In the matter of Maiden Civil (P&E) Pty Ltd; Richard Albarran and Blair Alexander Pleash as receivers and managers of Maiden Civil (P&E) Pty Ltd & Ors v Queensland Excavation Services Pty Ltd & Ors

2The Caterpillars are vehicles that can be driven, and are powered by their own engines, which use diesel fuel. The 930 is a wheeled vehicle, while the 330 and 320 are tracked. The Caterpillars are emblazoned with Maiden's name. 3Between 2010 and May 2012, Maiden undertook civil construction work in the Northern Territory at a number of construction sites, including at Alice Springs. 4Hastings Deering sold the Caterpillars to QES on 25 May and 18 August 2010; the deposits were paid by QES, and the balances were financed by Esanda (for the 320) and Westpac (for the 330 and 930), secured on the home of QES's principal Mr Callum Rutherford and guaranteed by Mr Rutherford and his company Calani Plastering & Carpentry Pty Ltd. More or less concurrently with payment of the deposits to Hastings Deering, QES received from Maiden funds that corresponded with the amounts of the deposits. Maiden took possession of the Caterpillars and used them in its civil construction work in the Northern Territory. QES thereafter invoiced Maiden on a periodical basis for amounts that corresponded to finance charges payable by QES to Esanda and Westpac, plus ten percent, which Maiden paid. In March 2011, Maiden provided to QES the funds required to payout the Esanda finance in respect of the 320, and QES thereupon discharged that finance. After 23 March 2011, QES rendered no further invoices to Maiden in respect of the hire of the 320; but it continued to render invoices - and Maiden continued to pay them, if irregularly, in respect of the 330 and 930. 5In about March 2012, Maiden approached a finance broker, Mr Gary Serkeci, seeking short-term finance. The broker approached Fast, following which Maiden provided various lists of its assets, which included the Caterpillars, to a valuer appointed by Fast, Mr Schiller. Mr Schiller prepared a valuation of Maiden assets, including the Caterpillars, which he sent to Fast in mid-April 2012. Following Mr Schiller's valuation, Fast's solicitors McCabe Terrill prepared loan and security documentation, which on 2 May 2012 they sent by email to Maiden's lawyer Mr John Cockburn, together with a Loan Agreement for a loan in the amount of $250,000 for a three-month term, and a General Security Deed, which attached schedules listing Maiden's property, including the Caterpillars. 6Maiden executed the Loan Agreement and the General Security Deed by its then directors, Mr Scott McLean and Mr James Gallaugher, signing counterpart copies of them. On 31 May 2012, Fast executed the Loan Agreement and the General Security Deed, and transferred $192,989.38 (being the amount of the loan, less the establishment fee and certain other prepayments) into an account as directed by Maiden. The General Security Deed purported to grant to Fast a "security interest" in, inter alia, the Caterpillars. 7In July 2012, Fast became aware of the occurrence of a number of events of default under clause 11.1 of the General Security Deed, as a consequence of which Fast had the contractual right to take the various enforcement actions against the Secured Property mentioned in clauses 11.2 and 11.3 of the General Security Deed, and the right to appoint a receiver pursuant to clause 12.1. On 27 July 2012, Fast appointed Messrs Albarran and Pleash as receivers and managers of "all of the Company's assets, undertakings and present and after-acquired property of any kind, including but not limited to the serial numbered collaterals listed in Schedule 1 and the plant and equipments listed in Schedule 2". The Caterpillars were among the items listed in the Schedules. Although there was originally a dispute as to the validity of the appointment, that is no longer in issue. 8Following their appointment, the receivers claimed possession of the Caterpillars. Meanwhile, QES's principal Mr Rutherford made alternative hire arrangements for the 930 and 330, and on 2 August 2012 Ward Mining & Civil Pty Ltd issued a purchase order for their hire for a 3 month term; under interim arrangements made between the parties, they have been let on short-term hire by QES. The 320 remains in possession of Central or Mr Cullenane. 9On 27 August 2012, Maiden went into voluntary administration, and on 24 September 2012, into liquidation pursuant to a creditors' voluntary winding up. 10The main issues are: (1)Is QES or Maiden the true owner of the Caterpillars (or any of them)? I conclude that Maiden was the true owner of the 320, and QES was the true owner of the 930 and 330. (2)If QES is the true owner, is its security interest superior to that of Fast? I conclude that Fast's perfected security interests in the 930 and 330 are superior to QES's unperfected security interests. This includes conclusions that, while QES's interest is a "transitional security interest", this does not in the circumstances afford any protection to QES because its interest as lessor was registrable on a transitional register but was not so registered, so that the exception in PPSA, s 322(3), applies. If I were wrong about the true ownership of the 320, the same conclusion would apply to it. (3)Whether, Maiden having been a lessee under a lease that has been terminated, the plaintiffs have a currently enforceable right to possession of the Caterpillars, and in particular whether PPSA, s 112 means that Fast could deal with the 930 and 330 only to the extent that Maiden was entitled to do so in conformity with the QES leases. I conclude that s 112 does not have that effect, and that the plaintiffs have currently enforceable rights to possession of the 930 and 330. If I were wrong about the true ownership of the 320, the same conclusion would apply to it. (4)Whether Central or Mr Cullenane has claim superior to Fast's in respect of the 320. I conclude that no such claim has been established.

Who is the true owner? 11Although the case ultimately falls to be resolved according to the system of priorities established by the PPSA, the notion of title - or "true ownership" - is not irrelevant. QES's claims depend, in part, on the proposition that it has title to the Caterpillars while Maiden does not. QES claims to be the true owner of the Caterpillars, having purchased them in 2010 and having then hired them to Maiden. The plaintiffs dispute this and say that Maiden is the true owner of the Caterpillars. 12As has been mentioned, it is plain that QES acquired the Caterpillars from Hastings Deering; that the deposits were paid by QES (albeit from funds that QES received from Maiden), and that the balances were financed by Esanda (on the 320) and Westpac (on the 330 and 930), secured on Mr Rutherford's home and guaranteed by Mr Rutherford. It is also established that, having taken possession of the Caterpillars for use in its business, Maiden was invoiced for, and paid to QES on a periodical basis, amounts that corresponded to finance charges payable by QES to Esanda and Westpac, plus ten percent; and that Maiden provided to QES the funds required to payout the Esanda finance in respect of the 320, following which it retained possession of the 320, in respect of which QES rendered no further invoices, though it continued to render invoices in respect of the 330 and 930. 13Mr Rutherford acknowledged that he had been a friend of Maiden's principal Mr McLean. Indeed, he had been a 42% shareholder in Maiden, and was recorded as having been a secretary, though he said that was an error. During 2010 or thereabouts, he was employed by Maiden. At about the same time, QES had purchased two Land Cruisers for Maiden, with Maiden providing the deposit and paying the finance: "Maiden bought it pretty much. I just financed it because Scott [McLean] had no money". 14It was put to him that QES similarly bought the 320 on behalf of Maiden, and that when the finance was paid out QES transferred ownership to Maiden; he answered "Then you'd be wrong"; he also denied that there was a similar arrangement in respect of the 930 and the 330. He said that the moneys received from Maiden that were applied to the deposits were accounted for as dividends. I accept that they have been treated as taxable income of QES. He said that the amount charged to Maiden by QES represented the finance charges plus a 10% margin; the invoices are consistent with that evidence, and I accept that QES was charging Maiden an amount to cover the financing charges plus a margin. However, he denied that the arrangement between QES and Maiden was that once the finance was paid out, absolute title would be transferred to Maiden. He also, implausibly, denied that a signature, which had the appearance of his own, had been placed by him on a draft Share Sale Agreement relating to his shareholding in Maiden, clause 9 of which contained an acknowledgement that QES held equipment purchased on behalf of Maiden and using third party finance serviced by Maiden, and an undertaking by Mr Rutherford and QES to transfer ownership to Maiden. 