the pleading to the effect that there had been a sale of certain of the mining equipment by ATG to Synergy Metals. 11 In any event, I find that on the evidence RnD Funding registered its security interest under the Deed in accordance with the requirements of the Personal Property Securities Act 2009 (Cth) (PPSA). The Deed was entered into on 22 December 2017 and registration of the interest was effected on 27 December 2017. Therefore, its security interests could not be defeated by any purported sale to Synergy Metals which was alleged to have occurred in August 2019. 12 There is no dispute on the pleadings as to the terms of the Deed insofar as it creates a security interest over the personal property of ATG in favour of RnD Funding and that there has been default by ATG. 13 In support of its claim to the mining equipment being property of ATG, RnD Funding relied upon the unchallenged affidavit evidence of Mr Wood. I find that the affidavit establishes the following matters: (1) Mr Wood and his mining partner Mr Kemp sold various assets to ATG under the terms of an agreement dated 22 June 2017. (2) The assets were delivered to ATG but much of the agreed price was not paid. (3) Mr Wood came to provide consulting services to ATG in respect of its mining operations. (4) As a consultant to ATG, Mr Wood had access to the books and records of ATG and was involved in acquiring plant and equipment for ATG. (5) In August 2020, Mr Wood was asked by RnD Funding and Mr Cummins one of the receivers appointed by RnD Funding to ATG to conduct a stocktake of the plant and equipment of ATG that were located on mining tenements in Teetulpa. (6) Mr Wood had access to records of ATG when he undertook that stocktake in person. (7) Mr Wood took photographs of items of property that he identified as corresponding with the records of ATG or his personal knowledge of the property of ATG, including the property that he and Mr Kemp had sold to ATG. 14 Mr Wood produced the photographs and gave evidence of descriptions of the property which I accept. I am satisfied on the evidence that he was sufficiently familiar with the property of ATG to be able to identify, in some instances with the assistance of the records to which he referred, those items which formed part of the property of ATG. On the basis of that evidence I am satisfied that items (1) to (11) listed above are each the property of ATG the subject of the security held by RnD Funding. 15 As to the Franne Crane being item (12), it is admitted by the cross-defendants that ATG owned a Franne Crane. The case advanced by RnD Funding is that it formed part of the equipment that Synergy Metals claimed to have purchased from ATG. For reasons that have been given, the Franne Crane could not have been sold to ATG by reason of the perfection of the interest of RnD Funding in the property of ATG by the registration of its interest under the PPSA. Therefore, as it is inherent in the case advanced for RnD Funding that the Franne Crane was property of ATG, I accept that it has been shown that it is part of the property the subject of the security held by RnD Funding. 16 As to items (13), (14) and (15), they (and other items) are each listed in the Report on Company Activities and Property (Report) provided to the liquidator of ATG by Mr Hillam as its director. The report describes Mr Wood as 'project manager' and as to his duties and responsibilities states 'plans, coordinate and manage exploration and mining activities'. The Report lists assets said to have been sold to Synergy Metals on 18 August 2019, that is after the Deed was registered in accordance with the PPSA. Included in that list are items that have already been considered. In addition items (13), (14) and (15) are described. Necessarily implicit in the claim made in the document is the fact that the items were the property of ATG as at 18 August 2019. In substance, the Report which bears the signature of Mr Hillam is an admission against interest that those items were at that time the personal property of ATG. In consequence, they were the subject of the security interest created by the Deed. 17 I note that the Report refers to two forklifts as having been purportedly sold. One is described as Forklift SYD said to have been sold for a price of $1,560. The other is described as a Crown forklift and is listed with the model number CD25TT4730. It is said to have been sold for a price of $3,054. Only the Forklift SYD was identified in the evidence of Mr Wood. Nevertheless, I am satisfied on the basis of the evidence that there are two forklifts and that both have been assets of ATG at the relevant time and therefore subject to the security interest of RnD Funding. It is appropriate for the second forklift to be identified by reference to what appears to be its model number. 18 Section 43 of the PPSA provides that a buyer for value of personal property takes that property free of an unperfected security interest. However, as has been noted, in this instance the security interest of ATG was perfected by its registration. There are other circumstances specified in Part 2.5 of the PPSA in which a buyer may take personal property free of a perfected security interest. However, there was no evidence advanced by Synergy Metals to support such a claim. 19 In any event, given the involvement of Mr Hillam as the controlling mind of each of the entities involved, if there was any dealing between ATG and Synergy Metals (about which I make no finding) then, on the evidence, Mr Hillam would have knowledge of the security interest of RnD Funding at all material times. His knowledge would be attributed to Synergy Metals. 20 There is a pleaded claim by way of defence to the effect that there was an agreement reached between Australian Mining Pty Ltd and ATG on 28 February 2017 pursuant to which Australian Mining agreed to sell a gold processing plant located on land the subject of certain mining tenements (being amongst those where Mr Wood carried out his inspection). It is said that there was a retention of title clause as part of that agreement. It is further said that by reason of the failure to pay Australian Mining title has not passed. It is then said that the gold processing plant was agreed to be sold to Goldus. These claims depend upon allegations that, in the result, have not been the subject of evidence. Therefore, those aspects of the defence have not been made out. 21 To the extent that it is suggested by way of defence that the property has become some form of fixture, I do not accept those claims. The photographs reveal property that is moveable and in the nature of mining equipment for surface operations of the kind to be conducted on the tenements. It is all equipment of a kind that is readily moveable. To the extent that there are connections to the surface they are not of a kind that manifest an intention that the equipment form a fixture to the land. All the equipment is of a kind that is either moveable and not attached in any way or is manifestly of a kind that would be removed from the tenements when mining operations are concluded. Mr Wood has given evidence to that effect. 22 Further, in order for the items of mining equipment to be treated as having merged with a legal estate in the land it would need to be demonstrated that they were brought onto the land and affixed to it by in reliance upon an estate or interest in the land. There is no evidence of any interest other than the interest as the holder of a mining tenement. Therefore, it appears that analysis of the kind undertaken in TEC Desert Pty Ltd v Commissioner of State Revenue [2010] HCA 49; (2010) 241 CLR 576 would pertain to tenements issued under Mining Act 1971 (SA). They provide for permission to enter upon land to carry out authorised operations: s 57. There is also a statutory right conferred upon the owner of mining machinery or goods on land to remove them after a tenement has been transferred or has ceased to apply: s 86. 23 RnD Funding seeks declaratory relief as to its security interest in each of the items of mining equipment. It seeks that relief as against the parties only and does not claim relief in terms that would speak to claims by others. For reasons that I have given, I am satisfied that such relief should be ordered. 24 A minute of proposed orders as to declaratory relief has been provided. It specifies the identifying aspects of each of the items. I am satisfied that the terms of the proposed orders correspond with the available evidence. 25 For those reasons there will be orders as to declaratory relief. Liberty was sought to apply for further relief. I will reserve that liberty. Liberty was also sought to apply for orders as to costs once the outcome was known and a claim for costs against Mr Hillam personally was foreshadowed. There will be provision for RnD Funding to apply within 30 days as to any orders as to costs. It should do so by filing a minute of the orders it seeks and any further affidavit material upon which it relies. If there is no agreement as to costs orders the matter will be listed for a case management hearing in relation to costs. I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Colvin. Associate: Dated: 10 September 2021