Typo Costs Company $23 Million

May 11, 2017

We have previously discussed how the Personal Property Securities Act allows greater protection for owners of personal property in the possession of others such as machinery, plant and equipment, livestock and grain.

A recent NSW Supreme Court case has demonstrated how easy it is to miss out on that protection through a simple administrative error.

Facts

1. Alleasing leased an ore crusher to OneSteel.
2. Alleasing sensibly registered the lease agreement as a PPS Lease on the PPSR, to protect its interest in the ore crusher.
3. Unfortunately when completing the online registration details, Alleasing recorded the ABN of OneSteel, where it should have recorded OneSteel’s ACN.
4. OneSteel went into voluntary administration and the company’s administrators took possession of the ore crusher on behalf of OneSteel’s creditors, who had registered PPSR security over the personal property of OneSteel.
5. The court held that Alleasing’s mistake in its registration made the registration defective and the PPS lease ineffective.
6. OneSteel’s administrators were therefore able to sell the ore crusher and distribute the proceeds to OneSteel’s secured creditor.

ABN vs ACN

Whether the ABN or ACN should be recorded in a PPS registration depends on the capacity in which the parties are entering into the security agreement:

1. The security agreement needs to disclose if the parities enter into the agreement as a trustee.
2. If the grantor enters the agreement as a trustee of a trust, which has an ABN – the registration should be recorded over the ABN of the trust.
3. If the grantor has an ACN and enters the agreement not as trustee – the registration should be recorded over the ACN of the company.

It is essential that the correct grantor entity be recorded in PPS registrations. Using the wrong grantor entity will invalidate the registration and could result in the loss of personal property or other rights claimed under the registration.

This is clearly an easy area to come unstuck.  For further information or advice on your PPSR registrations please contact Michael Cowley or Melissa Hill.