15Maiden included the Caterpillars amongst its assets in the lists provided to the valuer Mr Schiller, and in the schedules to the General Security Deed, in which Maiden represented that it was the legal and beneficial owner of the secured property. However, while that may be good evidence of admissions of ownership against Maiden, it is of little weight against QES. The Caterpillars were badged "Maiden Civil", but this is not inconsistent with Maiden having possession of them as lessee as distinct from as owner. Maiden insured the Caterpillars, but that is not inconsistent with Maiden being the lessee, as lessees are often required to insure; and while it could be of some significance that the insurance noted the interest of the financiers but not that of QES, there is nothing to show that QES was aware of that. 16It is clear that legal title to the Caterpillars was acquired by QES from Hastings Deering. While it is clear that funds received from Maiden paid the deposit, the periodical finance changes, and (in respect of the 320) the funds to payout Esanda, this does not mean that Maiden was paying the deposit or the finance charges, as distinct from dividends and hiring charges which in turn enabled QES to pay the deposits and finance charges. The treatment of the funds as income of QES for taxation purposes is consistent with this. Moreover, the only party to whom the financiers could look was QES. 17The question is whether QES has transferred title to the Caterpillars, or any of them, to Maiden. Once the finance in respect of the 320 was paid out, no further invoices were rendered to Maiden in respect of its hire. Mr Rutherford proffered the explanation that his arrangement with Maiden was to charge the financing costs plus 10%, so that once the finance was paid out, there was no finance cost to him and so no "cost plus 10% fee". If so, that meant that Maiden was thereafter entitled to possession of the 320 indefinitely for no fee. It is commercially unthinkable that Maiden would fund the payout of the lease on terms other than that it would acquire the property, namely the Caterpillar. I reject Mr Rutherford's denial that there was an arrangement to that effect; the combination of the payment out of the Esanda finance with funds provided by Maiden, and the concurrent cessation of the rendering of invoices in respect of the 320 to Maiden, admits of no other reasonable explanation. In my view, the arrangements between QES and Maiden included that upon payout of the relevant financier, the Caterpillar would be transferred to Maiden. Such an arrangement was admitted in respect of the Land Cruisers, and the rationale that Maiden was unable to raise finance itself would have been equally applicable to the Caterpillars. The provision of the funds for the deposit and discharge of the finance by Maiden, and the cessation of invoices upon payout of the 320, point to an arrangement to the same effect as that in respect of the Land Cruisers. The arrangements between QES and Maiden were not a mere lease, but included an agreement to transfer title on discharge of the finance. 18None of that denies that, in the meantime, QES was the legal owner, having acquired title from Hastings Deering and being the sole recourse for Esanda and Westpac. The agreement was performed only in respect of the 320, because only the Esanda finance was paid out. Invoices continued to be issued for the 330 and 930, because the Westpac finance had not been discharged. On any view, legal title in the 330 and 930 remained in QES. However, on or about 23 March 2011, title in the 320 passed to Maiden. 19Accordingly, I conclude that Maiden was the true owner of the 320, but QES was the true owner of the 330 and 930. This has the consequence that while QES has a claim in competition with Fast to the 330 and 930, it has no such claim in respect of the 320, the only remaining issue concerning which is the claim of Central or Mr Cullenane. Nonetheless, if my conclusion about the 320 be incorrect, the below reasoning would apply to it as well as to the 930 and 330.

The security interests in the Caterpillars 20The plaintiffs assert that Fast has a security interest in the Caterpillars within the meaning of the PPSA, which has priority over any interest of QES, Central or Mr Cullenane. That interest is said to arise from the terms of the General Security Deed. The plaintiffs contend that, even if QES be the owner of the Caterpillars, the operation of the PPSA has the effect that its ownership does not give it a superior right to the Caterpillars than Fast. 21It is now common ground that, if QES be the owners of the Caterpillars or any of them, QES has a "security interest" in those Caterpillars, within the meaning of the PPSA. It was also ultimately not in dispute, that Fast has a security interest in the Caterpillars. However, in order to inform the discussion of the question of priorities, it is useful to explain how these "security interests" arise. 22By PPSA, s 10, "grantor" means, inter alia, "a lessee under a PPS lease"; "security agreement " means "(a) an agreement or act by which a security interest is created, arises or is provided for; or (b) writing evidencing such an agreement or act"; and "security interest" has the meaning given by s 12, which provides as follows: 12 Meaning of security interest (1) A security interest means an interest in personal property provided for by a transaction that, in substance, secures payment or performance of an obligation (without regard to the form of the transaction or the identity of the person who has title to the property). Note: For the application of this Act to interests, see section 8. (2) For example, a security interest includes an interest in personal property provided by any of the following transactions, if the transaction, in substance, secures payment or performance of an obligation: (a) a fixed charge; (b) a floating charge; (c) a chattel mortgage; (d) a conditional sale agreement (including an agreement to sell subject to retention of title); (e) a hire purchase agreement; (f) a pledge; (g) a trust receipt; (h) a consignment (whether or not a commercial consignment); (i) a lease of goods (whether or not a PPS lease); (j) an assignment; (k) a transfer of title; (l) a flawed asset arrangement. (3) A security interest also includes the following interests, whether or not the transaction concerned, in substance, secures payment or performance of an obligation: (a) the interest of a transferee under a transfer of an account or chattel paper; (b) the interest of a consignor who delivers goods to a consignee under a commercial consignment; (c) the interest of a lessor or bailor of goods under a PPS lease. 23The notion of a PPS lease is defined by s 13, as follows: 13 Meaning of PPS lease (1) A PPS lease means a lease or bailment of goods: (a) for a term of more than one year; or (b) for an indefinite term (even if the lease or bailment is determinable by any party within a year of entering into the lease or bailment); or (c) for a term of up to one year that is automatically renewable, or that is renewable at the option of one of the parties, for one or more terms if the total of all the terms might exceed one year; or (d) for a term of up to one year, in a case in which the lessee or bailee, with the consent of the lessor or bailor, retains uninterrupted (or substantially uninterrupted) possession of the leased or bailed property for a period of more than one year after the day the lessee or bailee first acquired possession of the property (but not until the lessee's or bailee's possession extends for more than one year); or (e) for goods that may or must be described by serial number in accordance with the regulations, if the lease or bailment is: (i) for a term of 90 days or more; or (ii) for a term of less than 90 days, but is automatically renewable, or is renewable at the option of one of the parties, for one or more terms if the total of all the terms might be 90 days or more; or (iii) for a term of less than 90 days, in a case in which the lessee or bailee, with the consent of the lessor or bailor, retains uninterrupted (or substantially uninterrupted) possession of the leased or bailed property for a period of 90 days or more after the day the lessee or bailee first acquired possession of the property, (but not until the lessee's or bailee's possession extends for 90 days or more). (2) However, a PPS lease does not include: (a) a lease by a lessor who is not regularly engaged in the business of leasing goods; or (b) a bailment by a bailor who is not regularly engaged in the business of bailing goods; or (c) a lease of consumer property as part of a lease of land where the use of the property is incidental to the use and enjoyment of the land; or (d) a lease or bailment of personal property prescribed by the regulations for the purposes of this definition, regardless of the length of the term of the lease or bailment. Bailments for value only (3) This section only applies to a bailment for which the bailee provides value. 24The lease of the Caterpillars from QES to Maiden was not in writing, and there is no evidence of any agreed term. The hire was continuous, for a period of more than a year, and Maiden retained uninterrupted possession of the Caterpillars for more than 1 year. Accordingly PPSA, sub-section 13(1)(b) and/or 13(1)(d) was satisfied. The Caterpillars are goods that may or must be described by serial numbers and were in Maiden's possession for more than 90 days; accordingly, sub-section 13(1)(e)(ii) and/or (iii) was also satisfied. It was not suggested that any of the exclusions in sub-section 13(2) applied. In particular, the income from hiring the three machines was QES's only income, and it was Mr Rutherford's intention to continue to let the Caterpillars for hire on short-term rentals; accordingly, it was not established that QES was not regularly engaged in the business of leasing goods. It follows that the leases of the Caterpillars by QES to Maiden were PPS leases within the meaning of PPSA, s 13, and - as was ultimately not in dispute - that QES' interest in the Caterpillars, as lessor, was a "security interest" within PPSA, s 12(3)(c). 25PPSA, s 19, relevantly provides as follows: 19 Enforceability of security interests against grantors -attachment Attachment required for enforceability (1) A security interest is enforceable against a grantor in respect of particular collateral only if the security interest has attached to the collateral. Attachment rule (2) A security interest attaches to collateral when: (a) the grantor has rights in the collateral, or the power to transfer rights in the collateral to the secured party; and (b) either: (i) value is given for the security interest; or (ii) the grantor does an act by which the security interest arises. ... Goods leased, bailed, consigned or sold under a conditional sale agreement. (5) For the purposes of paragraph (2)(a), a grantor has rights in goods that are leased or bailed to the grantor under a PPS lease, consigned to the grantor, or sold to the grantor under a conditional sale agreement (including an agreement to sell subject to retention of title) when the grantor obtains possession of the goods. (6) Subsection (5) does not limit any other rights the grantor may have in the goods. ... 