Gold Valley Iron Pty Ltd (in liq) v OPS Screening & Crushing Equipment Pty Ltd - [2022] WASCA 134

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT :   THE COURT OF APPEAL (WA)
CITATION:   GOLD VALLEY IRON PTY LTD (in liq) -v- OPS SCREENING & CRUSHING EQUIPMENT PTY LTD [2022] WASCA 134
CORAM:   BUSS P
MURPHY JA
VAUGHAN JA

HEARD:   22 NOVEMBER 2021
FURTHER
APPLICATION AND
SUPPLEMENTARY
SUBMISSIONS       :   21 JULY, 27 JULY, 10 AUGUST & 15 AUGUST 2022
DELIVERED          :   20 OCTOBER 2022
FILE NO/S:   CACV 122 of 2020
BETWEEN:   GOLD VALLEY IRON PTY LTD (in liq)
First Appellant
RICHARD SCOTT TUCKER as joint and several liquidator of GOLD VALLEY IRON PTY LTD (in liq)
Second Appellant
JOHN ALLAN BUMBAK as joint and several liquidator of GOLD VALLEY IRON PTY LTD (in liq)
Third Appellant
AND
OPS SCREENING & CRUSHING EQUIPMENT PTY LTD
Respondent

ON APPEAL FROM:
Jurisdiction              :   SUPREME COURT OF WESTERN AUSTRALIA
Coram:   TOTTLE J
Citation: OPS SCREENING & CRUSHING EQUIPMENT PTY LTD v GOLD VALLEY IRON PTY LTD (in liq) [2020] WASC 412
File Number            :   CIV 1495 of 2020

Catchwords:

Personal property - Securities - Security interests in personal property - Hire purchase agreements - Personal Property Securities Act 2009 (Cth) - Whether each hire agreement created a security interest within s 12 of the Act - whether any security interest held by the respondent (as the secured party) vested in the first appellant (as the grantor) under s 267(2) of the Act

Legislation:

Personal Property Securities Act 2009 (Cth)

Result:

Appellant's application in an appeal filed 27 July 2022 for leave to amend ground of appeal 1 granted
Appeal allowed

Category: A

Representation:

Counsel:

First Appellant	:	Mr J E Scovell & Mr J Abberton
Second Appellant	:	Mr J E Scovell & Mr J Abberton
Third Appellant	:	Mr J E Scovell & Mr J Abberton
Respondent	:	Mr J M Healy

Solicitors:

First Appellant	:	Lavan
Second Appellant	:	Lavan
Third Appellant	:	Lavan
Respondent	:	Trinix Lawyers

Case(s) referred to in decision(s):

Adams v Lambert [2006] HCA 10; (2006) 228 CLR 409
Agnew v Commissioner of Inland Revenue [2001] 2 AC 710
AL Hamblin Equipment Pty Ltd v Commissioner of Taxation (Cth) [1974] HCA 44; (1974) 131 CLR 570
Albarran v Queensland Excavation Services Pty Ltd [2013] NSWSC 852; (2013) 277 FLR 337
Attorney-General for New South Wales v Brewery Employees Union of New South Wales [1908] HCA 94 (1908) 6 CLR 469
Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99
Australian Guarantee Corporation Ltd v Ross [1983] 2 VR 319
Ballas v Theophilos [1958] VR 576
Bank of Montreal v Innovation Credit Union [2010] 3 SCR 3
Banque Commerciale SA, en liquidation v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279
Barron (Inspector of Taxes) v Littman [1953] AC 96
BHP Billiton Iron Ore Pty Ltd v National Competition Council [2008] HCA 45; (2008) 236 CLR 145
Carter v Hyde [1923] HCA 36; (1923) 33 CLR 115
Coulton v Holcombe [1986] HCA 33; (1986) 162 CLR 1
Daimler Chrysler Services Canada Inc v Cameron [2007] BCCA 133
Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd [2014] VSCA 326; (2014) 49 VR 86
Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12; (2017) 261 CLR 544
Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640
Esanda Finance Corporation Ltd v Plessnig [1989] HCA 7; (1989) 166 CLR 131
Fitzgerald v Masters [1956] HCA 53; (1956) 95 CLR 420
Forestry Commission of New South Wales v Stefanetto [1976] HCA 3; (1976) 133 CLR 507
Goldsbrough, Mort & Co Ltd v Quinn [1910] HCA 20; (1910) 10 CLR 674
Graham v Portacom New Zealand Ltd [2004] 2 NZLR 528
Greenberg v Inland Revenue Commissioners [1972] AC 109
Helby v Matthews [1895] AC 471
Hocking v Director‑General of the National Archives of Australia [2020] HCA 19; (2020) 271 CLR 1
Hughes v Pluton Resources Ltd [2017] WASCA 213; (2017) 52 WAR 456
i Trade Finance Inc v Bank of Montreal [2011] 2 SCR 360
International Litigation Partners Pte Ltd v Chameleon Mining NL [2112] HCA 45; (2012) 246 CLR 455
JS Brooksbank & Company (Australasia) Limited v EXFTX Limited (in receivership and liquidation) formerly known as Feltex Carpets Ltd [2009] NZCA 122
Karflex Ltd v Poole [1933] 2 KB 251
Kay's Leasing Corporation Pty Ltd v Fletcher [1964] HCA 79; (1964) 116 CLR 124
Laybutt v Amoco Australia Pty Ltd [1974] HCA 49; (1974) 132 CLR 57
Mackay v Wilson (1947) 47 SR (NSW) 315
McEntire v Crossley Bros Ltd [1895] AC 457
McLennan v McCallum [2010] WASCA 45
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104
National Australia Bank Ltd v Garrett [2016] FCA 714; (2016) 340 ALR 532
O'Halloran Enterprises Pty Ltd v Williamson [1979] VR 33
Quadling v Robinson [1976] HCA 31; (1976) 137 CLR 192
Re Arcabi Pty Ltd (in liq); Ex parte Theobold [2014] WASC 310; (2014) 288 FLR 236
Re Bowery Bar Pty Ltd [2021] NSWSC 697
Re Giffen [1998] 1 SCR 91
Re International Harvester Credit Corp of Canada Ltd and Touche Ross Ltd (1986) 30 DLR (4th) 387
Re OneSteel Manufacturing Pty Ltd (Administrators Appointed) [2017] NSWSC 21; (2017) 93 NSWLR 611
RHG Mortgage Securities v BNY Trust Company [2009] NSWSC 1432
Rohrt, Rose Guerin and Partners Pty Ltd (in liq) v Princes Square W24NY Pty Ltd [2021] FCA 483
Sandhurst Golf Estates Pty Ltd v Coppersmith Pty Ltd [2014] VSC 217; (2014) 285 FLR 267
Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq) [2019] NSWCA 11; (2019) 99 NSWLR 317
Simic v New South Wales Land and Housing Corp [2016] HCA 47; (2016) 260 CLR 85
University of Wollongong v Metwally [No 2] [1985] HCA 28; (1985) 59 ALJR 481
Waller v New Zealand Bloodstock Ltd [2006] 3 NZLR 629
Water Board v Moustakas [1988] HCA 12; (1988) 180 CLR 491
Westpac Banking Corporation v Souter [2013] VSC 649
Whisprun Pty Ltd v Dixon [2003] HCA 48; (2003) 77 ALJR 1598
White v Spiers Earthworks Pty Ltd [2014] WASC 139; (2014) 99 ACSR 214
Woodroffe v Box [1954] HCA 22; (1954) 92 CLR 245
Yanner v Eaton [1999] HCA 53; (1999) 201 CLR 351
Zerjavic v Chevron Australia Pty Ltd [2020] WASCA 40
Zhu v Treasurer of the State of New South Wales [2004] HCA 56; (2004) 218 CLR 530

TABLE OF CONTENTS

BUSS P & MURPHY JA

The relevant facts and circumstances

The relevant provisions of the PPSA

The primary judge's identification of the issues to be determined

The primary judge's reasons in relation to whether under each hire agreement the first appellant granted to the respondent a security interest within s 12(1) of the PPSA

The primary judge's reasons in relation to whether each hire agreement constituted a PPS lease

The primary judge's conclusion

Grounds of appeal

The notice of contention

The appellants' submissions

The respondent's submissions

The fundamental issues

The appellants' application for leave to amend ground 1

A brief overview of the nature and purpose of the PPSA

The first fundamental issue

The second, third and fourth fundamental issues

Conclusion

VAUGHAN JA

Introduction

The preliminary issue in the primary proceedings

The initial question of contractual construction

The nature of a 'security interest' pursuant to s 12 of the PPSA

Disposition: did the hire agreements each provide for a 'security interest' within s 12 of the PPSA?

Are the hire agreements 'hire purchase agreements' within s 12(2)(e)?

Did the respondent have an 'interest in personal property' provided for by the hire agreements?

Did the hire agreements, in substance, secure payment or performance of an obligation?

The parties' primary contentions

The factors relevant to the characterisation task

The gaps in the evidence

The factors which support characterisation of the hire agreements as in substance securities

A neutral factor

The factors which support characterisation of the hire agreements as a pure hire

Conclusion: the hire agreements, in substance, secured payment or performance of an obligation

Conclusion and orders

Annexure

Respondent's Schedule for Hire Agreement GENT0413A-2

BUSS P & MURPHY JA:

