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AICM further submissions to the Federal Attorney General’s department for the purposes of the interim report being prepared as part of

the 2014 review of the Personal Property Securities Act (2009) (PPSA) and its regulations (Reg) (the Review) as affecting Small Businesses (SB’s) (interim report) and the other portions of the Review

Summary AICM previously provided submissions in June 2014 to the Federal Attorney General’s department in relation to the interim report and other portions of the Review (initial submissions). AICM is extremely appreciative and grateful for the time and opportunity given to discuss some of these issues with Mr Bruce Whittaker, and looks forward to discussing these and other issues further.

In the initial submissions, AICM consider that in addition to suitable legislative changes and clarity which can be made to the PPSA, substantial information and training should be made available urgently to small and medium businesses on PPSA, and the PPS register functionality made more user friendly (as has occurred in other jurisdictions, with examples).

In these below submissions (further submissions) AICM have highlighted their additional comments in yellow and in some cases how AICM’s initial submissions and some of the other respondents compare (such as whether AICM agree with them or if not, why not agreed with). This is not intended as exhaustive table of comparisons but only certain issues due to time constraints and that further discussions are likely to occur with the Attorney General’s Department.

Any queries should be directed to Peter Mills ([email protected]; phone (d) (07) 3338 7921), who is the principle contact for these submissions, a member of AICM, the AICM (Queensland Division) councillor for Law & Legislation and Special Counsel with Thomson Geer Lawyers.

Areas for Comment For clarity, and as done with the initial submissions, the further submissions are provided in the attached schedule 2 and is broken into 3 areas:

1. Legislative change – specific provisions of the PPSA and Reg might be improved by changes to the laws, or by rulings being made by the Registrar under the PPSA. Details of sections of the laws, any relevant court decisions (including foreign cases and laws), and any other material (with hyperlinks to each) supporting a submission are included.

2. Better PPS register website functionality – on the basis of the above submission, some suggested practical changes to the website are made eg electronic templates able to be created by users, as occurs in other PPS registries.

3. Better information and education for SB’s – on the basis of the above submission, some suggestions as to PPS education are provided. It is noted that AICM has provided and continues to provide training to SME’s and large organisations staff on the process and requirements of the PPS registry. AICM would be pleased to further discuss the opportunities which might be available as a training organisation for the PPS education process. This appears to be the most urgent of the issues for small business.

Purpose of the further submissions To provide a chain of commentary as to the Review, the initial submissions, AICM’s view as to various other submissions by other respondents, and to consolidate these into the further submissions. This is directed at the key issues, as AICM see them, that compliance by SB’s with the regime under the PPSA is important, as with their being secured under the PPS against the end customer:

mailto:[email protected]


• the original supplier will have greater ability to recover against the original collateral and/ or to recover for proceeds under PMSI’s;

• the SB will have greater ability to recover the collateral including proceeds;

• the SB will not be exposed to an unexpected loss of assets (for not being properly perfected) or for unfair preferences claimed by a liquidator. The age old adage of ‘ I will pay when I get paid’ or ‘we have had to pay a liquidator back’ should be reduced.


Schedule 1 – Table 1:Terms of Reference

I, George Brandis QC, Attorney-General, request Mr Bruce Whitaker to undertake a review of the operation of the Personal Property Securities Act 2009 (PPS Act).

The review should consider:

a) the effects of the reforms introduced by the PPS Act on:

i) Australian businesses, particularly small business

ii) Australian consumers

iii) the market for business finance in Australia, and

iv) the market for consumer finance in Australia

b) the level of awareness and understanding of the PPS Act at all levels of business, particularly small business

c) the incidence and, where applicable, causes of non-compliance with the requirements of the PPS Act particularly among small businesses

d) opportunities for minimising regulatory and administrative burdens, including costs, on businesses, particularly small business, and consumers

e) opportunities for further efficiencies in the PPS Act regime including (but not limited to) simplification of the Personal Property Securities Register and its use

f) the scope and definitions of personal property covered by the PPS Act

g) the desirability of specifying thresholds for the operation of the PPS Act regime in respect of particular types of personal property

h) the interaction of the PPS Act with other legislation including the Corporations Act 2001, and

i) any other relevant matters.

The review must include consultation with relevant stakeholders.

An interim report is to be provided jointly to me and the Hon Josh Frydenberg MP, Parliamentary Secretary to the Prime Minister, by 31 July 2014 on the impact of the PPS Act on small businesses with recommendations on any priority actions (including legislative) that should be considered by Government in respect of issues raised in the review that concern small business stakeholders.

The final report on the review, which should include recommendations on how to improve the PPS Act, including simplification of the Act where appropriate, must be provided jointly to me and the Hon Josh Frydenberg MP, Parliamentary Secretary to the Prime Minister by 30 January 2015.

George Brandis QC Attorney-General

[Authority: Section 343 of the Personal Property Securities Act 2009]


Schedule 1 – Table 2: Key of other respondents submissions

Number as per AG list

Respondent

1 Mr Gary Kerr – Kerr’s Hire 2 Mr Ken Matthews – Manlift Hire 3 EDX Australia 4 Russell Kennedy Lawyers 5 Mr Gary Parker – Amglad Enterprises 6 Dr Craig Latham – Australian Small Business Commissioner 7 Electaserv Trading 8 Thoroughbred Breeders Australia 9 Mr Craig Wappett – Johnson Winter & Slattery Lawyers 10 Chalkwest 11 Elphinstone Engineering 12 Combined Small Business Alliance of Western Australia No number “13”

14 Australian Pipeline Industry Association 15 Hire and Rental Industry Association 16 Master Builders Association 17 Australian Bankers Association 18 Law Council of Australia 19 Australian Institute of Credit Management No number “20”

21 Australian Livestock & Property Agents Association 22 Queensland Law Society 23 New South Wales Young Lawyers 24 Restaurant & Catering Industry Association 25 Civil Contractors Federation 26 Commercial Asset Finance Brokers Association of Australia 27 New South Wales Business Chamber [DOC 463KB] 28 Business South Australia [PDF 87KB] 29 Allens, Ashurst, Herbert Smith Freehills, King & Wood Mallesons, and Norton Rose

Fulbright Australia

30 Australian Motor Industry Federation 31 Office of the New South Wales Small Business Commissioner 32 Self Storage Association of Australasia 33 Mr Robert Payne – Payne Investments 34 Australian Finance Conference


35 Debtor and Invoice Finance Association 36 National Farmers’ Federation 37 Small Business Development Corporation WA


Schedule 2 – Tables 1-3 Table 1 – Legislative change

Issue no.