26Thus pursuant to s 19(5), Maiden - as a PPS lessee in possession of the Caterpillars - had rights in the Caterpillars, to which a security interest could attach. These rights are not limited to possessory rights, but include proprietary rights. Section 19(5) has equivalents in the New Zealand and Canadian PPS legislation from which the PPSA is derived. For example, the British Columbia Personal Property Security Act 1989 provides, by s 12(1)(b), that a security interest "attaches" when the debtor acquires "rights in the collateral", and s 12(2) states that "a debtor has rights in goods leased to the debtor ... when he obtains possession of them in accordance with the lease". In Re Giffen [1998] 1 SCR 91; (1998) 155 DLR (4th) 332, Iacobucci J, delivering the judgment of the Supreme Court of Canada, said of that provision: 32 Thus, upon delivery of the car to the bankrupt, the lessor had a valid security interest in the car that could be asserted against the lessee and against a third party claiming a right in the car. However, the lessor's security interest remained vulnerable to the claims of third parties who obtain an interest in the car through the lessee including trustees in bankruptcy. In order to protect its security interest from such claims, the lessor must therefore perfect its interest through registration of its interest (s 25), or repossession of the collateral (s 24). The lessor did not have possession of the car, and it did not register its security interest. Thus, prior to the bankruptcy, the lessor held an unperfected security interest in the car. ... 36 I note that s 12(2) of the PPSA also recognizes that a lessee obtains a proprietary interest in leased goods. Section 12(2) states explicitly that "a debtor has rights in goods leased to the debtor ... when he obtains possession of them in accordance with the lease" (emphasis added). Thus, s 12 operates to "deem or recognize that a lessee has a proprietary interest" (Buckwold and Cuming, supra, at p. 471). The Saskatchewan Court of Appeal considered a provision similar to s 12 of the British Columbia PPSA in International Harvester and held that (at p. 206): ... a trustee in bankruptcy, upon whom there devolved a chattel in the possession of the bankrupt under a commercial lease for a term exceeding a year, succeeds to the contractual or "possessory" interest of the bankrupt in that chattel, as well as the bankrupt's statutory or "proprietary" interest therein as conferred upon the debtor by s 12 of the Act. [Emphasis added.] 37 From the perspective of both the PPSA and the BIA the bankrupt, as lessee, can be described as having a proprietary interest in the car. 27Similarly, the (NZ) Personal Property Securities Act 1999 provides, by s 40: (1) A security interest attaches to collateral when- (a) Value is given by the secured party; and (b) The debtor has rights in the collateral; and (c) Except for the purpose of enforcing rights between the parties to the security agreement, the security agreement is enforceable against third parties within the meaning of section 36. ... (3) For the purposes of subsection (1)(b), a debtor has rights in goods that are leased to the debtor, consigned to the debtor, or sold to the debtor under a conditional sale agreement (including an agreement to sell subject to retention of title) no later than when the debtor obtains possession of the goods, 28In Graham v Portacom New Zealand Ltd [2004] 2 NZLR 528, Portacom leased five portable buildings to NDG Pine Ltd, which it delivered to NDG over a four-year period. NDG granted a debenture to a bank, which debenture was registered on the register maintained pursuant to the Act. Portacom did not register its interest (as lessor) in the buildings. The bank appointed receivers and managers of NDG's assets, who claimed to be entitled to sell the buildings; Portacom disputed this. Rodney Hansen J held that the rights of a lessee in leased goods referred to in s 40(3) of the PPSA were not confined to the lessee's possessory rights and that, as against the lessee's secured creditors, the lessee had rights of ownership in the goods sufficient to permit a secured creditor to acquire rights in priority to those of the lessors; accordingly, NDG had both a possessory interest and a proprietary interest in the buildings and could grant a security interest in the buildings themselves and not just in its leasehold interest in the buildings. His Honour (at [17]) rejected the submission that, as NDG had only a possessory interest in the buildings, it could not, by means of the debenture, confer on the bank a right to sell, explaining: 18 A lessee of goods may, by virtue of its possessory interest, grant a security interest in the goods. Section 43 ... provides that a debtor has rights in goods leased to the debtor. A security interest can therefore attach to the lessee's interest in the goods ... 19 The consequences of this to the lessor will differ according to the term of the lease. In the case of a lease for a term of more than one year, a security interest is deemed to be created by s 17(1)(b) regardless of the identity of the person who has title to the collateral. As Gedye, Cuming and Wood, Personal Property Securities in New Zealand (2002), para 40.3.1 put it, the lease is treated as a security agreement and the lessee is treated as the owner of the leased goods for registration and priority purposes. If the lessor fails to register its interests, it loses priority to a perfected security interest over the leased goods ... 29His Honour then referred to Canadian authority (including Re Giffen and International Harvester Credit Corp of Canada v Touche Ross Ltd (1986) 30 DLR (4TH) 387) and scholarship as confirming that analysis, and continued: 28 The rights of a lessee in leased goods referred to in s 40(3) of the Act are not therefore confined to the lessee's possessory rights. As against the lessee's secured creditors, the lessee has rights of ownership in the goods sufficient to permit a secured creditor to acquire rights in priority to those of the lessor. The conceptual basis for this is explained in an article by Bridge, Macdonald, Simmonds and Walsh, "Formalism, Functionalism and Understanding the Law of Secured Transactions" (1999) 44 McGill LJ 567 at pp 602-603. The authors reject the thesis that for the purpose of art 9 of the United States Uniform Commercial Code and the Canadian legislation, a creditor's interest in collateral attaches only to the debtor's possessory rights. They go on to say: The internal logic of the Article 9 and PPSA priority regime is premised on a rejection of derivative title theory in favour of registration as the principal mechanism for ranking priority both among secured creditors and as between the secured creditor and the debtor's general creditors including the trustee in bankruptcy. To give effect to this intent, 'rights in the collateral' must be understood as requiring a mere bare right to possession or a power to convey a greater interest than has the debtor, a point confirmed in PPSA jurisprudence and expressly stated in some of the more recent PPSAs. On this interpretation, ostensible ownership - in the radical sense of bare possession or control of the collateral - has effectively replaced derivative title for the purposes of determining the scope of the secured debtor's estate at the priority level. Thus, by the very act of deeming a true lease to be a PPSA security interest, ownership in the leased assets is effectively vested in the lessee as against the lessee's secured creditors and trustee in bankruptcy. 30In Waller v New Zealand Bloodstock Ltd [2006] 3 NZLR 629, S H Lock (NZ) Ltd held a debenture, granted in 1999, over the assets of Glenmorgan Farm Ltd, and registered its interest on the day on which the PPSA commenced, 1 May 2002. In 2001, Glenmorgan leased from New Zealand Bloodstock Ltd a stallion, "Generous", title to which remained with NZ Bloodstock, which did not register its interest. In 2004, NZ Bloodstock terminated the lease and repossessed Generous; shortly thereafter Lock appointed Messrs Waller and Agnew receivers of Glenmorgan under the debenture. The receivers claimed that Lock was entitled to priority under the PPSA and sued NZ Bloodstock for possession of Generous. The New Zealand Court of Appeal held that the lease, having been for a term of more than one year, amounted to a security interest; that for the purposes of s 40 Lock had given value and Glenmorgan had rights in Generous, and the security was enforceable against NZ Bloodstock. As Lock's security interest had been perfected by registration, it took priority over the competing security interest of NZ Bloodstock, as with respect to priority of competing security interests, the principle nemo dat quod non habet was ousted by the PPSA. 31Robertson and Baragwanath JJ said (at [54]) that because the lease was for a term of more than one year, then for the limited purpose of priority of securities, the contractual language of the agreement to lease (which provided that title to Generous would remain with NZ Bloodstock) was overridden by statute, and instead of its previously inviolable title to the stallion, NZ Bloodstock was deemed to have a statutory "security interest", which was liable to be overridden by a competing security interest. Their Honours found the policy underlying that result in the New Zealand Law Commission's report (at p 89): LEASES FOR A TERM OF MORE THAN ONE YEAR In practical and legal effect, many commercial leases are indistinguishable from hire purchase agreements or conditional sale contract. They create the same degree of apparent ownership which justifies the traditional regulation of chattel mortgages and charges as well as the proposed regulation of title-based securities and assignments. 32The Commonwealth Parliament, in enacting legislation that was modelled on the New Zealand and Canadian legislation, should be taken to have intended the same approach, which was by then well-established in Canada and New Zealand, to apply. 