White v Spiers Earthworks Pty Ltd
[2014] WASC 139
•16 APRIL 2014
WHITE-v- SPIERS EARTHWORKS PTY LTD [2014] WASC 139
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2014] WASC 139 | |
| Case No: | CIV:2245/2013 | 18 & 20 SEPTEMBER, 2 OCTOBER 2013 | |
| Coram: | LE MIERE J | 16/04/14 | |
| 16 | Judgment Part: | 1 of 1 | |
| Result: | Application granted | ||
| B | |||
| PDF Version |
| Parties: | HAYDEN LEIGH WHITE AND DAMIAN JOHN TEMPLETON IN THEIR CAPACITIES AS JOINT AND SEVERAL RECEIVERS AND MANAGERS OF BEM EQUIPMENT PTY LTD (ADMINISTRATORS APPOINTED) (RECEIVERS AND MANAGERS APPOINTED) SPIERS EARTHWORKS PTY LTD IN ITS OWN RIGHT AND AS TRUSTEE FOR THE SPIERS ASSET TRUST BRADLEY STEPHEN SPIERS HELEN MARGARET SPIERS |
Catchwords: | Hire agreement Hirer appointed administrators Whether defendants' interest in hire assets vested in hirer company Whether hirer company is entitled to possession of hire assets and holds them subject to charge Whether Personal Property Securities Act 2009 (Cth) s 267 applies Specified event Voluntary administrators appointed Defendants' interest is in substance a security interest Hire purchase agreement is a PPS lease Perfection of security interest Transitional arrangements for perfecting security interests No unjust acquisition of property for purposes of Personal Property Securities Act 2009 (Cth) s 252B |
Legislation: | Chattel Securities Act 1987 (WA), s 14 Constitution 1901 (Cth), s 51(xxxi) Corporations Act 2001 (Cth), s 436A Hire-Purchase Act 1959 (WA) Personal Property Securities (Consequential Repeals and Amendments) Act 2011 (Cth) Personal Property Securities (Corporations and other Amendments) Act 2010 (Cth) Personal Property Security Act 2009 (Cth), s 2, s 10, s 12, s 13, s 21, s 252B, s 261, s 267, s 307, s 308, s 310, s 322, s 330, s 332 Personal Property Security Regulations 2010 (Cth), reg 9.2 Road Traffic Act 1974 (Cth) |
Case References: | Australian Tape Manufacturers Association Ltd v The Commonwealth (1993) 176 CLR 480 Georgiadis v Australian and Overseas Telecommunications Corporation (1994) 179 CLR 297 Mutual Pools & Staff Pty Ltd v The Commonwealth (1994) 179 CLR 155 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiffs
AND
SPIERS EARTHWORKS PTY LTD IN ITS OWN RIGHT AND AS TRUSTEE FOR THE SPIERS ASSET TRUST
First Defendant
BRADLEY STEPHEN SPIERS
HELEN MARGARET SPIERS
Second Defendants
Catchwords:
Hire agreement - Hirer appointed administrators - Whether defendants' interest in hire assets vested in hirer company - Whether hirer company is entitled to possession of hire assets and holds them subject to charge
Whether Personal Property Securities Act 2009 (Cth) s 267 applies - Specified event - Voluntary administrators appointed - Defendants' interest is in substance a security interest - Hire purchase agreement is a PPS lease - Perfection of security interest - Transitional arrangements for perfecting security interests
No unjust acquisition of property for purposes of Personal Property Securities Act 2009 (Cth) s 252B
Legislation:
Chattel Securities Act 1987 (WA), s 14
Constitution 1901 (Cth), s 51(xxxi)
Corporations Act 2001 (Cth), s 436A
Hire-Purchase Act 1959 (WA)
Personal Property Securities (Consequential Repeals and Amendments) Act 2011 (Cth)
Personal Property Securities (Corporations and other Amendments) Act 2010 (Cth)
Personal Property Security Act 2009 (Cth), s 2, s 10, s 12, s 13, s 21, s 252B, s 261, s 267, s 307, s 308, s 310, s 322, s 330, s 332
Personal Property Security Regulations 2010 (Cth), reg 9.2
Road Traffic Act 1974 (Cth)
Result:
Application granted
Category: B
Representation:
Counsel:
Plaintiffs : Mr L D Ayres
First Defendant : Mr B P Wheatley
Second Defendants : Mr B P Wheatley
Solicitors:
Plaintiffs : Minter Ellison
First Defendant : Mossensons
Second Defendants : Mossensons
Case(s) referred to in judgment(s):
Australian Tape Manufacturers Association Ltd v The Commonwealth (1993) 176 CLR 480
Georgiadis v Australian and Overseas Telecommunications Corporation (1994) 179 CLR 297
Mutual Pools & Staff Pty Ltd v The Commonwealth (1994) 179 CLR 155
1 LE MIERE J: In 2010 the defendants operated an earthmoving business. The defendants agreed to sell the business to BEM Equipment Pty Ltd (the Company). The sale was effected by the Company and the defendants entering into two agreements entitled Business Purchase Agreement and Plant Hire Agreement (Hire Agreement). Under the Hire Agreement the defendants agreed to hire to the Company vehicles and other equipment used in the business (Hire Assets).
2 In February 2011 the Company gave a fixed and floating charge to the National Australia Bank Ltd (NAB) as security for the payment of the amount owing to the bank. On 24 July 2013 the Company appointed administrators pursuant to Corporations Act 2001 (Cth)s 436A. On 31 July 2013 NAB appointed the plaintiffs, who I will refer to as the Receivers, as receivers and managers of the Company pursuant to the charge. The Receivers say that by operation of s 267 of the Personal Property Securities Act 2009 (Cth) (PPSA) the defendants' interest in the Hire Assets vested in the Company.
3 The defendants say that the appointment of the Receivers was an event of default under the Hire Agreement. On 9 August 2013 the defendants gave notice to the Company and to the Receivers of the termination of the Company's right to possession of the Hire Assets. The defendants say that they are the owners of the Hire Assets and entitled to possession of them.
4 On 12 August 2013 the Receivers commenced these proceedings by originating summons. The Receivers claim a declaration that the Hire Assets have vested in the Company and that the Company holds the assets subject to the NAB charge. The Receivers also seek an order for delivery up and possession of any personal property, chattels or equipment that the defendants have removed from the possession of the Company.
The facts
5 The facts are agreed. In 2010 the Company, as hirer, and the defendants, as owners, entered into the Hire Agreement. Pursuant to the terms of the Hire Agreement, the Company took on hire from the Defendants certain personal property defined by that agreement as the 'Hire Assets'. The Hire Agreement was a hire purchase agreement as defined in the Hire-Purchase Act 1959 (WA). The Hire Assets are, variously, in the nature of:
(a) 'motor vehicles' that are, or have been, licensed under the Road Traffic Act 1974 (WA) (RT Act); and
(b) trailers, some of which were, are or have been licensed under the RT Act.
Pursuant to the terms of the Hire Agreement, the parties to the Hire Agreement agreed that market value of the Hire Assets was $1,401,500.
6 At all material times from the commencement of the Hire Agreement, the Company possessed the Hire Assets in accordance with the terms of the Hire Agreement, and utilised them in the course of its business by employing them in the performance of earthmoving works for third parties in various locations throughout Western Australia and/or leasing items of the Hire Assets to third parties from time to time.
7 Voluntary administrators were appointed to the Company on 24 July 2013. The Receivers were appointed as joint and several receivers and managers of the property of the Company on 31 July 2013. Between the commencement of the Hire Agreement and the date on which the Receivers were appointed, the Company had paid significant moneys to the Defendants pursuant to and in accordance with the terms of the Hire Agreement.