Issue PPSA section Submission as to issue Submission as to how to best improve given

the issue and submission

Submissions by other bodies

1 Exclusion of fixtures s.8 The definition of ‘fixtures’ should be clarified so that it is clear any degree of affixation will not by itself make something a fixture. Having said this, the tenure of the land, license or interest held by the grantor or another in the land should not determine whether it is capable at law of being part of the land or a fixture eg TEC Desert Pty Ltd v Commissioner of State Revenue [2010] HCA 49 (15 December 2010) at http://www.austlii.edu.au/au/cases/cth/HCA/2010/49.html

The degree and purpose of attachment tests under the common law meaning of what is, or is not, a “fixture” should be applied, but still denote that the nature of the tenure, license or interest in the land will not determine whether it is a “fixture” or part of the “land”.

2 “Chattel paper” as a item of personal property

s.10 The use of chattel paper as collateral is still a common means of collateral, especially as concerns construction or other contracts for service or use of intellectual property. See also Item 23B below. The different classes of collateral enhance the ability of a SB to raise collateral against specific assets under a different collateral class to those already the subject of a security interest eg IP as opposed to chattel paper. Reducing the number of classes would make this more difficult and be inconsistent with the purpose of the PPSA,

No change required and it should not be removed from the PPSA.

3 Definition of ‘consumer property’

s.10 “consumer property” means personal property held by an individual other than personal property held in the course or furtherance, to any degree, of carrying on an enterprise to which an ABN has been allocated.

This definition should make it clear it is referring to an ABN issued to the individual not someone else, eg an employer of the individual.

4 Definition of “Currency”

s.10 "currency" means currency authorised as a medium of exchange by the law of Australia or of any other country.

The definition is sufficient as it stands, and should not be changed. To change to “money” would lead to confusion concerning any authorised

http://www.austlii.edu.au/au/cases/cth/HCA/2010/49.html

http://www.austlii.edu.au/au/cases/cth/HCA/2010/49.html


Issue no.




means of exchange ”of another country”.

5* Definition of “interest” s.10 The current definition of ‘interest’ includes a right in personal property and this has created some uncertainty regarding the scope and application of the PPSA. This in turn leads to unnecessary costs being incurred. The New Zealand and Canadian PPSAs do not define ‘interest’.

The definition should be repealed or amended to make it clear an interest must be a proprietary interest not merely a contractual right relating to personal property.

6* Meaning of ‘PPS lease’

s.13 The references to ‘bailment’ should not be deleted, as the functionality and transparency of the register and laws would be compromised. To limit the PPS lease concept to lease, rental or hiring arrangements where the lessee or bailee pays for the use of the goods (not merely provides ‘value’, as defined) would not take account of the various commercial arrangements in place for bailments and might require the parties to then revert to the archaic tests and confusion of actual or “ostensible”, and reverting to the common law confusion of priority over commingled goods: Examples:

• as previously arose under “floor plan” bailment financing of car yards prior to REVS;

• as to equipment provided to third parties as part of the supply of goods (as opposed to services see below) such as long term use of on site storage tanks provided by fuel suppliers to earthwork construction companies;

• as to storage of substantial amounts of commingled goods in storage facilities, such as diesel supplied by multiple transport companies to the one biodiesel facility for biodiesel production;

• as to storage of farmer’s crops in silo’s by forward buying grain merchants, as opposed to the burdensome and non-transparent arrangements which arise by “perfection by possession” under “field warehousing”/ lease

Strongly oppose the removal of the references to “bailment” in PPS leases. NB other legislation refers to a PPS Lease being a “lease or bailment” (eg see Saskatchewan PPS Laws definition of “lease”), the lack of definitions and preference for uniformity on this key issue (and unlikely effect of thereby excluding “hire” if “bailment” were removed and vice versa)


Issue no.




arrangements;

• provision of branded store shelving and fit outs by suppliers of ROT stock as inducement for acquisition of supplier’s goods.

The argument that the removal of “bailments” would address concerns (that, despite s.13(2)(a) and (b) and s.13(3), a PPS lease might apply to incidental bailment arrangements found in many kinds of commercial contracts including construction, transport, storage and maintenance agreements) is incorrect however, due to the confusion for creditors of whether an arrangement is a true bailment, or “in substance” a finance arrangement (see eg the issue discussed at par 72 in Carey v. Smith [2013] NZHC 2291. A bailment that arises as an incidental aspect of a contract where the bailee is providing services to the bailor and the bailor is paying for those services are not subject to the PPSA (as that is the better view as to how the Act, as currently drafted, operates). There has been (with respect) unfounded assertions of considerable confusion about this issue imposing unnecessary cost and administrative burdens on many businesses. To amend would also cause confusion as bailment arrangements that are ‘in substance’ security interests would continue to be subject to the PPSA (s.12(1)) as would bailment arrangements that constitute ‘commercial consignments’ (s.12(3)(b)). To remove the term “bailment” (given that neither it, “hire” or “Lease” are currently defined under the PPSA) may lead to confusion as to whether or not an arrangement is a security interest. It has been difficult to locate any decisions by which a clear differentiation in the meaning of “hire”, “bailment” and “lease” has been found by a court for PPS purposes.


Issue no.




6A That the terminology of “indefinite period” in rule 13(b) is the biggest concern to the hire industry as it is run on an indefinite hire regime1 and too great a burden for registration by SME’s2

The solution to this problem is for the owner/ lessor contracts being suitably worded and registrations effected only once against a hirer normally under an umbrella agreement. It is an example however of the lack of knowledge/ compliance that an owner/ lessor believes that there is no solution but to register every time equipment is hired out.

S1, S2

6B That the definition of “motor vehicle” is too broad3

Its relation to the definition of “PPS lease” (so far as serial numbered goods are concerned) causes concern in the hire industry that unintended coverage of goods has arisen (and which is inconsistent with other laws such as tax law definitions of motor vehicles) due to the definition of :”motor vehicle” at reg 1.7

The new definition from 1 July 2014 to mean “property is also capable of travelling at more than 10km/hr AND has a total motor power greater than 200W” will sufficiently narrow the definition of “motor vehicle”.

6C the one year period is too short4

the one year period for operating leases (which generally also applies from 1 July 2014 to PPS leases of motor vehicles) is consistent with the overseas legislation and should not be compared with the customary 4 or 5 year financing leases (which are “in substance” security interest and so have technically no time test).

the one year test for PPS leases should not be changed except as per the recent amendments.

S1

7 Meaning of ‘Purchase Money Security Interest’

s.14 The exclusion for transactions involving non-serial numbered property used predominantly for personal, domestic or household purposes should be deleted. This is an unnecessary complication of the Act. Given the substantial value of consumer goods, it should left up to the market to determine whether to register. This will also provide greater clarity to creditors of the individual (such as under a guarantee) who would reply on the guarantor’s assets also possibly. The protection afforded by section National Consumer Credit Protection Act against AllPAAP’s in consumer credit contracts is sufficient..

The exclusion for transactions involving non-serial numbered property used predominantly for personal, domestic or household purposes should be deleted


Issue no.




8 Addition of other collateral by the regulations to “serial number” goods”

s.10 and regulations

It has been suggested that other serial numbers also be widened to include items such as computers, medical equipment, etc. The register currently functions on searching by specified serial numbers, in which the manufacturers generally have a strict protocol of generating such numbers eg VIN. The free text field (currently and if it became compulsory) and security agreement would enable clarity of what items are covered to be obtained.

