Goldus Pty Ltd (Subject to a Deed of Company Arrangement) v Cummins (No 4) [2021] FCA 1095

By Alicia Hill, Principal and Matthew Deetlefs, Law Clerk

The case of Goldus Pty Ltd (Subject to a Deed of Company Arrangement) v Cummins (No 4) [2021] FCA 1095 involved disputes regarding numerous companies interests in property and whether a security interest had been created. This article reviews the Court’s approach when determining whether a security interest was created.

Background:

Australian Mining Pty Ltd (Australian Mining) and Goldus Pty Ltd (Goldus) had entered into a mining joint venture over land which was subject to certain mining tenements held or owned by Goldus (tenements).

Australian Mining and Goldus also entered into a Deed of Cross Security as required by the terms of the joint venture.

Australian Mining later became a joint obligator with Australian Tailing Group Pty Ltd (ATG) under the terms of a General Security Deed provided as security for the facility agreements between RnD Funding Pty Limited (RnD Funding) and ATG.

RnD Funding was seeking to recover amounts from ATG and claimed to have appointed a controller and receivers over assets of Australian Mining. RnD Funding claimed control of the assets of Australian Mining secured by the General Security Deed including Australian Mining’s security interest over the tenements.

Goldus sought under section 418A of the Corporations Act 2001 (Cth) that the Court declare that the tenements were not subject to a security interest in favour of Australian Mining and that Australian Mining had not taken valid control or possession of the tenements.

Section 418A allows parties to apply to the Court for such a declaration.

RnD Funding sought that the Court declare the opposite and to make orders accordingly.

There were also other disputes as to:

• whether Australian Mining was now the sole venturer as Goldus may have relinquished its interest under the terms of a deed of company arrangement; and
• that shares in Goldus were held on constructive trust or were subject to a security interest in favour of RnD Funding.

Court Finding

The Court held that the Deed of Cross Security did not create a security interest over the mining tenements. In interpreting the relevant documents, the Court found that:

• The scope and purpose of the joint venture agreement between Australian Mining and Goldus was expressed as accessing the tenements rather than owning or exploiting those tenements;
• No provision in the joint venture agreement between Australian Mining and Goldus requirement any contribution of, creation of an interest in, or transfer of an interest in, the tenements to the joint venture;
• The joint venture agreement was a restatement of the terms of a joint venture initially entered between Goldus and another entity in 2007 but no interest in the tenements was included in the current joint venture which would be expected if the terms of a previous joint venture were being restated;
• The tenements had not become joint venture assets and Goldus retained ownership of the tenements, only contractual rights to the tenements were conferred by the joint venture agreement; and
• Although it was still possible that a security interest was conferred by the Deed of Cross Security even if the tenements were not joint venture assets, the definitions of ‘Secured Property’ and ‘Security Interest’ did not include the tenements, the definitions of PPS Property and Non-PPS Property referred only to join venture assets, and the relevant clauses did not suggest that a security interest over the tenements was being created.

RnD Funding therefore could not claim control of the tenements as no security interest had been created.

Take-aways:

Security interests must be created and registered correctly to ensure an interest is created. If there are defects, the interest may not be secured, or you may have a lower priority when creditors are being paid if the relevant company becomes insolvent.

The Court will interpret commercial instruments in a way that a reasonable businessperson would understand those documents. If a security interest is to be conferred by a document, it must therefore be clear that such an interest is being created. Precise language must be used.

If you have any queries about any of the matters raised by this case, then please contact Alicia Hill on (03) 8540 0292 or alicia.hill@mst.com.au