The recent New South Wales Supreme Court judgment of In the matter of OneSteel Manufacturing Pty Limited (administrators appointed) [2017] NSWSC 21 highlights the critical importance of getting your Personal Property Securities Register (PPSR) registrations right if you are the lessor of plant and equipment or other goods.
In that case, Alleasing Pty Limited (Alleasing) had leased a crusher and spare parts to OneSteel Manufacturing Pty Limited (OneSteel). The crusher lease and spare parts lease were PPS leases within the meaning of section 13 of the Personal Property Securities Act 2009 (PPSA) and Alleasing had registered a financing statement in respect of the crusher, and later the spare parts. However, the registrations were against OneSteel’s 11 digit Australian Business Number (ABN) and not its 9 digit Australian Company Number (ACN) as prescribed by the Personal Property Securities Regulations 2010 (Cth) (Regulations).
For a financing statement to be registered in accordance with section 153 of the PPSA and Schedule 1 of the Regulations it must contain the correct details of the grantor. These include:
- the ACN of a company grantor;
- an individual grantor’s name and date of birth; and
- the ABN of a partnership or a trust grantor.
When OneSteel subsequently appointed administrators, the administrators informed Alleasing that the registrations were ineffective. As a result of section 267 of the PPSA which deals with the vesting of unperfected security interests in the grantor upon the appointment of an administrator to the grantor, Alleasing’s interest in the crusher and spare parts had vested in OneSteel. Alleasing responded by amending the original registrations to include OneSteel’s ACN and by registering new registrations using OneSteel’s ACN.
In deciding this matter, the Court was required to consider:
- whether the original registrations were valid because OneSteel’s ABN included its ACN;
- if the original registrations were ineffective, whether Alleasing should be entitled to an extension of time to allow the registrations registered after OneSteel’s administrators were appointed to be declared effective; and
- whether the vesting of the crusher was unconstitutional as an acquisition of property on unjust terms.
The court found:
- the original registrations were ineffective under section 165 of the PPSA as they did not include OneSteel’s ACN as required and notwithstanding OneSteel’s ACN was contained in its ABN, a search of the PPSR for OneSteel’s ACN would not have revealed the original registrations;
- the later registrations were also ineffective because when OneSteel’s administrators were appointed Alleasing’s security interest was unperfected meaning that under section 267 of the PPSA the crusher and the spare parts had already vested in OneSteel; and
- the vesting provisions of the PPSA do not result in ‘an acquisition of property’ so Alleasing’s constitutional argument also failed.
The Court also considered whether the defect in the first registrations were seriously misleading so as to render them ineffective under section 164(1)(a) of the PPSA. The Court concluded that they were because the omission of the ACN meant that searchers would not discover these registrations.
Alleasing had funded the design, supply, installation, assembly, construction and commissioning of the crusher at a cost of over $23 million and had also funded the acquisition of the parts which were ultimately declared to have vested in OneSteel. This case is a cautionary tale for lessors and other secured parties of the serious consequences that can flow from a simple mistake made when registering a security interest and from not amending it in a timely manner.
For more information or discussion, please contact HopgoodGanim Lawyers’ Resources, Energy and Projects team.