PPSA and the Importance of Perfecting Your Internest

In the recent decision of Forge Group Power Pty Limited (In Liquidation) (Receivers and Managers Appointed) v General Electric International Inc [2016] NSWSC 52 (11 February 2016) the importance of perfecting your interest under the PPSA was emphasised.

GE leased 4 Gas Turbines (electricity generators) to Forge Power who subsequently went into administration. GE did not register their interest under the PPSA.

The rental term over 2 years provided for a total of $33 million in payments. Payments commenced January 2014. Forge Power entered administration 3 months later in March 2014.

GE attempted to argue that there were two exceptions available to it under the PPSA:

1. A lease is not a PPS lease if GE is not regularly engaged in leasing goods (s13(2)(a)).
   In answering 1, the court may look to the global leasing activity of the company (not just Australia) and the test is performed when the lease is into. Regardless of the global test, GE was held to regularly engage in leasing activities in Australia.
   
   
2. That the gas turbines were actually fixtures per s10. The judge noted, GE was trying to argue that its leased goods would actually be lost forever by becoming fixtures. The Judge held that the Turbines were not fixtures and subject to the PPSA.

The consequence of not perfecting their interest meant that the turbines became available to the liquidators and GE became an unsecured creditor.

Please note that this article does not constitute legal advice and should not be relied on as such.