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Now that the PPSA has been in operation since 30 January 2012, we have seen the first Supreme Court of NSW decision on the question of priorities between competing security interests under the PPSA.
This decision emphasises the unique role of the PPSA in contradicting the age old belief that you cannot deal with property that you don’t own. This case provides a valuable lesson to businesses who lease goods or lose possession of their goods to a lessee or in a bailment.
The case is Maiden Civil (P &E) Pty Ltd [Maiden]; Richard Albarran and Blair Alexander Pleash as receivers and managers of Maiden Civil v. Queensland Excavation Services (QES) In this case Maiden Civil leased Caterpillar machines from QES in 2010 before the introduction of the PPSA. The lease was an oral agreement. Later in 2010 Maiden used the Caterpillars as security for a loan from a finance company Fast Financial. The loan agreement was in writing, and specifically granted a security interest in the Caterpillars to Fast Financial. After the commencement of the PPSA on 30 January 2012, Fast Financial “perfected” their security interest in the Caterpillars by registering that interest on the Personal Property Securities Register [PPSR].
Unfortunately for QES, whilst their lease of the Caterpillars was held by the Court to be a "PPS Lease" and a "deemed security interest" under the Act, the fact that it was such a security interest allowed Maiden to grant a valid security interest to Fast Financial in the same Caterpillars.
The Court found that the way to determine a contest between the two competing security interests between QES and Fast Financial was to refer to the priority provisions contained in s.55 of the Act. In this case, QES had a security interest under the PPS Lease, as did Fast Financial but Fast Financial won the priority interest in the Caterpillars over QES because:
On this basis the Court found that the security interest in the Caterpillars held by Fast Financial had priority over the security interest held by QES notwithstanding that QES were the owners of the Caterpillars. The result was that Fast Financial were allowed to claim possession of the Caterpillars from the claims of QES.