All businesses should be aware of the importance of properly
recording security interests on the Personal Property Securities
Register (PPS Register). The courts have once
again reminded us of the importance of strict compliance with the
legislation when registering security interests, and the potential
to lose property to third parties when registrations are inadequate
in the event of external administration.
In the matter of OneSteel Manufacturing Pty Limited
(administrators appointed)  NSWSC 21, the creditor,
Alleasing Pty Limited, leased to OneSteel Manufacturing Pty Limited
plant equipment said to be worth $23million. The fact that the
lease was covered by the Personal Property Securities Act
2009 (Cth) (PPSA) was not in dispute.
Registrations were lodged notifying Alleasing's interest in the
equipment, but by reference to OneSteel's ABN, not the ACN.
When administrators were appointed to OneSteel, they contacted
Alleasing and informed its representatives that the registrations
were defective. This caused Alleasing to lodge fresh registrations
over its interest in the equipment, but this time by reference to
OneSteel's ACN. OneSteel continued to argue that the
registrations were defective and the equipment had been lost to
Alleasing approached the court in an effort to recover its
equipment. It pursued a number of arguments, including a
constitutional argument which has to date not been successful in
Australia in this kind of case.
Alleasing first argued that the security interest had in fact
been perfected on the bases that:
by making the first registrations with reference to the ABN,
the nine digit ACN had in fact been included on the PPS
the post-adminstration registration could in effect be
backdated to be effective prior to the date of appointment of the
The PPSA regime is clear that registration of a security
interest where the grantor is a company (and is not trustee of a
trust with an ABN) must be done by reference to the grantor
The PPSA also relevantly provides that a defect in a
registration will exist at a particular time where a search of the
PPSR by reference to that particular time, and to the grantor's
details would not be capable of disclosing the registration.
The court found for the administrators on the basis that a
search of the PPS Register by ACN alone would not reveal the
registrations, and so they were defective. The court also refused
to retrospectively perfect the security interest, as the subsequent
registration was done after the 'critical date' on which
the administrators were appointed to OneSteel.
The decision is an important reminder that strict compliance
with the requirements of the PPSA is required when registering
security interests. With the New Year only just underway, secured
parties are reminded to review any registrations where this might
be an issue, and to address the incorrect registration as soon as
possible. If there is any concern that the grantor may be the
subject of some form of external administration, it is important to
seek legal advice and take steps to protect your rights. In some
cases a Court application may be able to cure the problem.
As for the Constitutional argument, this was essentially that
Alleasing's property had been acquired on unjust terms in a
manner not permitted by the Consitution. Fans of Australian film
will remember this principle as 'the vibe' raised by the
suburban solicitor Dennis Denuto in the film 'The
Unfortunately for Allleasing, the Court found no vibe and the
argument was rejected essentially because the Court held that the
relevant part of the PPSA is a law for adjusting right of creditors
in insolvencies and not a kind of law that the Constituion will
strike down. Statements made by an Alleasing spokesman and reported
in the press suggest that the issue may be appealed all the way to
the High Court.
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.
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