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To recap: the PPSR was created by the Personal Property Securities Act 2009 (Cth) [“the Act”]. The Act governs security interests in personal property (such as consumer goods, raw materials, book debts, motor vehicles and intellectual property), which arise in a wide range of commercial and other arrangements. Where previously possession or control of personal property was said to be “nine tenths of the law”, under the Act possession of personal property is effectively ten tenths of the law. Where an owner of personal property parts with possession of that property to a third party for whatever reason – whether pursuant to a consignment, retention of title arrangement, as collateral for a loan, or in countless other such situations – unless that “owner” has perfected their security interest in the personal property by registering that interest on the PPSR, their “ownership” of the property is “trumped” by the possession of the property by that third party. A practical effect is that, if the third party goes bankrupt or enters into liquidation, the trustee or liquidator of that third party is able to seize, sell or otherwise deal with the personal property without recourse to the putative “owner” of that property.
At the logistical level, migrating registered personal property security interests that existed prior to 30 January 2012 onto the new PPS Register [“the PPSR”] threw up many challenges. Several thousand company charges were not migrated to the PPSR from the former ASIC register of charges, and tens of thousands of other security interests registered on dozens of former state-based registers were improperly or inaccurately migrated across to the PPSR (it should be noted that previously registered security interests, such as company charges, existing as at 30 January 2012 are deemed to be covered by the protections afforded by the PPSR for a period of 2 years following 30 January 2012).
But perhaps the biggest cause for concern has been a general lack of awareness of the operation of the PPSR, the kinds of arrangements that necessitate registration of a security interest, and even a lack of awareness of the existence of the register itself. Perhaps the major cause of such confusion has been the Act’s extension of the kinds of situations in which a “security interest” over personal property will arise to arrangements that did not previously require the registration of a security interest – such as “retention of title” (Romalpa) arrangements, chattel leases, and consignments of goods.
For the owners of dozens of rare guitars (valued at several hundred of thousand dollars) held on consignment by Jacksons Rare Guitars, Sydney, a lack of knowledge of the existence or operation of the PPSR was very costly indeed. When Jacksons entered into liquidation, the liquidator was able to seize and sell all guitars held on consignment in respect of which no security interest had been registered on the PPSR by the “owner”. That is, owners were not able to recover possession of their own guitars.
The Hastie Group case (Carson, in the matter of Hastie Group Limited (No 3) ) is also potentially cause for concern for owners of personal property. Here, while security interests had been registered on the PPSR by creditors in respect of personal property in the possession or control of Hastie, the vagueness of many of the registrations (which prevented Hastie’s administrators from identifying the property to which they related) led the Court to order that the administrators were able to retain the proceeds of sale of all unclaimed personal property in Hastie’s possession. That is, the administrators could sell personal property that could not be ascribed to a particular creditor or owner, and could distribute the proceeds of sale as part of the general pool of monies available to creditors.