Do not currently broaden the items which can be described by serial number due to lack of current information as to industry consistency.

9 PMSI - sale and lease back arrangements

s.14(2)(a) The use of sale and lease back arrangements as a financing arrangement do not take the benefit of the “take free” provisions in Part 2.5, as the financier would not be a true “buyer”. (See at par 72, Carey v. Smith [2013] NZHC 2291). The consent of an existing security interest holder over the collateral would therefore still be required. The fact that the arrangement is not a PMSI, does not mean that it is not a security interest “in substance” which must still be perfected otherwise.

No changes required, except to possibly make clear that where the buyer is a true “buyer” (as opposed to the seller raising in substance a finance security), a PMSI can arise.

10 Disposal of collateral subject to security interest

s.32 Section 32 should clarify (subject to “taking free” rules in Part 2.5) that a secured party may: “consent to a disposal subject to the original collateral continuing to be subject to its security interest.” Section 34(1)(c)(i) suggests this is the intention.

Amend s.32 to clarify “a secured party may consent to a disposal subject to the original collateral continuing to be subject to its security interest.”

11 Meaning of ‘transfer’ as used in s.34

s.34 A priority contest between a lessor under a lease that is a security interest and a secured party who has been granted a security interest by the lessee can be resolved under the normal ‘single grantor’ priority rules as between the lessor and the other secured party. In respect of a leased asset, subject to the application of the ‘taking free’ rules in Part 2.5 of the PPSA, the priority of a secured party who has taken security from a lessor as against a secured party who takes security from the lessee should not be

Section 34 should clarify that a ‘transfer’ in this context means a sale/transfer of ownership not a mere transfer of possession including a transfer of possession under a security interest (including a PPS lease).


Issue no.




dependent upon the priority of the lessor (irrespective of whether the PPSA applies to the lease).

12 The application of the vesting and priority rules in the context of leasing and sub-leasing/hiring transactions

Alleged auto extinguishment under section 53(2) PPSA as to security interests of bankers and financiers over collateral on – leased by initial grantor.

The commercial effect of this allegation (mainly by controllers) is that the bankers are concerned as to the value of the principal collateral for obligations owed and so look to other assets (and/ or increase cost of lending to SB’s due to perceived risk), as opposed to enforcing their security over the principal collateral in priority to others.

This uncertainty as to section 53(2) PPSA defeats one of the key purposes of the PPSA -to enhance the ability of businesses and consumers to use their assets as security.

Various sections including ss 32, 34, 37, 43-46, 53(2), 60, 62, 66-68, 76(3) and 267

A priority contest between a lessor under a lease that is a security interest and a secured party who has been granted a security interest by the lessee can be easily resolved under the normal ‘single grantor’ priority rules as between the lessor and the other secured party (normally s62 will result in the lessor having PMSI priority if it has perfected properly). However, there are a number of areas of complexity and uncertainty that can arise in the context of leasing and sub-leasing/hiring transactions. Before suggesting drafting solutions we think it is necessary to review and clarify the policy objectives and intended outcomes under the PPSA in the following scenarios. In each of these scenarios it should be assumed the lease will be a security interest to which the PPSA applies.

Diagram # 1 - Common fact scenario

Assume a lessor (LOR) leases goods to lessee (LEE) in the ordinary course of LOR’s business. LOR has previously granted a security interest over the leased asset to secured party 1 (SP1). An administrator or liquidator is subsequently appointed to LEE.

There is no basis for supporting that related entities or casual industry arrangements should be exempt from the requirements of the PPSA, given its possible affect upon the transparency of the PPS register. The current definitions of “PPS Lease” sufficiently provide for same. Such exemption is opposed. The vesting rules in the PPSA should not be abolished as they create greater certainty for controllers of incapacitated entities to be able to deal with them in suitable priority. That the operation of section 53(2) PPSA be clarified by notes to it, such that: 1. the subrogation of LOR’s interest

to SP1 is without prejudice to SP1’s rights under its own perfected security interest eg SP1 can still claim the same rights which LOR has (whether or not A was perfected), as well as SP1’s own direct perfected priority over the collateral.

2. it be stated that this was not the requirement of any amendment, but only to clarify so as to assist LOR’s caught in such conundrums.

This would be consistent with the application of the PPS rules (This issue has been considered overseas under PPS laws which do not appear to contain an equivalent of the wording of section 53(2). In such countries.


Issue no.




Policy issue #1:

• The SP1 might equally be granted an AllPAAP (as part of a line of credit used to acquire the collateral) or PMSI (for a financing lease or a operating lease of a superior lessor).

• Currently, with lack of knowledge as to the PPSA, the Small Business LOR have not been registering PMSI’s against their end lessee. The banks and financiers of course have no security agreement with the end lessee and no knowledge of their identifiers, and so do not and cannot register against them as a grantor (‘double perfection’ not possible).

• Assuming LOR has not perfected against LEE but SP1 has perfected as against LOR, does LOR’s interest vest in LEE subject to SP1’s security interest so that SP1 still has its security as against the administrator or liquidator? Under s267 it appears that only the security interest granted by LEE (that is, LOR’s interest under the Lease) vests in LEE. However, if LOR’s interest vests in LEE is there any interest of LOR to which SP1’s security interest can remain attached or reattach?

• While the taking free rules such as s46 mean SP1’s interest is subject to the Lease; does the vesting rule in s267 effectively eliminate SP1’s interest once LOR’s interest vests?

• If the Lease is not an ordinary course of business transaction and none of the other taking free rules apply, and the Lease is a ‘transfer’ for the purposes of s34 (see item 7 in this table), does SP1 need to register against LEE (and how can it if it does not have the details of LEE?) in accordance with s34 to maintain perfection of its security interest? Alternatively, could SP1 rely on LOR registering its interest under the Lease against LEE to indirectly achieve the same outcome? If neither of these

Their rule is clear that the banker or financier retains priority over the principal collateral (see Perimeter Transportation Ltd. (Re), 2010 BCCA 509 at: http://caselaw.canada.globe24h.com/0/0/british-columbia/court-of-appeal/2010/11/17/perimeter-transportation-ltd-re-2010-bcca-509.shtml )

http://caselaw.canada.globe24h.com/0/0/british-columbia/court-of-appeal/2010/11/17/perimeter-transportation-ltd-re-2010-bcca-509.shtml






Issue no.




things happens, what effect, if any, does it have on the operation of the vesting rule in s.267?

