Is your property as protected as you think it is?
On the 27th of June 2013 the New South Wales Supreme Court handed down the first significant decision concerning priorities between security interests under the Personal Property Securities Act 2009 (PPSA)
The main theme of the case is summarised below.
- Queensland Excavation Services Pty Ltd ( “QES” ) owned 3 civil construction vehicles (Caterpillars)
- These were leased to Maiden Civil (P&E) Pty Ltd ( “Maiden” ) and labelled with Maiden’s corporate branding
- There were no formal leases in place even though monthly invoices were rendered and duly paid.
- The caterpillars had been in possession of Maiden for over 12 months. The arrangement commenced prior to the introduction of the PPSA.
- QES never officially registered or “Perfected” their interest in the property on the PPSR instead relying on the transitional arrangement afforded under the PPSA.
- In May 2012 Maiden entered a finance agreement with Fast Financial Solutions Pty Ltd ( “Fast” )
- The caterpillars were included in the security schedule for the finance with Fast.
- Maiden defaulted on the QES lease payments for 2 of the pieces of equipment and QES repossessed them and on leased them to another company
- Maiden defaulted on the Fast finance and Fast appointed and administrator and the company was liquidated.
- QES argued that the caterpillars were owned by it and as the arrangement had commenced prior to the inception of the PPSA were also subject to a transitional security interest in favour of QES
- The Liquidator and Fast argued that, by virtue of the security interest registered in its favour when funding was provided, it was the possessor of the caterpillars.
- It was agreed that both entities had a secured interest in the caterpillars.
- Brereton J, found preference in favour of the Liquidator and Fast as the security interest had been properly perfected where the interest in favour of QES was not.
- QES was ordered to retrieve the caterpillars from the third parties currently leasing them and deliver them to the Liquidator.
As an owner of property, or a holder of securable interest under the PPSA, don’t assume that the transitional provisions will protect you. You must ensure that all secured interests are registered on the PPSR.
If you would like an assessment of your position in relation to this issue please contact your LBW Principal and we can work with you and an approved legal specialist to improve your PPSA compliance.