Is there a deadline for lodging a PPSR registration?

When should I lodge a registration?

Once a liquidator is appointed to a debtor, they are allowed to ignore any security interests registered during the 6 months leading up to their appointment if they hadn’t been lodged within 20 business days of the security agreement being formed. 

In a trade credit context, the security agreement is usually the completed credit application incorporating the supplier's Terms & Conditions (which, in turn, would be expected to include their Retention of Title right).

Thus, if a supplier fails to lodge their registration within 20 business days of receiving a credit limit application, they risk losing their security rights if a liquidator is appointed within the next 6 months.

Separately, the supplier needs to register their Retention of Title right before they deliver their goods to their customer in order to make sure they don't lose any Purchase Money Security Interest (PMSI) rights to which they might be entitled.  Although, where the goods represent a product that will be kept by the buyer for their own use, the PPSA allows an additional 14 days' grace.

Should I register against the ACN or the Trust ABN?

My buyer has an ACN but also has a Trust ABN – should I register against the company or against the trust?

We would recommend both. 

One registration can be lodged against two different ‘grantors’, so there shouldn't be any additional expense.  However, at the very least, a registration should be lodged against the Trust ABN.

The below chart is a handy reference to identifying a grantor:

Grantor Type	Grantor Details Required
Sole Trader	Full Name (as per driver’s licence) and date of birth
Sole Trader acting as Trustee	Trust ABN (if the Trust does not have an ABN, as per ‘normal’ Sole Trader)
Partnership	ABN
Partnership acting as Trustee	Trust ABN (if the Trust does not have an ABN, as per ‘normal’ Partnership)
Partnership without an ABN	Full name and DOB of each partner (or ACN’s of each if a corporate partnership)
Company with an ACN and no Trust involved	ACN
Company with an ACN acting as Trustee	Trust ABN (if the Trust does not have an ABN, as per ‘normal’ Company)
Corporate entity without an ACN	Full name of the business as per articles of association
Government Entity	ABN
Trust	Trust ABN (if no ABN, use rules per the trustee)

Perfection by Possession or Control

For ease of communication and in service of providing the degree of emphasis required, it’s quite common for me to say that

“If you don’t register your security interest on the PPSR, you might as well not have one”.

However, it’s easy to forget that there are other means by which a security interest might be perfected.  In addition to Perfection by Registration, there is also Perfection by Control and Perfection by Possession.

Perfection by Control is the sort of thing usually only available to Banks, where they are able to treat a Grantor’s bank account with them as collateral under a security agreement – although the Grantor may own the contents of that account, the Bank will have day to day control. 

Another variation might possibly involve a Grantor’s Stockbroker who is able to exercise controlling rights over their client’s portfolio.  If the client had granted their stockbroker a security interest over their securities account, then, by virtue of their day to day control of those securities, the stockbroker would not need to register that security interest in order for it to be effective.

It is also been adjudged possible for those exercising control over satellites or other space objects from a ground station to be able to use that control to perfect a relevant security interest.

While this form of perfection is not likely to be available to a trade credit supplier, they would nevertheless do well to note that Perfection by Control trumps any other form of perfection.

Thus, if you supply a space satellite subject to a Retention of Title clause, your PMSI super-priority, perfected by registration, will be outranked by any general security interest that might be held over that satellite by whichever third party happens to be flicking the switches and pressing the buttons controlling that satellite.

Satellites aside, Perfection by Control primarily applies to intangible forms of collateral – ones where it is not possible to perfect over them by possession and the ability to exercise control is used as the functional equivalent of possession.

The issue of Perfection by Possession is fairly topical given a recent court judgement in the case of Knauf Plasterboard versus the liquidators of Plasterboard West P/L trading as Retroflex.

Retroflex had granted Knauf a general security interest in all their present and future property via a security deed.  Unfortunately, Knauf omitted to register that deed on the PPSR and it was only some 20 months later, when it became obvious that Retroflex may have been struggling, that Knauf finally got around to lodging their registration.  Barely a week then passed before Retroflex defaulted under the deed and Knauf appointed Receivers to protect their interests. This was followed a couple of days later by Retroflex appointing liquidators.

