One of the greatest risks for holders of security interests which are not registered on the Personal Property Securities Register is the risk that the grantor becomes insolvent and the insolvency administrator takes possession of the secured assets.
In White v Spiers Earthworks Pty Ltd  WASC 139 decided competing claims to equipment.
Spiers sold its business to BEM and leased motor vehicles and trailers to it. BEM obtained finance and gave a charge over its assets to NAB. When BEM became insolvent NAB appointed a receiver. The receiver claimed possession of the motor vehicles and trailers. Spiers had not registered its leases on the PPSR.
The issue was whether the lessor’s rights were unperfected security interests which vested in BEM so as to become subject to the charge under section 267(2) of the Personal Property Securities Act.
Judge Le Miere concluded that:
“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.
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.
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. …..
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.”