Our Alert of 16 October 2009 discussed the application for special leave to the High Court in respect of the Queensland Court of Appeal's judgement in Re Octaviar Ltd (No 7)  QCA 282. This was the appeal from the decision of Re Octaviar Ltd; Re Octaviar Administration Pty Ltd  QSC 37.
A summary of what has happened so far
- The Octaviar case considered a registrable charge under the Corporations Act 2001 (Corporations Act) which secured all money owing under defined "Transaction Documents". By designating a new document as a "Transaction Document" the money secured under the charge was increased.
- At first instance, the Queensland Supreme Court held that this was a "variation" of the charge, and as such a failure to notify ASIC within the prescribed period under Chapter 2K of the Corporations Act rendered the charge void to the extent that it secured any increased liability.
- On appeal, the Queensland Court of Appeal overturned the first instance decision. It unanimously held that although the liabilities secured by the charge had been increased, the charge had not been varied; instead, it simply continued to operate in accordance with its terms. This decision reflects typical existing financing practice.
- An application for special leave to appeal from the Queensland Court of Appeal decision to the High Court was filed in October 2009.
Application for special leave granted
An application for special leave deals only with the question of whether the High Court will allow the appeal to proceed to a hearing and does not address the merits of the case.
In Octaviar, the special leave application was heard on 12 March 2010 and the application was successful. At this stage the appeal to the High Court is likely to be held in Brisbane in June and the Full Court will hear the appeal. It is anticipated that in April or May 2010 the exact date of hearing will become available.
What does this mean?
For banks, financial institutions and insolvency practitioners, prudence continues to dictate a cautious approach. It remains the case that, when restructuring financing documents, it is crucial to consider whether a variation of a charge that is notifiable under section 268(2) of the Corporations Act has occurred.