The introduction of the Personal Property Securities Act (PPSA) in Australia led to significant concern amongst business owners, financiers and various stakeholders on what rights they have under the legislation and requirements to ensure their rights are protected. To date there has been limited decided cases on the application of the PPSA to provide guidance to the finance industry however Hall Chadwick appointees have been involved in one of the first decisions made by the Supreme Court of New South Wales with respect to the PPSA.
In its judgement dated 27 June 2013, in the matter of Maiden Civil (P&E) Pty Ltd; Richard Albarran and Blair Alexander Pleash as receivers and managers of Maiden Civil (P&E) Pty Ltd & Ors v Queensland Excavation Services Pty Ltd & Ors  NSWSC 852 the Supreme Court of New South Wales dealt primarily with the rights of lessors, lessees and third party financiers on assets to which all claimed an interest. The decision is consistent with those previously made in Canada and New Zealand and confirm that the unregistered interest of a lessor will vest in an insolvent lessee and may be secondary to those of a third party financier who has registered their security interest over the lessee.
Key Issues & Findings
In coming to his decision Brereton J has confirmed the requirements on lessors to ensure their rights over assets are protected. The most critical being that perfection of a security interest is paramount to ensure the lessor’s position is maintained over their assets that are subject to various leases. Failing to do so can enliven the PPSA provisions and allow lessees and third party financiers to trump the position of the original lessor.
The case reflects the intention of the PPSA regime to provide priority to registered security interests and thus provides certainty to the finance community. It will be a useful precedent with respect to the future interpretation of the Act.
Your Hall Chadwick contact is available to discuss the implications of the case if you require further information.
This information has been shared by Jovandeep Singh of Hall Chadwick Chartered Accountants and Business Advisors.
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