Registering security interests on the Personal Property Securities Register (PPSR) requires accuracy and attention to detail. The well-known case of In the matter of OneSteel Manufacturing Pty Limited (administrators appointed)  NSWSC 21 showed that the recording of a grantor of a security with their ABN instead of their ACN is insufficient for the security interest to be perfected. That particular error is infamous for causing OneSteel to lose their priority interest over an asset worth $23 million, effectively causing a $23 million loss.
Recently, another case has illustrated that where there are trusts involved, it is critical that the correct entity details are recorded on the PPSR. In In the matter of Psyche Holdings Pty Limited  NSWSC 1254, a lender, Ridgeway, entered into a general security agreement for a loan granted to Psyche Holdings, the corporate trustee of a trading trust.
Where a trust is the grantor of a security interest, the trust’s ABN must be used as the reference in the financing statement in accordance with PPSA Regulation 1.5 in Schedule 1 of the Personal Property Securities Regulations 2010 (Cth), rather than the corporate trustee’s ACN.
The key issue was that Psyche Holdings’ trust was not assigned an ABN until after the PPSR registration had been made. This meant that Ridgeway had used the trustee’s ACN for their security registration.
Upon realising this mistake – some 5 years after making the registration – Ridgeway applied to the Court under section 588FM of the Corporations Act 2001 (Cth) (Corporations Act) to exercise its discretion to have the registration time for their security fixed to a later date.
Under s 166 of the Personal Property Securities Act, where a registration is correct at the time of lodgement but subsequently becomes incorrect, the registration becomes ineffective five business days after the secured party acquires knowledge of the defect.
Luckily for Ridgeway, the Court was satisfied that the ABN/ACN error was due to inadvertence and elected to fix a later time for the registration under section 588FM of the Corporations Act. Ward J held that:
- Unsecured creditors were not prejudiced by the delay in proper registration;
- There were no competing secured creditors that lodged financing statements in the 5-year delay period, thinking that the assets were unencumbered by Ridgeway’s security interest; and
- The only other secured creditor had priority of interest over Ridgeway’s general security interest that would not be affected by any re-registration.
If the above facts had not been present, it is unlikely that the Court would have exercised its discretion to make good the defective PPSR registration.
So how should the PPSR be used for security over a trust’s assets? A system where both the trustee’s ACN and trust’s ABN are registered as grantors for the one security registration may help solve some of the issues that arose in this case. In many ways, however, this case shows that the PPSR regime is still far from perfect – and confusion will likely persist despite such matters going to the Courts.