Things you need to know about the Personal Property Securities Act

The Personal Property Securities Act 2009 (the PPSA) commenced on 30 January 2012. It affects almost all personal property – generally, this is anything other than land.

It does not just affect banks and lenders. If you are a manufacturer, supply goods on credit, lease equipment, operate a franchise or work on construction projects, then you need to understand these rules.

The PPSA deems many ordinary commercial arrangements to be a “security interest”. If you have a security interest and have not followed the process outlined in the PPSA, then you will lose your interest in the property.

For example:

‘Retention of title’ clauses, which are typically used by suppliers to retain title to their goods until payment is received, will now be treated as a ‘security interest’ under the PPSA. These will now need to be registered in order to have the same effect as before the PPSA.
Other ownership interests, such as ownership of leased assets, will in some cases be deemed to be ‘security interests’, and title to your equipment can be lost if appropriate steps are not taken under PPSA.

The following case studies illustrate these points.

Case Study 1

PurchaseCo grants an ‘all-assets security’ to BankCorp (i.e. the equivalent of a pre-PPSA ‘floating charge’). BankCorp registers this security interest immediately under the PPSA.

A month later, SupplyCo supplies goods to PurchaseCo on a retention of title basis. SupplyCo doesn’t register this, relying instead on the fact that it has explicitly ‘retained title’ to the goods.

PurchaseCo enters into receivership and SupplyCo wants to take back its goods.

Unfortunately for SupplyCo, it has an unregistered security interest. This means that because BankCorp has a prior registered security, it is able to take possession of all assets in Purchaser’s possession, including SupplyCo’s goods. This is regardless of the fact that title in the goods never passed to the PurchaseCo.

SupplyCo could have protected itself by registering its security interest.

Case Study 2

HireCo is in the business of leasing building equipment for large building projects. It hires out a crane to DeveloperCo on a long term basis and the crane is stored on DeveloperCo’s land. HireCo doesn’t register this – after all, it still owns the crane.

This is a risky move by HireCo under two scenarios:

1) DeveloperCo goes into liquidation. The crane will vest in DeveloperCo; that is, HireCo loses its ownership of the crane and it now belongs to DeveloperCo, whose creditors will enjoy the proceeds.

2) DeveloperCo sells the crane to NewBuyer, even though DeveloperCo doesn’t have an ownership interest to allow it to do so. The crane will belong to NewBuyer.

The main point – you must register your ‘security interest’ under the PPSA in order to retain ownership of your assets. If you don’t, you may lose your interest in the assets. This is the case even if you still legally own the assets – if they are in another person’s possession and you haven’t registered your security interest when you should have, you will lose them.

We can assist you to understand the opportunities and risks associated with this new regime. We can put in place the right documents and processes to protect your interests.

Call us on 1300 654 590 or email us if you would like to ensure that you retain you personal property and security interests.

The information contained in this post is current at the date of editing – 24 November 2023.

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