Putting aside the mechanics of migration from previous registers and how security interests are registered, searched and discharged, it is critical to understand that the PPSA is not limited by the names of particular transactions and is not restricted to particular industries.

This is reflected in the fact that over 600,000 security interests were registered in the first 60 days after 30 January 2012 in addition to the 6.3 million security interests migrated from existing registers or pre-loaded.

As the PPSA has regard to substance over form and contemplates the registration of security interests not previously registrable it is likely that the first disputes will involve determining priority between competing security interests.

In deciding PPSA disputes title and equitable principles are not relevant.

Once it is determined that the PPSA applies to a security interest, Section 55 PPSA sets out default priority rules.

An indication of how priority may be decided can be obtained from the Canadian case of Bank of Montreal v. Innovation Credit Union, 2010 SCC 47.

James Buist, a Saskatchewan farmer, obtained a loan from Innovation Credit Union. In order to obtain this loan, he provided the Credit Union with a security interest governed by the PPSA in all of his present and after-acquired personal property pursuant to a security agreement dated October 7, 1991. The Credit Union did not register this security interest until June 28, 2004.

The Bank of Montreal, between 1998 and January 2004, took Bank Act security over much of the same property. The farmer, however, did not disclose either the Credit Union’s loans or its security interest and the Bank’s searches of both the PPSA and Bank Act security registries disclosed no prior security interests. After the debtor defaulted, the Bank seized and sold some of his property covered by its security.

The Credit Union brought an application pursuant to the Canadian PPSA seeking a declaration that it had a priority claim over the proceeds of the disposition. The Supreme Court of Canada held that the first-in-time PPSA security interest had priority over the Bank Act security because the Bank acquired no greater interest than the debtor had at the time the Bank Act security was taken. At the time that the Bank of Montreal took its Bank Act security, the debtor had already given the Credit Union a security interest in that collateral under the PPSA. The Supreme Court decided that the Bank’s security interest was therefore subject to the Credit Union’s prior interest, regardless of the fact that the latter was unperfected.

Langes can advise you on registration of security interests as well as priority and enforcement issues under the PPSA. Contact your local office.

• Lease and Bailment fact sheet;
• Farming and Agriculture fact sheet;
• Hire and Rental industry fact sheet;
• Artists fact sheet.

A list of the approved forms is available here.

As the charges listed missed the pre-commencement migration, the charges must be registered on the PPS Register by or on behalf of each secured party. That registration can be done at no cost up to and including 31 January 2014. If you have taken company charges as security you should check the list to see if any of your securities are on it.

Otherwise all ASIC current company charges should be searched for using the PPS Register, not the ASIC Register.

Similarly all new company charges should now be registered on the PPS Register.

Registration of discharges of company charges must now be done online: ASIC form 312 is no longer relevant.

Migration of ASIC Charges involved other problems:

• During the Data Migration process ASIC charges were migrated with ABNs rather than ACNs in the majority of cases. The register expected to receive ACN’s. The PPS Register has advised users to undertake searches on ABN, ACN and organisation name. The Register has published a PDF list of all migrated ABNs and their corresponding ACNs to assist users who do not have the ABN to more easily locate the ABN to search PPSR.
• Charges registered on the ASIC register of company charges with more than one chargee (secured party) were migrated to PPSR with only one secured party in the secured party group (SPG). Proposed solution.
• Charges discharged on the ASIC register after the initial data load from ASIC have been migrated to PPSR (i.e. they appear on PPSR as current charges). Until a fix is effected Secured Parties can discharge these registrations on PPSR themselves, which does not incur a fee.

Bank of Western Australia Limited v National Australia Bank Limited [2011] QSC 379 considered a dispute between Bankwest and NAB about funds deposited with NAB by the second defendant Cabarita who had borrowed from Bankwest and given it a fixed and floating charge over its assets in June 2008. Part of the loan was deposited by Cabarita with NAB as security for a guarantee for a loan to a related company. Bankwest claimed that its charge became a fixed charge over these deposits (because the guarantee by Cabarita to NAB was a breach of its agreement with Bankwest) and that NAB must account to it for the funds.

Cabarita had agreed with NAB in August 2008 that the term deposits need not be repaid by NAB whilst Cabarita remained liable as a guarantor for the related company and that NAB could set-off the debt under the guarantee against NAB’s liability to Cabarita for the term deposits. NAB applied the term deposits towards that debt by terminating the deposits.

Bankwest failed in its claim because its floating charge did not become fixed until Cabarita gave the guarantee to NAB.

Under PPS, the highest level of perfection of a security interest over a deposit is control, that is where a lender has the deposit in its own financial institution. But even if the deposit is with another financial institution the security interest can still be registered.

PPS does not recognise “fixed” and “floating” interests: it introduces new priority rules based on control and registration.

Bankwest would have been in a different position if its security interest was registered in priority to NAB. But that would have affected Cabarita’s financial arrangements.

Only people with a genuine purpose for searching personal property securities may search the Register. The Act contains a list of persons who may search the register, and for what purposes: Section 172(2).

