1. Aspects of the Personal Property Securities Act and Register Operations October 2012 Jeanette Franicevich, Business Officer – PPSR, ITSA

2. Outline Overview and purpose of PPS reform Key concepts PPS Register
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Some people think they don’t need to worry about the PPSA because they have consumer goods. Others have said that they don’t need to worry because they only deal with corporations.

3. What is personal property?
In summary, personal property includes all kinds of property, tangible and intangible except:
Land and fixtures; and
Certain rights, entitlements and authorities granted under Cth, State and Territory law (eg water rights)
Some people think they don’t need to worry about the PPSA because they have consumer goods. Others have said that they don’t need to worry because they only deal with corporations.
But, in general, “personal Property” includes of property, tangible and intangible except, land and fixtures; and certain rights, entitlements and authorities granted under Cth, State and Territory law tha have been excluded from the PPSA (eg water rights).
Crops are not fixtures more detail later.

4. What is a security interest?
Traditional security interests
Eg a fixed/floating charge, chattel mortgage
In substance security interests
Retention of title (ROT)
Hire purchase
Deemed security interests
PPS lease
Commercial consignments
The Act defines a security interest as “an 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).”
In substance – doesn’t matter what call it if the interest is in personal property and it “secures payment or performance of an obligation” . It includes ROT, more detail later.
The Act goes further and provides for “deemed” security interests. Deem security interest don’t need secure payment or performance of an obligation – they are taken to be security interests. Examples include a PPS Lease – lease of property that runs for more than a year, or more than 90days for serial numbered goods. So these leases are security interests as are commercial consigments.

5. Where we’ve come from – PPS laws
Liens On Crops Of Sugar Cane Act 1931 (Qld)
Major Sports Facilities Act 2001 (Qld)
Circuit Layouts Act 1989 (Cth)
Manufactured Homes (Residential Parks) Act 2003 (Qld)
Motor Vehicles and Boats Securities Act 1986
Partnership Act 1891 (Qld)
Police Powers and Responsibilities Act 2000 (Qld)
Property Agents and Motor Dealers Act 2000 (Qld)
Property Law Act 1974 (Qld)
Sale Of Goods Act 1896 (Qld)
Second-Hand Dealers and Pawnbrokers Act 2003 (Qld)
Storage Liens Act 1973 (Qld)
Transport Operations (Road Use Management) Act 1995 (Qld)
Bills Of Sale Act 1886 (SA)
Consumer Credit (South Australia) Act 1995 (SA)
Co-operatives Act 1997 (SA)
Criminal Law (Clamping, Impounding and Forteiture of Vehicles) Act 2002 (Vic)
Natural Resources Management (Water Management and Other Matters) Amendment Act 2007 (SA)
Partnership Act 1891 (SA)
Second-Hand Vehicle Dealers Act 1995 (SA)
South Australian Meat Corporation Act 1936 (SA) )
Stock Mortgages And Wool Liens Act 1924 (SA)
Unclaimed Goods Act 1987 (SA)
Plant Breeders’ Rights Act 1994 (Cth)
Workers’ Liens Act 1893 (SA)
Commercial Arbitration Act 1984 (Vic)
Consumer Credit (Victoria) Act 1995 (Vic)
Warehouse Liens Act 1990 (SA)
Bills Of Sale Act 1899 (WA)
Bulk Handling Act 1967 (WA)
Consumer Affairs Act 1971 (WA)
Consumer Credit (Western Australia) Act 1996
Cooperative and Provident Societies Act 1903 (WA)
Chattel Securities Act 1987 (WA)
Disposal of Uncollected Goods Act 1970 (WA)
Hire Purchase Act 1959 (WA)
Motor Vehicles Dealers Act 1973 (WA)
Partnership Act 1895 (WA)
Pawnbrokers and Secod-Hand Dealers Act 1994 (WA)
Property Law Act 1969 (WA)
Road Traffic Act 1974 (WA)
Goods Act 1958 (Vic)
Goods Securities Act 1986 (SA)
Sale Of Goods Act 1895 (WA)
Settlement Agents Act 1981 (WA)
Trustees Act 1962 (WA)
Warehousemans’ Liens Act 1952 (WA)
Bills Of Sale Act 1900 (Tas)
To help in understand the benefits of the PPS regime, it is useful to outline where we’ve come from.
Firstly, there were an overwhelming number of different Acts that deal with Personal Property Securities.
There were over 70 Commonwealth, State and Territory Acts that regulate the taking of security interests in personal property in Australia today.
Many of these Acts regulate only a very small number of goods and they provide for significantly different rules as to what must be done to make the security an effective one. Take a moment to look at just how many Acts you have to consider if, for example, you wanted to provide credit to a party that was offering you a security interest in different types of property that was located throughout Australia.
Oh and despite the really small print, this is just page 1, but it is a useful way to demonstrate the plethora of legislation that lawyers, financiers and others were dealing with on a day-to-day basis.

