In the matter of Production Printing (Aust) Pty Ltd (in liquidation) [2017] NSWSC 505 (2 May 2017)

Last Updated: 3 May 2017

Supreme Court New South Wales

Case Name:	In the matter of Production Printing (Aust) Pty Ltd (in liquidation)
Medium Neutral Citation:	[2017] NSWSC 505
Hearing Date(s):	4 April 2017
Decision Date:	2 May 2017
Jurisdiction:	Equity - Corporations List
Before:	Black J
Decision:	The proceedings are dismissed with costs.
Catchwords:	PERSONAL PROPERTY – where lessor of personalty registered its security interest on the Personal Property Securities Register against the lessee’s Australian business number rather than its Australian company number – where registration consequently defective – where lessee placed in administration – whether lessor’s security interest temporarily perfected pursuant to Personal Property Securities Act 2009 (Cth) s 166 – whether lessor’s security interest vested in the lessee.
Legislation Cited:	- Acts Interpretation Act 1901 (Cth), ss 15AA, 15AB(1) - Commonwealth Constitution, s 51(xxxi) - Corporations Act 2001 (Cth), ss 513B(b), 513C, 588FL–588FM - Judiciary Act 1903 (Cth), s 78B - Personal Property Securities Act 2009 (Cth), ss 12(2)(i), 13–14, 19–21, 153, 159–160, 163–166, 293(1), 252B, 267, 293 - Personal Property Securities Regulation 2010 (Cth), reg 5.5, Sch 1 cl 1.3 item 3
Cases Cited:	- Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27 - Certain Lloyd’s Underwriters v Cross [2012] HCA 56; (2012) 248 CLR 378 - Erskine v Elan Media Partners Pty Ltd [2016] VSC 493 - Federal Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55; (2012) 250 CLR 503 - Power Rental Op Co Australia LLC v Forge Group Power Pty Ltd (in liq) (recs and mgrs apptd) [2017] NSWCA 8 - Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 - Re Accolade Wines Australia Ltd [2016] NSWSC 1023 - Re OneSteel Manufacturing Pty Ltd (admins apptd) [2017] NSWSC 21
Category:	Principal judgment
Parties:	HP Financial Services (Australia) Pty Limited (Plaintiff) Production Printing (Aust) Pty Ltd (In Liquidation) (First Defendant) Production Printing Services Pty Ltd (Second Defendant)
Representation:	Counsel: A Leopold SDC/M. Rose (Plaintiff) S C Ipp (First Defendant – Liquidator) Solicitors: Norton Rose Fulbright (Plaintiff) Hall & Wilcox (First Defendant – Liquidator)
File Number(s):	2016/307557

JUDGMENT

1. By Amended Originating Process filed on 16 March 2017, the Plaintiff, HP Financial Services (Australia) Pty Ltd (“HPFS”) seeks an order, under s 500(2) of the Corporations Act 2001 (Cth), that leave be granted to it to begin and proceed with this proceeding against Production Printing (Aust) Pty Ltd (in liq) (“PPA”). That leave is appropriately granted where the matters raised by this proceeding could not readily be determined by the lodgement of a proof of debt in PPA’s liquidation. Although a second entity, Production Printing Services Pty Ltd (“PPS”) is named as the Second Defendant, orders were made by the Court on 7 February 2017, by consent, dismissing the claims for relief by HPFS against PPS.
2. HPFS also seeks orders, under s 293(1) of the Personal Property Securities Act 2009 (Cth) (“PPSA”) extending the time for the registration and perfection of its security over certain property of PPA, so that period will expire on 6 September 2016, and under s 588FM of the Corporations Act that 6 September 2016 be fixed as the time for it to register its security interest on the Personal Property Securities Register (“PPSR”) for the purposes of s 588FL(2)(b)(iv) of the Corporations Act. HPFS also seeks a declaration that its security interest has not vested in PPA under s 588FL of the Corporations Act or s 267 of the PPSA.

