The lessor or the liquidator – who owns leased equipment when a company goes into liquidation? Which case won?
Parties enter into written contract for rental and supply of turbines
In this case, a power company had been retained by a government body in Western Australia to design, construct, test and commission a temporary power station.
In March 2013, the power company entered into a written contract with a conglomerate to lease four mobile gas turbine generators to the power company for a fixed term. At the end of the lease the turbines were to be returned to the conglomerate.
The Personal Property Securities Register
By way of background, in 2012 the Commonwealth government introduced a new national online register for security interests, called the Personal Property Securities Register.
The register operates as a risk management tool for Australian consumers and businesses, so they can verify whether any security interests have been recorded against personal property, people or organisations that they are dealing with.
Vice versa, consumers and businesses can register priority claims against personal property they’ve supplied to others, such as equipment, stock or other goods and assets (excluding land, buildings, or other fixtures, which are not included in the scheme).
Importantly in this case, the existence or non-existence of a recorded security interest on the register can be relevant when assessing who has a better claim to ownership of particular property.
Power company enters voluntary administration, then placed in liquidation
In 2014, shortly after the turbines were installed, the power company appointed voluntary administrators and subsequently went into liquidation. At that time the conglomerate had not registered its interest in the turbines on the register.
It was up to the court to determine who had the better claim to ownership of the turbines – the power company or the conglomerate that had provided the turbines on lease.