WARNING: Australia’s first major decision on the operation of the PPSA
This month, Brereton J of the NSW Supreme Court handed down the first major decision involving the Personal Property Securities Act 2009 (Cth) (PPSA) since its inception in January 2012.
Most importantly, His Honour held that the rights of the holder of a registered security interest prevailed over those of the legal owner of the personal property in question.
Maiden Civil (P&E) Pty Ltd v Queensland Excavation Services Pty Ltd  NSWSC 852 (Maiden Civil)
- Maiden Civil leased 3 Caterpillar excavators from Queensland Excavations Services (QES). QES did not seek to register its security interest on the PPSR (or under any previously operating register). After this transaction, Maiden Civil sought secured finance from a financier who registered its security interest in all present and after acquired property of Maiden Civil. Maiden Civil defaulted on its secured loan, triggering receivers to be appointed.
- QES claimed legal title in the excavators. The Receivers claimed their registered security interest included the excavators and a dispute ensued.
The leases of the Caterpillars by QES to Maiden Civil were determined to be PPS Leases and thus QES’ interest in the Caterpillars was a security interest for the purposes of the PPSA. QES failed to perfect its security interest in the Caterpillars.
The financier also held a security interest in the Caterpillars, and while commencing later in time, was perfected and thus judged to rank in priority to QES’ interest.
This position is entirely in line with the legislative intent of the PPSA and in total contrast to the state of the Common Law prior to the enactment of the PPSA.
Given there was no precedent in Australian case law, His Honour sought guidance from New Zealand and Canadian cases where similar legislation has been enacted for some time. QES attempted to distinguish the PPSA from its New Zealand and Canadian counterparts, with little success.
QES also attempted to rely on the fact that its interest was transitional (and thus protected by deemed perfection at the commencement of the PPSA without the need for registration). However, given QES’ interest could have been registered prior to the PPSA (on Northern Territory Register of Interests in Motor Vehicles and Other Goods) and QES failed to do so, His Honour ruled that the transitional protections under the PPSA did not extend to protect QES in these circumstances.
The moral of the story?
If you hold a security interest over personal property, perfect that interest as soon as possible after coming into existence. The easiest way to perfect is to register. For further information or assistance, please contact us.