Category Archives: Practice

Common Issues with the PPSA and how to deal with them as a solicitor or barrister

I recently presented a video podcast with my learned friend and fellow barrister Amanda Carruthers on the topic “PPS Issues in Insolvency”: see below. The format is to highlight the frequent PPSA issues that we see as barristers and how best to tackle them as a practitioner.

You can also download the seminar and watch at https://foleys.com.au/ResourceDetails.aspx?rid=459&cid=5

Enjoy. The seminar is part of a series presented by Foleys List on a wide range of topics relevant to commercial lawyers. See the full range at https://foleys.com.au/cpdresources.aspx

When is a defect in a PPSR registration fatal? A defect in the ACN of the secured party not misleading

Case Note – Future Revelation Ltd v Medica Radiology & Nuclear Medicine Pty Ltd [2013] NSWSC 1741

It is often the case that an error is made in the ACN, ABN or even name of a party, or in the serial number of collateral,  when registering on the PPSR.  The online nature of the registration process lends itself to typos or transcription errors.

The Supreme Court of NSW has found that a defect in the ACN of the secured party in a financing statement registered on the PPSR does not render the registration ineffective.

Section 153 of the  Personal Property Securities Act 2010 (“PPSA”) requires that a financing statement include certain details of the secured party.  If the secured party is a Body Corporate, the ACN must be entered – see item 2 in the table under para 1.3(4) in schedule 1 of the PPSR regulations.

In Future Revelations, the secured party’s ABN number was entered instead of its ACN number.

The PPSA codifies which defect in the register make the associated registration is ineffective.  It is important in practice to be aware of them:

  • Section 164 provides that a defect in the register will render the relevant security interest ineffective if it is “seriously misleading”, excepting defects prescribed in the regulations, or it if is defect mentioned in section 165.
  • The defects in section 165 are:
    • defects preventing disclosure of the registration by searching the serial number of the collateral where that detail is required for registration.  An example would be omission of the serial number or an error in it;
    • where the serial number is not required, where a search by reference to the grantor’s details is not capable of disclosing the registration.  An example might be an error in the name of the grantor, such as recording the name of a partnership as that of an individual partner, rather than that of the partnership;
    • where the registration is said to be in respect of a PMSI, but in fact is not;
    • otherwise as specified in the regulations.
  • At present no regulations have been made under sections 164 or 165.

What makes a registration defect “seriously misleading”?  Since the PPSR is a register designed to enable the public to identify security interests in collateral, or security interests given by a grantor, errors are seriously misleading if they  hinder or prevent a search turning up security interests by reference to the identifying details of the collateral or grantor.

In Future Revelations, Brereton J said at [5] to [7]:

  1. The suggested defect in this case is not one of a kind mentioned in s 165. The question then is whether it is “seriously misleading”. That term is not defined in the PPSA, nor is there any guidance in respect of its meaning in the explanatory memorandum or the second reading speech. However, as is well-known, the PPSA is modelled on and derived from similar legislation in Canada and New Zealand and, as was observed in Maiden Civil (P&E) Pty Ltd v Queensland Excavation Services Pty Ltd [2013] NSWSC 852, the Commonwealth Parliament in enacting legislation that was modelled on the New Zealand and Canadian legislation should be taken to have intended approaches and interpretations applied by the Courts of those countries to their legislation to apply in Australia. A similar view has been taken in New Zealand.
  1. Canadian case law suggests that the test for whether a defect is “seriously misleading” is whether it will result in the registration not being disclosed on a search [see Re Lambert (1994) 7 PPSAC (2d); GMAC Leaseco Ltd v Moncton Motor Home & Sales (2003) 227 DLR (4th) 154 at [58]]. That makes sense, as the purpose of registration is to enable the existence of the security interest in the collateral to be searched and ascertained. A person searching in the PPSR is likely to be concerned with the identity of the grantor and/or the collateral. In terms of searching the PPSR, while there is facility to search by reference to the identity of the grantor and the collateral, there is no facility to search by reference to the identity of the secured party.
  1. In the present case, a search by reference to the identity of the collateral or the grantor would have disclosed the relevant security interest. Such a search would have identified clearly enough the secured party, namely Suncorp, even though its ABN and not ACN was stated. In my view, it is very clear that this defect was not seriously misleading or indeed for that matter misleading at all. Accordingly, it seems to me by operation of s 164(1) that the registration is not ineffective by reason of the defect that has been identified.

So errors in the details of the secured party will be not be fatal, provided the details in the registration in respect of the serial number of the collateral, or the grantor, as the case may be, is correct.

However, an error in the ACN or name of a grantor, where the serial number of the collateral was not required, may well be fatal – see for example a case where the name of the grantor was recorded as “Grandstand” rather than “Granstrand”.

