Australia: Federal Court analyses the operation of the Corps Act and the PPSA in relation to the vesting of security interests in a company under external administration

Last Updated: 27 November 2014
Article by Adam Israel

On 24 September 2014, in Pozzebon (Trustee) v Australian Gaming and Entertainment Ltd (in Liq) [2014] FCA 1034 the Federal Court dismissed an application by a creditor of a company in liquidation seeking a declaration, amongst other things, that a security interest granted to the creditor had not vested in the company.

At issue was the interpretation of section 21 of the Personal Property Securities Act 2009 (PPSA) and section 588FL Corporations Act 2001 (Corps Act). Section 21 sets out how a security interest may be 'perfected' for the purposes of the PPSA. Section 588FL sets out the circumstances in which a security interest will vest in a company under external administration.

The applicant creditor argued that the manner in which its security interest was perfected meant that section 588FL did not apply and the security interest did not vest in the company upon it entering external administration.

The Federal Court rejected the applicant creditor's arguments and construed the relevant provisions of the PPSA and Corps Act so as to hold that section 588FL did apply to the security interest and by its operation the security interest was not valid or enforceable against the respondent company.

Facts of the case

On or about 24 December 2013, the applicant (Pozzebon) advanced the sum of $250,000 to the respondent company (AGEL). A loan agreement and security agreement were executed by the parties in respect of the advance.

On 9 May 2014, Pozzebon registered its security interest granted by the security agreement on the Personal Property Security Register (PPSR).

On 26 May 2014, some five months after the security interest was created, AGEL was placed into voluntary administration. AGEL had one relevant asset, being funds in the sum of $860,000 held in a bank account.

Pozzebon lodged a formal proof of debt with the administrators of AGEL claiming the sum of $348,713.37 in relation to the advance.

The administrators of AGEL notified Pozzebon that its security interest was unenforceable against AGEL and had vested in the AGEL pursuant to the operation of the Corps Act and PPSA.

On 1 July 2014, AGEL was placed into liquidation.

Relevant Legislation

Section 21 of the PPSA stipulates the requirements for perfection as follows:

  1. " A security interest in particular collateral is perfected if:
    1. the security interest is temporarily perfected, or otherwise perfected, by force of this Act; or
    2. all of the following apply:
      1. the security interest is attached to the collateral;
      2. the security interest is enforceable against a third party;
      3. subsection (2) applies.
  1. This subsection applies if:
    1. for any collateral, a registration is effective with respect to the collateral; or
    2. for any collateral, the secured party has possession of the collateral (other than possession as a result of seizure or repossession); or
    3. for the following kinds of collateral, the secured party has control of the collateral:
      1. (i) ... "

Upon the advent of the PPSA, section 588FL of the Corps Act essentially replaced section 266 which had dealt with the circumstances in which a charge over a company would be void against a liquidator or administrator.

Section 588FL stipulates that a security interest in collateral will vest in a company in external administration in certain circumstances. Those circumstances are, in summary, as follows:

  1. the security interest is enforceable against third parties; and
  2. the security interest is perfected by registration, and by no other means; and
  3. the registration time for the collateral occurs after the latest of the following times:
    1. (i) 6 months before the company entered external administration;
    2. (ii) 20 business days after the security agreement that gave rise to the security interest came into force;
    3. (iii) a later time ordered by the Court under section 588FM.

As the registration of Pozzebon's security interest occurred both after:

  • the date 6 months before AGEL entered external administration; as well as
  • 20 business days after the date the security interest was created,

unless Pozzebon was able to establish that either of paragraphs (a) or (b) above were not satisfied, the security interest would vest in AGEL under the operation of section 588FL.

In this case, Pozzebon sought to establish that paragraph (b) above, being "the security interest is perfected by registration, and by no other means", was not satisfied.


At trial, AGEL accepted that the security interest satisfied the 'perfection' requirements of section 21 of the PPSA as it:

  • attached to AGEL's interest in the bank account;
  • was enforceable; and
  • was registered on the PPSR.

AGEL argued that as the security interest:

  • was perfected through registration; and
  • was not perfected through the other methods by which a security interest may be perfected under section 21 (being through possession or control),

the requirement of section 588FL that a security interest be "perfected by registration, and no other means" was satisfied.

Pozzebon submitted that its security interest was perfected by three distinguishable elements or "means", being 'attachment' and 'enforceability' and 'registration', which meant that the requirement of perfection by registration and "by no other means" was not satisfied as 'registration' was not the only means by which its security interest was perfected. As a consequence, in Pozzebon's submission, section 588FL did not apply to its security interest.

Findings of the Court

The Court rejected Pozzebon's contentions in relation to the interpretation of section 21 of the PPSA and section 588FL of the Corps Act. The Court held that the elements of 'attachment' and 'enforceability' are necessary pre-conditions for a security interest to be perfected, which, when combined with one of the alternatives set out in subsection 21(2) of the PPSA, being either 'registration', 'possession' or 'control', results in the perfection of a security interest.

It was held that the reference in subsection 588FL(2)(a)(ii) to a security interest being perfected "by registration, and by no other means" is distinguishing 'registration' as a means of perfection from 'possession' or 'control' and is not distinguishing 'registration' from 'attachment' and/or 'enforceability'. The elements of 'attachment' and 'enforceability' were not held to be "other means" as contemplated by 588FL(2)(a)(ii).

Accordingly, the only "means" by which Pozzebon's security interest was perfected was by registration. As a consequence, section 588FL applied to the security interest and by its operation the security interest vested in AGEL.


The purpose of section 588FL is to protect against security interests being granted fraudulently with the knowledge of an imminent external administration.

Pozzebon's claim appears to be an attempt to avoid the ramifications of its failure to register its security interest within 20 business days of the security interest being created. Had Pozzebon registered the security interest within that 20 business day period, it would have retained the security interest even though that registration would have occurred within the six month period prior to AGEL entering external administration.

This case serves to reiterate the importance for parties who are granted a security interest in the property of a company to ensure that the security interest is registered on the PPSR within 20 business days of the security interest being granted in order to avoid it being subject to section 588FL of the Corps Act in the unforeseen event that the grantor enters external administration within six months of the expiry of the 20 business day period from when the security interest is granted.

For insolvency practitioners and the interests of unsecured creditors, this case serves to confirm the application of section 588FL to security interests that are perfected by registration (and caught by the relevant timeframes of the section) and thereby assist in protecting the vesting of such security interests in the company upon entering external administration.

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.

Kemp Strang has received acknowledgements for the quality of our work in the most recent editions of Chambers & Partners, Best Lawyers and IFLR1000.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Adam Israel
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.