Registration of Security Interests and the Transitional Provisions under the Personal Property Securities Act 2009 (Cth)
In June 2013, the NSW Supreme Court in Maiden Civil (P&E) Pty Ltd; Richard Albarran and Blair Alexander Pleash as receivers and managers of Maiden Civil (P&E) Pty Ltd & Ors v Queensland Excavation Services Pty Ltd & Ors  NSWSC 852 (the Caterpillar case) provided guidance on the application of the Personal Property Securities Act 2009 (Cth) (PPSA). It also set out the importance of priorities of, and the registration of, security interests in personal property 1 on the Personal Property Securities Register (PPSR). The facts of the Caterpillar case are relevant to all Owners who lease or hire out their personal property, particularly those in the construction industry.
To protect your interest in your personal property:
- all security interests must be registered on the PPSR before relinquishing possession of the personal property
- all Transitional Security Interests must be registered on the PPSR before 30 January 2014
- be aware that a lien in unfixed plant and material is not a "security interest" and is not registrable on the PPSR, but the PPSA does contain priority rules for Priority Interests.
The Caterpillar case is a timely reminder for all Owners of personal property to register their security interest in their personal property or risk losing the personal property to creditors. It is also a reminder that the transitional period (being the period from 30 January 2012 to 30 January 2014), which temporarily protects unregistered security interests in personal property, will not apply to security interests which were registrable on a transitional register, but were not registered. Even if the transitional provisions do apply, Owners must register those transitional security interests on the PPSR prior to the end of the transitional period in order to perfect and protect those security interests. This period is rapidly nearing its end.
Facts of the Case
Queensland Excavation Services Pty (QES) purchased three Caterpillar excavation machines (the Caterpillars) and provided the Caterpillars to Maiden Civil (P&E) Pty Ltd (Maiden), pursuant to an oral lease. Maiden used the Caterpillars in the Northern Territory for civil construction matters. As Maiden had possession of the Caterpillars, it included the Caterpillars as an asset when applying for a loan in March 2012. Fast Financial Solutions Pty Ltd (Fast Financial) granted Maiden a loan and took an interest over all of Maiden's assets under the Security Deed. The relationship between the parties in this case is outlined in this image.
Upon the execution of the Security Deed, Fast Financial registered its interest in the Caterpillars on the PPSR. QES did not register their interest in the Caterpillars on the PPSR or under the Northern Territory "transitional" register. Upon Maiden's insolvency and the termination of the lease, a dispute arose as to the question of priority of interests between QES, the Owner of the Caterpillars (who did not have a registered security interest in the Caterpillars on the PPSR) and Fast Financial, the creditor of the leasee (Maiden) of the Caterpillars (who had registered its security interest in the Caterpillars on the PPSR).
The PPSA created a unified system for creating priorities of interests over security interests in personal property upon the registration of that interest in personal property on the PPSR. In the Caterpillar case, Fast Financial had "perfected" its security interest in the Caterpillars by registering its security interest on the PPSR. Fast Financials' "perfected" interest was held to take priority over QES' unregistered and "unperfected" interest. As a result, Fast Financial was able to take possession of the Caterpillars, despite QES being the Owner of the Caterpillars and QES terminating its lease with Maiden. The dispute was one of priority rather than ownership. This decision is consistent with the priorities set out in the PPSA. 2
The PPSA also contains transitional provisions 3 that provide for the temporary "perfection" of security interests for the period between 30 January 2012 to 30 January 2014. This only applies if the security interest was created prior to 30 January 2012 (Transitional Security Interest). Any Transitional Security Interest takes priority over any subsequently "perfected" interests. 4 An exception to a Transitional Security Interest is if the security interest was registrable under a "transitional" register 5, but was not registered. 6 In the Caterpillar case, although QES created its interest in the Caterpillars prior to 30 January 2012, QES' interest was registrable under the Northern Territory "transitional" register and therefore was not "temporarily perfected" under the transitional provisions of the PPSA 7.
Owners of personal property are reminded that the temporary protection for Transitional Security Interests expires on 30 January 2014, and on that date any "perfected" interest under the PPSR will take priority over all unregistered interests. 8
The PPSR and Security of Payment Legislation
Not all interests in personal property are considered a "security interest" under the PPSA. For example, the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOP Act) 9 entitles a claimant to "...exercise a lien in respect of any unpaid amount over any unfixed plant and materials supplied by the claimant for use in connection with carrying out of construction work for the respondent." The claimant's lien under the SOP Act is not considered a "security interest" under the PPSA 10 and is not registrable on the PPSR. Despite this, the PPSA contains an exception for statutory interests arising under law (Priority Interest) 11<, which includes a lien created under the SOP Act. A Priority Interest takes priority over a security interest if, amongst other things, the Priority Interest arises in the ordinary course of business and the person who holds the declared statutory interest provided the goods. Owners and contractors should be aware of these provisions in the SOP Act and the PPSA when dealing with unfixed plant and materials in NSW. Note that there are similar SOP Act provisions in other States (e.g., Vic 12, SA 13, Tas 14, ACT 15).
1Personal property includes all property other
than land and interests in land, which includes equipment, vehicles
2Section 55(3) of the PPSA.
3Part 9.4 Division 2 of the PPSA.
4Section 320 of the PPSA.
5Northern Territory Register of Interests in Motor Vehicles and Other Goods.
6Section 322(3) of the PPSA and reg 9.3 of the Personal Property Securities Regulations (Cth) 2010.
7Part 9.4 Division 2 of the PPSA.
8Section 322(f) of the PPSA.
9Section 11(3) of the SOP Act.
10Section 8(b) of the PPSA.
11Section 73(a) of the PPSA.
12Section 12A of the Building and Construction Industry Security of Payment Act 2002 (Vic).
13Section 11 (3) of the Building and Construction Industry Security of Payment Act 2009 (SA).
14Section 14 of the Building and Construction Industry Security of Payment Act 2009 (Tas).
15Section 13(3) of the Building and Construction Industry (Security of Payment Act) 2009 (ACT).
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.