Australia's new Personal Property Securities Act
2009 (PPSA) has introduced radical changes to the law in relation
to personal property. Research institutions must make sure that
their equipment and other property is properly
Personal property includes machinery, equipment, consumables,
computer hardware, cars, livestock and many other types of property
– but not "real" property, ie land, or prescribed
statutory licences (eg water rights). A security interest includes
an interest in personal property under a transaction that secures
payment or performance of an obligation (eg traditional securities
such as mortgages and charges, as well as
"quasisecurities" such as retention of title and flawed
asset arrangements). It also includes the interest of a consignor,
lessor or bailor in certain circumstances, even though
consignments, leases and bailments do not usually secure any
What are some examples of circumstances where an
institution needs to register an interest in personal
LENDING EQUIPMENT TO A THIRD PARTY
Your institution lends some equipment to a company. It turns out
the company is not trustworthy and sells the equipment to a third
party. Under the PPSA, your institution had a security interest in
the equipment, but it did not register its interest on the Personal
Property Securities Register. The third party buyer of the
equipment takes ownership of the equipment free of your
institution's interest. Your institution is left only with a
right against the company in relation to the proceeds – it
has no right to recover the equipment.
SELLING EQUIPMENT TO A THIRD PARTY ON DEFERRED PAYMENT
Your institution has developed prototype equipment for a
customer, with a series of staged payments having been agreed. The
major payment is due upon formal acceptance of the equipment by the
customer, after which title to the equipment will pass to the
After you deliver the equipment to the customer but before
formal acceptance, the customer encounters financial difficulties
and defaults on its loan from a bank. The bank registered its
security interest over all the customer's assets. Your
institution did not register its interest. The bank's interest
takes priority over yours and the bank may sell the customer's
assets, including the prototype equipment, to satisfy its claims.
Your institution has to wait in line as an unsecured creditor and
may receive nothing. But if you had properly registered your
institution's interest, it would have taken priority over the
bank's interest (even if you registered after the bank).
Below is a summary of when you may need to register
security interests over personal property.
You license your intellectual property to a third
IP licences are not security interests, hence not
registrable under the PPSA. But you may wish to register on the
relevant IP register, eg the Register of Patents. The PPS Register
does not replace any aspect of the IP registration regimes.
In outsourcing your IT operations, you provide
equipment to the outsourcer but you still own it.
By registering, you maximise your rights against
third parties in case the outsourcer hits financial difficulties or
improperly disposes of the equipment.
You lend equipment to a third party.
See example above.
You sell equipment to a third party on deferred
See example above.
You obtain an option to purchase particular
This right is, notably, not registrable – it
is usually not a security interest.
Of course, for small value transactions, it may not be
worthwhile to register your interest. As an indication, the base
cost to register an interest online for up to 7 years is $7.40. At
the other end of the spectrum, the fee to register an interest
online for an unlimited time is $130.00.
We are currently in a two year transition period.
This transition period gives you until 30 January 2014 to
register any interests existing as at 30 January 2012. If they are
not registered by then, you risk losing your rights in relation to
the relevant personal property.
You should review your existing agreements which involve the
above scenarios, and determine whether to register your
If a new interest arises now, it may need to be registered
promptly (or even in advance of it arising) in order to maximise
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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