8 Prior to the commencement of the PPSA on 30 January 2012, the defendants did not register their interest in the Hire Assets (pursuant to the Hire Agreement) on the register that was kept by the Commissioner (as defined in the Chattel Securities Act 1987 (WA) (CS Act)) pursuant to s 14 of the CS Act. Prior to the appointment of voluntary administrators to the Company on 24 July 2013, the Defendants did not register financing statements on the Personal Property Security Register established and maintained by the Registrar of Personal Property Securities under the PPSA.
9 It was initially not conceded by the defendants that the Hire Assets were registrable goods to which the CS Act applied, or that the defendants' security interest in the Hire Assets was capable of being registered under that Act prior to the PPSA commencing. Following conferral between the parties and further material being adduced, it was established that the Hire Assets were registrable goods and the defendants' interest in the assets was capable of being registered under the CS Act.
The issue
10 The Receivers say that by operation of PPSA s 267(2), the interest of the defendants in the Hire Assets vested in the Company immediately before the appointment of the Administrators and the Company is entitled to possession of the Hire Assets and holds them subject to the NAB charge. The defendants say that PPSA s 267(2) does not apply or does not have any effect in this case. I will first consider whether the elements of PPSA s 267(2) are met so as to vest the defendants' interest in the Hire Assets in the Company.
11 A person who holds a security interest is referred to in the PPSA as a 'secured party' and a person who is regarded by the PPSA as giving the security interest is a 'grantor'. In this case the Receivers say that the defendants are secured parties and the Company is the grantor of the security interest held by the Receivers.
PPSA s 267
12 PPSA s 267(1) provides that the section applies if two conditions are met. The first is that one of the specified events occurs. One specified event is that an administrator of a company is appointed. In this case that occurred when voluntary administrators were appointed to the company on 24 July 2013.
13 The second condition is that a security interest granted by the Company is unperfected at the relevant time. The concept of perfection is related to the enforceability of a security interest. A security interest is only effective if it has attached to collateral, that is personal property to which a security interest is attached. A security interest attaches to collateral when the grantor has rights in the collateral, or can transfer it to the secured party, and value is given or the security interest otherwise arises. Perfection occurs when a security interest has attached to collateral and any further steps needed to make the security interest effective against third parties have been taken.
14 In this case the relevant time for determining whether the security interest is perfected is 24 July 2013 when the administration commenced. PPSA s 267(2) provides that the security interest held by the secured party vests in the grantor immediately before the relevant time mentioned in s 267(1). In the circumstances of this case the effect of PPSA s 267(2) is that the defendants' interest in the Hire Assets vested in the Company immediately before the appointment of administrators on 24 July 2013 if the defendants' interest in the Hire Assets is a security interest granted by the Company and it was unperfected when the administrators were appointed. I will consider each of those issues.
Security interest
15 A 'security interest' is defined by PPSA s 12. There are two categories of security interest – 'in substance' security interests and 'deemed security interests'. The primary definition of 'security interest' is in PPSA s 12(1) which defines a security interest to mean '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)'. Section 12(2) then gives examples of security interests by providing that a security interest includes an interest in personal property provided by any of the specified transactions, if the transaction, in substance, secures payment or performance of an obligation. The specified transactions include a conditional sale agreement (including an agreement to sell subject to retention of title), a hire purchase agreement and a lease of goods (whether or not a PPS lease).
16 The PPSA deems three types of interests in personal property to be security interests, whether or not the transaction in substance secures payment or performance of an obligation. The interest of a lessor of goods under a PPS lease is deemed by PPSA s 12(3) to be a security interest. PPS lease is defined by PPSA s 13, which I will consider later in these reasons.
17 The Receivers submit that the defendants have a security interest in the Hire Assets because the Hire Agreement gives rise to an 'in substance' security interest or alternatively is a PPS lease.
