Supreme Court New South Wales Medium Neutral Citation: In the matter of Accolade Wines Australia Limited and other companies [2016] NSWSC 1023 Hearing dates: 28 June and 1 July 2016 Date of orders: 25 July 2016 Decision date: 25 July 2016 Jurisdiction: Equity - Corporations List Before: Brereton J Decision: Refer to para 53 Catchwords: CORPORATIONS – charges, debentures and other borrowings – security interests – registration – extension of time – application pursuant to (CTH) Corporations Act 2001, s 588FM – inadvertence – where security interest initially registered against grantor's ABN, not ACN – prejudice – where no apparent prejudice to creditors by delay in obtaining effective registration – where no defendant joined – held, appropriate to exercise discretion under s 588FM to fix later time, but grantors must be joined and afforded opportunity to be heard COMMERCIAL LAW – Personal Property Securities – (CTH) Personal Property Securities Act 2009 – extension of registration time for PMSIs pursuant to PPSA, s 293 – relevant considerations – where need for extension is due to inadvertence – prejudice – prejudice in s 293(3)(b) differs from s 588FM(2)(a)(ii) – prejudice not conclusive because necessary consequence of remedy is prejudice to other secured parties – prejudice significant where coupled with reliance – reliance – expert evidence that financiers search against ABN as well as ACN – whether other secured parties should be joined before or after orders made – held, their interests are liable to be affected and they must be joined – held, just and equitable to grant extension – order made ex parte, reserving liberty to apply to set aside or vary Legislation Cited: (CTH) Corporations Act 2001, s 588FL, s 588FM (CTH) Personal Property Securities Act 2009, s 12(3), 13, 14, s 55, s 62, s 153, s 164, s 165, s 293 Cases Cited: A Limited Company, Re (1928) 28 SR (NSW) 364 Appleyard Capital Pty Ltd, Re; 123 Sweden AB v Appleyard Capital Pty Ltd (2014) 101 ACSR 629; [2014] NSWSC 782 Bevillesta Pty Ltd v Imagine UN Ltd [2009] VSC 50; 69 ACSR 574 Black Opal IP Pty Limited, In the matter of [2013] NSWSC 1225 Campbell Finance Pty Ltd v Vivstan Packaging (Aust) Pty Ltd (in liq) [1998] 2 VR 340; (1996) 22 ACSR 109 Cardiff Workmen's Cottage Co Ltd, In re [1906] 2 Ch 627 Cardinia Nominees Pty Ltd, In the Matter of [2013] NSWSC 32 Carpenter International Pty Limited, Re (2016) 111 ACSR 477. Cinema Art Films, Re [1930] NZLR 500 Douglas-Brown v Standard Chartered Finance Ltd (1990) 2 ACSR 737 Dudley Engineering Pty Ltd, Re [1968] 1 NSWR 483 Ehrmann Bros Ltd, Re [1906] 2 Ch 697 Flinders Trading Co Pty Ltd, Re (1978) 3 ACLR 218 Freightlines Northern Territory Pty Ltd (1999) 32 ACSR 573 Guardian Securities Ltd, Re [1984] 1 NSWLR 95 Hewlett Packard Australia Pty Ltd v GE Capital Finance Pty Ltd [2003] FCAFC 256; (2003) 135 FCR 206; 47 ACSR 589 Investa Properties Pty Ltd v Westpac Property Funds Management Ltd (2001) 187 ALR 462; 40 ACSR 124; [2001] NSWSC 1089 Joplin Brewery Co Ltd, Re [1902] 1 Ch 79 Kris Cruisers Ltd, Re [1949] 1 Ch 138 L H Charles & Co Ltd, Re [1935] WN 15 National Australia Bank v Davis & Waddell (Vic) Pty Ltd (2003) 44 ACSR 296; (2003) 21 ACLC 1401; [2003] VSC 1 Sanwa Australia Finance Ltd v Ground-Breakers Pty Ltd (in liq) [1991] 2 Qd R 456; (1990) 2 ACSR 692 Southern Engineering Services Pty Ltd (in liquidation) ACN 000 091 716, In the matter of [2014] NSWSC 1882 Transurban CCT Pty Ltd (in its own capacity and as trustee of the Transurban CCT Trust), Re [2014] NSWSC 1909 Texts Cited: Personal Property Securities in Australia (LexisNexis) Annotated Personal Property Securities Act 2009 (CCH) Category: Principal judgment Parties: Alleasing Pty Limited and Alleasing Finance Pty Limited (plaintiffs) Representation: Counsel: B A Coles QC w N Mirzai (plaintiffs) Solicitors: King & Wood Mallesons (plaintiffs) File Number(s): 2016/188785 Judgment 1. By Originating Process filed on 21 June 2016, the Plaintiffs Alleasing Pty Limited and Alleasing Finance Pty Limited, who are providers of asset finance and leasing services, seek an order pursuant to (CTH) Corporations Act 2001 ("CORPA"), s 588FM, fixing (for the purpose of CORPA, s 588FL(2)(b)(iv)) a time later than the end of 20 business days after the relevant security agreement, for the registration of security interests held by them in respect of certain collateral against various customers who have entered into contracts with one or other of the Plaintiffs for the rental of goods ("Grantors"); [1] and also an order pursuant to (CTH) Personal Property Securities Act 2009 ("PPSA"), s 293(1)(a), extending beyond 15 business days the period specified by PPSA, s 62(3), for the Plaintiffs to perfect by registration those security interests [2] as are purchase money security interests ("PMSIs") within the meaning of PPSA, s 14. Background 1. The Plaintiffs [3] lease goods to customers, for terms in excess of one year. The leases are therefore "PPS Leases", [4] and the interest of the Plaintiffs in the subject matter of those leases is a "security interest", such subject matter being the collateral. [5] 2. The Plaintiffs attempted to perfect their security interests by registration at or about the time the relevant leases took effect, by lodging financing statements on the PPSR ("the initial registrations"). However, a recent review has revealed that the initial financing statements were registered against the ABN of the grantor (each of which is a corporate entity), rather than its ACN. This defect potentially invalidates the registration because: (1) PPSA, s 153, requires a financing statement to include, relevantly, "the grantor's details as prescribed in the regulations"; (2) PPS Regulations Schedule 1, cl 1.3, has the effect that where the grantor is a body corporate that has an ACN, the prescribed details are the ACN (not the ABN) of the grantor; [6] (3) PPSA, s 164(1), provides that a registration with respect to a security interest that describes particular collateral is ineffective because of a defect if, and only if, there is a seriously misleading defect in the registration (which does not arise), or a defect mentioned in s 165; and (4) PPSA, s 165(b), mentions circumstances, in a case in which the collateral is not required to be described by a serial number, where no search of the register by reference only to the grantor's details required under s 153 is capable of disclosing the registration. As the grantor's details required by s 153 were its ACN, and as the initial registrations did not specify the ACN, a search of the register by reference only to the grantor's ACN would not have disclosed the registration; accordingly, it seems that the initial registrations were ineffective. If so, then the Plaintiffs failed to register their security interests within 20 business days after the relevant security agreements came into force, so that pursuant to CORPA, s 588FL, those interests would vest in a grantor which went into liquidation or administration within six months of their ultimate effective registration. 