14 Mar 2016

Are you in the business of hiring or leasing goods to customers?

If hiring or leasing goods to customers is a part of your business, then it is of paramount importance that you take steps to ensure that your interest in those goods is properly secured. This includes seeking appropriate professional advice so that you understand what to do and when to do it.

The recent decision in Forge Group Power Pty Limited (in liquidation) (receivers and managers appointed) v General Electric International Inc [2016] NSWSC 52 serves as a dramatic example of the consequences of failing to take proper steps.

In that case, General Electric (“GE”) leased gas turbines, worth approximately $50 Million, to Forge Group Power Pty Limited (“Forge”) which subsequently went into administration and then liquidation.

Notwithstanding various provisions in the lease contract between the parties, to the effect that ownership of the turbines would remain with GE, and that Forge was contractually obliged to return them to GE at the end of the rental term, GE failed to register their security interest on the Personal Property Securities Register (“PPSR”).

As a result of GE failing to register its security interest, ownership of the goods came to be vested in Forge upon the appointment of its administrators, and dealt with accordingly in the administration/liquidation of the company.

It seems strange that a person or company can lose ownership of its own property as a result of the bankruptcy or insolvency of the person or entity to which such property has been leased, however, the Personal Property Securities Act 2009 (‘the Act’), which came into full operation in January 2012, clearly provides for this scenario if this type of lease is not registered.

Accordingly it is vitally important to know if and when a security interest should be registered.

Even if your business is not that of leasing goods, there may be activities of your business to which the Act may apply and which may impact your business to some extent. Businesses which involve hire purchase, selling goods on consignment or providing goods under retention of title arrangements are common examples.

We can provide cost effective and timely advice with respect to all aspects of the Act and the PPSR.

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About the Author


Joshua is a member of our Commercial practice group. He provides commercial legal services and has experience in commercial leasing, property law and conveyancing, wills and estate planning, commercial contracts, corporations law, mining law and bankruptcy. He has also worked in native title matters.

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