Defendants' interest is in substance a security interest
18 In this case the Hire Assets are personal property and the Hire Agreement is a transaction. For the defendants' interest in the Hire Assets to be a security interest, the security interest must be 'provided for' by the transaction. It may seem anomalous to say that the defendants' interest in the Hire Assets is provided for by the Hire Agreement where the defendants owned the Hire Assets before the transaction was entered into. However, PPSA s 12(2) shows that the PPSA is intended to apply to relationships such as lessor and lessee and hirer and hiree under a hire purchase agreement, where the secured party already had its interest in the property before the security interest was granted. The relevant issue in this case is whether or not the Hire Agreement in substance secures payment or performance of an obligation.
19 An interest in relation to goods provided for by a transaction that in substance secures payment or performance of an obligation is a security interest for the purposes of the PPSA, regardless of its form or who has title or ownership to the goods. The concept of being in substance security for payment or performance of an obligation refers to the economic or commercial substance of a transaction. To determine whether the Hire Agreement in substance secures payment or performance of an obligation it is necessary to consider the rights and obligations of the parties under the Hire Agreement.
20 There are a number of features of the Hire Agreement which indicate that the Hire Agreement is in substance a sale of the Hire Assets, with the defendants retaining title until the final payment to secure payment of the total purchase price. First, the total amount payable for the hire of the Hire Assets under the Hire Agreement is an amount equal to the agreed market value of the Hire Assets. Payment is to be made by monthly payments commencing 11 months after the commencement date. Each monthly payment is an amount calculated so that over the term of the agreement the total payments made by the Company equal the market value of the Hire Assets plus a monthly interest charge.
21 Secondly, the Hire Agreement gave the Company two options to purchase the Hire Assets. The first option was exercisable at any time during the term of the agreement. In essence, the Company could acquire the Hire Assets, or any of them, for $1.00 provided that the total amounts paid by the Company under the agreement exceeded the market value of the purchased assets at the time of the exercise of the option. The second call option is exercisable by the Company one month prior to the end of the term of the agreement by payment of $10,000 to the defendants. After paying $10,000 the Company will have paid an amount equal to the market value of the Hire Assets plus a monthly interest charge.
22 Thirdly, the Hire Agreement was part of the transaction by which the Company purchased the business under the Business Purchase Agreement. It is a condition of the Business Purchase Agreement that on completion of the Business Purchase Agreement the defendants and the Company 'will execute the [Hire Agreement] in relation to the sale and purchase of the Hire Assets'. In substance, the Company purchased the Hire Assets by the payment of the purchase price by instalments over time, together with interest, and the defendants got security over the assets by way of it being a hire purchase agreement rather than a sale.
23 The interest of the defendants in the Hire Assets is a security interest for the purposes of the PPSA because their interest is in substance a security interest. It is therefore unnecessary to consider whether or not the defendants' interest is a deemed security interest on the ground that the Hire Agreement is a PPS lease. However, as the matter was argued by the parties I will briefly set out my conclusion that the Hire Agreement is a PPS lease.
Hire Agreement is a PPS lease
24 A PPS lease is deemed to be a security interest. A PPS lease is defined by PPSA s 13(1) to be a lease or bailment of goods, amongst other things, for a term of more than one year. That condition is met in this case. However, PPSA s 13(2) provides that a PPS lease does not include a lease by a lessor who is not regularly engaged in the business of leasing goods. The only evidence in relation to this matter is the statement by the first named second defendant, Bradley Spiers, in his affidavit sworn 13 August 2013 that:
The Business leased various items of earthmoving equipment on a regular basis.
- I find that the defendants regularly engaged in the business of leasing goods and hence the Hire Agreement is a PPS lease.
Perfection of security interest
25 The second condition for PPSA s 267 to apply is that the security interest granted by the Company was unperfected when the administration commenced. PPSA ch 2 pt 2.2, which includes s 21, contains rules about how a security interest is perfected. Perfection occurs when a security interest has attached to collateral and further steps needed to make the security interest effective have been taken. The Receivers conceded that the defendants' security interests attached to the collateral, that is the Hire Assets, but contend that their interest was not perfected when the administrators were appointed.
