If a PPSR registration financing statement does not comply with the requirements set out in both the PPSA and the PPS Regulations there is a risk that the registration may be defective. Unfortunately a defective financing statement may remain undetected until it is challenged, usually when default occurs. Is an error in the secured party’s details different from an error in the grantor’s details?

In Future Revelation Ltd v Medica Radiology & Nuclear Medicine Ltd [2013] NSWSC 1741 the Supreme Court of New South Wales made a declaration that a registration in the Personal Property Register was not ineffective by reason that when registered the secured party was identified on the register by its ABN and not by its ACN.

In the registration, Suncorp was identified by its ABN rather than its ACN.

The court confirmed that a registration made within time was not ineffective by reason of a minor defect in the secured party’s details.

Justice Brereton said:

“Pursuant to (Cth) Personal Property Securities Act 2010 (“PPSA”), s 153, a financing statement must include certain details of the secured party. Pursuant to the (Cth) Personal Property Securities Regulations 2010, the details which must be so included in respect of a Body Corporate include a hierarchy, depending on the nature of the Body Corporate and which identifier details exist in respect of it. Thus, if the secured party is a Body Corporate, the ACN must be entered. These are mandatory requirements, such that it might be argued that if not included there is no “financing statement” within the meaning of the PPSA.

In the present case, when the security interests were registered, the ABN of Suncorp instead of its ACN, was provided. PPSA, s 164(1), states that a registration with respect to a security interest that provides particular collateral is ineffective because of a defect, if and only if, there is a seriously misleading defect in any data relating to the registration, or there is a defect of the kind mentioned in s 165.

The suggested defect in this case is not one of a kind mentioned in s 165. The question then is whether it is “seriously misleading”…

Canadian case law suggests that the test for whether a defect is “seriously misleading” is whether it will result in the registration not being disclosed on a search …That makes sense, as the purpose of registration is to enable the existence of the security interest in the collateral to be searched and ascertained. A person searching in the PPSR is likely to be concerned with the identity of the grantor and/or the collateral. In terms of searching the PPSR, while there is facility to search by reference to the identity of the grantor and the collateral, there is no facility to search by reference to the identity of the secured party.

In the present case, a search by reference to the identity of the collateral or the grantor would have disclosed the relevant security interest. Such a search would have identified clearly enough the secured party, namely Suncorp, even though its ABN and not ACN was stated. In my view, it is very clear that this defect was not seriously misleading or indeed for that matter misleading at all. Accordingly, it seems to me by operation of s 164(1) that the registration is not ineffective by reason of the defect that has been identified.”

What defects could void registration?

An example of a defect referred to in section 165 of the PPSA is if a search of the PPSR by reference only to the details of the grantor of the security interest (eg in a leasing transaction, the lessee) that are required to be included in the financing statement under the PPSA, is not capable of disclosing the relevant registration.

A financing statement should therefore correctly identify the grantor by using the information which is required to be
included under the PPSA and Schedule 1 of the PPS Regulations.

A registration may also be ineffective if the grantor’s name is misspelt or the registration is in the name of individual partners rather than the firm name.

A security interest which has been registered as a PMSI but is not is also a defect which automatically makes registration ineffective.