We recently provided advice in a matter where a number of lenders and financiers had registered security interests on the Personal Property Securities Register (the “PPSR”) granted to those entities by a corporate trustee in its capacity as trustee of a trust (the “Trust”).
Each of the financing statements registered by the lenders/financiers on the PPSR included the ACN of the corporate trustee rather than the ABN of the Trust.
Based on the relevant provisions of the Personal Property Securities Act 2009 (Cth) (the “PPSA”), the Personal Property Securities Regulations 2010 (Cth) (the “Regulations”) and the Corporations Act 2001 (Cth) (the “Act”) and in accordance with the prevailing case authorities in this area, we advised that each of the security interests were defective and as such, they vested in the Trust and became part of the property of the Trust for the benefit of the Trust’s creditors upon the Trust’s entry into liquidation.
Pursuant to section 164(1) of the PPSA, a registration on the PPSR with respect to a security interest that describes particular collateral will be ineffective because of a defect if and only if there is a:
(a) seriously misleading defect in the registration; or
(b) defect of the kind mentioned in section 165.
Section 165(b) of the PPSA in particular, mentions circumstances, in a case in which the collateral is not required to be registered by serial number, where no search of the PPSR by reference only to the grantor’s details required under section 153 of the PPSA is capable of disclosing the registration.
The combined effect of section 153 of the PPSA and section 1.5(3)(b) of Schedule 1 of the Regulations is that where the grantor is a trustee of a trading trust, as was the case in our matter, the grantor’s details required to be included in the financing statement registered on the PPSR is the ABN of the trust.
Where the grantor’s details required by section 153 of the PPSA are its ABN, if the financing statement does not include the ABN, as was the case in our matter, a search of the PPSR by reference only to the grantor’s ABN would not disclose the registration. In those circumstances, the Courts have held that such registrations are ineffective pursuant to sections 164(1)(a), 164(1)(b) and 165(b) of the PPSA and that the defective security interests will, pursuant to section 267 of the PPSA and section 588FL of the Act, all vest in the Trust, and thus become part of the property of the Trust for the benefit of the Trust’s creditors upon the Trust’s entry into liquidation.
Given the severe consequences that can flow from incorrectly registering security interests on the PPSR, lenders and financiers need to take care when registering financing statements on the PPSR. This is particularly the case where the security interest has been granted by a corporate trustee in its capacity as trustee of a trust.
Marino Law has extensive experience acting for liquidators, lenders and financiers in the administration of all corporate insolvency appointments. Our highly experienced lawyers regularly advise clients in the following areas of corporate insolvency:
(a) voluntary administrations;
(c) enforcement of securities; and
(d) statutory demands.
We also regularly provide advice to liquidators, lenders and financiers regarding the registration of security interests on the PPSR, the validity of those registrations and their enforceability.
Should you require assistance in any of the above areas, please contact one of our highly experienced lawyers.