A recent court decision has provided direction to legal practitioners on the necessity of registering all personal property which is subject to a lease/ hire agreement on the Personal Property Securities Register (the PPSR).
Since the introduction of the Personal Property Securities Act 2009 (Qld) (the PPSA), it has been emphasised that persons with an interest in personal property must secure these interests. Simply put, all personal property (e.g. equipment) the subject of an agreement whereby you enable another person or company to have possession or use of your personal property before the obligations (i.e. full payment) of the agreement that is the basis of this arrangement are performed, must be registered on the PPSR to ensure your rights to that personal property are not outranked by entities with competing rights. The PPSA highlights that personal property is nearly all types of property other than real estate.
In the Australian case of White v Spiers Earthworks Pty Ltd [2014] WASC 139, Spiers Earthworks Pty Ltd (Spiers) entered into a hire agreement (the Agreement) to sell its business to BEM Equipment Pty Ltd (BEM). Pursuant to the Agreement, BEM took possession of personal property with a market value of greater than $1 million from Spiers.
Unbeknown to Spiers at the time, Spiers had not registered its interest in the personal property on the PPSR. As a result, Spiers lost the majority of its assets when BEM became insolvent. The appointed receiver that was to distribute the assets to BEM’s creditors denied Spiers had a legal right to the personal property subject to the Agreement as it did not have a secured interest, that is to say, Spiers had not registered the equipment in question on the PPSR.
Thus, title to the personal property was considered to have passed to BEM upon possession and accordingly became part of the asset pool which was distributed to creditors who had registered their interests and as a result took priority over Spiers. Spiers lost all rights to its personal property and sustained a loss of more than $1 million.
Sadly for Spiers, this loss could easily have been prevented. Spiers could have registered its interest in the personal property on the PPSR and the receiver of BEM’s assets would have had to release the personal property back to Spiers. This case emphasises that the courts are now enforcing the provisions of the PPSA.
If you have personal property that is not in your possession, it is vital that you protect your interests in this personal property by seeking urgent legal advice on the way the PPSA affects you., Hall & Co Solicitors will be happy to assist you with any enquires you have relating to the PPSA and the PPSR.