It is timely to remind businesses of the importance of correctly registering security interests in property (other than land) on the Personal Property Securities Register (PPSR) and to reflect on this developing area of the law. A lack of understanding of the law or attention to the rules of registration can be very costly and could result in unexpected outcomes. Two recent NSW cases highlight this and how disastrous mistakes can be.
In the first matter, General Electric leased to Forge Group Power a number of turbines but did not register a security interest in the turbines on the PPSR. GE ended up losing its interest in the turbines due to this failure as they were unsuccessful in arguing that the turbines had become fixtures to the land and thus outside the scope of the personal properties securities regime.
In the other case, Alleasing leased plant and equipment to OneSteel Manufacturing but inadvertently used the wrong identifying number when registering on the PPSR (they used an ABN instead of its ACN). After administrators were appointed to OneSteel they were able to successfully claim that the PPSR registrations were defective and the interest in the plant and equipment vested in the administrators. Depending upon the nature of the legal entity granting the security interest, the details to be provided in recording the security interest can differ.
What these two cases highlight is that a proper understanding of the PPSR involves both a good knowledge of the law as well as procedural knowledge of the register. Both form and substance are integral to protecting your interest and even simple mistakes can have adverse consequences.
Particularly if you are in the business of leasing equipment or machinery for longer periods at a time, it is an essential element of that business now to correctly register your interest in the property on the PPSR. If you fail to register correctly, what seemed so obviously your property could easily fall into the hands of another party.
We welcome discussing the personal property securities regime further with you. Please contact Ian Bracken for further information.