33In the General Security Deed, Fast was defined as the "Secured Party", and Maiden was defined as the "Grantor". By clause 2, Maiden granted to Fast a "security interest" in the Personal Property to secure the due payment of the "Secured Moneys". Pursuant to clause 1.1, "Personal Property" means "all of the Grantor's assets (whether owned legally or beneficially) undertakings and present and after-acquired property of any kind (including a licence) and includes all personal property in which the Grantor has rights, whether now or in the future, including but not limited to the serial numbered collaterals listed in Schedule 1 and the plant and the equipments listed in Schedule 2 ...". "Secured Moneys" means "all of the Grantor's indebtedness to the Secured Party (including, for the purposes of s 18(4) of the PPSA, future advances)". "Secured Property" means "all Personal Property and all other Property, wherever situated." The Caterpillars were all listed in the schedules: the 930 as item 15 of Schedule 1; the 330 as item 18 of Schedule 1; and the 320 as item 35 in Schedule 2. 34Accordingly, the General Security Deed was agreement by which an interest in personal property that secures payment or performance of an obligation was created; it was a "security agreement", and the interest it created in favour of Fast was a "security interest", within the meaning of PPSA. Pursuant to s 19(2), Fast's security interest attached to the Caterpillars when it gave value for its security interest by advancing the funds referred to in the Loan Agreement and General Security Deed. Once Fast's security interest had attached to the Caterpillars, it was enforceable against Maiden pursuant to s 19(1).

Priority between competing security interests 35The competing security interests of QES and Fast must then be resolved according to the system of priorities established by the PPSA. The Supreme Court of Canada explained in Re Giffen (at [28]) that such a dispute cannot be resolved through the determination of who has title to the collateral, because the dispute is one of priority, not ownership. That Court (at [38]) adopted the explanation of the theory of the Saskatchewan PPSA advanced by the Saskatchewan Court of Appeal in International Harvester (at 204-5), that a person with an interest rooted in title to property in the possession of another, once perfected, can, in the event of default by the debtor, look to the property ahead of all others to satisfy his claim; but if that interest is not perfected, it is vulnerable, even though rooted in title to the goods, because a third party may derive an interest in the same goods by virtue of some dealing with the person in possession of them, and may become entitled to priority, ahead of the person holding the unperfected security interest, to look to the goods to satisfy a claim. 36Priorities between competing interests are governed by PPSA, s 55, which relevantly provides as follows: 55 Default priority rules (1) This section sets out the priority between security interests in the same collateral if this Act provides no other way of determining that priority. Note: For other rules about priorities, see the following: (a) the remaining provisions of this Part; (b) Chapter 3 (agricultural interests, accessions and commingling); (c) Part 9.4 (transitional application of this Act). Priority between unperfected security interests (2) Priority between unperfected security interests in the same collateral is to be determined by the order of attachment of the security interests. Perfected security interest has priority over unperfected security interest (3) A perfected security interest in collateral has priority over an unperfected security interest in the same collateral. Priority for perfection in other ways (4) Priority between 2 or more security interests in collateral that are currently perfected is to be determined by the order in which the priority time (see subsection (5)) for each security interest occurs. (5) For the purposes of subsection (4), the priority time for a security interest in collateral is, subject to subsection (6), the earliest of the following times to occur in relation to the security interest: (a) the registration time for the collateral; (b) the time the secured party, or another person on behalf of the secured party, first perfects the security interest by taking possession or control of the collateral; (c) the time the security interest is temporarily perfected, or otherwise perfected, by force of this Act. (6) A time is a priority time for a security interest only if, once the security interest is perfected at or after that time, the security interest remains continuously perfected. Note: A security interest in the proceeds of original collateral has the same default priority as the security interest in the original collateral (see subsection 32(5)). 37Section 55 thus directs attention to whether, and if so when, the relevant security interests have been "perfected". The concept of "perfection" is dealt with by s 21, which relevantly provides as follows: 21 Perfection-main rule (1) A security interest in particular collateral is perfected if: (a) the security interest is temporarily perfected, or otherwise perfected, by force of this Act; or (b) all of the following apply: (i) the security interest is attached to the collateral; (ii) the security interest is enforceable against a third party; (iii) subsection (2) applies. (2) This subsection applies if: (a) for any collateral, a registration is effective with respect to the collateral; or (b) for any collateral, the secured party has possession of the collateral (other than possession as a result of seizure or repossession); or (c) for the following kinds of collateral, the secured party has control of the collateral: (i) an ADI account; (ii) an intermediated security; (iii) an investment instrument; (iv) a negotiable instrument that is not evidenced by a certificate; (v) a right evidenced by a letter of credit that states that the letter of credit must be presented on claiming payment or requiring the performance of an obligation; (vi) satellites and other space objects. Note: For what constitutes possession and control of collateral, see Part 2.3. (3) A security interest may be perfected regardless of the order in which attachment and any step mentioned in subsection (2) occur. (4) A single registration may perfect one or more security interests. 38In turn, s 21(1) directs attention to whether the relevant security interest has attached to the collateral (as to which see the discussion of s 19, above), and is enforceable against a third party, in respect of which s 20 relevantly provides as follows: 20 Enforceability of security interests against third parties General rule (1) A security interest is enforceable against a third party in respect of particular collateral only if: (a) the security interest is attached to the collateral; and (b) one of the following applies: (i) the secured party possesses the collateral; (ii) the secured party has perfected the security interest by control; (iii) a security agreement that provides for the security interest covers the collateral in accordance with subsection (2). Note: For possession and control of collateral, see Part 2.3. Written security agreements (2) A security agreement covers collateral in accordance with this subsection if: (a) the security agreement is evidenced by writing that is: (i) signed by the grantor (see subsection (3)); or (ii) adopted or accepted by the grantor by an act, or omission, that reasonably appears to be done with the intention of adopting or accepting the writing; and (b) the writing evidencing the agreement contains: (i) a description of the particular collateral, subject to subsections (4) and (5); or (ii) a statement that a security interest is taken in all of the grantor's present and after-acquired property; or (iii) a statement that a security interest is taken in all of the grantor's present and after-acquired property except specified items or classes of personal property. 39As already explained, Fast's security interest had attached to the Caterpillars; accordingly, s 20(1)(a) is satisfied. The General Security Deed is a security agreement evidenced by writing signed by Maiden as grantor within s 20(2)(a)(i), and contains a description of the particular collateral (s 20(2)(b)(i)) and a statement that a security interest is taken in all of the grantor's present and after-acquired property (s 20(2)(b)(ii). Accordingly, the security agreement "covers the collateral" for the purposes of s 20(1)(b) (pursuant to s 20(b)(iii)), and Fast's security interest in the Caterpillars is therefore enforceable against a third party (which, in relation to the General Security Deed, includes QES). 40That Fast's security interest had attached to the Caterpillars means that s 21(1)(b)(i) is also satisfied. As that security interest is enforceable against a third party, s 21(1)(b)(ii) is satisfied. Fast's security interest in the Caterpillars has been registered, and accordingly a registration is effective with respect to the collateral within the meaning of s 21(2)(a); accordingly, s 21(1)(b)(iii) is satisfied. It follows that Fast's security interest in the Caterpillars is perfected within the meaning of s 21(1) of the PPSA. So much is common ground. 41However, QES has not registered its security interest in respect of any of the Caterpillars, and its security interest is therefore not perfected. In those circumstances, s 55(3) applies, so that Fast's perfected security interest in the Caterpillars has priority over QES' unperfected security interest in them. This also is no longer in dispute, subject to a number of further arguments now raised by QES in its Amended Defence, and which now represent the real issues in dispute between the parties, to which I shall shortly turn. (Before doing so, however, I observe - though it was not argued - that QES's security interest is vulnerable not only because it was not perfected by registration, but also on the ground that it was not enforceable against third parties under s 20, because there was no security agreement that covered the collateral for the purposes of s 20(1)(b)(iii): while the PPS leases were "security agreements", they were not in, or evidenced in, writing as required by s 20(2); accordingly, s 20(1)(b) is not satisfied).

