Amendment Demands - updated process/forms

 I published a guide to issuing amendment/discharge demands in May 2017 - you can read that article HERE.  

The PPSR has now issued a sample amendment guide themselves (available HERE) as well as a guide to its dispute process (available HERE).

They have also launched a new amendment statement form "to help simplify the strict legal process required when disputing a PPSR registration"  

The new form is a little more user friendly and can be found HERE.

In short, if one of your suppliers or financiers is maintaining a registration against you that you think is incorrect or should no longer apply to your business, you must first contact them to explain your reasoning and to request that they remove (or amend) their registration.  In many cases a relatively friendly approach by phone or email will be sufficiently effective, however, if that fails to achieve the desired result, a formal amendment request should be sent - as per the example in the PPSR's sample amendment guide.

You should then give your supplier/financier 5 business days to respond.  Failing receipt of a satisfactory response within that timescale, you can use the PPSR's new Amendment Statement form to formally request the removal or amendment of the contentious registration.

The PPSR's tips for the process can be downloaded from HERE.

Proposed Fee Changes

On the 11^th April the Australian Financial Security Authority (AFSA), which operates the PPSR, issued a consultation document regarding changes to the PPSR’s fees intended to take effect from 1^st July 2018.

With the PPSR having, effectively, earned back its own development costs in its first 3 years of operation, its fees are now, pretty much, only there to ensure it covers its own running costs.  Given a steady growth in registration activity, AFSA believes that it can reduce its fees and yet still cover its own costs for the next few years and has thus proposed the following reductions:

Activity	Current	Proposed
7 year registration	$6.80	$6.00
7 to 25 year registration	$34.00	$25.00
Indefinite registration	$119.00	$115.00
Searches	$3.40	$2.00

The consultation document is silent on the matter of fees for ‘Minor Amendments’ and the reissue of Verification Statements.

Minor amendments include changes to:

• Free text description (collateral description)
• Subordination Indicator
• Giving of notice identifier
• Proceeds Indicator and description
• Vehicle Registration Number (i.e. the number plate of the vehicle)
• Aircraft Nationality
• Aircraft nationality code and registration marks assigned pursuant to the Chicago Convention (where not used as a serial number)

Minor amendments and the reissue of Verification Statements are currently charged at $3.40 each.  I’ve written to AFSA querying these omissions.

The consultation document can be found at https://www.ppsr.gov.au/cost-recovery-implementation-statement with any comments required to be forwarded to stakeholders@afsa.gov.au by 6pm on Friday 4^th May.

UPDATE: AFSA has now advised that 'Minor Amendments' such as changing Collateral Descriptions will (should the proposed new charges be accepted) no longer attract a charge from the PPSR.  Similarly, if the proposed new fees are accepted, the reissue of Verification Statements will also not attract a fee.

UPDATE #2: AFSA has issued a notice advising that the planned implementation of the fee reductions will need to be delayed in order to give certain stakeholder groups longer to prepare for the fee reduction.  I don't pretend to understand why it would need to take more than 2 months to prepare for a small fee reduction but, nevertheless, there will be a delay.  No fresh implementation date has been given at this point but I will update again when this is announced.


UPDATE #3: We've now had confirmation that the new fees will be implemented on 1st August 2018 following approval from the Attorney-General.

PPS Leases – Extended to 2 years

I wrote on this issue in March when the Government’s Bill to extend the qualifying period for PPS Leases to 2 years passed its first reading.  I was sceptical at the time as to how swiftly we could expect the Bill to be enacted and come into effect but clearly, those lobbying for the changes carry some serious clout because Royal Assent took place on 19^th May and the terms of the Act are now in force.

While, superficially, the Act has merely served to double the qualifying period for leases to get caught up by the PPSA, more tellingly, the Act also keeps indefinite leases out of the PPSA’s claws until such time as the lessee’s actual possession of the leased property passes the 2 year mark. 

This is, by far, the more meaningful change and it will almost certainly be welcomed by all the small hire operations that don’t expect to hire their goods out for much more than a few days or weeks yet fail to put an expiry period on the lease. 

However, the relief that no doubt comes from not having to worry about the administrative burden of the PPSA may be offset by the corresponding loss of protection that having their leasing arrangement treated as a security interest allowed. 

Loss of protection from Preference demands

Under the PPSA, property being leased is treated as collateral in a security interest that would allow the lessor to recover their property in the event the lessee failed to continue making payments under the lease.  Up until now, a lessor will have been able to use the presence of this ‘security interest’ (provided it was properly registered) as a defence against any claim from a liquidator that monies paid under the lease should be returned as preferential payments. Under this new Act, it is difficult to see how a lessor (for an indefinite lease that has yet to run for 2 years) would be able to use that defence.