26 In general, the steps needed to perfect the security interest involve registration on the Personal Property Securities Register or possession. PPSA s 21(1) provides that a security interest 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 the third party; and
(iii) subsection (2) applies.
- Subsection (2) applies if the conditions set out in s 21(2)(a), (b) or (c) are satisfied. In this case they are not. Subparagraph (a) requires registration. Subparagraph (b) requires that the secured party has possession of the collateral, other than possession as a result of seizure or repossession. In this case the defendants seized or repossessed some of the Hire Assets but that does not satisfy subpar (b). Subparagraph (c) refers to certain kinds of personal property which is not applicable in this case.
27 The conditions of PPSA s 21(1)(b) are not met. Therefore, the defendants' security interest in the Hire Assets is perfected if, and only if, the security interest is temporarily perfected, or otherwise perfected, by force of the Act. To determine whether the defendants' security interest was temporarily perfected, or otherwise perfected by force of the Act, it is necessary to turn to the transitional arrangements. PPSA ch 9.4 is about, amongst other things, the perfection of transitional security interests. Transitional security interests are declared to be perfected until the end of the month, that is, 24 months after the registration commencement time.
Transitional arrangements for perfecting security interests
28 Leases and hire purchase agreements created after the commencement of the PPSA need to be registered on the Personal Property Securities Register in order to be perfected by registration. Existing security registrations were electronically migrated to the PPS Register. Lessors and bailors with existing leases, bailments or hire purchase agreements which are security interests under the PPSA have two years from the registration commencement time to register those interests that were not electronically migrated and/or to register existing interests that did not previously require any registration. During this period PPSA s 332 declares the interest to be temporarily perfected.
29 PPSA s 307 defines a transitional security agreement as a security agreement that is in force immediately before the registration commencement time and that continues in force at and after that time. A 'security agreement' is defined in PPSA s 10 to mean, amongst things, an agreement by which a security interest is created, arises or is provided for. The Hire Agreement is a security agreement. PPSA s 308 defines a transitional security interest. In essence, a security interest is a transitional security interest if it is created pursuant to a security agreement and it is a security interest under the PPSA but was created before the registration commencement time. The defendants' interest in the Hire Assets is a transitional security interest.
30 PPSA s 322 sets out a number of rules in relation to the deemed perfection of transitional security interests. The effect of PPSA s 322(1) is relevantly that subject to the exception in PPSA s 322(3), a transitional security interest is deemed to be perfected for a period of 24 months commencing immediately before the registration commencement time. The exception created by PPSA s 322(3) is that PPSA s 322(1) and (2) do not apply to a transitional security interest if the interest is of a class prescribed by regulations made for the purposes of PPSA s 322(3).
31 Regulations have been made for the purposes of PPSA s 322(3). Personal Property Securities Regulations 2010 (Cth) reg 9.2 provides relevantly that a transitional security interest is prescribed for the purposes of PPSA s 322(3) where it is registrable on a transitional register, and where it was not registered on the relevant register prior to the registration commencement time, that is 30 January 2012. A transitional register is a register of data in relation to personal property maintained under a law of the Commonwealth, a state or a territory: PPSA s 330.
32 Prior to the registration commencement time, the Chattel Securities Act 1987 (WA) (CS Act) required the Commissioner to keep a register 'in which shall be entered security interests in relation to registrable goods' (REVS Register). The REVS Register was a transitional register within the meaning of the PPSA. The Hire Assets constituted registrable goods under the CS Act. The defendants' security interest in the Hire Assets constituted a security interest under the CS Act. Therefore, the defendants' security interest was registrable under the CS Act. The defendants did not register their interest in the Hire Assets on the REVS Register. Accordingly, the defendants' transitional security interest in the Hire Assets is prescribed by reg 9.2 and falls within the exception under PPSA s 322(3). It follows that the defendants' transitional security interest in the Hire Assets is not perfected by reason of PPSA s 322. Accordingly, the defendants' security interest granted by the Company was unperfected at the time prescribed in PPSA s 267(1). It follows that the security interest in the Hire Assets held by the defendants vested in the Company immediately before the appointment of the administrators by operation of PPSA s 267(2).