3. For that reason, on or about 15 June 2016, the Plaintiffs sought again to perfect their security interests, by lodging new financing statements on the PPSR, this time referring to the Grantors' ACNs. In a small number of cases, [7] other potential defects in the initial registrations were also rectified by new financing statements lodged on 21 June 2016. 4. While the majority of the relevant security interests are PMSIs, [8] for more abundant caution, the Plaintiffs have lodged two financing statements in respect of each security interest, one stating that the interest is a PMSI, and the other stating that it is not. This is because some of the leases may be transactions of sale and leased back to the seller, and so excluded from the definition of PMSI. [9] As one of the defects mentioned in s 165 is, if the financing statement indicates that a security interest is a PMSI, it is not a PMSI – with the consequence that the registration would be ineffective – the relevant interests have been alternatively registered as non-PMSIs, lest any is ineffective as a PMSI on that ground. APPLICATION UNDER CORPA s 588FM Ex parte application 1. The application is made ex parte. In Re Appleyard Capital Pty Ltd; 123 Sweden AB v Appleyard Capital Pty Ltd, [10] I explained that applications seeking relief pursuant to CORPA, s 588FM, ought generally not be brought ex parte, [11] a view which was reiterated in Re Transurban CCT Pty Ltd (in its own capacity and as trustee of the Transurban CCT Trust), [12] where it was said that in circumstances where the grantor company's rights are unquestionably affected by the application, the grantor company should be joined as a defendant and given notice of the application. [13] 2. That conclusion is reinforced when it is recognised that the proceedings were incorrectly entitled In the matter of Alleasing Pty Limited and Alleasing Finance Pty Limited. Those companies are the applicants, not the companies the subject of the proceedings. The companies to which the proceedings relate are the Grantors, not the Plaintiffs. The title of the proceedings should be amended to In the matter of Accolade Wines Australia Limited and other companies – Accolade Wines being the first named of the Grantors in the schedules to the Originating Process. Once that is done, the necessity for their joinder becomes self-evident. 3. The Plaintiffs submit that it is appropriate to apply ex parte because (1) there are 31 Grantors, in respect of which the Plaintiffs are seeking urgent relief; (2) any rights in the secured property held by the Grantors have already been the subject of registrations (albeit potentially ineffective) from the time they were initially granted, and the new registrations (in respect of which this application is brought) seek only to put the Plaintiffs in the position in which they would have been had the initial registrations not been defective; and (3) each relevant lease between the Plaintiffs and each Grantor contains a clause whereby the corporate grantor is obliged to assist the Plaintiffs with any step taken by it to properly perfect its interest in the relevant collateral (which is said to be consistent with the principle that a lessee cannot take any steps to disclaim the lessor's title without forfeiting the lease). However, a Grantor – particularly one which may be on the brink of insolvency – must have regard to the interests of its creditors as well as those of its members. Circumstances may arise in which, in discharge of that duty, it may be right to oppose the grant of relief if to do so may operate to the advantage of creditors generally. The fact that there are 31 Grantors is no reason for not joining all or any of them. Relief in this context is always said to be urgent, but the urgency is caused by the Plaintiffs' need to remedy their failure to make an effective timely registration. Time runs from the date of registration, not the date of the order, so that once the new registrations are made, there is no enormous urgency in obtaining the order. [14] The fact that there were earlier (ineffective) registrations, while in some respects support the Plaintiffs' case, is no reason for depriving the Grantors of an opportunity for disputing that there should be an extension. 4. As explained in Transurban CCT, the effect of an order of the kind sought here is to prevent property – which might otherwise vest in the grantor in certain events – from doing so. In those circumstances, the grantor is a proper and necessary party and should be joined, and I propose to order that the Grantors be joined, not least so that they are bound by the orders. However, although they have not yet been joined, the Grantors have been given notice of the application, and invited to appear or to inform the Plaintiffs of their position in respect of it prior to the hearing. Some Grantors have indicated consent, some non-opposition, and some have not responded; none has indicated opposition, and none has sought to appear. That significantly mitigates the objections to proceeding ex parte, as does the usual reservation of leave to any liquidator or administrator who might be appointed within six months to apply to set aside or vary the order. 5. There are other secured creditors of various Grantors, who have not, at least so far, been given notice of the application. Their rights and priorities are not affected by relief under CORPA, s 588FM, as an order under s 588FM has no effect on the priority of security interests. [15] Thus, want of notice to them is not an objection to proceeding on the s 588FM application. However, as will appear, their rights and priorities may be affected by the relief sought under PPSA, s 293, a matter to which it will be necessary to return. 