{"id":26082,"date":"2017-01-09T12:28:28","date_gmt":"2017-01-09T12:28:28","guid":{"rendered":"https:\/\/rmolaw.com.au\/another-lesson-to-protect-your-interest-in-leased-equipment-personal-property-securities-act-2009-cth\/"},"modified":"2025-02-24T05:18:57","modified_gmt":"2025-02-24T05:18:57","slug":"another-lesson-to-protect-your-interest-in-leased-equipment-personal-property-securities-act-2009-cth","status":"publish","type":"post","link":"https:\/\/rmolaw.com.au\/zh\/another-lesson-to-protect-your-interest-in-leased-equipment-personal-property-securities-act-2009-cth\/","title":{"rendered":"Another Lesson To Protect Your Interest In Leased Equipment: Personal Property Securities Act 2009 (Cth)"},"content":{"rendered":"\n[et_pb_section][et_pb_row][et_pb_column type=”4_4″][et_pb_text]The recent decision of the New South Wales Supreme Court in Forge Group Power Pty Limited (in liquidation) (receivers and managers appointed) v General Electric International Inc. [2016] NSWSC 52<\/em> is a reminder of the importance of registering (or perfecting in another way) your interest in personal property.\n\nThe case is a harsh reminder for businesses to comply with the registration requirements of the Personal Property Securities Act 2009<\/em> (Cth) (\u201cPPSA<\/strong>\u201d), in order to protect their business\u2019s interests.\n

Setting The Scene<\/h3>\nHorizon Power and Forge Group Pty Ltd (\u201cForge Group<\/strong>\u201d) entered into a head contract in 2013 (\u201cHead Contract<\/strong>\u201d).\n\nSubsequent to the Head Contract, Forge Group entered into another contract with General Electric International (\u201cGE<\/strong>\u201d) pursuant to which GE agreed to lease four mobile gas turbine generators (\u201cTurbines<\/strong>\u201d) to Forge Group for a fixed term (\u201cLease<\/strong>\u201d). GE also agreed to provide Forge Group with additional services, such as installation, commissioning and demobilisation of the Turbines for the duration of the Lease.\n\nOn 11 February 2014, not long after the Turbines had been installed, Forge Group appointed voluntary administrators.\u00a0 Forge Group went into liquidation on 18 March 2014.\n

The Issues At Hand<\/h3>\nAt the time of Forge Group\u2019s liquidation, GE had not registered its interest in the Turbines on the Personal Property Security Register (\u201cPPSR<\/strong>\u201d).\n\nForge Group sought declarations from the court that the interests of GE (and other parties who were assigned rights in the Turbines by GE) vested in Forge Group immediately before the appointment of the administrators.\n\nWith GE facing the prospect of having no rights to the $60 million Turbines, GE argued that the PPSA did not apply to the Lease on the basis that:\n
    \n \t
  1. GE was not regularly engaged in the business of leasing goods; and<\/span><\/li>\n \t
  2. In the alternative, the Turbines were fixtures.<\/span><\/li>\n<\/ol>\n

    Was GE Regularly Engaged In The Business Of Leasing Goods?<\/h3>\nThe PPSA provides that, if the lessor of the goods is not \u201cregularly engaged in the business\u201d, then the PPSA does not apply (section 13(2)(a) of PPSA).\n\nGE argued that it had not regularly engaged in the business of leasing, and that only its Australian operations should be taken into consideration.\u00a0 This was due to the fact that GE had sold all leasing components of its power generation rental business on 22 October 2013 (after the parties entered into the Lease), and was no longer engaged in the business of leasing goods in Australia.\n\nForge Group argued that GE\u2019s international operations should be taken into account.\n\nThe New South Wales Supreme Court found that:\n
      \n \t
    1. The activities outside of Australia should be taken into account, wherever in the world those activities occur;<\/span><\/li>\n \t
    2. The test applies to the time the Lease was entered into (May 2013), meaning that GE was engaged in the business of leasing goods at that time;<\/span><\/li>\n \t
    3. GE was regularly engaged in the business of leasing goods at all relevant times.<\/span><\/li>\n<\/ol>\n

      What Does \u201cRegularly\u201d Really Mean?<\/h3>\nThe case raised interesting commentary on the interpretation of the word \u201cregularly\u201d under section 13(2)(a) of the PPSA.\n\nAcross the world, there have been different interpretations of the word \u201cregularly\u201d by the courts when it comes to each country\u2019s respective personal property securities legislation.\u00a0 The courts in Canada have found \u201cregularly\u201d engaged in the business of leasing to refer to an established part of the business, regardless of frequency, yet the courts in New Zealand have decided that \u201cregularly\u201d engaged in the business of leasing means a series of transactions.\n\nThe court in this case held that consideration must be given to whether a party is \u201cregularly\u201d engaged in the business of leasing, not whether they are engaged in the activity of \u201centering into leases\u201d.\n

      Are Turbines Fixtures?<\/h3>\nThe PPSA provides that security interests do not apply to a \u201cfixture\u201d (section 10 of PPSA).\nGE argued that the Turbines were fixtures and that section 10 of the PPSA introduced a specific meaning of \u201caffixed to the land\u201d, namely \u201ca non-trivial attachment\u201d.\n\nForge argued that the common law test applied, which took into account the intention of the person affixing the goods to the land and the degree of annexation. For example:\n