Update to the PPSR - R6d

A small update went into the PPSR over the weekend.  The main change has been long awaited and should be welcomed by all.

Previously, when lodging a new registration, the expiry period options only allowed for 25-year and indefinite periods to be chosen, for any other period, a specific date needed to be added:

With one of the most common registrations periods preferred by trade credit suppliers being 7 years, having to specifically add an end date was, not only a nuisance but also fraught with the opportunity for error.

This has now been fixed and users from this morning onwards are able to simply select a 7-year registration period and let the PPSR calculate the end date:

Not an especially radical change but one that should make life just a little bit easier, and that's nice.

Government's Response to the PPSR Review

Bruce Whittaker completed his formal review of the PPSR in March 2015 and his report, containing 394 recommendations, was put to Parliament at that time.  I first wrote to the Attorney Generals' Department in September 2016 asking what progress had been made in assessing the review's recommendations and have begun making something of an annual habit of it ever since.

The request for information and the formal response from the AGD after 18 months consideration can be found HERE, and the response after 30 months can be found HERE.  Some 44 months on from the PPSR Review's release I've received the following response to my latest enquiry requesting an update on the progress of its consideration:

Thank you for your email about the Government’s response to the Review of the Personal Property Securities Act. I am sorry for the delay in responding to you.

Regarding timelines, while the department has made considerable progress on the response to the Review, we are currently consulting with a range of industries and stakeholders regarding a number of the more complex recommendations in the Review.  Following the conclusion of this consultation, the Government intends to release its response to the Review. This is to provide stakeholders with notice of the Government’s position on the review as soon as possible. Following this, the department will undertake broader consultation on the corresponding exposure draft legislation. We are not in a position to provide a release date at this time, but will keep you updated.

With all due respect to the AGD, this doesn't represent any advance on their update last year in which they advised:

The Government intends to release an Exposure Draft of a Bill to amend the Act and a prototype PPS Register, for public consultation. Stakeholders will have an opportunity to provide comment on the Bill and the Register before the Government takes further action to implement the recommendations of the Review.

The Government will make further announcements about the timing of public consultation on the Bill and Register.

If anything, the latest response seems to represent something of a step backwards.

At this stage, it might be worth pointing out that it 'only' took around 2 years from the passing of the 2009 Act to commencement of the Register in the first place (not that anyone considered that to be particularly quick) and we are now approaching 4 years from the presentation of the Review's findings without the Government having even released a response for consultation let alone an implementation strategy.

With so many finding the registration of their security interests on the PPSR an overly complicated exercise fraught with the possibility of error, it is disappointing that there is such delay in implementing recommendations designed to simplify the process and remove many of the Act's pitfalls.

Spike in PPSR Registrations due to Expire

Earlier this week, AFSA released their PPSR statistics for the 2018 June quarter.

While there’s not much that’s particularly surprising in the statistics (which you can find here) there is a new addition to the format, in that AFSA has now provided information regarding the number of registrations due to expire in the next 18 months.

I’ve drawn up a quick chart based on the figures, in as much as they relate to ‘Other Goods’ registrations (the type of registration most appropriate to the majority of trade credit suppliers):

While the picture from March 2019 onwards looks as we might have expected, this is preceded by a huge spike in expiries in January 2019, surrounded by high levels of expiring registrations from October to February.

While the last two days of January 2012 saw the start of the Register (and the previous three months a few waves of advanced registrations and migrations from other registers) I’m surprised that the registration activity that took place at those times didn’t concern itself, almost exclusively, with transitional registrations with an indefinite expiry.  As someone very closely involved with thousands of bulk registrations in those early weeks of the register, virtually all were lodged as indefinite transitional registrations.

However, clearly there were a great many registrations being lodged for only 7 years and these are now coming up for renewal.

I'll shortly be following up this post with a step by step guide to renewing registrations on the PPSR.

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.

When should a PPSR registration be lodged?

In general terms, the answer is ‘as soon as possible’ and, in this context, that means, as soon as the supplier has a reasonable belief that they may be doing business with the grantor in question and that such business will involve the granting of a security interest.

In order to avoid falling foul of the Corporations Act, the supplier’s registration should be lodged within 20 business days of their security agreement being formed. For trade credit suppliers, that security agreement will usually be represented by the signing of the initial credit application by which the supplier’s Terms & Conditions of trade are accepted (provided, of course, that those T&Cs contain the supplier’s security rights – usually in the form of a Retention of Title clause).

