As the October start date for the Australian personal property
securities (PPS) regime approaches (see
Personal Property Securities Reforms coming soon), Pacific
Island countries such as Vanuatu, Solomon Islands and Tonga
(Pacific PPS Countries) have already implemented PPS legislation
(and neighbouring countries such as Samoa are expected to soon
Whilst the regimes in the Pacific PPS Countries have their own
quirks and differences, common concepts and procedures underlie how
a party secures (and enforces) the performance of an obligation or
a payment by another party.
The following questions should be considered and addressed prior
to securing a payment or the performance of an obligation.
Is my transaction caught?
The PPS regime generally applies to all transactions which
secure an obligation with collateral (ie. personal property). The
regime provides for the creation and enforceability of security
interests in such property, which can include tangibles such as
cars, art, machinery and crops as well as intangibles such as
intellectual property and contract rights.
Depending where a security interest is created, it is important
to check the scope of the relevant legislation. For example, in
Tonga a building or other improvement to real property can also be
subject to a security interest in Tonga. In the Solomon Islands,
personal property is defined more broadly as 'movable'
property which includes fixtures .
Given the scope of the legislation, traditional retention of
title or 'Romalpa' clauses found in supply and services
agreements will fall within the ambit of the regime (as they create
a security interest) and must therefore be registered. This is one
of the fundamental shifts under the PPS regime which looks more to
the substance, not the form, of the transaction.
What is a security interest?
Broadly, it is a right or interest in personal property (ie.
'collateral') that secures the performance of an
The security interest must 'attach' to collateral.
Generally a security interest attaches to collateral and becomes
enforceable against a debtor and third parties when:
the debtor has signed an agreement that provides a description
of the collateral;
value has been given by the secured party to the debtor;
the debtor has rights in the collateral.
Is that all I need to do?
No. Unless a possession or control rule applies, chances are
your security interest is not 'perfected' under the PPS
regime. In most cases perfection involves taking additional steps
to give the public notice of a security interest so as to be
enforceable against third parties. In most cases, a security
interest must be registered on an electronic register to achieve
perfection. The agreement is not lodged but each PPS regime sets
out requirements at to what information must be filed by way of
notice on the register.
How do I describe the collateral in a notice or financing
Good question. In most cases a general description of the
collateral by item, kind or class will be sufficient. However, for
some items of collateral a more specific description is needed to
ensure enforceability/effectiveness of the security interest
against third parties and to ensure the notice is not
'seriously misleading' – for example descriptions
of consumer goods and serial numbered property . These requirements
differ from country to country in the Pacific. Information
collected by the secured party therefore becomes important prior to
registering a notice.
Does my notification to the PPS register last forever?
Depends... on what country the security interest is
registered/perfected. In Tonga and the Solomon Islands the duration
of the notice of a security interest lasts 5 years (which can be
continued). In Vanuatu, the duration of the notice is the expiry
date specified in the notice. Notices need to be monitored to
maintain the perfection and therefore priority of a security
interest in Tonga and the Solomon Islands
What if the collateral (subject to the security interest)
changes over the life of the agreement?
The agreement should be drafted in such a way that avoids the
need to amend documentation every time the collateral (subject to
the security interest) changes. Only the notice details should be
amended on the register.
PLN has experience across the Pacific with the various PPS
regimes. We can assist in documenting and registering security
interests arising from transactions to ensure the priority of a
security interest is achieved and maintained throughout the life of
Winners of the 2010 Lawyers Weekly e.law Asia Pacific Box
Breaker of the Year Award and the 2009 NSW Exporter of the Year
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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