Posted on July 25, 2013 by

First major case for the Personal Property Securities Register

Can the ‘true owner’ of personal property ever lose that property to a third party lender?  Before 30 January 2012 (when the Personal Property Securities Act 2009 Commonwealth(PPSA) came into effect) your answer may well have been emphatically ‘no’.  The case of Maiden Civil (P&E) Pty Limited receivers and managers appointed v Queensland Excavation Services Pty Limited [2013] NSWSC 852 (Maiden case) reverses the position at law, in a case that may appear to be counter intuitive to the result most people would have expected.  


Maiden Civil (P&E) Pty Limited (Maiden) acquired three caterpillar civil construction vehicles.  Facts relating to the acquisitions varied from item to item, but effectively Queensland Excavation Services (QES) purchased the caterpillars from Hastings Deering, and leased them to  Maiden.  QES purchased the caterpillars with money from Westpac and Esanda.

One of the vehicles was eventually acquired by Maiden in its own right.  The arrangement appears to have been a type of hire purchase arrangement, whereby financing was organised by QES and ultimately Maiden may have acquired all three caterpillars, had things not played out differently.

Maiden paid leasing fees to QES, albeit irregularly.  Maiden then borrowed $250,000.00 from Fast Financial Solutions Pty Limited (Fast), offering all its assets and undertakings, including the caterpillars, as security.

This is where the facts turn on new constructions and definitions under the PPSA.  The lease of the goods by QES to Maiden constituted a ‘security interest’ in the caterpillars.  This interest can be registered and recorded on the new Personal Property Security Register (PPSR).  However, QES failed to register that interest, a point that will become salient.

Fast, by taking on all assets and undertakings of Maiden as security, also had a ‘security interest’.  Fast did record their interest on the PPSR.

Ultimately, Maiden defaulted under the loan agreement with Fast and Fast used its rights under the loan agreement to appoint a receiver to Maiden.  The receivers then claimed the caterpillars.

Prior to the PPSA there was a convenient legal dictum which summarised the position: nemo dat quod non habet. You can’t give what you haven’t got.  The true owner in these circumstances would claim, and recover, the property in question.  The true owner (of at least two of the caterpillars) was QES.  Maiden was merely a lessee of the goods, and therefore could not ‘give’ them to Fast as a security.

The PPSA changes all of that, introducing a new vocabulary which companies, individuals and government entities buying and selling personal property would do well to learn.  Leases can be security interests in personal property.  In the event that a company is wound up or placed under administration, the right to claim personal property does not proceed on the basis of who the ‘true owner’ is, but rather on a complex series of priority interests in goods that is established under the PPSA.

This is not the place to give a detailed breakdown of what consitutes a ‘security interest’; nor when a security interest becomes ‘perfected’ under the PPSA.  Perhaps the most important takeaway fact is that one of the chief priorities is that a security recorded on the PPSR will take precedence over one that is not.  Where two interests in the same property are recorded on the PPSR, the first recorded in time usually takes precedence.

The result

That is what happened here.  Fast, the intermediate lender, had registered its security, whereas QES had not.  On the receivership, the salient question was not who the ‘true owner’ was, but whose security interest was recorded.  QES had failed to record, so Fast took priority.  The caterpillars went to Fast as the only security holder recorded on the PPSR.

Had QES, or Esanda, or Westpac, recorded their interest when it first arose, their priority would have overtaken that of Fast.  (However, if that had happened, query whether Fast would have lent the money in the first place).


At first instance this may appear an arbitrary and even unfair outcome.  However, it is entirely consistent with the PPSA and the cases in New Zealand and Canada, the jurisdictions from which the law was inspired.

The same result occured in Graham v Portacom New Zealand Pty Limited [2004] 2 NZLR 528 involving the New Zealand version of the PPSA.  That matter is almost the equivalent of the Maiden case with the variation of a few facts.

Portacom New Zealand Pty Limtied (Portacom) leased five portable buildings (portaloos) to NDG Pine Pty Limited (NDG).  Portacom did not register its interest.  NDG granted a debenture to a bank, and the bank registered its interest under the New Zealand equivalent of the PPSR.

