The Facts

Parties enter into written contract for rental and supply of turbines

In this case, a power company had been retained by a government body in Western Australia to design, construct, test and commission a temporary power station.

In March 2013, the power company entered into a written contract with a conglomerate to lease four mobile gas turbine generators to the power company for a fixed term. At the end of the lease the turbines were to be returned to the conglomerate.

The Personal Property Securities Register

By way of background, in 2012 the Commonwealth government introduced a new national online register for security interests, called the Personal Property Securities Register.

The register operates as a risk management tool for Australian consumers and businesses, so they can verify whether any security interests have been recorded against personal property, people or organisations that they are dealing with.

Vice versa, consumers and businesses can register priority claims against personal property they've supplied to others, such as equipment, stock or other goods and assets (excluding land, buildings, or other fixtures, which are not included in the scheme).

Importantly in this case, the existence or non-existence of a recorded security interest on the register can be relevant when assessing who has a better claim to ownership of particular property.

Power company enters voluntary administration, then placed in liquidation

In 2014, shortly after the turbines were installed, the power company appointed voluntary administrators and subsequently went into liquidation. At that time the conglomerate had not registered its interest in the turbines on the register.

It was up to the court to determine who had the better claim to ownership of the turbines – the power company or the conglomerate that had provided the turbines on lease.

case a - The case for the liquidator

case b - The case for the conglomerate
  • The turbines were designed to be removed, and the power company had a contractual obligation to return the turbines to the conglomerate at the end of the lease.
  • That means the turbines are "personal property" and not fixtures to the land, so the Personal Property Securities Act applies to the lease.
  • The conglomerate has been regularly engaged in the business of leasing goods through its global operations, which means that under the PPSA it had to register its security interest in the turbines in order to perfect its claim of ownership.
  • The conglomerate did not register a security interest before the power company went into liquidation and so the court should find that ownership of the turbines transferred to the power company immediately before the appointment of administrators, as prescribed by the PPSA.
  • These are our turbines. It was never part of the bargain that ownership of these expensive items would transfer to the power company under the lease. That would be a most unfair result.
  • Installation of the turbines required the turbines to be bolted to concrete foundation slabs and held in place with heavy steel cables fastened to concrete blocks. Properly characterised, the turbines are "fixtures" not "personal property" so the provisions of the PPSA do not apply.
  • The PPSA also should not apply because we do not meet the definition of being "regularly engaged in the business of leasing goods" in Australia. While we may have been in the past, our temporary power generation rental business was sold before the power company took possession of the turbines.
  • The court should find that the strict provisions of the PPSA are not to be applied in this case and that our interest in the turbines should take priority over those of the power company.

So, which case won?
Cast your judgment below to find out

Vote case A – the case for the liquidator
 Vote case B – the case for the conglomerate

Bill Akhurst
Business disputes and litigation
Stacks Law Firm

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.