The NSW Supreme Court has confirmed what we expected would be
the result in Forge Group Power Pty Limited (in
liquidation)(receivers and managers appointed) v General Electric
International Inc – the failure by General Electric to
register on the PPSR has cost them their very expensive generator
The case relates to a written contract for Rental of Power
Generation Equipment and Supply of Associated Services
("Lease") between Forge Power and General Electric
International Inc (GE) under which GE agreed to
rent some Turbines to Forge Power for a fixed term.
It was common ground that the PPSA establishes a Register of
Personal Property Securities on which security interests may be
"perfected" by registering an instrument called a
financing statement, and that primacy is given to the Register. In
this case no financing statement for the Lease had been registered
The key issues to be determined by the Court was whether the
PPSA is engaged in regard to the Lease of the turbines based on the
given facts and focused on 2 possible exceptions. The Court held
that the PPSA will be engaged if the Lease is a PPS lease. The
Lease will be a PPS lease unless GE was not regularly engaged in
the business of leasing goods within the meaning of s 13(2)(a) or
if the Turbines became fixtures within the meaning of s 10.
The Court found that GE was in fact regularly engaged in the
business of leasing goods, and that the turbines were not fixtures,
and accordingly the PPSA was engaged in this instance and that by
operation of s 267(2), the interests of GE in the Turbines vested
in Forge Power immediately before the appointment of voluntary
administrators on 11 February 2014 and Forge Power's right or
title to, or interest in the Turbines, is superior to that of
The case highlights the risks of not registering on the PPSR but
also reminds that there are exceptions. The Court commented (at
135) on General Electric's desperate attempt to activate the
exception of the leased items becoming a fixture stating that
"one feature of these proceedings worthy of mention and
brought about by the way the PPSA operates is that GE was impelled
(counter intuitively one might think) to argue that objectively
viewed, it intended to lose its own very valuable property"
(sic. by arguing it was a fixture).
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