The importance of registration on the Personal Properties Security Register (PPSR) is well known. But registration in and of itself is not sufficient to create an enforceable security interest.
The recent Supreme Court case of In the matter of Accolade Wines Australia Limited and other companies considers whether a court can make an order to rectify a registration or extend the time for registration.
The plaintiffs were a secured party which mistakenly registered a security interest against the ABN of the grantor rather than its ACN. The mistake was discovered by the plaintiff later than the 15 business day period within which the secured party can register a purchase money security interest (PMSI) against the grantor. Registration of a security interest as a PMSI is extremely important as it provides the secured party with a “super priority” in respect of the particular secured property as opposed to time based priority, which provides priority in the order that the secured parties have registered their security interest.
The plaintiff approached the Court for an extension of the period of registration under s 588FM of the Corporations Act 2001 (Cth) (Corporations Act) and s 293 of the Personal Properties Securities Act 2009 (Cth) (PPSA).
In terms of s 588FM of the Corporations Act, an extension may be granted if the failure of registration:
· was accidental or due to inadvertence or some other sufficient cause; or
· is not of such a nature as to prejudice the position of creditors or shareholders; or
· on other grounds, it is just and equitable to grant relief.
In terms of s 293 of the PPSA, a court may extend the number of business days for perfection of purchase money security interests if it is satisfied that it is just and equitable to do so. specifies that:
Justice Brereton granted the extension on the basis that the incorrect PMSI registration was an inadvertent administrative error and that the failure of the earlier registration did not prejudice the position of creditors.
Take Home Lessons:
· Courts will be reluctant to grant leave to rectify the register.
· Approaching the Court is a costly last resort and should only be used as a failsafe measure when the circumstances allow for an application to be made.
Proper and accurate registration at the first available opportunity is crucial in order to ensure the enforceability of a security interest on the PPSR.