By and -

Snapshot

  • The recent decision of Forge Group Power Pty Ltd (in liquidation) (receivers and managers appointed) v General Electric International Inc [2016] NSWSC 52 provides useful guidance on the meaning of ‘regularly engaged in the business of leasing goods’ within the Personal Property Securities Act 2009 (Cth) (PPSA).
  • In testing whether a person is (or is not) regularly engaged in the business of leasing goods, consideration should be had to activity wherever it occurs, not just activity in Australia.
  • The frequency of leasing transactions is a factor that should be considered when assessing whether an entity is ‘regularly engaged in the business of leasing’, however the frequency itself is not determinative.

In the recent decision of Forge Group Power Pty Ltd (in liquidation) (receivers and managers appointed) v General Electric International Inc  [2016] NSWSC 52 (Forge v GE) the Supreme Court of NSW provided important guidance on the meaning of ‘regularly engaged in the business of leasing goods’ within the Personal Property Securities Act 2009 (Cth) (‘PPSA’). This decision is noteworthy to the development of PPSA jurisprudence as it is the first major Australian decision that considers the meaning of ‘regularly engaged in the business of leasing goods’ under s 13(2)(a) of the PPSA.

The Court considered both New Zealand and Canadian perspectives on the issue, but preferred the Canadian courts’ interpretation of what it means to be ‘regularly engaged in the business of leasing goods’.

Background

Horizon Power, a statutory body under the Electricity Corporations Act 2005 (WA) and Forge Group Power Pty Ltd (in liq) (receivers and managers appointed) (‘Forge’) were parties to a contract where Forge was retained to design a power station, and supply, construct, test and commission all equipment (‘Head Contract’). Forge subsequently entered into a rental agreement (‘the lease’) with General Electric International Inc (‘GE’) whereby GE agreed to rent turbine generators to Forge for a fixed term and provide services such as installation, commissioning and demobilisation of the turbines.

The lease was not registered on the Personal Property Securities Register (PPSR). Not long after the turbines were installed, Forge appointed voluntary administrators. Forge entered into liquidation the following month.

Section 267 of PPSA operates to vest unperfected security interests in the grantor upon the grantor’s winding up.

In Forge v GE, the application of the PPSA depended on:

(i) whether or not the lease was a ‘PPS lease’ as defined under the PPSA; and

(ii) whether the turbines were fixtures.

Relevantly, s 13(2)(a) of the PPSA expressly states that a PPS lease does not include a lease by a lessor who is not regularly engaged in the business of leading goods.

Forge commenced proceedings seeking declarations that GE’s interests in the turbines vested in Forge immediately prior to the administrators’ appointment. Conversely, GE argued that it was not regularly engaged in the business of leasing goods and was exempt under s 13(2)(a).

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