The factual background

3. The application was supported by substantial affidavit evidence led by HPFS. In the event, there was no contest as to its factual basis and the application ultimately turns upon relatively narrow, but important, legal questions. I have had regard to, but need not summarise, the evidence led by Mr van der Merwe by his affidavit dated 14 October 2016, by Mr Teoh by his affidavits dated 12 October 2016 and 15 March 2017, by Ms Smith by her affidavit dated 9 November 2016, by Ms Rozali by her affidavits dated 10 November 2016 and 15 March 2017 and by Mr Goldman by his affidavits dated 30 January 2017 and 15 March 2017.
4. By way of background, on 4 December 2014, HPFS entered into an Equipment Finance Agreement, described as a “Master Rental and Financing Agreement” with PPA. On the same date, HPFS registered a security interest in respect of printing equipment to be leased under that agreement on the PPSR, although it did so against PPA’s Australian business number (“ABN”) rather than its Australian company number (“ACN”). Between 5 December 2014 and 19 October 2015, HPFS entered into four separate leases with PPA pursuant to the Master Rental and Financing Agreement in respect of the lease of printing equipment purchased at a cost exceeding $4 million. It is common ground that the Master Rental and Financing Agreement was a “security interest” for the purposes of s 12(2)(i) of the PPSA and that each of the four leases between HPFS and PPA was a “PPS lease” for the purposes of s 13 of the PPSA and each such PPS lease was a “purchase money security interest” (“PMSI”) within the meaning of s 14 of the PPSA.
5. PPA was placed in voluntary administration on 22 July 2016 and, on 29 July 2016, its voluntary administrator notified HPFS that PPA contended that HPFS’s registration of its security interest was defective, by reason that it had been registered by reference to PPA’s ABN rather than its ACN. PPA subsequently transitioned from voluntary administration to liquidation on 26 August 2016. On 6 September 2016, HPFS registered a further PMSI on the PPSR in respect of the leased goods against PPA’s ACN. That registration will, of course, be of no assistance to it if the earlier security interest had already vested in PPA immediately prior to the appointment of a voluntary administrator to PPA, under s 267 of the PPSA or s 588FL of the Corporations Act.

The defective registration of HPFS’s security

6. HPFS’s case was outlined in detailed written opening submissions, in an initial form, and a replacement form, together with further written submissions in reply, and further submissions filed pursuant to leave granted on 4 April 2017. The liquidator of PPA opposed the relief sought by HPFS in somewhat simpler submissions in response and in submissions in reply to HPFS’s further submissions filed pursuant to leave. Mr Leopold, who appears with Mr Rose for HPFS, helpfully summarised the steps in HPFS’s submissions in oral submissions, to which I will first turn in identifying the relevant issues. It will be apparent, as I set out the steps in HPFS’s submissions below, that they involve matters of substantial complexity. Although each of those complex steps was addressed in detail in Mr Leopold’s and Mr Rose’s submissions for HPFS, I will only address them to the extent that it is necessary to do so in order to determine this application.
7. First, HPFS accepts that, when it registered its security interest as a PMSI on the PPSR on 4 December 2014, it failed to comply with the requirements of s 153 of the PPSA, because that security was registered by reference to PPA’s ABN rather than by reference to its ACN. Mr Leopold submits that HPFS’s lodgement of that financing statement by reference to the ABN, rather than the ACN, was a non-compliant financing statement for the purposes of s 153 of the PPSA and gave rise to a defect in the register for the purposes of s 164 of the PPSA.
8. Section 153 of the PPSA relevantly provides that a financing statement with respect to a security interest (including such a financing statement as amended by the registration of a financing change statement) consists of data that complies with a table appearing in that section. That table in turn requires that the data specify, relevantly, the grantor’s details as prescribed by the Regulations. Regulation 5.5 and item 3 in the table following cl 1.3 of Schedule 1 to the Personal Property Securities Regulations 2010 (Cth) require reference to the grantor’s ACN, where the grantor of the security interest is a body corporate that has an ACN. Section 164 of the PPSA provides that:

“(1) A registration with respect to a security interest that describes particular collateral is ineffective because of a defect in the register if, and only if, there exists:
(a) a seriously misleading defect in any data relating to the registration, other than a defect of a kind prescribed by the regulations; or
(b) a defect mentioned in section 165.
(2) In order to establish that a defect is seriously misleading, it is not necessary to prove that any person was actually misled by it.
(3) A registration that describes particular collateral is not ineffective only because the registration is ineffective with respect to other collateral described in the registration.”

9. Section 165 of the PPSA, to which that section refers and to which I will refer below, in turn relevantly provides that:

“For the purposes of paragraph 164(1)(b), a defect in a registration that describes particular collateral exists at a particular time if any of the following circumstances exist: ...
(b) in a case in which the collateral is not required by the regulations to be described by serial number in the register—no search of the register by reference to that time, and by reference only to the grantor’s details (required to be included in the registered financing statement under section 153), is capable of disclosing the registration ...”

