Mistaken PPSA registrations can be very costly
23rd February, 2017
The importance of registering a security interest correctly on the PPSR was recently addressed in In the matter of OneSteel Manufacturing Pty Ltd (administrators appointed) [2017] NSWSC 21.
Facts
In that case, in October 2014 Alleasing Pty Ltd, a company in the business of asset finance and leasing, entered rental agreements with OneSteel which operated the Knob Mine in South Australia. The agreements related to a crusher and spare parts. They were PPS leases under the PPSA and the rental payments to Alleasing exceeded $4 million per year.
Alleasing registered the financing statement on the PPSR within time, but used the incorrect ‘prescribed details’ for OneSteel. That is, it included OneSteel’s ABN rather than its ACN (it should have registered using OneSteel’s ACN since it was a non-trustee company).
OneSteel was placed into administration in April 2016. After considering the Alleasing PPSR registration, the administrators advised Alleasing that it was defective and that, under s267 PPSA, the PPS leases vested in OneSteel upon their appointment.
Alleasing tried to fix this by immediately lodging fresh and correct financing statements on the PPSR, amending the existing registrations and starting a court action seeking an extension of time to register their interest on the PPSR to the date of the new registrations.
Court findings
The court action failed. Importantly:
1. A third party searching the PPSR correctly (i.e. using the ACN) would not have uncovered Alleasing‘s security interest. The defect was therefore seriously misleading.
2. The fact that the 9 digits of the ACN were also the last 9 digits of the 11 digit ABN was irrelevant. The registration was defective.
3. The judge declined to extend the time of registration of Alleasing’s security interest to the date of the correct registration. It has power to do so if there was an accident, inadvertence or other sufficient cause. However, in the present case, Alleasing’s security interest had already vested in (i.e. been transferred to) OneSteel upon the appointment of the administrators. This could not be undone by extending the time to register to a time after the administrators were appointed.
Summary
Alleasing potentially lost vast sums of money. The case demonstrates how vital it is to ensure PPSR registrations are precise.
If you uncover errors in the registration of existing security interests, it is essential to apply to court for relief to extend the period for registration as soon as possible. Once an administrator is appointed, it will be too late.
If you require assistance with any concerns you have about PPSR registrations, please contact Tony Scoglio or David Tooth of Scoglio Law to discuss.