A party can take steps to protect their personal property which is in the possession of a third party.  There are critical elements to be satisfied and timeframes to be met when a security interest is registered on the Personal Property Securities Register (PPSR).  Careful attention must be adopted to ensure that the relevant provisions of the Personal Property Securities Act 2009 (Cth) (PPSA) are applied and understood, so that an entity obtains the relevant priority, and its security interest can be enforced in the event of default.  Failure to properly consider all relevant issues and address the relevant requirements to ensure that the registration of the security interest on the PPSR is valid and has a proper basis could be fundamental – one small mistake could mean that the party loses its ability to enforce a security interest and recover its goods, particularly in circumstances where a company goes into liquidation.  However, missing the crucial timeframes for registration on the PPSR may occur by inadvertence, mistake or simply being unaware of the requirement to do so – in those circumstances, an application may be made seeking orders under section 588M of the Corporations Act 2001 (Cth) (the Corporations Act), extending the time for the registration of the security interest.

In the decision of Re Dairy Soils Pty Ltd (in liq) [2025] VSC 540 (2 September 2025), Justice Waller determined whether there should be an extension of time for registration of the security interest.

The brief facts of the case can be summarised as follows:

• On 1 July 2021, Agfor Rural Pty Ltd (Agfor) entered into a lease agreement with the defendant, Dairy Soils Pty Ltd (Dairy Soils) regarding livestock and machinery valued at $1.4 million;
• The interests of Agfor in the livestock and machinery were purchase money security interests (PMSIs) pursuant to the PPSA. To preserve its priority, Agfor was required to register those interests on the PPSR within 20 business days of their creation;
• Agfor failed to register the interests on the PPSR until 23 January 2025, and the registration did not indicate that the interests were PMSIs. Agfor subsequently correctly registered the livestock as PMSIs on 13 March 2025 and the machinery on 17 March 2025;
• On 18 March 2025, Agfor issued an application under section 588FM of the Corporations Act for the Court to fix a later time by which the security interests must be registered on the PPSR;
• On 21 March 2025, Liquidators were appointed to Dairy Soils which had the effect of vesting Agfor’s interests in the livestock and machinery in Dairy Soils. By section 588FL, if a security interest is not registered within 20 days of the agreement, the secured creditor risks losing its security if the company goes into liquidation within six months of the actual registration date.  The appointment of liquidators on 21 March 2025 had crystallised the rights of unsecured creditors in the livestock and machinery;
• Where an application is made under section 588FM to extend the time for registration, only one of the three grounds needs to be satisfied to enliven the jurisdiction:

(2) …the Court may make the order sought if it is satisfied that:

(a) the failure to register the collateral earlier:

(i) was accidental or due to inadvertence or some other sufficient cause;

     or

(ii) is not of such a nature as to prejudice the position of creditors or shareholders; or

(b) on other grounds, it is just and equitable to grant relief.

• Agfor submitted that its failure to register its security interests was due to inadvertence because it did not understand its obligation or its ability to register its interests in the livestock and machinery on the PPSR and was not advised by its solicitors to do so;
• However, the delay in this case was substantial and materially distinguishable from the cases where relief had been granted — a delay of approximately three years and six months was unacceptable;
• The establishment of jurisdiction in these applications does not guarantee the Court’s exercise of discretion – this must be undertaken having regard to all relevant circumstances at the time of the hearing;
• The meaning of ‘inadvertence’ was explained by Brereton J in Re Appleyard Capital Pty Ltd; 123 Sweden AB v Appleyard Capital Pty Ltd (2014) 101 ACSR 629 (and has been adopted in subsequent cases):

For the purpose of s 588FM(2)(a)(i), “inadvertence” includes failure to advert to or understand the requirement for registration within the specified period, and innocent error in the sense of failure to register through ignorance of the legal requirement to do so, or of the consequences of not doing so…

• The ‘inadvertence’ ground may also be satisfied where a party operates under a mistake as to the consequences of failing to register a security interest. The concept of inadvertence also includes human error or oversight or not being properly attentive;
• The Liquidator’s evidence established that the making of the orders would cause substantial prejudice to unsecured creditors. The Liquidator deposed that if the orders were not made, there would be sufficient assets to pay ordinary unsecured creditors a dividend. A report exhibited to the Liquidator’s affidavit estimated a return to unsecured creditors of approximately 26 cents in the dollar. If the orders were made, there would be insufficient assets for any return to unsecured creditors;
• The secured assets had substantial value — livestock worth $1.247 million and machinery worth $178,600. The removal of these assets from the pool available to unsecured creditors represented a significant detriment, affecting not only ordinary unsecured creditors but also employee entitlements;
• Therefore, the Judge refused to make an order fixing a later time for registration of the security interest for the purposes of s 588FL(2)(b) of the Corporations Act.

Therefore, parties must be mindful of the deadlines for registration of security interests and if they have missed crucial deadlines, whether steps are required to be taken to obtain orders fixing a later time for registration.  Liquidators will need to consider the timing of registrations on the PPSR and whether there may be grounds to seek that they be removed.  There are a range of complex issues which are required to be considered in these applications for orders under section 588FM of the Corporations Act.  Where an application is made by the creditor under section 588FM, the Liquidator may need to oppose and put together substantial affidavit material to demonstrate the detriment to unsecured creditors if the orders are made and the creditor is entitled to rely on its registration – this may diminish the pool significantly and 26 cents in the dollar v nil is a significant impact of the creditor’s failure to register on time.

Catherine and her team have significant experience in this area regarding security interests, the PPSA, and what may be involved when liquidation occurs and can provide necessary advice and assistance where required.