Australia: Security interest and insolvencies: Lessons for secured parties

Last Updated: 13 March 2017
Article by Simone Farrugia


The recent decisions in OneSteel Manufacturing Pty Limited (Administrators Appointed) [2017] NSWSC 21 and Power Rental Op Co Australia, LLC v Forge Group Power Pty Ltd (in Liquidation) (Receivers and Managers Appointed) [2017] NSWCA 8 serve as a timely reminder of the importance of registering security interests correctly on the Personal Property Securities Register (PPSR) to avoid assets vesting in a company upon it being placed into external administration.


In the matter of OneSteel Manufacturing Pty Limited (Administrators Appointed) the facts were that Alleasing leased a crushing and screening plant and spare parts for the crusher to OneSteel.

While Alleasing registered its security interest on the PPSR, Alleasing incorrectly included OneSteel's ABN in the entry instead of OneSteel's ACN.

Subsequently, OneSteel was placed into administration.


OneSteel's administrators wrote to Alleasing claiming that the registrations were defective and ineffective and, consequently, asserted that Alleasing's interest in the crusher and the parts vested in OneSteel under the vesting provisions in section 267 of the Personal Property Securities Act 2009 (PPSA).

Alleasing attempted to fix the defective registration by amending the registration and by lodging new financing statements but this time with OneSteel's ACN. Alleasing also commenced court proceedings seeking a declaration that the security interests were validly perfected and did not vest or, alternatively, an order under section 588FM of the Corporations Act 2001 fixing the time for registration to the date that the second registrations were lodged.

The main issues were:

  1. Is a registration against a corporate grantor's ABN rather than its ACN "seriously misleading", and therefore ineffective, for the purposes of section 164(1)(a) of the PPSA or otherwise ineffective under section 164(1)(b) and section 165(b) of the PPSA?
  2. Can a court make an order under section 588FM of the Corporations Act (Act) to extend the time for registration for the purposes of section 588FL(2)(b)(iv) of the Act where the relevant security interest was not perfected at the time administrators were appointed to the insolvent company?


The Court held that:

  1. A registration of a security interest against the ABN of a corporate grantor where the corporate grantor has an ACN will not perfect the security interest.
  2. Alleasing's failure to register its security interest against OneSteel's ACN meant that Alleasing's security interest was ineffective pursuant to sections 164(1)(b) and 165(b) of the PPSA and seriously misleading pursuant to section 164(1)(a) of the PPSA.
  3. When considering Alleasing's rights, it is the rights that were in effect as at the date of the administrator's appointment, being the original registration without the amendment to the ACN.
  4. Because the original registration was defective and ineffective as at the date of the administrator's appointment, and notwithstanding Alleasing's attempts to fix the error in its security registration, Alleasing had lost its rights in the crusher and spare parts and that those assets vested in OneSteel upon it being placed into administration.
  5. An extension of time is not available to validate the post-appointment registrations and amendments.

As a consequence, Alleasing lost its interest in the crushing and screening plant and spare parts for the crusher, lost its priority as a secured creditor (including all of the rights available to a secured creditor in respect of its security interest and the administration) and it was reduced to the position of an unsecured creditor.


In Power Rental Op Co Australia, LLC v Forge Group Power Pty Ltd (in Liquidation) (Receivers and Managers Appointed) the facts were that Forge had contracted with Horizon Power, a Western Australian statutory body, to design a power station at Port Headland, and supply and construct the necessary equipment for its operation.

To fulfil its obligations under that contract, Forge entered into a lease with General Electric Inc (GE), whereby GE would rent four turbine generators to Forge for use in the power station (Turbine Lease).

GE failed to register a financing statement on the PPSR in respect of GE's interest, as lessor, in the turbines. Accordingly, the security interest remained unperfected.

Shortly after the turbines were installed, Forge entered into voluntary administration, and subsequently liquidation.

Forge argued that the turbines vested in the company immediately before the administrators were appointed, pursuant to section 267(2) of the PPSA because the Turbine Lease was an unperfected security interest. GE's position was that it retained superior title over the turbines because the PPSA did not apply to the Turbine Lease, and therefore it was entitled to the return of the turbines.

The turbines had an approximate value of $60 million.

In Forge Group Power Pty Limited (In Liquidation)(Receivers and Managers Appointed) v General Electric International Inc [2016] NSWSC 52, the Supreme Court at first instance held the turbines vested in Forge immediately before the administrators were appointed. Understandably, and no doubt due to the value of the turbines, GE appealed this decision.


The main issue on appeal was whether the four turbines leased by GE to Forge were fixtures within the meaning of section 10 of the PPSA.

Section 10 of the PPSA defines fixtures to mean "goods, other than crops, that are affixed to land."


The Court of Appeal upheld the original judgment and determined that:

  1. GE was in the business of regularly leasing goods (as it was a "proper part of their business").
  2. The turbines were not fixtures, and as such the Turbine Lease was a PPS lease for the purposes of the PPSA and ought to have been registered on the PPSR.
  3. The turbines vested in Forge immediately before the appointment of voluntary administrators and GE lost the entirety of their title and interest in the turbines.

Again, an insolvency has robbed an intended secured creditor of its rights as a consequence of failing to comply with the PPSA strict regime.


The two decisions are a timely reminder of the importance of secured parties ensuring that their security interests are properly registered on the PPSR and the potentially significant consequences of failing to do so.

Secured parties should be very careful in completing PPSA registrations and lodge as soon as possible. If in doubt about whether a security interest needs to be registered on the PPSR, the prudent course is to register anyway because the consequences if you are wrong, can be dire.

Simone Farrugia
Restructuring and insolvency
Colin Biggers & Paisley

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.

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.

Simone Farrugia
Similar Articles
Relevancy Powered by MondaqAI
Carroll & O'Dea
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”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Carroll & O'Dea
Related Articles
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions