In February 2014 the ANZ bank appointed receivers to one of its mining services customers, the Forge Group. About $300 million was owed to the ANZ and some asset insurers, substantially in connection with leased equipment which had been financed by the bank and the insurers. The Forge group is now in liquidation.
Part of Forge’s leased equipment stock included four gas turbines, estimated to be worth up to $50 million. The turbines were leased by Forge from APR Energy PLC, a global energy technology hiring group, listed on the London stock exchange but headquartered in Florida USA.
For reasons unclear APR failed to register its turbine leases (which, presumably, were longer than one year) to Forge on Australia’s Personal Property Securities Register (PPSR). In January 2012 the Personal Property Securities Act (PPSA) had come into effect requiring PPSR registration of leased and other chattels (goods) not in the possession of their true owners.
Under Part 8.2 the PPSA, if a distressed company-grantor goes into a form of external management (administration or liquidation), any of its leased chattels unregistered by their lessors on the PPSR vest in the company. Hence its external managers have the right to take control of those assets. The managers may then dispose of the goods for the benefit of the company’s wider creditor body. The equipment lessor most likely will miss out on any of the proceeds from the disposal.
The Forge receivers (latterly liquidators) are currently in the process of seeking a declaration from the NSW Supreme Court that the four turbines have now fallen under the ANZ’s PPSR registered security interest. If the court makes the declaration the turbines will be available for sale by the liquidators, primarily for the benefit of the bank.
Coinciding with these developments is the publication by the Attorney-General’s Department of submissions made members of the public made to the Department’s scheduled two year review of the operation and effect of the PPSA. A preliminary report has recently been released by the Department, outlining the many concerns and difficulties being experienced by Australian business users with the new laws.
About two-thirds of the nearly 60 submissions made to the PPSA review appear to have originated from the United States. The submitting entities include state and national chambers of commerce, state and national politicians and other elected officials, industry associations, political lobbyists, and current and retired business people. The thrust of these submissions is that the PPSA is having the unintended consequence of “illegally expropriating” the property of a US citizen (APR Energy).
The irony is that the PPSA in general, and the dire consequence of loss of title from failing to perfect (register) security interests in chattels in the possession of others in particular, is based on the United States Uniform Commercial Code (UCC). The relevant UCC provisions are the famous Article 9, dating from 1951, and the more recent chattel lease specific Article 2A, from 1987. In summary, both provisions require “filings” by owners of chattels in the possession of others in order to protect the property rights of the owners, just as the PPSA does.
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