Personal Property Securities Act

Like a Cinderella story, the stroke of midnight on 29 January 2014 marks the end of a special time under the Commonwealth’s Personal Property Securities Act 2009 (“PPSA”).

From 30 January 2014 the PPSA transitional rules will no longer apply, and any unperfected transitional security interests will lose their priority as against other, later perfected security interests in the same collateral.

What happens on 1 February 2014?

For two years, under the PPSA’s transitional rules, security interests created before 30 January 2012 (“transitional security interests”) were temporarily “perfected”, meaning that a transitional security interest retained the same priority it had at 30 January 2012 against other security interests in the same asset perfected after that date.

While some transitional security interests, such as fixed and floating charges registered with the Australian Securities and Investments Commission, were automatically perfected by the Government transferring them to the Personal Property Securities Register (“PPSR”), other non-publically registered security interests were not automatically perfected, such as retention of title arrangements, long-term machinery leases and step-in rights. It was these typically “private” arrangements that the transitional rules aimed to preserve.

If your transitional security interest is not perfected by midnight on 29 January 2014 then other perfected security interests will take priority over your claim. Importantly, your unperfected security interest will not help you in the event the grantor is wound up or placed under external control as you will be relegated to the same position as an unsecured creditor.

What should you do before “pumpkin hour” on 29 January 2014?

The simplest way to perfect a security interest is to register it on the PPSR. Use the power of the PPSA then to protect your financial position and:

  • Ensure all your transitional security interests are registered on the PPSR before midnight on 29 January 2014.
  • Search the PPSR to ensure that all your security interests you think are already registered are actually registered.
  • Review your existing known security arrangements to ensure you have identified all your security interests, and then ensure those interests are registered.
  • Consider whether additional registrations should be made, or existing registrations be amended. For example, if your security interest relates to a serial-numbered vehicle, ensure that your registration refers to the correct serial number and the vehicle described is the one you understand you have an interest in – some vehicles have been found to have duplicate serial numbers.
  • Review your other contractual and trading arrangements with customers to ensure those arrangements are properly documented and any previously unidentified security interests arising are registered, for example:
    • long-term property development contracts with step-in rights; retention of title arrangements;
      consignment arrangements;
    • long-term storage arrangements;
    • long-term machinery or equipment hire.

If you are the grantor of a security interest, it is also worthwhile reviewing the PPSR to understand what security interests have been registered against you and whether those registrations are proper. You have rights against a supplier if you believe there has been an incorrect registration made against you.

For a further helpful list of key terms in the PPSA, and a summary of the priority rules for security interests, contact us.

Who can help?

The team at Meyer Vandenberg has all sorts of advice about the PPSA and strategies to best protect you against a trading partner’s insolvency. Call us for tailored solution to meet your needs.

Mark Flint — Partner — Dispute Resolution Team
(02) 6279 4428
mark.flint@meyervandenberg.com.au

Bernice Ellis — Senior Associate — Dispute Resolution Team
(02) 6279 4385
bernice.ellis@meyervandenberg.com.au

John Morrissey — Associate — Property Commercial Finance Team
(02) 6279 4439
john.morrissey@meyervandenberg.com.au

Jim Hartley — Lawyer — Dispute Resolution Team
(02) 6279 4391
jim.hartley@meyervandenberg.com.au