The Supreme Court of New South Wales considered what constitutes a “seriously misleading” defect in a security interest registration under section 164 of the Personal Property Securities Act 2010 (Cth). The key issue is whether the defect will result in the registration not being disclosed on a search of the PPS Register. While it was ultimately found that the recording of the secured party’s ABN rather than its ACN in a financing statement was not seriously misleading (because a search of the PPS Register would have identified the secured party), this case is a useful reminder of the need to take care when completing financing statements to ensure that an error does not result in the security interest not being effective.
Future Revelation Pty Ltd (Future) sought a declaration that registrations on the Personal Property Securities Register were effective despite the fact that the ABN of the secured party was entered on the financing statement instead of its ACN. Under the Personal Property Securities Act 2010 (Cth) (PPSA):
- a financing statement must include certain details of the secured party, including its ACN (where it is a body corporate) (section 153): and
- a security interest will be ineffective if there is a “seriously misleading” defect in any data relating to the registration (or there is a defect of a kind mentioned in section 165 (section 164).
In the absence of any definition of what is “seriously misleading”, Brereton J in the Supreme Court of New South Wales looked to Canadian case law (given that the PPSA is modelled on the Canadian legislation) which suggests that the test for whether a defect is seriously misleading is “whether it will result in the registration not being disclosed on a search.”
Brereton J noted that the purpose of registration is to enable the existence of a security interest in collateral to be searched and ascertained, and while there is facility in the PPS Register to search by reference to the grantor and the collateral, there is no facility to search by reference to the secured party.
On the basis of the above, Brereton J held that a search of the PPS Register would have disclosed the registration and as such, there was not a “seriously misleading” defect.
See the case.