6. Accordingly, although it will be appropriate to make an order joining the Grantors as defendants, directing service on them and reserving to them liberty to apply, I am prepared to proceed on the s 588FL application ex parte at this stage. I do so somewhat reluctantly, as the necessity for joining the grantors has previously been referred to more than once, [16] and it should not be assumed that this approach will be acceptable in future cases. However, the evidence of giving notice of the proceedings to the Grantors permits that course to be adopted here. Accident, inadvertence or other sufficient cause 1. Broadly, the effect of CORPA, s 588FL(2), is that when a company is being wound up, an administrator has been appointed or a deed of company arrangement has been executed, any PPSA security interest which was perfected, registered, or became enforceable against a third party after the latest of six months before the critical time or 20 days after the security agreement came into force or such later time as the Court may fix under section 588FM, vests in the company, for the benefit of creditors generally, and the secured creditor loses the benefit of the security. [17] Provision for fixing such a later time is made by s 588FM, which provides as follows: 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). Note: If an insolvency-related event occurs in relation to a company, paragraph 588FL(2)(b) fixes a time by which a PPSA security interest granted by the company must be registered under the Personal Property Securities Act 2009, failing which the security interest may vest in the company. (2) On an application under this section, the Court may make the order sought if it is satisfied that: (a) the failure to register the collateral earlier: (i) was accidental or due to inadvertence or some other sufficient cause; or (ii) is not of such a nature as to prejudice the position of creditors or shareholders; or (b) on other grounds, it is just and equitable to grant relief. (3) The Court may make the order sought on any terms and conditions that seem just and expedient to the Court. 1. Thus, s 588FM confers on the Court a discretion to fix a later time if satisfied of any one of three grounds, namely that the failure to register the collateral earlier was accidental (or due to inadvertence or some other sufficient cause), or was not of such a nature to prejudice the position of creditors or shareholders, or that, on other grounds, it is just and equitable to do so. The section also permits the Court to make the order on terms and conditions. [18] 2. For the purpose of s 588FM(2)(a)(i), "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. [19] Inadvertence will readily be found where an error of a secured creditor in not attending to registration of its security within time is innocent and does not result from any disregard of its statutory obligations. [20] In Transurban CCT, the secured party became aware that the financing statements initially lodged contained potential defects, in that while they were properly registered against the ACN of each relevant corporate entity (as required), they were not registered against the ABN of the trust of which one of the defendants was a trustee (as required by PPS Regulations Schedule 1, cl 1.5). When this potential defect was discovered (more than 20 business days after the security interest was created), the secured party lodged a further financing statement referring to the ABN of the trust, and applied for an extension of time pursuant to CORPA, s 588FM. In granting that application, the Court held: [21] For the purposes of s 588FM(2)(a)(i), "inadvertence" has been interpreted to include failure to advert to or understand the requirement for registration within the specified period, an 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 [Appleyard Capital, [10], and the cases there cited]. In this case, it is apparent that a bona fide attempt to register the security interests was made on 4 July 2014 and that the potential deficiencies — which, as I have said, are not clearly deficiencies — came to notice of the plaintiff's solicitors on about 13 August 2014 when the consultant who had carriage of the matter learnt of his firm's preferred practices in respect of such registrations. 1. The Plaintiffs submit that the erroneous reference in the initial registrations to the ABN rather than the ACN of each of the grantors was accidental or due to inadvertence or some other sufficient cause, so as to permit time to be extended under CORPA, s 588FM. In the present case, when the Plaintiffs first lodged financing statements in respect of the relevant security interests, they utilised the platform of a third-party service provider to effect the registrations. Unlike a registration that is made directly via the PPSR portal, this third-party platform allows secured parties to lodge a financing statement against a company's ABN or ACN. When the Plaintiffs registered their security interests though this platform, they intended to do whatever was necessary to perfect their interests by registration for the purposes of the PPSA. As the platform permitted use of the Grantor's ABN, they believed that to do so was compliant and sufficient. They did not advert to the requirement that the ACN be used, nor to the possibility that, by using the ABN, the registrations might not be compliant and might be ineffective. 2. At first, the only evidence of this "inadvertence" was hearsay conclusionary evidence of the Plaintiffs' solicitor, upon which I was not prepared to act, because where an applicant relies on its own inadvertence, its proper officer should give appropriate direct evidence of that inadvertence. However, there is now evidence from the chief executive officer of the Plaintiffs, to the effect that the employees who effected the registrations did so because the platform provided no alert as to the significance of the choice between ABN and ACN, and were not aware that it made any difference to the status of the security interest. I am amply satisfied that the failure to effect timely registrations was due to inadvertence. The discretion to "fix a later time" under s 588FM is thus enlivened. 