Fact scenario #2 Under the same parties as set out in Diagram #1 above, but assuming (as a matter of timing) LOR leases goods to LEE and does properly perfect, and that LOR subsequently grants a security interest over the leased asset and the Lease itself to SP1 (rather than transferring the chattel paper created by the Lease in favour of SP1). An administrator or liquidator is subsequently appointed to LEE. Policy Issues: • If the Lease is not an ordinary course of business transaction and none of the other taking free rules applies in favour of LEE, does SP1 need to register against LEE (or rely on LOR registering its security interest under the Lease against LEE) to maintain perfection of its security interest? Note that s34 should not apply because the Lease is entered into before SP1 takes its security interest from LOR. • Does LOR’s security interest vest in LEE subject to SP1’s security interest so that SP1 still has its security as against the administrator or liquidator? As noted above, it appears that only LOR’s interest vests in LEE. But if LOR’s interest vests in LEE is there any interest of LOR to which SP1’s security interest can remain attached?

Submission repeated as to clarifying section 53(2), that the security interest granted by LEE is only in priority to SP1 whilst there is a valid and subsisting lease granted by LEE (ie lease).


Issue no.




Diagram # 2 - Further common fact scenario

Fact scenario 3 Assume a lessor (SP1) leases goods to another person (LOR). LOR then subleases the goods to a sublessee (LEE). LEE then grants a security interest over all of its assets to secured party 2 (SP2).

Policy issues:

• Assuming LOR has not perfected against LEE but SP1 has perfected against LOR and the sublease is an ordinary course of business transaction (or another taking free rule applies in favour of LEE), does SP1 remain perfected in respect of the leased asset? Note that s34 will not apply if s46 or another taking free rule applies. Section 37 provides that SP1’s interest reattaches when the sublease expires or is rescinded or LOR repossesses the leased asset. This suggests SP1 is only entitled to proceeds, including LOR’s interest under the sublease, until reattachment occurs. It appears ss67 and 68 will not apply if LEE takes free of SP1’s security interest.

• Does SP2 always defeat SP1 in a priority contest

Submission repeated as to clarifying section 53(2), that the security interest granted by LEE is only in priority to SP1 whilst there is a valid and subsisting lease granted by LEE (ie lease).


Issue no.




12A That the alleged effect of section 53(2) PPSA on a failure of the lessor to register is that their financier’s registered security interest gains no priority in a leasing scenario as set out in Diagram 2 above5

53(2) Submission repeated as to clarifying section 53(2), that the security interest granted by LEE is only in priority to SP1 whilst there is a valid and subsisting lease granted by LEE (ie lease). Despite it being possible in such scenario that a secured party of a lessee/ grantor would not gain all priority (having found no perfected security interest by the lessor against the collateral (registered or otherwise, and not otherwise able to search as not “serial numbered property”) it would be a more just scenario that they have priority (whether or not serial numbered property): a) in the case where the lessee’s secured party properly perfected after the lessor’s secured party, subject to the lessor’s secured party security interest, but have priority ahead of the lessor’s security interest; and b) in the case where the lessee’s secured party properly perfected before the lessor’s secured party, have priority ahead of that secured party and the lessor’s security interest

S1,

12B Vesting rules under section 267 PPSA and Corporations Act are unfair to the equipment hire industry6

267 There is no practical nor theoretical basis from here or overseas jurisdictions to exempt the hire industry. There is an argument that the carve outs in section 13 (2) (definition of “PPS Lease) should be extended to exclude “(e ) a hire by a hirer who is not regularly engaged in the business of hiring goods”

S1, S2


Issue no.




13 Continuous perfection s.56 We have a concern that a secured party may be able to claim that it has been continuously perfected via two or more registrations when the earlier registration(s) may not be disclosed by a search. Such an outcome would significantly compromise the efficacy of the PPSR in terms of enabling a person searching the PPSR to establish a secured party’s priority time. Neither the PPSA nor the PPS Regs require the linking of prior registrations to a current registration but it appears, on a literal reading of sections 55 and 56, that continuous perfection can be maintained even though: • an earlier registration has been discharged after

a replacement registration has been made; • the former has not been linked to the latter; and • there is no way of knowing the registration time

of the first (or other previous) registration(s) in the chain of registrations relied upon to establish continuous perfection.

The PPSA and PPS Regs should expressly deal with the linking of registrations and how this can be used to preserve the priority time afforded to the initial registration.

14 Meaning of ‘possession’

s.62 It would be useful to clarify whether ‘possession’ (for the purposes of s62) is intended to mean mere physical possession or possession of the collateral by the grantor as a grantor (the latter is preferable).

Clarify that ‘possession’ (for the purposes of s62) is intended to mean possession of the collateral by the grantor as a grantor

15 Priority for accounts s.64 The timing and notice requirements in s.64(1)(b)(ii) pose practical difficulties. Consideration should be given to simplifying these requirements. The notice required to be given to a PMSI secured party under s.64(1)(b) should be able to be given before or after the accounts financier has registered in relation to accounts. The accounts financier’s priority could apply to accounts for which it has provided new value at any time from the later of 15 business days after the notice has been given to the PMSI secured party or when the accounts financier’s registration is made in respect of accounts.

Would propose that the notice under section 64(1)(b) can be so given, and must provide sufficient details of the provider of new value/ secured party’s intended GONI when giving notice. We strongly repeat this position.


Issue no.




It is noted that as no financing statement details would be available, that the provider of new value must provide its intended GONI with such notice.

16 Financing statements s.153 Except in the case of serial number registrations, it should be possible to nominate multiple classes of collateral in a single registration and it should be possible to use the same free text to supplement one or more of the collateral classes nominated in the registration, ie to supplement the registration generally. Having to do separate registrations for each collateral class creates an unnecessary administrative and cost burden and can make the interpretation of search results more difficult than it should be. eg if 2 x security agreements each cover multiple classes of collateral (eg boat, motor vehicle and other goods under #1; livestock under #2), then 2 x financing statements setting out each collateral classes covered would be required. The current approach under our legislation is also inconsistent with the approach in New Zealand and Canada. Many security agreements that are not general security agreements over all assets will nevertheless cover collateral in more than one collateral class. This would appear to also be a functionality assistance to the register also. It should be possible to nominate multiple classes of collateral in a single registration and it should be possible to use the same free text to supplement one or more of the collateral classes nominated in the registration, ie to supplement the registration generally. See further commenting below as to “free text” ought also to have better functionality, so that the free text can be updated by a secured party on an en globo basis eg the classes of collateral and/ or description of property sold by them to the grantor expands from that originally defined in the financing statement due to either expanded operations and/ or acquisition or merger of legal entities or as a result of a

Amend section 153 so that the financing statement can identify each different class of collateral under a single security interest. There should also be a new collateral class being ‘all present and after acquired property relating to’.


Issue no.




restructuring. This suggested change recognises this commercial reality, should reduce costs and result in more informative collateral descriptions appearing on the register. There should also be a new collateral class being ‘all present and after acquired property relating to’. This could be used where a security interest is created in respect of all of the grantor’s assets related to a specific business, location or joint venture. Selecting this collateral class would be supplemented by a free text description of the relevant business, location or joint venture (but not a security agreement as this would be incompatible with a notice based register, see further comments below).