Transitional security interests 42Having accepted that its leases of the Caterpillars to Maiden were PPS leases, QES contends that its security interest is entitled to priority as a "transitional security interest", which was "perfected by force of the Act immediately before the registration commencement time". 43The notion of a "transitional security interest" is defined by s 308, as follows: 308 Meaning of transitional security interest In this Act: transitional security interest means a security interest provided for by a transitional security agreement, if: (a) in the case of a security interest arising before the registration commencement time - this Act would have applied in relation to the security interest immediately before the registration commencement time, but for section 310; or (b) in the case of a security interest arising at or after the registration commencement time: (i) the transitional security agreement as in force immediately before the registration commencement time provides for the granting of the security interest; and (ii) this Act applies in relation to the security interest. Note: Section 310 provides that this Act only starts to apply to security interests at the registration commencement time. 44Section 311 makes provision in respect of the enforceability of transitional security interests against third parties, by applying the law that applied immediately before the effective commencement of the PPSA (called the "registration commencement time"), namely 1 February 2012: 311 Enforceability of transitional security interests against third parties Despite section 20, a transitional security interest is enforceable against a third party in respect of particular personal property if it would have been so enforceable under the law that applied to the enforceability of security interests immediately before the registration commencement time, and as if this Act had not been enacted (whether the security interest arises before, at or after the registration commencement time). 45Section 320 provides a guide as to priority rules for transitional security interests, relevantly as follows: 320 Guide to priority rules for transitional security interests (1) The following table is a guide to how this Act applies to the determination of priorities involving transitional security interests: Priorities involving transitional security interests

Item The following security interest: has priority over ... because of ... 1 a perfected transitional security interest an unperfected security interest (whether transitional or not) subsection 55(3). 2 a perfected transitional security interest a perfected security interest that is not a transitional security interest subsection 55(5) and sections 322 and 322A. 3 an unperfected transitional security interest an unperfected security interest that is not a transitional security interest subsection 55(2) and section 321. 4 a perfected security interest (whether transitional or not) an unperfected transitional security interest subsection 55(3).

46Section 322 provides for protection of "transitional security interests" that have not been registered on the PPS register, for up to 24 months after the commencement of the PPSA, as follows: 322 Perfection rule Main rule (1) A transitional security interest in collateral is perfected from immediately before the registration commencement time, whether the security interest arises before, at or after the registration commencement time (including a transitional security interest that arises after the end of the month that is 24 months after the registration commencement time). Note 1: As a result of this subsection, the priority time for a transitional security interest under subsection 55(4) will be immediately before the registration commencement time, as long as the security interest remains continuously perfected. Note 2: See section 320 for a general summary of priority rules as they affect transitional security interests. (2) However, the transitional security interest stops being perfected under subsection (1) at the earliest of the following times: (a) when the security interest is perfected by registration under Division 6 (migration of personal property interests); (b) when the security interest is perfected by preparatory registration under Division 7; (c) when a registration under Division 6 or 7 is amended so that the registration perfects the security interest; (d) when the security interest is otherwise perfected by registration, or is perfected by possession or control; (e) when the security interest is otherwise perfected (but not temporarily perfected) by this Act, other than under this section; (f) the end of the month that is 24 months after the registration commencement time. Note: In the case of a transitional security interest in collateral that does not arise until after the end of the month that is 24 months after the registration commencement time, this section has the same effect as for other transitional security interests. In particular: (a) if a financing statement describing the collateral is registered before the end of that month, by the operation of sections 21, 55, 321 and this section, the security interest is continuously perfected from the registration time for the collateral until the registration stops being effective; and (b) if the security interest is not perfected (otherwise than under this section) at the end of the month that is 24 months after the registration commencement time, the security interest will become unperfected at that time. Exception (3) Subsections (1) and (2) do not apply to a transitional security interest in collateral if the interest is of a class prescribed by regulations made for the purposes of this subsection. 47This provision interacts with s 55 through s 21(1)(a), which provides that a security interest in particular collateral is perfected if the security interest is temporarily perfected, or otherwise perfected, by force of the Act. The plaintiffs accept that any security interest of QES in the Caterpillars was a "transitional security interest" within s 308 and that, but for s 322(3), the effect of ss 322(1) and (2) would be to give QES's security interest priority over Fast's security interest, even though it was not registered on the PPS register. However, the plaintiffs contend that s 322(3) applies so as to exclude QES's interest in the Caterpillars from protection under s 322. 48Section 322(3) provides that ss 322(1) and (2) do not apply to "a transactional security interest in collateral if the interest is of a class prescribed by the regulations made for the purposes of this subsection." Pursuant to (CTH) Personal Property Securities Regulations 2010 ("PPSR"), regulation 9.2, a transitional security interest is prescribed for the purposes of s 322(3) where it is registrable on a transitional register and where it was not registered on the relevant register prior to the registration commencement time. The effect of this is that interests so registrable do not attract protection under s 322 (1) and (2). 49Under s 10, "transitional register" has the meaning given to it by s 330, which is contained in Division 6 (Migration of personal property interests) and provides as follows: This Division applies if, at or after the migration time, and before the registration commencement time: (a) an officer or agency of the Commonwealth, a State or a Territory gives the Registrar data, in relation to personal property, that is held by the officer or agency in a register (a transitional register) maintained under a law of the Commonwealth, a State or a Territory; and (b) the data is given in the approved form; and (c) the Registrar accepts the data. 50The Northern Territory Register of Interests in Motor Vehicles and Other Goods ("NT Register") was established pursuant to the Northern Territory of Australia Registration of Interests in Motor Vehicles and Other Goods Act 2008 ("NT Register Act"), which was repealed by the Personal Property Security (National Uniform Legislation) Implementation Act 2010 ("NT Implementation Act"), under s 8 of which, in conjunction with the repeal of the NT Register Act, the NT Register ceased, and the NT registrar was authorised to give information to the Commonwealth, the PPS Register, or another person in order to establish the PPS Register. Data from the NT Register was given to and accepted by the PPS Register within the meaning of s 330; accordingly, it was a transitional register within the meaning of the PPSA. 51Section 8 of the NT Register Act relevantly provided that an application for registration "of a registrable interest in prescribed goods" may be made to the Registrar. Accordingly, in order for QES's interest in the Caterpillars to have been registrable on the NT Register, it had to be a "registrable interest" in "prescribed goods". "Prescribed goods" were defined in s 3 of the NT Register Act to include "a motor vehicle", which in turn was defined as follows: "motor vehicle" means a motor car, motor carriage, motor cycle, tractor or other vehicle propelled wholly or partly by volatile spirit, steam, gas, oil or electricity, or by any means other than human or animal power, and includes a trailer or caravan, but does not include a vehicle used on a railway or tramway. 52The Caterpillars are vehicles that are wholly propelled by a volatile spirit and are not used on a railway or tramway. Accordingly, they fall within the definition of "motor vehicle", and thus also of "prescribed goods", for the purposes of the NT Register Act. 53A "registrable interest" is defined in s 3 of the NT Register Act as follows: "registrable interest", in relation to goods, means the interest in the goods of: (a) the person to whom is owed the obligation the performance for which is secured by a security interest to which the goods are subject; (b) a lessor of the goods; ... whether arising under a law of the Territory or of a participating State. 54QES's interest was as lessor and arose under the law of the Territory or of a participating State: the Caterpillars were located in the Northern Territory throughout the period of the lease, and by s 3 of the (NT) Registration of Interests in Motor Vehicles and Other Goods Regulations 2003, the Australian Capital Territory, New South Wales, Queensland, South Australia and Victoria were all participating States. Accordingly, QES's interest as lessor in the Caterpillars was a "registrable interest". 