This appeal from a judgment of Tottle J after the trial of a preliminary issue in an action in the General Division of the Supreme Court concerns the proper construction and application of various provisions of the Personal Property Securities Act 2009 (Cth) (the PPSA).
The action in the General Division arose from a dispute about the ownership of mining equipment hired by the respondent to the first appellant.
By five separate written hire agreements dated 13 December 2019, the respondent agreed to hire to the first appellant mining equipment owned by the respondent for at least 10 continuous months.
On 17 February 2020, the first appellant was placed into voluntary administration.
On 19 March 2020, the first appellant was placed into liquidation and the second and third appellants were appointed its joint and several liquidators.
After the first appellant was placed into liquidation, the respondent demanded that the appellants return or release the mining equipment to the respondent.
On 22 March 2020, the respondent collected some of the mining equipment. However, the appellants failed to return or release the remaining mining equipment to the respondent.
On 15 April 2020, the respondent began the action in the General Division by filing a writ of summons.
The respondent claimed, amongst other things, an order that the appellants deliver up the remaining mining equipment to the respondent, further or alternatively, provide the respondent with uninhibited access to the remaining mining equipment to enable the respondent to collect it.
On 24 July 2020, the appellants filed a defence and counterclaim.
The appellants alleged that:
(a)each hire agreement was a transaction which created a security interest that was held by the respondent and that, in substance, secured payment or performance of an obligation by the first appellant to the respondent within s 12 of the PPSA;
(b)consequently, the respondent, as the secured party, was required to perfect its security interest in accordance with s 21 of the PPSA in respect of each item of mining equipment;
(c)the respondent failed to perfect its security interest in respect of any item of the mining equipment; and
(d)in the circumstances, immediately before the first appellant was placed into voluntary administration, the respondent's security interests vested in the first appellant, as the grantor, by operation of s 267 of the PPSA.
The appellants counterclaimed, amongst other things, a declaration that the respondent's security interest in each item of the mining equipment was not perfected, within s 21 of the PPSA, as at 17 February 2020; a declaration that the respondent's security interests vested in the first appellant, pursuant to s 267 of the PPSA, on 17 February 2020; and an order that the respondent deliver up the items of mining equipment which the respondent collected on 22 March 2020, alternatively, that the respondent pay to the second and third appellants for the account of the first appellant the value of those items of equipment.
The preliminary issue formulated by the parties and determined by the primary judge was this: did each hire agreement create a security interest in the mining equipment the subject of the agreement pursuant to s 12(1) of the PPSA, alternatively pursuant to s 12(3) of the PPSA, which the respondent was required to perfect by registration pursuant to s 21 of the PPSA?
His Honour concluded that none of the hire agreements created a security interest in the mining equipment the subject of the agreements which the respondent was required to perfect by registration pursuant to s 21 of the PPSA. It followed, in his Honour's view, that s 267 of the PPSA had no application in the circumstances of the case and the respondent's alleged security interests in the equipment did not vest in the first appellant pursuant to that provision.
On 25 November 2020, the primary judge made declaratory orders to that effect.
On 10 December 2020, his Honour ordered that the appellants' counterclaim be dismissed.
We note that the preliminary issue formulated by the parties was confined to whether the hire agreements created security interests in the mining equipment pursuant to s 12(1), alternatively s 12(3), of the PPSA, which the respondent was required to perfect by registration pursuant to s 21 of the PPSA.
The preliminary issue did not include whether, if the hire agreements did create security interests which the respondent was required to perfect by registration, the respondent had validly and effectively perfected its security interests.
The appellants pleaded in their defence that:
(a)on 20 December 2019, the respondent registered security interests in respect of the mining equipment on the Personal Property Securities Register (par 6);
(b)however, the security interests were not registered as required by sch 1, cl 2 of the Personal Property Securities Regulations 2010 (Cth) (par 7);
(c)in the premises, the security interests were defective registrations pursuant to s 164(1)(b) and s 165 of the PPSA, alternatively were seriously misleading within s 164(1)(a) of the PPSA (par 8); and
(d)the security interests were therefore not valid registrations capable of being enforced by or relied upon by the respondent (par 9).
The appellants repeated those pleas in their counterclaim.
The respondent, in its reply and defence to counterclaim, joined issue with the appellants in relation to whether the respondent was required and had failed to perfect its alleged security interests in the mining equipment. The respondent pleaded that the hire agreements did not create any security interest, within s 12 of the PPSA, in the equipment and, accordingly, no such security interest was capable of vesting in the first appellant pursuant to s 267 of the PPSA.
The primary judge did not deal in his reasons with the question whether any purported registration by the respondent was valid and effective. It was unnecessary for his Honour to deal with that question because, as we have mentioned, it was not included in the preliminary issue formulated by the parties.
The appellants rely upon three grounds of appeal. After the court heard and reserved judgment in the appeal, the appellants filed an application in the appeal on 27 July 2022 for leave to amend ground 1. The essence of the appellants' complaints in their grounds of appeal is that his Honour erred in finding that each hire agreement did not constitute, in substance, a security interest within s 12(1) of the PPSA which the respondent was required to perfect by registration pursuant to s 21 of the PPSA, and his Honour also erred in finding that the PPSA had no application in the circumstances of the case and the respondent's alleged security interests in the equipment did not vest in the first appellant pursuant to that provision.
We would allow the appeal. In our opinion, each of the hire agreements constituted a hire purchase transaction that provided for an interest in personal property (namely, the mining equipment) that, in substance, secured payment or performance of an obligation by the first appellant to the respondent (without regard to the form of the transaction or the identity of the respondent as the person who had title to the equipment). The interest in personal property was the respondent's rights in the mining equipment as the hiree of the equipment and the holder of the reversion.

The relevant facts and circumstances

The relevant facts, as found by the primary judge, are not in dispute.
The following recitation of those facts is taken from his Honour's reasons.
There were five written agreements between the parties under which the first appellant agreed to hire from the respondent specified items of equipment. The material terms of the agreements were identical.
Each agreement was entitled 'Monthly Plant and Equipment Dry Hire Agreement' and comprised a front page on which basic information was recorded in tabular form, a second page containing 'Hire Particulars', a third page recording 'Additional Hire Charges', two pages of 'Terms and Conditions of Hire' and finally two pages of 'Special Terms & Conditions of Hire'.
The front page of each agreement contained five tables of information. One contained details of the quote provided by the respondent, one contained the 'Hirer Details' in which various details of the first appellant were set out. Another table contained 'Equipment Details' recording details of the equipment the subject of the agreement and the 'Plant Insurance Value'. Another table specified the 'Hire Rate'. Using the agreement in respect of a C-1540S Cone Crusher as an example, the form of the table relating to the hire rate was as follows:[1]
[1] The extracts from the agreement are reproduced with the spelling and grammatical errors contained in the agreement.
Hire Rate:

Minimum Ten Continuous Months Hire Period:

Monthly Hire Rate:

AU$46,000.00

+ GST per month

Monthly hire rate based on a maximum 200 SMU hours per month. Hours in excess of 250 SMU hours per month will be charged at the below pro rata hourly hire rate.

Pro Rata Hourly Rate:

AU$230.00

+ GST per hour

The final table on the first page of the agreement was as follows:
Outright Purchase Price Option:

AU$693,500.00 + GST

Ex Works - Bibra Lake, WA

In each agreement the price specified in the 'Outright Purchase Price Option' table was the same as the figure specified as the 'Plant Insurance Value'.
The 'Hire Particulars' included provisions referred to as 'Special Terms', 'Hire Period', 'Delivery Date', 'Commencement Date' and 'Anticipated Completion Date' all set out in tabular form along with other details that are not presently relevant. The relevant provisions are reproduced below.
Hire Particulars:

Special Terms:
1. Machine rental is subject to received and completed Hire Agreement, [the respondent's] Trading Terms Agreement; Special Terms & Conditions of Hire Agreement, as well as Customer purchase order and insurance CoC from a reputable insurer.

2. Hirer is granted to option to purchase the equipment, subject to receipt of an executed Special Terms & Conditions of Hire Agreement.

3. Two months base rental to be paid in advance, in order to secure units and commence dispatch preparations. Two months in advance to be maintained at all times during the hire. Hire invoices will be sent out minimum five business days prior to end of month for the base monthly hire rate. These invoices must be received in [the respondent's] nominated bank account prior to COB AWST on the last business day of the calendar month.

     Should funds not be received by this time, the equipment will be immediately disabled and demobilisation arrangements made.

     [The respondent] will retain the two months in advance as a security deposit up until the point of off hire, return of the equipment and completion of post hire repair estimation. The advance payment will be applied to the post hire repair invoice, with any difference being returned to the customer or to be paid by the customer within two business days of invoice issue.

     Should the customer purchase the units at any stage during the hire, the advance payment will be applied as a deposit against the purchase buy out amount.

Hire Period: Minimum ten (10) continuous months hire period with option to purchase at anytime. Should the hire fall short of ten (10) continuous months for any reason other than buyout of equipment, [the respondent] will be entitled to charge the difference between the ten (10) months hire rates and its standard monthly contract hire rates.

Delivery Date: Anticipated 20/12/2019 - To be confirmed by [the respondent]

Commencement Date: As per delivery date

Anticipated Completion Date: To be confirmed by customer - minimum period applies, as above

Nothing turns on the provisions included under the heading 'Additional Hire Charges'.