17 Security interest registration against the partners and the partnership

153(1)(item 1) It has been suggested that a single registration be sufficient for a grantor who is a member of a partnership, for coverage over the partnership and their own separate interests eg 3 x partners be registered against their property by their personal assets and the partnership property. This is not either possible or suitable as the assets of each individual partner not held under the partnership’s ABN will be either: • “consumer property” (if not held under carry on

an enterprise under an ABN - section 10 definition) and so under a different collateral class, and/ or

• serial numbered collateral (being “consumer property” which must be registered against by serial number), and/ or

• an interest in property which is held by a different enterprise (eg another partnership or a trust for which they are a partners or trustee)

Whilst there is merit to registering against more than one class of collateral held by the same grantor, a general registration would not enable transparency of certainty of registration and would make search results from the register less transparent.

18 Register - party identification data

Section 153(1), Sch 1,

cl 1.5

There is currently concern whether the “holder”/ “grantor” of the security interest is the corporate trustee or the trust. This is partly due to the definition of “security agreement”, and because the ABN

To provide expressly that: • the identifier of the ABN is

compulsory,


Issue no.




register does not currently disclose the legal entity who is the trustee of the trust under the identified ABN.

• that the ACN or other relevant identifier of the trustee/s is not compulsory and will not make the registration of no effect or be misleading or defective if not correct.

19 Verification statements s.157 Where the collateral is consumer property and serial numbered property the grantor’s details are not registered. However, section 157 refers to the “person registered as a grantor in the registration”. It was likely that this non-inclusion of the grantor was possibly the result of the migrated REV’s security interests, which were lodged only by serial number and not by name. It would create greater transparency to the register and still maintain the privacy of the individual grantor provided the searches undertaken are for a “proper purpose” under section 172 PPSA.

That s 157 should merely refer to “the grantor” rather than the “person registered as a grantor in the registration”.

20 Change of name of secured party or SPG

s.157 A change of name does not change the identifier of the secured party. Indeed, it would likely to self- populate such change from ASIC or the ABN register. No new amendment finance statement is required in such cases. No change is required.

No change is required.

21 Change of address for service and GONI

s.157 A change of address for service or GONI does not create a new finance statement, though it might alter the provisions of a finance statement (section 153(1)(Item 3).

Maintain current status quo. Ie the need to give an amendment statement with exemptions for commercial collateral.

22 Transfer of security interests

s.162 Section 60 provides that the transferred security interest has the same priority after the transfer is registered as what it did before. The Act should be clarified to make it clear that a failure to register a financing statement or financing change statement upon the transfer of a security interest is not ‘seriously misleading’ and does not make the registration defective. Section 276 implies this is the correct interpretation but the language of

The Act at section 160 and 163 should be clarified (in line with section 60) to make it clear that a failure to register a financing statement or financing change statement upon the transfer of a security interest is not ‘seriously misleading’ and does not make the registration defective.


Issue no.




s.160 and s.163 suggests otherwise. Section 162 also refers to transfers of collateral but this aspect must be read in conjunction with section 34 which does specify timing requirements.

23 Particular defects in registration

s.165(c) It should remain the position that a registration should be defective (s165(c)) or considered to be ‘seriously misleading’ for the purposes of s.164 if it indicates that a security interest is a PMSI (to any extent) and it is not in fact a PMSI (to any extent). Sections 165(c) and 164 should not be amended accordingly. No consideration should be given to omitting item 7 in the table in s.153(1) or making it optional. The reasons for these oppositions to any suggested change are as follows: • transparency is lost as to the nature of the

creditor generally and places a burden upon the grantor and SPG to maintain vigilance as to PPS compliance as opposed to new SPG having to consider terms of the security agreement and transaction.

• the consequences of not checking the PMSI box in a registration are catastrophic for suppliers of inventory and lessors as s 165(c) is currently drafted; Many issues depend on PMSI’s not least of which is credit scoring and rating. If you have a lot of registrations that are PMSI’s by various entities, then the presumption will mainly be as a trade supplier, not a lender of money.

• if (as per possibly to be proposed by others as described in Item 26 in this Table 1) a free text description of collateral is made mandatory for non-serial number registrations, secured parties can use the free text to indicate if their security interest is limited to collateral supplied, sold or leased by them to the grantor. This would be much more helpful to persons searching the register than the current PMSI box indicating

Maintain that failure to properly register a PMSI is “defective” and “seriously misleading” for the purposes of section 164 and 165. No consideration should be given to omitting item 7 in the table in s.153(1) or making it optional.


Issue no.




that a PMSI is being claimed to some extent

23A Submission by others to simplify the use of the PPSR by removing the requirement to answer certain questions such as: i. Is the security a

PMSI? ii. Is the collateral

inventory? iii. Are proceeds

claimed? iv. Is the collateral

subject to control?

v. Is the security interest subordinated?

vi. Period of registration (move to a default position of 7 years)7

157 We object to the items (i) to (v).

We submit that: (i) to (iv) remain as they currently are as otherwise transparency is not obvious and greater cost likely to be incurred in determining what assets are available for collateral, what interests have super priority and what assets are subject to the “take free” provisions. (v) be effected a default position of “No”. (vi) be effected as the default position.

S3

23B Submission by others to reduce number of collateral class8

We strongly object. The different classes of collateral enhance the ability of a SB to raise collateral against specific assets under a different collateral class to those already the subject of a security interest eg IP as opposed to chattel paper. Reducing the number of classes would make this more difficult and be inconsistent with the purpose of the PPSA,

None required S3

24 Amendment demands s.178 The table in section 178(1) purports to limit itself to amendment demands being able to be provided only as to security interests “securing obligations” (see items 1 and 2 in table). There appears to be no good reason as to why the

The table in section 178(1) be amended to allow amendment demands to be provided as to any registered security interest. The functionality (as to linking) should


Issue no.




table should be so limited to “in substance” security interests” as opposed to deemed security interests which may not secure obligations (though they also often do). The grantor or other person with an interest in the collateral should be able to insist on the registration being amended, whether or not it secures an obligation, if it is not correct. The section also does not clearly address the situation where a registration is made over ‘all present and after acquired property’ but the actual security interest only relates to specific property. The grantor should be able to insist on the registration being replaced (as the collateral description can’t be amended by a financing change statement) by a new registration for the relevant specific collateral class or classes. The secured party’s priority could be preserved by linking its new registration to the earlier overreaching registration.

be increased to enable a new registration to be effected (where an amendment cannot be effected) and preserve priority by linking to prior overreaching registration.