If the registration is not lodged within that 20 business day period, the supplier runs the risk that, if their customer falls insolvent in the next 6 months, a liquidator will be able to use section 588FL of the Corporations Act to, effectively, ignore the registration.

I’ve written at greater length on the implications of section 588FL HERE.

Obviously, if the supplier misses that 20 business days window, they should still go ahead and register on the PPSR as soon as possible, it just means that they’ll need to keep their fingers crossed that a liquidator doesn’t get appointed during the next 6 months – once 6 months have elapsed with no liquidator in sight, the supplier can relax.

If we put aside for one moment the Corporations Act provisions, the other key timing issue concerns the effectiveness of your Purchase Money Security Interest (PMSI) rights.

As we know, Retention of Title suppliers, those providing goods on a Consignment Stock basis, and long-term leasers of equipment automatically qualify for having the security arrangements that those trading practices represent designated as PMSIs, thus entitling them to a super-priority over any earlier (or later) registered general security interests.

However, in order to ensure their PMSI right is effective, the registration must be lodged within specific time frames:

Where the Collateral is Inventory	Before the grantor takes possession of the goods
Where the Collateral is not Inventory	Within 15 business days of the grantor taking possession of the goods

Any registration lodged outside of those time frames will still be valid, but it won’t benefit from the super-priority that the PMSI designation would otherwise afford.

If repeat supplies are involved, suppliers should remember that even though they may have registered too late for the first few deliveries, a registration will still be effective over later deliveries.

Protecting Your Gear On Site

February saw the collapse of WA based builder Cooper & Oxley accompanied by scenes of subcontractors climbing over fences and evading security guards in order to attempt to recover tools and equipment that they had left on project sites.  You can find an example here.

Since then, there has been an understandable increase in advice being offered to subcontractors as to how they might be able to protect themselves.  What has been less understandable, however, is the oft-repeated suggestion that a registration on the PPSR might act as some sort of golden ticket allowing a subcontractor to recover any of their gear they might have had stored on site.

If you are selling goods subject to a right to recover those goods if you’re not paid for them, then a registration on the PPSR is essential if you want to be able to exercise that right against a liquidator or administrator etc.  Similarly, if you are engaged in a long-term hire of goods (and by long, I mean at least 2 years) then, again, registration is essential to protect those goods from falling into the hands of an Insolvency Practitioner. 

However, such leasing arrangements and conditional sale agreements are specifically deemed to create security interests under the PPSA; simply storing your tools on a building site overnight is not.

When a company goes into liquidation, the liquidator is entitled to treat any property that is used as collateral in a security interest as having vested in the insolvent company and thus available to be liquidated for the benefit of creditors.  The only real exception to this is where that collateral/security interest has been registered on the PPSR.

 

Because a subcontractor’s tools are not the subject of a sale (conditional or otherwise) to the insolvent company and are not being leased to them, the liquidator has no right to treat them as if they were the property of the main contractor. If they're not collateral in a security interest, there's no danger of them vesting in the insolvent company.

If that is the case, why do we read about subcontractors and tradies being locked out of sites, unable to recover their tools?

One of the first jobs a liquidator needs to do, on arrival, is to take stock and evaluate what assets the company might hold.  They can’t do this effectively (or fairly) if there is a steady stream of people marching onto the site and walking off with whatever property they can lay their hands on – some of it may well be their own but some of it may be the company’s and some may actually belong to other subcontractors.

In this sense, the liquidator is a little like the coroner arriving at the site of a freshly discovered body in popular American TV shows.  Their first job is to protect the integrity of the crime scene and then, gradually, determine to what extent the items found in and around that scene were relevant to the body and the means by which it came to be dead.  If you happen to have lost your car keys in that area, it will be understandable if you have to wait a while before you can get them back!

And so it is with a liquidator, they’ll need to ensure they can identify what goods belonged to the company and what belonged to subcontractors and then they’ll need to ensure that the right gear is made available to the right subcontractor.  To do this properly will, unfortunately, take time.  

From subcontractors I’ve spoken to, while the delay in getting their gear back is extremely frustrating, they do eventually get their stuff back and, if they don’t, it’s invariably because it had been taken by another subcontractor trying to grab what they could, presumably, in an attempt to offset money owed to them by the company.

Not only is a registration on the PPSR not necessary and will do nothing for the rights of the subcontractor in recovering their tools, it may even create confusion, leading to further delays in the subcontractor being reunited with their gear.

