PPSA - Reality bites in equipment hire

Maiden Civil (P&E) Pty Ltd; Richard Albarran and Blair Alexander Pleash as receivers and managers of Maiden Civil (P&E) Pty Ltd & Ors v Queensland Excavation Services Pty Ltd & Ors [2013] NSWSC 852

In a decision by the Supreme Court of NSW handed down on 27 June 2013, the provisions of the Personal Property Securities Act 2009 Cth. (PPSA) dealing with vesting and priority have been tested.  The judgment drives home the key point about the PPSA.  It can operate to deprive an owner who has leased or hired goods of ownership where the lease or hire gives rise to a PPSA security interest and the owner fails to perfect that interest. 

The goods in question included a Caterpillar wheel loader and an excavator owned by Queensland Excavation Services (QES).  Maiden Civil (P&E) Pty Ltd (Maiden) undertook civil construction work in NT and took possession of the Caterpillars to be used in that work.   The arrangement for Maiden to use the Caterpillars pre-dated the PPSA start date of 30 January, 2012 and was an unwritten agreement.  There was at least initially finance from Westpac and Esanda to QES and the agreement was that Maiden would pay ‘back to back’ to QES the finance charges plus a margin.  QES did not make a registration on the PPSR in respect of the arrangement.

In March 2012, Maiden ran short of funds and obtained finance from Fast Financial Solutions Pty Ltd (Fast) and granted to Fast a general security interest over all its assets, including the Caterpillars. Fast registered its security interest on the PPSR.

Fast became aware of a number of events of default under its security and on 27 July 2012 Fast appointed Messrs Albarran and Pleash as receivers and managers (Receivers). The Receivers claimed possession of the Caterpillars. On 27 August 2012 Maiden went into administration and subsequently transitioned to insolvent  liquidation.


The Court found that the unwritten arrangement was a PPSA security interest.  As the goods were 'motor vehicles’ as defined in PPSA, a ‘PPS lease’ security interest arose after 90 days.  Accordingly a priority contest arose between QES and Fast.  Both were holders of security interests under the PPSA.

An order was made for the Caterpillars to be delivered to the Receivers on the basis that:

  • Fast’s perfected security interest in the Caterpillars had priority over QES’s unperfected security interest in them; and
  • upon Maiden going into administration, the unperfected security interest of QES vested in Maiden as the grantor, but subject to the security interest of Fast.

An argument by QES that it ought to have the benefit of ‘deemed perfection’ under the two year transitional period following the 30 January 2012 start date was rejected.  Whilst it was clear enough that the security interest had arisen under the oral agreement before 30 January 2012 this was not by itself enough to save it as a ‘transitional security interest’.  This was primarily because the interest could have been registered under a pre-PPSA law (in this case NT legislation dealing with registration interests in vehicles and other goods) and as such the ‘deemed perfection for 2 years’ concession in the transitional provisions did not apply because of a specific exception to it in the PPSA.  Had the goods not been motor vehicles within that pre-PPSA NT registration scheme, the outcome may have been different.


The decision is consistent with the outcomes  in celebrated cases in New Zealand such as Waller v New Zealand Bloodstock Ltd [2006] 3 NZLR 629.   The basic outcome will not be a surprise to Australian PPSA practitioners.  The decision should serve as a wake-up call to those hire and lease businesses that have not yet confronted PPSA.

Important points for those businesses to keep in mind are:

  • A lease or a hire arrangement can be a PPSA security interest  and subject to the vesting provisions under the Act in the event of insolvency of the customer grantor.
  • That under PPSA a dispute with a customer’s financier cannot be resolved through determination of who ‘owns’ the equipment, because the dispute is one of priority between security interests.
  • The transitional scheme in the PPSA is complex and there are gaps in it – as this case shows.  There are in any event only about six more months of transitional protection left.
  • Where there is a PPSA security interest, perfection by registration is the essential means of protecting ownership.
  • The interests of QES were damaged by the decision.  The judgment mentions that QES had obtained some finance for the equipment from Westpac and Esanda which had at least partly been discharged.  Even if QES had not been the owner of the Caterpillars and had they been owned by the financiers, this would not in our view have prevented Fast ending up with them.  Under PPSA, an owner’s rights (such as those of a financier) are ‘derivative’ and depend on the lessee protecting its position.  Even if QES still had finance on the Caterpillars it would presumably still have been liable to pay that off, even though it lost them.
  • The court also commented on the oral nature of the QES / Maiden agreement and that the lack of writing made any security interest unable to be ‘enforceable against third parties’ under section 20 of the PPSA.  Whilst there are some concessions from this requirement for pre-PPSA transitional interests the key message going forward is that an unwritten security interest is simply incapable of being perfected under PPSA. Attention to the documentation requirements of PPSA is critical.

Authors: Oliver Shtein