When landlords or bailees take possession of uncollected goods, they may be exposed to loss of priority due to the application of the PPSA. The risk can be mitigated by registration on the PPSR, by contractual drafting to avoid the creation of a security interest or by the application of uncollected goods legislation. But in what circumstances will such measures be effective against a liquidator or third-party claimant to the goods?
Last Tuesday morning I presented a seminar to the ARITA Vic/Tas annual conference on the problems facing insolvency administrators, landlords and bailees arising from the introduction of the PPSA.
A copy of the paper presented and the overheads from the seminar are available at the links:
It is common practice that landlords fail to register leases on the PPSR even though they have security interests over the goods of a defaulting tenant. They can be left vulnerable to vesting risk and disputes with third parties over title to goods when they want to dispose of them.
It is possible to structure a lease so that rights over uncollected goods do not give rise to a security interest, by use of deemed abandonment.
Even where security interests vest, or are otherwise lost, interests in uncollected goods can be claimed by a landlord in possession or by other bailees if they arise at law, such as common law, equitable or statutory liens. The so-called “uncollected goods” legislation in each state and territory provide protection of this kind.
See the seminar paper for an exploration of these issues looking recent cases I have appeared in dealing with these issues, and other authorities. The cases include:
Some time in late 2019 I received the invitation to present this seminar from Adrian Hunter, secretary of the Vic/TAs committee. Who would have thought then that the presentation would be delivered almost 2 years later! Luckily fortune smiled on this year’s conference which went ahead just before the most recent lockdown. It was great to be able to present to a live audience for the first time in quite a while.
In this case the Federal Court confirmed, perhaps unsurprisingly, that intellectual property, as an intangible, is “personal property” for the purposes of the PPSA and capable of being subject of a security interest by means of retention of title.
The defendant, GrowthOps, argued that a “conditional sale agreement” capable of giving rise to a security interest by reason of section 12(2)(d) of the PPSA is limited to tangible goods and excludes intellectual property rights.
The essential point defeating GrowthOps was that, in substance, its contract withheld title to the subject intellectual property until payment for the same was made by its debtor and accordingly amounted to a security interest within the broad meaning of section 12(1) of the PPSA, which does not mention or require that the subject personal property be tangible.
The case involved the sale of various business and assets of the failed Sargon Group. Sargon Group promoted itself as a “tech-driven trustee services, fund operations and custodial services” business with more than $55 billion in assets under trusteeship or supervision.
The group consisted of some 39 companies, which were the subject of a range of secured claims by different secured creditors.
The administrators of some of the companies in the group negotiated a sale of businesses and associated assets in April 2020. The administrators sought and obtained leave of the court to dispose of encumbered property subject of the sales pursuant to section 442C(2)(c) of the Corporations Act 2001 (Cth) (CA).
After completing the sale, the administrators paid the proceeds into Court where various competing secured creditors, as defendants, laid claim to the proceeds in a subsequent trial.
GrowthOps claimed to have developed and supplied software systems that were sold by the administrators in the sale of business. GrowthOps claimed that it had retained title to the relevant IP (called the “Developed IP” in the contract and the judgment) in clause 7.1(a) of its contract with Sargon Capital, the relevant Sargon entity. The clause stated:
All Intellectual Property Rights in the Services and Deliverables (Developed IP), except any GrowthOps Background IP or its service methodology and knowledge, vests in Sargon immediately upon payment to GrowthOps for same, and GrowthOps hereby assigns, and must procure that its personnel assign, all Intellectual Property Rights in the Developed IP To [sic] Sargon. GrowthOps agrees to do all things which may be necessary for these ownership rights to pass to Sargon. At Sargon’s request, GrowthOps must provide, and ensure that its personnel or sub-contractors provide consents to or waivers of any moral rights in specific Developed IP. This clause does not in any way derogate from the ability for GrowthOps to utilise the same service methodology for other clients.
Sadly for GrowthOps, it had failed to register its rights under the contract on the PPSR before the appointment of the administrators. At trial GrowthOps sought to escape vesting of its interest pursuant to section 267 of the PPSA.
