By Amanda Carruthers
The recent decision of the Supreme Court of New South Wales In the matter of OneSteel Manufacturing Pty Ltd has provided a clear warning about the consequences of incorrectly registering your security interests on the Personal Properties Security Register (“PPSR”).
When registering your security interest on the PPSR, the details you are required to enter will depend on the type of grantor you are registering against. When registering against a grantor that is a body corporate that has an ACN (often a Pty Ltd company) the prescribed details that must be entered for registration to be effective are the grantor’s ACN.
However, in some instances, the registration is required to be on the ABN – such as when the grantor is a partner in a partnership, a trustee (including if it is a corporate trustee, such as a company acting as a trading trust) or a body politic.
There may be instances where it is unclear what type of entity the grantor is, whether deliberately, or due to inadvertent omission. While there are generally legal remedies available to correct such mistakes, the case of OneSteel shows the risk that exists if you do not register correctly.
To ensure that your security interests are validly protected, we highly recommend that you always register your interest using both the ACN and ABN, given the minor additional expense of registering, compared to the high cost potentially incurred either from losing your security, or by engaging in a legal battle to maintain your interest. The unsuccessful party in the above case lost their interest in over $23 million of assets, not to mention their legal expenses, and any legal expenses they were required to pay to the successful party, due to their defective registration.
We recommend all our clients check their current registrations to be satisfied that they have strictly complied with the requirements of the PPS Act.
To read our article about the facts surrounding the decision in the OneSteel case, follow this link to the last edition of Directions.
If you have any doubts or concerns about your registrations please contact us immediately – we are here to assist you in keeping your business practices up to date, and understanding your legal interests and risks.