10. Second, Mr Leopold recognises that no search of the PPSR by reference to the details required by s 153 of the PPSA and the associated regulations would have disclosed the registration of HPFS’s security over PPA’s assets, where that security interest had been registered by reference to PPA’s ABN rather than its ACN. HPFS also accepts, at least for the purposes of proceedings at first instance, that the registration of the Master Agreement on the PPSR against PPA’s ABN rather than its ACN resulted in a defective registration, on the basis found by Brereton J in similar circumstances in Re Accolade Wines Australia Ltd [2016] NSWSC 1023. HPFS accepts, at least for the purposes of the proceedings at first instance, that I would adopt the same approach as Brereton J in Re OneSteel Manufacturing Pty Ltd (admins apptd) [2017] NSWSC 21, so far as his Honour there held that the defect in that registration, where a financing statement contained only an ABN and not the ACN of a company that granted that security interest, was a “seriously misleading defect” for the purposes of s 164(1)(a) of the PPSA and fell within ss 164(1)(b) and 165(b) of the PPSA.
11. As a formal matter, HPFS relies upon the constitutional arguments advanced in Re OneSteel Manufacturing Pty Ltd (admins apptd) above, but not accepted by Brereton J in that case. A notice of a constitutional matter under s 78B of the Judiciary Act 1903 (Cth) was given by HPFS, so far as it contends that s 267 of the PPSA is disapplied by reason of s 252B of the PPSA, which preserves the operation of s 51(xxxi) of the Constitution, on the basis that the operation of that section would otherwise amount to an acquisition of property other than on just terms. It is not necessary to address that question in this judgment, since HPFS rightly accepted that I would properly adopt the same approach as adopted by Brereton J in Re OneSteel Manufacturing Pty Ltd (admins apptd) above, in respect of the same question, and that any issue as to the correctness of that approach is properly a matter for appeal.
12. As a formal matter, HPFS also relies on an argument that the 11 digit ABN of a company includes the 9 digit ACN of that company, which was not accepted by Brereton J in Re OneSteel Manufacturing Pty Ltd (admins apptd) above. Mr Ipp, who appears for PPA, takes issue with the formal submissions made by HPFS, and relies in that respect on the reasoning of Brereton J in Re OneSteel Manufacturing Pty Ltd (admins apptd) above. Mr Leopold fairly accepts that the reasoning of Brereton J was not plainly wrong and that, as a matter of judicial comity, I would adopt the same reasoning. I take that course.

The scope of s 166(1) of the PPSA

13. However, third, and critically, HPFS relies on an argument that was not put in Re OneSteel Manufacturing Pty Ltd (admins apptd) above. That argument is that ss 19–21, 166 and 293 of the PPSA have the effect that HPFS’s security interest was temporarily perfected by registration prior to, and on, the section 513C day (for the purposes of that section of the Corporations Act) on which voluntary administrators were appointed to PPA, and consequently there was no vesting of HPFS’s security interest in PPA under s 267(2) of the PPSA or s 588FL(4) of the Corporations Act.
14. Mr Leopold submits that, despite the defect in the registration of HPFS’s security interest under s 165(b) of the PPSA, s 166 of the PPSA confers temporary effectiveness of HPFS’s security between the time when the defect “arose”, which he contends was the date of its defective registration on 4 December 2014, and the earliest of the times stated in s 166(2) of the PPSA, being the end of the five business days after HPFS acquired actual or constructive knowledge of the defect, at the earliest on 29 July 2016 or otherwise on 3 August 2016. Section 166 of the PPSA in turn relevantly provides that:

“(1) This section applies if:
(a) one of the following defects in a registration that describes particular collateral arises at a particular time (the defect time):
...
(ii) a defect mentioned in paragraph 165(b), other than a defect resulting from a change of the grantor in relation to the collateral; and
(b) the defect does not arise only because of an irregularity, omission or error in a financing statement or a financing change statement.”
Example: A defect mentioned in paragraph 165(a) may occur if there is a change in the serial number under which collateral is required to be described in the register. For example, a patent may be required to be described by serial number (a Patent Application Number or a Patent Number). The Patent Application Number may be changed to a Patent Number when the patent is registered on the patents register.
Note: A change of the grantor may occur if the collateral described in the registration is transferred. In this case, the secured party’s security interest may be temporarily perfected for a certain period (see section 34).

