29 Jan The PPSA matters!
Transitional period ends 31 January 2014.
The Personal Property Securities Act 2009 (PPSA) came into force on 30 January 2012 greatly expanding the scope of transactions that constitute security interests in personal property. In particular, clients with ownership interests under retention of title arrangements, finance leases and certain operating leases and bailments now have ‘security interests’ which must satisfy specific requirements (for example, oral agreements will not be enforceable) and be registered on the Personal Property Securities Register (PPSR). Failure to do so could result in a client losing its rights to recover the property.
For example, a seller of goods who retains title to the goods until the buyer pays the purchase price has a security interest under the PPSA. Similarly, a lessor under an operating lease with a term of more than one year (or more than 90 days if the lease relates to a motor vehicle, aircraft or watercraft) also has a security interest. In addition, construction and other contracts that give one party a right to use property of another and sell that property upon default to recover a debt, have been found to constitute security interests. Clients with such arrangements should comply with the PPSA and register financing statements on the PPSR to ensure that such clients can claim this property in the event of non-payment.
Mining tenements are not personal property for the purposes of the PPSA: section 162A of the Mining Act 1978. Similarly a petroleum exploration permit, a geothermal exploration permit, petroleum production licence and a geothermal production licence are not personal property for the purposes of the PPSA: s152 of the Petroleum and Geothermal Energy Resources Act 1967.
This issue is particularly timely. A two year transitional period applies to security interests that were created prior to 30 January 2012. In PPSA terms, these security interests are “perfected” automatically throughout this transitional period which preserves their priority against other creditors until the transitional period ends. This two year ‘grace period’ gives holders of these security interests until 20:59 on Friday, 31 January 2014 (23:59 Canberra time) to register to continue this “perfected” status. Failing to register before this time means the security interest loses its perfected status which could result in clients losing priority and their rights to reclaim the property.
For example, if a client has sold goods to a customer under a retention of title arrangement, but fails to register on the PPSR, the client would not be able to reclaim the goods if the customer became insolvent, and the goods become available to satisfy the unsecured debts of the customer. The rights of an owner are no longer seen as paramount or ‘trumping’ any other competing interest in personal property. Under the PPSA, an owner who parts with possession of personal property (in certain circumstances) must register on the PPSR or it could lose those rights to other competing creditors.
How does this relate to the resources industry? Miners who part with possession of their product (such as gold or copper concentrate) by giving possession of the product to a transport company would not be able to reclaim the product if the transport company became insolvent unless registration under the PPSA has been perfected.
Get in touch with your regular contact at Hunt & Humphry for advice on your particular circumstances.