Alleasing Falls in PPSR Trap
The recent decision of In the matter of OneSteel Manufacturing Pty Limited (administrators appointed)  NSWSC 21 shows how costly an incorrect registration on the Personal Property Securities Register (PPSR) can be for a secured party.
The Key Facts
- Alleasing Pty Limited (Alleasing) leased a crusher and screening plant (Crusher) to OneSteel Manufacturing Pty Limited (OneSteel).
- Alleasing registered its security interest over the Crusher by reference to OneSteel’s ABN instead of OneSteel’s ACN (Registration).
- OneSteel went into administration. The administrators considered Alleasing’s PPSR registrations to be defective and that Alleasing’s interest in the Crusher had vested in OneSteel pursuant to section 267 of the Personal Property Securities Act 2009 (Cth) (PPSA).
- Financing statements that register security interests on the PPSR must contain certain data about the grantor: section 153(1) PPSA.
- If the collateral is not consumer property, the data required is prescribed by a list. Generally, the data required will be the grantor’s ACN: section 153(1) PPSA, regulation 5.5 Personal Property Securities Regulations 2010 (Cth) (PPSR), clause 1.3 of Schedule 1 PPSR.
- A registration on the PPSR may be ineffective if there is a seriously misleading defect in any data relating to the registration, or if a search of the grantor on the PPSR done in accordance with legislation would not reveal the existence of that registration: section 164, section 165 PPSA.
- An ineffective registration on the PPSR is an unperfected security interest. An unperfected security interest vests in the grantor of the security interest if the grantor enters administration: section 267 PPSA.
- The three key issues were whether:
(a) the Registration was ineffective;
(b) Alleasing should be granted an extension of time to register; and
(c) the operation of section 267 of the PPSA was unconstitutional by effecting the acquisition of goods other than on just terms.
- The Court found that the Registration was ineffective
(a) The Legislation required Alleasing to register its security interest over the Crusher by reference to OneSteel’s ACN and not its ABN. This was a defect in the Registration.
(b) The defect caused the Registration to be ineffective because a person conducting a search on the PPSR in accordance with legislation (i.e. searching under OneSteel’s ACN) would not have discovered the Registration. This is seriously misleading for the purpose of section 164 of the PPSA and also a specified defect under section 165 of the PPSA.
10. The Court found that Alleasing should not be granted relief by way of an extension of time for registration
(a) An extension could only be granted if Alleasing’s security interest was perfected prior to OneSteel entering administration.
(b) Granting an extension would not have caused the Crusher to divest back to Alleasing, because the Crusher already vested in OneSteel under section 267 of the PPSA when OneSteel entered administration.
11. The Court found that the operation of section 267 was not unconstitutional
(a) Section 267 does not effect an acquisition. It merely prescribes consequences that arise in certain circumstances and adjusts rights between parties.
(b) The “acquisition of property on just terms” provision of the Australian constitution is only concerned with the regulation of legislative power where property is acquired for a Commonwealth purpose.
12. As a result, the Court confirmed that OneSteel owned the Crusher. The Crusher could be sold by OneSteel’s administrators and the proceeds distributed to creditors.
The importance of correctly registering security interests on the PPSR is often under estimated when compared to the value of the collateral that the security is protecting.
If you think you might have personal property security interests, you should obtain advice on how to register those interests. It would also be prudent to periodically review all of your existing PPSR registrations for any defects.