In the decision 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 [2013] NSWSC 852, the Supreme Court of NSW found that an unperfected Personal Property Securities Act 2009 (Cth) (PPSA) security interest held by a lessor (and owner) of machinery vehicles was inferior to a subsequent, perfected, security interest.

This is the first major decision under the PPSA and clearly highlights the consequences of failing to perfect a lessor security interests by registration under the PPSA.  It also highlights the guidance that the courts will take from the New Zealand and Canadian interpretations of their respective personal property securities legislations.

WHAT HAPPENED?           

In 2010 Queensland Excavation Services Pty Ltd (QES) purchased caterpillar vehicle machinery.  QES leased the caterpillars to Maiden Civil (P&E) Pty Ltd (Maiden).

It was common ground that QES’ interest in the caterpillars was a “security interest” within the meaning of the PPSA.  That interest arose under section 12 of the PPSA which defines a “security interest” to include the interests of a “lessor or bailor of goods under a PPS Lease”.  A “PPS Lease” includes a lease or bailment of goods for a term of more than one year in circumstances where the lessor is regularly engaged in the business of leasing goods.

QES’ interest in the caterpillars could have been registrable on the Northern Territory motor vehicle register (before the PPSA commenced), however, QES did not effect any such registration.  It also did not register its interest on the PPS Register (PPSR) after the PPSA commenced. 

In May 2012, Maiden obtained a loan from Fast Financial Solutions Pty Ltd (Fast) and provided a security interest in the caterpillars to Fast as security as if it were the owner of the caterpillars.  Fast perfected that security interest by registering it on the PPSR.

After an event of default by Maiden, Fast appointed a receiver over Maiden’s assets; Maiden subsequently went into administration and then liquidation. 


One not familiar with the operation of the PPSA would be forgiven for questioning how Maiden, as mere lessee of the caterpillars, was able to provide Fast with a security interest in the caterpillars themselves, rather than a security interest in the lease.  However, section 19(5) of the PPSA provides that a grantor of a security interest has rights in goods that are leased to it under a PPS lease when it obtains possession of those goods.  Importantly in this case, the Supreme Court confirmed that those rights of a lessee are not limited to possessory rights under the PPS lease, but include proprietary rights.  In making this statement the court relied on New Zealand and Canadian case law.


Having determined that both QES and Fast had security interests in the caterpillars, the question that remained for the court was which interest took priority?  In considering that question, the fact that QES was the lawful owner of the caterpillars was of no significance.

Rather, what mattered was whether and when each security interest was perfected.  In the case of QES’ security interest, the fact that QES had not registered its interest on the Northern Territory motor vehicle registry (which is a transitional register under the PPSA) meant that it did not obtain the benefit of deemed perfection otherwise applicable to transitional security interests.  That being so, the court found that Fast’s perfected security interest had priority over QES’ unperfected security interest.

However, QES’ failure to register the interest under the PPSA also meant that the security interest was not perfected when Maiden went into administration.  As a consequence, by virtue of section 267(2) of the PPSA, QES’ security interest vested in Maiden upon it entering into administration.  The court found that the practical effect of this is that QES’ security interest as lessor of the caterpillars was extinguished.  That is, QES no longer had any interest in the Caterpillars and Maiden held them subject only to the perfected interest of Fast. 


In essence, the decision confirmed that the nemo dat rule – that “no one gives what they don’t have” – is no longer the leading principle.  But this does not mean that lessors of goods are without protection from the effects of the PPSA.  Lessors can protect themselves by:

  • being aware of what constitutes a PPS lease and, therefore, is subject to the registration requirements under the PPSA; and
  • registering on the PPSR any lessor security interests created under a PPS lease without delay.

The important message to remember is that lessors under PPS leases will not be able to rely on their title to the leased goods in circumstances of a competing security interest in those goods and that the key to protection is registration.