15. I proceed on the basis that, as Mr Leopold emphasises, I must interpret s 166 of the PPSA by reference to its language rather than by any preconception as to its purpose. I must also have regard to s 15AA of the Acts Interpretation Act 1901 (Cth) which provided, at the date on which the PPSA received the Royal Assent, that:

“In the interpretation of a provision of an Act, a construction that would promote the purpose or object underlying the Act (whether that purpose or object is expressly stated in the Act or not) shall be preferred to a construction that would not promote that purpose or object.”

16. I have regard to the observations of the majority of the High Court in Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 at [69] that the primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all of the provisions of the statute; that the meaning of a statutory provision must be determined by reference to the language of the statute viewed as a whole; and that “the process of construction must always begin by examining the context of the provision that is being construed”. The majority then summarised the process of statutory construction (at [78]) as follows:

“[T]he duty of a Court is to give the words of a statutory provision the meaning that the legislature is taken to have intended them to have. Ordinarily, that meaning (the legal meaning) will correspond with the grammatical meaning of the provision. But not always. The context of the words, the consequences of a literal or grammatical construction, the purpose of the statute or the cannons of construction may require the words of a legislative provision to be read in a way that does not correspond with the literal or grammatical meaning.”

17. In Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27 at [47], the joint judgment similarly observed (references omitted) that:

“This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the text itself. Historical considerations and extrinsic materials cannot be relied on to displace the clear meaning of the text. The language that has actually been employed in the text of legislation is the surest guide to legislative intention. The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy.”

The joint judgment also pointed (at [51]) to the risk that a Court would not give the text the necessary attention if it focussed on an anterior perception of the general purpose of a statute.

18. In Federal Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55; (2012) 250 CLR 503 at [39], the joint judgment of the High Court quoted the first sentence of the passage cited above from Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue and again emphasised the primacy of the text in statutory interpretation, observing that:

“This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the [statutory] text.’ So must the task of statutory construction end. The statutory text must be considered in its context. That context includes legislative history and extrinsic materials. Understanding context has utility if, and in so far as, it assists in fixing the meaning of the statutory text. Legislative history and extrinsic materials cannot displace the meaning of the statutory text. Nor is their examination an end in itself.” (Footnotes omitted)

