Forge Group Power Pty Limited V General Electric International Inc


Forge went into voluntary administration, then liquidation. Forge had leased turbines from GE. GE failed to make a PPS registration to perfect its interest as lessor. The Court held the lease was an unperfected security interest, and so vested in Forge on administration. Accordingly Forge acquired title to the turbines.

GE argued: (1) that it was not regularly engaged in the business of leasing goods, and so the lease was not a PPS lease, and (2) that the turbines were fixtures, outside the scope of the PPSA. The Court disagreed on both.

Leasing business: GE argued that only Australian leasing business should be considered, not worldwide. And that the time for testing business was when the lease attached or when Forge obtained possession of the turbines (which occurred after GE had sold much of its leasing business), not the earlier time when the lease was signed.

The Court disagreed on both. Worldwide business should be considered, not just Australian. And the test was when the lease was entered into, not some later time. But even if it had ruled otherwise, the Court considered the scope of GE’s activities in Australia was enough to constitute being regularly engaged in leasing business at all relevant times.

Fixtures: Forge argued that the PPSA definition of ‘fixtures’ aligned with the common law meaning, and that the turbines were not fixtures. GE argued that the PPSA meaning was broader.

The Court agreed with Forge. The common law meaning of ‘fixture’ applied. Applying the common law test – intent with which the item was put in place, having regard to degree of annexation and object of annexation – the turbines were not fixtures. They were designed to be moveable (even though demobilisation and relocation would take some days), and were intended to be relocated after the lease term was expired.

The decision was upheld on appeal: Power Rental Op Co Australia, LLC v Forge Group Power Pty Ltd [2017] NSWCA 8.

The summary of the pertinent points in this legal case update has been provided by Steve Pemberton, Lawyer and Consultant, as an extract from his digest of PPSA cases.