Appeal of Octaviar decision to be heard in the High Court

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) Corporations Act 2001.  The Trial Judge found that the failure to register a variation within the required period rendered the charge void to the extent of the relevant variation.

The Queensland Court of Appeal's decision was consistent with market practice and the accepted view of banking and finance lawyers.

The HCA is likely to hear the appeal later this year. Until clarity is provided by the HCA, we recommend lenders continue to use those methods developed after the decision at first instance, to overcome or mitigate the effect of the Octaviar decision.

For more information, please contact:

Stephen Newman, Partner

Phone (direct):  +61 3 9608 2219

Email:                 s.newman@cornwalls.com.au

or

Carolyn Falcone, Senior Associate

Phone (direct):  +61 3 9608 2252

Email:                 c.falcone@cornwalls.com.au