19. Similarly, in Certain Lloyd’s Underwriters v Cross [2012] HCA 56; (2012) 248 CLR 378, French CJ and Hayne J observed (at [25]–[26]) that the purpose of a statute resides in its text and structure; that a determination of a statutory purpose does not permit or require a search for what was in the mind of those who promoted or passed the legislation when it was enacted; and the Court must avoid making an a priori assumption about a statute’s purpose in construing it. There may, of course, be no difference between the result of a literal and purposive approach if the statutory drafting is effective to express the relevant legislative purpose.
20. HPFS submits that the defective registration on 4 December 2014 was a defect within the scope of s 165(b) of the PPSA, being a defect other than a defect resulting from a change of the grantor in relation to the collateral, which “arises at a particular time” for the purposes of s 166(1)(a)(ii) of the PPSA, being the time at which the security was granted. HPFS in turn submits that the time at which the security was registered, and the defect arose, was the “defect time” for the purposes of s 166(2) of the PPSA (to which I will refer below) and the starting date for the “temporary effectiveness” that arises under that section where such a defect arises. Mr Leopold contrasts the language “arises at a particular time” in s 166(1)(a) with the use of the language “exists at a particular time” in the chapeau of s 165, and submits that the word “arises” rather than “exists” was used in s 166(1)(a) to identify the point at which a defect first existed. Mr Leopold fairly accepted in oral submissions (T6) that HPFS’s proposition that temporary perfection was available on s 166 of the PPSA required that s 166(1) of the PPSA be read as applying to a defect that “arose” at the time a security was first registered, that is, a defect that existed at all times from the moment at which that security was first registered.
21. I do not accept Mr Leopold’s submission as to the proper construction of s 166(1)(a) of the PPSA. It seems to me that the use of the word “arise” in s 166(1)(a) contemplates a defect that comes into existence at a time at which it had previously not existed. It seems to me that the usual meaning of the term “arise”, which includes “to come into being or action” or to “originate” or to “appear” is indicative of a subsequent development rather than a defect existing at the moment a registration is created. It does not seem to me that, as a matter of general usage, one would refer to a defect in an item that had existed since the moment it was created as a defect which had “arisen” in respect of that item. I also do not accept Mr Leopold’s submission that the use of the term “arises”, as distinct from the term “exists”, in that section was necessary to identify the time when the defect first existed, since that could readily have been achieved by using the language “first existed” in the section.
22. The example of the operation of s 166(1) of the PPSA provided in the text of the PPSA, which I have quoted above, provides no support for the reading which HPFS gives to that section, pointing instead to the position where a defect arises in respect of a registration that was initially effective. In HPFS’s further submissions filed pursuant to leave granted on 4 April 2017, Mr Leopold contended that the example to s 166 is inconsistent with the proper construction of s 166, and the section prevailed over the example. He points out that s 15AD of the Acts Interpretation Act, as in force at the date on which the PPSA received the Royal Assent, being 15 December 2009, provided for a provision of an Act to prevail over an example which was inconsistent with it. I do not accept the submission that such an inconsistency exists between the example and the text of the section. The section, properly construed in accordance with its terms, is consistent with the example that is given of its operation, for the reasons that I have set out above.
23. Mr Ipp responds that the example to s 166 implies that the financing statement becomes irregular after registration, and that is consistent with the operation of the section. Mr Ipp also points out, and I accept, that the effect of ss 159, 160 and 163 of the PPSA, when read together, is that a financing statement or financing change statement can become irregular after the “registration time”, as defined in s 160, and that reinforces the conclusion that s 166 has useful work to do, without being given the operation which HPFS seeks to attribute to it.
24. Mr Leopold also refers to the decision of Sifris J in Erskine v Elan Media Partners Pty Ltd [2016] VSC 493 at [58]–[60] and suggests that decision proceeds on the footing that, although an original registration failed, its validity was preserved by s 166 of the PPSA. If that decision is to be read in that way, then it does not seem to me that its application should be extended to defects arising from the terms of the initial registration of the kind considered in Re Accolade Wines Australia Ltd above, Re OneSteel Manufacturing Pty Ltd (admins apptd) above and this case.
25. In order to establish that its security was temporarily perfected, HPFS must also satisfy the requirements of s 166(1)(b) of the PPSA, which I have quoted above. Mr Leopold acknowledges that temporary perfection is not available under s 166 of the PPSA unless, for the purposes of s 166(1)(b) of the PPSA, it can be said that:

“the defect does not arise only because of an irregularity, omission or error in a financing statement or a financing change statement.”

26. Mr Leopold draws attention to the use of the language “a defect in the register” and “a defect mentioned in section 165” in s 164(1) of the PPSA and submits that a registration is ineffective, not by reason of every defect in the register, but only by reason of a defect in the register that is seriously misleading for the purposes of s 164(1)(a) of the PPSA or that is a defect mentioned in s 165 of the PPSA. Mr Leopold also submits that a defect in registration that describes particular collateral which is not required to be described by serial number only “exists” for the purposes of s 164(1)(b) of the PPSA if:

“no search of the register by reference to [the time at which the defect exists], and by reference only to the grantor’s details [required to be included in the registered financing statement under section 153] is capable of disclosing the registration.”

Mr Leopold submits that this matter is an additional criterion that must be satisfied before a defect in the register can be characterised as a defect mentioned in s 165 of the PPSA.

