Australia: PPSA: navigating the minefield

Last Updated: 16 June 2013
Article by Miles Anderson

Serial Numbered Goods | PMSI | Trusts | Description of Goods | Timeframes for Registration against Companies | Lien | Banking Covenants | Tidying up your own House

The Personal Property Securities Act 2009 (Cth) ("PPSA") has been in force for over a year now and many businesses are just starting to realise the significant effect it has on the way business is transacted. In this Alert, we have outlined a number of areas where the PPSA impacts on clients in a variety of industries.

Serial Numbered Goods

Motor vehicles, boats, trade marks and patents are some of the assets that MAY be described by serial number in a PPSA Registration. Does this mean you have to register by serial number? The answer is an emphatic Yes! Under the PPSA a purchaser will take free of any security interest if a search by serial number alone will not disclose a registration. That means where assets MAY be described by serial number (basically any type of vehicle or towable machine and a number of intellectual property rights) registering against the owner of that asset is not enough.

Example: Bank has a charge over all of the assets of Earth Moving Company which it registers on the PPSA over "all present and after acquired property". Hire Business buys excavators from Earth Moving Company and does a PPSA search of their VIN numbers that does not disclose Bank's interest (as Bank did not register against serial numbers). Hire Business takes the excavators free of Bank's interest even if Hire Business has done a PPSA search of Earth Moving Company and been aware of Bank's interest.

We also note that registrations migrated to the PPSR from REVs often do not link back to the owner and are recorded only by their VIN. This is another reason why searching and registering against both the owner and the serial number is essential.


If you supply goods on credit or hire goods you need to register a Purchase Money Security Interest ("PMSI") to protect your interests. If you don't, you risk losing your goods.

PMSIs must be registered in strict timeframes (before delivery of the goods if your customer will use the goods as inventory and otherwise 15 business days). If you miss these deadlines don't just register anyway as you may make the position worse if you have an incorrect registration.

Example: Hire Business leases one of its newly acquired excavators to Constructor for an open hire period. The hire continues for three months at which point Hire Business realises it should have registered at the commencement of the hire because the hire has extended to more than three months. Hire Business then registers a PMSI. There are no other secured creditors of Constructor. A liquidator is appointed to Constructor and Hire Business's security interest is declared void because it was not validly registered as a PMSI. As a result, the excavator vests in the liquidator. Given there was no other security interests registered against Constructor, Hire Business would have still had first ranking security if it had registered its security interest without nominating it as being a PMSI.


A trust is not a legal entity. However, under the PPSA, where assets are owned by a trust, a security interest must be registered against the trust. This means that if a company or an individual owns assets as trustee, then you are only obliged to search against or register against the ABN of the trust, not the ACN of the corporate trustee or the individual trustee.

It is therefore essential when dealing with another party to ascertain whether there is a trust involved and make appropriate searches and/or register against any trust. We would, however, recommend also registering against the corporate or individual trustee as well.

Example: Liquidator does PPSA searches of Constructor to ascertain security interests granted by Constructor but does not search against the ABN of Development Trust of which Constructor is the trustee.
Liquidator sells business assets owned by Constructor to Developer and gives warranties as to ownership that those assets are unencumbered. The assets are then repossessed by Finance Company who has registered a security interest against the ABN of Development Trust. Developer loses the assets (because it failed to search against the ABN of the trust) and then sues Liquidator for breach of warranty.

Be Specific with your Description of Goods

Make sure you clearly describe the property over which you are taking a security interest.

This point was highlighted in the Australian Federal Court in Carson, in the matter of Hastie Group Limited (No 3) [2012] FCA 719. In this case, the PPSR included 995 secured interests noted against the company. Following these registrations, the company went into administration. Many of the security interests were simply recorded as the collateral class "Other Goods" without the optional field being completed in the PPSR under which the collateral can be described. The Administrators took reasonable steps to attempt to identify the security interests, including writing to each creditor requesting specific details of their security interests. Response to the requests was low resulting in 77% of the assets remaining unclaimed. Ongoing costs of renting premises to hold the assets lead the Administrators to apply to the Court allowing them to sell the assets at auction, and after certain conditions were met, to apply the sale proceeds to Hastie's administration.

The Court allowed the Administrators to sell the assets and use the proceeds to pay creditors after a three month escrow period. This case shows how critical it is for PPSR interests to be recorded in sufficient detail.

Register within 20 Business Days

If you take a security interest against a company, you should record your interest on the PPSR as soon as possible, and no later than 20 business days after entering into the security agreement.

Section 588FL of the Corporations Act 2001 (Cth) provides that if you do not register your interest within 20 business days and the company is wound up or an administrator is appointed within six months of you entering into the security agreement, your security interest will probably be unenforceable.

Note also that when registering your interest as a PMSI stricter timeframes apply.

Be Aware of Liens

Even if you register a security interest under the PPSA, there is still a chance you can lose your goods in certain situations. The PPSA will give priority to someone who has possession of and makes improvements to your goods if they do not have notice of an earlier registered security interest.

The New Zealand case of StockCo v Walker addressed this issue. StockCo provided the purchase price for a herd of cattle. The cattle were leased to Capehorn. Capehorn entered into a Grazing Agreement with Walker that required Walker to maintain the leased cattle on her land for the purpose of improving the cattle. She did this by feeding and caring for them in such a way as to increase their body weight at a stipulated rate.

Capehorn went into receivership and Walker served a notice of general lien in respect of the cattle on Caphorn's receivers and StockCo. The Court ruled that Walker had a common law lien over the cattle which had priority over StockCo's registered security interest. This is because Walker's priority interest arose in the ordinary course of her business (taking care of and increasing the value of cattle on her land) and also, because she had no knowledge of the prior registered security agreement.

If your goods are going to be in someone else's possession, make sure they are made aware of your security interest and that the creation of a lien in those goods constitutes a breach under your security agreement.

Banking Covenants

It is becoming common practice for financiers to include PPSA covenants in their financing and banking documentation, requiring a borrower to register all security interests granted to it by its customers, associated entities and other parties. Importantly, these provisions usually apply so as to require a borrower to register any retention of title interests. Borrowers risk being in default under their facilities if they do not comply with the PPSA. This could have significant consequences for listed entities that may need to disclose such default to the market.

Tidying up your own House

Managing your own registrations should be considered good house-keeping. There are a lot of 'old' registrations that have been migrated to the PPSR that are no longer relevant.

A PPSR search is now an ordinary part of any due diligence on a refinance or sale transaction. Do a search now so you can deal with any registrations that should not be there or you may encounter delays later when timing of a refinance or sale transaction is critical.

ClarkeKann provides specialist advice on all PPSA related issues. We are also able to provide implementation programmes, seminars and staff training sessions to assist clients and their staff in better understanding the legislation and the practical implications it has for their business.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Miles Anderson
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.