The legal issues that the administrators faced

In order to establish who owned the cattle, the administrators needed to answer the following questions:

Issue 1: was there a retention of title clause within the contracts?

Yes, except CSNM. CSNM did not include its retention of title clause in any of CSNM's contracts, so no retention of title clause was incorporated into its contracts.

Issue 2: will a security interest that is perfected on the day that administrators are appointed vest pursuant to section 267 of the PPSA?

No ‒ the Court found that section 267 of the PPSA refers to the time when the administrators are appointed, rather than the day. As a result, a security interest will vest under section 267(2) if it is unperfected at the time the administrators are appointed (rather than at the start of the day on which the administrators are appointed).

This was relevant to Charles Stewart only, which registered a security interest on the Register only a few hours prior to the appointment of the administrators. 

Issue 3: did the security interest vest pursuant to section 588FL of the Corporations Act?

Yes ‒ section 588FL of the Corporations Act provides that if the security interest is enforceable against third parties and perfected solely by registration, and the registration occurred after the latest of:

  • six months before administrators were appointed; or
  • after 20 business days after the security agreement came into force, or the time that administrators were appointed, whichever time is earlier,

    then the security interest vests in the company immediately before the appointment of administrators.

This section was relevant to both DLS and Charles Stewart, which had each registered security interests within six months of the administrators' appointment and more than 20 business days after entry into the relevant tripartite contracts.

The Court found that:

  • the only security interest came into force when the contracts were signed;
  • a security agreement did not have to be enforceable between the parties before a security interest came into force. The Court rejected an equation of "coming into force" with "enforceability". It found it was not necessary for attachment to have occurred under the PPSA in order for the security agreement to "come into force".

The result: DLS and Charles Stewart's security interests vested in Carpenter on the appointment of the administrators. Charles Stewart had also applied under section 588FM of the Corporations Act for an extension of time to register its security interest under section 588FL, which leads to Issue 4. 

Issue 4: when will an extension of time be granted under section 588FM?

The court may grant an extension under section 588FM(1) in three circumstances: the failure to register was caused by accident or inadvertence, the failure to register is not of such a nature as to prejudice creditors or shareholders, or on another just or equitable ground.

Charles Stewart relied on inadvertence. The Court found that inadvertence includes:

  • failure to understand the requirement for registration at all, or within a specific time; and
  • failure to register through ignorance of the consequences of not registering.


In this instance, the agent knew about the requirement to register. The Court found that the real reason the agent failed to register in time was a mistaken belief that Carpenter could and would pay on time. This did not amount to inadvertence within the meaning of section 588FM.

Charles Stewart's failure to register in time did not amount to a sufficient cause within the meaning of section 588FM(2)(i). The time to register was not extended. The security interest was registered out of time, and it vested in Carpenter pursuant to section 588FL.