3. In those circumstances, it is unnecessary to rely on the alternative grounds under s 588FM(2), that the failure to register earlier was not of such a nature as to prejudice the position of creditors or shareholders; or that, on other grounds, it is just and equitable to grant relief. However, for reasons referred to under "discretionary considerations" below, there is a powerful case that the failure to register earlier was not of such a nature as to prejudice the position of creditors or shareholders. Discretionary considerations 1. While the potential for prejudice to creditors or shareholders is a relevant consideration in the exercise of the discretion, 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, as the unsecured creditors may well have been in no different a position had the security interest been the subject of a timely effective registration. As explained in Appleyard Capital, the type of prejudice that is of particular relevance is prejudice attributable to the delay in registration, rather than prejudice from making the order (which is inevitable); and the period of delay in effecting registration is relevant, because the shorter the delay the less likely that the failure to register within time will have had any impact. The significance of the passage of time is mainly related to the possibility of competing interests having arisen, in particular, through others having dealt with the company on the footing that the collateral was unencumbered. [22] 2. Where the grantor is shown to be financially secure, then it is unlikely that a "critical day" will arise in the foreseeable future, and the grant of relief will not likely affect any person adversely; [23] indeed, if solvency is established that is likely to be the end of the matter. [24] However, if the Court is not satisfied that there is no risk that unsecured creditors could be adversely affected, the unsecured creditors (or their representatives) are entitled to be heard against the making of an order, though this may sufficiently be achieved by suspending the operation of the order, or by imposing a term reserving leave to apply to set it aside in the event of a liquidation or administration (a Guardian Securities condition). [25] 3. Here, there is evidence that none of the Grantors is in insolvent administration. Originally, there was only hearsay evidence that the Plaintiffs knew of nothing to suggest the impending insolvency of any Grantor, and there was no evidence that none of the Grantors were or had recently been in default under the relevant leases. I was not prepared to act on such evidence, but this has since been remedied and the evidence now establishes that a computer search of the payment history of each grantor reveals that the Plaintiffs enjoy the enviable position that none of the Grantors owes any outstanding arrears under any relevant lease. Accordingly, the prospects of a critical event occurring within six months appear remote. 4. Moreover, the Plaintiffs' security interests are confined to the specific collateral the subject of the relevant lease. While some creditors have, since the initial registrations in respect of a Grantor, registered a security interest in respect of that Grantor, they are not prejudiced by the delay, which has (potentially) enabled them to achieve priority over the Plaintiffs; their priority will not be disturbed by an order fixing a later time under s 588FM. [26] While it is conceivable that unsecured creditors may have extended credit to a Grantor in the belief that there was no security interest held by the Plaintiffs, the evidence of Helena Busljeta – referred to in more detail below [27] – establishes that financiers commonly search the PPSR across ABN, ACN and company name for existing security interests in respect of a particular grantor, so that it is unlikely that a creditor relying on a search of the register in extending credit to a Grantor would in fact have been unaware of the Plaintiffs' security interest. 5. Thus, it appears unlikely that a critical event will occur within six months of the registration date; and even if such an event were to occur, it is not apparent that creditors would have been prejudiced by the delay in obtaining effective registration. The purpose of s 588FM is to relieve against the consequences of inadvertence, at least where the oversight has not caused prejudice. In the circumstances, it is appropriate to exercise the discretion under s 588FM to fix a later time, namely the date on which the new registrations were effected, which was between 15 and 21 June 2016. APPLICATION UNDER PPSA s 293 1. Unless PMSIs were afforded priority, in respect of the specific collateral to which they relate, over existing security interests which may attach to the same collateral but are not PMSIs, a prudent third party would never lease goods to a grantor who had already granted a security interest in "all of the present and after-acquired property" ("AllPAP"), unless an express subordination agreement were obtained from the AllPAP holder. To that end, PPSA, s 62, relevantly provides that where (as here) the interest is in personal property other than inventory, and the collateral is goods, a perfected PMSI has priority over a perfected security interest that is not a PMSI if the PMSI is perfected by registration before the end of 15 business days after the day the grantor obtains possession of the property, and the registration that perfects the PMSI states that the interest is a PMSI. [28] Thus, had the original PMSI registrations been effective, the Plaintiffs would hold a perfected PMSI, which would prevail in a priority contest as against any other secured creditor with a perfected security interest over the same collateral – even though the other was first in time; but because the PMSI was not registered within the 15-day period, the Plaintiffs' security interest is not entitled to that priority. And while orders under CORPA s 588FM will address the potential application of s 588FL in respect of the relevant registrations, an s 588FM order has no effect on the priority of security interests, but merely avoids the consequence that in the event of liquidation or administration they vest in the grantor within six months, [29] so that the new registrations effected by the Plaintiffs will, absent further or other order, take priority only from the date of the new registration, and although they are PMSIs will not be entitled to priority over prior security interests in the same collateral. In practice, this means that an AllPAP security interest granted by a Grantor prior to perfection of the Plaintiffs' PMSI would have priority over the Plaintiffs' interest. 2. For this reason, the Plaintiffs also seek an order pursuant to PPSA, s 293(1)(a), extending the number of business days for perfection of their PMSIs by registration against each of the Grantors, for the purposes of PPSA, s 62(3). PPSA, s 293, relevantly provides that on application, a court may make an order extending the number of business days in a period specified in paragraph 62(3)(b) (perfection of purchase money security interests), if satisfied that it is just and equitable to do so, [30] and may do so even if the period has ended. [31] Section 293(1)(a) is applicable, as no collateral the subject of any security interest held by the Plaintiffs falls within the definition of "inventory", so that s 62(3) (rather than s 62(2), in respect of which there is no power to extend the period) applies. 