Re Barclays Bank PLC  NSWSC 1095 (24 August 2012) has become the second case (after Hastie - see my post of 12 September 2012) to consider the Personal Property Securities Act (PPSA) in some detail (although the case is quite short - 19 paragraphs, and relates only to an application to extend time for registration of a financing arrangement, in order to perfect the security interest under the PPSA).
Barclays Bank PLC provided a loan facility for 8 million pounds to Sportingbet PLC. As part of that facility, an Australian subsidiary of Sportingbet, Centrebet, was required to provide security to Barclays. As a part of that security arrangement, Centrebet executed a General Security Deed on 24 April 2012.
Under the Corporations Act, a financing statement under the PPSA (which the General Security Deed would be) was to be registered within 20 business days of the relevant deed coming into force.
Despite specific advice from its Australian lawyers, the UK counsel for Barclays overlooked the registration requirement and failed to take steps to register the deed until 9 August 2012, around two months after the last day on which it should have been registered to avoid 'vesting' under section 588FL(2).
Section 588FL(2) provides that a security interest will 'vest' unless it is registered before the latest of several events, the relevant ones of which were:
- 20 business days after the security agreement came into force; or
- a later time ordered by the court under section 588FM.
As a result of this oversight, Barclays applied (unopposed) to the NSW Supreme Court for an order under section 588FM extending the time for registration of the relevant deed to 9 August 2012.
Section 588FM(2) provides that the court may make an order fixing a later registration time where it is satisfied:
- that the failure to register the collateral by the required time was accidental, inadvertent or not of a nature to prejudice creditors or shareholders; or
- that it is just and equitable to fix such a later time.
Sections 588FL and 588FM were introduced into the Corporations Act by the Personal Property Securities (Corporations and Other Amendments) Act 2010 (Cth) (Amending Act). At the same time, section 266 (relating to the registration of charges with ASIC) was repealed.
Justice Black noted (at paragraph 4) that:
The terms of s 588FM are broadly similar to the circumstances in which the court could previously extend the time for lodgement of notice of a charge under s 266(4) of the Corporations Act, and the authorities as to that section will assist in guiding the exercise of the court’s discretion under s 588FM.
Justice Black was satisfied that Barclay’s failure to register their security interest was ‘accidental or inadvertent’ within the previously understood meaning of those terms.
Justice Black took notice of the fact that Barclay’s UK counsel had:
- had limited experience in finance transactions,
- received limited training in the PPSA regime, and
- only become aware of the timeframe for registration in July 2012, some 2 months after the registration window had actually expired.
Although noting that the UK counsel could have acted more promptly (paragraph 10) after becoming aware of the registration timeframe, Black J was satisfied that Barclay’s counsel did not then appreciate the potentially serious consequences of late registration. In this regard, Black J expressly acknowledged that such errors are unsurprising during the transition to the PPSA regime.
In considering whether it was appropriate to exercise the court’s discretion, Black J noted, applying principles referred to above under the old section 266, that it was relevant that Sportingbet and Centrebet did not oppose the application, Centrebet was in a strong financial position, there had been no material change in Centrebet’s financial position during the delay period, no security had been granted to third parties during the delay period and no material debt had been incurred during the delay period.
Accordingly, Black J was satisfied that late registration would not prejudice the position of Centrebet’s creditors or disturb or affect any accrued or accruing rights.