The 'Terms & Conditions of Hire' dealt with matters such as the payment of hire charges, the obligation on the Hirer to keep the equipment safe, the obligation on the Hirer to insure, the Hirer's responsibility for damage, the Hirer's responsibility for maintenance, and the Hirer's responsibility for the maintenance of service records and other practical matters relating to the hire of mining equipment. The terms included a term to the effect that the owner had the right to terminate the hire and recover the hired plant at any time 'in the event of non-payment of monies owing or plant misuse/abuse'. Further, there was a term to the effect that if the 'fixed hire period [was] concluded early, hire charges remain payable until agreed final hire date or until plant is rehired by the owner' but there was no other provision that dealt expressly with termination of the agreement.
Clause 7 of the 'Terms & Conditions of Hire' provided:
7.The owner has the right to terminate the hire and recover the hired plant at any time, in the event of non‑payment of monies owing or plant misuse/abuse.
Clause 12 and cl 13 of the 'Terms & Conditions of Hire' dealt with adjustments to the hire charges that may be made in favour of the Hirer in respect of 'stand down time'. The clauses provided as follows:
12.Stand down time will only be granted by the owner, upon written or oral request by the Hirer, prior to the commencement of the proposed stand down period. Adjustment for hire charges will be considered on the merit of the request and will be at the owner's discretion. Stand down rates, if granted, will be charged at 50% of the current standard hire rate.
13.No hire charge shall be applied to the Hirer's account in instances of inclement weather or major machine maintenance/repairs. For hire charges to be wavered, the Hirer must notify the Owner on each and every day the machine is to be stood down in these instances.
In the 'Special Terms & Conditions of Hire' the respondent was designated 'the Owner' and the first appellant 'the Client'. The Special Conditions were preceded by a preamble that read as follows:
This document is in place to act as a binding agreement between the Owner and the Client, detailing the special conditions associated to Monthly Plant and Equipment Hire Agreement Number CENT0413A‑2, as agreed.
The Special Terms & Conditions of Hire were as follows:
Special Conditions:
1.The Client will commence the hire of a 2019 Terex Finlay C‑1540S Cone Crusher, with details confirmed as per Monthly Plant & Equipment Hire Agreement Number CENT0413A-2, at the agreed rates listed within the Hire Agreement. Any additional costs and charges associated with this hire will be as per the binding Monthly Plant & Equipment Hire Agreement and [the respondent's] Terms and Conditions of Hire Agreement.
2.The hire of this machine by the Client will be governed by the binding Monthly Plant & Equipment Hire Agreement and [the respondent's] Terms and Conditions of Hire Agreement, except where these Special Conditions of Hire are applied and take precedent.
3.The Client is agreed to have first right of refusal to purchase the 2019 Terex Finlay C‑1540S Cone Crusher, machine serial number TRX1540SHOMK50180, for the purchase price of AU$693,500.00 + GST (base unit pricing, exclusive of any required modifications, mobilisation, commissioning etc). Any resultant sale enactment will be governed as per [the respondent's] standard Terms & Conditions of Sale;
·If the Client enacts the Sales Agreement by settling machine purchase funds within 30 days from commencement of hire, [the respondent] agree[s] to apply a rebate of 100% of the monthly hire rate for each month of hire which has been fully paid to and received by [the respondent], as a deposit against the final settlement amount for the machine purchase. No GST amount can be refunded or applied as a deposit.
·If the Client enacts the Sales Agreement by settling machine purchase funds within 31-60 days from commencement of hire, [the respondent] agree[s] to apply a rebate of 85% of the monthly hire rate for each month of hire which has been fully paid to and received by [the respondent] as a deposit against the final settlement amount for the machine purchase. No GST amount can be refunded or applied as a deposit.
·If the Client enacts the Sales Agreement by settling machine purchase funds within 61-90 days from commencement of hire, [the respondent] agree[s] to apply a rebate of 70% of the monthly hire rate for each month of hire which has been fully paid to and received by [the respondent] as a deposit against the final settlement amount for the machine purchase. No GST amount can be refunded or applied as a deposit.
·If the Client enacts the Sales Agreement by settling machine purchase funds within 91-120 days from commencement of hire, [the respondent] agree[s] to apply a rebate of 65% of the monthly hire rate for each month of hire which has been fully paid to and received by [the respondent] as a deposit against the final settlement amount for the machine purchase. No GST amount can be refunded or applied as a deposit.
·If the Client enacts the Sales Agreement by settling machine purchase funds within 121-300 days from commencement of hire, [the respondent] agree[s] to apply a rebate of 50% of the monthly hire rate for each month of hire which has been fully paid to and received by [the respondent] as a deposit against the final settlement amount for the machine purchase. No GST amount can be refunded or applied as a deposit.
4.No transfer in ownership or title of the machine will take place until full settlement of machine purchase funds has been received (and confirmed as received) by [the respondent] in our nominated bank account. As such, all usage of the unit up until this point will be subject to [the respondent's] Terms & Conditions of Hire and any alterations/modifications to the machine must be requested in writing to the Owner and subsequently approved in writing.
5.Rebate amounts are based on the base hire rate only, and exclude the amortised modifications. For clarity, this is the post three months hire rate.
Clause 3 of the Special Terms & Conditions of Hire refer to '[the respondent's] standard Terms & Conditions of Sale', but there was no evidence that any such terms existed or, if they existed, what they were.

The relevant provisions of the PPSA

Section 3 of the PPSA includes an overview of the PPSA as follows:
This Act is a law about security interests in personal property.
A security interest is an interest in personal property provided for by a transaction that secures payment or the performance of an obligation. The form of the transaction and the identity of the person who has title to the property do not affect whether an interest is a security interest.
Personal property includes many different kinds of tangible and intangible property, other than real property. Examples include motor vehicles, household goods, business inventory, intellectual property and company shares. Personal property is known as collateral if it is (or is anticipated to be) the subject of a security interest.
A security interest is enforceable against a grantor when it attaches to collateral. A security interest attaches to collateral when a person gives value for acquiring the security interest (or does something else to acquire it), and in return, the person gains rights in the collateral.
A security interest is enforceable against third parties when it has attached to the collateral and either the secured party has possession or control of the collateral, or a security agreement covers the collateral.
If a security interest in collateral is perfected, it takes priority over another security interest that is unperfected when the security interest comes to be enforced. A security interest is perfected if:
(a)it has attached to collateral; and
(b)it is enforceable against third parties; and
(c)certain extra steps (possession or control of the collateral, or registration on the Register of Personal Property Securities) have been taken to protect the interest.
Certain security interests are also declared to be temporarily perfected, or perfected, under this Act.
The secured party whose security interest has the highest priority is entitled to enforce that interest ahead of secured parties with security interests that have a lower priority.
Between perfected security interests, perfection by control has a higher priority than other forms of perfection. The next level of priority is given (subject to certain rules) to perfected purchase money security interests. If no other way of working out priority between perfected interests is provided, the highest priority is given to the security interest that has been continuously perfected for the longest period.
The Register of Personal Property Securities enables secured parties to give notice of actual or prospective security interests. Notice is given by the recording of data about secured parties, grantors and collateral. The register may be kept electronically, for example in a form that is interactive and accessible over the internet.
Section 8(1) states that the PPSA does not apply to any of the interests specified in that provision, except as provided by s 8(2) or s 8(3). Section 8 has no application in the present case.
Section 10 contains numerous definitions. It provides, relevantly, that in the PPSA:
general law means the principles and rules of the common law and equity.
goods means personal property that is tangible property, including the following:
(a)crops;
(b)livestock;
(c)wool;
(d)minerals that have been extracted (including hydrocarbons) in any form, whether solid, liquid or gaseous and whether organic or inorganic;
(e)satellites and other space objects;
but does not include financial property or an intermediated security.
grantor means:
(a)a person who has the interest in the personal property to which a security interest is attached (whether or not the person owes payment or performance of an obligation secured by the security interest); or
(b)a person who receives goods under a commercial consignment; or
(c)a lessee under a PPS lease; or
(d)a transferor of an account or chattel paper; or
(e)a transferee of, or successor to, the interest of a person mentioned in paragraphs (a) to (d); or
(f)in relation to a registration with respect to a security interest:
(i)a person registered in the registration as a grantor; or
(ii)a person mentioned in paragraphs (a) to (e).
insolvency has the same meaning as in paragraph 51(xvii) of the Constitution.
Note:Other parts of speech and grammatical forms of "insolvency" (for example, "insolvent") have a corresponding meaning (see section 18A of the Acts Interpretation Act 1901.
…
interest, in personal property, includes a right in the personal property.
…
law of the Commonwealth, a State or a Territory means:
(a) an Act of the Commonwealth, the State or the Territory; or
(b) an instrument made under such an Act.
…
located, in relation to personal property, or a person, has the meaning given by section 235.
…
matter includes act, omission, body, person and thing.
…
perfected has the meaning given by section 21.
personal property means property (including a licence) other than:
(a)land; or
(b)a right, entitlement or authority that is:
(i) granted by or under a law of the Commonwealth, a State or a Territory; and
(ii)declared by that law not to be personal property for the purposes of this Act.
Note:This Act does not apply to certain interests even if they are interests in personal property (see section 8).
possession has a meaning affected by section 24.
PPS lease (short for Personal Property Securities lease)has the meaning given by section 13.
PPS matter (short for Personal Property Securities matter) has the meaning given by section 206.
…
provides: a security agreement provides for a security interest if the interest arises under the agreement.
…
secured party:
(a)means a person who holds a security interest for the person's own benefit or for the benefit of another person (or both); and
(b)if the holders of the obligations issued, guaranteed or provided for under a security agreement are represented by a trustee as the holder of the security interest—includes the trustee; and
(c)in relation to a registration with respect to a security interest ‑ includes a person registered as a secured party in the registration.
...
security agreement means:
(a)an agreement or act by which a security interest is created, arises or is provided for; or
(b)writing evidencing such an agreement or act.
security interest has the meaning given by section 12.
…
this Act includes the regulations.
time of execution has the meaning given by section 74.
…
value:
(a)means consideration that is sufficient to support a contract; and
(b)includes an antecedent debt or liability; and
(c)in relation to the definition of purchase money security interest ‑ has a meaning affected by section 14.
…
writing includes:
(a)the recording of words or data in any way (including electronically), if, at the time the recording was made, it was reasonable to expect that the words or data would be readily accessible so as to be useable for subsequent reference; and
(b)the display, or other representation, of words or data by any form of communication (including electronic), if:
(i)the display or representation is recorded in any way (including electronically); and
(ii)at the time the recording was made, it was reasonable to expect that the words or data would be readily accessible so as to be useable for subsequent reference.
Section 12 is concerned with the meaning of 'security interest'. It provides, relevantly:
(1)A security interest means an interest in personal property provided for by a transaction that, in substance, secures payment or performance of an obligation (without regard to the form of the transaction or the identity of the person who has title to the property).
Note: For the application of this Act to interests, see section 8.
(2)For example, a security interest includes an interest in personal property provided by any of the following transactions, if the transaction, in substance, secures payment or performance of an obligation:
(a)a fixed charge;
(b)a floating charge;
(c)a chattel mortgage;
(d)a conditional sale agreement (including an agreement to sell subject to retention of title);
(e)a hire purchase agreement;
(f)a pledge;
(g)a trust receipt;
(h)a consignment (whether or not a commercial consignment);
(i)a lease of goods (whether or not a PPS lease);
(j)an assignment;
(k)a transfer of title;
(l)a flawed asset arrangement.
(3)A security interest also includes the following interests, whether or not the transaction concerned, in substance, secures payment or performance of an obligation:
(a)the interest of a transferee under a transfer of an account or chattel paper;
(b)the interest of a consignor who delivers goods to a consignee under a commercial consignment;
(c)the interest of a lessor or bailor of goods under a PPS lease.
Section 13 is concerned with the meaning of 'PPS lease'. It provides:
(1)A PPS lease means a lease or bailment of goods:
(a)for a term of more than 2 years; or
(c)for a term of up to 2 years that is automatically renewable, or that is renewable at the option of one of the parties, for one or more terms if the total of all the terms might exceed 2 years; or
(d)for a term of up to 2 years, or a lease for an indefinite term, in a case in which the lessee or bailee, with the consent of the lessor or bailor, retains uninterrupted (or substantially uninterrupted) possession of the leased or bailed property for a period of more than 2 years after the day the lessee or bailee first acquired possession of the property (but not until the lessee's or bailee's possession extends for more than 2 years).
(2)However, a PPS lease does not include:
(a)a lease by a lessor who is not regularly engaged in the business of leasing goods; or
(b)a bailment by a bailor who is not regularly engaged in the business of bailing goods; or
(c)a lease of consumer property as part of a lease of land where the use of the property is incidental to the use and enjoyment of the land; or
(d)a lease or bailment of personal property prescribed by the regulations for the purposes of this definition, regardless of the length of the term of the lease or bailment.
Bailments for value only
(3)This section only applies to a bailment for which the bailee provides value.
Section 18 specifies general rules about security agreements and security interests. By s 18(1):
A security agreement is effective according to its terms.
Section 19 relates to the enforceability of security interests against grantors and the concept of attachment. Section 19 provides:
Attachment required for enforceability
(1)A security interest is enforceable against a grantor in respect of particular collateral only if the security interest has attached to the collateral.
Attachment rule
(2)A security interest attaches to collateral when:
(a)the grantor has rights in the collateral, or the power to transfer rights in the collateral to the secured party; and
(b)either:
(i) value is given for the security interest; or
(ii)the grantor does an act by which the security interest arises.
Time of attachment
(3)Subsection (2) does not apply if the parties to a security agreement have agreed that a security interest attaches at a later time, in which case the security interest attaches at the time specified in the agreement.
(4)To avoid doubt, a reference in a security agreement to a floating charge is not a reference to an agreement that the security interest created by the floating charge attaches at a time later than provided under subsection (2).
Goods leased, bailed, consigned or sold under a conditional sale agreement.
(5)For the purposes of paragraph (2)(a), a grantor has rights in goods that are leased or bailed to the grantor under a PPS lease, consigned to the grantor, or sold to the grantor under a conditional sale agreement (including an agreement to sell subject to retention of title) when the grantor obtains possession of the goods.
(6)Subsection (5) does not limit any other rights the grantor may have in the goods.
Note:A security interest may attach to crops while they are growing, and to the products of livestock, before they become proceeds of the crops or livestock (for example, wool before it is shorn). See subsections 31(4) and (5) (meaning of proceeds) and section 84A (security interests in crops and livestock).
Section 20 is concerned with the enforceability of security interests against third parties. Section 20 provides, relevantly:
General rule
(1)A security interest is enforceable against a third party in respect of particular collateral only if:
(a)the security interest is attached to the collateral; and
(b)one of the following applies:
(i) the secured party possesses the collateral;
(ii)the secured party has perfected the security interest by control;
(iii)a security agreement that provides for the security interest covers the collateral in accordance with subsection (2).
Note: For possession and control of collateral, see Part 2.3.
Written security agreements
(2)A security agreement covers collateral in accordance with this subsection if:
(a)the security agreement is evidenced by writing that is:
(i) signed by the grantor (see subsection (3)); or
(ii)adopted or accepted by the grantor by an act, or omission, that reasonably appears to be done with the intention of adopting or accepting the writing; and
(b)the writing evidencing the agreement contains:
(i)a description of the particular collateral, subject to subsections (4) and (5); or
(ii)a statement that a security interest is taken in all of the grantor's present and after‑acquired property; or
(iii)a statement that a security interest is taken in all of the grantor's present and after‑acquired property except specified items or classes of personal property.