6. Where we’ve come from – PPS laws (cont)
Building Act 2000 (Tas)
Consumer Credit (Tasmania) Act 1996
Cooperatives Act 1999 (Tas)
Disposal Of Uncollected Goods Goods Act 1968 (Tas)
Factors Act 1891 (Tas)
Homes Act 1935 (Tas)
Motor Vehicle Securities Act 1984 (Tas)
Building and Construction Industry Security of Payments Act 1999 (NSW)
Payments Act 1999 (NSW)
Tribunal Act 1998 (Vic)
Warehousemens’ Liens Act 1958 (Vic)
Agricultural Chemicals Distribution Patents Act 1990 (Cth)
Credit Act 1984 (NSW)
Consumer Credit (New South Wales) Act 1995 (NSW)
Duties Act 2000 (Vic)
Fair Trading Act 1999 (Vic)
Fisheries Act 1995 (Vic)
Conversion of Securities Adjustment Act 1931 (NSW)
Conveyancing Act 1919 (NSW)
Duties Act 1997 (NSW)
Factors (Mercantile Agents) Act 1923 (NSW)
Partnership Act 1892 (NSW) )
Payments Act 2002 (Vic)
Chattel Securities Act 1987 (Vic)
Pawnbrokers And Second-Hand Dealers Act 1996 (NSW)
Petroleum (Onshore) Act (NSW)
Building And Construction Industry Security Of Credit Act 1984 (Vic)
Sale Of Goods Act 1895 (SA)
Second-Hand Dealers and Pawnbrokers Act 1996 (SA)
Co-operatives Act 1996 (Vic)
Fines Act 1996 (NSW)
Impounding Act 1993 (NSW)
Confiscation Act 1997 (Vic)
Disposal Of Uncollected Goods Act 1961 (Vic)
Domestic (Refal and Nuisance) Animals Act 1994 (Vic)
Co-operatives Act 1992 (NSW)
Co-operatives Housing and Starr-Bowkett Societies Act 1998 (NSW)
Forestry Rights Act 1996 (Vic)
Legal Practitioners Act 1968 (SA)
Finance Brokers Control Act 1975 (WA)
Fines, Penalties and Infringement Notices
Partnership Act 1891 (Tas)
Penalty Unites and Other Penalties Act 1987
Motor Car Traders Act 1986 (Vic)
Partnership Act 1958 (Vic)
Property Law Act 1958 (Vic)
Road Safety Act 1986 (Vic)
Sale of Goods (Vienna Convention) Act 1987 (Vic)
Second-Hand Dealers and Pawnbrokers Act 1989 (Vic)