Defendants' contentions
33 The effect of PPSA s 267 is that the defendants' interest in the Hire Assets vested in the Company, unless for some reason I have not yet considered PPSA s 267 does not apply or does not have that effect. The defendants put forward two bases on which they contend the PPSA s 267 does not apply or does not have that effect. I will now turn to those arguments.
34 The defendants' first contention is that PPSA ss 267 and 332 and reg 9.2 do not apply to vest the defendants' interests in the Hire Assets because that would result in an acquisition of property from the defendants otherwise than on just terms and PPSA s 252B provides that a provision of the PPSA does not apply to the extent that the operation of the provision would result in an acquisition of property from a person otherwise than on just terms. The defendants' second contention is that the failure of the defendants to register their security interest under the CS Act does not affect the validity and enforceability of their interest in the Hire Assets by reason of PPSA s 261. Where PPSA s 261 applies:
[a] failure to register the security interest under the applicable state law does not:
(a) affect the validity, priority or enforceability of the security interest, or of a security agreement providing for the security interest; or
(b) otherwise limit the effect of the security interest, or a security agreement providing for the security interest.
No unjust acquisition of property for purposes of PPSA s 252B
35 The defendants say that vesting their interest in the Hire Assets in the Company would result in an acquisition of property, because the vesting would wholly extinguish their proprietary interest in the Hire Assets and vest it in the Company. The defendants say that that acquisition of property is otherwise than on just terms because they receive nothing in return. Insofar as they are an unsecured creditor entitled to prove in the administration, that is a right which flows from their contractual rights under the Hire Agreement. The Receivers say that the vesting of the defendants' interest in the Hire Assets was not an acquisition of property of the kind which attracts the obligation to provide just terms, but is part of and incidental to a statutory scheme for the adjustment of competing rights and liabilities amongst creditors of an insolvent company.
36 PPSA s 252B is in pt 7.3 of ch 7 which is about the constitutional operation of the Act. PPSA s 252B was inserted in the PPSA by the Personal Property Securities (Corporations and other Amendments) Act 2010 (Cth) (the Amendment Act). The Explanatory Memorandum to the Bill that became the Amendment Act stated that s 252B was inserted into the PPSA to remove any doubt about the constitutionality of the PPSA, and that s 252B establishes that a provision of the PPSA would not apply where it would have the effect of providing for an acquisition of property otherwise than on just terms.
37 PPSA s 252B(2) provides that in s 252B(1) 'acquisition of property' and 'just terms' have the same meaning as in s 51(xxxi) of the Constitution. The High Court has held that a statutory provision is not one for the acquisition of property within s 51(xxxi) of the Constitution where the provision is not one for the acquisition of property as such, but rather part of and incidental to a general regulatory scheme aimed at the adjustment of competing rights and liabilities.
38 In Australian Tape Manufacturers Association Ltd v The Commonwealth (1993) 176 CLR 480 Mason CJ, Brennan, Deane and Gaudron JJ said:
In a case where an obligation to make a payment is imposed as genuine taxation, as a penalty for proscribed conduct, as compensation for a wrong done or damages for an injury inflicted, or as a genuine adjustment of the competing rights, claims or obligations of persons in a particular relationship or area of activity, it is unlikely that there will be any question of an 'acquisition of property' within section 51(xxxi) of the Constitution (page 510).
- That dictum was approved by the High Court in Georgiadis v Australian and Overseas Telecommunications Corporation (1994) 179 CLR 297 at 306 - 307 by Mason CJ, Deane and Gaudron JJ and in Mutual Pools & Staff Pty Ltd v The Commonwealth (1994) 179 CLR 155, 171 - 172 (Mason CJ), 180 (Brennan J) and 189 - 190 (Deane and Gaudron JJ). In 'Overriding Guarantee of Just Terms or Supplementary Source of Power?: Rethinking Section 51(xxxi) of the Constitution' (2005) 27 Sydney Law Review 639 at 649 – 650, Rosalind Dixon demonstrates that this dictum has been applied by the High Court on several subsequent occasions.