Loss of PMSI ‘super priority’

In order to be eligible for PMSI super priority where the collateral being used is designated as a non-inventory item, the perfecting registration must be lodged within 15 business days of the lessee taking possession of the property.

However, where an indefinite lease is concerned and the lessor doesn’t lodge their registration until it becomes clear the lease may extend beyond the new 2 year qualifying period, that 15 business days period may long since have passed leaving the lessor’s claim to their equipment to fall behind those of other general security holders with registrations already in place.

I notice that the Hire and Rental Industry Association (HRIA) has, rather dangerously, advised its members that registration within the PPSA designated timescale won’t be necessary in order to get PMSI priority; unfortunately, its explanation as to why this might be isn’t especially convincing.

It would have been far better for the new Personal Property Securities Amendment (PPS Leases) Act to have also adjusted the PMSI designation timescales to accommodate these changes and remove any doubt.

Vesting under the Corporations Act

Regardless as to how the PPSA might be interpreted, the Corporations Act, at s588FL, clearly states that…

If a registration has been lodged during the 6 months leading up to the appointment of a liquidator, it must have been lodged within 20 business days of the security agreement coming into force in order to avoid the collateral in question being vested with the liquidator.

Basically, if a registration isn’t lodged within 20 business days of the leasing agreement being entered into, the lessor has to keep their fingers crossed that a liquidator doesn’t get appointed to the lessee during the 6 months following their eventual registration.

If anyone gets a little lost at this point, I have a visual here that should help.

The PPSR, in explaining the implications of the new Act, suggests registering at 22 or 23 months into the leasing period, but this clearly won’t help lessors avoid falling foul of s588FL.

Fortunately, the HRIA recognises the danger that those at the PPSR clearly don’t and recommend that registrations be lodged before 18 months have passed if it looks as though the lease might go on for longer than expected.  Where there is already an expectation that the lease could last longer than 2 years, they recommend registering at the outset.

This seems a sensible workaround but, with proper prior public consultation and better thought out legislation, there should be no need for ‘workarounds’!

Summary

Leases and bailments entered into after 20 May 2017 will be subject to the new definition of PPS Leases and such leases will not need to be registered on the PPSR unless they are to run for longer than 2 years.

Agreements entered into before 20 May 2017 will remain subject to the previous definition of a PPS Lease and should still be the subject of a PPSR registration if they are due to run for longer than a year, allow for extensions taking the agreement beyond a year, or are for an indefinite period.

Update: Please see my post on "When does a Grantor take possession?" for some fresh thinking on some of the issues/concerns raised in this post.

PPSR - Requesting an Amendment or Discharge

Recent posts have concerned themselves with how to conduct searches of the PPSR and how to set up an alert to be notified when a new registration has been lodged against you.

It seems a natural follow on to now look at your options should you find that someone has lodged a registration against you that you don’t believe should be there.

The most likely scenarios are where:

• Trading that had given rise to a security interest has been fully concluded with no reasonable expectation of further trading in the foreseeable future; or
• A trading partner (or indeed, anyone) is asserting a security right to which you have never agreed.

While a registration without a solid underlying security interest is, effectively, worthless it nevertheless has the potential to cause problems – particularly should you find yourself having to negotiate a loan with a fussy financier or deal with an overly cautious conveyancer when trying to sell some property. 

Your first course of action should be to write to the Secured Party that lodged the registration. 

While, for the sake of the legislation, you need to write to the person/contact point identified in the registration as the Address for Service, there is no harm in also involving a more familiar contact in the correspondence if you feel that might be helpful to your cause.

However, I would strongly discourage adopting an overly aggressive stance and threats of legal action and penalties should definitely be avoided.  I’ve had a number of such approaches referred to me and have found that, rather than intimidate the recipient, they have invariably provoked a desire on their part to dig their heels in and devote unnecessary time and effort into trying to find fault with the demand!

All that is needed is a short, polite letter, referencing the registration number in question, suggesting that the registration is no longer required/valid and requesting its discharge.  Importantly, the letter should also add that it is being sent in accordance with section 178 of the PPSA.

Something along the following lines should suffice:

Dear Sirs,

REQUEST TO DISCHARGE REGISTRATION 201401010007553

It has come to our attention that you have lodged the above registration against us on the Personal Property Securities Register.

We have reviewed our dealings with you and find them to have been fully concluded with no outstanding obligations; consequently we request that you effect the discharge of this registration at your earliest convenience.

We will review the situation in 5 business days’ time.

Please note that this letter has been sent in accordance with section 178 of the Personal Property Securities Act.

Yours faithfully… etc

Or, depending on the circumstances, the red text could be replaced with something along the following lines:

We have reviewed our dealings with you and find that no security interest of the nature described in your registration has been agreed by us

If your section 178 request to the Secured Party fails to elicit a satisfactory response, your next step is a section 180 request to the PPSR.

