Two recent court decisions have highlighted the perils associated with failing to register interests on the Personal Property Security Register (PPSR), or failing to correctly register interests. In both cases, the mistakes proved very expensive, with property worth millions vesting in administrators and receivers and managers.
In the matter of OneSteel Manufacturing Pty Ltd (administrators appointed) [2017] NSWSC 21
In one recent case, the financier Alleasing Pty Ltd leased plant and equipment (for $4 million per annum) to its customer OneSteel Manufacturing Pty Ltd. Alleasing registered its interests on the PPSR but incorrectly used OneSteel's ABN instead of its ACN when registering. Administrators were appointed to OneSteel and successfully argued that the registrations were defective. Property in the plant and equipment vested in the administrators and Alleasing lost its interest in the leased property. You can read more about the case here.
(Note: The outcome would have been different if OneSteel was a corporate trustee. Where a customer is the trustee of a trust, the ABN of the trust and not the ACN of the customer should be used when registering).
Forge Group Power Pty Limited v General Electric International Inc [2016] NSWSC 52
In another recent case, General Electric International Inc leased turbines (valued at US$44 million) to Forge Group Power Pty Limited. General Electric lost its interest in the turbines because of its failure to register that interest on the PPSR. The lessor was unsuccessful in arguing that the turbines were 'fixtures' within the meaning of section 10 of the Personal Property Securities Act 2009 (Cth) (PPSA) and therefore outside the scope of the PSSA. You can read more about this case here.
Does your business lease, hire or loan plant or equipment?
If your business dry hires or wet hires plant and equipment to customers or to your related entities for an indefinite term or for a term of more than one year, you need to take steps to document that hire and to correctly register its interests on the PPSR. Failing to register can lead to severe financial consequences such as losing ownership of personal property worth millions of dollars.
Cooper Grace Ward is a leading Australian law firm based in Brisbane.
This publication is for information only and is not legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as legal advice. If there are any issues you would like us to advise you on arising from this publication, please contact Cooper Grace Ward Lawyers.
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