Businesses and individuals must identify and register their security interests on the PPS Register to avoid losing assets to customers' secured creditors.
The case of Re Maiden Civil (P&E) Pty Ltd [2013] NSWSC 852 (27 June 2013) highlights some important points:
- Businesses and individuals should seek advice on the transitional rules in the Personal Property Securities Act (PPSA).
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For example, if you had an interest that could have been registered on either the Motor Vehicles and Boats Securities Act 1986 (Qld) or the Bills of Sale and other Instruments Act 1955 (Qld) and you did not register before 30 January 2012, you might be unable to rely on the transitional provisions and risk losing your assets to a secured creditor.
- It is essential to have a written agreement and all relevant documentation to support your security interests.
In the case, Queensland Excavation Services (QES) leased three excavators to Maiden Civil (Maiden). The parties did not have a written lease agreement.
Maiden defaulted under the terms of one of its loans and the financier appointed receivers. The receivers claimed that the financier was entitled to the three excavators before QES, even though QES owned the excavators.
The Court held that, without a written agreement, QES could not enforce its alleged security interest against a third party. Also, the Court confirmed that as the excavators could have been registered on transitional registers (such as the Northern Territory Register of Interests in Motor Vehicles and Other Goods Register, analogous to the QLD REVS and QLD Bill of Sale Register), the transitional provisions did not apply. The excavators were therefore available to be repossessed.
QES might have prevented this outcome if it had identified and perfected its security interests in accordance with the rules in the PPSA.
If you are relying on the transitional protection rules under the PPSA, think twice because:
- the rules do not apply if you could have registered your interest on a transitional register before 30 January 2012;
- you cannot enforce a security interest against a third party (such as a creditor) without a written agreement; and
- the transitional protections end on 30 January 2014.
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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.
