In a decision handed down today, the Supreme Court of New South Wales found that GE’s proprietary interest in assets worth in the order of $50M was extinguished upon the appointment of administrators to the purchaser company, Forge Group Power Pty Limited.

The decision in Forge Group Power Pty Limited (in liquidation) (receivers and managers appointed) v General Electric International Inc [2016] NSWSC 52 was reached on orthodox PPSA principles, but it is notable because it demonstrates in real terms what can happen (and how much money can be lost) if a lessor fails to take the precaution of spending a few dollars to register its interest in leased goods (in this case multi-million-dollar wind turbines) on the PPS Register.

The decision was not solely of interest due to the sums involved. It also contains useful guidance about when a lessor will be considered to be “regularly engaged in the business of leasing goods”, making clear that:

• the relevant date to apply the test is the date the lease was entered into; and
• one may have regard to activity outside Australia as well as within Australia.

GE sought to persuade the court that the turbines had become “fixtures” (that is, part of the land), thereby excluding them from the personal property securities regime. The court found against GE on this point and determined that the turbines remained subject to the PPSA as “personal property”. Accordingly, there being no PPS registration perfecting GE’s interest in the assets, they automatically vested in the company immediately prior to the appointment of administrators.

ERA Legal are experts on the PPSA. For further information about this decision and how it may affect you, please do not hesitate to contact our Sydney office.