Section 21 specifies the main rule in relation to the perfection of a security interest in particular collateral. Section 21 provides:
(1)A security interest in particular collateral is perfected if:
(a)the security interest is temporarily perfected, or otherwise perfected, by force of this Act; or
(b)all of the following apply:
(i)the security interest is attached to the collateral;
(ii)the security interest is enforceable against a third party;
(iii)subsection (2) applies.
(2)This subsection applies if:
(a)for any collateral, a registration is effective with respect to the collateral; or
(b)for any collateral, the secured party has possession of the collateral (other than possession as a result of seizure or repossession); or
(c)for the following kinds of collateral, the secured party has control of the collateral:
(i)an ADI account;
(ii)an intermediated security;
(iii)an investment instrument;
(iv)a negotiable instrument that is not evidenced by a certificate;
(v)a right evidenced by a letter of credit that states that the letter of credit must be presented on claiming payment or requiring the performance of an obligation;
(vi)satellites and other space objects.
Note: For what constitutes possession and control of collateral, see Part 2.3.
(3)A security interest may be perfected regardless of the order in which attachment and any step mentioned in subsection (2) occur.
(4)A single registration may perfect one or more security interests.
Section 267 is concerned with the vesting of unperfected security interests in the grantor upon the grantor's winding up or bankruptcy etc. It provides:
Scope
(1)This section applies if:
(a)any of the following events occurs:
(i)an order is made, or a resolution is passed, for the winding up of a company or a body corporate;
(ii)an administrator of a company or a body corporate is appointed (whether under section 436A, 436B or 436C of the Corporations Act 2001, under that section as it is applied by force of a law of a State or Territory, or otherwise);
(iii)a company or a body corporate executes a deed of company arrangement (whether under Division 10 of Part 5.3A of the Corporations Act 2001, under that Division as it is applied by force of a law of a State or Territory, or otherwise);
(iiia)a restructuring practitioner for a company or a body corporate is appointed (whether under section 453B of the Corporations Act 2001, under that section as it is applied by force of a law of a State or Territory, or otherwise);
(iiib)a company or a body corporate makes a restructuring plan (whether under Division 3 of Part 5.3B of the Corporations Act 2001, under that Division as it is applied by force of a law of a State or Territory, or otherwise);
(iv)a sequestration order is made against a person (the bankrupt) under the Bankruptcy Act 1966;
(v)a person (the bankrupt) becomes a bankrupt by force of section 55, 56E or 57 of the Bankruptcy Act 1966; and
(b)a security interest granted by the body corporate, company or bankrupt is unperfected at whichever of the following times applies:
(i)in the case of a company or body corporate that is being wound up—when, on a day, the event occurs by virtue of which the winding up is taken to have begun or commenced on that day (whether under section 513A or 513B of the Corporations Act 2001, under either section as applied by force of a law of a State or Territory, or otherwise);
(ii)in the case of a company or a body corporate to which subparagraph (a)(ii) or (iii) applies—when, on a day, the event occurs by virtue of which the day is the section 513C day for the company or body, within the meaning of the Corporations Act 2001 (including that Act as it is applied by force of a law of a State or Territory, or otherwise);
(iia)in the case of a company or a body corporate to which subparagraph (a)(iiia) or (iiib) applies—when, on a day, the event occurs by virtue of which the day is the section 513CA day for the company or body, within the meaning of the Corporations Act 2001 (including that Act as it is applied by force of a law of a State or Territory, or otherwise);
(iii)in the case of a bankrupt—when a sequestration order is made against the bankrupt under the Bankruptcy Act 1966, or when he or she becomes a bankrupt by force of section 55, 56E or 57 of that Act.
Note 1:For the meaning of company, see section 10.
Note 2:See also Division 2A of Part 5.7B of the Corporations Act 2001.
Security interest vested in grantor
(2)The security interest held by the secured party vests in the grantor immediately before the event mentioned in paragraph (1)(a) occurs.
Note:This subsection does not apply to certain security interests (see section 268).
Title of person acquired for new value without knowledge
(3)Subsection (2) does not affect the title of a person to personal property if:
(a)the person acquires the personal property for new value from a secured party, from a person on behalf of a secured party, or from a receiver in the exercise of powers:
(i)conferred by the security agreement that provides for the security interest; or
(ii)implied by the general law; and
(b)at the time the person acquires the property, the person has no actual or constructive knowledge of the following (as the case requires):
(i)the filing of an application for an order to wind up the company;
(ii)the passing of a resolution to wind up the company;
(iii)the appointment of an administrator of the company under section 436A, 436B or 436C of the Corporations Act 2001;
(iv)the execution of a deed of company arrangement by the company;
(v)the appointment of a restructuring practitioner for the company under section 453B of the Corporations Act 2001;
(vi)the making of a restructuring plan by the company.
Note:Section 296 deals with the onus of proving matters under this subsection.

The primary judge's identification of the issues to be determined

The primary judge stated that whether the respondent had a security interest in each item of the mining equipment involved two subsidiary questions:
(a)Did each hire agreement involve the first appellant granting to the respondent a security interest within s 12(1) of the PPSA (an 'in substance security interest')?
(b)Did each hire agreement constitute a PPS lease? If so, the respondent's interest in each item of the mining equipment in its capacity as lessor was deemed by s 12(3) of the PPSA to be a security interest [22].

The primary judge's reasons in relation to whether under each hire agreement the first appellant granted to the respondent a security interest within s 12(1) of the PPSA

