A recent decision in the NSW Supreme Court has provided the first substantive judicial consideration of the Personal Property Securities Act 2009 (PPSA), which commenced on 30 January 2012.
The case involved two Caterpillar excavators and a Caterpillar Loader which had been used by Maiden Civil (P&E) Pty Ltd (Maiden) in its civil construction business in the Northern Territory. The Caterpillars were leased by Maiden from Queensland Excavation Services Pty Ltd (QES) under a verbal agreement.
In 2010 QES had purchased the Caterpillars with finance and issued invoices to Maiden for the finance payments plus a fee of 10%. Maiden then made payments to QES and paid off one of the excavators. However, Maiden defaulted on its obligations in relation to the other two vehicles and the lease was terminated by QES and the vehicles were repossessed by QES. The repossessed vehicles were subsequently leased by QES to another client.
In March 2012 Maiden sought short term finance from Fast Financial Solutions Pty Ltd (Fast). In May 2012 Maiden executed a loan agreement for $250,000 and a General Security Deed giving Fast all of its current and future assets as security, including all three vehicles. Fast registered its security interest on the Personal Property Securities Register (PPSR). Maiden subsequently defaulted on its loan with Fast resulting in Fast appointing receivers to Maiden. The company was also placed into voluntary administration which then went into liquidation. The third vehicle was seized by a creditor of Maiden who claimed a lien arising from a verbal agreement that security would be provided over the equipment of Maiden for work done by the creditor.
The receivers commenced action against QES and the other creditor, seeking possession of all three Caterpillars.
The Court held that notwithstanding that QES was the true owner of the two repossessed vehicles, Fast’s perfected security interests in the two vehicles were superior and had priority to QES’s unperfected security interests (as a PPS lease).
The Court also held that whilst QES’s interest was a “transitional security interest” it was not registered on a transitional register and therefore, the exception in s322(3) of the PPSA applied.
Further, as QES had not perfected its interest at the time Maiden entered voluntary administration, the vesting rule in s267 of the PPSA applied and the vehicles vested in Maiden.
In respect of the third vehicle, the Court held that Maiden was the true owner of the vehicle and that the creditor’s position could not be substantiated with evidence and in any event, any security interest which may have existed was unperfected and would have vested in Maiden upon the commencement of the voluntary administration.
The Court therefore ordered that all three Caterpillars be delivered up to the receivers.