Octaviar decision overturned
Further to our article Secured Lender beware: Octaviar the Court of Appeal of the Supreme Court of Queensland has heard, and unanimously allowed an appeal against the first instance decision in Re Octaviar Ltd; Re Octaviar Administration Pty Ltd  QSC 37 (6 March 2009) (Octaviar).
First Instance decision
In Octaviar the court had found that where a charge was drafted to secure all money owing by a chargor in respect of a ‘Transaction Document’ and an additional document was subsequently designated as a ‘Transaction Document’, that designation constituted a variation of a charge that required a notice of variation be lodged with the Australian Securities and Investment Commission (ASIC) pursuant to section 268(2) of the Corporations Act. This decision was of considerable concern to lenders as it did not reflect market practice.
Court of Appeal decision
The Court of Appeal has decided that where a charge secures liabilities in respect of Transaction Documents, that may be designated as such in the future, that it is not necessary to lodge a notice of variation with ASIC pursuant to section 268(2) of the Corporations Act, unless there is an amendment to the terms of the charge itself. This decision is in line with the previous market practice.
High Court Appeal?
It is not yet known if the Court of Appeal decision will be appealed to the High Court.
Accordingly, it may be preferable that:
- if the charge secures obligations under a specific document, and the liability under the charge has been increased (via the designation of additional documents), ASIC should be notified as soon as possible and
- lenders consider using an “all moneys” charge for future transactions, until it is known whether an appeal to the High Court will be made.
You might be also interested in...
Financial Services | 18 Sep 2009
On 17 September 2009, the Federal Government announced a number of amendments to the National Consumer Credit Protection Bill 2009 (Cth) (Bill). These amendments are intended to implement recommendations made by the Senate Economics Committee as a result of public consultation.
Financial Services | 8 Oct 2009
On 2 October 2009, the Federal Government released its exposure draft regulations (draft regulations) on short selling disclosure. Broadly, the draft regulations are proposed to be implemented in two tranches.
The first tranche relates to the reporting of transactional (gross) short selling information largely replicates the existing transactional reporting requirements under the Australian Securities and Investment Commission (ASIC) Class Order 08/751 and is scheduled to commence on or before 11 December 2009.