On 1 June 2016 the Victorian Court of Appeal delivered its judgment in Timbercorp Finance Pty Ltd (In Liquidation) (Timbercorp) v Collins (Collins) and Tomes (Tomes) [2016] VSCA 128, the latest in a string of Timbercorp cases.

The latest decision was preceded by a class action which went all the way to the High Court in which the investors lost their claim against Timbercorp for misleading representations.

This week’s TGIF considers the Federal Court decision of National Australia Bank Ltd v Garrett [2016] FCA 714 in which the Court stepped in to invalidate and restrain an improper registration on the PPSR

BACKGROUND

Snapshot

Key Points:

This case provides some clarification of matters relating to registration of retention of title clauses for secured creditors dealing with grantors

The registration of security interests on the Personal Property Securities Register (PPSR) is a critical, yet unresolved, issue in the context of the appointment of administrators and liquidators, and also for parties to sale transactions.

In March 2013, four portable gas turbines worth about AU$50m had been leased to Forge Group Power Pty Ltd (Forge) by GE International Inc (GE) as lessor.  In February 2014 and March 2014 Forge was placed in administration and liquidation respectively.

The decision in Re Forge Group Construction Pty Ltd (in liq) (Receivers and Managers appointed); ex parte Jones [No 2] [2016] WASC 87 confirms that while some communications between liquidators, receivers and their respective solicitors can be privileged, it is not necessarily always the case. Critical factors include the purpose of the communication in question and whether there is a sufficient commonality of interest between liquidators and receivers in relation to the communication’s subject matter.

Facts

WHAT HAPPENED?

Rahan Constructions Pty Ltd (Rahan) was contracted to undertake commercial construction and other works in about April 2012.  On or about this date, Rahan entered into a credit account with Asset Flooring Pty Ltd (Asset Flooring).  Rahan’s obligations under this credit account were personally guaranteed by the respondent, Mr North.

On 30 July 2013, Rahan was wound up by order of the court and Asset Flooring sought to enforce the guarantee for the outstanding balance owing under the credit account.

Key Points:

Companies that have leasing as a small and irregular part of their overall business still must comply with the PPSA if their interests in leased goods are to be protected.

This week’s TGIF considers the decision of Commonwealth Bank of Australia v Currey in which the Court looks at whether a breach of clause 25.1 of the Code of Banking Practice renders a guarantee void or voidable.

BACKGROUND

A bank lent money to a family company, which was secured by personal guarantees provided by the applicants. 

By its much anticipated yet hardly surprising judgment in Forge Group Power Pty Limited (in liquidation)(receivers and managers appointed) v General Electric International Inc  [2016] NSWSC 52, the Supreme Court of New South Wales has again shone a bright light on the importance of perfection of security interests under the PPSA, and the dramatic consequences that follow for failing to do so by reason of the PPSA vesting rules.  Indeed, the failure to register in this case has had multi-million dollar consequences.