The substantive defences pressed at trial were:
On creation of the Developed IP, there was an implied licence to Sargon to enable Sargon to use it pending transfer of title on payment, and the PPSA does not apply to rights under a licence: see s12(5)(a) of the PPSA.
A “conditional sale agreement” in s 12(2)(d) of the PPSA is implicitly confined to goods. The implicit limitation to goods was said to arise from the fact that s 12(2) contains a list of expressions which can only relate to goods. It further argued that the expression “conditional sale agreement” is familiar in the context of a sale of goods and, in s 6 of the Goods Act 1958 (Vic), there is a reference to a sale of goods being conditional or unconditional. Further, s 19(5) of the PPSA refers to a conditional sale agreement of goods.
There was in fact no sale of anything, and therefore no conditional sale agreement. Rather, there was a provision of services for a fee, incidental to which there was creation of intellectual property which was transferred upon payment of the fee.
As a logical extension of 3, the transaction did not, in substance, secure payment or performance of an obligation. Clause 7.1(a) merely spelled out the time at which title in the “incidental” Developed IP would pass to Sargon Capital. Clause 7.1(a) did not secure payment since even if the fees remained unpaid, Sargon Capital continued to enjoy the use of the Developed IP through the implied licence.
Sargon Capital itself advanced an alternative argument that, on its proper construction, clause 7.1(a) effected an immediate assignment of copyright (upon its creation) to Sargon Capital (allowing it to use those rights as an assignee), whilst stipulating that the copyright would not vest in Sargon Capital until payment had been made (at which time the copyright would permanently vest in Sargon Capital). Sargon Capital argued that s 197 of the Copyright Act distinguishes between the “vesting” and “assignment” of copyright. It argued that the vesting of property carries with it a notion of permanency whereas an assignment may be limited or conditioned and is capable of being revoked or ended by the assignor.
The Court (O’Bryan J) disposed of the arguments as follows.
First, the implied licence was not relevant. The subject of the sale was not that licence, but the underlying Developed IP.
Second, that the Developed IP is an intangible was also irrelevant:
The transaction was within the scope of the definition of security interest within section 12(1).
That definition which extends “to an interest in personal property” is not restricted to tangible goods: there are many instances of transactions caught by the PPSA that apply only to intangibles.
The list of transactions in section 12(2) are examples, are not exhaustive and are not a code. The fact that some can only apply to tangible goods does imply that the act applies only to tangibles.
GrowthOps could offer no reason why the purposes of the PPSA would be served by such a narrow construction. The stated purpose (from the explanatory memorandum) of introducing the PPSA was to achieve “more certain, consistent, simpler and cheaper arrangements for personal property securities.” Excluding intangibles would undermine that purpose.
Third, the transaction was not a fee for service. The contract contemplated the creation and vesting of the Developed IP in Sargon Capital upon payment of the fee owing to GrowthOps. It was accordingly an exchange of money for both services and the transfer of IP.
Fourth, the transaction did secure payment by withholding title to the Developed IP, despite the existence of the implied licence, because that licence would cease on termination of the agreement, whereas title would be permanent. There was accordingly an incentive to pay the outstanding amounts due, to secure title.
The Court also rejected the distinction between vesting and assignment of copyright advanced by Sargon Capital. Assignment of copyright was the means by which title was to be transferred, and vesting was the consequence of the assignment. In other words, the terms are related and “assignment” results in “vesting”. They are not separate or distinct forms of rights transfer.
This case is another striking example of the need to register security interests on the PPSA. In my view the result was not surprising, certainly in my experience practitioners have rightly assumed that intangible property is caught by the PPSA. In addition to the reasons given by the court, the term “conditional sale agreement” is not defined in the PPSA nor is it expressly limited to goods on its face nor is there any apparent reason to imply such a limitation.
The defences run by GrowthOps were nevertheless creative and perhaps may have been better left untested by a judicious compromise with the administrators before trial.
Last week I delivered an update on developments in PPSA case law to an audience at Leo Cussens, an update I present twice each year. The seminar covered 10 recent cases and was part of a morning of presentations on the PPSA by various speakers.