7. Where we’ve come from – PPS laws (cont)
Transport Act 1983 (Vic)
Trustee Act 1958 (Vic)
Designs Act 2003 (Cth)
Victorian Civil and Administration
Control Act 1966 (Qld)
Bills of Sale and Other Instruments Act 1955 (Qld)
Legal Aid Commission Act 1979 (NSW)
Mining Act 1992 (NSW)
Offshore Minerals Act 1999 (NSW)
Warehousemans’ Liens Act 1935 (NSW)
Water Management Act 2000 (NSW)
Cooperatives Act 1997 (QLD)
Credit (Rural Finance) Act 1996 (Qld)
Pharmacy Practice Act 2006 (NSW)
Sale Of Goods Act 1896 (Tas)
Second-Hand Dealers and Pawnbrokers Act 1994 (Tas)
Corporations Act 2001 (Cth)
Consumer Credit Act 1995 (ACT)
Cooperatives Act 2002 (ACT)
Credit Act 1985 (ACT)
Instruments Act 1933 (ACT)
Hemp Fibre Industry Facilitation Act 2004 (ACT)
Pawnbrokers Act 1902 (ACT)
Conversion Act 1921 (Cth)
Loans Securities Act 1919 (Cth)
Public Trustee Act 1985 (ACT)
Road Traffic Act (NT)
Uncollected Goods Act 2004 (NT)
Offshore Petroleum Act 2006 (Cth)
Shipping Registration Act 1981 (Cth)
Warehouseman's Liens Regulations 2007
Chattel Securities Regulations 1997
Copyrights Act 1968 (Cth)
Co-operatives Regulations 1997
Instruments (Fees) Regulations
Bills of Sale (Fees) Regulations 1995
Bills of Sale (Requirements as to Instruments) Regulations 1995
Public Trustee Act 1941 (WA)
Rights in Water and Irrigation act 1914(WA)
Goods Securities Regulations 1997
Registration Of Interests In Motor Vehicles And Other Goods Act 1983 (NT)
Sale Of Goods Act 1972 (NT)
Cooperatives Regulationsa 2003
Co-operatives Regulations and Admiralty Act 1988 (Cth)
Trade Marks Act 2995 (Cth)
Air Navigation Act 1920 (Cth)
Australian Industry Development Corporation Act 1970 (Cth)
Commonwealth Inscribed Stock Act 1911 (Cth)
Mercantile Law Act 1962 (ACT)
Partnership Act 1963 (ACT)
Fisheries Management Act 1991 (Cth)

8. Where we’ve come from – PPS laws (cont)
Loans Securities Redemption and
Offshore Minerals Act 1994 (Cth)
Warehousemen's Liens Act (NT)
Motor Dealers Regulations
Taxation Administration Act 1953 (Cth)
Treasury Bills Act 1914 (Cth)
Wool International Act 1993 (Cth)
Traffic Act (NT)
Bills of Sale (Fees) Regulations 1983

9. Where we’ve come from - Registers
The Register (Chattel Securities Act 1987 (WA))
Register of Patents (Cth)
Register of Co-operative Charges (NSW)
Register of Encumbered Vehicles (REVS) (NSW)
State Offshore Mining Register (NSW)
Australian Register of Ships (Cth)
Register of Designs (Cth)
The Register (Motor Vehicle Securities Act 1984 (Tas))
Register (Bills Of Sale Act 1886 (SA))
Register of Co-operative Charges (SA)
The Register (Goods Securities Act 1986 (SA))
The Register (Liens On Fruit Act 1923 (SA))
Registry Book (Bills Of Sale Act 1899 (WA))
Register of Cooperative Charges (Tas)
Register of Trade Marks (Cth)
Register of Co-operative Charges (Vic)
Register of Cooperative Charges (ACT)
The Register (Bills Of Sale Act 1900 (Tas))
Register of Co-operative Charges (NT)
Fisheries Act (Vic)
Registrar-General to collate (Instruments Act 1933 (ACT))
Land Titles Registry and General Registration Office (NT)
Register of Charges for Co-operative housing bodies (NSW)
Register of Plant Breeder’s Rights (Cth)
The Register (Stock, Wool And Crop Mortgages Act 1930 (Tas))
Register of legal and equitable interests in petroleum titles (NSW)
General Register of Deeds (Registration of Deeds Act 1957 (ACT))
Register under Registration of Interests in Goods Act 1986 (NSW)
Australian Register of Company Charges (Cth)
Register of Interests in Motor Vehicles and Other Goods (NT)
Register of Liens (Liens on Crops of Sugar Cane Act 1931 (Qld))
Vehicle Securities Register (Chattel Securities Act 1987 (Vic))
Register of mortgages of mineral development licences (Vic)
Register of Security Interests (Bills of Sale and Other Instruments Act 1955 (Qld))
Register of Liens on Crops, Register of Liens on Wool and Mortgages of Stock (Vic)
Register of legal and equitable interests in exploration licences, assessment leases and mining leases (NSW)
Register of Security Interests (Motor Vehicles and Boats Securities Act 1986 (Qld))
Register of authorisations (Fish Resources Management Act 1994 (WA))
General Register of Deeds (Security Interests in Goods Act 2005 (NSW))
This is a list of the Registers in Australia that dealt with personal property securities. It doesn’t fill a page, but there are plenty of them.

