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.

Retention of Title Clauses - Where Less is More

At least once a week I’m asked to review a set of Terms & Conditions for ‘compliance’ with the PPSA.

I’ve always been a little amused by this idea given that much of the manner of the PPSA’s introduction was based on reflecting how creditors had, in practice, been securitising the payment obligations of their debtors rather than dictating how this should be done going forward.

Generally, in view of the nature of my client base, I’d need to do little more than check to make sure there was a half decent Retention of Title (ROT) clause present and, if they hadn’t already been added, suggest a few waivers of some of the obligations that the PPSA might otherwise require of creditors.

However, this morning I came across an ROT clause where PPSA compliance clearly was an issue.

The clause in question read as follows:

The Supplier and the Buyer agree that ownership of the Goods shall not pass until:

(a)   The Buyer has paid the Supplier all amounts owing to the Supplier; and

(b)   The Buyer has met all of its other obligations to the Supplier.

Aside from a touch of redundancy with (a) being pretty much covered off by (b), my main concern was over the wording at (a).

The PPSA gives suppliers the opportunity to take a Purchase Money Security Interest (PMSI) ‘super priority’ where their interest is over collateral that secures its own purchase price. The alternative to collateral securing its own purchase price would be for the identified collateral to be taken as security for a broader description of amounts owing – such a broader description would not necessarily qualify for the PPSA’s super priority treatment.

Unfortunately, the wording used at (a) above states that the Supplier is treating the goods they are selling as collateral against “all amounts” they may be owed and therefore offers up a ‘broader’ description of what is being secured than would arguably qualify for PMSI super priority.  I am acutely familiar with circumstances where insolvency practitioners have successfully argued this specific issue!

Given that there is remarkably little difference between (a) and (b), I suggested that (a) be rephrased along the following lines:

The Supplier and the Buyer agree that ownership of the Goods shall not pass until:

(a)   The Buyer has paid the Supplier the full purchase price for those Goods; and

(b)   The Buyer has met all of its other obligations to the Supplier.

While it might be a natural reaction on the part of suppliers to attempt to make their security interests as all-embracing as possible, when it comes to the PPSA and its PMSI super priority, it could be said that ‘less is more’.  Or, at least, that a narrower, more focused interest is likely to be more effective.

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!