The liquidators took the view that because Knauf’s security deed had been lodged within 6 months of their appointment and not within 20 days of the security deed being entered into, section 588FL of the Corporations Act allowed the collateral subject to that deed to vest with Retroflex.

I’ve written previously on the subject of the dreaded section 588FL and its implications at PPSA vs The Corporations Act (which also includes a brightly coloured chart!).

While on the face of it the liquidators were correct, Knauf argued that in addition to the registration, they had also achieved perfection of their security interest by possession – such possession taking place with their appointment of the Receivers.

While there were other issues at play, not least the dubious process Retroflex used to appoint liquidators, the court determined that:

• Merely appointing receivers is not sufficient to constitute ‘possession’ if the property in question appears to remain in the possession of the grantor/debtor; and
  
• When the receivers took steps to exercise their rights under the security deed, their actions would be taken as equivalent to a seizure of the property.

Under section 21 of the PPSA, possession as a result of seizure (or repossession) is explicitly excluded as a form of possession sufficient to achieve perfection under the Act.

Set up a PPSR Alert

I put up a post last month detailing how to conduct a search on the PPSR – primarily aimed at helping businesses keep abreast of any registrations that might have been lodged against them. 

By way of a companion piece, I thought I’d now write about how you can get an automatic alert from the PPSR any time someone lodges a registration against you.  The alert won’t give you any details beyond letting you know that a new registration has been made but at least it will save you from having to make unnecessary searches on the off-chance a new registration might have been lodged.

Anyone can sign up for a PPSR alert and the service is entirely free of charge.

First go to https://transact.ppsr.gov.au/ppsr/Home

From there, use the menu tab to navigate from Subscriptions to Alert notifications to Create alert notification request as below:

Once there, you’ll be asked to enter (and then re-enter) the email address to which you want your alert to be sent:

If you have a Business to Government link set up (most of you won’t) you can also enter details here to have alerts sent to your B2G mailbox:

Otherwise you can just leave this blank.

You are then prompted to set up a name for your Alert as well as the length of time you want the Alert to remain active – the PPSR will present you with a default name and use the current date as a start date with the alert to run for a year -  this will be fine for most but can easily be amended.

Proceeding to the next page, you’ll then be asked to identify the Grantor on which you want the alert - this will be you if you're checking up on people lodging against you.  

There are a couple of things to note here, firstly, the alert system can only be set up for Grantors that have either an ACN, ARBN or ARSN – which means no alerts can be set up on sole traders, partnerships, trusts, Governmental entities or indeed any organisation without one of those three identifiers.  On the plus side, however, you can add multiple Grantors to the same alert.

Simply choose the relevant identifier (this will usually be the ACN), hit the Verify button to make sure you’ve not made a typo and then Add to place the Grantor on your list of Alert candidates.

Keep doing this until you get bored.

You have now set up your Alert and all that is needed for it to be activated is clicking on Next> at the bottom right of the screen.   

When I first went through this process I was expecting to go to a screen asking me to review all that I’d entered and confirm that I wanted to go ahead and activate the Alert but, although you are taken to a ‘Confirmation’ screen, the Alert has already been set up by this point.

The confirmation email to which the above screen refers arrives promptly and looks as follows:

Keep this email safe or, at least, keep the Alert Notification Request number handy as this acts in tandem with your email address to allow you access to maintain or delete the Alert notification you have set up - as you can see from the below screencap I took when cancelling the Alert notifications I’d set up on the OneSteel companies:

As I said at the outset, the alert the PPSR sends you won’t tell you very much but at least it will act as a prompt to conduct a fresh search if you don’t already have a good idea as to what the new registration might relate to.

How to Conduct a Search of the PPSR

There are a few reasons why trade credit suppliers may need to search the PPSR not least of which is to find out who has been lodging registrations against them! 

