News / PERFECTION IS THE KEY /
PERFECTION IS THE KEY
17 July 2013
The New South Wales Supreme Court recently handed down the first significant judgment relating to the Personal Property Securities Act 2009 (Cth) (PPSA), in Maiden Civil (P&E) Pty Ltd; Richard Albarran and Blair Alexander Pleash as receivers and managers of Maiden Civil (P&E) Pty Ltd & Ors v Queensland Excavation Services Pty Ltd  NSWSC 852. This case confirms that ownership will not always prevail in priority disputes under the PPSA.
This matter involved three pieces of machinery. Queensland Excavation Services Pty Ltd (QES) purchased and then leased the equipment to Maiden Civil (P&E) Pty Ltd (Maiden). While the arrangement with Maiden was not in writing, Maiden did use and had possession of the equipment for over one year, making periodic payments to QES. QES did not register its interest on the Northern Territory Register of Interest or subsequently on the PPS Register.
Maiden subsequently borrowed money from Fast Financial Solutions Pty Ltd (Fast Financial), granting Fast Financial a security interest over all of its assets, including the equipment. Fast Financial registered this interest on the PPSR.
Receivers were then appointed by Fast Financial to Maiden and QES terminated the lease with Maiden. A dispute arose between the receivers appointed by Fast Financial and QES concerning priority rights over the equipment.
Finding for the receivers
In finding for the receivers, Brereton J held that the lease between QES and Maiden was a PPS lease and was thus a security interest. The lease was a 'transitional security interest' which would be temporarily perfected under the PPSA for 24 months from the date it came into force. That perfection does not apply, however, if any security interest was registrable under a 'transitional' register but was not registered. The Northern Territory Register was such a register. QES failed to register the interest on the Northern Territory Register or subsequently on the PPSR, therefore the interest was not perfected.
Turning to whether Maiden had sufficient rights to grant an interest to Fast Financial, his Honour noted that upon Maiden's administration, QES's interest vested in Maiden causing Maiden to become entitled to the equipment subject to any perfected interests. This meant that regardless of QES's ownership of the equipment, it no longer had an interest in the equipment and Fast Financial, its security interest having been perfected, was able to successfully take priority.
This case serves as a reminder to owners of goods who lease or hire out their property that ownership is no longer the determining factor in priority disputes. Unperfected security interests may be defeated. It is therefore vital that owners take steps to protect their interests in their property by registering them on the PPSR.
If owners have not taken these steps under the impression that they will have 24 months 'temporary perfection', they may need to re-examine their interests. Temporary perfection will not apply if the security interest was registrable on a transitional register but was not registered before 30 January 2012. It is also important to remember that this protection afforded to transitional security interests is only available until 1 February 2014.
For more information contact:
Mark Madsen | Partner
t +61 7 3224 0241
f +61 7 3224 0333
Ruth Sainsbury | Graduate
t +61 7 3224 0382
f +61 7 3224 0333