A copy of the paper and overheads presented at the seminar can be found here:
Keon Pty Ltd as trustee for Keon Family Trust v Goldfields Equipment Pty Ltd (InLiquidation)  WASC 61, a harsh lesson for a lender relying on an (undrafted) agreement to provide a charge as a security interest (the lender failed)
Allied Master Chemists of Australia Limited, Re  NSWSC 291, an extension of time case under s588FM where the court did not require a Guardian Securities order mainly because the borrower was a large listed pharmaceutical group with no material insolvency risk
Everlyte Ltd v Registrar of Personal Property Securities  AATA2584, a demonstration that an ownership interest of itself, not securing payment or performance of an obligation, is not a security interest. The applicant was the owner of a stolen helicopter who registered its interest on the PPSA as owner after the theft.
The insolvency reforms aimed at helping small businesses through insolvency, passed in the The Corporations Amendment (Corporate Insolvency Reforms) Act 2020, commenced on 1 January 2021 without much take up.
On Monday 1 February 2021 I had the pleasure of speaking with the the CPA Insolvency & Reconstruction Discussion Group in Melbourne, at the invitation of Hugh Milne, about my thoughts on the reforms now they have commenced.
So far no one has actually commenced an insolvent administration under the new part 5.3B, but it’s only been a month.
Five companies have lodged declarations under section 458E of the Act in which they indicate an intention to appoint in the future, and gained the advantage of temporary restructuring relief against winding up and insolvent trading claim through to the end of March.
Hardly the flood of insolvencies that the part was introduced as a cheap and quick way to disperse.
In the discussion I pondered:
if political rather than reform imperatives were involved in the rush to legislate, perhaps explaining why submissions from the industry bodies, lawyers and accountants were largely ignored
is the typical company eligible to use the part as rare as a unicorn: whether the barriers to qualify for using the part (tax lodgement and employee entitlements) will leave it largely unused
will directors will have the credit or cash available to trade through the reconstruction period of at least 35 days, given that trade-on creditors of the company will have no recourse to company assets during the reconstruction period
whether the $1 million debt threshold is really too low given that contingent and future claims appear to be captured within it, in the final set of regulations.
A copy of the presentation powerpoint slides can be found here:
The outline of the Federal Government’s small business insolvency reform package, to introduce a debtor in possession model for incorporated businesses with less than $1 m in debt, have been covered elsewhere. This package was announced just after 4pm yesterday. A copy of the Treasurer’s media release can be found here. The lease also includes a link to a “Insolvency Reforms Fact Sheet” here. A useful summary of the proposed changes, by my colleague at the Victorian Bar, Carrie Rome-Sievers, can be found here.
Some thoughts that immediately spring to mind, from a PPSA perspective and generally follow.
Is the appointment of a “Small business restructuring practitioner” (SBRP) also going to trigger vesting under section 267 of the PPSA? Or will vesting not occur if and until an administration or liquidation occurs. A security interest which is unperfected vests in corporations which are wound up or enter into a voluntary administration or DOCA (s267(1)). The underlying policy principle behind vesting is to aid unsecured creditors in the insolvent administration left unaware of the unperfected security interest.
Presumably voidable transactions will continue to be recoverable only in liquidation. When will the relation back period commence for a subsequent liquidation? Will it be from the appointment of the SBRP, or will it be the date on which the voluntary administration is taken to commence? If it is the latter, the appointment of a SBRP will be a tool that can be used to manipulate the relation back period to protect voidable transactions. See the discussion in my article on this issue, relating to the manipulation of the relation back period by VA appointments.
The proposal requires all employee entitlements to be paid before a SBRP can be appointed. What entitlements? Arrears of wages and superannuation? What about unpaid accrued leave entitlements? Presumably contingent claims like amounts due on retrenchment are not included. Are such payments protected from preference claims in future liquidation?
Whilst the debtor is in possession, the business continues to trade for 20 business days whilst devising a turnaround plan. What is the status of debts incurred in this period? Is the owner/director personally liable, because the SBRP is not. This seems to be a serious flaw compared to the personal liability of administrators in the same position. It would seem to me that trade creditors would be reluctant to extend any credit once a SBRP was appointed without some security.
The new regime is set to apply from 1 January 2021, yet as others have noted today, there has been little or no industry consultation with respect to devising the proposal. Presumably that will follow in coming months, however the process of baking the pie seems somewhat arse end around (apology for the mixed metaphor).