27. Mr Leopold in turn submits that, for the purposes of s 166 of the PPSA, the defect referred to in s 166(1)(b) must both be a defect in the register and must satisfy the additional element specified in s 164(1)(b) that no search of the register by reference to the time at which the defect existed, and by reference only to the grantor’s details, was capable of disclosing the registration. Mr Leopold submits that the defect in HPFS’s registration did not arise only because of HPFS’s failure to register by reference to PPA’s ACN but also because no search of the register was capable of disclosing the registration. Mr Leopold further elaborated his already complex submissions as to a suggested distinction between a defect in a registration and a defect in the register, as put in HPFS’s replacement written submissions, in written submissions in reply. It is not necessary to seek to summarise the complexities of that additional submission to determine this application. The distinction between the two does not seem to me to assist HPFS because, even if it is correctly drawn, the defect in the register and the defect in the registration in this case both arise only because of the irregularity, omission or error in the financing statement, and not from any other cause.
28. Mr Ipp responds that s 166(2) of the PPSA only applies if both ss 166(1)(a) and (b) of the PPSA are satisfied and that s 166(1)(b) is not satisfied in the present case, so that the defective registration is not temporarily perfected by s 166(2) of the PPSA. Mr Ipp submits that the “defect” referred to in s 166(1)(b) is a defect in registration, and that conclusion appears to follow from the previous reference to “one of the following defects in a registration” in s 166(1)(a). That reading of the section is also supported by s 10 of the PPSA which provides that “defect, in relation to a registration, includes an irregularity, omission or error in the registration”. Mr Ipp also submits that the fact that a search of the PPSR by reference to the grantor’s details (as required to be included in the registered financing statement under s 153 of the PPSA) would not disclose the registration of HPFS’s security interest:

“is not a defect in registration that is independent and different from the defect in registration that arises ‘only because of an irregularity, omission or error in a financing statement’ ... . They are essentially the same defect. The one is simply the inevitable consequence of the other.”

29. Mr Leopold accepts that, on HPFS’s construction of s 166(1)(b) of the PPSA, the requirement in that paragraph would probably always be satisfied. That is the consequence of the fact that, as Mr Ipp pointed out, the error in the financing statement which amounted to the irregularity, omission or error in it was, and would ordinarily be, the same error that had the result that a search of the register would not disclose that interest. Mr Leopold also submits that, on PPA’s construction of s 166(1)(b), it will never be satisfied and a construction of that section which gives it some work to do should be preferred. I do not accept the premise of the latter submission. That paragraph could at least be satisfied where an additional matter arises from a change subsequent to the date on which a security interest was effectively registered, as in the case of the example given in s 166 of the PPSA.
30. Mr Leopold’s submission as to the scope of s 166(1)(b) of the PPSA involves some complexity and, possibly, some fine distinctions. It is not necessary to express a view as to whether each step in this submission, prior to its conclusion, should be accepted as a matter of construction of the relevant provisions of the PPSA. It seems to me that the conclusion is incorrect, because the defect in the registration of HPFS’s security does arise only because of the irregularity, omission or error in the financing statement lodged by HPFS. There is no other operative cause of the defect or of the “additional” fact on which HPFS relies than that irregularity, omission or error. Where that irregularity, omission or error gives rise both to the defect in the register and the consequential inability to identify the registration by a search of the register by reference only to the grantor’s details, so as to establish the defect in the registration, it is still the case that the defect arises only because of that irregularity, omission or error and s 166 of the PPSA does not apply.
31. I should also note that, notwithstanding Mr Leopold’s submission as to the primacy of the statutory language, he also submits that the purpose or object underlying s 166(1) of the PPSA is that registration should be regarded as effective, notwithstanding the existence of a defect described in s 166(1)(a), until shortly after a party who registered the security obtained actual or constructive knowledge of the defect and that:

“The balance is seemingly struck in favour of the chargee who does not have actual or constructive knowledge of a defect, even if vesting would otherwise have occurred prior to actual or constructive knowledge being acquired.”

32. On the other hand, Mr Ipp submits that the primacy of the register created under the PPSA is a fundamental principle underlying the enactment of the PPSA: Power Rental Op Co Australia LLC v Forge Group Power Pty Ltd (in liq) (recs and mgrs apptd) [2017] NSWCA 8 at [42]–[43], [83]. Mr Ipp also submits that:

“The practical consequence of [HPFS’s] construction of sub-section 166(1)(b) is that a secured party can register a financing statement that fails to comply with section 153 but nevertheless results in perfection by the Act. [PPA] submits that that construction of sub-section 166(1)(b) would give section 153 no particular use or work to do. Further, it would seriously undermine how the Register was used and in turn work fundamentally against the policy and object of the Act.”

