A recent New South Wales Supreme Court decision has confirmed that perfected interests under the Personal Property Securities Act (“PPSA“) may take precedence over an owner’s interest in an asset.
The proceedings involved competing claims to civil construction vehicles leased by Queensland Excavation Services Pty Ltd (“QS“) to Maiden Civil (P&E) Pty Ltd (“MC“). The vehicles had been in MC’s possession for quite sometime and QS was invoicing MC for their use, notwithstanding that no written leases had been entered into between the parties, and nor had any lease been perfected by way of registration under the PPSA.
MC had also granted a security interest over all of its assets to Fast Financial Solutions Pty Ltd (“Fast“) by a general security agreement (“Agreement”), which was perfected by registration under the PPSA. Fast then appointed receivers to MC under the perfected Agreement as a result of MC’s financial difficulty. The receivers claimed that Fast held a security interest in the assets within the meaning of the PPSA, and that they had priority over any interest of QS, the owner of the assets. MC sought to have QS deliver the assets to them as it had taken back possession.
It was held that QS had a security interest as a lessor under a PPS lease which was not registered. While the interest was a transitional security interest, it was registrable but not registered prior to the registration commencement time. The protection available to transitional security interests did not apply. QS’s security interest was unperfected. Accordingly, Fast’s perfected security interest in the assets had priority over QS’ unperfected security interest in them. Events of default under the Agreement had occurred and the receivers and Fast had enforceable rights of possession of the assets against QS who took back possession. A perfected interest takes priority over an unperfected interest regardless of ownership.
This result is not unexpected, but is a good example of the need to consider whether an interest in an asset may require registration under the PPSA.
Please call any member of our Commercial Team to discuss any aspects of the PPSA.