The Personal Property Securities Act 2009 (Cth) (PPSA) provides strict time limits for the registration of a security interest on the Personal Property Securities Register (PPSR).

The recent case of Relux Commercial Pty Ltd (in liquidation) v Doka Formwork Pty Ltd [2014] VSC 570 serves as another reminder of the consequences of failing to comply with those time limits.

The facts

Relux Commercial Pty Ltd (Relux) operated a construction company that specialised in pouring, laying and erecting large concrete slabs and panels. In order to conduct its operations, from at least March 2013, Relux leased formwork equipment from Doka Formwork Pty Ltd (Doka).  In fact, it leased formwork to Relux on 21 January 2014, 26 February 2014 and again 14 March 2014.

On 7 April 2014, administrators were appointed to Relux and shortly afterward at a meeting of Relux’s creditors, Relux was wound up and liquidators were appointed.

Unfortunately for Doka, the last time it registered a security interest in respect of the various pieces of formwork it had leased to Relux prior to its liquidation, was on 20 February 2014.

Given the time frames involved with respect to registration of the security interest and the liquidation of Relux, the The Court was called upon to determine whether formwork leased on 21 January 2014, 26 February 2014 and 14 March 2014 vested with the liquidators or Doka pursuant to section 588FL of the Corporations Act 2001 (Cth)

Considerations

Section 588FL of the Corporations Act 2001 (Cth) sets out the circumstances under which a security interest granted by a company will vest in the grantor (i.e. the company itself) in the event of its winding up.

The section provides that unless the registration of a security interest has been completed within 20 business days of the creation of the interest (in this case, the lease of the formwork to Relux) or earlier than 6 months before the appointment of administrators or liquidators, it will vest in the company on winding up and the secured party (in this case Doka) will lose the benefit of the security interest.

In each case, Doka failed to register its security interests in the formwork within the 20 business days stipulated in section 588FL and the Court was forced to declare that the inerest in the formwork vested in Relux, and was subject to the control of its liquidators.

Take away point

This case is a timely reminder that all security interests, once created, should be registered on the PPSR as soon as possible and in any event, not later than 20 business days after their creation . When in doubt, seek advice.

For more information on this topic, please contact ERA Legal.