The PPSR doesn’t understand Retention of Title!

On 23/07/2018 AFSA, the operators of the PPSR, issued a news briefing regarding how the PPSR could assist a building developer in “using the PPSR to secure its retention of title in the material it supplies”.

Given that it would be unusual for a building developer to be doing the ‘supplying’ when it comes to materials, I thought I’d get a copy of the information sheet AFSA were promoting.

Sure enough the PPSR Case Study 11/V1, started with:

“Scenario – building developer uses the PPSR to secure its retention of title in the materials it supplies ...”

The information sheet goes on to elaborate as follows:

“Developer Sceneview owns land on which it has permission to build a warehouse.

It contracts with Projex to build the warehouse. The contract provides that Projex sources the material needed for the build process.

Projex will submit invoices to Sceneview for works and materials, whether the materials are on-site or off-site.

Sceneview has a security interest, under the contract, in all building materials in the possession of Projex, to secure performance of Projex’s obligations under the warehouse contract.

Sceneview registers that security interest against Projex on the PPSR.”

I don’t know about you, but the first thing that struck me was that it was Projex, as the supplier, that was most likely to hold a Retention of Title over the goods they were supplying.  While Sceneview may be contractually granted a security interest over goods in the possession of one of their contractors, such a right would not be a Retention of Title right.

The information sheet then hints that it knows that what it is describing is not really a Retention of Title right, because it goes on to suggest that ‘Sceneview’s’ registration will only defeat a competing registration by a bank by virtue of having been lodged earlier.  If the registration concerned a true Retention of Title right it would have been eligible for PMSI treatment and the relative timing with a bank registration would have been irrelevant.

I wrote to AFSA drawing their attention to their description of an ROT interest, not actually being an ROT interest and, a couple of days later, got a phone call from quite a pleasant lady who explained that they already had concerns internally over the information sheet in question and had been reviewing it even while it was being actively promoted as part of an email campaign. 

As anyone who has had dealings with civil servants will appreciate, there was no admission that an error might have taken place, nor any explanation as to why a misleading information sheet not only remained as part of the PPSR’s help documents (it’s still there at the time of writing by the way) but was then selected for specific dissemination to a wider audience. They were gracious enough, however, to acknowledge that, I was ‘not necessarily wrong’ in the error I had pointed out. 

Bless them.

Accidental Discharges from the PPSR

Even with the best will in the world, every now and again a mistake will get made, and, in addition to the plethora of opportunities for making mistakes in lodging a registration on the PPSR, it is also quite easy to mistakenly discharge one of your registrations.  Unfortunately, unlike the program I’m using to write this post, the PPSR doesn’t have a convenient ‘undo’ button and although the PPSR does allow for such errors to be corrected, the word ‘convenient’ really does not apply.

The PPSR’s primary concern in such matters is not with assigning blame or getting you to eat humble pie over making your mistake in the first place, but to ensure that no-one could be misled should they reinstate the registration that had been discharged in error.

This means that your very first action upon realising that the registration shouldn’t have been discharged should be to lodge a replacement registration.  

The longer your registration is ‘missing’ the more opportunity there is for a third party to be potentially misled into thinking there was less security in place than there would have been had your registration not been discharged in the first place.

Unfortunately, the Corporations Act and the PPSA’s own PMSI designation requirements mean that, in some cases, a replacement registration won’t suffice on its own – the original registration needs to be reinstated.

In order to convince the PPSR to restore your discharged registration you will need to obtain a “Request to remove, restore or correct data” form from the PPSR.  They haven’t made this the easiest of forms to find but, at time of writing, it was available from a link at the bottom of the page here.  

For restoring a registration, there are essentially only three sections of the form that need to be completed:

• Firstly, you need to identify yourself (applicant details) in the same manner as you were identified when you first set up your Secured Party Group.

• Secondly, you need to enter the unique number of the registration to be restored and ‘tick the box’ making it clear that you want the registration to be restored rather than removed or corrected.

• Thirdly, after skipping a couple of sections relating to having a registration removed, you need to enter some free-form text to explain the circumstances surrounding the mistaken discharge.  Remember, the PPSR is not interested in assigning blame and it is usually sufficient just to enter something to the effect that removal of the registration was simply down to human error.

After that, the form just needs to be signed and submitted to forms@ppsr.gov.au.

Once the PPSR has had the opportunity to consider the form you’ve submitted, they will look to ensure that no-one is likely to be significantly misled by restoring the registration in question.

To this end they will check their search records to see if anyone had conducted a search during the period the registration was ‘missing’ and not replaced by you with another.  If there were no searches and your replacement registration was submitted sufficiently promptly, all will be good, otherwise you may need to write to the potentially misled parties to clarify the position.

You may also be asked to obtain the Grantor’s approval to restore the registration.

I’ve not had the opportunity to test an instance where the Grantor in question has refused to confirm that they have no objection to the restoration of the registration but would assume that confirmation that the circumstances that led to the original registration were still in place should be sufficient.

That should then be it!

The original registration should be restored to the register in a manner virtually indistinguishable (as far as legislative requirements are concerned) from it ever having been removed in the first place.

The PPSR has its own guidance notes on the process here for those who want to make doubly sure.