Two recent cases have highlighted the necessity of strictly complying with the Personal Property Securities Regulations 2010 (Cth) when registering security interests. In both Re Onesteel Manufacturing Pty Ltd (administrators appointed)  NSWSC 21 and Production Printing (Aust) Pty Ltd (in liquidation)  NSWSC 505, the security interest registered was held to be defective as it had been registered against the grantor’s ABN, and not their ACN as required by the regulations.
However, the recent decision of In the Matter of Accolade Wines Australia Limited and other companies  NSWSC 1023 provides an example of the circumstances in which the Court would consider granting extensions to secured parties registering their security interests outside of regulated time frames, thereby curing defective registrations.
In the Matter of Accolade Wines Australia Limited and other companies  NSWSC 1023
The plaintiffs provided leasing services to businesses, where the leases generally ran for terms of over a year and were considered security interests under the Personal Property Securities Act 2009 (PPSA). Whenever a new lease was entered into with a customer, the plaintiffs would subsequently register their interest on the Personal Properties Securities Register (PPSR) to perfect their security interest under the lease.
After conducting an audit of their PPSR registrations, the plaintiffs discovered that a number of their registrations were defective as they had registered their interests over the ABN of company grantor’s rather than the ACN.
The plaintiffs subsequently attempted to correct the registration defects by making new registrations on the PPSR against the customers’ ACNs. As the new registrations occurred more than 20 days after the relevant security agreements came into force, the plaintiffs brought an application for an extension of time to register their interests so that the new registrations would retain benefits of the earlier registrations.
The court granted the extension on the basis that the registrations had inadvertently been made against the customers’ ABNs as the plaintiffs believed that they could register against either an ACN or ABN. There was a strong case that the failure to register earlier would not prejudice the position of creditors or shareholders as each customer was solvent, unlikely to become insolvent, and the security interests were restricted to specific collateral as the subject of the leases.
Significance of the decision
This decision contains implications for any secured parties who have made late PPSR registrations or have discovered any potentially invalidating errors in their PPSR registrations and want to remove any risk which may arise from those registrations. Although there have been numerous cases where the Court has granted extensions of time for late PPSR registrations, this was the first reported decision in respect of numerous registrations.
It is essential to identify who has ownership of the asset that you seek to hold an interest in. The PPSA prescribes certain requirements in relation to different registrations. In the case of where the grantor is a corporation, registration needs to be effected against the ACN of the grantor and not the ABN.
If one wishes to register a PPSR security interest against a trust, this may be a security interest granted by a body corporate or individual in its capacity as trustee of a trust. In this circumstance, consider:
a) registering the interest against the ABN allocated to the enterprise carried on by the trust; and
b) registering also against the ACN of the trustee, or the individual trustee.
If the trust does not have an ABN then it may be prudent to register against the name of the trust, whilst seeking specialist advice regarding the risks of this approach. The consequences of failing to register against the ABN of the trust may result in a security interest against the trust being defeated. If a subsequent party does secure their interest by registering against the trust’s ABN, it may even defeat an earlier PPSR registration against the company’s ACN.
If you require further advice on how these changes will affect you or if you require any assistance to ensure compliance with PPSR registrations, please do not hesitate to contact us.