10. Past approach Numerous Acts and registers Lack of a uniform approach
To summarise - There were 70 laws at the Cth and State/Territory level, 40 registers administered by 30 separate departments and agencies.
That shows the importance of personal property securities in the economy, but also that it was fragmented and complex. What law applies to the transaction will very depending on the type of collateral, where it is located, whether the grantor is a company or an individual, and the structure of the transaction (mortgage, charge or pledge). This created high transaction costs and which may discourage lenders from accepting personal property as security.
The reforms are designed to increase certainty and consistency and reduce costs and complexity by introducing a single, national set of rules and single place for registering and searching security interests in personal property.

11. A single Act and a single national register
Key benefits of reform
A one-stop-shop
A single Act and a single national register
New Concepts
New Ideas
New Terminology
The key objective of the PPS reform is to have a one-stop shop – one Act and one register.
This should make it easier for businesses to use personal property to obtain finance, which will have flow on effects for growth and productivity.
As most of you know reform along those lines has already occurred in a number of jurisdictions, notably in North America and New Zealand.
As the slide says, there is a lot of new things in this space – new concepts, new ideas, new terminology.
So let’s get started.

12. Fundamental concepts
Secured party
Security interest
Collateral
Grantor
A secured party takes a security interest in collateral that a grantor has an interest in
On screen we have a depiction of the most common scenario.
Secured party – is the person who has the security interest. Commonly they would be the lender but they might also be a supplier or a lessor.
We’ve covered what a security interest is an interest in relation to personal property that, in substance, secures payment or performance of an obligation.
Collateral: Means the personal property to which the security interest attaches. For technical reasons under the Act it also means the property described in a registration on the register. In most cases those things overlap.
Grantor: is the person who has the interest in the personal property to which a security interest is attached. Most often they would be the person that owes payment (ie borrower) or has the obligation that the security interest secures, but they need not be.

13. Three steps to ‘Perfection’
Perfection of a security interest requires:
Attachment
Enforceability v grantor
Enforceability against 3rd parties
Attachment plus possession or written security agreement
Registration/possession
(not necessarily in that order)
* Security interests in some types of property can be also perfected by ‘control’
A perfected interest is the best kind security interest, because if your security interest is perfected it will win in a priority contest with an unperfected.
In order to perfect a security interest you must have: attachment, enforceability against 3rd parties and an extra step to protect the interest, this could be through registration, possession or control.
So an SI will attach to collateral when the Grantor has right in the collateral and either value is given for the security interest, or the Grantor does and something by which the security interest arises. Once the SI is attached to the collateral it is enforceable as against the Grantor. In most cases this occurs when the grantor and SP enter into a security agreement.
In order for the SI to be enforceable against third parties, a SP must have possession or control of the collateral or there must be a written security agreement in place which covers the collateral.
Finally the interest must be in the control or possession of the SP (particular definitions in the Act) or registered. Registration is likely to be the most common. Perfect v unperfected – Perfected v perfected, generally which ever interest was perfected first, not if the interest that was perfected later is a PMSI because it has a super priority.

