Capital Finance Australia Limited & Anor v Tolcher (As Liquidator of Lloyd Scott Enterprises Pty Limited & Anor

The High Court of Australia considered an appeal concerning the priority of security interests in the liquidation of Lloyd Scott Enterprises Pty Limited (in liquidation) and Lloyd Scott. The appellants, Capital Finance Australia Limited and another party, held registered security interests over the assets of the companies. The respondent, Mr Tolcher, was the liquidator of the companies. The dispute arose because the companies had granted security interests to the appellants, but these were not registered on the Personal Property Securities Register (PPSR) until after the companies had entered liquidation.

The central legal issue before the High Court was whether the appellants' security interests, which were unperfected at the time of the companies entering liquidation, could nonetheless take priority over the liquidator's claim to the assets. Specifically, the Court had to determine the effect of section 267(2) of the Personal Property Securities Act 2009 (Cth) (PPSA) in circumstances where a security interest was granted before the commencement of the PPSA but was not perfected by registration before the relevant time of insolvency.

The High Court held that section 267(2) of the PPSA, which deals with the transitional provisions for security interests granted before the commencement of the PPSA, did not operate to preserve the priority of the appellants' unperfected security interests. The Court reasoned that the PPSA intended to create a unified national regime for security interests, and that the priority of security interests was to be determined by the PPSA itself. As the appellants' security interests were unperfected at the time of liquidation, they vested in the liquidator pursuant to section 588FL of the Corporations Act 2001 (Cth) and were therefore subordinate to the liquidator's claim. The Court affirmed the decision of the Full Federal Court.