The New South Wales Supreme Court in Maiden Civil (P&E) Pty Ltd v Queensland Excavation Services Pty Ltd clarifies the operation of the PPSR regime in respect of priority disputes and highlights the need for owners to be prudent in registering their security interest when entering into lease agreements.
Queensland Excavation Services Pty Ltd (QES) purchased three Caterpillar vehicles with finance from Esanda and Westpac. Pursuant to an informal agreement, these vehicles were leased to Maiden Civil (P&E) Pty Ltd (Maiden) who used the machinery for work in the Northern Territory. As well as paying the initial deposit for the purchase of the machinery, Maiden made periodical payments to QES that corresponded with the Esanda and Westpac loan repayment amounts plus 10%. QES did not register its interest in the machinery on the PPSR or on the Northern Territory Register of Motor Vehicles (NTRMV).
Following a period of financial hardship, Maiden sort short term finance from Fast Financial Solutions Pty Ltd (Fast). A general security deed was executed in respect of all Maiden’s property including the Caterpillar vehicles and this interest was perfected by way of registration on the PPSR.
Maiden defaulted under the agreement and Fast appointed receivers and managers to all of the company’s assets. Upon going into liquidation, the issue of priority in respect of QES and Fast’s interests arose.
The New South Wales Supreme Court recognized that Fast held a security interest as a result of the general security deed which had been perfected by registration on the PPSR.
Although QES held an interest in the Caterpillar vehicles as their owner/lessor, this interest was not perfected and was outranked by Fast’s interest. Although the PPSR regime was not in existence at the time the lease agreement was entered into, QES could have nonetheless registered their interest on the NTRMV. In failing to do so, QES was not entitled to temporary perfection as a transitional priority under the PPSA.
The decision highlights the need for owners of assets to register their interests in those assets, the dangers of failing to perfect a security interest and the costs of ignoring the PPSR regime.