Octaviar Appeal

Re Octaviar Ltd (No 7) [2009] QCA 282 is the appeal

from the decision of Re Octaviar Ltd; Re Octaviar

Administration Pty Ltd [2009] QSC 37. This decision was handed

down on 18 September 2009.

Our Alert of 18 March 2009 analysed the first instance

judgment.

The case considered a charge registrable under the Corporations

Act which secured all money owing under defined "Transaction

Documents". The money secured under the charge was, in a

practical sense, increased by the parties designating a new

document as a "Transaction Document". This designation

was permitted by the charge as the definition of "Transaction

Document" included a category of documents as agreed between

relevant parties.

At first instance, the Queensland Supreme Court held that this

was a "variation" of the charge which required

notification to ASIC under Chapter 2K of the Corporations Act. A

failure to notify within the prescribed period resulted in the

charge being void to the extent that it secured the increased

liability. On appeal, this decision was overturned. The Queensland

Court of Appeal unanimously held that, although the liabilities

secured had been increased, the charge had simply continued to

operate in accordance with its terms and had not been varied.

It is not yet known if an appeal will be lodged against this

decision. Any application for special leave to appeal to the High

Court must be filed by Friday, 16 October 2009.

Facts

In May 2007 Octaviar Ltd (Octaviar) granted a guarantee (Young

Guarantee) in favour of Fortress Credit Corporation (Australia) II

Pty Ltd (Fortress) of the obligations of Young Village Estates Pty

Ltd under a loan agreement with Fortress dated 25 May 2007. This

guarantee was unsecured.

In June 2007 Octaviar gave a second guarantee in favour of

Fortress of the obligations of Octaviar Castle Pty Ltd (Castle)

under a loan agreement with Fortress dated 1 June 2007 (Castle Loan

Agreement). Octaviar also gave a charge over its assets in favour

of Fortress in relation to its obligations under this guarantee

(Charge). The definition of "Secured Money" in the Charge

was essentially all money owing under any defined "Transaction

Document". Transaction Document, in turn, had the meaning

given in the Castle Loan Agreement. In the Castle Loan Agreement

paragraph (c) of the definition of "Transaction Document"

stated that "Transaction Document" included:

"each other document which the

Lender and the Borrower or a Security Provider agree in writing is

a Transaction Document for the purposes of this

Agreement;".

In January 2008 Fortress and Octaviar, which was a

"Security Provider" for the purposes of the Castle Loan

Agreement, agreed that the Young Guarantee...