Another financier has lost millions due to a faulty PPSR registration.
A recent decision of Justice Black of the NSW Supreme Court in Production Printing (Aust) Pty Ltd (in liquidation)  NSWSC 505 involved the following facts:
- HP leased printing equipment to a debtor company;
- The arrangement was registrable on the Personal Properties Securities Register (PPSR) as a “PPS lease”;
- HP registered its interest on the PPSR against the debtor company’s ABN, not ACN;
- Voluntary administrators were later appointed to the debtor company and challenged the registration as invalid.
The parties accepted that the registration was defective because it was registered against the ABN of the debtor company, not its ACN. Section 153 of the PPSA and clauses 1.3 to 1.6 of the regulations stipulate how a grantor must be identified. For an ordinary company which does not operate as trustee of a trust, registration against the ACN is mandatory: see Re OneSteel Manufacturing Pty Ltd (admin appointed)  NSWSC 21.
The argument advanced by HP to circumvent this was that section 166 of the PPSA applied. Section 166 says:
(1) This section applies if:
(a) One of the following defects in a registration that describes particular collateral arises at a particular time (the defect time):
(ii) a defect mentioned in paragraph 165(b), other than a defect resulting from a change of the grantor in relation to the collateral; and
(b) The defect does not arise only because of an irregularity, omission or error in a financing statement or financing change statement”
Under section 166(2) a defect of the form above is temporarily effective until the earliest of certain times being, the end time for registration, 60 months after the defect time or 5 business days after the secured party acquired actual or constructive knowledge of the defect.
HP argued that the defective registration fell within section 166 and was remedied by HP immediately on it discovering the defect (and therefore within the 5 business days above).
This argument was rejected by the Court for reasons including that the defects contemplated by section 166 were those which arise at a time after registration. The section did not extend to defects created by the initial registration.
The Court distinguished Erskine v Elan Media Partners Pty Ltd  VSC 493, a decision of Sirfis J in the Victorian Supreme Court. That case involved a pre PPS charge which failed to migrate to the PPSR. On discovering the failed migration, the secured party lodged an incorrect PPS registration which was later remedied. Justice Sirfis applied section 166 to remedy any defect arising. Unfortunately the nature of the registration error was not identified in the judgement. In any event, Erskine was distinguished in Production Printing and held not to apply to a fundamental error of the form in Production Printing.
The registration was therefore defective and vested in the debtor company due to the administration.
This case is another example of the draconian consequences of seemingly small PPSR errors. It is no surprise HP chose to litigate this matter given the financial consequences of losing its security. These surprising outcomes highlight the technical rigour of the PPS legislation and the need for strict compliance.