A “Maiden” PPSA Decision: Are your security interests perfected?
Re: Maiden Civil (P&E) Pty Ltd v Queensland Excavation Services Pty Ltd & Ors NSWSC 852
The first significant decision concerning priorities between security interests under the Personal Property Securities Act 2009 (PPSA).
Summary of the Maiden Facts
Queensland Excavation Services Pty Ltd (QES) owned 3 civil construction vehicles (Caterpillars) which had been leased to Maiden Civil (P&E) Pty Ltd (Maiden). QES and Maiden had not entered into a formal written lease for the Caterpillars, however Maiden had been in possession of the Caterpillars for more than 12 months, had been invoiced periodically by QES for the use of the Caterpillars, and the Caterpillars were emblazoned with Maiden’s name. In May 2012, Maiden entered into a Loan Agreement and General Security Deed (GSD) with Fast Financial Solutions Pty Ltd (FAST). The GSD attached schedules listing Maiden’s property, which included the Caterpillars, and granted Fast a security interest in the Caterpillars (amongst other property). Maiden defaulted under the GSD (and was ultimately liquidated). Fast appointed receivers who commenced proceedings for possession of the Caterpillars, two of which had been re-let on a short term lease by QES (upon Maiden’s default under the lease) and one which had been taken by another defendant to the proceedings who also claimed a right to the Caterpillar (which claim failed). QES claimed that it was the true owner of the Caterpillars and argued its rights to the Caterpillars fell under the transitional provisions of the PPSA because the lease agreement with Maiden came into existence prior to the commencement of the PPSA. The receivers argued that Maiden was the true owner of the Caterpillars.
Justice Brereton found that:
- ownership of one of the Caterpillars belonged to Maiden as a result of the construction of the finance and lease arrangements between QES and Maiden for the Caterpillar, and QES was the true owner of the remaining two Caterpillars;
- as for the remaining two Caterpillars, there was ultimately no dispute as whether both QES and Fast had a security interest over the Caterpillars. Although QES may have been the true owner of those two Caterpillars, its interest had been deemed by the PPSA to be a security interest (PPS lease) which had not been adequately protected under the PPSA. The question to be determined was one of priority of the security interests;
- in examining section 19(5) of the PPSA the Court followed the lead of New Zealand and Canadian legislature and courts and found that Maiden had not only possessory rights over the Caterpillars, but also proprietary rights, even though it was not the owner of the Caterpillars;
- as a result, Maiden had validly granted to Fast a security interest within the meaning of the PPSA and that security interest was enforceable against Maiden pursuant to s 19(1) of the PPSA.
- this was despite that Maiden no longer had any right to possession of the Caterpillars under leases which were now terminated as s267 of the PPSA vested the interest of the unperfected security in Maiden on commencement of the Maiden administration.
- section 55(3) of the PPSA regulates priorities between competing security interests under the PPSA and because the QES leases were not perfected, and the Fast security interests under the GSD were perfected (because it had been registered), Fast’s security interest over the Caterpillars had priority;
- the transitional provisions of the PPSA could not save QES, because QES had not registered its security interests under the applicable pre-PPSA state register for motor vehicles.
Why is Maiden important?
The Maiden decision is important as it is the first authoritative case that considers the requirements of “perfection” under the PPSA. The decision also confirms that:
- the dispute concerning competing security interest is not a dispute about “ownership”, but one of “priority”;
- a perfected security has priority over an unperfected security, regardless of “ownership”;
- property owners and their financers are at risk if they fail to register their interests in the property on the PPSR if their goods are, by lease or bailment, in the possession of another;
- transitional security interests in motor vehicles will be denied if those security interests were not registered on the pre-PPSA state equivalent register prior to the PPSR.
As an owner of property, or a holder of securable interest under the PPSA, don’t assume that the transitional provisions will protect you. You must ensure that all secured interests are registered on the PPSR. Registration is the key to the protection of secured interests.
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