We’ve written in the past about the first casualties of the PPSA (Personal Properties Securities Act). Along a similar vein we have the first significant judgement by the Supreme Court of NSW, in which the hirer of equipment (the legal owner) lost its right to take back the equipment when a company it hired the goods to went into liquidation.
Queensland Excavation Services Pty Ltd (QES) was a company that leased out earthmoving vehicles. Maiden Civil (P&E) Pty Ltd (Maiden) leased caterpillars from QES. QES failed to register its security interest on the PPSR.
At some time after Maiden leased the caterpillars, Maiden borrowed money from Fast Financial Solutions Pty Ltd (Fast Financial), granting them a security interest over all of its assets, including the caterpillars. Fast Financial duly registered that security interest on the PPSR.
Fast Financial later appointed receivers and managers to all of Maiden’s assets, which then went into administration and liquidation.
Who had the rights to the caterpillars?
The court found that QES had a security interest in the Caterpillars, as the lease between QES and Maiden was a PPS lease. Fast Financial also had a security interest in the Caterpillars. The issue as to who had the better rights to the caterpillars needed to be resolved according to the PPSA principles of priority, rather than the old method of determining who had better title or ownership before the new PPSA regime.
Prior to the PPSA legislation, QES generally would have had the right to take back its caterpillars. However in this new regime, the result was that Fast Financial’s security interest prevailed because its security interest was registered. Between a registered security interest and an unregistered security interest, the registered security interest has priority. It’s as simple as that. It was completely irrelevant that QES actually owned the machinery.
“Between a registered security interest and an unregistered security interest, the registered security interest has priority”
So what’s the lesson to be learnt? It’s quite simple really. If you have a security interest you must register it on the PPSR. Failure to register can result in drastic consequences, and even though you own the goods, you may lose them to someone else who has registered their security interest.
“If you have a security interest you must register it on the PPSR”
If you have a security interest in property that has not been registered or if you have any questions relating to the PPSA or PPSR, contact us for a confidential discussion.