SV Partners’ Peter Gountzos and Michael Carrafa have done their bit to undermine an attempt by a creditor to have a court fix a later time for registration of the creditor’s security interests, and by doing so have potentially guaranteed a return for ordinary unsecureds in the winding up of Dairy Soils Pty Ltd.
“If the orders are made, there will be insufficient assets for any return to unsecured creditors,” Peter Gountzos, SV Partners.
The positive outcome – other than for applicant creditor Agfor Rural Pty Ltd (Agfor) – came to iNO’s attention via a decision delivered this week in the Supreme Court of Victoria by judge Ian Waller KC.
Agfor had asked the court to exercise its discretion pursuant to s 588FM(2) of the Act to order the fixing of a later time by which Agfor’s security interests in livestock and machinery it had leased to Dairy Soils are to be registered.
In Dairy Soils Pty Ltd (in liq) [2025] VSC 540 his honour laid out the applicable law and principles governing the perfecting of security interests in the context of corporate insolvency and the interplay between jurisdiction and discretion.
“The question that arises for determination in this application is whether the Court should exercise its discretion pursuant to s 588FM(2) of the Act to order the fixing of a later time by which Agfor’s security interests in the livestock and machinery are to be registered,” the judge said.
Gountzos and Carrafa opposed granting the relief, with Gountzos telling the court in an affidavit that “if the orders sought by Agfor are not made, there will be sufficient assets to pay ordinary unsecured creditors a dividend of approximately 26 cents in the dollar”.
“If the orders are made, there will be insufficient assets for any return to unsecured creditors,” Gountzos said.
What appeared to trouble the judge most about Agfor’s application was the delay in getting its registrations perfected and the potential imperilling of crystallised rights.
“The appointment of liquidators on 21 March 2025 has crystallised the rights of unsecured creditors in the livestock and machinery,” he said.
“As the authorities make clear, this creates rights ‘in the nature of property’ that should not be destroyed lightly. The making of the orders sought would necessarily defeat these crystallised rights.
“The purpose of s 588FM is to provide relief from the harsh consequences of inadvertent failure to comply with registration requirements.
“However, this purpose must be balanced against the legitimate expectations and crystallised rights of unsecured creditors, particularly where the delay has been substantial and the prejudice is significant.
“Balancing all relevant factors, I am not satisfied that there are circumstances of sufficient significance to warrant the destruction of the crystallised rights of unsecured creditors,” he concluded.
the judgement is of some importance because quite often when made there is a reservation of the ability of anyone who may be affected to make an application for it to be set aside or varied – as a matter of public policy that is sensible but also as a matter of public policy it is important to have regard to the interests of creditors as a whole in the manner in which the judicial discretion is exercised by the Court. To this extent a proper report by the external administrator as to the circumstances of the particular administration is essential.