Despite commencing on 30 January 2012, the implications of Personal Property Securities Reform have not been fully understood by the business community.

The transition
We are half way through the transition period allowed for pre-30 January 2012 security interests to be transferred to the new PPS Register without loss of priority.

If you had a security registered on any of the registers replaced by the PPS Register (eg ASIC, REVS) and it was not transferred to PPSR it must be registered by 29 January 2014 to retain the original creation date priority.

If you have a security interest created before 30 January 2012 which was not previously required to be registered you have until 29 January 2014 to register it. But if there is another “transitional security interest” over those assets which is already registered it may have priority.

Whilst retention of title interests created before 30 January 2012 can be registered until 29 January 2014 they will not apply to goods delivered after 30 January 2012. Goods delivered after 30 January 2012 will not be protected under a retention of title agreement unless that agreement was registered on PPSR.

New types of security
Before PPSR the supply of goods on credit involving retention of title (Romalpa clauses), by consignment and equipment leases were not capable of registration.

Nor were a variety of other arrangements when a business gave possession of its property to someone else.

Even if a business is not transferring ownership, when it allows a consumer or another business to have possession of its goods you should consider registering your interest in those goods (depending on the particular transaction).

Risks under PPSR
There are 2 major risks under PPSR:

1. the risks of not registering a security interest: if a business does not register its interest in the goods it risks losing its claim against another creditor of the customer. Or it could lose its rights if the customer sells the goods to a third party. Or if the customer becomes insolvent.

2. Even if you register your interest it must be correctly registered claiming the correct type of security interest for the correct type of collateral class.

If you haven’t reviewed your business activities for PPSR implications, call your local Langes representative now.

Here’s a video from the PPS Registrar

In the matter of Barclays Bank plc [2012] NSWSC 1095 Judge Black of the New South Wales Supreme Court made an order pursuant to section 588FM of the Corporations Act 2001 extending the time for registration of a security interest granted to Barclays Bank by a customer over certain trade marks and other property.

The security had not been registered within 20 business day period after the security agreement took effect as required by section 588FL(2) due to the error of a solicitor in the United Kingdom and a lack of understanding by the client of its significance.

Barclays provided a UK £8 million term loan facility to a UK publicly listed company, Sportingbet plc, in January 2012. The facility agreement contemplated that companies within the Sportingbet group, including the Australian company now known as Centrebet International Pty Ltd (“Centrebet”), would agree to the facility agreement and grant additional security by 24 April 2012.

Barclays were advised by their Australian lawyers of the 20 business day registration period but a financing statement was not registered until 9 August 2012. The UK solicitor gave evidence that she did not then appreciate the potentially serious consequences of non-registration within the 20 business day period.

The customers did not oppose the application. The court was provided with financial information relating to Centrebet for the period between 23 May 2012 (the end of the 20 business day registration period) to 9 August 2012 (the date of registration of the relevant security interests) (“relevant period”). A letter from a director of Centrebet indicated that, during the relevant period, there had been no material change in Centrebet’s financial position; Centrebet had not granted any security to any other creditor other than security that may have arisen by statute or law as a result of its normal business operations; and Centrebet had not incurred any debt of a material amount.

Judge Black stated:

“I am satisfied that the failure to register the relevant security interests in this case was due to inadvertence, which includes being not properly attentive, or failing, in this case, to understand the requirement to lodge notice of a security interest within the specified period and the consequences of failure to do so….

I consider that the delay of some two months between the last day of the 20 business day period and the date of registration is not a particularly long period…

The fact of demonstrated solvency of Centrebet and that no other security interests were registered, and the absence of any indication of any risk of winding up or administration in respect of Centrebet, are also highly relevant matters, and assist the court to conclude that late registration “will not disturb or affect an accrued or accruing rights meriting consideration” and support the making of the relevant order…

An extension of time may …be granted on terms that it is without prejudice to the rights of any person who has, between the date the security interest was granted and the date of registration, obtained any security over the assets subject to the security interest…. I …do not consider that such a condition is necessary or appropriate in this case, given the evidence of Centrebet’s financial position and that it has not granted a security interest other than arising by operation of law in the ordinary course of business in the relevant period. In my view, it is a proper case to make the orders sought unconditionally”

The liquidators of ‘Kar Land Pty Ltd trading as ‘We Buy Any Cars’ have confirmed the position of unpaid sellers who have not registered their security interest on the PPS Register has not changed:

Customers – who have sold cars to the company
We understand that there are a number of people who have sold cars to the company and have not been paid. With the liquidation of the company, your claim will be a ‘unsecured debt’ in the company. Please note that regrettably you do not have the right to reclaim your car, only an entitlement to a dividend in the liquidation.

Whilst businesses are slowly getting the message that a retention of title security interest must be registered on the PPS Register (for example WOW Sight and Sound), consumers are even less prepared.

According to the Courier Mailabout 1200 consumers across the country are collectively owed more than $3.6 million.