Simple PPSR Error Costs Business $23 million
In the case of OneSteel Manufacturing Pty Limited (administrators appointed) the Court held that a lessor of equipment who registered its interest on the Personal Properties Security Register (PPSR) incorrectly by using the ABN of the lessee instead of the ACN, had caused its registration to be defective.
As a result, the lessor’s interest in the equipment it had leased vested in the lessee when Administrators were appointed to the lessee.
Alleasing Pty Limited entered into a lease with OneSteel, under which Alleasing leased to OneSteel a striker crushing and screen plant as well as spare parts, valued at approximately $23 million. There was no dispute that the leases were PPS leases under the Personal Property Securities Act 2009 (Cth) (PPSA), and Alleasing registered its security interest in the equipment on the PPSR.
The registration was made by Alleasing using the ABN of OneSteel rather than its ACN.
Administrators were subsequently appointed to OneSteel. The Administrators argued that the equipment became Alleasing’s property upon the appointment of the Administrators, as OneSteel’s registration on the PPSR was defective. Alleasing claimed the registrations were validly perfected.
The issue of particular attention in this case was that section 153 the PPSA requires a financing statement to include the grantor’s details as prescribed in the regulations. The regulations note that where the grantor is a company that has an ACN, the prescribed details are the ACN of the grantor. Under section 164(1) of the PPSA, a registration will be defective if there is a seriously misleading defect in the registration or a defect mentioned in section 165 of the Act.
The Court found that the registrations were defective as they did not include OneSteel’s ACN. The Court held that as a search of the PPSR by reference only to OneSteel’s ACN would not reveal the registrations, the registrations were defective pursuant to sections 164(1)(b) and 165(b) of the PPSA, as well as under section 164(1)(a) for being seriously misleading.
As such, the security interest was unperfected and the equipment vested in OneSteel upon the appointment of Administrators.
What does this mean for you?
This case highlights the importance of strictly complying with the registration requirements under the PPSA. The decisions that we are seeing coming out of the Courts is that relief will not be provided to companies who almost get it right, but not quite.
Given the serious consequences of a failure to comply with the registration requirements, we recommend that you obtain professional assistance in this regard. Beck Legal offers compliance advice and registration services to secured parties, so please contact us if you require assistance with this.