As you may be aware the Personal Properties Securities Act (Commonwealth) 2009 (“PPSA”) was implemented in early 2012. It allows creditors, lenders or lessors, (the secured party) to secure title to, or an interest in, personal property in exchange for payment of a debt or an obligation by the borrower, debtor, lessee, (grantor) through a transaction relating to personal property.
For example, a financier can secure title to property under a chattel mortgage on the Personal Property Security Register (“PPS Register”).
Or, an investor contemplating the purchase of a business can search the PPS Register for a secured interest over the plant and equipment of the business.
The PPSA in turn affects creditors competing for title to goods and the determination of which creditor succeeds in priority to those goods.
Therefore, registering and securing that interest is very important.
What can be registered under the PPSA?
A security interest can be asserted over, but not limited to:
- A fixed charge;
- A floating charge
- A chattel mortgage;
- A conditional sale agreement (including a sale subject to retention of title);
- A hire purchase agreement
- A consignment, commercial or other,
- A lease or bailment of goods
- A transfer of title.
What cannot be registered?
The PPSA does not apply to:
- Secured land;
- Secured water rights;
- Workers liens, warehouse liens and distrained goods:
The act of registering your security interest on the PPSA register is defined under the PPSA as “perfecting” your interest. This is particularly so with a “collateral” interest, being the actual personal property secured.
Who should be using the PPSA register?
Those who should be registering personal property on the PPSA register, are, but not limited to:
- Trade suppliers of goods on credit, retention of title or on consignment;
- Finance companies.
- Businesses hiring or leasing out equipment.
The PPSA is also useful to consumers buying second hand goods, who can search the register for secured interests over goods to be purchased. Goods include motor vehicles, trailers, boats, artwork, intellectual property, livestock, crops, furniture, electrical goods and machinery.
It is particularly important to ensure that you register the correct details such as VIN numbers of vehicles, as any defect in the description will result in the registration being “unperfected” and your interest in the property will not be secured. The consequence is that someone else could take possession of that property and sell it free of any security.
On 1 July 2014, the Personal Property Securities Amendment (Motor Vehicles) Regulation 2014 came into operation which amended the definition of a “motor vehicle” under PPSA to be:
- Capable of a speed of at least 10km per hour; and
- Containing engine(s) with a total power greater than 200W; and
- Has a VIN, manufacturer’s number, or chassis number.
This change narrows the definition of a motor vehicle, such as self-propelled vehicles to have all of the above. By including serial numbered vehicles in the definition, the Government has tried to reduce compliance costs for businesses, by allowing them to rely on a single general registration over vehicles relating to the same party granting the security, rather than individual registrations against each separate item with a serial number.
Interesting Western Australian case involving Receivers asserting an interest over a company’s unregistered interest.
WHITE-v- SPIERS EARTHWORKS PTY LTD  WASC 139 (16 April 2014)
In 2010, Spiers Earthworks Pty Ltd (“Spiers”) sold their earthmoving business to BEM Equipment Pty Ltd (“the Company”). As part of the sale, the Company entered into two agreements entitled Business Purchase Agreement and Plant Hire Agreement (Hire Agreement). Under the Hire Agreement Spiers agreed to hire to the Company, vehicles and other equipment used in the business (Hire Assets).
Spiers did not register the security interest over the assets hired by the Company.
In February 2011 National Australia Bank Ltd (NAB) took from the Company a fixed and floating charge as security for the payment of the amount owing to the bank. On 24 July 2013 the Company appointed administrators pursuant to Corporations Act 2001.
On 31 July 2013 NAB appointed White as receivers and managers of the Company pursuant to the charge (“the Receivers”). The Receivers asserted that by operation of s 267 of the PPSA the interest in the Hire Assets vested in the Company as the security interest was unperfected at the time of appointment of the administrators.
Spiers gave notice on 31 July 2013 to the Company and the Receivers that the Company’s right to the Hire Assets had terminated asserting that the appointment of the Receivers resulted in an event of default of the Hire Agreement.
After considering the facts and the operation of the PPSA, His Honour Judge Le Miere agreed with the Receivers and decided that the Company’s interests in the Hire Assets vested in the Company immediately before the appointment of the administrators on 24 July 2013. Spiers’ interest in the Hire Assets was “unperfected”, therefore Spiers was not entitled to possession of the Hired Assets.
What should you note from this?
The registration of a security interest and the timing of registration on the PPSA Register is paramount.
Please contact Anne Najjar by phone on 8360 8310 or email firstname.lastname@example.org for more information or if you require assistance with this process, including drafting your business agreements to protect your security interests.