25 Part 9.5 Part 9.5 Part 9.5 is unnecessarily complicated and the concept of ‘control’ under Part 9.5 having a different meaning to Part 2.3 causes confusion. If preferred creditor liabilities, such as employee entitlements and an administrator’s lien, are to have a statutory priority in respect of certain assets (eg inventory, accounts and certain ADI accounts) on insolvency simpler rules consistent with the concepts in the PPSA should be included in the Corporations Act. Part 9.5 of the PPSA should be repealed, apart from s 339 which should be modified in line with the changes to the Corporations Act contemplated below. Part 9.5 and the definition of ‘circulating security interest’ in the Corporations Act draw a distinction between certain assets based on whether the grantor or secured party owns or has title to them or has ‘control’ of them. This is inconsistent with the general approach of the PPSA and adds to the complexity of security documentation. It is also confusing when there is no definition for ”equipment” as there is in other jurisdictions ie equipment used in the provision of services such as

Consideration should be given to amending the term “inventory” to not include “equipment” so as to not fall foul of the take free provisions in section 46 or the circulating asset provisions in the PPSA. The Corporations Act to distinguish security interests in inventory (and traceable proceeds) based on whether or not the secured party has a PMSI (irrespective of who has title or ‘control’). Priority for preferred creditor claims, such as employee entitlements and the administrator’s lien, could be limited to inventory (and proceeds) to the extent it is not subject to a PMSI.


Issue no.




hired scaffolding is “inventory” for the purposes of PPSA, despite it not be for resale by the grantor. In section 16 of the PPSA NZ, the meanings of “inventory” and “equipment” are provided as follows:

“Inventory means goods …(b) to be provided or have been provided under a contract for services; …. “Equipment means goods that are held by a debtor other than as inventory or consumer goods.” …. In McCloy v Manukau Institute of Technology [2013] NZHC 936 at par [40] the court considered this, when deciding whether equipment leased was “inventory” and held that it was not for the purposes of their “take free” provisions equivalent to section 46 PPSA:

I do not accept that the hoists are inventory. Inventory is usually trading stock, although the term also clearly includes raw materials, work in progress and materials used or consumed in a business. The fact that a company such as Mainzeal may ultimately decide to sell equipment that has become surplus or which needs to be replaced does not change that equipment into inventory. In my judgement, in the context of this case, the hoists are equipment and accordingly cl 6.2.1 of the general security agreement does not assist Hobson Gardens.

It is of concern as to whether a different outcome would arise in Australia given the lack of a definition to “equipment” in Australia. Consideration should be given to amending the term “inventory” to not include “equipment” so as to not fall foul of the take free provisions in section 46 or the circulating asset provisions in the PPSA (below). The operation of Part 9.5 and the definition of ‘circulating security interest’ in the Corporations Act


Issue no.




has encouraged some law firms to use general security agreements which essentially preserve the pre-PPSA distinction between ‘fixed’ and ‘floating’ charge assets and the concept of crystallisation, with an added distinction based on whether the secured party has title to certain assets (eg the Five Firm GSA Model Clauses). This adds to the complexity of general security agreements and is an undesirable development. Instead of distinguishing between security interests in inventory based on title or ‘control’, one alternative approach might be for the Corporations Act to distinguish security interests in inventory (and traceable proceeds) based on whether or not the secured party has a PMSI (irrespective of who has title or ‘control’). Priority for preferred creditor claims, such as employee entitlements and the administrator’s lien, could be limited to inventory (and proceeds) to the extent it is not subject to a PMSI. The objective should be to shift the focus from title and control as the determining factors.

26 Further description of collateral to be mandatory for non-serial number registrations

PPS Regs, Schedule 1,

Part 2

For all collateral classes other than ‘all present and after acquired property’, and except for serial number registrations, and subject to functionality for en globo changes (see item 23 above) it should be mandatory to include a further free text description of the collateral (as is the case in NZ). Many secured parties are simply registering against a collateral class without using the free text option and this can make search results quite unhelpful. While not suggesting there should be any prescriptive requirements for the free text description, it should help produce more meaningful search results if a free text description is mandatory. The free text used with a registration over ‘all present and after acquired property, with exceptions’ needs to describe the exceptions by item or class (PPS Reg 1.6). However, many secured parties are simply describing the exceptions as “anything the secured party doesn’t have security over” or “any property not

For all collateral classes (other than ‘all present and after acquired property’, and serial number registrations), and subject to functionality for en globo changes by a secured party to its registrations (see item 12 above) it should be mandatory to include a further free text description of the collateral. Not adopt any proposal to enter a separate filed (except as currently available in free text) or to divide into “identifiable or unidentifiable” Other Goods, and not remove any collateral from “vesting rules”.


Issue no.




covered by a security agreement” or similar wording. This is meaningless to searching parties and the PPS Regulations should be amended to clarify that this practice does not satisfy the requirement to describe the exceptions by item or class. The PPSR is designed as a notice register, not a document register. Registration practices that simply refer to a particular security agreement or definitions in a security agreement are inconsistent with a notice based register and should be discouraged. To further delineate the classes of category by value as “identified goods” (but for the garage sale rule in section 47) would be new to the PPS laws and inconsistent with its general purpose of treating security interests alike in all collateral.

26A Thresholds not be introduced9.

it is a commercial decision for the creditor as to whether cost effective to register.

Do not introduce thresholds. S3

27 Purpose for indicating if collateral might include inventory for the purposes of Part 9.5


Part 4.1

Subject to the clarification of “equipment” and having the additional option of “equipment” as opposed to only “inventory”, it should be maintained. The issue of “inventory” needs also to be considered in the issue of “take free” issues and priority over “proceeds”, as it is not relevant to only insolvency. Removing this would not simplify the registration process. Also note comments above re Part 9.5 generally.

Purpose for indicating if collateral might include inventory for the purposes of Part 9.5 should be maintained.

28 Purpose for indicating if collateral might be subject to control for the purposes of Part 9.5


Part 4.1

Apart from s 340(2)(a) there is no obvious reason why this needs to be included in a registration, it is merely a question of fact that generally only needs to be established on insolvency. Removing this would simplify the registration process. Furthermore, ‘control’ for the purposes of Part 9.5 is primarily relevant to whether the secured party has a ‘circulating security interest’ under s.51C, Corporations Act. This is not an issue where the secured party owns the collateral (eg retention of title).

Remove the requirement for indicating if collateral might be subject to control for the purposes of Part 9.5.


Issue no.




Also note comments above re Part 9.5 generally.

29 Additional vesting role in Corporations Act

Corporations Act, Part 5.7B,

Div.2A

There is no equivalent provision in the NZ or Canadian legislation for company grantor security interests (and it is not clear why company grantor security interests should be treated differently to other entity grantor security interests for insolvency purposes). Repeal this additional vesting rule or at least clarify when “the security agreement that gave rise to the security interest came into force” (see s.588FL(2)(b)(ii) in the Corporations Act). Problems with this vesting rule include: • duplication but also inconsistency with the PPSA

vesting rule; • PPS leases that arise under s.13(1)(d) – when

does the relevant security agreement for such a PPS lease come into force?

• security agreements that are signed well before the grantor has possession of the relevant collateral. There is confusion because of inconsistency between the s.62, PPSA timing requirements for PMSIs and s.588FL, Corporations Act.

The potential application of the vesting rule under the PPSA and the potential loss of priority for a secured party who does not register or otherwise perfect promptly (including complying with s62 of the PPSA for secured parties claiming a PMSI), should be sufficient incentive without a further vesting rule in the Corporations Act.

