Forge was a company in the business of building power stations and had contracted with the Western Australian government to build one at Port Hedland. Forge leased four turbine generators from General Electric and put them in the power station.
Shortly after the turbines were installed, Forge went broke and its liquidator took the generators to sell. General Electric, as the owner, appealed to the court. Forge’s liquidator argued that the lease fell within the auspices of the Personal Property Securities Act (PPSA) which required such leases to be registered. As the lease was not registered, upon liquidation the PPSA provides that title to the leased goods passed to the liquidator.
Of course, General Electric didn’t want to give up the turbines and argued that the PPSA didn’t apply. One of the arguments was that the generators were fixed to the land, rather than being a good detachable from the land (which would have excluded the arrangement from the PPSA).
On that issue the court looked at the usual matters that separate a good (an item separate to land) from a fixture (an item that becomes part of the land, like a house). The court looked at the extent to which the generators were bolted down, plumbed in and the purpose for which they were placed on the land. The court concluded that they were goods rather than fixtures and accordingly that the PPSA applied. General Electric lost the generators.
The case highlights the problems that arise in leasing and financing goods, particularly goods that may become fixtures. Semi fixed plant like stock yards, pumps, fuel tanks, fit-out items, storage containers, and large stationary machinery are pressing examples.
If there is any doubt as to whether a particular piece of plant is a fixture, the secured party should register a PPSA interest and also have the mortgagee of the land disclaim any interest in the plant.
If you need help with any commercial leasing or financing arrangements, contact Everingham Solomons Solicitors because Helping You is Our Business.
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