The Personal Property Securities Register (PPSR) was created pursuant to the Personal Property Securities Act 2009 (Cth) (PPSA). The PPSR is a critical tool for creditors to protect their interests as the system allows for the registration and management of security interests in personal property.
What is Personal Property?
Section 10 of the Act defines Personal Property as:
means property (including a licence) other than:
(a) land; or
(b) a right, entitlement or authority that is:
(i) granted by or under a law of the Commonwealth, a State or a Territory; and
(ii) declared by that law not to be personal property for the purposes of this Act.
Note: This Act does not apply to certain interests even if they are interests in personal property (see section 8).
What is a security interest?
Section 12 of the PPSA states that a security interest means “…interest in personal property provided for by a transaction that, in substance, secures payment or performance of an obligation (without regard to the form of the transaction or the identity of the person who has title to the property).”
Taking Security and Defects
It is crucial that security is perfected for it to be enforceable. Perfecting one’s security seeks to achieve the following outcomes:
- It provides priority for the creditor against the debtor against other creditors;
- Protects the creditor where an event of insolvency occurs in respect of the debtor; and
- Allows the creditor to enforce its security interest against third parties.
To take security under the PPSA a security interest must:
- Attach to collateral (which under section 10 of the PPSA means
(a) means personal property to which a security interest is attached; and
(b) in relation to a registration with respect to a security interest–includes personal property described by the registration (whether or not a security interest is attached to the property.)
- Be enforceable against third parties (by way of an agreement in writing); and
- Be perfected.
Under section 164 and 165 of the PPSA, a registration can be defective if:
- There is a seriously misleading defect in any data relating to the registration, other than a defect of a kind prescribed by the regulations; or
- A defect mentioned in 165.
Section 165 of the PPSA states that a defect in a registration occurs if any of the following circumstances arise:
(a) in a case in which the collateral is required by the regulations to be described by serial number in
the register–no search of the register by reference to that time, and by reference only to the serial number of the collateral, is capable of disclosing the registration;
(b) in a case in which the collateral is not required by the regulations to be described by serial number in the register–no search of the register by reference to that time, and by reference only to the grantor’s details (required to be included in the registered financing statement under section 153), is capable of disclosing the registration;
(c) if the registered financing statement (as amended, if at all) indicates that a security interest in the collateral is a purchase money security interest (to any extent)–the security interest is not a purchase money security interest (to any extent) in the collateral;
(d) in any case–circumstances in relation to the data related to the registration that are prescribed by the regulations.
In the matter of Re OneSteel Manufacturing Pty Ltd (administrators appointed) [2017] NSWSC 21, Justice Brereton found that the registration of a security interest against a corporate debtor’s Australian Business Number instead of its Australian Company Number would cause a registration to be defective. In this matter, the lessor lost $23 million in assets as it incorrectly registered a security interest against the ABN of the debtor and not the ACN. After the debtor went into administration, the company’s interest was defeated, and its interest became unsecured.
It is clear from OneSteel Manufacturing Pty Ltd that conducting detailed searches of the party you wish to secure your interest against on the PPSR is vital to securing any interest you may have in personal property. It is always beneficial to obtain legal advice upon entering any security agreement to ensure that your interests are adequately protected, and all steps are undertaken to perfect any security you may have. If you believe that you might be affected by security interests or would like advice in relation to the PPSR, please contact Roser Lawyers and speak to one of our friendly professionals.