But while trade suppliers may not have such an immediate need to search the register as, say, financiers, it is still helpful to have a good idea as to how a search is conducted if for no other reason than that knowledge will help ensure the accuracy of their own registrations. 

It is a good rule of thumb that if a registration won’t show up on a properly conducted search, it is almost certainly not going to be effective.

The first step is to visit https://www.ppsr.gov.au whereupon you’ll be presented with a great deal of help and guidance and, at the top right hand corner, a button to click in order to take you to the PPSR itself:

If you think you might need to consult the Register on a regular basis you might find it convenient to bookmark the landing page at https://transact.ppsr.gov.au/ppsr/Home?li=False&si=0.

Once on the PPSR there will be a couple of ways to start your search, but, for ease and consistency, I’m going to focus on options presented from the main menu tabs at the top of the page:

We’re obviously going to be concentrating on the PPSR’s search facilities and, hovering over the PPSR Search tab will provide the following options:

As you can probably tell from where I have my mouse cursor in the above screencap, we’re going to start off by conducting a search of a grantor which is classified by the PPSA as an organisation.  As is suggested by the only other grantor search option, the PPSA regards any entity that is not an individual as being an organisation.

Because it is relatively topical (see here) we’re going to conduct a search on ONESTEEL MANUFACTURING PTY LTD.

Firstly, we need to identify the grantor in accordance with the PPSR’s requirements.  To this end we are immediately asked if the organisation in question has an “ARSN”.

An ARSN is an Australian Registered Scheme Number and is primarily used by managed investment schemes – not a customary Grantor for trade credit suppliers.

After selecting ‘No’, you are then presented with:

OneSteel Manufacturing is a PTY LTD company and will therefore have an ACN (Australian Company Number).

However, once ‘Yes’ is selected and the opportunity to enter the ACN number is provided the following warning is also presented:

Here is the most clear-cut guidance provided by the PPSR that, where the company you are trading with is acting as the trustee of a trust, the registration needs to be lodged against the ABN of the trust. 

If OneSteel was acting as a trustee, we’d change our mind and, counter-intuitively, select ‘No’ to the question asking if they have an ACN, thus opening up the opportunity to select ‘Trust’ as an organisation type and enter the relevant trust ABN.  However, OneSteel does not act as a trustee of any trust, therefore, we will leave our response as ‘Yes’ and continue.

After entering OneSteel’s ACN in the box provided we are prompted to use the ‘Verify’ button to check to see that the number we’ve entered produces a name match with ASIC’s records that reflects our expectations.

In this instance, there’s been no error and all is good.

The PPSR now gives us the opportunity to tweak our search a little, offering the opportunity to search for registrations lodged during a specific date range:

Or for registrations lodged against specific classes of collateral:

Note, that if you choose to search by date range (say for example, you’re repeating a search conducted a couple of months ago and are only interested in registrations lodged since that time) you won’t be allowed any other options to filter your search.

Also note that if you choose to restrict your search to a specific collateral class (or classes) you will always have ‘All present and after acquired property’ registrations included in your results whether you wanted them included or not.

You also have some further options for your search under the heading Advanced search criteria:

The options are largely self-explanatory and, as you can see from the above screencap, are defaulted so as not to limit the search results.

I find it a little amusing that if you attempt to un-check all three Transitional registration criteria boxes you get the following error message:

Anyway, silly personal amusements aside, you then have the opportunity to sort your search results by registration number, either showing oldest to most recent or youngest to least recent.

And that is pretty much it. 

You get the opportunity to enter a reference to help remind you why you did the search or to identify later what the search related to, but the next step is to select ‘Search’ and get your credit card out ready to pay the $3.40 search fee.

UPDATE: Note that the fee for such searches has been reduced to $2.00.

Migrated Security Interests - back in focus!

When the PPSR first started it was immediately populated by a number of registrations representing security interests that had been migrated across from other registers.  

