With the transition to the new Personal Property Securities Act 2009 (PPSA) regime, this case shows that the Courts are willing to be flexible with the timeframes for registration of security interests. A failure to appreciate the requirement to lodge a notice of security interest within the appropriate timeframe, and the consequences for not doing so, may in certain circumstances be considered to be “inadvertence” for the purposes of s 588FM of the Corporations Act 2001 (Act).
Barclays Bank plc (Barclays) provided a UK £8 million loan facility to a UK publicly listed company, Sportingbet plc, in January 2012. In accordance with the facility agreement, Centrebet International Pty Ltd (Centrebet) (an Australian company of the Sportingbet group) was to grant additional security for the loan. Centrebet executed a General Security Deed (Deed) on 24 April 2012.
Barclays retained UK legal advisers and, through them, Australian legal advisers in respect of the transaction. Barclays were advised on execution of the Deed that a financing statement should be registered in respect of the collateral in compliance with the PPSA within 20 business days of the day on which the Deed came into effect. A financing statement was not registered until 9 August 2012.
Barclays was not made aware of the implications of non-registration within the required timeframe and the solicitor (in the Australian firm’s London office) with carriage of the transaction gave evidence that she did not then appreciate the potentially serious consequences of non-registration within the timeframe.
Barclays sought an order under s 588FM of the Act to fix 9 August 2012 as the registration time for the relevant security interests. Centrebet did not oppose the application.
With reference to case law concerning the repealed s 266 of the Act, the Court observed that several factors were relevant to its exercise of discretion under s 588FM, namely that:
- the failure to register was due to inadvertence, which in this case included a failure to understand the specified time frame for lodging notices of security interests;
- the length of delay prior to the registration of the security interests, a period of approximately 2 months, was not long;
- Centrebet was in a strong financial position, with no other security interests registered against its assets during the period of the delay; and
- the risk of prejudice to other creditors was remote.
Accordingly, the Court granted orders fixing 9 August 2012 as the registration time for the relevant security interests. The Court noted that under the repealed s 266, a condition was often imposed on an order to allow a liquidator, administrator or deed administrator to discharge the order where insolvency occurs within 6 months of registration. However in this case, in light of Centrebet’s strong financial position, the Court refrained from doing so.
See the case.