3. PPSA, s 293(3), provides that in making an order to extend a period under s 293(1), the court must take into account: (a) whether the need to extend the period arises as a result of an accident, inadvertence or some other sufficient cause; (b) whether extending the period would prejudice the position of any other secured parties or other creditors; (c) whether any person has acted, or not acted, in reliance on the period having ended. Inadvertence 1. For the reasons already stated in respect of s 588FM, I am satisfied (for the purposes of s 293(3)(a)) that the need to extend the number of business days arises as a result of inadvertence. [32] Prejudice 1. As to the prejudice referred to in s 293(3)(b), neither the researches of counsel, nor mine, have revealed any direct authority on s 293. The authorities on CORPA, s 588FM, and its predecessors provide some assistance, but, there is an important distinction. As explained in Appleyard Capital, [33] in s 588FM(2)(a)(ii), the prejudice referred to is prejudice to the position of creditors or shareholders from "the failure to register the collateral earlier" – in other words, prejudice attributable to not making a timely registration. That means that, to evaluate prejudice for the purposes of s 588FM, one compares the position of the creditors if an extension is granted, with their position if there had been an effective timely registration; often there will be no difference. However, the prejudice referred to in s 293(3)(b) is prejudice from "extending the period". This directs attention not to the impact on other secured parties or creditors of the delay in registration, but to the impact of making an order extending the period; to evaluate prejudice for that purpose, one compares the position of creditors if an extension is granted, with their position if no extension is granted, and usually there will be a difference because priorities will be disturbed. 2. Although no competing security interests have been granted to other secured parties specifically over any particular collateral in which the Plaintiffs have a PMSI, some of the Grantors have granted AllPAP security interests to other secured parties, in some cases before ("Earlier AllPAPs") and in others after ("Later AllPAPs") the date on which the Plaintiffs made their initial registrations. Whether granted before or after the initial registrations, those AllPAP security interests are now entitled to priority over the Plaintiffs' PMSIs. If an order is made under s 293(1) extending the period for registration of the Plaintiffs' PMSIs, the AllPAP holders will lose that priority in respect of the particular collateral which is the subject of the Plaintiffs' PMSIs. It follows that they will be prejudiced by extending the period. 3. However, such prejudice, while not irrelevant, is not conclusive. Appleyard Capital explained that in the context of s 588FM, prejudice to other creditors could not be conclusive because otherwise an order would never be made in any case in which it mattered: in any case where an extension was of utility, there would inevitably be prejudice by removing the collateral from the pool available to satisfy unsecured creditors generally, and enabling that result was the fundamental purpose of the provision. [34] The same applies here: the essential purpose of granting an extension is to reinstate the priority to which a PMSI would otherwise be entitled over prior AllPAPs (as it will in any event have priority over later AllPAPs), and thus in any case in which the remedy is of any practical utility, there will be prejudice to a prior AllPAP holder. Reliance 1. As it seems to me, prejudice will be of significance chiefly where it is coupled with reliance under s 293(3)(c); the kind of "reliance" contemplated is where a third party has dealt with the grantor – in particular, by taking a security interest over property that includes the PMSI – in the belief that there was no perfected PMSI that would trump its interest. 2. At the time when any Earlier AllPAP holder took security from the relevant Grantors, the property the subject of the Plaintiffs' security interests was not property of the relevant Grantor. An AllPAP secured party whose security interest was registered prior to the Plaintiffs' initial registrations could not have "acted, or not acted, in reliance on the period having ended", as its interest was acquired prior to the existence of the Plaintiffs' PMSI. Only a Later AllPAP holder – one whose interest was acquired after the Plaintiffs' initial registration – could potentially fall within s 293(3)(c). The evidence establishes that there are 13 security interests in this category, involving eight financiers, at least most of which are major and sophisticated financiers. 3. The Plaintiffs have adduced evidence from a solicitor, Helena Busljeta, who has been in practice for almost 25 years, predominantly in the area of banking and finance, and currently in the Banking and Finance team at the Plaintiffs' solicitors King & Wood Mallesons ("KWM"), specialising in the PPSA. She has been responsible for training partners and lawyers at KWM about the PPSA, including the process for registering a security interest on the PPSR and searching the PPSR; preparing and maintaining internal guidelines and precedents for use in KWM about PPSA matters, including for registering security interests and searching the PPSR; and providing advice and training to clients of KWM on those matters. She is also involved in external consultation groups involved in the operation of the PPSA, including as chair of the Walrus Committee which comprises partners and senior lawyers from Allens Linklaters, Ashurst, Herbert Smith Freehills, KWM and Norton Rose Fulbright, and meets regularly to discuss PPSA issues with the objective of suggesting solutions; one of its outputs has been the "Report on the Review of the Personal Property Securities Act" to the Commonwealth Attorney-General ("the Walrus Report"). She has published articles on the PPSA, given presentations on the PPSA at conferences, co-authored a chapter on the PPSA, and lectured on the PPSA. 4. Ms Busljeta's evidence is that it is common practice among financiers taking security interests, and lawyers acting for them, to conduct searches of the PPSR against all of a potential grantor's ABN, ACN and company name. Such a triple search is mandated by the KWM internal guidelines. One reason for this is that when the PPSR was initially established, there was a mass migration of security