The Maiden Case – Bringing home the importance of registering your personal property security interests on the PPSR

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By: Kathleen Watt, Lawyer

In the matter of Maiden Civil (P&E) Pty Ltd; Richard Albarran and Blair Alexander Pleash as receivers and managers of Maiden Civil (P&E) Pty Ltd & Ors v Queensland Excavation Services Pty Ltd & Ors [2013] NSWSC 852

This recent case in the New South Wales Supreme Court has brought home the message loud and clear that perfection is more important than ownership.

In substance, this was a dispute between two parties over priority to three civil construction vehicles.  One party was the purported owner of the vehicles, Queensland Excavation Services Pty Ltd (“QES”), who had been leasing the vehicles to Maiden Civil (P&E) Pty Ltd (“Maiden”).  The second party was the secured creditor of Maiden, Fast Financial Solutions Pty Ltd (“Fast”).

THE STORY

Maiden Case 1

At the outset, QES bought the vehicles from Hastings Deering.  In leasing the vehicles to Maiden for it to use in its civil construction work, QES would receive periodic payments from Maiden.  The payments generally corresponded with purchase price payouts QES regularly made to Hastings Deering (Maiden paid an additional 10%).  When Maiden provided funds for the final payout by QES for one of the vehicles, QES ceased invoicing Maiden in respect of that vehicle.

Independently to this, Maiden sought finance from Fast and, in doing so, provided a list of assets to Fast which included the three vehicles.  Fast then proceeded to:

  1. Have the vehicles valued;
  2. Prepare a General Security Deed securing all present and after-acquired property of Maiden, including the vehicles which were detailed in a schedule attached to the Deed;
  3. Transfer the loan amount to Maiden pursuant to the Deed; and
  4. Registered the security interest on the Personal Property Securities Register (“PPSR”).

When Maiden defaulted under their General Security Deed with Fast, Fast exercised their enforcement rights in appointing receivers and managers of the secured property.

Both QES and the receivers and managers on behalf of Fast claimed they had rights to the vehicles.

THE OUTCOME

The Court held that QES had transitional security interests over the two vehicles that had not been fully paid out.

However, Fast’s registered security interest gave them priority to the two vehicles, because QES’ transitional security interests were capable of registration on a transitional register but were not so registered prior to the registration commencement time of 30 January 2013.

Lesson – EVEN IF YOU HAVE security interests that commenced prior to 30 January 2013, the transitional protection under the PPSA may not apply. Seek advice from us if you are unsure.

Even if QES had registered their transitional security interests on the PPSR, their interest would not have been enforceable against Fast because there was no agreement with Maiden in writing that covered the vehicles.

Lesson – IF YOU OWN PERSONAL PROPERTY that is leased to others, you need to ensure that:

  1. the agreement between the parties is in writing ;
  2. the written agreement describes or includes the personal property, is signed by the lessee and expressly disallows the lessee from granting further security interests in your property; and
  3. your security interest is registered on the PPSR.

Maiden Case 2

The Court held that Maiden was the true owner of the vehicle that had been fully paid out and that the arrangement was an agreement to transfer title upon discharge of the finance, based on the fact that QES stopped invoicing Maiden once the payouts to Hastings Deering were complete.

Fast was able to enforce their right to possess all three vehicles, two by way of their higher priority under the Personal Property Securities Act 2009 (Cth), and the third because it was held to be owned Maiden, as of right.

THE RESULT OF THIS CASE is a clear reminder to ensure that your personal property rights are properly defined, agreed upon in writing and secured, and well before the expiry of the transitional period on 30 January 2014.