The Commonwealth Personal Property Securities Act 2009 came into operation on 30 January 2012. It comprises 300 + pages (never mind the regulations) and is not light reading.
Can it be summarized in just two A4 pages? Let’s try.
The PPSR Act establishes something that might be crudely likened to a Torrens title registration scheme for tangible and intangible personal property. It is modeled on existing legislation in New Zealand and Saskatchewan.
“Personal property” does not mean domestic or consumer property (although that is within its scope too). “Personal” means personal as opposed to real property. Most businesses will be affected (For example who has title to the hire-purchased photocopier in a solicitor’s office if the soli goes broke? What if the soli stays solvent and the photocopier supplier goes bust?)
The registration system is national, internet-based, administered by the Insolvency & Trustee Service of Australia (ITSA) and accessible 24/7.
In insolvency situations the register will generally determine the title of the liquidator / trustee in bankruptcy to personal property in the possession of the insolvent company / individual that might otherwise be claimed by a financier, unpaid supplier etc.
Example:
Say ABC Company goes into liquidation while in possession of:
- vehicles it has leased from X bank;
- widgets from Y supplier which have not yet been paid for and are subject to retention of title clauses; and
- an entire business ABC purchased from Z on vendor terms and on which there are still instalments outstanding.
In this example X, Y and Z would formerly probably have had good title as against the liquidator to their particular property in ABC Company’s possession. But no longer. Under the new regime the liquidator will likely be entitled to seize and sell each of these assets as part of ABC Company’s insolvent estate unless the rival claimants have registered a security interest in them.
Registration of a given security interest will cost $5 a time.
Failure to make that $5 investment might cost unlucky punters literally millions – see Waller v New Zealand Bloodstock Limited [2005] NZCA 254; [2006] 3 NZLR 629. In that case the owners of a $2 million racehorse leased it to a stud. The stud’s financier repossessed the stud (and with it, the horse). The horse’s owners had not registered their security interest in their horse under New Zealand’s equivalent of the Australian legislation. They lost their $2 million chaff-burner to the liquidator as a result.
Now consider the lawyers –
- Clients’ standard terms of trade agreements might require revision. Previously effective retention of title clauses in supply agreements might fail under the new regime unless supported by registration of the resulting security interest;
- Clients who are not advised of the new regime by their lawyers are likely to be gravely miffed if they lose their assets to their customer’s liquidators as a consequence;
- Professional negligence claims against lawyers will inevitably result – see for example K-Auto Trading NZ v McGurie [2008] NZHC 94
After a remarkably long gestation the Personal Property Security Act 2009 is now operational law. The new regime includes a two year introductory transition period (but why defer getting things right until 2014?)
Paul Duggan 