interests that had previously been registered on other registers, and in excess of 800,000 ASIC company charges were migrated onto the PPSR by reference to the grantor's ABN, not ACN; and although the migration issue has now largely been resolved, the practice has continued. Another reason is that there are often imperfect registrations. A fact sheet produced by the Australian Financial Security Authority recommended that the triple search be conducted, and the Walrus Report stated that it has become "customary market practice" to conduct the triple search. The text Personal Property Securities in Australia (LexisNexis) acknowledges that it is market practice to conduct a triple search. The authors of Annotated Personal Property Securities Act 2009 (CCH) encourage searching across "the available search options to reveal the most complete picture as to how the property is encumbered and to what extent". The search platforms provided by a number of third-party providers to search the PPSR include a feature which allows a user to search across all of a grantor's ABN, ACN and company name in one transaction. Each of the third-party providers' websites contains a recommendation that a search be conducted across all three identifiers. 5. Had the secured parties who hold Later AllPAPs in respect of Grantors conducted such searches – and I accept, in the light of Ms Busljeta's evidence, that a reasonably prudent financier would have done so – the results would have identified the Plaintiffs' security interest over specific, fixed assets and, where relevant, that it was PMSI. 6. Ms Busljeta also gives evidence that a financier contemplating taking a security interest from a borrower is generally chiefly concerned about whether there are other (prior) "AllPAP" (or "AllPAP-except") registrations in favour of another bank or financial institution, because the financier wants to know whether the potential borrower has granted security over all its assets to other financiers who would take priority due to their prior registration; but typically is not concerned about registrations against specific collateral, whether or not they are PMSIs, because usually they are "ordinary course of business" transactions, rather than security for financial accommodation. 7. Thus, it appears improbable that a Later AllPAP holder would in fact have materially relied on the relevant period having expired. 8. I am therefore satisfied, on the material now before the court, that it is just and equitable to make an order extending the number of business days in the period specified in paragraph 62(3)(b) for the perfection by registration of the Plaintiffs' PMSIs. Joinder 1. I have nonetheless been acutely anxious about making orders which will disturb the priority to which the AllPAP holders are presently entitled, without first affording them an opportunity to be heard. To disturb a secured party's priority is an interference with a proprietary right, in respect of which the secured party is entitled to be heard. Though on the current (unilateral) state of the evidence it seems unlikely, it is not inconceivable that they, or some of them, might not conduct a triple search as a matter of practice; it is not inconceivable that there might be an alternative opinion about the necessity or desirability of conducting a triple search; and it is not inconceivable that they conducted such a search and appreciated that because the Plaintiffs' PMSI was not registered against the Grantor's ACN, it was ineffective, and proceeded on that basis. In any event, as they can all be identified, and as their proprietary rights will be disturbed, they are proper and necessary parties and ought to have been joined. This includes the Earlier AllPAP holders, although the problem is more acute with the Later AllPAP holders. 2. It is illustrative of the concern of the court not to trample on the interests of prior secured parties – and why, if their interests are to be affected, they must be joined – that it was customary in this context to impose a so-called Joplin condition, to the effect that the extension is without prejudice to the rights of parties acquired prior to the time of actual registration. [35] In its ultimate form in this State, it was settled by Street J (as he then was): [36] This order for extension of time is to be without prejudice to the rights, if any, of any person who, between 15 November 1964 [being the date of the charge] and the actual date of lodgment for registration of the said deed and document, has obtained any charge or security over the assets to which the charge in the said deed extends. 1. This is a powerful indication that secured creditors whose priority might be affected should at least be joined and afforded an opportunity to be heard, at least unless a Joplin condition is imposed. 2. However, imposition of a Joplin condition in the present statutory context would seriously undermine the utility of the remedy provided by s 293, and deprive it of much, if not of all, of its beneficial effect: it would render an s 293 extension of no utility, at least in respect of Later AllPAPs. The essential purpose of s 293 appears to be to relieve against the consequences of accident and inadvertence, with prejudice and reliance being relevant considerations but not absolute objections. As such an order would only be needed if the failure to register within time had resulted in another security interest potentially gaining priority over the PMSI (the PMSI once registered, albeit belatedly, would in any event have priority over subsequent security interests), it must have been intended that, in an appropriate case, priorities might be disturbed. Thus, s 293 evinces an intention that the rights of other secured parties might be displaced, and is inconsistent with the routine use of a Joplin condition. In this case, a Joplin condition would not produce the result the Plaintiffs seek, because the priority of at least the Later AllPAP holders would not be disturbed. 