24/07/2013

The first major case on the PPSA has some important lessons for business, particularly those that deal with caterpillars.

Our readers may recall that, in 2012, we wrote a number of articles explaining parts of the Personal Property Securities Act 2009 (Commonwealth) ("PPSA") which became law early in 2012.

The first major decision on the PPSA has now been handed down by the Supreme Court of NSW in Albarran and Pleash as Receivers and Managers of Maiden Civil (P & E) Pty Ltd ("Maiden") v Queensland Excavation Services Pty Ltd ("QES"). There are some important lessons in the case for businesses, particularly those which lease or hire equipment. Certainly, such businesses ignore the PPSA at their peril!

The case concerned three significant items of Caterpillar earthmoving equipment ("Caterpillars"). Maiden had granted a finance company, Fast Financial Solutions Pty Ltd ("Fast"), a security interest in the Caterpillar equipment pursuant to a Loan Agreement and a General Security Deed (formerly known as a charge). Following a number of defaults by Maiden under the General Security Deed ("GSD"), in July 2012, Fast took enforcement actions against the Caterpillars.

The court held as follows:
•    In relation to one of the Caterpillars, Maiden took possession of it from QES (the original buyer under finance), paid the finance charges payable by QES and provided QES with the funds to pay out the finance which QES then duly discharged. In these circumstances, the court held that Maiden was the true owner of that Caterpillar.
•    In relation to the remaining two Caterpillars, the court held that QES was the true owner of both machines.
•    However, because Fast had perfected its security interests in both machines by registering them on the register of the PPSA, those interests were superior to the security interests of QES, because QES had never registered them as it should have done under the PPSA. Section 55(3) of the PPSA provides as follows: "a perfected security interest [ie by Maiden] in collateral [ie the two items of Caterpillar machinery] has priority over an unperfected security interest [ie that of QES because it never registered its interest under the PPSA or earlier legislation] in the same collateral [ie the two items of Caterpillar machinery]."    

The main point to remember in this case is that QES had purchased two of the Caterpillar machines under finance and the court held that it was the true owner. However, under the General Security Deed (ie the charge) registered under the PPSA, Maiden had priority over that equipment!

Accordingly, in these circumstances, the court held that all three items of Caterpillar equipment had to be delivered up to Maiden or, rather, its receivers and managers.   

The PPSA is complex legislation and its application can lead to unexpected results. If you are hiring or leasing goods as owner, lessor or lessee or selling goods (or indeed buying them) under a retention of title clause or simply giving security over personal property of your company or business, you should ensure you are protected to the maximum extent possible under the PPSA.

If you need help with any aspect of the PPSA, please contact Townsends Business & Corporate Lawyers on (02) 8296 6222.