The primary judge stated that the essential question was whether each hire agreement provided for 'the grant by [the first appellant] to [the respondent] of an interest in the equipment to which it related that in substance secured payment or performance [of] an obligation by [the first appellant]?' [37].
His Honour said that the drafting of the hire agreements lacked precision and clarity. It was therefore difficult to discern the intention of the parties. His Honour noted, in particular, the following [40]:
(a)Special Term 2 of the Hire Particulars records the grant of the option to purchase the equipment. The option was expressed to be 'subject to receipt of an executed Special Terms & Conditions of the Hire Agreement' which would suggest that the Special Terms & Conditions were of some relevance to the option to purchase. The Special Terms did not refer, however, to the option and the relevance of those terms to an option to purchase is not apparent. In oral submissions the first defendant's counsel noted that the option was expressed to be subject to 'receipt' of an executed copy of the Special Terms & Conditions rather than being subject to the terms themselves. In the context of hire agreements, notable for the imprecision with which their terms have been expressed, I am not persuaded that this distinction is to be accorded any significance.
(b)The hire agreements were silent as to the price to be paid in the event that the option were to be exercised though it may be inferred that the price was that specified in the 'Outright Purchase Price Option' table. The only reference to an allowance against the option price for hire charges paid is the reference in the final paragraph of Special Term 2 of the Hire Particulars to the effect that the two months hire charges paid in advance were to 'be applied as a deposit against the purchase buy out amount'.
(c)There is no textual foundation for construing the provision relating to the rebate of hire charges applicable on a sale following the exercise of the first right of refusal as being applicable also if the option to purchase was exercised. That said, assessed objectively, it would seem unlikely that the parties would have contemplated that the approach to rebating hire charges against the purchase price would differ markedly between a purchase pursuant to the exercise of an option and a purchase pursuant to the exercise of the first right of refusal.
(d)Assuming for the purposes of discussion that the hire agreements are to be construed as conferring on the [first appellant] an option to purchase the equipment and that the purchase price was to be reduced by the rebate of hire charges in the amounts specified in cl 3 of the Special Terms & Conditions of Hire, the percentages of the hire charges rebated are not consistent with a transaction which in substance involves the payment of the capital cost of equipment by instalments in the form of hire charges. I return to this issue later in this section of the reasons but the short point is that because the percentage of the rebated hire charges reduced over time so did the financial incentive to buy the equipment.
The primary judge observed that the difficulty in discerning the intention of the parties from the text of the hire agreements was compounded because 'subject always to the terms of the bargain, from a commercial perspective, a first right of refusal and an option to purchase reflect conflicting commercial objectives on the part of an owner of property on the one hand and a potential purchaser of the property on the other' [41].
His Honour said that it may be possible 'technically' to construe the hire agreements as providing for both a right of first refusal and an option to purchase 'on the basis that it would have been open to [the first appellant] to exercise the option until [the respondent] gave notice of an intention to sell the equipment thereby enlivening the first right of refusal'. However, his Honour concluded that this would be 'a strained construction' of the hire agreements [43]. His Honour added [43]:
And, given the conflicting commercial objectives to which I have referred, it is not a construction that makes commercial sense on any view of the price to be paid on the exercise of the option. That is, whether the price is 'Outright Purchase Price Option' figure less the two months hire charges paid in advance or the Outright Purchase Price Option less the rebate of hire charges as set out in cl 3 of the Special Terms & Conditions of Hire.
The primary judge said that, in his view, the references in the hire agreements to the option to purchase should be construed as references to the right of first refusal in cl 3 of the Special Terms & Conditions of Hire, with the result that the first appellant's only right to acquire the mining equipment arose by exercising the right of first refusal [44]. His Honour explained that this construction of the hire agreements [44]:
(a)reflects the parties' intention (as recorded in cl 2 of the Special Terms & Conditions of Hire) that the Special Conditions are to be accorded precedence over the other provisions of the hire agreements;
(b)acknowledges the connection between the grant of the 'option' and the Special Conditions evidenced by the words 'subject to receipt of an executed Special Terms & Conditions of the Hire Agreement' in special term 2 of the Hire Particulars;
(c)can be reconciled with the use of the term 'option to purchase' by reading it down as meaning an option exercisable if the owner decided to sell; and
(d)avoids the commercially improbable result of the inclusion in the hire agreements of a first right of refusal and option to purchase at any time being provisions calculated to achieve conflicting commercial objectives.
His Honour then said that there were two further features of the hire agreements which, in his view, provided support for the conclusion that they were not agreements for the sale and purchase of the mining equipment. Those features were as follows [46]:
(a)Clauses 12 and 13 of the Terms & Conditions of Hire provided for adjustment of the hire charges for 'stand down time'. While it must be acknowledged that whether any adjustment would be made lay in the discretion of [the respondent], the inclusion of a provision that recognised the possibility of an adjustment for stand down time tends to suggest that the payment of the hire charges did not amount, in substance, to payment of the purchase price of the equipment.
(b)The percentage of the hire charges paid over the hire period, which was to be rebated in the event of a purchase of the equipment, reduced over the hire period. For example, if the equipment was purchased in the first month of the hire period, 100% of the hire charges paid to that date would be rebated against the purchase price whereas if the equipment was purchased between four and 10 months (121 ‑ 300 days) into the hire period the rebate would be 50% of the hire charges paid. If the hire agreements were in substance agreements for the purchase of the equipment, with the monthly hire charges effectively representing payment of the purchase price by instalments, one would expect the proportion of the hire charges rebated against the purchase price would increase rather than decrease over time to provide an incentive to the lessee to acquire the equipment. Further, the fact that percentage rebated in the event of a purchase between four and 10 months remained at 50% and did not vary depending on when in that period of six months the purchase was effected is not consistent with the hire agreements being agreements which financed the purchase of the equipment. If the agreements were finance agreements one would expect the percentage of the hire charges rebated against the purchase price to vary depending on the transaction date to reflect the time cost of money.
The primary judge said that, having concluded that the hire agreements were not, in substance, agreements for the purchase of the mining equipment, 'it [was] impossible to identify any basis upon which it could be said that the agreements provided for the grant of security interests by [the first appellant] to [the respondent]' [47]. His Honour said that the hire agreements 'did not confer a proprietary interest on [the first appellant] as hirer from which it could grant a security interest in favour of [the respondent] as security for payment or performance of an obligation' [47].
His Honour concluded his consideration of this issue by making these comments:
(a)Special Term 2 of the Hire Particulars, which provided for the payment of two months hire charges in advance as a security deposit, might have created a security interest in the hire charges paid in advance, but it did not create a security interest in the equipment [48].
(b)The respondent's right under the hire agreements to terminate the hire and recover the mining equipment at any time 'in the event of non‑payment of monies owing or plant misuse/abuse' should be characterised as 'a limitation on [the first appellant's] contractual right to possession and use of the equipment rather than the grant of a security interest' [49]. The respondent's right to repossess, in the event of non-payment of the hire charges, was 'an incident of ownership of the equipment and not a right "provided for" by the hire agreement[s]' [49].

The primary judge's reasons in relation to whether each hire agreement constituted a PPS lease

The primary judge noted that the hire period specified in the hire agreements was 'a minimum 10 months continuous hire'. His Honour said that the hire period as specified did not equate to a term of '10 months' or to 10 terms of one month. His Honour concluded that the hire agreements did not specify a term. Also, the hire agreements did not include a provision conferring on the first appellant a right to renewal of any term. His Honour was therefore of the view that the hire agreements did not constitute PPS leases within s 13(1)(c) of the PPSA [58].
His Honour considered that the hire agreements were leases for an indefinite period. By s 13(1)(d) of the PPSA, for a lease or bailment for an indefinite term to constitute a PPS lease, the lessee or bailee must retain uninterrupted or substantially uninterrupted possession of the leased or bailed property for more than 2 years. His Honour said that it was not sufficient that the lease or the bailment may extend for more than 2 years. It must actually do so [59].
It followed, in his Honour's view, that the hire agreements did not constitute PPS leases.

The primary judge's conclusion

The primary judge concluded that s 267 of the PPSA had no application in the circumstances of the case.

Grounds of appeal

As we have mentioned, the appellants rely upon three grounds of appeal.
Ground 1 (in its form at and before the hearing of the appeal) alleges, in essence, that the primary judge erred in finding that each hire agreement did not constitute, in substance, a security interest within s 12(1) of the PPSA. In particular, the appellants complain that, in construing the hire agreements:
(a)his Honour failed to have regard to whether the hire agreements 'in substance' secured payment or performance of an obligation, independently of the existence of any option to purchase or first right of refusal with respect to the equipment;
(b)his Honour failed to have regard to the actual text of the hire agreements including Special Terms 1, 2 and 3 of the Hire Particulars; the order of application of the terms and conditions; and the entry into the Special Terms & Conditions of Hire Agreement; and
(c)his Honour erred in finding that the hire agreements provided only for a first right of refusal, alternatively did not provide for an option to purchase, the equipment.
Ground 2 alleges, in essence, that his Honour erred in determining the intention of the parties with respect to the hire agreements without regard to extrinsic evidence including the registrations (being an objective fact which did not merge upon the parties' entry into the hire agreements).
Ground 3 alleges that the primary judge erred in construing the commercial intention of the parties to the hire agreements in a manner which relied upon the rebate of hire charges and the market value of the equipment (when there was no expert or other evidence in relation to those matters) and did not provide for the possibility that the parties' respective commercial interests were complementary rather than mutually exclusive.
We note that the appellants' grounds of appeal relate to his Honour's rejection of the appellants' contention that the hire agreements provided for a hire purchase transaction that created security interests in the mining equipment. The appellants have not challenged his Honour's finding that the hire agreements were not PPS leases within s 13 of the PPSA.

The notice of contention

The respondent relied upon a notice of contention.
The notice asserts:
In addition to the matters referenced by the primary judge [at [46(b)] of his reasons] in support of the construction of the Hire Agreements are Schedules which were attached to the respondent's submissions at first instance (those schedules were admitted at first instance without objection from the appellant) which established that on a mathematical calculation of the hire charges the cost of purchasing the Equipment would become more expensive the longer the term of the Hire Agreements. That is, the antithesis of an agreement creating a security interest in the nature of a hire purchase or a finance lease where it would be expected the cost of purchase would decrease over the term of the hire period.

The appellants' submissions

Counsel for the appellants submitted, in essence, that:
(a)Each hire agreement involved a 'transaction' and 'personal property'.
(b)Each hire agreement involved the grant of a security interest by the first appellant to the respondent because each agreement was, in substance, an agreement for the sale of the equipment.
(c)Clauses 2 and 3 of the Special Terms in the Hire Particulars refer to the first appellant having an option to purchase the equipment which is exercisable at any time.
(d)Clause 3 of the Special Terms & Conditions of Hire refers to the first appellant having a first right of refusal to purchase the equipment.
(e)The first appellant's option to purchase the equipment was in addition to and separate from the first appellant's first right of refusal.
(f)Although the option to purchase and the first right of refusal were separate rights, the rebate of hire charges provided for in cl 3 of the Special Terms & Conditions of Hire applied in the event that the option to purchase was exercised.
(g)The provisions of each hire agreement for the payment of two months base rental in advance, the payment of monthly hire charges and the respondent's right to disable and demobilise the equipment if payments were not made on time were provisions which secured the first appellant's use of the equipment during the hire period. When those provisions are considered in conjunction with the option to purchase it is apparent that, in substance, each hire agreement was an agreement for the sale of the equipment to which it related.
Counsel argued that the primary judge's erroneous finding that each hire agreement did not constitute, in substance, a security interest within s 12(1) of the PPSA arose from a number of other errors in his Honour's approach to the resolution of the preliminary issue, namely:
(a)His Honour analysed the hire agreements on the basis that operating leases, on the one hand, and financing leases, on the other, were mutually exclusive concepts.
(b)His Honour failed to have regard to whether the hire agreements 'in substance' secured payment or performance of an obligation independently of any option to purchase or first right of refusal conferred on the first appellant.
(c)His Honour failed to have regard to the actual text of the hire agreements.
(d)His Honour misconstrued the hire agreements in finding that the hire agreements provided only for a right of first refusal and did not provide for an option to purchase the equipment.
(e)His Honour determined the intention of the parties with respect to the hire agreements without regard to extrinsic evidence.
(f)His Honour relied upon the rebate of hire charges and the market value of the equipment in construing the commercial intention of the parties.
(g)His Honour should have considered that the parties' respective commercial interests were complementary, rather than mutually exclusive, in construing the commercial intention of the parties.

