Background
Moreton Resources Pty Ltd was pursuing two Administrative Review Tribunal proceedings concerning substantial research-and-development tax refunds. The refund claims were only expectancies, rather than property, unless and until Moreton Resources obtained an enforceable right to payment.
In 2017, Moreton Resources granted a security interest over all its present and after-acquired property under a secured debenture deed. It later agreed in 2021 to assign its interests in specified proceedings and refunds to MRL Moreton Resources Pty Ltd, a company controlled by Moreton Resources director Alexander Elks. Melgear Pty Ltd, the successor security trustee, appointed Darryl Edward Kirk as receiver in 2022. Moreton Resources subsequently entered a deed of company arrangement that released claims against it while preserving secured creditors’ ability to exercise rights under their security documents.
The primary judge held that the assignment prevented any eventual refund from becoming Moreton Resources’ property and therefore from falling within Melgear’s security. Because that conclusion disposed of the dispute, the primary judge did not determine the effect of the deed of company arrangement. The receiver appealed.
The Court’s Holding
The Court of Appeal unanimously allowed the appeal. It held that, although the refund claims were mere expectancies, an enforceable right to payment and any refund actually paid would be personal property acquired after the security agreement. Under the Personal Property Securities Act 2009 (Cth), Melgear’s security interest would attach automatically when Moreton Resources acquired rights in that property.
The later assignment did not prevent the earlier statutory security interest from attaching. Both Melgear’s security and the assignee’s equitable claim would arise when the refund right came into existence, but allowing the subsequent assignment to remove the property from Melgear’s collateral would undermine the PPSA’s statutory policy that security interests, including interests in after-acquired property, operate according to their terms.
The deed of company arrangement released Moreton Resources from the secured debt of $1,283,382.78 plus interest, but s 444D(2) of the Corporations Act 2001 (Cth) preserved Melgear’s ability to realise or otherwise deal with its security for that released amount. That security continued to extend to after-acquired property, including rights to the refunds and the refunds when paid. The Court declared that Kirk could conduct the identified Tribunal proceedings and related proceedings concerning Moreton Resources’ 2014 taxation liability, and ordered the first, second and fourth respondents to pay his costs below and on appeal.
Key Takeaways
- A mere expectancy can become after-acquired property to which an existing PPSA security interest attaches once an enforceable right or payment arises.
- A later equitable assignment of future property cannot defeat the statutory operation of an earlier security interest over after-acquired property by preventing the collateral from vesting beneficially in the grantor.
- A deed of company arrangement may release the debtor’s personal liability while s 444D(2) preserves a non-assenting secured creditor’s property rights, including rights against after-acquired property, to recover the released secured amount.
Why It Matters
The decision strengthens the effectiveness of all-assets security interests under the PPSA. A debtor cannot ordinarily place future property beyond an earlier secured creditor merely by making a later outright assignment that purports to capture the property at the instant it comes into existence.
It also clarifies the distinction between releasing a secured debt through a deed of company arrangement and preserving the proprietary rights securing that debt. In declining to follow the contrary approach in Re Bluenergy Group Ltd, the Court confirmed that s 444D(2) can preserve recourse to after-acquired property even after the company emerges from the deed arrangement.