Repeal this additional vesting rule or at least clarify when “the security agreement that gave rise to the security interest came into force” (see s.588FL(2)(b)(ii) in the Corporations Act).

29A Allow the security to stand for new advances made after the creation of the security agreement – even where it is registered out of

588FL We say this adds confusion. There is no equivalent of 588FL in other PPS jurisdictions and it should be removed.

As suggested above at 29. S3


Issue no.




time.10


Table 2 – Better PPS register website functionality

Issue no.

Issue Submission as to issue Submission as to how to best improve

given the issue and submission


1 The register website is not friendly to use for SB’s who are irregular and only casual users. The more friendly the website is to use, the more likely that SB’s will regularly use it. The more regularly the PPS register is used, the: • more government revenue

generated, • better transparency created

as to grantors, • more likely the SB is to be

protected as to the collateral it has provided on credit;

Substantial business and deposits of funds are normally required to open an account with the PPS register. This is not suitable to the SB as it commits its funds/ capital to a service which is irregularly used.

The current process for casual users of the PPS website is that they must go through a 5 stage process each time (once they have created a SPG) to register a security interest. More likely than not, the SB will be registering the same type of security interest time and again, but with simply a different grantor/ customer Common scenario: Company A sells or leases widgets on 14 day credit, the security agreement/ lease/ terms of sale (T+C’s) for which are common to 90% of its customers. Company A will register a PMSI (for retention of title or PPS lease) against ‘commercial property which is ‘other goods’, is ‘inventory’, and for a 7 year period, and claim proceeds. In other PPS jurisdictions, such as Ohio (USA), their online UCC register under Article 9 Uniform Commercial Code (which Code is generally acknowledged as the source of all PPS laws) enables the users to save a number of their own created and favourite ‘My Templates’ finance statements electronically to their SPG account for use by changing simply the grantor details. See page 16 of the Ohio state guide for online registrations as an example: https://www.sos.state.oh.us/sos/upload/UCC/UCCOnlineUserGuide.pdf

Create a functionality change to the PPS register so that an SPG can save ‘my templates’ so that an SB can log in and register in an efficient manner without having to go through the various steps each and every time. This template form would not be created by the PPS register and so no liability would attach if the SPG created an incorrect template.

2 Ability to alter the free text field en globo for an SPG as their lines of inventory change from time to time

The current free text requirements are not compulsory. What they do create however is a catch twenty two for SB’s. If they describe their goods (provided under ROT or other PMSI normally) (such as “other goods” in the class of collateral and as “any and all goods supplied from time to time by the SPG to the grantor” in the free text) no effective

Make free text’s compulsory, but subject to enabling the SPG to amend free text’s en globo (or as selected) to be a new free text description with the change to only take effect from the time of such “amendment”.

https://www.sos.state.oh.us/sos/upload/UCC/UCCOnlineUserGuide.pdf‎

https://www.sos.state.oh.us/sos/upload/UCC/UCCOnlineUserGuide.pdf‎


Issue no.




transparency as a notice board is achieved. Having said this, many SB’s do not use the free text, for if they change their lines and supply other than a limited category as stated in their previous free text, then they cannot amend such free text en globo (even if still within categories under their security agreement).

3 Create the ability for a Grantor to download the data of the registrations made against them into an excel spread sheet, including NEVDIS data. Create the ability for a Secured Party Group to download the data of the registrations made by them into an excel spread sheet., including NEVDIS data.

The data is extremely useful for either to then use in preparing summaries of their financial obligations, loan applications, asset register and/or collateral not secured against, as well as identify their secured accounts receivable (eg if they wish to seek invoice finance or credit insurance). Also, the NEVDIS data would be extremely useful to be able to then further utilise for creating depreciation, other tax and accounting documents as well as registration and insurance application documents and reminders. Excel is suggested as it can normally be manipulated into another software easily.

4 Free text box Make free text’s compulsory, but subject to enabling the SPG to amend free text’s en globo (or as selected) to be a new free text description with the change to only take effect from the time of such “amendment”.

5 “PMSI” registration tick box Maintain that failure to properly register a PMSI is “defective” and “seriously misleading” for the purposes of section 164 and 165. No consideration should be given to omitting item 7 in the table in s.153(1)

Maintain that failure to properly register a PMSI is “defective” and “seriously misleading”

6 Inventory tick box To remain as they currently are as otherwise transparency is not obvious and greater cost likely to be incurred in determining what

To remain as they currently are


Issue no.




assets are available for collateral, what interests have super priority and what assets are subject to the “take free” provisions. Se also as to Part 9.5 above and consideration to be given to definition for “inventory”.

7 Auto notification function That the auto notification/ alert system be enhanced so that an ABN be the subject of an auto notification given especially the number of partnerships and trusts which SB provided credit to. No apparent reason (except possibly software came from ASIC’s auto alert system which did not have ABN’s). if possible (and given the sole trader grantor is registered against by the name and date of birth for “commercial property”) a limited notification by a sole traders details (but only as to commercial collateral if it is intended to maintain privacy as to consumer property.

That the auto notification/ alert system be enhanced so that an ABN be the subject of an auto notification given especially the number of partnerships and trusts which SB provided credit to.


Table 3 – Better information and education for SB’s

Issue no.




1 PPS attachment and perfection cannot be achieved unless ‘good’ contracts and ‘good’ registrations are created. Many SB’s are registering without either a suitable security agreement, or without entering correct fields of data. Part of this might be that they do not understand that registration against a debtor requires a suitable valid binding and enforceable ‘umbrella’ agreement (typically a terms of credit account application) to be entered into. The potential loss to a SB, and why they should properly contract documents and register correctly can normally be summarised as 4 x commercial questions: 1. would you insure the asset

against fire or damage? Failure to properly attach and perfect often means the loss of any priority over the asset, which is the same as if it was destroyed by fire and uninsured.

2. would loss of the asset cause you substantial financial hardship? Many assets are not commercially insurable, but are difficult to replace in a timely fashion eg small unique engineered items having to be imported from overseas, during which

As highlighted by several court decisions, a security interest will not be perfected if either: (a) the security agreement is not suitable,

valid and binding or (b) the fields of registration required are

incorrect or improper and the registration is therefore not effective eg under section 153, 164 and/ or 337A PPS.

The statistics for registrations and searches by user type and type for pre 31 January 2014 can be located generally at: Registrations: https://www.afsa.gov.au/about-us/ppsr/ppsr-statistics/end-of-transitional-period-statistics/registrations-created-on-the-ppsr-by-month Searches and other: https://www.afsa.gov.au/about-us/ppsr/ppsr-statistics/copy_of_personal-property-securities-register-ppsr-one-year-anniversary-statistics#Table 1 These statistics indicate that as more users become familiar over time with the PPS register, so too does the number of registrations and searches revenue increase (but for the some exceptions eg preparatory lodgements loaded before 30 January 2012 and/ or other transitional security interests lodged prior to 1 February 2014). Scenario 1: Suitable documents reduce paper work and better protect – state governments can help too Many tender documents and other agreements state that they are to be read

1. The results of the December 2012 survey by the PPS registrar be released immediately to state law societies and makers of submission to the interim report, and/ or posted on the enquiries website.

