The PPS (Personal Property and Securities) Act works as a comprehensive code and framework governing securities taken over personal property.
Business in these industries will be affected most by the PPS Act.
If you are in the manufacturing, wholesale and retail industries then you will be particularly affected by these changes.
The practical ramifications of the PPS Act are becomingly increasingly apparent in light of recent cases, both domestically and overseas, specifically, Canada and NZ whose legislation was the inspiration for our own PPS law.
Owners, whose goods are in the possession of another party such as a lessee or bailee, are specifically affected by the changes, and must take steps to ensure that their interests are protected.
Take this case for example
Consider the situation in which a hire company (in this case, Queensland Excavation Services Pty Ltd (QES)) leases 3 caterpillar excavators and loaders to building contractor Maiden Civil.
Maiden Civil (who eventually came to own one of the three tractors) borrowed $250,000 from financier, Fast Financial Solutions Pty Ltd, in return for offering security over all of its assets and undertakings (including the Lease) under a General Security Agreement. The financier registered its security interest on the PPS Register.
Maiden Civil subsequently defaulted under the security agreement and receivers were appointed by the financier. The receivers asserted their rights to the 3 tractors as registered security holder, including those two still owned by QES. (1)
The outcome? The Supreme Court found in favour of the finance company, recognising their rights under the registered security interest, ahead of the unregistered rights of the legal owner, QES, who were ordered to deliver the tractors it had since repossessed, to the receivers.
As demonstrated in this case, the Act, can and will, be construed in such a way as to give priority to registered interest holders of a lessee or bailee, over the unregistered interests of the legal owner of the goods (the lessor or bailor).
Confused?
In order to understand how the Court could come to such a finding, it is helpful to understand a little more about the overall purpose of the Act.
The PPS Act ambitiously sets out to implement a central framework to register and record security interests in personal property – much like how the Torrens Title System acts as a central register in recording the interests and priority in real property (land) transactions.
In order to achieve this aim, a litany of separate legislation and registries throughout Australia, were abolished (such as those relating to intellectual property, aircraft, vehicles, etc.) and brought under the centralised PPS system.
In order to give certainty to those searching the register, property that is in the possession of another entity such as a lessee or bailee, under a Lease (or bailment) arrangement for a year or more, is caught under the PPS Act. To protect their interest, an owner must register it on the PPS register.
Continue to When and How does the PPS Act apply to you?
Footnotes:
1 Maiden Civil (P&E) Pty Ltd v Queensland Excavation Services Pty Ltd [2013] NSWSC 852.