The regime includes a transitional period from 1 January 2021 to 31 March 2020, anticipating that there will not be enough trained SBRPs to meet the demand at the start. In this period businesses will be able to declare an intention to access the new process and thereby extend statutory demand and insolvent trading relief for the same period, as long as they appoint someone before 31 March. It seems to me the transition will introduce an added layer of uncertainty. I would imagine many business owners will choose the transition option to buy another 3 months of trading time.
It has been suggested, but I have not verified, that the proposal is a lift from a similar reform brought into law in the UK in June. See the attached link to a summary of the Corporate Insolvency and Governance Act 2020) (UK) prepared by Norton Rose Fulbright. It certainly looks very similar. That may explain how this proposal has been put together inside Treasury without much external input.
SBRPs appear to be paid a fee bargained with the debtor as a percentage of the “disbursements under the plan”, presumably a percentage of the payments made to creditors. What happens if the SBRP is not content with the fee offered?
The process is said to be available only to incorporated businesses. Sole traders are not mentioned. Yet sole traders make up a sizeable proportion of small businesses in Australia. Are parallel changes going to be made in bankruptcy? Part X arrangements going to be harmonized for example?
Only incorporated businesses with liabilities less than $1 million can use the process. How is the debt under the cap calculated? Is it limited to actual debts of that amount, or are contingent debts included? Will uncrystallised claims count, say under a premises lease or equipment lease? What about liquidated damages or penalties accruing in default under operational contracts, such as in construction?
The role of SBRP can be filled by persons other than a registered liquidator: who in practice is going to take on the role other than registered liquidators? Remembering that at law, if not in practice, voluntary administrators are not limited to registered liquidators, yet the latter are nearly always used.
I delivered a case law update to the Leo Cussens PPSA Half Day Seminar on Thursday morning, along with some excellent other presenters. One of the cases considered is Dalian Huarui Heavy Industry International Company Ltd v Clyde & Co Australia  WASC 132, a case involving an iron ore project in WA and security interests in funds paid into trust pending an arbitration over construction work. A copy of the paper is at the link.
The Dalian decision is particularly important for solicitors acting for judgment or arbitration creditors who obtain security for their claim prior to trial. The WA Supreme Court recognised that security lodged with a trustee (eg a solicitor acting for a party) by agreement will constitute a security interest for PPSa purposes. In this case Dalian failed to register but, through fortunate circumstances of the case, had become seized of full beneficial ownership of the security amount before the appointment of a liquidator. A happy $27 million piece of luck.
I recently presented a paper to Leo Cussens during a half day PPSA conference on the topic recent developments in the PPSA. A full copy of the paper can be found at this link: Leo Cussens – PPSA – 23.5.19
The PPSA is relatively new (for a law at least) and so the Courts are still working through the legislation as cases come before them. Many recent cases consider relatively straight forward aspects of the legislation.
As such, they are not of great significance other than as a demonstration of principle. In the matter of O’Keefe Heneghan Pty Ltd (in liq) & Ors (2018) NSWSC 1958 (O’Keefe) is one of those cases, considering the continuing super-priority of approved deposit taking institutions (ADI) (usually banks or non-bank financial institutions) under the Act.
One significant development has been repeated demonstration of the drastic consequences of failing to identify a grantor by its proper identification number, leading to a lot of decisions considering efforts to overcome such errors. The problem was identified to drastic effect for the secured creditor in OneSteel Manufacturing Pty Ltd (administrators appointed) (2017) NSWSC 21.
There has been a rash of subsequent cases grappling with the same issue from different angles, and the recent case of Psyche Holdings Pty Limited (2018) NSWSC 1254 (Psyche) is one of them.
Takeout: An ADI has super priority over ADI Accounts under its control, even where it has failed to register its security interest, since it is able to perfect its security interest by control of the ADI account. That follows since the account is held with it and is at all times the balance is under its direct control. An ADI which has perfected by control is entitled to follow its security interest out of the account into the control of others without losing its priority. Secured creditors who are not ADIs should be on notice that their priority will virtually always be secondary when competing against an ADI which has perfected by control, even after registration of their secured interest.
