PPSR UPDATE: Failure to Register on the PPSR Could Cost One Company $50 Million

In February 2014, Australia and New Zealand Banking Group Limited (“ANZ”) appointed KordaMentha Pty Ltd (“KordaMentha”) as receivers and managers of the mining services firm, Forge Group Limited (“Forge”).

Forge had secured debts of approximately $500 million, including over $300 million owed to ANZ and other insurance bond groups such as QBE and Asset Insure.

KordaMentha has now decided to issue legal proceedings in the Supreme Court of New South Wales claiming that four gas turbines leased to Forge are subject to ANZ’s security interest and may be sold by them to recover ANZ’s debt.

The turbines are estimated to be worth $50 million. They were leased to Forge by APR Energy PLC (“APR”), a company listed on the London Stock Exchange, and always remained the property of APR. However, APR failed to register the leasing arrangement on the Personal Properties Security Register (“PPSR”).

As this case unfolds we will learn more as to why the gas turbines were not registered on the PPSR.

The consequence of not registering could mean that the gas turbines are subject to ANZ’s security interest, thus allowing KordaMentha to sell them and pay the $50 million in sale proceeds to ANZ. If there is anything left over after ANZ’s secured debt is fully repaid, then APR may still not be entitled to this amount and may have to fight it out with Forge’s other secured and unsecured creditors.

From what we know about the case it does not bode well for APR. A case was decided in April this year where KPMG had been appointed as receivers of BEM Equipment Pty Limited (“BEM”). In this case, the Supreme Court of Western Australia ruled that Spiers Earthworks (“Spiers”), who had leased about $1 million in plant and equipment to BEM under a hire purchase agreement, did not “perfect” their interest by registering the lease on the PPSR. Spiers lost their interest in the plant and equipment under the lease agreement and KPMG were free to sell the equipment to recover monies owing to National Australia Bank.

The Forge case is by far the largest legal proceedings that have been brought under the PPSA and is a salient warning to all equipment suppliers as to the potentially devastating implications if they don’t put in place robust procedures for PPSR registrations.

Download the PDF version Download the PDF version

Miles Anderson


Miles leads our Financial Services team and has practised in the areas of banking and finance, property and agribusiness for over 20 years.

This bulletin is produced as general information in summary for clients and subscribers and should not be relied upon as a substitute for detailed legal advice or as a basis for formulating business or other decisions. ClarkeKann asserts copyright over the contents of this document. This bulletin is produced by ClarkeKann. It is intended to provide general information in summary form on legal topics, current at the time of publication. The contents do not constitute legal advice and should not be relied upon as such. Formal legal advice should be sought in particular matters. Liability limited by a scheme approved under professional standards legislation. Privacy Policy


…and we’ll email you valuable insights into issues affecting you and your business.

More Insights

Introducing Corporate Collective Investment Vehicles

Introducing Corporate Collective Investment Vehicles

Traditionally it has been perceived that a lack of familiarity by foreign investors with the trust based structure of Australian managed investment schemes has been a significant barrier to attracting offshore investment in Australian funds. To combat this, from 1...

read more
High Court lays down the law on asset-based lending

High Court lays down the law on asset-based lending

A recent case decided by the High Court found that the lender of an asset-based facility acted unconscionably in making a loan available to the borrower and ordered that the loan and mortgage be set aside. Key Takeaways Lenders must carefully scrutinize the...

read more