A $50 Million Mistake? The Biggest Australian PPSA Case Yet

At stake are 4 gas turbines, apparently leased by APR Energy to Forge Group Limited and worth $50 million.

Since the introduction of the Personal Property Securities Act (Cth) 2009 (‘PPSA’), owners of goods who are regularly engaged in the business of leasing or bailing goods must register their interest on the PPSR if they:

1. grant a lease or bailment of serial numbered goods (such as motor vehicles, intellectual property, aircraft or watercraft) for more than 90 days; or
2. grant a lease or bailment of any other goods not fixed to land for more than 12 months or an indefinite period.

The PPSA means that merely relying on legal ownership of goods is no longer sufficient in these arrangements. Registration on the PPSR is critical.

A failure to register risks a loss of priority to other creditors who subsequently register or having the goods vest in the company upon the company’s insolvency – which is what the receivers of Forge Group Limited will be asking the Court to decide.

The question of what constitutes being ‘regularly engaged’ in the business of leasing or bailment has not yet been determined in the Australian courts, while the courts in other countries that have similar regimes have differing approaches.

Until it is resolved, a cautious approach should be taken and if owners are handing over possession of their goods to another in return for expecting some benefit (not necessarily monetary) and those goods will be out of their possession for the above timeframes, then registration on the PPSR is essential.

There are very strict timeframes for registration under the PPSA which must be adhered to, failing which the effect can be the same as not registering at all.

Businesses who ignore the operation of the PPSA do so at their own peril. Now is the time to:

1. get your terms and conditions checked;
2. develop policies to ensure effective and accurate registrations within the strict timeframes imposed; and
3. get your staff skilled up on PPSA.

If you would like more information on the PPSA and how it affects your business, please contact us to discuss your situation with one of our experienced lawyers. Kells can work with you to make sure that your business has the PPSA covered.