PPSR & ‘Complicated Scenarios’

During the late 12^th and early 13^th centuries, the then Pope was having some difficulties with what, he deemed to be, heretical Catholics – those whose beliefs were out of step with the orthodox Catholic teachings of the time.  This resulted in some pretty horrific acts, particularly in southern France, and none more so than the massacre at Beziers in July 1209.

The town of Beziers was seen as a stronghold of Catharism (the heretics) but also included a fair-sized population of orthodox Catholics.  When ordered to attack the town, the story goes that a young soldier asked the Pope’s representative, Arnaud Amalric, how he would be able to tell the difference between orthodox Catholics and the heretic Cathars.  The reply has been filtered down through history to us as ‘Kill them all and let God sort them out”.

I feel a little uncomfortable quoting Amalric in a context as mundane as the PPSR but I’ve found myself increasingly resorting to advice along the lines of:

‘When in doubt, lodge a registration’ or

‘It’s better to have a registration you don’t need than need a registration you don’t have’ and 

‘Register them all and let God sort them out’.

Personally, I don’t really like the ‘scatter gun’ approach, I prefer a little more surgical precision, but there comes a point where the issue is not just about being right but also about avoiding getting caught up in expensive, long, drawn out arguments where you need to demonstrate that you are right.

While the PPSR has been with us for well over 4 years now, there is still a surprising lack of legal precedent established and there are a number of areas where argument is commonplace. 

The extent to which a Transitional registration is still appropriate despite minor amendments to terms & conditions; when is it appropriate to register against a Trust and when against the trustee of that trust; and to what extent a PMSI registration can also perfect a non-PMSI element are just a few of the more contentious areas.

In a recent question that was put to me, a client is trading with a buying group where invoices will be paid by one entity and yet goods will be delivered to, and on-sold by, a number of separate, albeit, related entities.  Who should the registration be lodged against?

Without going into the specific terms, my advice was, effectively, two-fold:

1. You register against the entity, or entities, that have demonstrably accepted your retention of title clause; and
2. Register against them all – at least one of the registrations is bound to be right!

The second response isn’t one I’m particularly proud of, but suppliers regularly face complicated scenarios such as these and legal advice can be expensive.  A PPSR registration, on the other hand, will cost as little as $6.80.  

Not sure which of 10 companies to register against?  

Asking a law firm to check your agreements and advise, will result in an expenditure of anything up to $1000; by comparison, lodging a registration against each of the 10 companies, just to be on the safe side, will cost $68.

And, as I suggested earlier, just because you’ve had legal advice, probably very good legal advice, doesn’t mean you won’t still get an argument from a liquidator who believes they have received equally good legal advice.

Is there a downside to multiple registrations in such circumstances?

The PPSA allows for appeals to be made by Grantors that believe a registration is unreasonable but, for any penalties or claim for damages to be made against the registering supplier, it would need to be demonstrated that the supplier didn’t have a ‘reasonable belief’ that the registration would be appropriate.  Again, there are no legal precedents that help us very much here, but, the more complicated the scenario, the more difficult it would be to demonstrate that the supplier’s registrations were not a reasonable response to a complex situation.

So, while I don’t particularly want to align myself with a 13^th century, blood-thirsty religious fanatic, my advice may often be ‘Register them all and let God sort them out’.