While the PPSA does not stipulate the length of time that should be available to a Secured Party to attend to your request, taking the next step of approaching the PPSR directly requires that they have had at least 5 business days to deal with your request.

To assist you in making your s180 request, the PPSR has a specially designed form for you to complete.  This can be found at:

Amendment Statement download

The form is comparatively straightforward although I’ll quickly run through the essentials.

All this information can be taken from the details of the registration itself.  If more than one Secured Party was listed on the registration (as may often be the case), you’ll need to complete one of these forms for each.

The form is asking for your details here – you are the applicant and, certainly in the context of this post, you are the ‘person’ identified as the Grantor in the registration.

Depending upon the circumstances, the response to the final question in this section:

Will depend upon whether you still have ownership of the goods in question or have used them up or on-sold them.

• If you still have ownership then your interest is an ‘Other Interest’,
• if you have on-sold them on terms that mean you still have a right to them in the event of non-payment then you have a ‘Security Interest’,
• but if you have used them up or on-sold them and have been paid in full, you have neither a ‘Security Interest’ nor ‘Other Interest’.

The amendment demand to which the first tick box refers will be the letter you sent to the secured party asking for the discharge – as you can gather, this box should be ticked and you should attach a copy of the letter.

In the circumstances we’ve been looking at in this post, box (a) should be ticked.  However, if you are seeking an amendment to a registration in respect of a legitimate security interest and merely wish to ensure certain specific collateral is excluded from its terms then (b) would be more appropriate.

The amendment demanded will, invariably, be the discharge of the registration.

Following the relatively self-explanatory declaration on the final page(s) the completed form should be sent to forms@ppsr.gov.au.

Once the form is processed by the PPSR, it will write to the Secured Party inviting them to comment on your demand.  The Secured Party has 5 business days to comment and, in the absence of any response, the PPSR will discharge the registration (or amend it) as per your request.

If the Secured Party responds, within the 5 business days permitted, to the effect that the registration should stay in place as per its current terms then, unless the Secured Party’s explanation is transparently spurious to the PPSR Registrar, your only remaining recourse will be to the Courts (section 182) – it would be exceedingly unusual if this became necessary.  But if it did, you’ll need to get professional legal assistance.

UPDATE 30th July 2021: The PPSR has revised its Amendment Demand form and issued its own guidance as to the amendment demand process.  Please see my more recent post HERE.

PPSA Amendment Finally Passes! [UPDATED]

Back in March 2014, I wrote about a Bill being put before Parliament to do away with the two tier system the PPSA had introduced whereby leasing arrangements were treated differently depending upon whether they involved serial numbered equipment (eg, motor vehicles and watercraft) or non-serial numbered equipment (eg, everything else).

That article, giving some background to the Bill and its implications, can be found here.

Finally, towards the end of last month, that Bill, the Personal Property Securities Amendment (Deregulatory Measures) Bill 2014, was passed.  While the approximately 15 months wait to get this approved won't be good news for those looking for swift implementation of any of the 394 recommendations included in the recently completed review of the PPSA, it will be good news for those businesses regularly engaged in the of hiring vehicles for periods of less than a year.

The Government has estimated that bringing the hiring of motor vehicles into line with the hiring of any other piece of equipment will save business over $11 million a year - whether that is based purely on the saving of registration fees or also includes the administrative costs involved in preparing and lodging a registration is not clear.

The good news, however, won't be felt just yet.  The Act needs to receive Royal Assent before it can be introduced and such introduction may take up to a further 6 months from that point.  

[UPDATE: An announcement by the PPSR today (28/08/15) advises that "The Government is working toward commencement of the amendment on 1 October 2015."]

Any leasing arrangements entered into before the, yet to be announced, amendment commencement date will still need to be registered in accordance with the 'old' rules but after that date, a great many small and medium sized businesses will have found themselves released from an annoying strand of red tape.

Just to reiterate - at present, if you are leasing a motor vehicle (or equipment that might fall under the Act's rather broad definition of motor vehicle) where the period of the lease falls into one of the following categories:

a) a term of more than 90 days; 
b) for an undefined period that may be construed as allowing for a hire extending beyond 90 days; or 
c) for any other period that allows, via automatic or optional renewal, extension to a total period exceeding 90 days.

A PPSR registration is necessary to prevent your property being taken as part of your customer's estate in the event a liquidator is appointed.

After the new amendment comes into force, the rules for motor vehicles will be just the same as for any other hired equipment:

a) a term of more than 12 months; 
b) for an undefined period that may be construed as allowing for a hire extending beyond 12 months; or 
c) for any other period that allows, via automatic or optional renewal, extension to a total period exceeding 12 months.

Any standard leasing arrangement that falls outside of any of the above situations need not register and need not run the risk of a liquidator taking possession of your equipment.