33. It seems to me that the interpretation that I have given to s 166(1)(b) of the PPSA, above, as a matter of its proper construction, will best achieve the purpose or object of the PPSA, and is therefore to be preferred to any other interpretation for the purposes of s 15AA of the Acts Interpretation Act. The interpretation for which Mr Leopold contends would lead to the perverse result that, so long as a financing statement is defective in a relevant respect from the moment it is registered, the registration of a security interest will be preserved by temporary perfection, including in circumstances where a person searching the register by reference to a grantor’s ACN would not, for example, be able to identify the registration of that interest. That result seems to me fundamentally to undermine any certainty which would be available to a person who searched the register, because he or she would need to make financing decisions not only by reference to security interests disclosed by a search of the register, but also on the basis that there may also exist an indeterminate number of other security interests, recorded in defective financing statements, which had temporary perfection for an indeterminate time.
34. It also does not seem to me that the effect of HPFS’s construction of s 166(1) of the PPSA in undermining the finality of the register is sufficiently mitigated by the possibility, to which Mr Leopold refers, that a security holder with a defective registration would still need to apply for an extension of the time period for registration under s 293 of the PPSA in order to have priority over a perfected security interest granted by the same grantor in the same collateral that is not a PMSI. That proposition does not mitigate that effect in respect of a PMSI and, in respect of other securities, would expose a person who took a subsequent security interest, where the earlier security interest was not identifiable by a search of the register, to the risk that the Court’s discretion might be exercised in favour of the grantor of the earlier security. The interpretation of s 166(1) of the PPSA for which PPA contends also seems to me to undermine the incentive properly to register a security interest that is created by provisions such as s 267 of the PPSA and s 588FL of the Corporations Act, and thereby to undermine the statutory purposes of the PPSA, even if one took the view that those sections presently have the capacity to impose a disproportionate penalty upon a person who has taken security in the case of a defect in its registration.
35. The result which I have reached is also consistent with the result that would be reached by reference to extrinsic material, in the manner permitted by s 15AB(1) of the Acts Interpretation Act, to confirm that the meaning of the provision is the ordinary meaning conveyed by its text, taking into account its context in the PPSA and the purpose or object underlying the PPSA, or to determine its meaning if it were treated (contrary to my view) as ambiguous or obscure. Paragraph 5.75 of the Replacement Explanatory Memorandum to the Personal Property Securities Bill treats the section as directed to “a change of circumstances” and paragraph 5.76 of the Replacement Explanatory Memorandum indicates that:

“This rule is not intended to give secured parties the opportunity to correct defects of their own creation, but to provide a grace period for secured parties to correct registrations where events beyond their control have led to a previously effective registration becoming defective.”

I do not accept Mr Leopold’s submission that the approach adopted in the Replacement Explanatory Memorandum is inconsistent with the ordinary and natural meaning of the term “arises” in s 166(1)(a) of the PPSA. That approach is, however, inconsistent with the operation which HPFS seeks to give to s 166(1) of the PPSA.

36. The conclusions that I have reached as to the proper scope of s 166(1)(a) and s 166(1)(b) are each sufficient to have the result that HPFS’s application must fail.

The effect of s 166(2) of the PPSA

37. Fifth, Mr Leopold submits that, despite the earlier provisions in the PPSA, the effect of s 166(2) of the PPSA is that the defect in the registration of HPFS’s security does not make that registration ineffective for the period 6 September 2014 to 10 August 2016. That subsection provides that:

Registration is temporarily unaffected by the defect
“(2) Despite sections 164 and 165, the defect does not make the registration ineffective for the period starting at the defect time and ending at the earliest of the following times:
(a) the end time for the registration (as registered immediately before the defect time);
(b) the end of the month that is 60 months after the defect time;
(c) the end of 5 business days after the day the secured party acquires actual or constructive knowledge of the defect.
Note: The period mentioned in paragraph (c) may be extended by a court under section 293.

38. Given the conclusions that I have reached above as to the application of s 166 of the PPSA, it is not necessary to address HPFS’s further submissions as to the time period for temporary effectiveness under s 166 of the PPSA, because I have held that no temporary effectiveness arises under that section. There was, in any event, no contest between HPFS and the liquidator as to that matter. Given the conclusions that I have reached as to the application of s 166 of the PPSA above, it is also not necessary to address the question, addressed by Mr Leopold in submissions, how s 166(2) would interact with a conclusion that the relevant defect in the PPSR was seriously misleading, consistent with the result in respect of a similar defect in Re OneSteel Manufacturing Pty Ltd (admins apptd) above, because I have held that s 166(2) has no application to that defect.
39. It is also not necessary to address the question whether temporary effectiveness under s 166 of the PPSA has the consequence that a security interest is “temporarily perfected” by force of the PPSA for the purposes of s 21(1)(a) of the PPSA, or Mr Leopold’s alternative argument by reference to s 21(1)(b) of the PPSA. Mr Leopold fairly accepted in oral submissions (T9) that his alternative submission under s 21(1)(b) of the PPSA depended on the construction of s 166 of the PPSA and was therefore not a freestanding alternative submission. It is not necessary to deal with these submissions, since the premise of each submission that the security interest was temporarily effective under s 166 of the PPSA is not established.

