The new national personal properties security scheme is due to
commence in October 2011 and will have widespread impact on the way
businesses record and conduct their commercial transactions. The
reform promises to merge more than 40 separate Australian wide
security registers into a uniform and functionally consistent
national registration system.
Will your business be affected?
If your commercial dealings involve any one of the following
security interests, your business will inevitably be affected by
the introduction of the Personal Property Securities Act 2009
Fixed and floating charges
Conditional sale agreements, including agreements to sell
subject to a retention of title
Hire purchase agreements
Leases of goods
Review of your standard terms and conditions
For many businesses, security interests such as those listed
above lie at the heart of contractual relations with customers and
end-users. If this applies to your business, we recommend you
immediately arrange a review of your current standard terms and
Ensure those terms and conditions reflect the new key concepts
introduced under the PPSA (such as 'collateral',
'attachment' and 'perfection') ,
Contract out of the PPSA to the extent required
Ensure that you preserve priority of your security interest
over the interest of other creditors.
Retention of titles arrangements
The PPSA makes some fundamental changes to existing law
regarding retention of title arrangements:
No longer will a supplier's title in goods be preserved
until full payment, even with a well drafted ROT clause. Now a
positive step, such as registration of the ROT, is necessary in
order to preserve priority in the event of competing creditors
If you fail to register (or register outside of the relevant
registration period) your ROT security interest, other creditors
may rank ahead in priority and seize your goods
Priority rules vary depending on the nature of the security
There are technical rules of registration that must be complied
with in order to preserve priority
Registration must take place within certain time limits.
Significantly, businesses will need to ensure their internal
practices are updated. In most cases under the reform, merely
relying on contractual terms will not be enough to preserve the
priority of your security interest over other creditors without
further positive steps being taken to possess, control or register
the security interest.
As the below example demonstrates, timing is critical when
competing interests exist over the same collateral:
Bank has General Security
Agreement registered over assets of
Supplier supplies Batch A
goods to Purchaser under ROT agreement
Supplier registers security interest over
Batch A goods as well as any subsequently supplied
Supplier supplies Batch B
goods to Purchaser
Purchaser goes into receivership
Outcome – Supplier has priority only
in respect of Batch B, because of its failure to register before
the supply of the Batch A goods.
Due to the broad nature and effect of the PPSA, this newsletter
provides a brief introduction to only some aspects of the PPSA and
is not intended as and should not be relied upon as legal advice.
We recommend you promptly seek legal advice in respect of your
If you have any queries in relation to the above or require
assistance in preparing for the changes, please contact either
Grant Sefton (Partner) or Lee-Anne Dimmock (Senior Associate) of
our Newcastle office, whose contact details are
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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This decision provides guidance as to when governments and their agencies could be said to be carrying on a business.
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