Personal Property and Securities Register (“PPSR”) - Timely registration of security interest
Tim Elliott
Arnold Siu
1. Background
The importance of timely registration of security interests was demonstrated in a recent Victorian
Supreme Court case of Relux Commercial Pty Ltd (in liq) v Doka Formwork Pty Ltd [2014] VSC 570.
2. Facts
Doka Formwork Pty Ltd (“Doka”) had leased formwork equipment (“Equipment”) to Relux
Commercial Pty Ltd (“Relux”) since March 2013 for indefinite periods. The Equipment was leased
and then delivered to Relux on different dates as follows:
1) prior to 1 January 2014;
2) on or about 26 February 2014; and
3) on or about 14 March 2014.
However, Doka’s interest in the Equipment was not registered on the PPSR until 20 February 2014.
Administrators were initially appointed to Relux on 7 April 2014 and later, the administrators were
appointed as liquidators on 16 May 2014. As Relux were in possession of the Equipment, the
liquidators applied to the Court to seek declaratory relief regarding whether Relux or Doka had the
superior right and interest in the Equipment.
3. Law
The leases between Doka and Relux fell within the definition of a security interest and a PPS lease
under the Personal Property and Securities Act 2009 (Cth) (“PPSA”). Section 12(3)(c) of the PPSA
provides that a security interest includes the interest of a lessor or bailor of goods under a PPS lease,
while section 13(1)(b) of the PPSA provides that a PPS lease includes a lease or bailment of goods for
an indefinite term.
As such, the Court in this case was asked to apply section 588FL of the Corporations Act 2001 (Cth)
(“Act”). Section 588FL of the Act provides that certain security interests covered by the PPSA that
are not registered on the PPSR within a certain time, vest in a company that is being wound up or in
administration.
According to section 588FL(2)(b) of the Act, a security interest in collateral, the subject of this case,
must be registered by the latest of the following:
1) 6 months before the date of administration or liquidation; or
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2) the earlier of 20 business days after:
a. the date that the lease agreement gave rise to a security interest; or
b. the date of administration or liquidation.
In this case, 20 business days after the dates where the lease agreements gave rise to the security
interests in the Equipment were the latest dates for registration of the security interests for all three
leases as these dates all fall before the date of administration and were later than the date which
was 6 months before the date of administration.
4. Outcome
Lease commencing prior to January 2014
For the Equipment leased prior to January 2014, it was considered that the security interest in this
Equipment had to be registered by 19 February 2014 at the latest by Doka (to fulfil the 20 business
day requirement). As Doka only registered their interest on 20 February 2014, the Equipment, the
subject of this lease would vest in the insolvent Relux, pursuant to section 588FL of the Act. As such,
despite Doka being the owner of the Equipment, Relux’s liquidator was now entitled to it.
Lease commencing 26 February 2014
20 business days after 26 February 2014 is 27 March 2014. As such, Doka had registered on time and
the Equipment which was the subject of this lease would vest in Doka pursuant to section 588FL of
the Act.
Lease commencing 14 March 2014
20 business days after 14 March 2014 is 11 April 2014. As such, Doka had registered on time and the
Equipment which was the subject of this lease would vest in Doka pursuant to section 588FL of the
Act.
5. Implications
Implications arising from this case are as follows:
1. registration of security interests is highly important and should occur as soon as possible
following the creation of security interests;
2. this case can be considered as good guidance as to how Courts are treating and interpreting
the PPSA given that this is the another major case to consider these issues in Australia,
following Re: Maiden Civil (P&E) Pty Ltd v Queensland Excavation Services Pty Ltd & Ors
[2013] NSWSC 852.
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