Practitioners need to be careful in checking transcription of the identifying details of the grantor and the collateral (particularly the serial number) when entering details on the PPSR website.

It is also worth noting that the application in Future Revelations was made urgently and  ex parte, without formally filing process.  The application was urgent since the borrower had just defaulted.  Leave was granted to file process in Court, and an order was made giving liberty to apply to any administrator, liquidator or unsecured creditor to claim their interests could be affected by the order of the Court.

Regards

Mark

 

What a difference a day makes – When does the relation back period start?

Re Weston Application; Employers Mutual Indemnity (Workers Compensation) Ltd v Omni Corporation Pty Ltd [2009] NSWSC 264

In insolvency law the calculation of precise periods of time is important.  Insolvency practitioners need to know exactly when limitation periods end in order to preserve potential claims.  The “relation back period” is one of the more important time periods relevant to calculating limitations, and yet there is surprisingly little authority on exactly when the relation back period starts.

The Relation Back period

Most practitioners are familiar with what is the last day of a relation back period. It is the “relation-back day” in corporate law, and in bankruptcy it is the date of the presentation of the petition against the bankrupt.

But what is the first day of the relation-back period?  If the relation back day is 12 December, is a 6 month relation-back period taken to begin on the 12 June?  Or 13 June?  The answer has obvious practical significance because it is not uncommon for a significant payment to fall on the 12th day.

The issue is whether one includes the relation back day or not in the 6 month period. Surprisingly, there is no appellate decision which makes the answer clear, however single judge authorities indicate one does count the relation-back day. So in the example, 12 June would not be included.

In Scott v The Commissioner of Taxation [2003] VSC 50 (link),  Justice Dodds-Streeton reached the same conclusion (at paragraphs 32 and 33).  However the decision does include reasoning on that point.

In Re Weston Application; Employers Mutual Indemnity (Workers Compensation) Ltd v Omni Corporation Pty Ltd[2009] NSWSC 264 (link), calculation of time going forward from the relation-back day was discussed in an application to strike out a voidable transaction claim on the basis it was out of time.  The time for making the application expires 3 years after the relation back day, or 12 months after the appointment of the liquidator, whichever is the later: s588FF(3)(a).

In Re Weston the liquidator commenced the application for relief under s588FF(1) exactly 3 years to the date after the relation back day:  the respective dates were 16 January 2009 and 16 January 2006.

Justice Barrett considered the issue relying on two statutory provisions (at paragraphs 6 to 16):

1.Section 105 of the Corporations Act. It provides:

Calculation of time

Without limiting subsection 36(1) of the Acts Interpretation Act 1901 , in calculating how many days a particular day, act or event is before or after another day, act or event, the first-mentioned day, or the day of the first-mentioned act or event, is to be counted but not the other day, or the day of the other act or event.

2.Section 36(1) of the Acts Interpretation Act 1901 (link).  It contains a useful table for calculating when a day should and should not be included in a time calculation.  The section states that:

A period of time referred to in an Act that is of a kind mentioned in [the table] is to be calculated according to the rule mentioned in [the table].

Based on those provisions, His Honour concluded:

  1. when a time period is expressed to end at, on or within a specified day, the period of time includes that day (item 4 of the table);
  2. when a time period is expressed to begin from a specified day, the period of time does not include that day (item 5 of the table).

The Start Date and the End Date

In Re Weston the result was that the liquidator had made his application in time, since the 16th of January 2006 was not included in calculating the 3 year limitation period after the relation-back day (applying item 5 from the table).

In calculating the start of the relation-back period, using the example above, 12 June would not be included, because 12 December would be included in the 6 month relation-back period (applying item 4 from the table).

Significance for Practitioners

The application of these principles is important:

  • for practitioners in diarising limitation periods;
  • identifying transactions at the extremes of the relation back periods under the voidable transaction provisions;
  • for third parties considering limitation defences;

for calculating the application of time periods generally where limits are strict. For an example, applied to determining whether an application was within time to set aside a statutory demand, see Autumn Solar Installations Pty Ltd v Solar Magic Australia Pty Ltd [2010] NSWSC 463.

Regards

Mark

Acknowledgement:  this post originally appeared on the Commercial Bar Association of Victoria blog, Commbar matters, at http://commbarmatters.com/2014/04/08/what-a-difference-a-day-makes-when-does-the-relation-back-period-start/

A tale of a brief in 29 parts – tips for junior lawyers briefing counsel in the email age

When I started as an articled clerk in the early 90s, one of the senior partners at my firm gave me a copy of a paper, which I have now unfortunately lost, on how to best prepare a brief.

I think of that paper from time to time because preparation of a brief is a skill which, in the age of email, is “evolving”, to put it diplomatically.