Initially, we were promised that the PPSR would, effectively, absorb the role of 70 national and state registers although, in the end, substantially fewer registers had data moved across.

Unfortunately, the migration exercise was not entirely successful and statutory provisions had to be introduced in order to confer legitimacy on registrations that, in any other circumstances, would have been deemed ineffective.

With the 5^th anniversary of the PPSR, at the end of January 2017, those statutory provisions are scheduled to lapse. 

This means that any PPSR registrations you have that had originally been lodged on an older register will need to be checked to ensure their continued effectiveness.

So what type of problems might there be?

One relatively well publicised issue, when the PPSR first started, revolved around security interests with multiple secured parties.

While an original lodgement on ASIC’s register of company charges might have shown that ABC P/L, DEF P/L and GHI P/L all shared in the same security interest against a debtor/grantor, when transfer to the PPSR took place, only ABC P/L might have been shown as the secured party.  Apparently, some 27,000 registrations are thought to fall in this category!

Another problem arises from the PPSA’s very strict rules regarding how a debtor/grantor should be identified.  

These rules do not necessarily align very well with those used by the original registers.  For example, most registers would not have deemed a Trust as having sufficient legal capacity to grant a security interest and would thus have required any registration to be lodged against the trustee of that trust as opposed to the trust itself.  However, the PPSA pretty much requires registrations to be lodged against the ABN of the trust rather than its trustee.

Similarly, ABNs will have commonly been used to identify corporate grantors on pre-PPSR registers whereas the PPSA requires such to be identified by their ACN, if they have one, or their full legal name if they do not.

Registrations that don’t identify grantors by their proper, PPSA legislated, identifiers are almost certainly likely to be considered ineffective.

The PPSA also has specific rules for identifying motor vehicles, watercraft, aircraft (including various bits of aircraft) and certain intellectual property rights by serial numbers in order to be fully effective.  There will undoubtedly be a great number of instances where those serial numbers were not migrated across from their originating registers.

If you have any security interests that were ‘automatically’ brought across from another register at the start of the PPSR, you only have a matter of weeks left to make sure they meet the PPSA’s requirements before they lose any ‘artificial’ effectiveness the subsequent statutory provisions may have conferred.

Setting up a Secured Party Group on the PPSR

Every business that lodges a registration on the PPSR will have established themselves as a Secured Party Group (SPG) but, although the Register has provided some guidance as to which buttons to click and which fields to complete when setting up an SPG, I have been unable to find any guidance whatsoever when it comes to deciding upon the membership of an SPG.

A big part of the problem is that the SPG is an administrative rather than a legislative invention.  The Personal Property Securities Act makes absolutely no reference to secured party groups; it only talks in terms of secured parties.  The idea that secured parties needed to be members of a group came from those charged with designing the Register, although, to be fair it should be pointed out that the ‘group’ concept had already been introduced in the New Zealand PPSR almost a decade earlier.

When should an SPG comprise more than one Secured Party?

The vast majority of SPGs that I’ve helped set up have been made up of just one secured party and for most of those there was no question of adding any other body to the SPG, so, in what circumstances should multiple secured parties be considered in the formation of an SPG?

One obvious circumstance would be where one secured party operates in some form of partnership with another and both are party to the same credit/security agreement with the grantor. 

However, if such a partnership had its own ABN then the PPSA’s rules for identifying secured parties would require identification by the partnership’s ABN; each partner could only be identified as a secured party in its own right if their partnership did not have an ABN.

It is quite conceivable though, that a small group of related companies might, effectively, share the same credit/security agreement – one legal entity providing equipment, another providing spare parts, while a third provides maintenance services.  If each entity shared in the same collateral class, if a joint registration would have the same appearance as individual registrations, then it is easy to see the sense (both administratively and financially) in lodging one registration on behalf of the group rather than one for each individual member.

