The Personal Property Securities Act 2009 (Cth) introduced a new system for determining priorities between security interests in personal property. The new system, which has now been in place for 3 and half years, includes a number of new concepts not previously used in Australian law. The PPSA regime is concerned with the substance of transactions, rather than the form, and this means that certain transactions that were not previously considered to be security arrangements can be caught by the PPSA.
One of the most prominent changes has been use of ‘deemed security interests’ under s12(3) of the Act. Perhaps the most controversial of these deemed security interests has been the PPS lease under s13, which provides that commercial leases and bailments that extend (or could extend) beyond 12 months are deemed security interests and must therefore be ‘perfected’ under the provisions of the Act. If a deemed secured party fails to perfect they may lose priority in the property and may lose their interest entirely if the grantor of the interest (usually the debtor) enters formal insolvency (see the vesting rule in PPSA s267).
However, a shorter rule has been included for what are called ‘serial numbered property’, which is defined in the PPS Regulations to include motor vehicles, certain IP rights and certain aircraft and watercraft. Under the current law, a commercial lease or bailment of serial numbered property may be deemed to be a security interest if the term of the arrangement could last for more than 90 days.
This has been highly controversial in the hiring industry who have lobbied for an exemption from the Act due to compliance costs. This rule is a reversal of the common law ‘nemo dat’ rule.
In 2014 the Government announced that it would amend the PPSA to remove the 90 day PPS lease category of deemed security interests, and this was supported by the recent Whittaker Review of the PPSA (March 2015). The change has now been implemented by the Personal Property Securities Amendment (Deregulatory Measures) Bill 2014, which has passed both houses of parliament and received Royal Assent on 25 June 2015. It will commence on a day to be proclaimed, but that day must be no longer than 6 months.
This is the first substantial change to the PPSA since it was introduced (although a minor change to the definition of motor vehicle was included in the PPS Regulations in 2014). The Government has yet to respond to the Whittaker Review, which has made some 400 recommendations, so there may be more changes to come.
Story by: Jason Harris, UTS:Law Senior Lecturer
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