The Personal Property Securities Act 2009 (PPSA) is now confirmed to commence on 30 January 2012. Set out below is some clarification of some of the more confusing issues raised with us in recent months.

Question 1:
When is a piece of machinery or equipment, a motor vehicle?

Answer:
When it falls within the definition of a 'motor vehicle' under PPSA and its regulations.

There are two aspects to the definition of a 'motor vehicle' under the PPSA and its regulations:

  1. Personal property:
  1. that is built to be propelled on land by a motor that forms part of the property; and
  2. is either capable of a speed of at least 10km/h or has 1 or more motors that have a total power greater than 200W; and
  3. has a VIN number, chassis number or manufacturer's number.
  1. Personal property:
  1. that is capable, when being towed by or attached to a motor vehicle, of travelling greater than 10km/h; and
  2. is a piece of machinery or equipment that is equipped with wheels and designed to be attached to or towed by a motor vehicle; and
  3. has a VIN number, chassis number or manufacturer's number.

There will be certain types of machinery or equipment (other than that conventionally considered to be a motor vehicle) that will fall within this definition and therefore may even bring a lease of these type of Goods, depending on the lease term, within the definition of a PPS lease.

Question 2:

When can a PMSI not be considered a PMSI?

Answer:
When it attaches to collateral (i.e. personal property) that the grantor intends to use predominantly for personal, domestic or household purposes (excepting collateral that is required or permitted by the regulations to be described by serial number).

As you know a PMSI or Purchase Money Security Interest is a security interest that arises in personal property:

  1. to the extent that it secures all or part of its purchase price;
  2. if it is taken by a person who gives value for the purpose of enabling the grantor to acquire rights in the collateral, to the extent that the value is applied to acquire those rights;
  3. where it is the interest of a lessor or bailor of goods under a PPS lease;
  4. where it is the interest of a consignor who delivers goods to a consignee under a commercial consignment.

An exception to this is where the grantor intends to use the personal property for predominantly personal, domestic or household purposes.

However this exception would not apply where the personal property may or must be described by serial number. Generally personal property that may or must be described by serial number will fall within the classes of motor vehicles, watercraft, aircraft and certain intangible property. So for example, if a Grantor leases a car ("motor vehicle") from you for 90 days or more though he or she intends to use it for predominantly personal, domestic or household purposes, you may still be able to claim a PMSI.

Question 3:
When is PPS Lease not a PPS Lease?

Answer:
When the Lessor or bailor is not regularly engaged in the business of leasing or bailing goods.

Imagine your lease or bailment of Goods to a Grantor satisfies the description of a PPS lease under the PPSA. If you are not in the regular business of leasing or bailing Goods, your lease may not be considered a PPS lease for the purposes of the legislation.

Assessing your business and the type of personal property you deal in

An important part of reviewing your business processes and terms and conditions of trade is the consideration of:

  1. What type of business you are in; and
  2. What type of personal property will you give or take a security interest in?

These are important considerations when deciding whether your business dealings will come within the ambit of the PPSA and how best to protect your interests.

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.