Drawbacks in secured parties grouping together in a single SPG

Fixed Membership

One of the first things to consider is that, once set up, the membership of an SPG cannot be changed.  If you already have an SPG in place and then later wish to add another secured party to it your only recourse is to establish a brand new SPG and transfer your existing registrations to that new SPG.  Similarly, if a secured party needs to be removed from an SPG, a new SPG needs to be created and existing registrations transferred across.

Fortunately, the PPSR’s process for transferring registrations can be relatively straightforward and inexpensive – providing you want to transfer all an SPG’s registrations or only one or two, otherwise, if you want to transfer, say, 400 out of 1000 registrations, it can be a very tiresome exercise indeed!

Challenges under the Act

Section 151 of the PPSA requires that secured parties not lodge a registration against a grantor unless they believe, on reasonable grounds, that the security interest they are attempting to perfect will materialise. 

Well, if secured party 1 (SP1) and secured party 2 (SP2) are both members of a Secured Party Group together and yet only SP1 has a trading relationship with the Grantor any registration lodged by the SPG against the Grantor would open SP2 up to the challenge that they did not have sufficient justification to identify as a secured party of the Grantor.

It is important to note that there are significant civil penalties for lodging a registration in breach of section 151.

Similarly, the Grantor could use section 178 of the PPSA to demand removal of the registration.  Section 178 allows for an amendment demand to be issued where:

 no collateral described in the registration secures any obligation (including a payment) owed by a debtor to the secured party.

While the registration might be quite valid in as much as it relates to the trading relationship between SP1 and the Grantor, its validity would be quite questionable as far as SP2 is concerned.

In order to resolve the situation in such a scenario, SP1 would need to establish a fresh SPG solely for its own use and transfer the disputed registration to that new SPG.  They could lodge a fresh registration under the new SPG and discharge the earlier registration but they would lose the effective start date of that registration (a significant loss if the registration concerned a transitional security interest).

Ownership changes

In addition to falling foul of aspects of the PPSA itself, unwise SPG groupings could also cause some commercial problems in the event that ownership changes take place within the group.

What if the business represented by SP2 is sold to new owners?  What if the sale is conducted in such a manner that the legal entity represented by SP2 (their ACN, for example) remains intact and only its shareholding and possibly its directors change?

There are no longer any common ties between SP1 and SP2 and yet both are members of the same SPG.  Clearly there will need to be new SPGs established for each of the secured parties but what transfers need to take place?  It might be fairly clear-cut in a number of instances where the customer bases of SP1 and SP2 do not overlap but what about those registrations where there is an overlap?  

A registration cannot be transferred to more than one SPG.  Either SP1 or SP2 will lose their registration and, while a fresh registration may only cost a few dollars, the loss of that registration also means a loss in the priority afforded by its registration start date – no small thing, particularly where transitional registrations are concerned!

Conclusion

It might sound from the foregoing that setting up an SPG with more than one secured party is more trouble than it’s worth but that need not be the case - and it should be pointed out that we’ve not exactly been inundated with s151 and s178 demands for removal of registrations based on the presence of an extraneous SPG member.

If SP1 and SP2 are both identified on your credit documentation; if your customer is signing an agreement with both parties; if SP1 and SP2 would each be lodging separate identical registrations against the same grantor had they not been members of the same SPG then there may be significant administrative and financial savings to be made by having both as members of the same SPG.

 And don’t forget that secured parties may be members of a number of different SPGs, therefore, SP1 could happily be a member of one SPG alongside SP2 while also being the sole member of its own SPG used to lodge registrations where there is no common agreement with SP2.

However, where each secured party has its own documentation; where there will be separate credit agreements even though there may be an overlap in customer base; where the nature of the collateral or the security interest might necessitate different registration needs; where it is not inconceivable that one of the secured parties might be sold off at some point in the future then it would be sensible for each secured party to establish its own SPG.

I’d suggest that the default position should be for each secured party to be the sole member of its own SPG and, only if a strong case can be made for a shared SPG, should a multiple membership arrangement be considered.

Amendment Demands - Section 178

In an earlier article, I discussed the importance of Section 151 of the PPSA and the requirement that there be a reasonable belief that the security interest being registered on the PPSR either exists or is likely to exist.  Click here for that article. 

