Greater Clarification for Fixtures under the PPSA

No sooner has the first anniversary passed of the court's judgment in Forge Group Power Pty Limited (in liquidation (receivers and managers appointed) v General Electric International Inc & Ors (2016) than a judgment has been handed down on the first significant appeal against that decision.

I won't go into any great detail concerning the original judgment (particularly because I've already written on the subject here) but, suffice to say, it involved a lot of money ($50 million) and whether or not the leased property in question should be treated as a fixture.

The latest judgment in Power Rental Op Co Australia, LLC v Forge Group Power Pty Ltd (in liquidation) (receivers and managers appointed) [2017] saw the Court of Appeal being asked to reconsider whether the turbines in the original case really were the non-fixtures the court found them to be.

The appellants' argument was (largely) that the PPSA did not use common law concepts regarding fixtures but instead created its own definition (effectively, property affixed to land) and because the turbines in question were substantially 'bolted' to the ground, they had become fixtures and thus fell outside the auspices of the PPSA.

The argument, however, appeared to carry little weight with the Court of Appeal which, in dismissing the appellants' case, held that:

The definition of ‘fixtures’ in the PPSA was intended to import the common law notions of affixation that ‘a fixture is an item of tangible personal property that is annexed to real property in such as way as to become a part of the real property and that whether an item is a fixture “depends on the degree and purpose of annexation of the item as well as the rebuttable presumption that what is fixed to land is a fixture and that which is not remains a chattel”’ is the relevant test (not a bespoke test such as a fixture is a ‘non-trivial attachment’),

In short, merely being attached to land (or a building built on the land) doesn't necessarily render an item of property a fixture - it actually has to become part of the fabric of the real estate in question in order to be considered a fixture.

Although much will depend upon the purpose the property is intended to serve by being attached to a building this should still be something of an alert to suppliers who might otherwise have been too quick to assume the PPSA would not apply to goods they were supplying.