Precision is key: Important reminder to get it right when registering security interests on the PPSR.

The recent Supreme Court of New South Wales decision of In the matter of OneSteel Manufacturing Pty Ltd (administrators appointed)[2017] NSWSC 21 reaffirms the importance of ensuring the accuracy of grantor details when registering financial statements on the Personal Property Securities Register (PPSR).

Key Findings

• The recent Supreme Court of New South Wales decision of In the matter of OneSteel Manufacturing Pty Ltd (administrators appointed)[2017] NSWSC 21 reaffirms the importance of ensuring the accuracy of grantor details when registering financial statements on the Personal Property Securities Register (PPSR);
• Security interests registered against the Australian Business Number (ABN) of a corporate grantor where the corporate grantor has an Australian Company Number (ACN) will be rendered ineffective and ‘seriously misleading’.

Facts Regarding Registration of Security Interests

Between May and July 2015, Alleasing Pty Ltd (Alleasing) leased a crusher and spare parts to OneSteel Manufacturing Pty Limited (OneSteel).

As the crusher and spare parts were not consumer property, s 153 of the Personal Property Securities Act 2009 (Cth) (PPSA) required that the financing statements include “the grantor’s details as prescribed in the regulations”. Clause 1.3 of Schedule 1 of the Personal Property Securities Regulations 2010 (Cth) (the Regulations) requires that where the grantor is a body corporate that has an ACN, the prescribed details are the ACN of the grantor.

Alleasing registered its security interest on the PPSR. But it incorrectly included OneSteel’s ABN in the entry, rather than its ACN.

OneSteel went into administration on 7 April 2016. The administrators advised Alleasing that they considered the registrations were defective and ineffective and, consequently, Alleasing’s interest in the crusher and the parts vested in OneSteel pursuant to s. 267 of the PPSA.

In June 2016, Alleasing lodged new financing statements referring to OneSteel’s ACN, and also amended the original registrations to refer to the ACN.

Issues

The Court considered whether:

1. the original registrations were rendered defective and ineffective as a result of being registered against the grantor’s ABN, and not it’s ACN;

2. an order could be made under s588FM of the Corporations Act 2001 (Cth) (Corporations Act) extending the time for registration.

Decision

• Brereton J declared that Alleasing’s registrations were defective. The Court rejected Alleasing’s submission that there was no defect in its original registrations, given that OneSteel’s 11 digit ABN included its 9 digit ACN. The Court found this fact irrelevant, as an ABN and ACN are two different identifiers issued by different agencies.
• The registrations were rendered ineffective. Sections 164(1)(b) and 165(b) of the PPSA provide that a registration will be ineffective if a search of the PPSR by reference to the details required to be included under s 153 of the PPSA was not capable of disclosing the registration. Clause 1.3 of Schedule 1 of the Regulations requires a financing statement to refer to a grantor’s ACN if it has an ACN. The registrations were ‘seriously misleading’ for the purposes of s 164(1)(a) of the PPSA as they did not enable a person searching the PPSR by reference only to OneSteel’s ACN to find Alleasing’s registrations.
• Under s 267 of the PPSA, security interests that are unregistered at the commencement of formal insolvency will ‘vest’ in the grantor. The interests of Alleasing had vested in OneSteel, effectively giving ownership of the leased asset to the insolvent estate.
• Alleasing could not perfect its security interest by obtaining an order under s 588FM of the Corporations Act. Section 588FM of the Corporations Act only provided relief to a company from the consequences of belated registrations of perfected security interests granted by companies, as opposed to unperfected interests. Here, as the correct registrations were unperfected at the critical time (being the time Onesteel went into administration), relief under s 588FM of the Corporations Act was unavailable.

Click here for more details on the Personal Property Securities Register.

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