When the bank appointed receivers and managers to NDG, it sought the return of the portaloos.  Portacom claimed that NDG’s interest was only as a lessee of the goods.  When NDG went into receivership, the lease came to an end, and the goods would revert to the true owner: Portacom.

Rodney Hansen J in the New Zealand High Court disagreed.  He said (at paragraph 19): the lease is treated as a security agreement and the lessee is treated as the owner of the leased property for registration and priority purposes.  If the lessor fails to register its interests, it loses priority to a perfected security interest over the leased goods.

This is the same position now in New South Wales, confirmed by the Maiden case.

What it means

When the Torrens system of land registration was introduced in the 19th century, it created a similar stir in the legal and commercial worlds.  Previously covenants, easements, mortgages and dealings in land of all types were found in a multitude of documents that were, hopefully, kept in the one place by the owner.

Governor Torrens’ system ended all that and made the register the paramount consideration in working out what dealings impacted land.  Subject to few exceptions, if a dealing did not appear on the Registrar General’s record of the folio, then the dealing did not impact on the land.

The PPSA and its recording system, the PPSR, introduces an analogous concept to the Registrar General’s record.  The interests in personal property will be recorded in the PPSR, and ownership will be determined by the priorites under the PPSA, not concepts like the ‘real’ or ‘true’ owner.

There will be instances like the Maiden case while we adjust to the new system.  While the Maiden case appears to be an unfair result (at least to QES) companies and government agencies can do much to improve their situation.

Practical steps as a result of the Maiden case

The advantage of the PPSA and its Register is that now there is an accurate, transparent data base of all personal property security transactions nationwide.  Where previously you went to one of 70 registers with the Commonwealth or State Governments to see if there were securities, mortgages or bills of sale over cars, aircraft, ships, machinery and the like, you now have one Register with all dealings recorded against it.

You can search the Register online at any hour of the day (for a price) and check whether an item you are contemplating buying has any other claim over it.

The PPSR also allows for recording of security of more items than was previously the case.  Thus, where a borrower previously offered a security over shares, the creditor could only take a security by possessing the share certificates.  Now, the security can be registered, and any one who cares to view the register can see if there is a security against the shares.  The system should cut down on instances of fraud.

So the lesson to be drawn is that whenever you are purchasing valuable or costly equipment, you should always undertake a search of the PPSR to see if there is a security interest recorded against it.

Even where you are purchasing real property, any personal property transferred as part of the sale may have securities registered on the PPSR.  I have seen a contract for the sale of a pub where special conditions called attention to the poker machines, freezers, coffee and vending machines and placed the obligation on the purchaser to ask the vendor to remove any security interests.  It is important in these transactions to identify the personal property that may be separately secured against the PPSR and to have its title cleared.

If there is a registration, no purchase should proceed unless there is clearance of the existing security or securities.  Under the PPSA the same item of personal property might have multiple securities against it.

For example, in the Maiden case any of the caterpillars could have had up to three securities recorded on the same item.  There was the Esanda/Westpac interest in buying the caterpillars from Hastings Deering; the QES interest as the owner leasing the caterpillars to Maiden; and the Fast interest in lending against the caterpillars.

There are also special rules for the registration of personal property that can be described by serial or registration numbers like cars, planes and ships: see section 44 PPSA.  These items are easier to search because of their unique descriptors.  For instance, you now do a PPSR check instead of a REVS check in NSW when you buy a car.

These registration checks can be useful in identifying future problems. For example, in the Maiden case, QES had already re possessed the caterpillars and leased them out to other parties at the time the litigation commenced.  A PPSR check may have identified the Fast secured interest, prompting the new lessee to ask what the impact of the interest was.


The PPSA and its Register are a fundemental change to the way personal property can be used as a security for loans.  It has important changes for anyone dealing in the purchase, sale and lease of personal property.

However, while it is a fundemental change it is not an arbitrary or unfair one.  The PPSR allows registration and nationwide recording of a wider range of security interests.  The scheme is more transparent than its predecessor and it allows people and businesses across the Commonwealth to deal with personal property more confidently than they did before.  While it will take time to learn the rules, the implications are overall positive in the same way that Torrens title made real property transactions easier to undertake.