Persons who undertake a search on the Register in relation to an individual will be required to make a declaration that they are undertaking a search for an authorised purpose.

There are serious consequences for undertaking an unauthorised search on the Register:
• Civil penalties may apply (maximum of approximately $5,500 per unauthorised search by an individual, or $27,500 per unauthorised search by a body corporate)
• Parties who suffer loss or damage may recover damages from the person who undertook the search; and
• The unauthorised search is an interference with the privacy of an individual under section 13 of the Privacy Act 1988.

The Act requires that certain collateral must be described on the Register by serial numbers. Requiring collateral types used for consumer purposes to be described by serial number promotes privacy protection, as such property would be identifiable on the Register by the serial number alone, and not by the grantor’s name.

A serial number search should be conducted if the collateral is:
• consumer property;
• is a motor vehicle or watercraft or aircraft; and or
• certain kinds of intangible property (designs, patents, plant breeder’s rights and trade marks).

However, when registering a motor vehicle as commercial property, the user has the choice of registering it with or without a serial number. Regardless of which choice the user makes, the grantor details are mandatory. The details are the grantor’s name and date of birth. If the grantor is a company, it will be identified by its ACN only.

Registrations on the Register will also include data about the secured party, such as the secured party’s identifier and address for service. But it will not be possible to search the Register against the details of the secured party.

Security interests which were previously registered on the following registers were migrated to the national PPS Register:

Commonwealth
•Australian Register of Ships (mortgages only)
•ASIC – Register of Company Charges (including provisional charges)
•Fisheries Register

New South Wales
•Register of Encumbered Vehicles (REVS NSW)
•Security Interest of Goods Register:
•stock mortgages originally registered under the Liens on Crops and Wool and Stock Mortgages Act 1989
•Bills of Sale from 1 January 2000
•current crop mortgages and all other interests registered under the Security Interests in Goods Act 2005
•Register of Co-operative Charges

Queensland
•Register of Encumbered Vehicles (REVS Qld)
•Bills of Sale Register (including Register of Liens on Crops of Sugar Cane)
•Register of Co-operative Charges

South Australia
•Vehicle Securities Register
The following registers maintained by the General Registry Office:
•Bills of Sale Register
•Stock Mortgages and Wool Liens Register
•Liens on Fruit Register
•Register of Co-operative Charges

Tasmania
•Register of Vehicle Security Interests
•Register of Bills of Sale, Stock, Wool and Crop Mortgages and Co-operative Charges

Victoria
•Vehicle Securities Register
•Register of Liens on Wool and Stock Mortgages (stock mortgages only)
•Register of Co-operative Charges

Western Australia
•Register of Encumbered Vehicles (REVS WA)
•Bills of Sale Register

Australian Capital Territory
•Register of Encumbered Vehicles (REVS ACT – from REVS NSW)
•General Register of Deeds and Instruments
•Register of Co-operative Charges

Northern Territory
•Register of Interests in Motor Vehicles and Other Goods (REVS NT – from REVS NSW)
•Lands Titles Registration and General Registry Office (Bills of Sale and stock mortgages)

If your existing security was on a register but was not migrated you have 24 months to register it on PPSR.

Any new security interests must be registered on the PPS Register to have priority against other creditors.

You can also now register many security interests which were not previously registrable eg reservations of title or equipment leases.

If you are a business which supplies goods on credit or provides credit for the purchase of goods and you are not sure whether you have a security interest which can be registered look at our security interest analysis or contact Langes for further information.

What are the rules for a company charge under PPSA?

Under changes to the Corporations Act which commence on 30 January 2012, when a company grantor is being wound up, an administrator appointed, or a deed of company arrangement executed (“the critical time”), any PPSA security interest which was perfected, registered or enforceable against a third party after the latest of:
a. six months before the critical time; or
b. 20 business days after the security agreement came into force;
c. a later time ordered by the Court under section 588FM;
would vest in the company and be available to creditors (section 588FL).

The Personal Property Securities Act does not generally impose any obligation to register a security interest at all or within a particular period of time. The PPSA also will not require a copy of a charge to be lodged.

Of course if a security interest is not promptly registered the secured party may lose priority against third parties or on the insolvency of the grantor. And a Purchase Money Security Interest must be lodged within 15 business days.

If you are taking a company charge as security it is critical to make sure it is registered on the PPS Register within 20 business days (15 business days if it is a Purchase Money Security Interest).

Here is a very brief (3 mins 45 seconds) recap on Personal Property Securities.

You can see a full size version here

You can see a list of our previous notes here.

All current registered charges will be migrated to the new PPS Register. But ASIC has advised that if a charge was registered provisionally with ASIC, whilst it will be transferred to the PPS it will be regarded as a transitional security interest which must be registered within 24 months to retain the original creation date.

All historical charge information e.g. charges that have been satisfied prior to 30 January 2012, will remain on the ASIC register and will be available for searching for 7 years. Therefore, after the Australian Register of Company Charges has closed, customers may need to search both the PPS Register and the ASIC Register to get the full history of charges for a company.