The Personal Property Securities Act 2009 (Cth) (PPSA) is a national scheme for registration of 'security interests' over property (other than land) in Australia. The PPSA establishes an online register, known as the 'Personal Property Securities Register' (PPSR), which enables security interests to be registered online 24 hours a day, seven days a week.
A recent New Zealand case has confirmed that a party's right to 'step in' to take possession of plant and machinery to complete works remaining under a construction contract can constitute a security interest under the New Zealand equivalent of the PPSA.
In McCloy v Manukau Institute of Technology  NZHC 936, the principal, Hobson Gardens, purported to exercise step-in rights over hoists owned by its contractor, Mainzeal, upon Mainzeal being placed in receivership. The High Court of New Zealand held that Hobson's step-in rights constituted a 'security interest' for the purposes of the PPSA but that, because Mainzeal's financier, Bank of New Zealand, had previously 'perfected' its own security interests over Mainzeal's hoists by registering those interests on the PPSR, the Bank's security interest over the equipment trumped that of Hobson Gardens. Because the PPSA establishes a regime which prioritises 'perfected' security interests, Hobson Gardens' contractual right to seize and sell the Mainzeal's hoists as a means of recovering costs incurred by it in completing the remaining works were rendered unenforceable.
Whilst the circumstances of this case have not yet been tested in Australia, the decision provides a useful indication of the direction in which the Australian Courts might head when faced with similar facts. To protect their step-in rights, head contractors and principal under construction contracts should perfect any security interests in contractors' equipment upon execution of the relevant construction contract by registering those interests on the PPSR, and should not wait until exercising those step-in rights to do so