In the matter of Apex Gold Pty Ltd  NSWSC 881 the Supreme Court of New South Wales has applied section 588FM(1) of the Corporations Act 2001 (“the Act“) in order to extend the time for registration of security interests granted by Apex Gold Pty Limited (“Apex Gold“).
In summary, section 588FL(2) of the Act provides that when a company is being wound up, an administrator appointed or a deed of company arrangement is executed, any security interest vests in the company (ie not the secured creditor) if it was perfected by registration and became enforceable against a third party after the latest of the following:
(1) six months before the critical time (defined in section 588FL(7) of the Act as the commencement of administration or winding up); or
(2) 20 days business days after the security came into force; or
(3) such later time as the Court orders pursuant to section 588FM.
The circulating security interest granted by Apex Gold to the plaintiff on or about 2 January 2013 was not entered on to the Personal Property Securities Register until 26 March 2013. Justice Hammerschlag noted (at ) therefore that “the last date for registration under s588FL(2)(b)(ii) (being 20 business days after the security agreement was entered into) was 31 January 2013. The registration is, thus, out of time for the purposes of that section.”
Section 588FM(2) of the Act provides that:
(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.
The security in question was principally embodied in an instrument described as Apex Gold General Security Agreement which was in evidence. Justice Hammerschlag found that the affidavit evidence satisfied that the failure to register the collateral earlier was accidental or due to inadvertence on the part of the solicitors who acted for the plaintiff in obtaining the security concerned from Apex Gold.
The Court made orders extending time for the registration, however leaving unaffected the rights of another secured creditor who had registered its interest in the period before the interest was registered, and (as is common with orders of this kind) leaving it open for any administrator or liquidator to apply to discharge or vary the order. In circumstances where the evidence disclosed that it was the creditor’s intention to appoint receivers and administrators, this liberty could prove to be significant.
Lesson: Anyone involved in the lodgement of security interests must have appropriate measures in place to ensure that security interests are registered on the PPSR within 20 business days once the security agreement comes into effect.
Should you have questions in relation to registering security interests or the Personal Property Securities Act generally, please do not hesitate to contact the Directors of our Insolvency & Restructuring Group