The Queensland Court of Appeal in a 3-0 decision overturned the decision of McMurdo J in Re Octaviar Ltd; Re Octaviar Administration Pty Ltd  QSC 37 on 18 September 2009.
The Court found that the obligation to notify ASIC under section 268(2) of the Corporations Act (CA) of a variation in the terms of a charge is only triggered where the terms of the charge document itself are varied or amended. It is not enough to merely increase the liabilities secured by the charge.
The Court found that although the letter agreement effected an increase in the secured liabilities, the letter agreement was not either:
The argument that Chapter 2K of the CA would be defeated in the event that a search of the ASIC register did not identify the exact liabilities secured by the charge was dismissed. It was held that it is the purpose of the ASIC register to notify those searching it whether or not a company’s assets are encumbered, not notification of the actual amount secured by the charge.
The decision is consistent with the previous financing practice as it existed prior to the first instance decision, whereby lodgement with ASIC was only required in the event that an amendment was made to the terms of the charge which altered the liabilities of the charge in such a way as to increase the obligations secured.
However, it would be inaccurate to assume that the law in relation to this area is now settled. This cannot be said until the expiration of the parties’ window for lodging an application to the High Court for special leave to appeal on 16 October 2009.
A cautious approach should be taken until the expiration of the period for special leave to appeal to the High Court in the drafting of registrable charges. Drafters should be careful to define 'secured money' so that those searching the ASIC register are made aware that further enquiries need to be made to reveal the exact nature of the liabilities that are secured by the charge.
Need more information or have any queries in relation to this matter or any other insolvency matters? Please contact Alison Robertson on (08) 9288 6872 or Wayne Zappia (08) 9288 6931.