14. Other key terms (contd)
Proceeds
Transitional Security Interest
Migrated Security Interest
PMSI
PMSI: Purchase money security interest – is a special type of security interest. As you would expect from the name it is a security interest taken to secure the repayment of purchase moneys. Deemed security interests such as PPS leases and commercial consignments have PMSI status. The big advantage of a PMSI is that is has a ‘super priority’. Even if a lender has a security over all the assets of a borrower, and has that registered, a later PMSI will take priority. The policy reason for that is that a PMSI lender has enabled the acquisition of the asset.
Proceeds: Generally security agreement will give the secured party an interest not only over the collateral, but also over any other property that is derived from a dealing in the collateral. For example, if the collateral is sold, the proceeds would extend to the cash or cheque received in return. Or where the collateral proceeds could include the wool once it is shorn, if the products are identifiable or traceable it.
Transitional security interest – These are security interests existed, or are created under a security agreement that was created prior to RCT. Generally speaking these interests enjoy a two year period of temporary perfection to allow secured parties an opportunity to register these interests.
Migrated security interest: a security interest that was migrated from one of the old registers. Eg interests that were registered on the ASIC Register of Company Charges have come across to the PPSR.

15. Focus on retention of title
Retention of title sales are security interests that are registrable on PPSR
Registration
Not compulsory but there are benefits to registering
Generally a PMSI (in respect of supplied goods)
*consider seeking professional advice on ROT documentation and registration issues
A big change with the Act is that ROT is security interest.
Under the new Act you can’t rely on title. As a seller, if your purchaser becomes insolvent, you can lose your interest in the goods if it isn’t registered.
Nothing in the Act requires you to register – it is a commercial decision for you. Depending on the counterparty, you may decide the risk of default is so slight as to make it unnecessary.
But if you do decide to register there are benefits over the current situation. As you probably know, whether an ROT will stand up in insolvency is a bit hit and miss. Under the new rules, if you do register, you get significant advantages that were very hard to achieve under the previous laws:
The security interest survives even if the goods become accessions to other goods (s88);
The security interest continues to operate even if your goods are used to make other goods; (s 99) – co-mingling
The security interest extends to proceeds, if they proceeds can be ‘traced’ in the hands of the purchaser (see sec 62).
These advantages operate even if your ROT terms don’t mention them – they work as a matter of law.
A word of warning though – if an ROT clause purports to secure all monies – not just the payment for the goods supplied – there is a legal question around whether that is a valid PMSI. Until that issue is sorted out, you may need to exercise caution in claiming you have a PMSI. I can’t give you detailed advice on that – you may wish to seek some legal advice on how you do the documentation and whether you register.
Important to seek independent advice on existing terms of trade which previously relied on a retention of title arrangement to ensure compliance with the PPS Act.
As a general rule, it is not necessary to register every supply – you will just register the one arrangement you have with a customer for the one fee and that will cover all future supplies – but you need to get advice on how to structure these terms of trade.

16. Focus on Agriculture Agriculture
Livestock
Crops
Special Rules for agricultural interests
Attachment
Priority interests
Security interests in crops and Interests in land
Agriculture is livestock or crops. Livestock means, while they are alive— animals including cattle, sheep, fish, poultry, sheep, swine; the unborn young of those animals; and the products of livestock before they become proceeds (for example, the wool on a sheep’s back before the sheep is shorn). Crops means crops that have not been harvested, it doesn’t matter whether they are matured or not or whether they are naturally grown or planted.
Special Rules : SI in a crop can attach while the crop is still growing.
Perfected security interest in crops and livestock will have priority over other perfected security interests if, it is granted for value and enabled, the crop to be grown or, the livestock to be fed or developed and the security agreement was made within a particular time frame for example while the crop was growing.
A security interest in crops will not affect the rights of a lessor or mortgagee of land on which the crops are growing unless
security interest was existed at the time the those rights were created or
the lessor or mortgagee consented in writing to the creation of the security interest.