The respondent's submissions

Counsel for the respondent submitted, in essence, that:
(a)Each hire agreement created a 'true lease'; that is, an operating lease. The hire agreements were not disguised sales or financing arrangements under which the first appellant acquired title to the equipment by the payment of hire charges. The Terms & Conditions of Hire reflected the terms of an operating lease. There were no terms which supported construing the hire agreements as agreements for the sale of the equipment.
(b)The references to Outright Purchase Price Option, the option to purchase the equipment, 'the purchase buy out amount' and 'buy out of equipment' in the hire agreements involve the use of imprecise language. Those references should be read as subject to the Special Terms & Conditions of Hire which, properly construed, limit the first appellant's rights to a right of first refusal to purchase the equipment for a specified price (which is the same amount as the Outright Purchase Price) less a rebate of the hire charges which have been paid.
(c)The specific terms which confer the right of first refusal take precedence over the general references to the option to purchase.
(d)A right of first refusal is not capable of constituting a security interest.
(e)A number of factors demonstrate that the hire agreements were not agreements for the sale and purchase of the equipment. In particular:
(i)The minimum hire period was only 10 months while the useful economic life of the equipment was significantly greater than 10 months.
(ii)The total hire charges for the equipment over the minimum hire period of 10 months did not equate to the market value of the equipment (taking the right of first refusal purchase price as its market value). The total hire charges over 10 months would equate to between 66% and 76% of the relevant first right of refusal purchase price for the e quipment.
(iii)The first appellant was not obliged to purchase the equipment.
(iv)In the event the first right of refusal was exercised, the purchase price would be calculated in such a way that it could not be described as a 'bargain price'.
(v)In the event the first right of refusal was exercised at the end of the minimum hire period of 10 months, the total which the first appellant would have been required to pay for the hire and purchase of the equipment would equate to more than 130% of the market value of the equipment.
(vi)In the event the first right of refusal was exercised after 12 months of hire, the total amount the first appellant would have been required to pay for the hire and purchase of the equipment would equate to more than 180% of the market value of the equipment.
(vii)There was no automatic right for the first appellant to obtain title to the equipment at the end of the term of the hire agreement.
Counsel argued that the primary judge did not make the errors alleged by the appellant in his Honour's approach to the resolution of the preliminary issue.

The fundamental issues

The fundamental issues were obscured rather than illuminated by the appellant's grounds of appeal.
The fundamental issues are as follows.
First, was each hire agreement a 'hire purchase agreement', within s 12(2)(e) of the PPSA, in respect of the mining equipment the subject of the hire agreement?
Secondly, if each hire agreement was a 'hire purchase agreement', within s 12(2)(e), in respect of the mining equipment the subject of the hire agreement, did the hire purchase transaction provide for the respondent (as the 'secured party' as defined in par (a) of the definition in s 10 of the PPSA) to have a 'security interest' in the mining equipment, within s 12(1) of the PPSA, and, if so:
(a)what was the nature and extent of the 'interest' (as defined in s 10 of the PPSA) in the mining equipment of the first appellant (as the 'grantor') to which the security interest of the respondent (as the secured party) was attached (see par (a) of the definition of 'grantor' in s 10 of the PPSA); and
(b)what was the nature and extent of the respondent's 'interest' (as defined in s 10 of the PPSA) in the mining equipment?
Thirdly:
(a)if each hire agreement was a 'hire purchase agreement', within s 12(2)(e), in respect of the mining equipment the subject of the hire agreement; and
(b)if the hire purchase transaction provided for the respondent (as the secured party) to have a 'security interest' in the mining equipment, within s 12(1),
did the security interest, in substance, secure payment or performance of an obligation (without regard to the form of the transaction or the identity of the person who had title to the mining equipment) and, if so, what was the nature and extent of the obligation?
Fourthly:
(a)if each hire agreement was a 'hire purchase agreement', within s 12(2)(e), in respect of the mining equipment the subject of the hire agreement; and
(b)if the hire purchase transaction provided for the respondent to have a 'security interest' in the mining equipment, within s 12(1); and
(c)if the respondent's security interest in the mining equipment, in substance, secured payment or performance of an obligation (without regard to the form of the transaction or the identity of the person who had title to the mining equipment),
did the security interest held by the respondent (as the secured party) vest in the first appellant (as the grantor), pursuant to s 267(2) of the PPSA, immediately before the administrators of the first appellant were appointed?

The appellants' application for leave to amend ground 1

After the court heard and reserved judgment in the appeal, the Court of Appeal Registrar sent a letter dated 21 July 2022 to the parties. The letter stated:
I have been instructed by the coram that heard the appeal to inform the parties that the court wishes to receive further submissions on whether, properly analysed:
(1)Each hire agreement constituted a hire purchase transaction.
(2)The transaction embodied in each hire agreement provided for an 'interest' (as defined in s 10 of the Personal Property Securities Act 2009 (Cth) (the PPSA)) in the mining equipment (without regard to the form of the transaction or the identity of the respondent as the person who had title to the equipment), within s 12(1) of the PPSA.
(3)The 'interest' (as defined in s 10) in 'personal property' (as defined in s 10) was the respondent's rights in the mining equipment as the hiree of the equipment and the holder of the reversion.
(4)The hire purchase transaction provided for that interest by creating the hiree/hiror relationship including the reversion in respect of the equipment.
(5)The respondent's rights in the mining equipment as the hiree and the holder of the reversion under each hire purchase transaction, in substance, secured 'payment or performance of an obligation' by the first appellant, within s 12(1) and s 12(2) of the PPSA. The obligation comprised the first appellant's promises to the respondent in each hire agreement to make payments and to perform obligations as stipulated in the hire agreement.
Such analysis would appear to be materially different from the position contended for by counsel for the appellants at the hearing of the appeal.
The court requires supplementary written submissions from the parties as follows:
(a)By 4.00 pm on 27 July 2022, the appellants must file and serve written submissions stating whether the appellants wish to adopt as part of their case the propositions set out at [1] to [5] above; and, if so, by the same time the appellants must file and serve an application to amend ground 1 of the grounds of appeal to incorporate a further particular advancing those propositions.
(b)If the appellants wish to adopt as part of their case the propositions set out at [1] to [5] above then, by 4.00 pm on 10 August 2022, the respondent must file and serve written submissions in response to the propositions set out at [1] to [5] above and the application to amend ground 1 of the grounds of appeal.
(c)By 4.00 pm on 15 August 2022, the appellants may file and serve written submissions in reply to the respondent's written submissions.
On 27 July 2022, the appellants filed and served written submissions stating that the appellants wished to adopt as part of their case the propositions set out at [1] to [5] of the Court of Appeal Registrar's letter dated 21 July 2022. On 27 July 2022, the appellants also filed and served an application in the appeal for leave to amend ground 1 by incorporating and advancing those propositions.
On 10 August 2022, the respondent filed and served written submissions.
The respondent opposed a grant of leave to amend for these reasons:
(a)apart from proposition (1), each of the propositions concerned a matter that was not advanced by the appellants at trial or at the hearing of the appeal;
(b)the appellants had identified no special or exceptional circumstances that would justify leave being granted; and
(c)although the respondent could not point to any particular evidence that it would have led had the propositions been raised at trial, the appellants ought to be bound by their conduct of the case at trial: a grant of leave would be inimical to the due administration of justice and the expedient determination of the dispute.
An appellant is bound by the conduct of his or her case at trial. In University of Wollongong v Metwally [No 2],[2] Gibbs CJ, Mason, Wilson, Brennan, Deane and Dawson JJ said:
It is elementary that a party is bound by the conduct of his case. Except in the most exceptional circumstances, it would be contrary to all principle to allow a party, after a case had been decided against him, to raise a new argument which, whether deliberately or by inadvertence, he failed to put during the hearing when he had [an] opportunity to do so (483). (emphasis added)
[2] University of Wollongong v Metwally [No 2] [1985] HCA 28; (1985) 59 ALJR 481.
The substance of that statement was reiterated in Coulton v Holcombe[3] by Gibbs CJ, Wilson, Brennan and Dawson JJ:
To say that an appeal is by way of rehearing does not mean that the issues and the evidence to be considered are at large. It is fundamental to the due administration of justice that the substantial issues between the parties are ordinarily settled at the trial. If it were not so the main arena for the settlement of disputes would move from the court of first instance to the appellate court, tending to reduce the proceedings in the former court to little more than a preliminary skirmish. The powers of an appellate court with respect to amendment are ordinarily to be exercised within the general framework of the issues so determined and not otherwise. In a case where, had the issue been raised in the court below, evidence could have been given which by any possibility could have prevented the point from succeeding, this Court has firmly maintained the principle that the point cannot be taken afterwards: see Suttor v Gundowda Pty Ltd ((1950) 81 CLR 418, at 438); Bloemen v The Commonwealth ((1975) 49 ALJR 219) (7 ‑ 8). (emphasis added)
[3] Coulton v Holcombe [1986] HCA 33; (1986) 162 CLR 1.
The High Court returned to this issue in Water Board v Moustakas.[4] Mason CJ, Wilson, Brennan and Dawson JJ emphasised that a point cannot be raised for the first time on appeal 'when it could possibly have been met' by calling evidence at the trial (497) (emphasis added). Their Honours allowed only these limited exceptions:
Where all the facts have been established beyond controversy or where the point is one of construction or of law, then a court of appeal may find it expedient and in the interests of justice to entertain the point, but otherwise the rule is strictly applied (see Suttor v Gundowda Pty Ltd (1950), 81 CLR 418, at p 438; University of Wollongong v Metwally[No 2] (1985), 59 ALJR 481, at p 483; 60 ALR 68, at p 71; Coulton v Holcombe (1986), 162 CLR 1, at pp 7 ‑ 8; O'Brien v Komesaroff (1982), 150 CLR 310, at p 319)) (497).
[4] Water Board v Moustakas [1988] HCA 12; (1988) 180 CLR 491.
In Whisprun Pty Ltd v Dixon,[5] Gleeson CJ, McHugh and Gummow JJ restated the applicable principles and elaborated upon their rationale:
It would be inimical to the due administration of justice if, on appeal, a party could raise a point that was not taken at the trial unless it could not possibly have been met by further evidence at the trial (University of Wollongong v Metwally [No 2] (1985) 59 ALJR 481 at 483; Coulton v Holcombe (1986) 162 CLR 1 at 8 - 9; Liftronic Pty Ltd v Unver (2001) 75 ALJR 867 at 875 [44]; Water Board v Moustakas (1988) 180 CLR 491 at 496 - 497; cf R v Birks (1990) 19 NSWLR 677 at 683-685). Nothing is more likely to give rise to a sense of injustice in a litigant than to have a verdict taken away on a point that was not taken at the trial and could or might possibly have been met by rebutting evidence or cross-examination. Even when no question of further evidence is admissible, it may not be in the interests of justice to allow a new point to be raised on appeal, particularly if it will require a further trial of the action (Multicon Engineering Pty Ltd v Federal Airports Corporation (1997) 47 NSWLR 631 at 645 - 646). Not only is the successful party put to expense that may not be recoverable on a party and party taxation but a new trial inevitably inflicts on the parties worry, inconvenience and an interference with their personal and business affairs.
As Water Board v Moustakas ((1988) 180 CLR 491 at 498) makes clear, a point may be a new point even though it is within the pleadings or particulars. The pleadings and particulars are frequently decisive in determining whether a party is seeking to raise a new point on appeal. But they are not conclusive. To determine whether a party is raising a new point on appeal, it is 'necessary to look to the actual conduct of the proceedings' (Water Board v Moustakas (1988) 180 CLR 491 at 497) [51] ‑ [52]. (emphasis added)
[5] Whisprun Pty Ltd v Dixon [2003] HCA 48; (2003) 77 ALJR 1598.
The juridical basis of the principles we have been discussing appears to derive, in part, from public policy considerations directed to ensuring finality in litigation and, in part, from the doctrine of estoppel by election in the conduct of litigation. However, to the extent that some aspects have their origin in estoppel by election, the relevant consideration is not that the other party is put in a worse position, but that he or she may have been put in a worse position. See Banque Commerciale SA, en liquidation v Akhil Holdings Ltd;[6] McLennan v McCallum;[7] Zerjavic v Chevron Australia Pty Ltd.[8]
[6] Banque Commerciale SA, en liquidation v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279, 284.
[7] McLennan v McCallum [2010] WASCA 45 [87] (Buss JA; McLure P & Newnes JA agreeing).
[8] Zerjavic v Chevron Australia Pty Ltd [2020] WASCA 40 [67] (Buss P, Murphy & Vaughan JJA).
If an appellate court is satisfied that the appellant is seeking to advance a new case on appeal, there is no residual discretion under which the court may permit the new case to be run 'in the interests of justice'. The interests of justice are embodied within the principles formulated in the High Court authorities we have discussed. See McLennan [88]; Zerjavic [66].
In the present case, we would grant the appellants' application for leave to amend ground 1 for the following reasons. First, ground 1, as originally formulated, raised questions as to the proper construction of the hire agreements, the proper construction of relevant provisions of the PPSA and the proper application of the relevant provisions of the PPSA to the hire agreements. The proposed amendment also raises questions as to the proper construction of the hire agreements, the proper construction of relevant provisions of the PPSA and the proper application for the relevant provisions of the PPSA to the hire agreements. Secondly, although the issues arising from the proposed amendment were not raised by the appellants at the trial of the preliminary issue, there is no possibility that those issues could have been met and determined in favour of the respondent by the respondent calling other evidence at the trial of the preliminary issue. Thirdly, this court may resolve the issues arising from the proposed amendment having regard to submissions by the parties on the appeal and without remitting the matter to the primary judge. Fourthly, the issues arising from the proposed amendment concern, to a significant extent, the proper construction of relevant provisions of the PPSA which have received only limited consideration by intermediate courts of appeal and scant attention from the High Court. Those issues involve questions of general public importance on significant national legislation. Fifthly, the issues arising from the amendment concern questions of law. Sixthly, this court may resolve the issues arising from the proposed amendment without relevant prejudice to the respondent. Seventhly, in the circumstances we have mentioned, it is in the interests of justice to allow the issues raised by the proposed amendment to be ventilated and dealt with on appeal.