So while that article addressed a supplier’s right to lodge a registration, this article will consider the buyer’s rights when it comes to demanding that it be removed.

Section 178 of the PPSA is the most immediately relevant here and sets out two key criteria for a buyer to demand that a registration lodged against them be removed:

(a)          The obligation owed by a debtor to the secured party is not secured by collateral described in the registration; or

          (b)          The particular collateral in which the person has an interest does not secure any obligation owed by a debtor to the secured party.

These criteria are very similar to each other and, in exploring a variety of scenarios there is certainly some cross-over between the two.

Essentially, a buyer/debtor may demand that a registration be discharged if there is no collateral as described in the supplier’s registration or if there are no monies owed by them to the supplier that are secured by the described collateral.

Scenarios

Probably, the most common situation where such criteria would apply is where a supplier has supplied goods subject to a retention of title clause and was subsequently paid in full.  The supplier has either simply overlooked their obligation to remove their PPSA registration or legitimately believed there was a likelihood of repeat business in the near future.  While a supplier may have the right to lodge/maintain a registration in the reasonable expectation that trading might take place, a buyer has a superior right to demand the removal of such a registration.

Fortunately, a little less common, s178 criteria could also apply where a supplier has incorrectly described their collateral in their PPSA registration as constituting an item of inventory whereas the goods in question are clearly non-inventory items.  In such a scenario, even though there may be monies owed by the buyer to the supplier, it is not technically secured by the collateral as per the registration’s description.

We could also have a situation where the registration has been lodged correctly and there is money owed by the buyer to the supplier in respect of collateral delivered by the supplier but the collateral has been on-sold or otherwise ‘used up’ – there is therefore no collateral against which the supplier’s security interest can ‘bite’.  What about the supplier’s claim to proceeds?  Well a pre-condition for a proceeds claim is that the proceeds be directly or indirectly attributable to the sale of the supplier’s collateral and washing around in a busy bank account will tend to disguise any attribution quite effectively.  We may also have a supplier selling something like bleach or disinfectant that has been used up by the buyer generating no tangible proceeds.

So if there are no monies outstanding on the account or there is no collateral against which a supplier’s security interest can attach then the buyer is well within their rights to request that the supplier’s registration be discharged.

So how should the buyer go about getting the registration discharged?

In an ideal world the buyer would phone or email their supplier, gently point out that the registration against them appears to be serving no purpose and politely ask that it be removed at the supplier’s earliest convenience.  Unfortunately, what seems to be a lot more common are  strident demands, indignant protestations, and veiled threats of legal action and fines.

Under section 178 the buyer/grantor should address an amendment demand to the secured party’s address for service (found on their registration) outlining their reasons for the registration to be discharged or otherwise amended.

While section 178 provides no timescale for the discharge/amendment to take place, section 179 allows for escalation to the PPSR Registrar if the secured party has not responded appropriately within 5 business days.

Once the Registrar becomes involved they will issue the secured party with an amendment notice.  That amendment notice will reiterate the amendment demanded and invite a written response by the end of a further 5 business days.

Should the Registrar not receive any response from the secured party during this time-frame they will either amend or discharge the registration in line with the grantor’s amendment demand.

Where the secured party does respond in good time with an argument against discharging or amending the registration, the Registrar will make their decision based on the information provided by the secured party and ‘any other relevant information’.

Reference to the PPSR Registrar is, however, not the grantor’s only recourse should the secured party fail to respond satisfactorily to their initial amendment demand.  The grantor may choose, instead, to take the matter to court.

The PPSA is understandably silent on timescales once the matter has entered the court system but, as with similar legal processes, both grantor and secured party will have the opportunity to argue their positions before the court and should a decision be rendered in favour of the grantor then it will take the form of an instruction to the PPSR Registrar to effect the requested amendment/discharge.

So what about the threats of fines?

