The Personal Property Securities Act 2009 (Cth) (the PPSA) commenced in 2011 and established the Personal Property Securities Register (the PPSR). In short, the PPSR proposes to provide a register of all security interests (an interest in personal property that, in substance, secures payment of a debt or other obligation) granted by a person (individual, or corporate entity) in personal property (other than real property, such as land). Where a mortgage is to land, a charge on the PPSR is to personal property. The PPSA has, at times, proven confusing, to both legal practitioners, and general users of the PPSR.
Some key definitions:
1. “Secured Party” is the person or entity whose interest is secured, similar to a mortgagee or lender;
2. “Grantor” is the person or entity whom the Secured Party is taking an interest in, similar to a mortgagor or borrower;
3. “Security Agreement” to be able to register on the PPSR, there must be an agreement in writing allowing the Secured Party to register an interest over the Grantor;
Priority
The PPSR works on a priority scheme – first in, best dressed. This is particularly important in relation to securing interests over a Grantor, where they shortly thereafter become bankrupt or get placed into liquidation. Section 588FL of the Corporations Act 2001 (Cth) (the Corporations Act) provides that in certain circumstances security interests under the PPSA which are not registered (on the PPSR) within a certain period of time will vest in the company. It is important to understand the consequences of registering and, on the contrary, failing to register an interest on the PPSR within certain timeframes, so as not to suffer potentially disastrous consequences under the Corporations Act.
To use the ABN or ACN?
When dealing with a company, business, or trust it is important to register the security interest against the proper identifier (ABN, ACN, ARBN). Generally, if the Grantor entered the agreement as a trust, then the security interest should be over the ABN, whilst if the Grantor entered the agreement as a company, then the security interest should be over the ACN. Registering over both the ACN and ABN could be problematic. Where the incorrect identifier is used, the security interest purported to be registered may likely and can render the registration defective. This is what happened in the case of OneSteel Manufacturing Pty Ltd (OneSteel) (Administrators Appointed) [2017] NSWSC 21. In this case, Alleasing Pty Ltd (Allleasing) had rented out equipment and machinery to OneSteel. Alleasing purpored to register charges over the ABN of OneSteel (as opposed to OneSteel’s ACN which would have been the proper identifier) (the Registrations). OneSteel subsequently went into voluntary administration. The Court held that the Registrations were defective. Alleasing lost its priority to recover the equipment and machinery that was rented from them, and in effect lost in excess of $20million.
If you are in the business of selling or leasing goods, come chat to the team at Rostron Carlyle Rojas Lawyers to help you through the complexities of the PPSA.
