It is extremely important for businesses to be aware of the strict compliance necessary when recording security interests on the Personal Property Securities (“PPS”) Register. A lack of attention to detail may render registrations inadequate, which can cause an enormous loss of property to third parties.
Alleasing Pty Ltd found this out to its dismay in In the matter of OneSteel Manufacturing Pty Ltd (administrators appointed)  NSWSC 21.
In this case, Alleasing leased to OneSteel plant equipment valued at approximately $23 million. However, the registrations that were lodged notifying Alleasing’s interest referenced OneSteel’s ABN, not its ACN. This would prove to be disastrous.
Administrators were appointed to OneSteel and they contacted Alleasing to inform them that the registrations were defective. Although Alleasing attempted to lodge fresh and accurate registrations over its interests, OneSteel continued to argue that the registrations were inaccurate and thus the equipment was lost to them.
Alleasing went to court in an attempt to recover its equipment. Alleasing argued that the security interest had been perfected on the basis that, by making the first registrations with the ABN, the nine digit ACN had actually been included on the PPS Register and that the post-administration registration could be backdated to be effective prior to the administrators being appointed.
The court found for the administrators, ruling that a search of the PPS Register by ACN alone would not reveal the registrations and thus they were defective. The court also refused to retroactively perfect the security interest, as the subsequent registration was lodged after the ‘critical date’ when administrators were appointed to OneSteel.
This decision is a daunting reminder of the strict compliance with the requirements of the PPSA that is necessary when registering security interests. It is highly recommended that secured parties review any registrations where this might be an issue and seek legal advice to address incorrect registrations as soon as possible. If you hold concerns that a grantor may be subject to external administration, it is very important to seek legal advice so as to protect your rights.
Bell Legal Group Partner Tim Elliott has a wealth of experience in all aspects of corporate insolvency law, corporate reconstructions, voluntary administrations, receiverships, liquidations and securities disputes. For an appraisal on the best way to protect yourself in relation to security interests, contact Tim Elliott today on (07) 55973366 or firstname.lastname@example.org.
Rob Ffrench of Bell Legal Group has 35 years of experience in commercial, contract and insurance law. Rob has a wealth of understanding in business structuring and strategic planning and can assist you in regards to your security interests. Rob may be contacted on (07) 5597 3366 or via email email@example.com.