Gastevich (by her litigation representative Tombides) v Starwest Investments Pty Ltd (No 2) [2026] FCA 281

This Federal Court case is about a lender trying to preserve the benefit of a security interest after discovering that an earlier PPSR registration was likely defective. The lender had advanced $4.55 million to a company acting as trustee of a trading trust. A registration had been made in 2018, but it identified the company by ACN only and did not identify it as trustee of the White Lion Trust or include the trust ABN.

That detail mattered because the PPSA regime turns heavily on effective registration and perfection. If a security interest is not effectively perfected and a relevant insolvency event later occurs, the security can vest in the company. In practical terms, the secured creditor can lose the benefit of the security and rank with unsecured creditors instead.

The lender later made a corrected registration on 11 December 2025 and asked the court to fix that date as the relevant time for registration under s 588FM of the Corporations Act. The court granted relief, but because the company appeared to be in financial difficulty, the order was made with a protective condition allowing a later application to set it aside or vary it if an insolvency event occurred within six months.

The commercial background was a substantial private funding arrangement within a family and business structure. Sonja Gastevich lent Starwest Investments Pty Ltd, as trustee of the White Lion Trust, $4.55 million in 2018. The trust conducted the Hamptons City Beach business. Ms Gastevich had borrowed the funds from Resolve Nominees Pty Ltd, and Resolve Nominees had in turn borrowed from National Australia Bank. The deed of acknowledgment of debt dated 12 January 2018 reflected those funding arrangements and repayment terms.

Under the deed, the company granted Ms Gastevich a security interest in all present and after-acquired personal property of the company, whether held in its own right or as trustee. The deed also contemplated PPSR registration. So, on paper, this was intended to be a secured loan, not an unsecured advance.

An initial PPSR registration was made on 7 May 2018. The problem was not that nothing had been done. The problem was that the registration likely did not correctly identify the grantor for trust property purposes. It recorded the company by ACN, but did not identify the company as trustee of the White Lion Trust and did not include the trust ABN. The lender later argued that this omission made the registration ineffective or seriously misleading.

The issue only came to light years later. By then, Ms Gastevich was elderly and suffering from severe cognitive impairment. In October 2025, her daughter Mary Tombides was appointed her plenary administrator. Once Ms Tombides became aware of the potential registration error, steps were taken promptly. Proceedings were commenced on 20 November 2025, and a corrected PPSR registration was made on 11 December 2025.

The company’s financial position gave the application real urgency. The evidence showed significant ATO debt, an unpaid statutory demand, and a recent lease default that had only been remedied after further funding from Resolve Nominees. That meant the risk of a future insolvency event was not theoretical. If one occurred, the timing and effectiveness of perfection would become critical.

The application was made under s 588FM of the Corporations Act for the purpose of s 588FL(2)(b)(iv). The practical aim was to have the court fix 11 December 2025 as the relevant time for registration. Without that order, if the company later entered one of the insolvency events covered by s 588FL, the security interest could vest in the company for the benefit of creditors generally.

The court set out the statutory test. It may make the order if satisfied that the failure to register earlier was accidental, due to inadvertence, or due to some other sufficient cause, or if the failure is not of such a nature as to prejudice creditors or shareholders, or if on other grounds it is just and equitable to grant relief. Even where one of those grounds is established, the court still retains a discretion and may impose terms and conditions that are just and expedient.

The judge described the discretion as broad and to be construed liberally for the purpose for which the power is intended. But that did not mean relief was automatic. The court still had to examine the actual circumstances, including the reason for the registration problem, the arguable validity of the security interest, the possibility of prejudice to creditors, and the company’s financial position.

On the registration defect itself, the court did not finally resolve every PPSA issue. It was enough that the lender’s position was reasonably arguable. The court accepted it was reasonably arguable that the deed created a registrable security interest over the company’s personal property held in its own right and as trustee. It also accepted it was reasonably arguable that the 2018 registration was defective or seriously misleading because it omitted the trust-related grantor details and ABN.

The reasons also noted conflicting authority on one pathway by which a defect might make a registration ineffective. Rather than deciding that broader conflict conclusively, the judge accepted that the lender’s argument was reasonably arguable and proceeded on that basis. For a business reader, the important point is that the court treated the omission as a real registration risk, not a technicality that could safely be ignored.

The court found that the failure to register effectively earlier was due to inadvertence. The evidence showed that lawyers at Chan Galic had been instructed in relation to the deed and the steps needed to perfect the security interest. Although the specific lawyer with carriage of the matter did not give evidence, the court inferred that the instructions extended expressly or implicitly to taking the necessary steps to perfect the security. The judge then inferred that the responsible lawyer had overlooked or misunderstood the requirement to include the ABN of the trustee of the White Lion Trust as part of the grantor details.

That was enough. The court said inadvertence in this context includes human error, oversight, failure to understand the registration requirement, and mistake or omission by a lawyer. The judge also noted that a bona fide attempt to register a security interest, even if deficient, can satisfy the requirement of inadvertence or some other sufficient cause. This was important because the lender had not ignored the PPSR altogether. A registration had been made in 2018, but it was likely flawed.

The court also accepted that once the problem was discovered in October 2025, corrective steps were taken promptly. That supported the exercise of discretion in the lender’s favour. The plaintiff’s age and severe cognitive impairment explained why there was no direct evidence from her about the state of the registration over the intervening years and supported the inference that she had no reason to doubt the registration had been done correctly in 2018.

Creditor prejudice was more difficult. The court explained that the relevant prejudice is not simply that unsecured creditors would receive less if the secured creditor keeps its security. That kind of consequence is inherent in many successful s 588FM applications. The more important question is whether the delay in effective registration may have affected the position of creditors, for example because they dealt with the company on the footing that the relevant assets were unencumbered.

Here, the court could not exclude that possibility. The ATO had been given notice and did not appear, but the court noted that the ATO was in substance an involuntary unsecured creditor and its absence did not prove there was no relevant prejudice. The company traded from leased premises, so the court inferred there would likely be voluntary trade and other unsecured creditors. A search of the trustee’s ABN would not have revealed the plaintiff’s security interest. That meant the court could not positively conclude that no unsecured creditor had been prejudiced by the delay.

The company’s financial position sharpened that concern. The evidence showed significant ATO debt, an unpaid statutory demand, and recent lease arrears. The judge said the insolvency risk was not negligible or even low. So while the possibility of a prejudiced creditor emerging was described as somewhat unlikely on the information available, it remained a real discretionary factor against unqualified relief.

The court granted the application and fixed 11 December 2025 as the relevant time for registration of the corrected PPSR registration. That meant the lender obtained the relief needed to protect the security interest from the vesting consequences that could otherwise arise under s 588FL if a relevant insolvency event later occurred.

But the relief was not unconditional. Because the court was not satisfied that there was no risk of prejudice to unsecured creditors, and because the company’s insolvency risk was material, the judge imposed what the reasons described by reference to authority as a Guardian Securities condition. The order gave liberty to any person with sufficient interest to apply to set aside or vary the relief if any of the insolvency events described in s 588FL(1)(a) occurred within six months after 11 December 2025.

This is a significant practical feature of the case. The court accepted the lender’s explanation and granted relief, but balanced that outcome against the interests of creditors by preserving a mechanism for later challenge if the insolvency risk crystallised soon after the corrected registration. There was also no order as to costs.

For business owners, directors and in-house teams, the case is a reminder that secured lending is a two-part exercise. First, you need a valid security agreement. Second, you need an effective PPSR registration that correctly identifies the grantor and the collateral. A problem in either step can become critical if the company later faces insolvency.

The risk is especially acute where a company acts as trustee. Trust structures are common in Australian business, but they create registration traps. If the company holds assets as trustee and the registration does not reflect the trustee capacity and required trust details, the registration may not do the job you expect. This case shows that a registration can be made in good faith and still be vulnerable.

The decision also shows how the court weighs a s 588FM application in practice. A lender is helped by evidence of a genuine attempt to register, an innocent oversight rather than disregard of obligations, and prompt corrective action once the issue is discovered. But those factors do not end the inquiry. If the company is under financial pressure, the court will look closely at whether unsecured creditors may have been affected by the delay.

Businesses should not treat s 588FM as a routine fallback. It is a discretionary remedial power. Relief may be granted, refused, or granted on conditions. The safer course is to review registrations early, especially where the security was registered years ago, the borrower is a trustee company, or the business is showing signs of distress.

The key dates in the case help explain the court’s reasoning. The loan deed was executed on 12 January 2018. The first PPSR registration was made on 7 May 2018. The potential defect was identified after Mary Tombides became plenary administrator in October 2025. Proceedings were commenced on 20 November 2025. A corrected PPSR registration was made on 11 December 2025. The hearing took place on 13 March 2026, and judgment and orders were delivered on 17 March 2026.

The six-month protective period in the orders ran from 11 December 2025. If a relevant insolvency event occurred within that period, a person with sufficient interest could apply to set aside or vary the order fixing the registration time.