The respondent argues that if, contrary to its preferred construction, there is an option to purchase, there is nevertheless no in substance security. First, as has been seen, the respondent says that there is no economic incentive to make the payments under the hire agreements and exercise the option to purchase.[117] I have rejected that submission (see [297] above). There was an incentive so far as the rebate reduced the price payable on exercise of the option to purchase. It cannot be said that, after applying the applicable rebate, the purchase price under the option to purchase was reflective of the then market value of the mining equipment. Second, the respondent says that the term of hire does not represent the whole of the useful life of the mining equipment.[118] Third, the respondent says that the first appellant's obligation is not to pay the equivalent of the capital cost of the mining equipment plus carrying costs by way of an interest payment.[119] Fourth, the respondent says that the exercise of the option to purchase is not a fait accompli, the transaction not being structured to ensure that its exercise is inevitable once the hirer makes all scheduled payments.[120]
[117] Respondent's supplementary submissions dated 10 August 2022 par 9.
[118] Respondent's supplementary submissions dated 10 August 2022 par 19.1.
[119] Respondent's supplementary submissions dated 10 August 2022 par 19.2.
[120] Respondent's supplementary submissions dated 10 August 2022 par 19.4.
I accept that there was, on the face of each hire agreement, no mandatory sale. But that is the case whenever there is an option to purchase. It does not mean that there is no de facto secured purchase transaction. Nor, viewing the transaction as a whole, is it determinative that the hire is for less than the useful life of the mining equipment. Professor Cuming's article contains an instructive passage that considers a like situation in the leasing context:
Many leases provide instalment payments for a period of time which is less than the useful life of the property and, in addition, include a purchase option involving the payment of a sum which is not nominal and which is payable before the lessee has made payments substantially equivalent to the value of the goods. If the amount payable under the option is significantly less than the market value which, at the date the lease was entered into, the parties could expect the goods to have at the date when the option is exercised, there is persuasive evidence that the lessee had an equity in the goods prior to exercise of the option. Usually, this type of transaction will require the lessee to make lease payments in excess of what other lessees are paying to lease similar or identical goods in the same market. What the parties have created is a transaction under which the lessee acquires an increased equity in the chattels with each lease payment. While the final payment is labelled 'optional' in the contract, from a commercial point of view it is obligatory because it makes no economic sense to refrain from exercising the option. Viewed in this light, the option is merely the final in a series of payments toward the purchase price of the chattels.[121] (emphasis added)
[121] R Cuming, 'True Leases and Security Leases under Canadian Personal Property Security Acts' 273.
Professor Cuming observes that American courts have shown little reluctance in finding that this type of transaction is a security agreement.[122] Professor Cuming also refers to a variant of this arrangement where rental payments, or a portion thereof, may be credited toward the amount payable on exercise of a payment option. If the option price approximates the market value of the goods the circumstance that the lessee (ie the hirer) can treat all or a large portion of the lease payments (ie the hire charges) as credit toward the purchase price is an indication of a secured sale transaction.[123] This variant succinctly describes the essence of the arrangement effected by the hire agreements. The reality of the rebate allowed under the option to purchase is that during the 300 days post-commencement of hire the first appellant was building up its 'commercial equity' in relation to the mining equipment by making the monthly hire charges payable under the hire agreements. This, in my view, strongly supports the conclusion that each hire agreement was a hire purchase agreement that constituted an in substance security pursuant to the PPSA.
[122] R Cuming, 'True Leases and Security Leases under Canadian Personal Property Security Acts' 273.
[123] R Cuming, 'True Leases and Security Leases under Canadian Personal Property Security Acts' 274 - 275.
This analysis is supported by the circumstance that, as mentioned, it should be inferred that the monthly hire rates under the hire agreements were in excess of the respondent's standard monthly contract rates for like mining equipment.
Finally, in seeking to counter the implications of the option to purchase, the respondent relied on schedules it prepared. I have reproduced the schedule for the first hire agreement as an annexure to these reasons. While there are minor monthly differences this schedule is representative of the other schedules. The schedules show that, on a monthly basis, there was an increase in the total amount payable by way of hire charges and purchase price (less allowable rebate) to purchase the mining equipment under the option to purchase. Viewed as a percentage of the amount stipulated in the outright purchase price option, the amounts were 100% (month 1), 102% (month 2), 106% (month 3), 109% (month 4), 117% (month 5) 120% (month 6), 123% (month 7) 127% (month 8), 130% (month 9) and 133% (month 10). (I have not included month 11 or month 12 as the rebate is no longer available at this point.)
The respondent relied on the schedules in support of its notice of contention (see [69] above). The respondent also submitted that:
The respondent has provided schedules of the comparison between the hire charges and the purchase price, and the total amounts payable under the hire agreements. In summary, if the first right of refusal was activated, the first appellant would have had to pay, as a minimum, roughly the same amount again as it had already paid the respondent in hire charges to exercise the first right of refusal and purchase the equipment (and, as a maximum, 14 times as much). It follows that the trial judge was correct to find that even if the hire agreements included an option to purchase, there was no evidentiary foundation for concluding that the option would have been exercisable at a 'bargain' price. Thus, it is clear that quite unlike a hire purchase agreement or finance lease where a sale is always intended, a sale in this instance was an unlikely possibility. At the time the hire agreements were entered, there was no obligation, nor even a reasonable expectation that there would be a sale of the equipment to the first appellant.[124] (citations omitted)
[124] Respondent's supplementary submissions dated 10 August 2022 par 20.
It is unsurprising that the overall cost of purchasing the mining equipment would increase over time. That is to be expected where the overall cost comprises a capital component and a carrying charge equivalent to an interest payment. That, in substance, is what is shown by the schedules. While the increase is not uniform, month-by-month, the disparity on a monthly basis is not so great as to avoid the conclusion that, in substance, what was effected was an arrangement whereby the first appellant was able (and, given its economic incentive, likely) to purchase the mining equipment for its market value plus a carrying charge in the nature of an interest component. In that respect it does not matter that the option to purchase was not exercisable at a bargain price.
The notice of contention is without merit and should be dismissed.
Second, as to the additional factors in support of the characterisation that the hire agreements were in substance securities, the first appellant was obliged to insure the mining equipment for its full market value (Additional Hire Charges cl 4; Terms & Conditions of Hire cl 2). Generally speaking, it is for the owner of goods to purchase insurance against loss or damage to the goods. Accordingly, the circumstance that the obligation to insure is transferred to a hirer is an indicator of a de facto secured purchase transaction. Standing alone it is not strong evidence. But it is corroborative of what appears from the option to purchase.[125]
[125] See R Cuming, 'True Leases and Security Leases under Canadian Personal Property Security Acts' 283 - 284.
Third, the first appellant assumed responsibility for repairs and maintenance as well as servicing costs. In particular, the first appellant accepted responsibility for all servicing, maintenance and damage (Terms & Conditions of Hire cl 5, cl 19). Damage caused by 'undue wear and tear' was to be repaired at the first appellant's expense (Terms & Conditions of Hire cl 4) as was any expense associated with the wear of various specific parts (Terms & Conditions of Hire cl 20). And, as has been mentioned, if the equipment was unsuitable for rehire on return, hire charges remained payable until repairs were carried out (Terms & Conditions of Hire cl 2). Ordinarily such costs are an incident of ownership.[126]
[126] R Cuming, 'True Leases and Security Leases under Canadian Personal Property Security Acts' 283 - 284.
Finally in terms of those factors which support the hire agreements being characterised as in substance securities, there is a disclaimer of any warranty or condition as to suitability or fitness for purpose (Terms & Conditions of Hire cl 8). Such a term is to be expected in a de facto secured purchase. However, it is also not uncommon in a pure hire. As such, standing alone, this factor is of little persuasive value.[127] In the present case it has relevance as a corroborative factor.