55The Caterpillars were intended for use, and at all times were used, in the Northern Territory. Prior to their acquisition, Mr Rutherford and Mr McLean had discussed renting them for general civil works in the Northern Territory. From their purchase in 2010 until the appointment of the receivers and managers, the Caterpillars were used in the Northern Territory. Throughout the period of the lease, they were located in the Northern Territory. Given that territorial connection, QES's interest as lessor - whether it is considered to have arisen in Queensland or in the Northern Territory - was registrable under the NT Register Act. QES did not register its interest on the NT Register. Accordingly, QES's interest as lessor was registrable on a transitional register (the NT Register) but was not so registered prior to the registration commencement time. In those circumstances, the exception in s 322(3) of the PPSA applies, and the protection afforded to transitional security interests by sub-section 322(1) and (2) does not avail QES. 56QES accepts that if the NT Register is the relevant register, sub-section 322(1) and (2) do not avail it, for the reasons just explained. However, QES submits that the perfection (and consequences thereof) of its security interest falls to be determined according to the law of Queensland, and that if the Caterpillars were not registrable on a transitional register in Queensland, then the exception in s 322(3) was not attracted. 57The starting point for this argument is PPSA, s 238, which relevantly provides as follows: 238 Governing laws-goods Main rules (1) The validity of a security interest in goods is governed by the law of the jurisdiction (other than the law relating to conflict of laws) in which the goods are located when the security interest attaches, under that law, to the goods. Note 1: Under section 237, the parties to a security agreement may expressly provide for the law of the Commonwealth to apply instead. Note 2: For when personal property is located in a jurisdiction, see section 235. (1A) At a particular time, the perfection, and the effect of perfection or non-perfection, of a security interest in goods is governed by the law of the jurisdiction (other than the law relating to the conflict of laws) in which the goods are located at that time. Goods that are moved (2) Despite subsections (1) and (1A), the validity, perfection, and the effect of perfection or non-perfection, of a security interest in goods is governed by the law of a particular jurisdiction (the destination jurisdiction), other than the law relating to the conflict of laws, if: (a) at the time (the attachment time) the security interest attaches, under that law, to the goods, it was reasonable to believe that the goods would be moved to the destination jurisdiction; and (b) the goods are currently located in the destination jurisdiction. (2A) Subsection (2) applies from the attachment time. Goods that are normally moved between jurisdictions (3) Despite subsections (1) to (2A), the validity, perfection, and the effect of perfection or non-perfection, of a security interest in goods is governed by the law of a jurisdiction (including the law relating to conflict of laws) if: (a) the grantor is located in that jurisdiction when the security interest attaches, under that law, to the goods; and (b) the goods are of a kind that is normally used in more than one jurisdiction; and (c) the goods are not used predominantly for personal, domestic or household purposes. Note: For the location of bodies corporate, bodies politic and individuals, see section 235. Goods entered on registers of ships (4) Despite subsections (1A) to (3), at a particular time, the perfection, and the effect of perfection or non-perfection, of a security interest in goods is governed by the law of a country if: (a) the goods are entered in a register of ships maintained by the country containing the names and particulars of ships; and (b) in proceedings in the country, the law of that country governs title to the goods. 58The issue in this respect pertains to "perfection" (by registration), rather than "attachment", of QES's security interest in the Caterpillars. Prima facie, s 238(1A) would refer this to the law of the jurisdiction where the goods are located at the relevant time, which was the Northern Territory. However, QES submits that s 238(3) applies, on the footing that the Caterpillars were goods "of a kind that is normally used in more than one jurisdiction", and that Maiden as grantor was located in Queensland when the security interest attached, as its registered office was in Queensland. 59In my view, this argument fails, at several levels. 60First, there is no requirement to resort to s 238, because no question of choice of law arises. The issue raised by PPSR, regulation 9.2, is whether the collateral was registrable on a transitional register. For this purpose, it suffices that the relevant interest could have been registered on a Register. QES's interests in the Caterpillars could have been registered on the NT Register, whether or not they could have been registered on a Queensland register. 61Secondly, even if there were a choice of law issue, s 238 has no application or relevance in this situation. It is in Part 7.2 (Australian laws and those of other jurisdictions) of the PPSA. As s 233 (Guide to this Part) explains, that part is about how Australian laws interact with foreign laws - not about internal private international issues as between jurisdictions within Australia. It is concerned with choice of law between Australia and foreign countries; not within Australia. In the absence of statutory provision, the general law would refer such questions to the lex situs, being the law of the Northern Territory [see Douglas Financial Consultants Pty Ltd v Price [1992] 1 Qd R 243, 251-253]. 62Thirdly, in any event, s 238(3) does not apply. I do not accept that the Caterpillars are goods are of a kind normally used in more than one jurisdiction. No doubt it is possible that some such equipment will be used in more than one jurisdiction, but there is nothing to show that that is "normally" the case. In my view, the provision is intended to deal with goods of a kind that are characterised by their inter-jurisdictional character - for example, shipping containers. If (contrary to my opinion) Part 7.2 applied to interstate conflicts within Australia, then arguably heavy transport vehicles of the kind used in interstate trade might be within the concept. But it has not been shown to be characteristic of earth moving equipment that it will be moved from one jurisdiction to another, even within, let alone out of, Australia. Accordingly, if s 238 applied at all, sub-section 238(1A) and (2) would both refer the issue to the law of the Northern Territory. 63Fourthly, while s 235(3) specifies as the location of a "body corporate" the jurisdiction in which it is incorporated, there is no provision in respect of corporations equivalent to that in s 235(6), which makes provision that in the application of the section in relation to Australia, the jurisdiction in which property or an individual is located is the jurisdiction of the state or territory in which the property, or the individual's principal place of residence, is located. This is because nowadays, although corporations may be registered in a particular state, they are incorporated in Australia. Thus s 235(3) would not have the consequence, even if s 238(3) applied, that the relevant jurisdiction was Queensland 64Fifthly - unlike sub-section (1), (1A) and (2) - s 238(3) includes the laws of the jurisdiction relating to conflict of laws. Under the rules of private international law applicable in Queensland, the lex situs governs the validity and effect of the assignment of chattels, and where there are multiple assignments, the lex situs of the later transaction [Douglas v Price, 251-253]. Accordingly, application of s 238(3) would result in the application, to the question of the validity and perfection of QES' security interest, of the laws of the Northern Territory. 65Sixthly, even if the law of Queensland were applicable, at least the 930 was registrable, but was not registered, in a transitional register in Queensland. Under the (QLD) Motor Vehicles and Boats Securities Act 1986, s 2: security interest means an interest in a motor vehicle, boat or outboard motor by way of security for or in respect of a liability, whether present, contingent or future created or otherwise arising in or under or in connection with a bill of sale, mortgage, charge, lien, hire-purchase agreement, lease or instrument having a like effect to any of them and includes the interest of - (a) an owner within the meaning of the Hire-purchase Act 1959 in respect of the liability of the hirer within the meaning of that Act; and (b) a lessor in respect of the liability of a lessee. 66Under s 3: (1) Motor vehicle means a land vehicle that moves on wheels and is propelled by a motor that is part of the vehicle. (2) Motor vehicle also includes a caravan or trailer designed to be attached to, or drawn by, a motor vehicle of a type mentioned in subsection (1). (3) Motor vehicle does not include the following - (a) a vehicle designed for use primarily in the mining industry; (b) farm machinery; (c) a vehicle designed for use on a railway or tramway. 67The 930 is admittedly a wheeled vehicle. (The plaintiffs accepted that the 320 and 330, being tracked vehicles, were not). Although QES suggested that the 930 was designed for use primarily in the mining industry, there is no evidence, nor any other basis, on which I could reach that conclusion. Accordingly, the 930 was a motor vehicle within the meaning of the Queensland Act and registrable under it, but not registered. (It may be - as argued by the plaintiffs - but is unnecessary to decide, that the 320 and 330 were registrable under the (QLD) Bills of Sale and Other Instruments Act 1955). 68For all those reasons, the transitional security interest argument does not avail QES, and least of all in respect of the 930.

