In the matter of Tankstream Rail (SW-2) Pty Limited

HIS HONOUR: The plaintiff Perpetual Trustee Company is the trustee of two trusts which, for the sake of convenience, may be called the Virtue 1 and the Virtue 2 trusts. In each case, the trust property includes an interest as chargee in rolling stock acquired by eight companies in various partnerships named in the originating process, with funds advanced to those companies for that purpose by Perpetual as trustee of one or other of the Virtue trusts. The relevant charges were given by a nominee company as agent for various of the partner companies.

Perpetual accepts, in my view correctly, that when the charges were granted they were charges of personal chattels – namely, rolling stock – granted by each relevant partner company, even though they were executed only by the nominee company as their agent, and that they were therefore registrable charges under (CTH) Corporations Act 2001, Ch 2K, as it then was. Although a timely notice was lodged with ASIC under Corporations Act, s 263, of the charge given by each of the three nominee companies, no notice was given of the charges given by the partner companies until 28 August 2013, when a financing statement under the (CTH) Personal Property Securities Act 2009 ("PPSA"), s 150, was registered, naming each of the partners as grantor of the relevant security interest.

The consequence of the failure to give timely notice of the charges by the partner companies was therefore that if a chargor partner company had gone into liquidation or administration, or had become the subject of a deed of company administration, the charge would have been void against the liquidator, administrator or deed administrator, respectively, of that chargor [Corporations Act, s 266(1)]. None of the chargor partner companies named in the originating process have had a liquidator or administrator or deed administrator appointed to them.

Corporations Act, s 266, relevantly provided as follows:

However, with effect from 30 January 2012, the Corporations Act was amended by the (CTH) Personal Property Securities (Corporations and Other Amendments) Act 2010. Relevantly, that Act repealed Corporations Act, Ch 2K, and inserted transitional provisions found in Corporations Act, Pt 10.13. Those transitional provisions relevantly include the following:

By originating process filed on 15 April 2015, Perpetual applies, pursuant to (NSW) Trustee Act 1925, s 63, for judicial advice as to whether it is justified in not proceeding to seek a declaration under Corporations Act, s 1504(3), in respect of the subject charges. Alternatively, it applies pursuant to Corporations Act, s 1504(3), for a declaration that the charges are not, and never have been, void under Corporations Act, s 266(1).

In connection with the application, Perpetual has provided a memorandum of counsel's advice of Mr S A Lawrance, who appeared for Perpetual on the hearing of the application, which comprehensively addresses the relevant issues and analyses the relevant considerations. The Court has been much assisted by Mr Lawrance's advice and is indebted to him for that assistance. Essentially, Perpetual contends that no application under s 1504(3) is required because, by reason of s 1504(1), s 266 ceased to apply to these charges with effect from the commencement date under the PPSA; namely, 30 January 2012. Alternatively, Perpetual seeks a declaration under s 1504(3).

On the present application which focused on the primary, rather than the alternative, claim, the essential question is whether s 266 has ceased to apply in respect of the subject charges. As s 1504(1) is in clear and general terms, that question really reduces to whether the exception contained in s 1504(2) is engaged so as to preserve, for the purpose of the relevant charges, the operation of s 266.

The condition which engages s 1504(2) is "if void immediately before the commencement date". On the face of s 266(1), a charge is only void if a liquidator, administrator or deed administrator has been appointed. None of those events has occurred in respect of any of the relevant chargor partner companies. Section 1504(2) would be engaged only if the term "if void immediately before the commencement date" were construed as meaning "contingently void" – that is to say, contingent upon the appointment of a liquidator, etc, or "liable to be voided" if a liquidator etc, were appointed.

Adoption of such a construction would answer an argument adverted to by Gallimore and Fraser in Chapter 6 – ‘Transition Issues in PPSA’ in C Wappett, B Whittaker and S Edwards (eds), Personal Property Securities in Australia (LexisNexis, 2010), to the effect that otherwise there would be a gap in the operation of the legislation, in that a registrable charge created before 30 January 2012 which had not been registered under Corporations Act, s 263, would not be liable to be avoided under Corporations Act, s 588FL, because it is not a PPSA security interest but a "transitional security interest" which is excluded from the definition of “PPSA security interest”. Thus, there would be no provision avoiding such a charge upon liquidation etc, even though it was and remained unregistered.

While that argument is not without force, it is not what s 1504(2) says. The provision uses the terminology "is void", and it is clear not only from s 266(1) but also from s 266(3) that a charge is void in the relevant sense only upon appointment of a liquidator etc. Neither counsel nor I have been able to find any authority on the construction of s 1504(2), so one is left with the words of the section, the context in which it appears, and such assistance as one can derive from extraneous material to which the Court can permissibly resort. The correspondence of the words "is void" in s 1504(2) with the terminology of ss 266(1) and (3) is a strong indication that it is used in the same sense in s 1504 and, as I have said, a charge is void under the earlier sections only if one of the relevant events has taken place.

Such a construction of s 1504(2) is also consistent with s 1503, the effect of which is that because there is no longer any requirement to maintain a register of charges, it is no longer required or possible to register a charge under s 263 after 30 January 2012. One consequence of this is that it would be no longer possible to cure partially, by belated registration, the problems caused by a failure to give timely notice of a charge to ASIC.

In addition, although it is marginal, such assistance as can be derived from the Explanatory Memorandum tends to favour the construction that “void” means void. Paragraph 7.3 of the Explanatory Memorandum says that the repeal of Ch 2K would not immediately apply to registrable charges under the Corporations Act, "except to the extent necessary to close the Corporations Act register to new registrations, and to limit the effect of Corporations Act, s 266 (the voiding of registrable charges)". Perhaps a little more tellingly, paragraph 7.7 says "Corporations Act, s 266(4), would continue to apply to registrable charges which became void under Corporations Act, s 266, before the commencement time". That suggests that the legislature was proceeding on the basis that a registrable charge which had become void by appointment of a liquidator etc, prior to the commencement time was what was intended to be the subject of the preservation of s 266(4).

For those reasons, in my opinion, the better construction of s 1504(2) is that it applies only where a registrable but unregistered charge has become void as a result of the appointment of a liquidator etc, prior to the commencement date – that is to say, 30 January 2012. As no such event had happened in respect of any of the relevant companies, s 1504(2) does not apply here. It follows that s 266 ceased to apply to these charges with effect from 30 January 2012. It is therefore not necessary to make an application under s 1504(3) for a declaration that the charges are not and never have been void. That section was intended to confer a discretionary power equivalent to the former power to extend time for registration.

Notice of this application has been given to each of the chargor partner companies. None has sought to appear on the hearing. Although a not straightforward question of construction arises, it seems to me appropriate that the trustee be given the benefit of the Court's advice and the protection of that advice on an issue such as this. In my view, the trustee should be given the advice it seeks.

The Court therefore orders that: