In May 2016, we reported on GE’s failure to comply with the Personal Property Securities Act 2009 and the resulting loss of their $50M in turbines to the Liquidators of Forge Group Power Pty Limited. This was, or should have been, a massive wake up call to all business operators on the importance of understanding the ramifications of the PPSA in protecting ones interest in collateral.
Well its happened again. This time it has resulted in a $23M loss.
In the recent matter of OneSteel Manufacturing Pty Limited (Administrators Appointed) (“OneSteel”), All Leasing Pty Limited (“All Leasing”) leased plant and equipment to OneSteel said to be worth $23 million. The lease was covered by the Personal Property Securities Act 2009 and the resulting security interest was registered on the Personal Property Securities Register (“PPSR”).
During April 2016, OneSteel was placed into Voluntary Administration. The OneSteel Administrators completed a search of the PPSR and identified that the security interest registered by All Leasing was defective and as such the plant and equipment subject to the lease agreement vested with the Administrator.
As it turns out, although Alleasing had registered its security interest on the PPSR, it had incorrectly included OneSteel’s ABN on the financing statement, rather than its ACN. A simple administrative error one might say.
All Leasing approached the Court seeking a declaration that its security interest was validly perfected at the time OneSteel was placed into Voluntary Administration.
The PPSA regime is clear that registration in the security interest were the Grantor (in this instance OneSteel) is a company and not a trustee of a trust, must be done by reference to the Grantor Company’s ACN.
The Court found that the PPSR registration was defective and as such All Leasing lost its security and ability to recover its plant and equipment leased to OneSteel.
The decision is an important reminder that strict compliance with the requirements of the PPSA is essential when registering a security interest in order to protect one’s interest in the collateral. We at Shaw Gidley are continuing to see both minor and critical defects in secured parties PPSR registrations, albeit not on the scale of the OneSteel matter, however, the implications resulting in those alleged secured creditors suffering substantial losses.
It is essential to seek appropriate legal advice prior to entering into a security agreement and registering their security interest on the PPSR to ensure security over the collateral is retained in the event that the company is placed into external administration.
Shaw Gidley are experts in restructuring, turnaround and insolvency and provide free initial advice on these matters. Please contact our offices on (02) 4908 4444 or (02) 6580 0400.