Takeout: It is very important to register a security interest in accordance with the requirements of the PPSA, particularly with regard to time limits and the form of application. That is particularly so with regard to use of an ABN or ACN in appropriate cases. If a security interest is not validly registered within time limits set by the PPSA, the secured party may lose priority or may lose the interest completely. While the Court has a discretion to order an extension of time for registration, the ability of the Court to grant extensions is limited and uncertain. Practitioners should not assume that an extension of time will be available on application to the court.
The courts continue to hammer out the meaning of various basic provisions of the PPSA.
The decision in Forge Group Power Pty Limited (in liquidation)(receivers and managers appointed) v General Electric International Inc  NSWSC 52 looked at two issues dealing with the reach of the PPSA to leases:
What constitutes “regularly engaged in the business of leasing goods”
What is a fixture for these purposes?
The Personal Property and Securities Act 2009 (Cth) (PPSA) introduced a new national code for determining the priorities of security interests in personal property., where primacy is given to registered interests.
Prior to the introduction of the PPSA, a owner of personal property, as a lessor, had all the common law rights of an ownership against the world, including to recover that property. Those rights were largely subject only to the terms of any transactions the owner entered with third parties affecting those rights: for example, by leasing, charging, pledging, bailing or selling the goods.
However, under the PPSA, the rights of ownership under a goods lease are affected when they are registrable security interests. A security interest arises where, in substance, an interest in personal property provided for by a transaction secures payment or performance of an obligation: section 12(1) of the PPSA.
Ownership interests under a Lease – the PPS Lease
Difficulties arise in relation to leases under registration schemes, because it is necessary for legislators to distinguish between leases that are in substance a financing arrangement which secure a payment or obligation (finance leases), and leases that are pure leases exacting payment only for use of the property before it is returned (operating leases). Examples of the former might include a long-term car lease, over a period of 3 years, with no residual or an agreed balloon payment. An example of the latter might include a 7 day car-hire for a daily fee, with the vehicle returned at the end of the hire.
There is a grey area between the two concepts, and room to argue whether a security interest arises or not, depending upon the term and financial structure of a lease.
Under the PPSA, the interest of a lessor under a lease will be registrable in several circumstances:
First, where in substance, the lease is a finance lease that creates an interest in the property that secures payment or performance of an obligation, and so falls within the general definition of a security interest. For example, a finance lease: see section 12(2)(i) of the PPSA;
Second, where the lease is a “PPS Lease”, irrespective of whether the lease is a finance or operating lease, but falls within the definition of PPS Lease: see section 13 of the PPSA.
The principal effects of failing to register are:
Where the lessee is bankrupted or enters into insolvent administration, an unregistered registrable security interest vests in the liquidator or trustee; and
priority is lost to holders of security interests in the property who are registered, for example a financing bank.
Generally speaking, a PPS Lease is a lease of goods that endures for a period of more than 12 months or is in respect of goods registrable by serial number:
It does not matter whether the lease is a finance or operating lease. Both are caught;
It includes leases where, by renewal or extension, the lease may or does continue for more than 12 months;
It includes a lease of goods that may or must be described by serial number (eg cars, aircraft and aircraft engines, watercraft, boats, certain intellectual property: section 13(1)).
If the lessor is not “regularly engaged in the business of leasing goods”, the lease is not a PPS Lease.
Further, if the property is a fixture, rather than personalty, the PPSA does not apply – see PPSA section 8(1)(j).
So why is it necessary to have PPS leases in the legislation? Why not just rely on the substance of the lease to determine whether it falls within section 12? There appear to be several reasons:
First, to eliminate the grey area between operating and finance leases, but to preserve from registration short term leases that are likely to be operating leases;
Second, to bring property identifiable by serial number completely within the registration scheme;
Third, the interest of a lessor under a PPS Lease is purchase money security interest for the purposes of the priority rules, and so takes priority over other secured creditors who are registered – see section 14(1)(c). It is notable that the interest of a lessor under a short term finance lease of less than 12 months is not a PMSI.