That part of the PPSA that concerns itself with Amendment Demands (part 5.6) is quite silent on the matter of penalties although there may be some application of section 151 that can be brought into play where the grantor suggests that there was no justification for the original registration in the first place.  While I’m not aware of any penalties having been applied for frivolous or unjustified registrations, section 151 certainly provides for civil penalties of up to 250 penalty points (equivalent to $42,500 at time of writing).

So far I’ve seen a lot more bluff & bluster and overly aggressive demands than I have civil and politely composed requests – possibly because the polite requests get acted upon straightaway whereas the aggressive ones tend to get referred to people like me for their advice – but the rules and timescales for action are clearly laid out and are unaffected by the tone chosen by the grantor.

Notifying the Grantor – what are your obligations?

Every time you lodge a registration on the PPSR you will be provided with a Verification Statement confirming the details of your registration.  Every Verification Statement issued by the PPSR contains the following paragraph:

Section 157 of the Act advises that the Secured Party, upon receiving their Verification Statement:

must ensure that a notice of the statement, in the approved form, is given to the following persons as soon as reasonably practicable after the time of the registration event:

(a)          a person registered as a grantor in the registration immediately before the time of the registration event;

(b)          a person registered as a grantor in the registration immediately after the time of the registration event.

Essentially, 157 requires that notification is provided to the Grantor.  The rather convoluted wording at (a) and (b) is to allow for circumstances where a Verification Statement has been issued to recognise an amendment to an existing registration in which a Grantor has been removed from a registration.  In such an instance 157 is advising that the notification must be sent to the Grantor that has been removed from the registration as well as to the Grantor added to or remaining on the registration.

[Remember:  Verification Statements are not only issued when an initial registration is lodged, they are also issued when any amendments are made to that registration – every Verification Statement you receive brings with it an obligation to notify the Grantor.]

Section 157 goes on to allow for the Grantor to waive their rights to receive notification of a Verification Statement where the security interest arises from a commercial rather than consumer transaction.

The sort of waiver that a Grantor may sign will usually appear as a clause in a set of Terms & Conditions that are accepted when entering into a credit agreement.  The following are some examples of 157 waivers I've seen cropping up in such Terms:

The Purchaser acknowledges and agrees that the Supplier may apply to register a security interest in the Goods at any time before or after delivery of the Goods. The Purchaser waives its right under s 157 of the PPSA to receive notice of any verification of the registration.

Or

Pursuant to section 157 of the PPSA, unless otherwise agreed in writing by Us, You agree to waive the right to receive the Verification Statement in respect of any Financing Statement or Financing interest statement relating to the Security Interest.

So, now we have a clearer idea as to what the Act actually states, let’s look a bit more closely at how we provide our notification, what form should it take and what information should be included; when we need to provide notification; and what happens if we let things slip and don’t actually get around to notifying the Grantor.

How should we provide our notification?

While the PPSR talks about giving “a notice of” the Verification Statement in “the approved form”, they basically mean that you should send a copy of the Verification Statement itself.  Which, means forwarding a copy of the statement the PPSR email to you onto your Grantor.  So that this doesn’t hit your Grantor unaware, it would be helpful if you were to accompany the Verification Statement with a helpful explanation as to what this is all about.

I’d suggest something along the following lines:

Dear Valued Customer

PPSR: NOTICE OF VERIFICATION STATEMENT
Provided pursuant to section 157 of the Personal Property Securities Act 2009

This letter is to inform you of a registration we have lodged on the Personal Property Securities Register (PPSR) a copy of which accompanies this letter.

Our registration is strictly in relation to a security interest we maintain over the goods we supply in the form of a Retention of Title clause enshrined in our standard Terms & Conditions of Sale.

Our registration on the PPSR is purely a means to safeguard our position against any competing claims from other creditors and should not, as a matter of practicality, change our normal trading relationship with you nor indicate any concerns regarding your value to us as a trading partner.

Should you believe that our registration is not valid please contact the undersigned as soon as possible and we will be happy to work with you to resolve any misunderstanding.

