Maiden Civil (PE) Pty Ltd: Richard Albarran and Blair Alexander Pleash as Receivers and Managers of Maiden Civil (PE) Pty Ltd & Ors v Queensland Excavation Services Pty Ltd & Ors  NSW SC582.
Read the case here.(link is external)
Introduction and background
After a sometimes anxious wait, at last there is a substantive decision of a Court considering some of the key provisions of the Personal Property Securities Act 2009 (Cth) (“PPSA“). The regime put in place by the PPSA commenced on 30 January 2012. On 30 and 31 October 2012, Brereton J in the Supreme Court of New South Wales heard the case of Maiden Civil, and late last month handed down a decision which gives the commercial and legal world some guidance on key provisions of the PPSA.
The judgment considers the operation of the attachment, perfection and priority rules under the PPSA, as well as the role of title, lease agreements, and the transitional provisions of the PPSA.
The decision, in short, has both confirmed the priority rights of a financier with a perfected security interest, and has established the primacy of a security interest over title. In this case, a later financier with a perfected security interest (Fast) took priority over:
(a) an earlier financier with an unperfected interest (QES); and
(b) the owner of the collateral.
The collateral in question was 3 Caterpillar construction vehicles, being a Caterpillar wheel loader and 2 Caterpillar excavators. The Plaintiffs, who sought a declaration and orders that the Defendants deliver up possession of the Caterpillars, were the Receivers and Managers of Maiden Civil (PE) Pty Ltd (“Maiden”) and the secured creditor that appointed the Receivers and Managers, Fast Financial Solutions Pty Ltd (“Fast“).
The Caterpillars were initially purchased by the First Defendant, Queensland Excavation Services Pty Ltd (“QES“) subject to finance provided by Esanda and Wesptac. QES in turn received from Maiden “funds that corresponded with the amounts of the deposits” paid by QES for the machines. Maiden took possession of the machines. QES then invoiced Maiden on a periodical basis for amounts corresponding to the finance charges payable by QES plus 10%.
Maiden subsequently sought and obtained short-term finance from Fast. The General Security Deed in respect of the Loan Agreement entered into by Maiden attached schedules listing Maiden’s property as collateral, including the Caterpillars.
After the occurrence of events of default under the General Security Deed, Fast took steps to appoint the Receivers, and the Receivers claimed possession of the Caterpillars.
Registration is the key to perfection in most cases. If QES had registered its security interest, the outcome would have been different. Don’t leave perfection to chance!
The transitional provisions will sometimes assist, but as it turned out in this case, the devil is often in the detail. Don’t leave perfection to chance!
In order for a lease agreement to be enforceable against a third party, it must comply with the requirements for a security agreement as set out in s20(2):
- Evidenced by writing that is signed or accepted by the grantor
- Contains a description of the collateral, or a statement that a security interest is taken in all present and after-acquired property either without or with exceptions
Don’t leave lease agreements to chance!