A recent decision in the Supreme Court of New South Wales has shed some light on the meaning of ‘regularly engaged in the business of leasing goods’ under the Personal Property Securities Act 2009 (Cth) (PPSA).

In Forge  Group Power Pty Limited (in liquidation)(receivers and managers appointed) v General Electric International Inc [2016] NSWSC 52, the parties entered into a contract for Forge to lease turbine generators from GE for a fixed term. The lease was not registered on the Personal Property Securities Register (PPSR) and shortly after the contract started Forge entered into liquidation. Part of the dispute was whether GE was ‘regularly engaged in the business of leasing goods’.

Section 13(2)(a) of the PPSA says “a lease by a lessor who is not regularly engaged in the business of leasing goods” is not a PPS lease and is therefore not required to be registered on the PPSR in order to be perfected.

Hammerschlag J held  at [29] that:

1. In testing whether a person is (or is not) regularly engaged in the business of leasing goods, regard is to be had to activity wherever it occurs, and not only to activity in Australia.
2. The test applies at the time the lease was entered into; and
3. When the relevant lease was entered into, and at all material times thereafter, GE was regularly engaged in the business of leasing goods within Australia.

This lease was not excluded from being a PPS lease under section 13(2)(a) of the PPSA, and the operation of section 267 of the PPSA vested the unperfected security interest in the lessor (Forge) upon its winding up. This meant that although the lease was not registered under the PPSR, the GE’s interest vested in Forge immediately before the appointment of the administrator and Forge’s interest was superior to GE’s.

The case highlights the importance of properly assessing whether registration on the PPSR of a lessors interest in goods is required.  The case helpfully provides guidance on what to look for when considering whether a lessor is regularly engaged in the leasing of goods so as to activate the requirement for registration in order to properly protect its interest in leased property.  Importantly, the judgment makes it clear that, although the PPSR is an Australian registration process, section 13(2)(a) of the PPSA has no geographical limitation on defining a PPS lease. Further, the PPSA is not intended to impose its implication on ‘ad hoc’ lessors, so the test should recognise the frequency and repetitiveness of activity of leasing but it is not essential. More importantly, the activity that constitutes the proper part of the business, at the time the Lease was entered into and at all material times thereafter will determine whether the lessor entity is ‘regularly engaged in the business of leasing goods’.

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