Whether HPFS’s security was temporarily effective as at the section 513 day in respect of PPA

40. Sixth, Mr Leopold submits that the critical time in this case, being the section 513C day for the purposes of that section of the Corporations Act, the date of the administrator’s appointment, was 22 July 2016, and that HPFS’s security had temporary effectiveness at that date by reason of s 166 of the PPSA. That proposition is consequential upon the correctness of HPFS’s fourth and fifth propositions. Given the findings that I have reached above, PPSA’s security interest was not temporarily effective and was not perfected on the section 513C day in respect of PPA.

Vesting under s 267 of the PPSA

41. Seventh, Mr Leopold submits that the vesting provision under s 267(2) of the PPSA applies only to security interests that were unperfected at the critical time, and that HPFS’s interest was not unperfected at the critical time because it had the benefit of temporary effectiveness under s 166 of the PPSA. Mr Ipp responds that ss 267(1)(a)(ii) and (b)(i) are each satisfied as, on 22 July 2016, being the date the voluntary administrator was appointed and the winding up of the company is treated as commencing by reason of ss 513B(b) and 513C of the Corporations Act, HPFS’s security interests were unperfected, and that unperfected security interest vests in PPA by operation of s 267(2) of the PPSA. Given the findings that I have reached above, the vesting provision under s 267 of the PPSA applies, because PPA’s security interest was not temporarily effective and was not perfected on the section 513C day, namely 22 July 2016, and that security interest was vested in PPA under s 267(2) of the Corporations Act. That may be a harsh and possibly unreasonable result in the relevant circumstances, but, for the reasons noted above, that result cannot be avoided under the present legislative regime by reliance on temporary effectiveness under s 166 of the PPSA.

Vesting under s 588FL of the Corporations Act

42. Eighth, Mr Leopold submits that s 588FL of the Corporations Act only applies where a security interest is perfected by registration and by no other means, and has no application where a security is perfected by temporary effectiveness under s 166 of the PPSA, and there is therefore no vesting of that interest under s 588FL(4) of the Corporations Act. Section 588FL does not apply, in this case, to vest the security interest in PPA, because that section is directed to a PPSA security interest that is perfected by registration, and by no other means, and HPFS’s security interests were not perfected by registration for the reasons noted above. In any event, there could be no utility in relief under s 588FL of the Corporations Act, where HPFS’s security interest has vested in PPA.

Extensions of time under s 293 of the PPSA

43. Ninth, Mr Leopold submits that these matters affect the position of only one holder of a prior security over all present and after acquired property, PPS, which consents to the grant of an extension for registration of HPFS’s security under s 293(1)(a) of the PPSA. However, Mr Leopold fairly accepts that there would be no utility in a grant of that relief to HPFS unless it has sustained all of the previous steps in its submissions, since the relevant property has vested in PPA where those previous steps have not been sustained.
44. Tenth, HPFS in turn seeks an extension of time under s 293(1)(m) of the PPSA, which relates to the time specified in s 166(2)(c) of the PPSA. Mr Leopold notes that extension is required because temporary perfection of HPFS’s security interest, if established, would exist only for five business days after HPFS had acquired actual or constructive knowledge of a defect in its registration, the date which he puts at 10 August 2016, and there was a period of ineffectiveness of the registration between 10 August 2016 and 6 September 2016 which would need to be cured under s 293(1)(m) of the PPSA. Again, that relief would only assist HPFS if its security interest had not previously vested in PPA. Mr Leopold accepts that, strictly, PPS is not on notice of that application, which was introduced by HPFS’s Amended Originating Process, and submits that that relief is sought for more abundant caution. No question of relief under s 293 of the PPSA arises, where such relief would be of no utility to HPFS in circumstances that its security interest has vested in PPA.

Orders and costs

45. For these reasons, the proceedings should be dismissed. The Plaintiff must pay the First Defendant’s costs of the proceedings, as agreed or as assessed.

**********