On 12 March 2010 the High Court of Australia (HCA) granted special leave to the Public Trustee of Queensland to appeal the decision of the Queensland Court of Appeal in the matter of Re Octaviar Ltd (No. 7) [2009] QCA 282.
As most readers will be aware, the Queensland Court of Appeal overturned the decision at first instance, which was to the effect that the designation of certain documents as ‘Transaction Documents’ under a facility agreement (for the purpose of thereby automatically bringing all amounts owing under the designated documents within the amounts secured by an existing charge), constituted a variation of that charge requiring registration under section 268(2)(a) of the Corporations Act 2001. The effect of failing to register a variation required to be registered within the required period is to render the charge void to the extent of the relevant variation.
The Queensland Court of Appeal’s decision in relation to this issue was consistent with market practice and the unanimous approach of law firms advising in the banking market prior to the decision at first instance.
The HCA is due to hear the appeal in June 2010. Until clarity is provided by the HCA, we recommend lenders continue to use those the methods to overcome or mitigate the effect of Octaviar developed after the initial decision and prior to the decision of Court of Appeal.
Author: Martin Irwin