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The PPS lease is redefined … when are you protected?

PPSA Law News | August 2017

Our readers will recall our review of the decision in the case of Forge Group Power Pty Limited [in liquidation] v General Electric International Inc & Ors [2016] 305 FLR 101 which was subsequently upheld on appeal. In that case GE leased four mobile gas turbines generator sets (turbines) to Forge for a fixed term. The lease term was for longer than 12 months and therefore became a “PPS Lease” under s.13 of the PPSA and subject to the requirements of the PPSA. GE did not register their security interest in the turbines, claimed to worth in the vicinity of $17 million. The turbines were not fixed to the land, and GE claimed that they were excluded from the PPSA because as they could be mobilised, they were “fixtures” at common law.

The Court dismissed that claim, thus the turbines were not excluded from the requirements of the PPSA and were required to be registered on the PPSR (Personal Property Securities Register) if they were to be the subject of secured interests of GE. Also, this decision confirms that in order to be excluded from the requirements of the PPSA to register a security interest the Grantee the person (lessor) leasing the goods to the Grantor (lessee) must NOT be in the “business” of leasing goods, where in this case GE clearly was.

The recent changes to the PPSA increased the minimum term of a PPS lease (entered into from 20 May 2017) to two years, from the previous one year. This means that:

  1. If a person or company hires or bails goods in the ordinary course of their business, and
  2. The lease or bailment covers a period totalling (with options) two years or more or is for an indefinite period,

then the lessor/bailor must register that lease or bailment (PPS Lease) on the PPSR as well as satisfy the requirement of having a security agreement in writing, in order to obtain priority over other interest holders or person in possession of the goods. Lessors/Bailors must ensure they perform the registration correctly and ensure ACN numbers are entered where required instead of ABNs which can be fatal to the effect of a registration.

Forum Law Solicitors welcomes your enquiries about the PPSA and registration of security interests to ensure security interests are protected. Contact us on (02) 9560 3388 8am–6pm Monday–Friday for a 30-minute obligation-free call to discuss your concerns.

Forum Law is an active member of several reputable law and industry associations. We have recently obtained ISO9001 accreditation.