July 23, 2014
Mr. Bruce Whittaker
PPSA Review Secretariat
Commercial and Administrative Law Branch
Attorney-General’s Department
3–5 National Circuit
BARTON ACT 2600
Australia
Re:The Unfortunate Effects of the Personal Property Securities Act
Dear Mr. Whittaker:
As a former member of the US Congress from Florida, I write concerning a serious problem being suffered in Australia by a reputable Florida company, APR Energy, LLC (“APR”).
I have received a copy of the Bulletin issued by the Honorable George Brandis QC, Attorney-General for Australia, regarding a review of the Personal Property Securities Act 2009 (the “PPS Act” or the “Act”) being undertaken by the Government of Australia.
APR is currently being caused severe economic hardship as a result of an illegal seizure of its property by a major Australian financial institution and the liquidators for an Australian power generation company. This illegal seizure arose in connection with a dispute between APR and Forge Group Power Pty Limited (“Forge”), an Australian power company, Australia and New Zealand Banking Group Ltd. (“ANZ Bank”), the third largest financial institution in Australia, and the Government of Australia, through its agency with the local, state-owned public utility in Western Australia, Horizon Power (“Horizon”). At this time, four large General Electric TM2500+ Gas Turbines owned by APR (the “Gas Turbines”) are located on Horizon’s property where they were delivered to generate electricity for the people of Australia. At the heart of the dispute is a most unfortunate claim under color of the PPS Act by Forge and ANZ Bank to possess and take title to APR’s Gas Turbines, valued at US$64 million, without due process of law and without compensation of any kind to APR.
The Gas Turbines were installed pursuant to an agreement between APR and Forge to lease the Turbines for the generation of power (the “Lease Agreement”) for delivery to Horizon. The Lease Agreement was terminated by APR when Forge commenced voluntary liquidation proceedings in February of 2014. Forge’s largest creditor, ANZ Bank, through its appointed managers and receivers, is seeking to illegally convert APR’s Gas Turbines as payment for a substantial debt owed by Forge to ANZ Bank.
It is important that the Lease Agreement expressly provides that title to the Gas Turbines would remain with APR and that the Gas Turbines were leased to Forge – never sold. Forge agreed to this explicitly when it signed the Lease Agreement for the Gas Turbines. Indeed, Forge agreed that it would not allow any security interest to be recorded against APR’s Gas Turbines.
Forge breached that provision in the summer of 2013 and granted a security interest to ANZ Bank without notice to APR. The Gas Turbines have been idle for over five months now, resulting in a loss of millions of dollars of revenue to APR. Since February of 2014, APR has been attempting to resolve the dispute amicably and assume possession of its Gas Turbines to no avail.
The United States is a key investor in Australia and one of its largest trading partners. Australia’s reputation of having a stable economic system and strong rule of law has unquestionably made it an attractive destination for American investors.
I am concerned that the PPS Act has the harsh and draconian effect of depriving legitimate owners of equipment and assets (including US companies) of title to their property without due process of law or just compensation. The Act is being improperly utilized by Australian financial institutions to illegally seize American-owned property. Absent repeal or revision of the PPS Act to provide for adequate safeguards for foreign investors, the PPS Act threatens Australia’s reputation of offering investors a safe climate for investment and having a sound and fair system of justice that abides by the rule of law. This is contrary to the spirit of the US-Australia Free Trade Agreement and the strong economic ties that exist between our two countries.
I hope that in preparing your interim report to Australia’s Attorney General regarding the implementation of the PPS Act you please consider the extremely unfair and unjust treatment APR has received, and recommend a repeal of the PPS Act or, at a minimum, revision of the Act to protect US companies’ ownership interest in their property.
Thank you for your kind consideration.
Sincerely,
Lincoln Diaz-Balart