3. Accordingly, in my view, the other secured parties, whose priority may be affected by an s 293 order, must be joined and afforded an opportunity to be heard. The only question is whether that opportunity should be before or after the orders are made. The Plaintiffs submitted that any opportunity to be heard should be afforded after the substantive orders are made, upon liberty to apply to vary or set aside the orders. That, of course, is not how courts normally operate; ex parte relief is usually reserved for interim orders in urgent cases. However, in the context of extensions of time for registration of charges, it has not been uncommon to proceed by making orders first and reserving leave to those potentially affected to apply to vary or set aside the orders, as the Guardian Securities condition referred to above illustrates. [37] 4. While years of practice reflected in the cases [38] demonstrate that the approach reflected in a Guardian Securities condition is an available one, it should be used with caution where it is clear that the rights of other parties will be adversely affected. A Guardian Securities condition is typically used in circumstances where it is unclear whether or not creditors will in fact be adversely affected – because the relevant company may well not go into liquidation or administration within six months. It is much clearer that the priority to which other secured parties are entitled will be disturbed if an s 293 order is made. In that context, an s 293 order should be made ex parte, reserving liberty to apply to set aside or vary the orders within a reasonable time, only where the case for an extension appears prima facie a very compelling one. 5. Ultimately, however, I have been persuaded that this is such a case. First, it is not as if there was no registration of the PMSI within the prescribed period; there was a registration, which was recorded on the PPSR, albeit a defective one because it was against the Grantors' ABN, not ACN. Secondly, the PMSIs are each in respect only of the specific collateral to which the relevant lease relates. Thirdly, an AllPAP is always liable to be trumped, in respect of specific after-acquired collateral, by a PMSI in respect of that collateral. Fourthly, to the extent that an Earlier AllPAP holder will be prejudiced, it is only by losing a windfall arising from inadvertence. Fifthly, for the reasons given above, it is very likely that any Later AllPAP holder in fact had notice of the Plaintiffs' PMSI when acquiring its security interest; and in any event, notice that there was an earlier PMSI in respect of specific collateral is unlikely to have been material to its decision to provide financial accommodation and take the AllPAP security. In those circumstances, it is not unreasonable that the forensic burden of moving the Court to vary or set aside the extension be cast upon any of the AllPAP holders who might wish to contend that they will be unacceptably prejudiced by the extension. Conclusion 1. My conclusions may be summarised as follows: 2. On an application under CORPA, s 588FM, for fixing a later date, when made before liquidation or administration, the grantor company is a proper and necessary party and ought to be joined (so that it is bound) and served. In this case, because notice of the application was given to each Grantor – although not then joined – in substance, though not in form, this requirement has been satisfied. 3. I am amply satisfied, on the evidence presently before the Court, that the failure to effect timely registrations was due to inadvertence. 4. It appears unlikely that a critical event will occur within six months of the registration date; and even if such an event were to occur, it is not apparent that creditors would have been prejudiced by the delay in obtaining effective registration. The purpose of s 588FM is to relieve against the consequences of inadvertence, at least where the oversight has not caused prejudice. In the circumstances, it is appropriate to exercise the discretion under s 588FM to fix a later time, namely the date on which the new registrations were effected, which was between 15 and 21 June 2016. 5. On an application under PPSA, s 293(1)(a), for the extension of a period for perfecting a PMSI by registration, any other secured party whose interest is liable to be postponed is a proper and necessary party and ought to be joined and served. This requirement has not been satisfied, in form or in substance. Although, consistent with the approach that has conventionally been taken in this field, it may in an appropriate case be satisfied by reserving liberty to persons affected to apply to set aside or vary the orders within a reasonable time, that approach should be used with caution where it is clear that the rights of other parties will be adversely affected. An s 293 order should be made ex parte, reserving liberty to apply to set aside or vary within a reasonable time, only where the case for an extension appears prima facie a very compelling one. 6. I am satisfied (for the purposes of s 293(3)(a)) that the need to extend the number of business days arises as a result of inadvertence. 7. If an order is made under s 293(1) extending the period for registration of the Plaintiffs' PMSIs, the AllPAP holders will lose the priority to which they are presently entitled. It follows that they will be prejudiced by extending the period. However, such prejudice, while not irrelevant, is not conclusive. 8. In circumstances where: 1. there was a registration, which was recorded on the PPSR, albeit a defective one because it was against the Grantors' ABN, not ACN; 2. the PMSIs are each in respect only of the specific collateral to which the relevant lease relates; 3. an AllPAP is always liable to be trumped, in respect of specific after-acquired collateral, by a PMSI in respect of that collateral; 4. to the extent that an Earlier AllPAP holder will be prejudiced, it is only by losing a windfall arising from inadvertence; 5. it is very likely that any Later AllPAP holder in fact had notice of the Plaintiffs' PMSI when acquiring its security interest; and in any event, notice that there was an earlier PMSI in respect of specific collateral is unlikely to have been material to its decision to provide financial accommodation and take the AllPAP security. I am satisfied, on the material now before the Court, that it is just and equitable to make an order extending the number of business days in the period specified in paragraph 62(3)(b) for the perfection by registration of the Plaintiffs' PMSIs. Moreover, the case for an extension is sufficiently compelling that it is not unreasonable that the forensic burden of moving the Court to vary or set aside the extension be cast upon any of the AllPAP holders who might wish to contend that they will be unacceptably prejudiced by the extension. 1. Accordingly, the Court orders that: 1. The title of the proceedings be amended to In the matter of Accolade Wines Australia Limited and other companies. 2. The Grantors named in Schedules A, B, C and D to the Originating Process be joined as First Defendants. 