Enforceable right to possession 69QES contends that the plaintiffs have no enforceable right to possession, as Maiden no longer has a right to possession of the Caterpillars (QES having terminated the leases), and the plaintiffs' rights to deal with the Caterpillars deriving from, and being no greater than, those of Maiden. The first limb of this submission was, in substance, that the grantor Maiden had a mere right to possession under the leases from QES in return for payment of the rent; that Maiden (and its receivers and managers) have repudiated the lease by denying QES's title and failing to pay rent; and that QES has accepted the repudiation, terminated the lease and re-assumed possession; accordingly, neither Maiden nor its receivers and managers nor Fast could have any further right to possession under the lease. The second limb invoked PPSA, s 112(1), which says that in exercising rights and remedies provided by PPSA, Chapter 4, a secured party may deal with collateral only to the same extent as the grantor would be entitled to so deal with the collateral.

Maiden's rights in respect of the Caterpillars 70The first answer to this submission is provided by PPSA, s 267(2), which provides that any security interest granted by a corporation that is unperfected at the commencement of its administration or winding up vests in the corporation. This provision is analogous to, but goes further than, the Canadian statute, considered in Re Giffen, which relevantly provided (by s 20(b)(i)), that a security interest in collateral is not effective against a trustee in bankruptcy if the security interest is unperfected at the date of the bankruptcy. The Supreme Court of Canada explained that the rationale of the provision was to enable trustees to defeat unperfected security interests because of the representative capacity of the trustee and the effect of bankruptcy on the enforcement rights of unsecured creditors, so as to permit the unsecured creditors to maintain, through the trustee, the same status vis-à-vis secured creditors who have not perfected their security interests which they enjoyed prior to the bankruptcy. Iacobucci J, speaking for the Court, said: 43 In the present appeal, the trustee's possessory interest in the car, acquired through the bankrupt under the authority of the BIA, comes into competition with the unperfected security interest of the lessor. Section 20(b)(i) of the PPSA states explicitly that a security interest in collateral "is not effective against a trustee in bankruptcy if the security interest is unperfected at the date of the bankruptcy". On a plain reading of s 20(b)(i), the lessor's interest in the car is ineffective against the trustee. 44 Section 20(b)(i) does not grant title or any other proprietary interest to the trustee, but it prevents the lessor from exercising rights against the trustee. Admittedly, the effect of s 20(b)(i), on the present facts, is that the trustee ends up with full rights to the car when the bankrupt had only a right of use and possession. ... 50 I accept that there is a principle which provides that a trustee in bankruptcy cannot obtain a greater interest to the goods than the bankrupt (beyond the context of a trust where the goods are not property of the bankrupt). However, s 20(b)(i) itself modifies that principle. Cases decided prior to the Court of Appeal decision in the case on appeal have consistently accepted that s 20(b)(i), or its equivalent, can give the trustee a greater interest in the disputed property than that enjoyed by the bankrupt. 71Section 267 of the Australian PPSA differs, in that, rather than merely rendering the unperfected security interest ineffective against the grantor's trustee in bankruptcy or liquidator, it vests the interest in the grantor. 72The consequence, in the present case, is that upon the commencement of the administration and/or winding up of Maiden, QES's unperfected security interests in the Caterpillars vested in Maiden. The exception provided for by s 268(1)(ii) in respect of PPS leases of serial numbered goods does not apply, because one or more of s 13(1)(a) to (d) apply, as Maiden as lessee retained possession of the Caterpillars under the lease for more than a year. The practical effect is that QES's security interest is extinguished; QES has no further interest in the Caterpillars; and Maiden holds them subject only to the perfected security interest of Fast. 73The second answer is that Maiden did not have only a mere right to possession under the QES leases. The Canadian and New Zealand cases already mentioned demonstrate that a PPS lessee on taking possession of the collateral acquires not only a possessory right but also proprietary rights to the extent that it can grant security interests to third parties, so that the lessor's interest if unregistered is vulnerable to being defeated by security interests so granted to such third parties. The PPSA treats the lessee under a PPS lease as the grantor of a security interest with rights in the collateral, and the lessor as a secured party, because it sees the transaction as, in substance, a security transaction, though in form it is a lease. As the cases mentioned show, it recognises that the lessee may validly and effectively grant security interests in the collateral to third parties, that can take priority of the lessor's unperfected interest, because the lessee is regarded for that purpose as having rights in the collateral. Maiden acquired possessory and proprietary rights in the Caterpillars upon taking possession of them, and granted a security interest in them to Fast under the General Security Deed. 74Under clauses 11.3(b) and 12.2 of the General Security Deed, following an event of default, Fast and receivers appointed by it respectively have the power to enforce the security interest by "entering into, seizing, taking possession of, managing or using the Secured Property". This confers on the plaintiffs a right to possession of the Caterpillars.

Section 112 75Section 112 provides as follows: (1) In exercising rights and remedies provided by this Chapter, a secured party may deal with collateral only to the same extent as the grantor would be entitled to so deal with the collateral. (2) However, subsection (1) does not apply: (a) if the secured party had title to the collateral immediately before starting to exercise any right or remedy provided by this Part; or (b) to the extent that it would otherwise prevent the secured party from dealing with the collateral by way of transfer because a transfer by the grantor would be prohibited or declared to be a default under a security agreement. Note: See section 79 (transfer of collateral despite prohibition in security agreement). (3) Without limiting subsection (1), under this Chapter a secured party may only seize, purchase or dispose of a licence subject to: (a) the terms and conditions of the licence; and (b) any applicable law of the Commonwealth, a State or a Territory. 76QES submits that this means that, because Maiden was a mere lessee, under a lease that had since been terminated, and did not have title to the Caterpillars, Fast could not deal with the Caterpillars. In other words, despite the conclusion that Fast had a perfected security interest in the Caterpillars that had priority over that of QES, when it came to enforcement action Fast was in no better a position than Maiden - in effect, nemo dat quod non habet. 77The New Zealand and Canadian legislation do not appear to contain provisions equivalent to s 112. Nonetheless, in the light of the Canadian and New Zealand authorities, and the adoption in s 19(5) of a provision closely analogous to those on which they were founded, it would be surprising if s 112 were intended to reinstate, as between competing security interests, the nemo dat rule. Section 112 should be interpreted in a manner consistent with the approach taken to title and priorities in the PPSA. 78In my view, the purpose of s 112 is illuminated by sub-section (3). While expressed to be "without limiting subsection (1)", it provides illustrations of what the draftsperson had in mind. The concern was not with the nemo dat principle, title or priority, which were otherwise addressed; but with other limitations or restrictions imposed by law on a grantor's ability to deal with the collateral. A requirement in a licence that it not be assigned without the consent of the licensor is an example. So would be a law that imposed pre-conditions to the grantor dealing with the collateral. Accordingly, the purpose of s 112 is to confirm that limitations and restrictions imposed by law on a grantor's ability to deal with collateral apply also to the secured party in enforcement action under Chapter 4. But it does not detract from the effect of PPSA in treating ostensible ownership, through possession, as a sufficient right in collateral for a PPS lessee to deal with it, to the extent of creating in a third party a valid security interest which, on perfection, prevails over the lessor's unperfected interest. This construction is fortified by the circumstance that s 112 is expressed to apply only to enforcement under Chapter 4, and not otherwise, indicating that it is no more than a restriction on the remedies given by Chapter 4, rather than a general limitation on the rights of a party holding a perfected security interest. 79Accordingly, PPSA, s 112, properly construed in the context of the Act as a whole, does not detract from the result that Fast's priority entitles it to possession of the Caterpillars, either under the General Security Deed or pursuant to Chapter 4. 