A recent Federal Court decision is a reminder of the impact of the vesting provisions under the Personal Property and Securities Act (PPSA) and the importance of timely registration of security interests.
In Pozzebon (Trustee) v Australian Gaming and Entertainment Ltd, in the matter of Australian Gaming and Entertainment Ltd (in liq)  FCA 1034, Justice Collier considered whether a security interest created between a lender and a company within six months of the company going into voluntary administration had 'vested' in the company for the purposes of section 588FL(2) of theCorporations Act 2001 and section 21 of the PPSA.
Section 588FL provides that where a security interest is created within six months of certain insolvency events (in this case, the company being placed into voluntary administration) the security interest will vest in the company if:
- it was perfected by registration and by no other means; and
- the registration did not occur within 20 business days after the relevant security agreement giving rise to the security interest came into force.
The lender argued that the interest had been perfected by 'attachment' and 'enforceability' and 'effective registration'. The court rejected this argument, making it clear that attachment and enforceability are mandatory prerequisites to perfection under section 21 of the PPSA and do not of themselves constitute 'other means' of perfection. The lender failed to establish that the security interest had been perfected other than by way of registration.
Since registration did not occur until five months after the security agreement came into force, the security interest vested in the company and the lender had to proceed in the liquidation as an unsecured creditor.