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PPSR Series Part 3: Notable Case Studies

The Personal Properties Securities Act (PPSA) has a reputation of being a confusing topic, even for lawyers. It is vital to ensure that registrations are completed with accurate information.

However, that isn’t the only point to keep in mind. The notable case study examples listed below highlight some other points to consider.

 

1. Registering against ABN for a company rather than ACN

Onesteel Manufacturing Pty Ltd (Administrators Appointed)[2017] NSWSC21 – A Finance Company providing finance to Onesteel had registered their security interest against OneSteel Manufacturing, but had registered their security interest against the ABN of OneSteel – not their ACN as per the requirements of the PPSA.

The Supreme Court held that registering against the ABN of a company where they hold an ACN is seriously misleading and therefore ineffective.

Take home: Using the correct identifiers for registrations is extremely important; and it doesn’t only apply to Companies and using ACN’s – it also applies to using the correct identifier for Trusts, Sole Traders and all other entity types.

 

2. The importance of Registering on-time

Relux Comercial Pty Ltd (in liquidation) v Doka Formwork Pty Ltd – Doka provided materials to Relux on 3 occasions (the first of which was on 21 January) and registered their interest on the PPSR. The security interest was registered on 20 February, which was outside the allowable timeframe for a registration to have effect (by one day!!)

The required timeframe for registration was 20 business days after the security interest was created; or 6 months before the grantor entered into Administration (the earlier of the two applies).

As the first of the supplies occurred more than 20 business days before registration, this supply vested in the assets of Relux. Doka was still able to retain the property of the second and third supplies.

Take home: This case illustrates the importance of knowing when you are supplying goods/materials to your customers and ensuring that you are aware of the timeframes for which you are required to register your interest by.

 

3. Leases and bailments under the PPSA; do you need to register?

Re Arcabi Pty Ltd (Receivers & Managers Appointed) (in liquidation) [2014] WASC 310. Arcabi provided a storage and sales business for rare coins and notes on behalf of its customers. In the majority of cases they did not own the stock that was on hand at Arcabi’s premises.

When Arcabi went into liquidation the issue was raised by the Administrator as to whether the coins and notes would vest in the assets of Arcabi as there was the possibility that a bailment or consignment arrangement existed under the definition of the PPSA.

The court found that this arrangement was not a bailment under the PPSA as the storage of the coins and notes did not secure payment or performance of an obligation. Once the bailment expired, the coins and notes did not become the property of Arcabi; and they were not obliged to purchase the coins and notes.

Take home: If you are a business that owns goods that in possession of another party or leases goods it is important to know what your obligations/rights are, and whether you should be registering your security interest in your leased goods; or whether a PPS lease may apply.

 

4. Competing interests – consumer goods pre-paid versus suppliers registered security interest

Re Renovation Boys Pty Ltd (administrators Appointed) [2014] NSWCS 340. Renovation Boys went into liquidation with 1,200 customer orders outstanding totalling $1,500,000.

In a large number of the orders, the customer had already paid for the stock (which meant title had passed to the consumer). The administrator sought judgement from the court as to whether these pre-paid orders could vest as assets of the company and be liquidated to pay out creditors; or whether they should be delivered to customers as title had passed.

Court ordered orders to be fulfilled to customer as title had passed to the consumer as per the Sale of Goods Act. The Administrators were able to claim a lien over the stock; which meant customers had to pay a fee to cover costs of administrator in recovering and receiving their stock.

Take home: If you are a supplier dealing with retailers it is important to note stock on site that has been paid for by consumers may affect your ability to recover that stock should the retailer go into liquidation.

 

Hopefully, these case studies will serve as examples of how to improve your registrations.

Click here to learn more about the CreditorWatch’s PPSR Logic solution or contact your account manager today. Alternatively, watch one of our PPSR webinars.

More articles like this:

PPSR Series: Part 1 – The Lowdown on PPSR

PPSR Series: Part 2 – Decoding PPSA Terminology


About the Author

Elan
Paul Mead is a Business Development Manager and in-house PPSR Specialist at CreditorWatch. He has worked within the finance /trade credit industry for over 15 years with banks and credit bureaus. During this time, he has completed his law degree and assisted a large number of clients with undertaking PPS Registrations.