What is the Personal Property Securities Act and what does it do?
The Personal Property Securities Act 2009 (Cth) (‘PPS Act’) came into operation on 30 January 2012.
The PPS Act created a national register, the Personal Property Securities Register (‘PPS Register’), that allows you to register security interests in personal property.
What is personal property and what is a security interest?
‘Personal property’ includes property such as goods, vehicles and intellectual property.
A ‘security interest’ is an interest in personal property that secures the performance of an obligation.
A common example of a security interest is where a person has borrowed money from a bank to buy a car and that loan is secured by a car.
If you lease or supply goods to customers, then you may have a security interest that can be registered on the PPS Register.
A security interest can include the situation where a company supplies goods or leases goods to customers on the basis that the supplier will own the goods until the goods are paid for (commonly known as retention of title).
Why should I bother registering my interest?
The point of registration is to make sure that you have priority over other unsecured creditors, to recover that property if the company you are leasing or supplying goods to, goes into liquidation.
If you register your interest on the PPS Register, you will have a greater chance of being able to recover any debt you are owed for those goods.
The grace period will come to an end on 31 January 2014.
There is currently a transitional ‘grace’ period in place so that people who have registered their security interests under previous registers that existed before the PPS Register came into effect, have time to register their interest on the PPS Register. However, this grace period will end on 31 January 2014.
Therefore if you have a security interest, you need to register that interest on the PPS Register before 31 January 2014, or risk losing priority to another creditor, or worse, you may lose your interest in that property altogether.
This can mean that if you don’t register your security interest on the PPS Register in time, these goods may be lost to your customers’ creditors, even though you own those goods.
Case Example: Maiden Civil v Queensland Excavation Services
A recent case, Maiden Civil v Queensland Excavation Services is an example of where a company that leased vehicles lost ownership of his property by failing to register its security interest properly.
In Maiden Civil v Queensland Excavation Services, Queensland Excavation Services (‘QES’) purchased and leased caterpillar civil construction vehicles (“the Caterpillars”) to Maiden Civil. Maiden Civil obtained finance through Fast Financial Solutions Pty Ltd (“Fast Financial”) to finance the leases from QES. As part of the terms of finance, Maiden Civil granted security over all of Maiden Civil’s property, including the Caterpillars through a security agreement.
Fast Financial appointed receivers and managers under the security agreement with Maiden Civil and Maiden Civil went into liquidation.
A dispute came about as to who had priority with respect to the Caterpillars: QES, who were the owners of the Caterpillars, or Fast Financial, who had an interest in the Caterpillars from the security agreement with Maiden Civil.
Fast Financial registered its security interest in the Caterpillars on the PPS Register, however, QES did not register its security interest in the Caterpillars on a preceding register, prior to the PPS Register coming into operation and QES did not register its interest on the PPS Register.
The court found that Fast Financial had priority over QES after it had registered its interest on the PPS Register despite the fact that QES owned the Caterpillars, because QES could have registered its interest on the PPS Register, but did not do so.
This case highlights the risks of not understanding the Personal Property Securities regime, the importance of registration and the risk of losing ownership of your property if you don’t register your interest on the PPS Register.
How the changes will affect you or your business
This leaves businesses that supply or lease equipment in a vulnerable position if they do not register their interest on the PPS Register in time.
The PPS Act will particularly affect companies which lease or hire out equipment or supply goods or services to other businesses.
If a customer or another company that you supply to, lease to or contract with goes into liquidation or voluntary administration, then the liquidator may take your onsite assets, which may be anything, including trucks, scaffolding and demountable buildings and those assets will become the property of the company in liquidation.
All businesses should therefore take a moment to look at whether the PPS Act may affect them before the grace period runs out, because if you don’t register your security interests on the PPS Register this could have dire consequences for your business. Also, it may not be obvious whether you have a security interest in property.
We can register your security interests on the PPS Register for you. We can also provide you with advice on how the PPS Act may affect your business, whether you have a security interest in property that can be registered and which assets should be registered.
We can also provide you with advice on any security agreement or contracts you have entered into; review your current terms and conditions to ensure they comply with the PPS Act and we can draft clauses that will protect your interests in the future.
Liability limited by a scheme approved under Professional Standards Legislation.