There has been some recent developments pertaining to the Personal Property Securities Act 2009 (PPSA) that should be of great interest to any business or property owner.
Two months ago, the case of Maiden Civil (P&E) Pty Ltd [2013] NSWSC 852 (27 June 2013) was heard in the Supreme Court of New South Wales. The case involved three parties:
– Queensland Excavation Services (QES), a company that leases earthmoving equipment;
– Maiden Civil (P&E) Pty Ltd (ACN 134 402 618) (Maiden Civil), a company engaged in civil construction works in the Northern Territory; and
– Fast Financial Solutions Pty Ltd (Fast Financial), a loan company that entered into an agreement with Maiden Civil.
The court heard that in 2010 QES leased three Caterpillar excavators to Maiden Civil. However, crucially, QES neglected to either register their interest on the Northern Territory Motor Vehicle Register (before the PPSA commenced) or on the Personal Property Securities Register (PPSR) after the PPSA commenced. This meant that their interest remained “unperfected”.
In May 2012, Maiden entered into a loan agreement with Fast Financial Solutions Pty Ltd (Fast Financial). This loan was secured by a General Security Deed wherein Fast Financial was granted a security interest in all present and after acquired property of Maiden. This included the Caterpillars.
Once the General Security Deed had been executed, Fast Financial registered its interests in Maiden’s property on the PPSR, thus “perfecting” their security interest.
After time, Maiden defaulted under the terms of its loan with Fast Financial who, in accordance with the terms of the General Security Deed, appointed Receivers and Managers over the assets of Maiden Civil. Maiden Civil then went into administration and then liquidation.
At trial, His Honour Justice Brereton found that a perfected interest took precedence over an unperfected one, regardless of the fact that QES was the lawful owner of the caterpillars. Drawing upon similar rulings in both New Zealand and Canada, His Honour, while acknowledging that both Fast Financial and QES had security interests in the caterpillars, ruled that the overriding factor was whether the interest had been perfected in accordance with PPSA.
This decision essentially confirms that the nemo dat rule (i.e. “no one gives what they don’t have”) can no longer be considered as a guiding principal. However, you can guard yourself against problems such as these by registering your security interests on a timely basis and ensuring complete and accurate descriptions of the collateral applying to those security interests on the PPSR.
If you require any advice on how the PPSA effects you and your interests, please don’t hesitate to contact Cooke and Hutchinson on 1800 000 993.