The Limits of Regularly Leasing and Fixtures
In Forge, General Electric International Inc (GE) had by an operating lease dated 5 March 2013 provided four gas turbine electrical generators to the plaintiff (Forge). On 11 February 2014, Forge went into liquidation. Prior to 22 October 2013, GE had operated a business in Australia of renting gas turbine power generation units. From that date, it sold the rental business and had assigned the benefit of the lease and the turbines. It also continued to supply replacement turbines on a temporary basis and free of charge, to its customers who required maintenance on turbines that GE had supplied.
GE argued that at the time of the liquidation it was no longer regularly in the business of leasing turbines. The submission was rejected, since:
the relevant date to assess that issue was at the date of lease, not the date of liquidation (at) and a the date of the lease it had not sold its business;
in any event, after the sale, GE continued to provide turbines on a replacement basis in the market, albeit where maintenance required it (at).
GE also argued the turbines were fixtures. Under section 10 of the PPSA a “fixture” means goods, other than crops, that are affixed to land. GE argued that the definition was a “bespoke” definition that differed from the common law. That submission was also rejected and the court found that the concept of fixture in the PPSA was the same as at common law (at ).
The turbines were found not to be fixtures on the facts. The key points included that (at ):
The turbines were truly portable, in that they were designed to be quickly demobilized and moved to another site, and were on wheeled trailer beds for that purpose;
They could be removed without damage to the land;
The cost of removal was modest compared to the cost of the turbines;
The turbines were rented for a short period, being two years, with limited renewals and were clearly intended to be removed in the future;
GE retained ownership and the lease specified that the turbines were personal property;
Forge was obliged to return them at the end of the term;
Forge did not own the site where they were installed.
Initial registration of a financing statement on the PPSR is very easy. You simply go to the Personal Property Securities Register (PPSR) website and follow the links, enter the prescribed data, pay a small fee and hit a button or two.
The ease of registration, compared to a paper based registry such as land titles or the former company charges register, makes the PPSR more open to abuse.
In Sandhurst Golf Estates Pty Ltd v Coppersmith Pty Ltd VSC 217 three companies had financing statements registered in respect of their personal property without basis. The registrations were maintained, in the face of demands to remove them, as leverage to pursue a claim one of the defendants had against Sandhurst and others. The claim was not to a security interest in respect of personal property, but rather a claim to some equitable interest in certain land. Accordingly, the claim was not registrable: see paragraphs  to  of the judgment of Robson J.
The financing statements following the administrative “show cause” process under the Personal Property Securities Act 2009 (Cth).
That was not the end of the matter – in this case the defendants threatened to, and did, make more registrations to pursue their claim. Each time a new financing statement, or financing change statement, is registered, then the administrative process has to be repeated. The administrative process is time consuming and expensive. In the meantime, before it resolves, the existence of a record of sham financing statements can adversely affect the innocent party, especially with its own financiers and may amount to an event of default.
In Sandhurst the plaintiff companies successfully sought injunctions restraining further financing statements, or financing change statements, from being registered by the defendants. The injunctions were obtained by the exercise of the Court’s inherent injunctive jurisdiction, rather than under any express power given to the Court by the PPSA: see paragraphs  to . The application is the first of its kind in Australia.
An application had also been made by the plaintiffs relying on s182 of the PPSA, but the Court did not need to deal with it. However it is notable,and perhaps an unintended omission from the PPSA, that the section does not contain an express power to enjoin registration of a financing statement, but does contain an express power to restrain the making of an amendment demand.
Further, having established the absence of any security interest in the plaintiff companies’ personal property, the Court found that the substance of the defendants’ claims to an equitable interest to be irrelevant. This meant that discovery in respect of those claims was not warranted, and that evidence and argument about those claims, except insofar as it was necessary to demonstrate the absence of a security interest, was not permitted. The finding prevented the disocvery process in the application itself from being used in an abusive manner. See paragraphs  to .
The author appeared as Counsel in the proceeding for the plaintiffs, instructed by Minter Ellison. Nick Anson, Partner and Jane Salveson, Special Counsel have prepared an interesting alert regarding this case and particularly the problems arising out of Sham registrations, which can be found here.
It is often the case that an error is made in the ACN, ABN or even name of a party, or in the serial number of collateral, when registering on the PPSR. The online nature of the registration process lends itself to typos or transcription errors.
The Supreme Court of NSW has found that a defect in the ACN of the secured party in a financing statement registered on the PPSR does not render the registration ineffective.