Forthcoming PPSR Fee Changes

Just to give you the heads up on a forthcoming change to the PPSR’s registration fees.

The scheduled change is still subject to sign off by the Government but, given that the formal Cost Recovery Impact Statement (CRIS) produced by AFSA has been made publicly available, I’d suggest that sign off will be little more than a rubber stamping of the CRIS proposals.

From 1/07/2015 the following fee changes are proposed:

Activity	Proposed Fee	Current Fee
Registration up to 7 years	$6.80	$8.00
Registration 7 to 25 years	$34.00	$40.00
Registration – Indefinite	$119.00	$140.00
Minor Amendment	$3.40	$4.00
Search	$3.40	$4.00
Discharge	$0.00	$0.00

For major amendments the fee will continue to reflect the equivalent new registration charge for the duration of the registration.

Why the proposed reduction?

So far, the fees charged by the PPSR have included a component to finance a repayment of the Government's start up investment in the Register.  This repayment is scheduled to be completed by 30th June 2015 thus charging beyond that date may be reduced proportionately - this amounts to a 15% reduction across the board.

As I have previously written on the importance of timely registration, it would be foolish to consider waiting until the new charges are introduced before lodging registrations!

PPSR Changes the Definition of 'Motor Vehicle'.

We all think we have a pretty good idea as to whether something is a motor vehicle or not.  And when it comes to cars, trucks, motor bikes etc we’re on pretty safe ground, but what about ride-on lawnmowers (or even a motorised lawnmower that isn’t a ride-on) or fork lift trucks or cranes or motorised shovels etc.?  This is where things become substantially less clear cut and we begin to grudgingly accept that a formal definition might not be a bad idea.  

However, the definition that the PPSA has been using may have been a little too all embracing:

The item is a motor vehicle under the PPS Act if it is built to be propelled wholly on land by a motor that forms part of it (but not if it runs on rails, tram lines or other fixed path), has a unique serial number and is also capable of travelling at more than 10km/hr OR has a total motor power greater than 200W.

I suspect that it is this speed OR power component of the definition that would allow certain lawnmowers to suddenly become motor vehicles.

However, from today (1^st July 2014) this has all changed with that OR being changed to AND.

Yes, indeed, this is a massive shift and perhaps, at long last, all those that have been clamouring for this change will finally be able to rest easy.

The new motor vehicle definition is, henceforth:

The item is a motor vehicle under the PPS Act if it is built to be propelled wholly on land by a motor that forms part of it (but not if it runs on rails, tram lines or other fixed path), has a unique serial number and is also capable of travelling at more than 10km/hr AND has a total motor power greater than 200W.

By the way, there has been no change to that part of the definition that allows for property that can be towed at speeds of more than 10km/h to be classed as motor vehicles, such as caravans, trailers and…

???

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.

PPSA – Changes proposed for those hiring serial numbered goods.

19^th March saw the tabling of the Personal Property Securities amendment (Deregulatory measures) Bill 2014 in parliament.  Not the most helpfully titled Bill, its contents are nevertheless pleasantly short and to the point and concern themselves with making life easier for small and medium sized businesses hiring out equipment that can be classified as either motor vehicles, watercraft or aircraft.

The Current Position

At the moment if you are leasing goods to another business for a period of 12 months or more (or for an indefinite period) you need to register that lease as a security interest on the PPSR in order to protect your ownership rights in the event that the business leasing your goods goes into administration. 

However, if the goods you are leasing can be defined as motor vehicles, watercraft or aircraft, then the qualifying criteria that the leasing period be at least 12 months is reduced to 90 days and hirers need to lodge registrations on the PPSR for comparatively short term leases in order to protect their ownership.

The Proposition

This Bill proposes to amend the Personal Property Securities Act 2009 (PPSA) so that leases of motor vehicles, watercraft and aircraft of 90 days or more will no longer be deemed to be PPS leases for the purposes of the PPSA.  This will minimise the need for small and medium hire businesses to make registrations in respect of leases of a term of less than 12 months.

The change will bring the PPSA into alignment with personal property securities (PPS) regimes in other common law countries (such as New Zealand and Canada) where a lease is deemed to be subject to PPS laws where the lease is for more than 12 months or an indefinite term. 

By reducing the number of transactions giving rise to PPS leases, the Bill should substantially reduce the compliance cost born by small and medium hire businesses.

Conclusion

The original decision in the PPSA to operate a two tier system for leased goods, one for serial numbered goods (motor vehicles etc) and another for everything else, seemed an unnecessary complication that provided no obvious benefit to anyone and a lot of pain for anyone unfortunate enough to have their equipment fall under the very broad definition of ‘motor vehicle’.

The decision to rectify this should be welcomed.

The provisions of the Bill will take effect not later than 6 months from it receiving Royal Assent.