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The big test for the "new" Personal Property Security regime
PPSA Law | August 2014
A recent case in Victoria has highlighted the perils of failing to register a security interest in personal property on the Personal Property Securities Register (PPSR).
For those of you who are not aware, the PPSR is the system for registering an interest in your property when it is in the possession of another and that property is the subject of an outstanding obligation [e.g. payment] The PPSR and the new system replaces the old regime of fixed and floating charges under the Corporations Act 2001 (Cth), Bills of Sale or Retention of Title (ROT) clauses and is governed by its own legislation, namely the Personal Property Securities Act 2009 (Cth). Importantly, it is simply not enough to have an agreement in place between parties which indicates that one or the other has a registrable interest in property which is in the possession of the other, without registering your interest on the PPSR website.
In the recent case of the Forge Group, a mining services firm, was placed into receivership in February 2014. The US Company APR Energy had leased 4 large gas turbines to Forge but as at February 2014 APR had failed to register its security interest in the gas turbines. Under the legislation all assets not properly registered under the PPSA can vest with the Lessee, in this case Forge Group, and as such can be dealt with by the receiver or external administrator as part of its liquidation of the company. In what will be the biggest test of the new laws to date Forge Group are taking the matter to the Supreme Court of NSW in an attempt to gain control of the turbines as assets of the company for the purposes of dealing with its creditors.
The 2-step process
The "perfection" of a security interest in personal property comprises 2 steps.
- A written security agreement between the Grantor of the Security Interest (usually the person with the possession of the Goods) and the Grantee (usually the owner of the Goods).
- Registration of that Security Interest on the PPSR.
It is insufficient to simply obtain a signed agreement between the parties without anything more. If you fail to correctly register your interest or do not register it at all you could very well find yourself in the predicament that APR Energy has where the company who is in possession of your property goes into liquidation and the external administrator who is appointed is entitled to take possession of the items as part of the assets of the company to be made available to its creditors.
It is advisable that your assets should be sufficiently identified either by having clearly marked serial numbers or being marked with your company's name or logo. This is particularly important if the items in question are commonplace items such as timber planks, scaffolding or formwork to name a few examples. Identification of the Goods is required in your security agreement and in the registration process on the PPSR.
As business and commercial lawyers in in the Inner West, with experience in insolvency, Forum Law is able to assist you with the preparation of Personal Property Security Agreements. If you have any questions or are unsure of whether or not you should have a registered security interest over your personal property, please feel free to contact our office and speak to us.
