WHO SHOULD READ THIS
- Any party with a security interest registrable or registered on the PPSR including financiers, other lenders, and lessors in the business of leasing goods.
THINGS YOU NEED TO KNOW
- A simple error in a PPSR registration may render a registration defective if not registered against the correct grantor identifier.
WHAT YOU NEED TO DO
- Review your current registrations and ensure your future registrations comply with registration requirements.
The case of Production Printing (Aust) Pty Ltd (in liquidation) [2017] NSWSC 505 provides a costly reminder of the point made earlier this year in Re Onesteel Manufacturing Pty Ltd (administrators appointed) that a security interest registered on the Personal Property Securities Register (PPSR) must be registered against the correct grantor details, and a failure to do so may mean the security interest will be defective and the asset lost.
Background
On 4 December 2014, HP Financial Services (Australia) Pty Ltd (HP) entered into a master equipment finance agreement with Production Printing (Aust) Pty Ltd (Production Printing). On the same day, HP registered a security interest in respect of printing equipment to be leased under the equipment finance agreement. HP registered their security interest against Production Printing's Australian business number (ABN) rather than its Australian company number (ACN).
Between 5 December 2014 and 19 October 2015, HP entered into four leases with Production Printing pursuant to the master equipment financing agreement in respect of printing equipment purchased for over $4 million. On 22 July 2016, Production Printing was placed into voluntary administration, and HP was notified that the administrators considered the registration was defective.
Decision
In our earlier alert dated 21 February 2017 on the Re Onesteel Manufacturing Pty Ltd (administrators appointed) case, we noted that section 153 of the Personal Property Securities Act 2009 (Cth) (PPSA) and Schedule 1 of the Personal Property Securities Regulations 2010 (Cth) set out specific requirements for registration, including that where the grantor is a body corporate, the security interest must be registered against the company's ACN (unless it is a responsible entity of a registered scheme and has an Australian Registered Scheme Number).
In Re Onesteel, it was held that registering against a company's ABN as opposed to the ACN made the registration defective. In this case, HP made an argument not run in Re Onesteel, arguing that section 166 of the PPSA temporarily preserved their security interest.
Conclusion
However, the Court rejected that argument and held that the exception under section 166 of the PPSA in relation to defective registrations only apply to allow a secured party to correct registrations where events beyond their control have led to a registration becoming defective (for example, when there is a change in the serial number under which collateral is required to be described in the register).
The Court accordingly affirmed the Re Onesteel decision and has firmly shut the door on the ability of secured parties to attempt to recover their security interest once the grantor suffers an insolvency event if the registration is defective. It is a costly reminder to register, register within time, and register correctly.
