North Sydney Commercial Lawyers

Personal Property Securities in your businessPrint This Post

Using Personal Property Securities in your business


This is an extract of a paper presented by Leigh Adams in Newcastle to the Hunter Forum of the Australian Restructuring Insolvency and Turnaround Association (“Arita”) on 27 October 2015.



Business owners often lend money and borrow money. Leigh Adams Commercial Lawyers acts for lenders and borrowers, including businesses in the factoring industry. These recent cases show what can go wrong with lending and borrowing. As commercial lawyers at the vanguard of this area, we try to maximise the potential for our lender clients to get their money back and for our borrower clients to relax when entering into these transactions: borrowers don’t have to ‘sell their soul’ to get badly needed working capital.


Central Cleaning Supplies v Elkerton

Does your credit application form need to contain your terms and conditions? The answer is Yes if you want to sue but No if you appeal the case to the Court of Appeal!

In this case ([2015] VSCA 92)  Central sold cleaning equipment to Swan.

Central had issued a credit application form which Swan signed. It was before January 2012, which is when the new Act for this area of law (Personal Property Securities Act) started. Central then received numerous orders for the purchase of cleaning equipment over the following months.  There was an invoice attached to every supply of equipment and every invoice contained a retention of title (ROT) clause.

Swan had financial problems and stopped paying invoices in November 2012. It went into liquidation a few months later (May 2013).

Central tried to rely on the retention of title clauses to reclaim its equipment. But the Court said that each invoice was a separate contract, and because the security interest arising from the retention of title clause was not registered on the Personal Property Security Register, the ownership of the equipment passed to Swan’s liquidator on Swan’s liquidation.

Why didn’t Central include their retention of title terms in its credit application? Poor legal advice, that’s why.

But Central appealed and the Court of Appeal held in favour of Central!  Central argued  that the credit application ‘provided for the granting’ of the retention of title security interest, as required by s 308 of the Personal Property Securities Act.

The Court of Appeal agreed, stating that the credit application form made reference to the supply of the equipment being governed by Central’s standard terms and conditions ‘as in force from time to time’.  The Court of Appeal said that this meant that the retention of title clause did not have to be included in the credit application form itself but could appear later – say, in invoices subsequently issued.

Therefore the credit application form was a contract that pre-dated the PPSA, and there was no need for registration of the security interest on the personal property securities register arising from the retention of title clause to get the equipment back from the liquidator



But why not just get the paperwork right from the start? That would have saved Central hundreds of thousands of dollars in legal fees.  We properly prepare  legal documents  and they help  keep  our clients out of Court.


Macquarie Leasing

What do you do if someone has an unsubstantiated grievance against you and wants to cause you harm? One person who felt aggrieved (for no reason) decided to register a security interest against the innocent person’s motor car on the Personal Property Securities Register to preventing them from selling it.

These were the facts in Macquarie Leasing Pty Ltd v Registrar of Personal Property Securities [2015] NSWSC 94. However, Justice McDougall made an ambulatory order directing the Registrar to immediately remove any security interest that might be registered.  Costs were ordered against the offending person.



We can advise you on how to manage people who misuse the provisions of the Personal Property Securities Act .


Photios case

In Photios [2015] NSWSC 336, an administrator was appointed to a company.

The appointment was pre-emptive, aggressive and unanticipated. The appointment could spell the end for the chances of the borrower to get back on their feet.

The borrower’s lawyers examined the documents which the administrator relied on for his appointment, and it was discovered that the documents had not been stamped with stamp duty before the administrator’s appointment. They were stamped afterwards. Was this good enough?  The Court said “No”.



Whenever aggressive action is taken against you under a security document, borrowers should always ask for the stamped, signed and dated security agreement that the external controller relies on. You will be surprised at the number of times they will not be able to find it.


Dura v Hue

The case of  Dura v Hue [2014] VSCA 326  concerned the rights of a creditor to funds which had been ordered by the Court  to be placed in a joint account in the name of parties’ solicitors, until the debtor’s appeal had been heard.

Months later the appeal failed, and the debtor went into liquidation shortly afterwards. The liquidator argued that the creditor was not entitled to the monies, because its interest in the moneys was not registered on the Personal Property Securities Register.

The Court said that the Personal Property Securities Act does not apply because the wording of section 12 means that it only applies to consensual transactions, and the Court order was not consensual.

However, the Court then said that the creditor was still entitled  to the money because it had an equitable charge on the funds,  and the Personal Property Securities Act does not apply to charges which arise in this manner: s8(1)(c).

In this case, even though there was no security interest for Personal Property Securities purposes, the judgment creditor was still entitled to the monies in the bank account because of the equitable charge which arose over the funds in the bank account.



Having your customer agree to make payments to you (the supplier)  by depositing the proceeds into a third party account separate from the supplier and the customer is one of the creative ways to continue dealing with your best customer where you are concerned that they may go into liquidation down the track.  The use of a third party account can minimise the chances of your security being eaten up by the claims of the employees of your customer if it goes into liquidation.  We can help you and we prepare such documents for our clients on a regular basis.


Hastie Group Case

Serious consequences follow  if  the grantor of a security interest becomes bankrupt or liquidated and there has been a failure to register or correctly register a security interest.

In the Hastie Group case, the administrators sought directions in the Federal Court pursuant to s 447D of the Corporations Act that they would be justified in selling unclaimed plant and equipment in the possession of the Hastie Group.

They had plant and equipment worth $6.4m at 36 different locations throughout Australia. This was  causing the administrators to incur significant rental costs which they could ill afford.

The administrators sought to identify which items of plant and equipment were owned by the Hastie Group and then to sell them. They wrote to all 995 registered security holders and placed ads in the press but only 23% responded to confirm the nature of their security interests. Many responses were not sufficient to adequately particularise the equipment or the security agreement under which the security interest arose or was claimed.

Yates J directed:

1.     That the administrators would be justified in treating the unclaimed plant and equipment as the property of the Hastie Group; and

2.     That the administrators could sell them by online auction and thereafter (broadly) distribute the proceeds in the ordinary course of the administration.

The orders were made as directions – not as a final judgment – and this left it open (for a time) for any interested party to apply to set aside the orders.  But no such application was made.



If you do not actively pursue or defend your rights under the Personal Property Securities Act,  then you risk losing them. Speak to Leigh at Leigh Adams Commercial Lawyers  –  we know what to do.