If you lease, hire or loan vehicles, equipment or other assets and do not register your interest in that property on the Personal Property Securities Register (PPSR), you risk losing your interest in those goods. The Personal Property Security Act(PPSA) effectively reduces the concept of property ownership to an ‘interest’ – ownership will no longer automatically entitle you to retain possession of an asset.
Two recent cases highlight the dangers of failing to register on the PPSR.
According to media reports, US energy company APR Energy is embroiled in litigation with the receivers of the Forge Group (Forge) over who is entitled to possession of four gas turbines worth approximately $50 million. The turbines belong to APR but were leased to Forge. APR’s interest was not registered on the PPSR.
The receivers of Forge claim that the lease of the turbines constituted a security interest under the PPSA and that APR’s failure to register on the PPSR means the gas turbines have vested in Forge and APR’s interest in the turbines has been extinguished. If the receivers succeed in the legal proceedings, the gas turbines can be sold to benefit Forge’s creditors.
The second case, White v Spiers Earthworks Pty Ltd, also resulted in a property owner losing its right to $1.4 million worth of assets. In 2010, Spiers agreed to hire out vehicles and trailers to BEM Equipment Pty Ltd (BEM). Spiers did not register its interest in the hired goods on the PPSR. In July 2013, receivers were appointed to BEM. Spiers argued that the appointment of receivers was an event of default under the hire agreement and therefore it was entitled to retake possession of the goods. The Court disagreed and held that the appointment of receivers resulted in the goods vesting in BEM and in the extinguishment of all of Spiers’ rights in the goods. The case is currently subject to appeal.
The full decision is available here: White v Spiers Earthworks Pty Ltd  WASC 139
Unfortunately, the PPSA is here to stay. While the chances of one of your customers becoming insolvent may seem remote, we urge you to treat each transaction with the utmost caution. If it looks like a PPSA transaction, it probably is. There are simple things you can do to safeguard your interests in your vehicles and equipment. Please contact us to help you do just that.