We encourage you to visit the Government website, www.ppsr.gov.au, if you require further information on the PPSA.

Thank you for your ongoing support.

Yours faithfully

The PPSR did toy with the idea of providing a template for the formal notification rather than requiring a copy of the Verification Statement itself be issued and even went so far as to refer to this as an option in their earlier Verification Statements:

However, when I challenged them on this they admitted they didn’t, in fact, have any such template and quietly removed any reference to it.

Important:  If any individual’s date of birth is visible on your Verification Statement then that date of birth should be masked/hidden/obscured/redacted or otherwise rendered unreadable before it is forwarded to anyone other than the specific individual in question.  Failure to do this may cause you to fall foul of the Privacy Act 1988.

When should we provide notification?

Well, the Act is relatively vague on the matter and states that the notification must be given to the Grantor “as soon as reasonably practicable after the time of the registration event”.

[Remember:  The registration event can mean the initial registration itself, an amendment to an existing registration or a discharge of a registration].

So, how should we interpret “as soon as reasonably practicable”?

Perhaps, more pertinently, how would the Australian courts interpret the term?

In 2001 the Australian High Court observed that the words ‘reasonably practicable’:

are ordinary words bearing their ordinary meaning. And the question whether a measure is or is not reasonably practicable is one which requires no more than the making of a value judgment in the light of all the facts. (Slivak v Lurgi (Australia) Pty Ltd 2001)

This is probably good news for those suspecting some legal trickery but less helpful to those of us looking for a little more certainty.  In a nutshell, we don’t know whether something was done as soon as was reasonably practicable without first examining all the relevant circumstances.

If you have just lodged a registration before shutting up shop for the evening then I daresay it would be reasonable to expect the notification to be sent to the Grantor the following morning.  If the following morning happens to be a non-working day (a weekend or public holiday) then it would probably still be reasonable if the notification was sent on the next working day. 

Would it be reasonable to delay sending the notification for up to a week or so?  I’d suggest that the onus would then be on the secured party to demonstrate that it was not practicable to send the notification any earlier.

But, before we get too wrapped up in this, let’s consider the implications should we fail to send our section 157 stipulated notification.

What if we don’t send a notification?

While the PPSA allows for fines to be levied for a number of breaches of the Act, failure to fulfil section 157 obligations is not one of those breaches.

However, the PPSA does warn that the Grantor may have available to them an action for damages against the Secured Party under section 271 of the Act.

Section 271, basically, states that, if the Secured Party has failed to perform a stipulated obligation towards the Grantor, they (the Grantor) “have a right to recover damages for any loss or damage that was reasonably foreseeable as likely to result from the failure”.

So the Grantor would have to demonstrate to a court’s satisfaction that, as a direct result of not being made aware of the existence of a PPSA registration lodged against them, they suffered a financial loss that should have been reasonably foreseeable by the secured party.

Now, while it may not be impossible to imagine a scenario whereby such a loss could have arisen it certainly does test what might be considered ‘reasonably foreseeable’.

If we add to this, a situation where the Secured Party merely advised the Grantor of the existence of their registration without sending them a copy of the Verification Statement, then it becomes even less likely that the Grantor would be able to demonstrate a financial loss arising from not knowing the precise details of a registration, the existence of which they were aware.

I don’t want to give any encouragement to those looking for an excuse to ignore their notification obligations but I won’t be disappointed if I am able to provide some small comfort to some poor beleaguered credit manager who wakes up in the middle of the night in a cold sweat having just realised that they’d failed to forward a copy of a verification statement.

Important: Where the Grantor is an individual, the PPSA has warned that failure to provide the required section 157 notice may constitute “an act or practice involving interference with the privacy of the individual for the purposes of section 13 of the Privacy Act 1988”.

The Privacy Act provides for a civil penalty of 2000 units for a serious and/or repeated or widespread breach of section 13.  A penalty unit is, at time of writing, equivalent to $170.00.