39 PPSA s 267 is in chapter 8. The guide to this chapter states that the chapter contains rules in pt 8.2, which includes s 267, about the vesting of certain unperfected security interests. The guide to pt 8.2 states that the part provides for the vesting of an unperfected security interest in the grantor in certain circumstances. The guide further states that:
[I]n the event of the bankruptcy of an individual grantor, or the winding up or the entry into administration of a body corporate grantor, a secured party's unperfected security interest vests in the grantor. However, some security interests are unaffected by this rule.
Some secured parties are entitled to damages or compensation in relation to the vesting of unperfected interests under this Part.
- Section 267(1) provides the circumstances in which the security interest held by a secured party vests in the grantor. The circumstances are where the grantor is insolvent and hence the vesting of the security interest in the grantor adjusts the competing rights of the secured party on the one hand and the unsecured creditors of the grantor on the other hand in relation to the personal property in relation to which the secured party has a security interest.
40 PPSA s 267(2) does not effect an acquisition of property within the meaning of 'acquisition of property' in s 51(xxxi) of the Constitution. The operation of s 267 to vest the defendants' interest in the Hire Assets does not result in an acquisition of property within the meaning of 'acquisition of property' in s 51(xxxi) of the Constitution, and hence PPSA s 252B does not apply to the circumstances of this case. The result is that PPSA s 267(2) applies and the interests of the defendants in the Hire Assets are vested in the Company by reason of PPSA s 267 notwithstanding PPSA s 252B.
PPSA s 261 – failure to register under State law does not affect validity or enforceability
41 The defendants' second contention is that their failure to register their security interest in the Hire Assets under the CS Act does not affect the validity or enforceability of their security interest because of the provisions of PPSA s 261. PPSA s 261 is in pt 7.4 which deals with the interaction of the PPSA with other Australian laws. The guide to pt 7.4 indicates the nature and purpose of the provisions in that part. The guide states that:
[Part] 7.4 deals with the interaction of the Act with other Australian laws.
The Act is not intended to exclude or limit the operation of any other law if that other law is capable of operating concurrently with the Act.
- Other laws prevail over the PPSA in certain situations which are not presently relevant. The guide states however that the PPSA prevails over other laws in relation to certain requirements relating to the registration and form of security and their perfection.
42 PPSA s 261(1) provides that the 'section applies if a law (the applicable law) of a state has the effect of requiring or enabling a person to register a security interest'. The Act contains an example:
[a] law of the State or Territory may have this effect by requiring a person to register any interest required by the person in a motor vehicle including, but not limited to, a security interest.
- PPSA s 261(3) provides that
[a] failure to register the security interest under the applicable law does not:
(a) affect the validity, priority or enforceability of the security interest, or of a security agreement providing for the security interest; or
(b) otherwise limit the effect of the security interest, or a security agreement providing for the security interest.
44 I do not accept the defendants' contention. PPSA s 2 states that the PPSA commences on the day after it receives the Royal assent. However, s 310 states that the PPSA starts to apply at the registration commencement time to transitional security agreements and interests. The CS Act was amended by the Personal Property Securities (Consequential Repeals and Amendments) Act 2011 (Cth) to the effect that the provisions of the CS Act which required or enabled the defendants to register their interest in registrable goods has no effect at and after the registration commencement time. When the PPSA started to apply in relation to transitional security agreements and security interests, the CS Act did not have the effect of requiring or enabling the defendants to register their security interest. Accordingly, PPSA s 261 did not apply.
Conclusion
45 By operation of PPSA s 267(2) the defendants' interests in the Hire Assets vested in the Company immediately before the appointment of the administrators on 24 July 2013. I will hear the parties as to the orders which should be made to give effect to these reasons for judgment.
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