Case note: multiple PPSR extensions of time

In a recent decision of the NSW Supreme Court, In the matter of Accolade Wines Australia Limited [2016] NSWSC 1023, Alleasing Pty Limited and Alleasing Finance Pty Limited, who are providers of asset finance and leasing services, were granted an extension of time for the registration of personal property security interests in respect of 31 different companies following the applicants’ failure to effect registrations in time as a result of inadvertence.

A review by the applicants revealed that the initial financing statements were registered against the ABN of the grantors (each of which is a corporate entity), rather than its ACN. This defect potentially invalidated the registrations. The applicants sought again to perfect their security interests, by lodging new financing statements on the Personal Property Securities Register (PPSR), this time referring to the Grantors’ ACNs.

The applicants lease goods to customers for terms in excess of one year. The leases are therefore “PPS Leases” which are registrable on the PPSR as a “security interest”.

The applicants urgently sought and were given orders pursuant to the Corporations Act 2001, s 588FM, fixing (for the purpose of s 588FL(2)(b)(iv)) a time later than the end of 20 business days after the relevant security agreement, for the registration of security interests held by them in respect of certain collateral against various customers who have entered into contracts with one or other of the applicants for the rental of goods (“Grantors”); and also an order pursuant to the Personal Property Securities Act 2009 (“PPSA”), s 293(1)(a), extending beyond 15 business days the period specified by PPSA, s 62(3), for the Plaintiffs to perfect by registration those security interests as are purchase money security interests (“PMSIs”) within the meaning of PPSA, s 14.

Justice Brereton considered whether service was required on the multiple grantors and whether extending the time for registration of the PMSI’s would disadvantage the holders of security interests over “all of the present and after-acquired property” (“AllPAP”).

“I am amply satisfied, on the evidence presently before the Court, that the failure to effect timely registrations was due to inadvertence.

It appears unlikely that a critical event will occur within six months of the registration date; and even if such an event were to occur, it is not apparent that creditors would have been prejudiced by the delay in obtaining effective registration. The purpose of s 588FM is to relieve against the consequences of inadvertence, at least where the oversight has not caused prejudice. In the circumstances, it is appropriate to exercise the discretion under s 588FM to fix a later time, namely the date on which the new registrations were effected, which was between 15 and 21 June 2016.

On an application under PPSA, s 293(1)(a), for the extension of a period for perfecting a PMSI by registration, any other secured party whose interest is liable to be postponed is a proper and necessary party and ought to be joined and served. This requirement has not been satisfied, in form or in substance. Although, consistent with the approach that has conventionally been taken in this field, it may in an appropriate case be satisfied by reserving liberty to persons affected to apply to set aside or vary the orders within a reasonable time, that approach should be used with caution where it is clear that the rights of other parties will be adversely affected. An s 293 order should be made ex parte, reserving liberty to apply to set aside or vary within a reasonable time, only where the case for an extension appears prima facie a very compelling one.

I am satisfied (for the purposes of s 293(3)(a)) that the need to extend the number of business days arises as a result of inadvertence.

If an order is made under s 293(1) extending the period for registration of the Plaintiffs’ PMSIs, the AllPAP holders will lose the priority to which they are presently entitled. It follows that they will be prejudiced by extending the period. However, such prejudice, while not irrelevant, is not conclusive.

In circumstances where:
◦(1) there was a registration, which was recorded on the PPSR, albeit a defective one because it was against the Grantors’ ABN, not ACN;
◦(2) the PMSIs are each in respect only of the specific collateral to which the relevant lease relates;
◦(3) an AllPAP is always liable to be trumped, in respect of specific after-acquired collateral, by a PMSI in respect of that collateral;
◦(4) to the extent that an Earlier AllPAP holder will be prejudiced, it is only by losing a windfall arising from inadvertence;
◦(5) it is very likely that any Later AllPAP holder in fact had notice of the Plaintiffs’ PMSI when acquiring its security interest; and in any event, notice that there was an earlier PMSI in respect of specific collateral is unlikely to have been material to its decision to provide financial accommodation and take the AllPAP security.

I am satisfied, on the material now before the Court, that it is just and equitable to make an order extending the number of business days in the period specified in paragraph 62(3)(b) for the perfection by registration of the Plaintiffs’ PMSIs. Moreover, the case for an extension is sufficiently compelling that it is not unreasonable that the forensic burden of moving the Court to vary or set aside the extension be cast upon any of the AllPAP holders who might wish to contend that they will be unacceptably prejudiced by the extension.”

Print Friendly, PDF & Email

Your Compliance Support Plan

We understand you need a cost-effective way to keep up to date with regulatory changes. Talk to us about our fixed price plans.