In Future Revelations, the secured party’s ABN number was entered instead of its ACN number.
The PPSA codifies which defect in the register make the associated registration is ineffective. It is important in practice to be aware of them:
Section 164 provides that a defect in the register will render the relevant security interest ineffective if it is “seriously misleading”, excepting defects prescribed in the regulations, or it if is defect mentioned in section 165.
The defects in section 165 are:
defects preventing disclosure of the registration by searching the serial number of the collateral where that detail is required for registration. An example would be omission of the serial number or an error in it;
where the serial number is not required, where a search by reference to the grantor’s details is not capable of disclosing the registration. An example might be an error in the name of the grantor, such as recording the name of a partnership as that of an individual partner, rather than that of the partnership;
where the registration is said to be in respect of a PMSI, but in fact is not;
otherwise as specified in the regulations.
At present no regulations have been made under sections 164 or 165.
What makes a registration defect “seriously misleading”? Since the PPSR is a register designed to enable the public to identify security interests in collateral, or security interests given by a grantor, errors are seriously misleading if they hinder or prevent a search turning up security interests by reference to the identifying details of the collateral or grantor.
In Future Revelations, Brereton J said at  to :
The suggested defect in this case is not one of a kind mentioned in s 165. The question then is whether it is “seriously misleading”. That term is not defined in the PPSA, nor is there any guidance in respect of its meaning in the explanatory memorandum or the second reading speech. However, as is well-known, the PPSA is modelled on and derived from similar legislation in Canada and New Zealand and, as was observed in Maiden Civil (P&E) Pty Ltd v Queensland Excavation Services Pty Ltd  NSWSC 852, the Commonwealth Parliament in enacting legislation that was modelled on the New Zealand and Canadian legislation should be taken to have intended approaches and interpretations applied by the Courts of those countries to their legislation to apply in Australia. A similar view has been taken in New Zealand.
Canadian case law suggests that the test for whether a defect is “seriously misleading” is whether it will result in the registration not being disclosed on a search [see Re Lambert (1994) 7 PPSAC (2d); GMAC Leaseco Ltd v Moncton Motor Home & Sales (2003) 227 DLR (4th) 154 at ]. That makes sense, as the purpose of registration is to enable the existence of the security interest in the collateral to be searched and ascertained. A person searching in the PPSR is likely to be concerned with the identity of the grantor and/or the collateral. In terms of searching the PPSR, while there is facility to search by reference to the identity of the grantor and the collateral, there is no facility to search by reference to the identity of the secured party.
In the present case, a search by reference to the identity of the collateral or the grantor would have disclosed the relevant security interest. Such a search would have identified clearly enough the secured party, namely Suncorp, even though its ABN and not ACN was stated. In my view, it is very clear that this defect was not seriously misleading or indeed for that matter misleading at all. Accordingly, it seems to me by operation of s 164(1) that the registration is not ineffective by reason of the defect that has been identified.
So errors in the details of the secured party will be not be fatal, provided the details in the registration in respect of the serial number of the collateral, or the grantor, as the case may be, is correct.
Practitioners need to be careful in checking transcription of the identifying details of the grantor and the collateral (particularly the serial number) when entering details on the PPSR website.
It is also worth noting that the application in Future Revelations was made urgently and ex parte, without formally filing process. The application was urgent since the borrower had just defaulted. Leave was granted to file process in Court, and an order was made giving liberty to apply to any administrator, liquidator or unsecured creditor to claim their interests could be affected by the order of the Court.
On 24 March 2013 I completed one of my bucket list ambitions, an Ironman triathlon.
Thanks to a number of donors I managed to raise $1,580 for the red cross in the process. Thanks to all of you who donated.
Here are some pics from the event, which I managed to complete in 15 hours, 9 minutes and 8 seconds.
It was a great day, lots of adrenaline and a massive sense of achievement. Also the hardest 7 hours and fifty minutes ever on a push bike riding into 35 km/h head winds, and a tough way to run a marathon for the first time.
Some special thanks to my wife and family for their patience and support over 12 months of preparation, to Bayside Triathlon Club athletes (esp IM athletes) and coaches Rob McNamara and Clint VB.