80However, even if on its proper construction s 112 means that in exercising rights and remedies under Chapter 4 Fast could deal with the Caterpillars only to the extent that Maiden was entitled to do so in accordance with the QES leases, that would not disentitle Fast from taking possession, as Fast is not seeking to exercise rights and remedies given it under Chapter 4, but those that it has under the General Security Deed. The PPSA does not effect the operation of the General Security Deed according to its terms (PPSA, s 18(1)), and does not derogate in any way from the rights and remedies that Fast has, apart from the PPSA, against Maiden in relation to a default by Maiden under the General Security Deed (s 110). Subsection 112(1) is only relevant to the exercise of rights or remedies "provided by this Chapter", and does not apply in respect of rights or remedies under other laws or arising under the terms of the security agreement. Thus s 112 does not constrain or limit any powers of enforcement of Fast that are conferred on it under the General Security Deed, as distinct from those given by Chapter 4 itself. The plaintiffs do not assert a statutory right to possession under Chapter 4, but seek to enforce their contractual rights under the General Security Deed. Accordingly, s 112 does not operate to restrict those rights. 81Moreover, s 116 provides that Chapter 4 does not apply in relation to property while a person is a controller of the property as a receiver, or receiver and manager (within the meaning of the (Cth) Corporations Act 2001). A note refers to Corporations Act, Part 5.2, "for the powers, functions and duties of receivers, and other controllers, of the property of corporations". The first plaintiffs are receivers and managers of the Caterpillars within the meaning of the Corporations Act, having been so appointed by Fast pursuant to the General Security Deed. In my view, this is not affected by Corporations Act, s 51F, which provides as follows: 51F Meaning of PPSA retention of title property Definition (1) Property is PPSA retention of title property (short for Personal Property Securities Act retention of title property) of a corporation if: (a) the property is personal property; and (b) the property is used or occupied by, or is in the possession of, the corporation; and (c) the corporation does not have title to the property; and (d) a PPSA security interest is attached to the property, within the meaning of the Personal Property Securities Act 2009; and (e) the corporation is the grantor in relation to the PPSA security interest, within the meaning of that Act. Examples: The following personal property is PPSA retention of title property if a PPSA security interest attaches to the property by virtue of the transaction concerned, and the grantor is a corporation: (a) property that is the subject of an agreement to sell subject to retention of title, or a hire purchase agreement, that secures the payment or performance of an obligation (see subsection 12(2) of the Personal Property Securities Act 2009); (b) property that is the subject of a lease, or a consignment agreement, that secures the payment or performance of an obligation (see subsection 12(2) of the Personal Property Securities Act 2009); (c) goods that are the subject of a commercial consignment (see subsection 12(3) of the Personal Property Securities Act 2009); (d) goods that are leased or bailed under a PPS lease (see subsection 12(3) of the Personal Property Securities Act 2009). References to property of a corporation (2) A reference in this Act to the property of a corporation does not include a reference to any PPSA retention of title property of the corporation, unless provided otherwise expressly or by necessary implication. Note: See also the definition of property in section 9. 82I would accept that the Caterpillars (other than the 320) are "PPSA retention of title property of Maiden" within that definition: they are personal property; they were used or in the possession of Maiden; Maiden did not have title to them; a PPSA security interest was attached to them (being QES's security interest); and Maiden was the grantor of that interest. However, it does not follow that they are not collateral of which the first plaintiffs are receivers: that depends on the effect of the General Security Deed and the instrument of appointment, which identify the Caterpillars as property the subject of the security and the appointment. Accordingly, s 112, which is within Chapter 4, does not apply in relation to the Caterpillars, as the first plaintiffs are controllers of them as receivers and managers.

Second and Sixth Defendant's claim 83One or other of Central and Mr Cullenane is currently in possession of the 320. Neither filed points of defence to the plaintiffs' points of claim. Mr Cullenane appeared unrepresented at the hearing and asserted that he had a lien on the 320, arising from an oral agreement with Maiden - through Mr McLean - that he would have security over Maiden's equipment - not specifically the 320 - for work done by him, said to be to the value of $60,000. Mr Cullenane submitted that in January 2012 he made arrangements with Mr McLean that he would do work or provide services for Mr McLean, secured over Maiden's equipment; and that he exercised his right to take the 320 as it was the only machine of value left on the job site that was not locked. 84There was no admissible evidence of these matters, and Mr McLean did not give evidence. The only evidence adduced by Mr Cullenane was a series of what appear to be orders by Maiden issued to Central for the hire of trucks and equipment, and invoices issued by Central to Maiden in respect of those orders, none of which relate to the 320. Thus the factual basis for Mr Cullenane's submissions was not established. 85However, assuming that Mr Cullenane claims to have a security interest of some kind in the 320, there is nothing to suggest that any such interest could be prevail against Fast. In particular, s 21(2) does not apply, because there is nothing to suggest that his interest has been registered, and while he has possession of the collateral it is apparently as a result of seizure; accordingly, such security as he might have has not been "perfected". It follows that any interest he might have would not be superior to the interest of Fast. Moreover, any such security interest being "unperfected", it too would have vested in Maiden upon the commencement of its administration and/or winding up, pursuant to PPSA, s 267.

Conclusion 86Maiden was the true owner of the 320, but QES was the true owner of the 330 and 930. 87Fast has a security interest in all three Caterpillars pursuant to the General Security Deed, which interest is attached to the Caterpillars, enforceable against third parties, and perfected by registration. 88Central and Mr Cullenane have not proved that they have any security interest in the 320, or any other interest beyond mere possession. In any event, it is not apparent how any interest they might have could be superior to that of Fast. 89QES has a security interest in the 330 and the 930 as a lessor under a PPS lease. QES has not registered its security interest on the PPS Register. While the interest was a transitional security interest, it was registrable on a transitional register, namely the NT Register, but not so registered prior to the registration commencement time, so the exception in s 322(3) of the PPSA applies, and the protection afforded to transitional security interests by sub-section 322(1) and (2) does not avail QES. The choice of law rules in s 238 are not relevant, nor applicable, but if applicable s 238(3) would not be attracted as it has not been shown to be characteristic of earth moving equipment that it will be moved from one jurisdiction to another. 90Accordingly, QES's security interest was unperfected. In those circumstances, s 55(3) applies, so that Fast's perfected security interest in the Caterpillars has priority over QES' unperfected security interest in them. 91Moreover, upon Maiden going into administration and/or liquidation, Maiden became entitled to the Caterpillars - subject to the perfected security interest of Fast - because QES's (and Central's or Mr Cullenane's, if any) unperfected security interest thereupon vested in Maiden. 92Section 112, properly construed in the context of the PPSA as a whole, does not affect the position that Fast's perfected security interest gives it a right to possession of the Caterpillars. But even if on its proper construction s 112 meant that in exercising rights and remedies under Chapter 4 Fast could deal with the Caterpillars only to the extent that Maiden was entitled to do so in conformity with the QES leases, that would not disentitle Fast from possession as: (a) Fast is not exercising rights and remedies under Chapter 4, but under the General Security Deed; and (b) In any event, Chapter 4 does not apply, because the receivers are controllers of the Caterpillars in the capacity of receivers and managers. 93It follows that, events of default under the General Security Deed having occurred, the Receivers and Fast have enforceable rights of possession of the Caterpillars against the defendants who presently possess them. 94The plaintiffs have sought only orders for possession, and have adduced no evidence of value that would enable any alternative judgment for the assessed value of the Caterpillars to be given, as contemplated by (NSW) Civil Procedure Act 2005, s 93. The defendants have not submitted that judgment for delivery up would be inappropriate. There is no claim for damages. 95Accordingly, the plaintiffs are entitled to orders to the following effect: (1)Give judgment that the first defendant deliver up to the first plaintiffs: (a)Caterpillar Wheel Loader VIN number CAT0930HLDHC00407; and (b)Caterpillar Excavator VIN number CAT0330DTFFK00181. (2)Give judgment that the second and sixth defendants deliver up to the first plaintiffs Caterpillar 320D Excavator, VIN number CAT0320DTDH01035. (3)Order that the first, second and sixth defendants pay the plaintiffs' costs. 96However, I will afford the parties an opportunity to address these orders, and for the plaintiffs to bring in short minutes, if they wish.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 27 June 2013