Last year I was fortunate enough to receive some instructions, via email, for a matter which kept me occupied for a good three or four days. Unfortunately for the client, at least half a day of that time was spent reading, printing, organising and collating the twenty-nine emails and 90 or so attachments of which the brief consisted.

 Why does the quality of a brief matter?

A barrister is briefed for specialist advocacy skills or for advice, or both. Both advocacy and the giving of advice involve the communication of ideas in a clear and simple form.

An advocate uses those ideas to persuade, whilst counsel preparing an advice uses them to inform and advise. In both cases the barrister must master the relevant facts and issues before forming and presenting the ideas. The material needed to achieve that mastery is in the brief.

A barrister can be much more effective, more quickly, if the brief is a reasonably comprehensive, well organised and a well summarised extract from the solicitor’s file.

As a bonus from a cost perspective, a good brief can both reduce the amount of preparation work required by Counsel.

 Ten Tips in the Age of Email

As best as I can recall, the gist of that lost paper (with a few updates for modernity) was as follows:

1. Provide a hard copy of the brief to counsel. Even if urgency requires documents to be emailed to counsel immediately, always make sure that a complete hard copy brief is provided as soon as possible. It saves a lot of time in printing and collating materials that could otherwise be spent working on the matter briefed.

2. Feel free, if a matter is urgent, to email copy of the key documents from the brief. For example, the memorandum to counsel, a copy of the index to the brief, plus a copy of the handful of key documents that can get counsel started. By this I would mean no more than perhaps 2 or 3 documents at most. So if the case has already been issued, that might mean the statement of claim and the defence.

3. The memorandum to counsel is a great opportunity to tell counsel what the case is about and your views on it. Usually by the time counsel is briefed, a solicitor acting in the matter has built up a very valuable store of information and opinion about the case, the issues and witnesses. It is great practice to provide that information to counsel in the memorandum. Give a summary of the relevant facts, identify the relevant parties, identify the relevant causes of action and defences, and of most value, give your own view of the merits of the case. For the same reason, it is good practice to give a copy of advices that have been given to the client by the solicitor about the matter, plus any file notes from the solicitor’s file that are relevant, for example memorandums concerning the characteristics of witnesses.

4. Counsel should be informed of any discussions that have taken place to try to resolve a matter. If a matter has reached the point where counsel has been briefed where there had been no commercial discussions to try and resolve the matter, that would be very surprising. If that were the case, there should be an explanation as to why that is the case.

5. Ideally, briefs should be provided to counsel sooner rather than later. The reason is that once counsel has had an opportunity to review the brief, counsel may be of the view that the proposed course that the client wants to take is not advisable. For example, if the brief is to make an application to Court on an interlocutory matter, it may be that the interlocutory application is in counsel’s view unlikely to succeed, and not worth issuing. If counsel is briefed before the application is issued, the potential cost of withdrawing the application, or the cost of proceeding and failing, can be avoided.

6. As far as the contents of the brief are concerned, it very much depends upon what the purpose of the brief is. But for example, for a trial one would expect to receive:

– The current version of the pleadings.

– The relevant trial directions

– The parts of the discovery that will be relevant.

– Any expert reports.

– Any recent relevant correspondence between the solicitors.

– Witness statements, or draft proofs taken from witnesses.

– Copies of any advices given by previous counsel or by the solicitor to the client where relevant.

– Any memoranda prepared by the solicitor in-house on questions of law that are relevant to the proceeding.

– Copies of any legal authorities, including legislation or cases relevant to the brief.

– Any correspondence regarding settlement.

7. The index to the brief should be set out in a logical manner. There is no hard and fast rule for how the index should be organised, as long as it makes some sense.

8. As a general rule counsel should never be provided with original documents. They should be kept by the solicitor at all times. This applies to not only Court documents but also to discovered documents.

9. Where photographs are provided, or reports include coloured diagrams, it is very helpful to have colour copies of those that are clearly legible. There is nothing worse than working with grainy, difficult to recognise, black and white copies of photographs or diagrams from reports.

10. Keep a copy of the brief on your file, and for long running matters, periodically update counsel’s brief by refreshing the index and taking out materials that are no longer needed – eg, material relating to an application that is complete.

11. [At the very helpful suggestion of Dominique Hogan-Doran, whose blog can be found here:  http://hogandoran.com/]  Prepare a chronology of key facts for the brief.  The best form of the chronology is not set in stone, and depends on the stage of the matter, but my preference is to include the date of the event, the relevant source document(s), where the event is pleaded, and any comments of the instructor on the significance of the event.

Conclusion

In concluding, perhaps one of the biggest benefits of a good brief is that it exploits human laziness! Barristers are, by human nature, more likely to pick up a well organised brief over a poorly or unorganised brief and start work on it. The response time from counsel is likely to be a lot quicker.

Regards

Mark