A neutral factor

[127] R Cuming, 'True Leases and Security Leases under Canadian Personal Property Security Acts' 285.

The default provisions in the hire agreements are essentially neutral to the characterisation question. Failure to make a monthly hire charge payment was to result in the mining equipment being immediately disabled and demobilisation arrangements made (Hire Agreement special terms cl 3). The respondent had the right to terminate the hire and recover the mining equipment at any time in the event of non-payment of any amount due or 'plant misuse/abuse' (Terms & Conditions of Hire cl 7). Hire charges remained payable for the minimum hire period if the hire period was concluded early (Terms & Conditions of Hire cl 11).
Recovery of the mining equipment on default is consistent with both a hire purchase agreement that constitutes an in substance security and a pure hire. Beyond that the default clause does no more than reinforce the basis for the calculation of contractual damages. It cannot reasonably be said that the default clause secures the payment of the hire charges and the purchase price under the option to purchase. There is no acceleration provision. Nor is the respondent granted remedies similar to those of a mortgagee.

The factors which support characterisation of the hire agreements as a pure hire

There are, however, a number of features of the hire agreements which are consistent with the agreements involving a pure hire rather than an in substance security arrangement. In some cases this is because the relevant matter is inconsistent with the usual incidents of ownership accruing to the first appellant as the person in possession of the mining equipment and having an option to purchase the equipment.[128]
[128] See in particular [120] - [123].
First, the minimum hire period of 10 continuous months was less than the useful economic life of the mining equipment, meaning that the mining equipment might be rehired on return to the respondent after the expiry or termination of the hire period. Moreover, the 10 months is a relatively short minimum hire period. The short length of the term is consistent with a pure hire rather than an in substance secured purchase contract. However, as has been seen, neither of these matters is determinative. To the contrary, the option to purchase coupled with the economic incentive provided by the rebate is consistent with a de facto secured sales transaction where the purchase was to be completed within 300 days after commencement.
Second, there was no rebate against the purchase price under the option to purchase if the first appellant exercised the option to purchase more than 300 days after the commencement of the hire. Again, however, this presupposes that the hire continued past the 300 days. There was an economic incentive to exercise the option to purchase and complete the purchase within 300 days after commencement of hire.
Third, the first appellant was obliged to operate the mining equipment within its specifications and in accordance with the respondent's instructions (Terms & Conditions of Hire cl 3).
Fourth, any alterations or modifications to the mining equipment had to be approved in writing by the respondent (Special Terms & Conditions of Hire cl 4).
Fifth, the hire agreements provided for an excess hourly rate when the mining equipment was used for more than 250 hours per month. A pro rata hourly rate was payable in addition to the monthly hire rate (Hire Agreement particulars of hire rate). Logically this excess rate compensated for extra wear and tear which would presumably reduce market value at the end of the hire period. Such a term is, in my view, consistent with a pure hire. In a de facto secured purchase transaction it would not be expected that additional compensation would be payable to the respondent for usage of the mining equipment on an excess hours basis.
Sixth, the hire agreements provided for potential reductions in the monthly hire charge in the event of 'stand down time', 'inclement weather' and 'major machine maintenance/repairs' (Terms & Conditions of Hire cl 12, cl 13). Such allowances are the other side of the coin to the additional hire charge for excess monthly usage. It is consistent with the hire agreements being a pure hire.
Seventh, the respondent accepted responsibility for and the costs of mechanical repairs necessary due to faulty manufacture (Terms & Conditions of Hire cl 5). Doing so is consistent with a pure hire. That said, standing alone this is of limited significance. Such an allocation of responsibility is not necessarily inconsistent with the hire agreements being characterised as a title-retention device for security purposes. It is also normal for a seller of equipment to be responsible for mechanical repairs required as a result of faulty manufacture.
Eighth, the first appellant was to maintain a two month hire charge amount as a security deposit.
I accept that, as the respondent submits,[129] this is often consistent with an operating lease rather than a security lease. However, I view this factor as having little weight in the present case. There is good reason why a person in the position of the respondent might wish to obtain an advance payment as and by way of additional security. That is particularly the case at the commencement of the hire period when the hirer is yet to build up a substantial 'commercial equity' in the goods.
[129] Respondent's supplementary submissions dated 10 August 2022 par 29.
Moreover, as Professor Cuming observes, it is difficult to see how the presence or absence of a security deposit does more than confirm a conclusion based primarily on other more persuasive factors.[130]

Conclusion: the hire agreements, in substance, secured payment or performance of an obligation

[130] R Cuming, 'True Leases and Security Leases under Canadian Personal Property Security Acts' 284.

I am satisfied that, when the various features of the hire agreements are considered and weighed, each agreement should be characterised as an in substance security for the purpose of the PPSA rather than a pure hire.
The single most important feature is the option to purchase. When the nature and structure of the option to purchase is understood it becomes apparent that in substance the hire agreements are a secured sales transaction. The transaction takes its legal form as a title-retention device for security purposes. The implications of the option to purchase are supported by a number of other features of the hire agreement. The contrary factors are peripheral indicia which do not detract from the conclusion that the transaction serves the function of securing the payment or the performance of an obligation as inheres from the option to purchase in the circumstances of the hire agreements.
It follows, in my opinion, that each hire agreement provided for a 'security interest' within the meaning of s 12(2)(e) (and s 12(1)) of the PPSA. Ground 1 of the appeal should be upheld.

Conclusion and orders

Question 1 of the preliminary issues before the primary judge was in the following terms:
Did each of the hire agreements create a security interest in the equipment the subject of the relevant hire agreement pursuant to: (i) section 12(1); (ii) alternatively section 12(3), of the PPSA which the [respondent] was required to perfect by registration pursuant to section 20(1) of the PPSA?
In this court, argument was confined to whether each hire agreement provided for a security interest in the equipment pursuant to s 12(1) of the PPSA (and, implicitly, s 12(2)(e) of the PPSA). No argument was presented to the effect that there was a security interest which the respondent was 'required' to perfect pursuant to s 20(1) of the PPSA. Nor, properly understood, does s 20(1) require perfection - it simply provides for certain consequences that might arise in the absence of perfection. That aspect of the question raised by way of preliminary issue should be disregarded.
I would answer question 1 of the preliminary issues as follows:
Each of the hire agreements provided for a 'security interest' in the equipment the subject of the relevant agreement pursuant to s 12(2)(e) (and s 12(1)) of the Personal Property Securities Act 2009 (Cth).
In concluding to the contrary, the primary judge was, in my respectful opinion, in error. Accordingly, the appeal should be allowed. Orders should be made providing for an answer to question 1 of the preliminary issues to the effect of that specified in [367] above. The proceedings should otherwise be remitted to the General Division of the court for the determination of the remaining issues in the proceedings. I see no reason why the remittal ought not be to the primary judge.
I would make orders to the following effect (allowing the parties to be heard on the precise terms of the orders):
1.The appeal is allowed.
2.The orders of the court made 25 November 2020 and 10 December 2020 in action CIV/1495/2020 are set aside. In substitution thereof it is ordered that:
Question 1 of the preliminary issues ordered to be tried by order of the court is answered as follows:
Question: Did each of the hire agreements create a security interest in the equipment the subject of the relevant hire agreement pursuant to: (i) section 12(1); (ii) alternatively section 12(3), of the Personal Property Securities Act 2009 (Cth) which the plaintiff was required to perfect by registration pursuant to section 20(1) of the Act?
Answer: Each of the hire agreements provided for a 'security interest' in the equipment the subject of the relevant agreement pursuant to s 12(2)(e) (and s 12(1)) of the Personal Property Securities Act 2009 (Cth).
3.Action CIV/1495/2020 is otherwise remitted to the General Division for determination of the remaining issues in the proceedings.
The parties should be heard on the costs of the appeal and the trial of the preliminary issues.

Annexure

Respondent's Schedule for Hire Agreement GENT0413A-2

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
BS
Associate to the Honourable Justice Buss
20 OCTOBER 2022

Minimum Ten Continuous Months Hire Period:
Monthly Hire Rate:	AU$46,000.00	+ GST per month
Monthly hire rate based on a maximum 200 SMU hours per month. Hours in excess of 250 SMU hours per month will be charged at the below pro rata hourly hire rate.
Pro Rata Hourly Rate:	AU$230.00	+ GST per hour

Special Terms:	1. Machine rental is subject to received and completed Hire Agreement, [the respondent's] Trading Terms Agreement; Special Terms & Conditions of Hire Agreement, as well as Customer purchase order and insurance CoC from a reputable insurer. 2. Hirer is granted to option to purchase the equipment, subject to receipt of an executed Special Terms & Conditions of Hire Agreement. 3. Two months base rental to be paid in advance, in order to secure units and commence dispatch preparations. Two months in advance to be maintained at all times during the hire. Hire invoices will be sent out minimum five business days prior to end of month for the base monthly hire rate. These invoices must be received in [the respondent's] nominated bank account prior to COB AWST on the last business day of the calendar month. Should funds not be received by this time, the equipment will be immediately disabled and demobilisation arrangements made. [The respondent] will retain the two months in advance as a security deposit up until the point of off hire, return of the equipment and completion of post hire repair estimation. The advance payment will be applied to the post hire repair invoice, with any difference being returned to the customer or to be paid by the customer within two business days of invoice issue. Should the customer purchase the units at any stage during the hire, the advance payment will be applied as a deposit against the purchase buy out amount.
Hire Period:	Minimum ten (10) continuous months hire period with option to purchase at anytime. Should the hire fall short of ten (10) continuous months for any reason other than buyout of equipment, [the respondent] will be entitled to charge the difference between the ten (10) months hire rates and its standard monthly contract hire rates.
Delivery Date:	Anticipated 20/12/2019 - To be confirmed by [the respondent]
Commencement Date:	As per delivery date
Anticipated Completion Date:	To be confirmed by customer - minimum period applies, as above