15 February 2017

PPSA Update

In the Matter of OneSteel Manufacturing Pty Ltd (Administrators Appointed) [2017] NSWSC 21

The recent decision of the New South Wales Supreme Court in OneSteel Manufacturing Pty Ltd illustrates (once again) the importance of strictly complying with the technical rules around the perfection of security interests through registration.

The case concerned a six year lease agreement entered into between Alleasing Pty Ltd (“Alleasing”) and OneSteel Manufacturing Pty Ltd (“OneSteel”) for mining plant and equipment valued in excess of $23 million dollars.  It was common ground that the lease was a Security Agreement, and was capable of being registered as a Purchase Monies Security Interest (“PMSI”).  If properly perfected, the security would have entitled Alleasing to “super priority” in recovery of its plant and equipment.

Alleasing registered its security interest by reference to OneSteel’s ABN.  The administrators contended that the security was one which was required to be registered by reference to OneSteel’s ACN, and that the defect was a seriously misleading defect in terms of section 165(b) of the Personal Property Securities Act 2009 (“PPSA”).

Section 153 of the PPSA requires financing statements to contain details prescribed by the regulations.  In the case of OneSteel, one such requirement was that the charge be registered by reference to OneSteel’s ACN.

A defect in registration will only render a registration ineffective where:

  1. the defect is seriously misleading; or
  2. the defect is one of the defects mentioned in section 165 of the Act.

In applying this test, it is the capacity to mislead which is crucial.  It is not necessary for the applicant to demonstrate that it (or anyone) was actually misled as a result of the defect.

Brereton J concluded that the defect was both:

  1. seriously misleading (for failure to comply with the regulations); and
  2. in breach of section 165(b) the Act in that a person searching the register by reference to the authorised search parameter (the ACN) would be misled into thinking that there was no interest lodged against the company.

As a result, the court concluded that the registration was ineffective.  As the security interest had not been perfected, Alleasing’s interest in the assets vested in OneSteel as a result of the operation of section 267 of the PPSA.

The court further concluded that there was no opportunity for Alleasing to make application to extend time for registration (in order to correct their mistake) once vesting under section 267 had occurred.


This decision reinforces the technical nature of the registration requirements under the PPSA.

The comments are equally relevant to the situation of (for example) trading trusts.  Under the regulation trust registrations must be recorded by reference to the trust ABN (rather than the ACN of the trustee company).

These issues of identification, together with strict time limits for registration for varying classes of collateral, suggest that insolvency practitioners will be justified in closely scrutinising PPSA registrations for the foreseeable future.

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