17. Privacy and consumer protection
restricted details about individual grantors
Authorised purpose to search against individual grantor
Motor vehicles –NEVDIS information
The Register is designed to protect consumers in a number of ways and there are also privacy protections built into the legislation.
Privacy – restricted details about individual grantors. For example, some types of property (cars, boats and aircraft) must be registered by serial number in consumer transactions and no details of the individual grantor are recorded.
You must have an authorised purpose to search against individual grantor’s name. A person searching for any registrations in which the person is registered as a secured party or grantor,
A person searching for a particular registration for a purpose related to a security interest attached to the collateral described in the registration,
A person searching because they are considering extending credit or engaging in financial dealings with the grantor concerned,
The Registrar for the purposes of administering the Act,
Insolvency administration,
A legal personal representative exercising their functions as such,
Certain government entities for law enforcement purposes.
Inclusion of NEVDIS information about motor vehicles – this includes the make and model and whether the car is recorded as stolen or written off. This provides a complete picture of the car to assist buyers.
‘non security interest’ registrations – other interests which may prevent the owner or person purporting to be the owner from dealing in the property (such as ‘hoon liens’ and property subject to proceeds of crime orders

18. Taking free provisions
Unperfected security interests
Ordinary course of business
Personal, domestic or household property (the ‘garage sale’ exemption)
The Act sets out a number of circumstances in which someone who buys property takes it free of any security interest in that property (even where the security interest has been perfected). These rules are designed to protect innocent purchasers for value.
Buyer for value takes free of any unperfected security interest in the property unless the buyer was a party to the transaction which created the security interest
A person who buys a motor vehicle where a search of the Register on the day before the sale would not have disclosed a registration against the correct serial number – for example, where the VIN was recorded incorrectly. For other property which must be described on the Register by serial number, the same rule applies if a search immediately before the time of the sale would not have disclosed the registration.
A person who buys property from someone in the ordinary course of the seller’s business will take the property free of any security interest in that property. For example, furniture bought from a furniture store – it is in the ordinary course of that store’s business to sell furniture. However, buying second hand furniture from some other type of business (eg a business which has renovated and decides to sell off its old furniture) will not attract this protection.
A person who buys property which will be used predominantly for personal, domestic or household purposes will take it free from any security interests in that property if the market value is less than $5000.

19. The PPS Register Available online 24/7 Public noticeboard
Fees determined on a cost recovery basis
Easy to use and follows the legislation
Available online 24 hours a day, 7 days a week
High availability important as it is a register of priorities, registration will be the most common form of perfection and priority results from perfection
Public access – noticeboard – public interest in ensuring unfettered access to security interests. Important to understand the Register acts as a ‘noticeboard’ – doesn’t of itself determine the validity of a security agreement, that validity or otherwise will be determined on the quality of the underlying agreement between the parties.
Flexibility
Different access channels
Users can manage their own access (accounts, roles and permissions)
Fees determined on a strict cost recovery basis (currently $3.70 to search and $7.40 to register for up to 7 years)
Easy to use and follows the legislation – difficult to make mistakes if you have all the right information to complete a financing statement – for example:
In the case of a financing statement which covers a motor vehicle which is consumer property, the Register will prompt for the relevant serial numbers AND only allow the registration to be made for a maximum of 7 years AND it will not allow for the addition of the individual grantor’s details
In the case of a secured party which is a body corporate, the Register will display the hierarchy of identifiers to ensure the applicant chooses the correct one from the list
When registering a transitional security interest, the Register will ask you to identify it as such – this prevents you being charged for the registration as the Act provides for these registrations to be free of charge
The default position under the Act is that proceeds are covered by a registration unless the security agreement provides otherwise – this default position is built in to the registration process

61. www.ppsr.gov.au enquiries@ppsr.gov.au 1300 007 777
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Disclaimer: This presentation provides general information about the operation of the PPS system and does not constitute legal advice.