PPSA & Trusts

To say that the PPSA’s position regarding Trusts is confusing would be an understatement.

The most relevant guidance comes from Schedule 1 of the PPS Regulations (the text for which I’ve reproduced at the end of this article).

That guidance appears to be stating that where a company is a trustee of a Trust that has an ABN and “holds or has an interest in collateral” any new registration should be made by reference to the Trust’s ABN. 

Unfortunately, there is no guidance as to the situation where the company is a trustee of a Trust that has an ABN but that Trust does not hold or have an interest in the collateral forming the security interest.

If we also look at the manner in which the PPSR has designed its own Web Service for registering security interests (see screenshot below) we can see that where the Grantor is an organisation with an ACN the issue as to whether a Trust is involved simply does not arise.

Only when the Grantor is identified as an organisation without an ACN (ARBN or ARSN) does the user get presented with the option to identify the Grantor by its Trust ABN (see screenshot below).

Under basic contract law principles your contract of supply is made with a company with an ACN and your Retention of Title clause enables you, in the event of that company’s non-payment, to recover from that company goods you have supplied.  Your security interest should therefore, in my opinion, be registered against your contractual party, i.e., by the ACN of the company forming your contractual party.

However, there is no doubt that the waters are substantially muddied by the PPSA’s ill-conceived addition of Trusts as eligible Grantors and there may be some mileage in a belt and braces approach involving a second registration against the Trust ABN.

UPDATE

The PPSR has now changed its on-line form and made matters a bit clearer regarding when to lodge registrations against trusts.  Now, when identifying that your Grantor has an ACN the user is presented with the following:

Presumably, the user is being encouraged at this stage to change their mind and select 'No' to the ACN question and register using the Trust ABN.



Please note that this guidance should not be used in place of proper legal advice and, although my work gives me some experience and familiarity with the PPSA/PPSR, I am not a legal professional by any stretch of the imagination (I don't get paid nearly enough for that!).

Ps. As threatened above, the following is the ‘relevant’ text from the Personal Property Securities Regulations 2010:

1.5           Secured party or grantor is a trustee

     (1)       For items 1 and 2 of the table in subsection 153 (1) of the Act, this clause applies if the secured party or grantor is:

                (a)    a body corporate that is a trustee of a trust that:

                          (i)    has an ABN; and

                         (ii)    does not have an ARSN; or

               (b)    any other trustee of a trust.

     (2)       The details mentioned in each item of the table, from the source mentioned for the item, are prescribed for the trustee mentioned in the item.

     (3)       For subclause (2), the prescribed details are:

                (a)    for a trustee that is an individual — the details mentioned in the item of the table in clause 1.2 that:

                          (i)    applies to the trustee; and

                         (ii)    has the lowest item number; and

               (b)    in any other case — the details mentioned in the item of the table that:

                          (i)    applies to the trustee; and

                         (ii)    has the lowest item number.

     (4)       In this clause:

trustee details means:

                (a)    the ABN allocated to the enterprise carried on by the trust; or

               (b)    the ACN or ARBN allocated to the trustee; or

                (c)    the name of the trust or trustee.

     (5)       Item 1 of the table applies only to a registration by the Registrar under subsection 333 (2) of the Act.

Item	Trustee	Details	Source
1	Trustee of a trust for which details have been included on the transitional register, for a migrated security interest	Trustee details, as recorded on the transitional register	Transitional register
2	Trustee of a trust that holds or has an interest in collateral in the course of, or for, an enterprise that has been allocated an ABN	ABN	Australian Business Register
3	Trustee of any other trust	Trustee details mentioned in paragraph (3) (a)	Source mentioned in paragraph (3) (a)

(Note: the Paragraph (3)(a) referred to in the above table only concerns itself with situations where the Grantor is an individual)