There’s been a suggestion that, while it won’t be perfecting a security interest, a PPSR registration might nevertheless serve as some sort of ownership document ‘proving’ that certain tools belong to the particular subcontractor.

Given that a PPSR registration can be lodged by anyone, for anything against anybody so long as they have a credit card with an available balance of at least $6.80 and that there’s no checking or verification that its details bear any relationship to reality, there is absolutely no way that a liquidator is going to accept a PPSR registration along these lines at face value.

Liquidators spend large amounts of their time picking holes in, and generally finding fault in, PPSR registrations and will not be convinced by a registration that, effectively, says that “a box of spanners and a hammer with a red handle” are owned by a particular tradie.  Even being able to identify tools by serial numbers won’t be treated as any evidence of ownership.

If proving ownership is the issue, it will be far more effective simply to have your name inscribed/labelled on the tool than to have it registered on the PPSR.

In short, while suppliers selling goods on Retention of Title terms, and hire companies, hiring goods on a long-term basis would be foolish not to register their interests on the PPSR, it would be foolish for subcontractors and tradies, looking to protect their tools, to think that a PPSR registration would be of any help.

Dangers for the Unwary when Trading with an Administrator

While this post might be of passing interest to those wanting to refresh their knowledge regarding the Corporations Act’s intersection with the PPSA, it’s main import is for those who may be invited to trade with a company under administration.

I wrote on the subject of late registrations being vulnerable to vesting by insolvency practitioners in The PPSA vs The Corporations Act, but a new spin on the issue has arisen following a judgement in Re Ten Network Holdings Ltd (Administrators Appointed)(Receivers & Managers Appointed) [2017] FCA 1144 that highlights a further problem with this aspect of the Corporations Act.

By way of a very brief recap, if you fail to register your security interest within 20 business days of your security agreement being entered into AND your buyer goes into external administration within the following 6 months, Section 588FL of the Corporations Act allows the insolvency practitioner to ignore your security interest.

However, 588FL also provides for vesting of a supplier’s security interest where it arises (and is subject to a registration) AFTER the appointment of an insolvency practitioner.

While it might be understandable for clearly late registrations to be ignored, what about those situations where a supplier is invited to supply goods to the buyer after it has been placed into administration?

Not all companies that go into administration end up being liquidated, many, given some temporary relief by the appointment of an administrator, are able to trade out of their problems, perhaps subject to a Deed of Company Arrangement (DOCA).  However, under the provisions of s588FL any supplier entering into an agreement to supply won’t be able to lodge an effective PPSR registration to perfect their Retention of Title (ROT) rights because such rights (and registration) arose after the appointment of the insolvency practitioner.  Thus, if the company turns out to be unable to trade out of its problems, and the administrator becomes a liquidator, the supplier’s ROT rights will end up being vested with the insolvent estate.

Not exactly a ‘fair’ outcome for the supplier.

However, all is not lost as the Corporations Act (section 588FM) allows the Courts to extend the date beyond the ‘critical date’ for a valid PPSR registration provided it would be “just and equitable” to do so.

The recent Ten Network judgement suggests that the Courts will be prepared to grant such an extension provided they can be reassured that to do so would be in the best interests of both the other creditors and the company in administration. 

It has also been suggested that the timing of the application for the order will be relevant, in that the time to apply for the extension (and lodge the registration) should be a great deal closer to the commencement of trading than to any eventual liquidation.

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.

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.

PPSR Statistics and Transitional Registrations

AFSA (the people that operate the PPSR) released their statistics for the quarter ended 31 March 2017 this morning. 

The report, which is quite brief, only comprising seven, easy to read, tables, can be found here.

There’s nothing terribly exciting contained in the report - registrations against motor vehicles account for a little under half of all registrations and a little over half of all searches, and intangible property still appears to be substantially better protected as collateral than agricultural property.

However, what puzzled me was the fact that, during the January – March quarter, 18,686 of the half a million or so registrations lodged were designated as Transitional.

While 18,686 is not very much in percentage terms (3.7% to be precise) it still represents an awful lot of new registrations asserting that the security interest they are intended to protect arose out of an agreement put in place over 5 years earlier and remaining unchanged since that time.

When the PPSR first started, Transitional registrations were free to lodge and, regardless of the date of the registration, the perfection a Transitional registration provided was, effectively, backdated to before the PPSR’s commencement.  However, when the Transitional arrangements ended in February 2014, although still free, the perfection granted by a Transitional registration was no longer backdated and, like non-transitional registrations, only applied from the registration date.  From July 2015, Transitional registrations ceased to be free and began attracting the same charges as their non-transitional equivalents.

