ABN but no ACN? Your PPSA registration may be defective - Securities

This week's TGIF considers In the matter of OneSteel Manufacturing Pty Limited (administrators appointed) [2017] NSWSC 21, where the New South Wales Supreme Court held that the registration under the PPSA of a security interest in valuable mining equipment was defective because the grantor's ACN was not included in the registration.

BACKGROUND

This dispute centred on an error in the PPSR registration of a security interest in a crushing and screening plant used in the mining industry. The amounts involved were considerable, as the yearly rent on the crusher was over $4m and it had cost $23m to construct and install.

The Lessor, an asset financier, registered a financing statement for the crusher in October 2014. However, the employee of the Lessor who registered the financing statements included only the Grantor's ABN and not its ACN in the registration.

In April 2016, administrators were appointed to the Grantor. The administrators considered the registrations to be defective because they did not include the ACN, meaning that the Lessor's interest vested in the Grantor. The Lessor disagreed and sought declarations that the registration was effective, but also lodged new financing statements that included the Grantor's ACN.

The issues to be decided by the New South Wales Supreme Court were:

Were the registrations defective because of the failure to include the ACN?
Could the Court make an order to effectively re-enliven the security by fixing a later time within which the new registrations could be made?

WERE THE REGISTRATIONS DEFECTIVE?

Section 153 of the Personal Property Securities Act 2009 (Cth) (PPSA) requires that certain prescribed data about the secured party and grantor must be included in a registration. The Personal Property Securities Regulations 2010 (Cth) specify that for a body corporate that has an ACN, the ACN must be included in the registration.

Under section 164 of the PPSA, a registration is defective if and only if there is a "seriously misleading defect in the registration" or if there is one of the specified defects in section 165. Section 165(b) provides that a regulation will be defective if "no search of the register ... by reference only to the grantor's details (required to be included ... under s 153) is capable of disclosing the registration".

In this case, the Court held that because section 153 and the regulations require that a body corporate include its ACN, and because a search of the register by reference only to an ACN would not disclose the registration, the registration was defective.

Importantly, the Court held it was immaterial that commercially available "combined grantor searches" would still have found the registration if the user searched by ABN only. Such services use the information given (eg, the ABN) to source other information from external sources (eg, the ACN and company name), and then conduct multiple searches of the PPSR. The Court held that section 165(b) required that a single search using the ACN only had to turn up the registration.

COULD THE COURT EXTEND THE TIME FOR EFFECTIVE REGISTRATION?

The Lessor also sought an order under section 588FM of the Corporations Act 2001 (Cth) (Corporations Act) on the basis that the failure to register was due to "accident, inadvertence or some other sufficient cause".

However, the Court refused the order because an extension under section 588FM of the Corporations Act is only available where a security interest is already perfected at the critical time (that is, the insolvency event). Because the original registration was defective and the security interest had not otherwise been perfected, there could be no extension of time for the post-appointment registrations.

COMMENT

The decision emphasises that the PPS regime requires strict compliance with registration requirements, and that the Courts are unlikely to be lenient when it comes to the consequences of user errors.

In the ordinary case, registrations for body corporates that have an ACN must always include the ACN. Notably, the ABN is not currently required by the legislation unless, for example, the body corporate is acting as a trustee.

As a matter of best practice, it is highly advisable that all body corporate registrations include a company's ACN, ABN and name. This ensures not only that the registrations comply with the requirements, but also that registrations will be easily found using any of an entity's relevant information.

Equally, practitioners should be aware that just because a search of the PPSR shows a registration has been filed, further investigation is required to determine whether that registration is valid.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.