2. That the PPS registrar formally retain a suitable industry body, such as AICM, to finance and effect education for the SB market11.

3. That from 1 September 2014 a suitable proportion of the lodgement fees and license fees (for bulk licensed lodgers) received by the PPS registrar be dedicated to an education ‘fund’ for the purposes of retaining a suitable industry body, such as AICM, for future education for SB’s.

https://www.afsa.gov.au/about-us/ppsr/ppsr-statistics/end-of-transitional-period-statistics/registrations-created-on-the-ppsr-by-month




https://www.afsa.gov.au/about-us/ppsr/ppsr-statistics/copy_of_personal-property-securities-register-ppsr-one-year-anniversary-statistics%23Table%201





Issue no.




substantial other equipment and work cannot be completed.

3. if “No” to 1 and 2, would the asset be irreplaceable? Example loss of unique trademarks and other intellectual property.

4. would it cause substantial hardship to you if you had to disgorge to a liquidator all payments received from the debtor over the last 6 months? This of course relates to the relation back period under insolvency law (eg 588FE Corporations Act), which commences on the 513C day (eg from appointment of the VA).

alone and that no other terms apply (eg government tenders and building supply contract). The effect of this is that each such contract attaches a new security interest (presuming there is one contained in it) and so a new financing statement registration must be affected each time there is a supply. A suitable umbrella agreement would cover this situation and enable SB’s to reduce paperwork and compliance by having to register possibly register only once against the grantor (depending on how many security interests they are granted (see as to not failure to have a suitable umbrella agreement over all contracts – Central Cleaning Supplies (Aust) Pty Ltd v Elkerton [2014] VSC 61). Many compulsory standard government and industry documents still fail to comply with the PPS eg compulsory NSW government subcontractor forms GC21 must be used on government tenders. They have not been reviewed by government for PPS, such as to step-in rights contained in them. Multiple special conditions being added to such forms by different head contractors wastes cost and time of SB’s in such duplication. It would be more efficient if the government which requires such terms, reviewed and settled such contracts to take account of PPS. Scenario 2: Valid and binding contracts Suitable documents reduce paper work and better protect. Many SB’s fail to identify that a security interest must still be granted by a duly authorised person of the grantor organisation. It is not good enough to send the ‘T+C’s’ to a purchasing officer and expect the agreement to be binding. (Example: see lack of agent’s authority to bind principal grantor – Auto Moto Corporation Pty Ltd v.


Issue no.




SMP Solutions [2013] NSWSC 1403). Scenario 3: Size does not matter for compliance – what chance do SB’s have without proper assistance? We have already seen several cases where AllPAAP’s have not been registered within the new time frame under the Corporations Act. These are too numerous to mention all (Example In the matter of Barclay’s Bank plc [2012] NSWSC 1095). Recently, Suncorp, a major financier, used its ABN instead of its ACN as the identifier for its SPG when registering a security interest. (Future Revelation Ltd v Medica Radiology & Nuclear Medicine Pty Ltd [2013] NSWSC 1741). The assignee of such security interest had to apply to the Courts for various rulings and obtained these just 3 days before a voluntary administrator was appointed to the grantor. Such errors when they do arise in cases, indicate that a faulty standard protocol was used and affecting many more PPS registrations by the same grantor. The situation for SB’s, who have none of the support which such large institutions have, can only be seen as daunting and perilous. The AICM has suitable speakers who have presented numerous seminars to industry and professional organisations on PPS. Due to their own funding limitations however, they cannot be expected to provide same to all SB’s. It is not clear as to what effect the current You tube seminars and tutorials on the PPS registry have had for SB’s. Perhaps the release of the survey conducted in late December 2014 by the PPS registrar will assist in better allocation of funds and information to SB’s and others.


1 S1 - page 1”The terminology of “indefinite period” in rule 13(b) is the biggest concern to the hire industry as it is run on an indefinite hire regime. Strangely there is no explanation in the dictionary of the PPS act describing this term so how do we know when a hire becomes indefinite. It completely overrides the ninety day and 1 year rule if the customer cannot give us a definite hire period. You might say why not just register it to be safe but when you are doing between fifty and sixty transactions a day I would have to employ a person solely to register and deregister equipment on a daily basis. A customer may want it for three days but if it rains the hire could extend to two weeks and if my staff don’t inform me of it and I don’t register it I am at risk of losing my equipment and livelihood. This terminology should be removed from the act as it is an infringement on business.” 2 S1 at page 1 and S2 at page 1 3 S1 - page 2 “built to be propelled, wholly on land by a motor that forms part of the property, and (b) either: (i) is capable of a speed of at least 10km/h; or (ii) has 1 or more motors that have a total power greater than 200 W I have attached in this submission a picture of a bicycle that has a 1200 watt motor and capable of speeds of up to 30 kilometers per hour and if you were hiring such a unit it would come under this legislation. I have also included manufacturer’s specification documentation of equipment that vary from one model to another where some come under the act and some don’t. In my opinion very little research was done in determining these figures. 4 S1- pg3 “Another anomaly is the ninety day and one year rule for leases. How would that figure have been arrived at. I have thirty current hire purchase agreements with Westpac bank and each agreement is for a definite period of 4 years. I have contacted my bank (document provided) and they inform me that that the average agreement is around 4-5 years so why does the hire industry have to be subjected to a hire period of 1 year before I would have to register it if it was a long term hire why not three or four years like the financial institutions . 5 S1 - page 3 “I also have a copy of the hire purchase agreement with the Westpac bank that is covered by a PMSI. The liquidator would see that the registered item would belong to Westpac and he would have to contact them to prove that they have documentation to that effect. The issue then is what happens to me. If I don’t have it registered on the PPS register is Westpac compelled to return it to me, if so why do I need to register it. I am led to believe that if the machine was not registered by me making the customer the grantor I would lose the item, the bank would not have any claim over the item so I would then still have to pay the bank any outstanding monies owing on the machine. Furthermore if the liquidated company was a client of Westpac any monies raised on the sale of my equipment would be used to pay of any monies owing to Westpac on a loan so Westpac would get a double dip. If that is so then this legislation is abhorrent!!” 6 S1 at page 3 and S2; 7 S3 at page 4 par (e ). “Few of these questions add anything to the actual registration, bearing in mind the PPSR is intended to be no more than a public notice board to alert a searcher to the fact a security interest is claimed by a secured party.” 8 S3 at page 4 “For all business sectors we see benefit in reducing the number of available collateral classes,” 9 S3 at page 5 “[We] do not think it is desirable to specify thresholds; it should be left to the commercial judgment of the creditor as to whether they wish to comply with the PPS Act and become a secured creditor.” 10 S3 at page 5. 11 S3 at page 3

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