The only real difference now between a Transitional registration and a non-transitional registration is that section 337A of the Act states that if you identify your registration as relating to a Transitional security agreement it will be ineffective for any collateral that is not covered by a Transitional agreement. There is, of course, also that annoying section 51 of the Corporations Act that states that a Transitional security interest doesn't count as a PPSA Security Interest!

In other words, if you designate your registration as Transitional and it turns out that your security interest isn’t, your registration will be, effectively, worthless.

Importantly, there is no equivalent clause in the Act stating that non-transitional registrations would be ineffective if it turns out they concern Transitional security agreements!

Thus, mistakenly identifying your registration as non-transitional isn’t half as dangerous in its implications as mistakenly identifying it as Transitional!

While I can certainly understand lodging a Transitional registration during the first couple of years of the PPSR, and can understand the attraction of not being charged for lodging a Transitional registration up to July 2015, I’m not sure I understand the reasoning behind persisting with lodging Transitional registrations today.

18,686 represents the second highest number of Transitional registrations lodged during a quarter since the PPSA’s Transitional Arrangements came to an end and brings the total number of Transitional registrations lodged since that time to over 175,000 – of which almost 100,000 were lodged since the price differential was removed.

I can’t help worrying that there are a significant number of businesses that started following a template for registrations 5 years ago and haven’t made any moves to update it since.

My advice remains:

• If the agreement signed between you and your customer is dated after 30/01/2012 then you should register as non-transitional.
• If your applicable Terms and Conditions have been amended since 30/01/2012 you should register as non-transitional.
• If you can’t find a copy of your agreement with your customer then you should look to get a fresh one signed and register as non-transitional.
• If your signed agreement doesn't incorporate your security agreement and your retention of title clause only appears on your invoice then you should register as non-transitional.
• If you're in any doubt register as non-transitional.

Links to earlier articles relating to the Transitional vs Non-Transitional ‘debate’ can be found here.

Potential PPSA Loophole Firmly Closed

We have already discussed the case of Alleasing v OneSteel Manufacturing where Alleasing’s registration on the PPSR was deemed ineffective because it was lodged against OneSteel’s ABN instead of its ACN.  You can read more about this here.

Well, last month we heard of a similar case where HP Financial Services fronted up to the NSW Supreme Court to argue that their registration against Production Printing (Aust) P/L’s ABN instead of its ACN should be deemed effective.  Although HPFS trotted out most of the same arguments that were raised in the Alleasing/OneSteel case, they did present an additional argument that I understand has been raised a few times with Insolvency Practitioners but had not previously made it to court. 

The new argument revolved around section 166 of the PPSA where, in a fairly convoluted manner, it effectively says that:

If there is a defect in a registration, the registration will be temporarily unaffected by the defect if the defect did not arise only because of an irregularity, omission or error in a registration.

“Temporarily” in this context could mean as long as 5 years after the defect occurred or as little as 5 business days after the defect was drawn to the secured party’s attention.

In short, HPFS’s argument was pretty much, yes, there was a defect but, because of s166, it doesn’t matter.

While s166 was intended to provide some protection to secured parties who had an initially effective registration rendered ineffective by events beyond their control, its application in HPFS’s context would end up creating the ludicrous situation where there might be no repercussions arising from serious mistakes in registrations and the transparency the PPSR was intended to provide would be lost.

The key in this case relied upon HPFS being able to convince the court that the defect at hand did not only arise because of an error in registration. 

HPFS argued that, in addition to the ABN/ACN error in registration, the defect was also the result of the registration not being visible in the results of a properly conducted search of the PPSR.  Thus not only was the registration defective because of s153 of the PPSA but also because of s165.

Personally, this sounds a little like trying to argue that it wasn’t just the bullet through a murder victim’s head that killed them but also the fact that their heart then stopped beating!

Fortunately, Justice Black in his decision on 2^nd May was not swayed by HPFS’s central argument and supported the intended interpretation of s166.  The rest of HPFS’s case, which was largely dependent on achieving the ‘temporarily unaffected’ status s166 might have afforded, collapsed like a row of dominoes.

In summary, this is another court judgement to remind us that, yes, the PPSA does operate as we thought it did and, no, there isn’t any easy remedy when you don’t get your registrations right.

Details of the judgement (that I've probably simplified out of all recognition) can be found here:

https://www.caselaw.nsw.gov.au/decision/5906e0eee4b0e71e17f592cc

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.

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.