A failure to register your security interests on the Personal Property Securities Register (PPSR) could prove to be a costly mistake.
What is the PPSR?
The Personal Property Securities Act 2009 (Cth) (PPSA) introduced a single national personal properties security register (PPSR) in 2012 for all debtors, all security interests, all types of personal property.
What is a Security Interest?
A security interest is an interest in personal property that in substance secures payment or performance of an obligation. Examples of when a security interest may arise include: a charge or chattel mortgage, a conditional sales agreement (including an agreement to sell subject to retention of title), a hire purchase agreement, lease of goods, but also includes transactions that fit the definition in the PPSA of a PPS Lease (cover leases and bailments).
The PPSA has dramatically changed the law relating to security interests in personal property and the rights that attach to those interests. It introduced a new rule-based system to determine priorities between competing security interests. The rules of priority depend upon when a security interest attaches to personal property and whether and when the security interest is perfected. The rules of attachment and perfection are complicated, but for transactions such as sale of goods on a retention of title basis and a PPS Lease, the security interest attaches when the purchaser, lessee or bailee obtains possession of the goods and the security interest is perfected when a written agreement is signed or accepted and the interest is registered. Registration is effected by registering a financing statement on the PPSR.
Wake up call – Forge v GE
The recent case of Forge Group Power Pty Ltd (In Liquidation) (Receivers and Managers Appointed) v General Electric International Inc [2016] NSWSC (“Forge v GE”) is a wake up call for those who have still not come to grips with the new laws, and those who have become complacent about the repercussions of failing to identify Personal Property Interest and more importantly failing to perfect those interests by registration.
In Forge v GE, GE’s interest in turbines leased to Forge had not been registered and consequently pursuant to the PPSA upon Forge entering into voluntary administration the turbines vested in Forge. As a result Forge’s liquidators were able to sell the turbines and distribute the proceeds to Forge’s creditors.
For more information please contact our friendly and professional team at Peter Speakman & Co on 9822 8611.
