Amendments To The Personal Property Security Act (PPSA)

Amendments To The Personal Property Security Act (PPSA)

The Personal Property Securities Act 2009 (Cth) (PPSA) continues to evolve with interested parties needing to be aware of the implications of the changes.

The most recent change to the PPSA relates to leases or bailments of less than one (1) year duration for serial numbered goods. Serial numbered property includes motor vehicles, watercraft, aircraft, and some types of intellectual property. Short leases for these goods will no longer be considered a PPS lease and accordingly, these arrangements will no longer require a security interest to be registered on the PPSR.

The effect of this amendment is that, for these short term leases, proof of ownership will now be sufficient to enforce a leasor’s interest in the event of an insolvency event. Previously, anything less than a perfected security interest would have placed the leasor at risk of the asset vesting in an external administrator.

This is good news for the leasing industry, but care needs to be taken as all leases that extend past one (1) year or are of an indefinite term will still be subject to the PPSA and require registration to be secured.

A recent case in the Supreme Court of Victoria, Relux Commercial Pty Ltd (in Liquidation) v Doka Formwork Pty Ltd [2014] VSC 570, provides a reminder of the importance in complying with the requirements of the PPSA.

Pursuant to the PPSA, registration must occur within twenty (20) business days of the transaction under which the Security Interest was created. If the Security Interest is registered after this time, there is a risk that a liquidator or administrator may be able to enforce a claim on the asset/s if a relevant insolvency event occurs within the first 6 months of registration.

In the example case, the Liquidators of Relux were able to prove that Relux had an interest in assets leased from Doka that surpassed that of Doka as the owner. The Liquidators were able to make this claim, which has been upheld by the court, as Doka registered their Security Interest in the leased assets one (1) day after the twenty (20) day deadline. This resulted in an imperfect, and subsequently unenforceable, Security Interest.

Had Doka registered their Security Interest one day earlier, as required by the PPSA, they would have retained the title to their assets. Instead the Liquidator may now realise the assets for the benefit of Relux’s creditors.

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