PPSA – The Americans don’t like it!

Many will have heard by now of the action being taken by KordaMentha, as receivers of Forge Group, against the US Company, APR Energy. 

The Forge Group had been leasing two power generators worth $50 million from APR Energy on a long-term basis.  Once Forge went into administration, this lease was deemed to be a security interest under the PPSA and, because it had not been registered on the PPSR, considered vested in Forge for the administrators to do with as they will.  APR is, understandably, not best pleased with this prospect and the argument is going to be heard in court.

However, my interest in this article is not so much with the ins and outs of the legal case so much as it is with the extent to which US interests, supportive of APR’s position, have been so prominent in the submissions given to Bruce Whittaker’s statutory review of the PPS Act.  The following are a few choice extracts from some of the contributions:

APR is currently being caused severe economic hardship as a result of an illegal seizure of its property by a major Australian financial institution and the liquidators for an Australian power generation company. …

At the heart of the dispute is a most unfortunate claim under color of the PPS Act by Forge and ANZ Bank to possess and take title to APR’s Gas Turbines, valued at US$64 million, without due process of law and without compensation of any kind to APR…

Forge’s largest creditor, ANZ Bank, through its appointed managers and receivers, is seeking to illegally convert APR’s Gas Turbines as payment for a substantial debt owed by Forge to ANZ Bank. 

Former member of the US Congress, Lincoln Diaz-Balart.

I have recently learned about your review of the Personal Property Security Act (PPSA) and would like to urge you to take into consideration the devastating effects of Section 13 of the PPSA for American companies doing business in Australia.

As you know, Section 13 allows certain entities to make false claims against property that is owned by American companies and being leased to Australian individuals and businesses. Under this law, American companies can loose hundreds of thousands of dollars in equipment to the Australian government in the event of bankruptcy. This is extremely troubling and Section 13 should be modified to prevent this.

The City of South Houston Chamber of Commerce. (Note: Section 13 of the Act provides a definition of what constitutes a PPS Lease).

We are consistently looking to expand into new markets where there is stability and opportunity.

I am, therefore, concerned about what I have learned about Australia's recent Personal Property Securities Act 2009 (PPS Act). As I understand it, Australia's PPS Act is being used by unscrupulous entities to illegally seize American-owned property and hold it for ransom. Failure by the owner to record its ownership interest can lead to the loss of everything from

vehicles and plant machinery to shares, intellectual property and contractual rights. 

For small businesses like mine, the loss of even one machine under such a scenario could be catastrophic. You tack on subsequent legal fees and companies like mine can find themselves in a hole from which they cannot remove themselves. In short, the PPS Act has turned the idea of doing business in Australia from an appealing to a dangerous gamble.

Barbara Woerner, Vice President of James Woerner Inc, New York.

Section 13 of the PPS Act will allow unscrupulous entities to register bogus security interests in leased property owned by companies doing business with BD Global. Treatment of lease agreements as security interests under the PPS Act allows Australian companies to improperly list leased property as security for a commercial loan. If the loan is in default, the lessor, which is often an American company has lost all rights to the property.

Blaine D. Hone, CEO of BD Global, Utah.

The PPSA has created an opportunity for dishonest entities in Australia to seize American-owned property and hold it hostage. By registering bogus "security interests" in property that is owned by American companies and leased in Australia, these entities are attempting to secure the property and quash the ownership rights of American companies. This has created a very dangerous and unstable situation for local companies that export valuable equipment to Australia pursuant to short-term lease agreements.

Thaddeus M Jones, Illinois House of Representatives, 29^th District.

Needless to say, these submissions all include a reminder of the important contribution US companies make to Australia and the extent to which that will be jeopardised without some special treatment being extended to US/foreign companies under the PPSA.

The full text of these submissions can be found at the following link: http://www.ag.gov.au/Consultations/Pages/StatutoryreviewofthePersonalPropertySecuritiesAct2009-SecondRound.aspx

While it would be easy to be snide about the characterisation of what is happening in the APR Energy case as ‘dishonest’, ‘bogus, ‘improper’, ‘illegally seize’, ‘hold for ransom’ etc, and to be cynical about what could be interpreted as veiled threats, there is, nonetheless, the very real issue that the Australian Government introduced the PPSA and then kept (relatively) quiet about its implications. 

Where were the press, TV, and radio advertisements announcing that if you didn’t register your credit sale or lease of goods you ran the risk of losing your property?  Where were the massive billboards saying ‘register it or lose it’?