3. The secured parties who hold a "all present and after-acquired personal property" security interest (including an "AllPAP-except" interest) registered on the Personal Property Securities Register ("PPSR") against any of the First Defendants be joined as Second Defendants. 4. Pursuant to (CTH) Corporations Act 2001, s 588FM, 21 June 2016 is fixed as the time for the Plaintiffs to register on the PPSR each PPSR registration referred to in Schedules A to D to the Originating Process and annexed to this order, for the purposes of Corporations Act, s 588FL(2)(b)(iv). 5. Pursuant to (CTH) Personal Property Securities Act 2009 ("PPSA"), s 293(1)(a), the number of business days set out in s 62(3)(b) be extended, in respect of each registration referred to in Schedules A and C to the Originating Process and annexed to this order, so that the period will expire on 21 June 2016. 6. Liberty be reserved to any liquidator, administrator or deed administrator of any of the First Defendants to apply to discharge or vary orders 4 and 5 if any winding up of any of such defendant occurs, or an administrator is appointed to such defendant under s 436A, s 436B or s 436C of the Corporations Act, or any such defendant executes a deed of company arrangement within six months of 21 June 2016. 7. The Plaintiffs within three days file an Amended Originating Process naming the First and Second Defendants, and thereafter serve the same on each of the First and Second Defendants, together with: 1. these orders; 2. these reasons for judgment; and 3. a letter from the Plaintiffs' solicitors containing statements to the effect that the Court has made the orders on the basis that leave is reserved to the addressee to apply to set aside the order, that any such application must be made by interlocutory process in the proceedings and be filed within 28 days of the date of service, and that a copy of the affidavits relied on in the proceedings may be obtained from the Plaintiffs' solicitors upon request. 1. Any party given notice of these orders in accordance with order 7 has liberty to apply to vary or set aside order 4 and/or 5, within 28 days after service on it of these orders. 1. These orders are to be entered forthwith. ********** Endnotes 1. These are listed in Schedules A (PMSI registrations with no other defects), B (non-PMSI registrations with no other defects), C (PMSI registrations with other defects) and D (non-PMSI registrations with other defects) to the Originating Process. 2. Being those listed in Schedule A and C to the Originating Process. 3. Alleasing Finance is a wholly owned subsidiary of Alleasing. While some of the relevant leases have been entered into by Alleasing and others by Alleasing Finance, nothing turns on the identity of the specific lessor, and they are referred to collectively as "the Plaintiffs". 4. PPSA s 13. 5. PPSA s 12(3)(c). 6. PPS Regulations Schedule 1, cl 1.3 Table item 3, which under cl 1.3(3)(b) takes priority over item 4. 7. Listed in Schedules C and D to the Originating Process. 8. Pursuant to PPSA s 14(1)(c). 9. See PPSA s 14(2)(a). 10. (2014) 101 ACSR 629; [2014] NSWSC 782. 11. (2014) 101 ACSR 629; [2014] NSWSC 782 at [34]. 12. [2014] NSWSC 1909. 13. [2014] NSWSC 1909 at [16]-[17]. 14. As an order can be made even after liquidation or administration: Hewlett Packard Australia Pty Ltd v GE Capital Finance Pty Ltd [2003] FCAFC 256; (2003) 135 FCR 206; 47 ACSR 589 at [28]-[30]; Appleyard Capital at [23]. 15. Appleyard Capital at [15]. 16. Appleyard Capital at [34]; Transurban CCT at [16]-[17]. 17. In the Matter of Cardinia Nominees Pty Ltd [2013] NSWSC 32 at [11]; In the matter of Black Opal IP Pty Limited [2013] NSWSC 1225 at [6]; Appleyard Capital at [8]. 18. Appleyard Capital at [9]. 19. Sanwa Australia Finance Ltd v Ground-Breakers Pty Ltd (in liq) [1991] 2 Qd R 456; (1990) 2 ACSR 692; Campbell Finance Pty Ltd v Vivstan Packaging (Aust) Pty Ltd (in liq) [1998] 2 VR 340; (1996) 22 ACSR 109; Freightlines Northern Territory Pty Ltd (1999) 32 ACSR 573 at 576; Cardinia Nominees at [14]-[16]; Appleyard Capital at [10]. 20. Re Kris Cruisers Ltd [1949] 1 Ch 138 at 142; National Australia Bank v Davis & Waddell (Vic) Pty Ltd (2003) 44 ACSR 296; (2003) 21 ACLC 1401; [2003] VSC 1 at [67]; Cardinia Nominees at [15]; Re Carpenter International Pty Limited (2016) 111 ACSR 477 at 521 [218]-[219]; [2016] VSC 118. 21. [2014] NSWSC 1909 at [8]. 22. Appleyard Capital at [30]; cf s 588FM(2)(a)(ii) (which refers to prejudice from the failure to register earlier, as distinct from prejudice from making the order), and see also In re Cardiff Workmen's Cottage Co Ltd [1906] 2 Ch 627; Re a Limited Company (1928) 28 SR (NSW) 364; Re Flinders Trading Co Pty Ltd (1978) 3 ACLR 218 at 225, 234; Re Guardian Securities Ltd [1984] 1 NSWLR 95 at 98; Transurban CCT at [13]; In the matter of Southern Engineering Services Pty Ltd (in liquidation) ACN 000 091 716 [2014] NSWSC 1882 at [1]; Carpenter International at 525 [236]. 23. Hewlett Packard at [29]. 24. Investa Properties Pty Ltd v Westpac Property Funds Management Ltd (2001) 187 ALR 462; 40 ACSR 124; [2001] NSWSC 1089 at [31]. 25. Appleyard Capital at [25]; Guardian Securities at 97; see also Re Cinema Art Films [1930] NZLR 500 at 502–3; Re L H Charles & Co Ltd [1935] WN 15; Bevillesta Pty Ltd v Imagine UN Ltd [2009] VSC 50; 69 ACSR 574 at [58]. 26. Appleyard at [15]. Their priority may, however, be affected by an order under PPSA, s 293, as discussed in the following section of this judgment. 27. See below [33]-[36]. 28. PPSA s 62(3). 29. Appleyard at [15]. 30. PPSA s 293(1)(a). 31. PPSA s 293(2). 32. See above [12]-[16]. 33. See the discussion at [18] above. 34. Appleyard Capital at [27]. 35. See Re Joplin Brewery Co Ltd [1902] 1 Ch 79; explained in Re Ehrmann Bros Ltd [1906] 2 Ch 697 and Kris Cruisers. Such orders are no longer made in connection with s 588FM extensions, because an s 588FM order has no effect on the priority of security interests registered before the plaintiff's charge, and as the secured creditors will not be affected, there is no need to make an order or impose a condition in that respect, nor any utility in doing so: Guardian Securities at 97; Douglas-Brown v Standard Chartered Finance Ltd (1990) 2 ACSR 737 at 740; Bevillesta at 581 [28]; Appleyard Capital at [15]. 36. In Re Dudley Engineering Pty Ltd [1968] 1 NSWR 483 at 487. 37. See [19] above. 38. Re Cinema Art Films [1930] NZLR 500 at 502–3; Re L H Charles & Co [1935] WN 15; Guardian Securities [1984] 1 NSWLR 95 at 97; Bevillesta Pty Ltd v Imagine UN Ltd [2009] VSC 50; 69 ACSR 574 at [58]; Appleyard Capital at [25]. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 26 July 2016