Migrated Security Interests - back in focus!

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

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

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

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

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

So what type of problems might there be?

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

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

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

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

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

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

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

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

Attaching Documents to your PPSR Registration

Firstly, I don't really see the point in lodging documents along with a PPSR registration.  In fact, whenever the PPSR presents you with anything 'optional' it should be interpreted as an opportunity to sabotage your registration!

Completing collateral description fields, for example, is not mandatory, leaving the field blank may be annoying to liquidators but completing it with anything other than a statement that encompasses all you supply (or are ever likely to supply) may mean that you are placing an additional limitation on the collateral to which your security rights will apply.

Similar concerns apply to attaching documents to your registration.  You don't 'need' to attach a document for your registration to be effective, but, having attached a document you then need to ensure it is kept up to date and relevant to your dealings with your grantor for the life of your registration lest it potentially be used against you in restricting your security rights.

Of course, as I've written previously (here), the PPSR is essentially a Notice Filing System rather than a Transaction Filing System and filing documents with your registration tends to just show that you really don't understand the changes that have taken place!  

However, the legal profession loves documents and while there are a great number of lawyers that have a clear and insightful understanding of the PPSR there are probably an even greater number that haven't got to grips with it at all and don't really appreciate the extent to which things have moved on from the old ASIC Register of Company Charges.

Against this background, we were recently asked by one of our clients to lodge a registration for them with a set of documents to be attached.  

Up to this point in time, I'd never paid much attention to the PPSR's attachments function, I knew it was there but I'd never used it.  However, when I went looking, the little button to upload an attachment was nowhere to be found - certainly not where I recall having seen it in the past.

After a frustratingly long time searching, I finally found a reference on the PPSR's website under their 'What Can Be Amended' tab stating:

Note: currently account users are unable to add an attachment to a PPSR registration due to a security update.  This does not impact on the ability to complete new PPSR registrations.

Given that only account users are able to lodge or amend registrations, the distinction that 'account users' as opposed to, simply, 'users' being unable to add attachments seemed a little strange, however, armed with the clue that this related to a security update, I was able to search a little more smartly and eventually found the following statement from the PPSR's Release Management page for 'Release 3':

A security update that is required to maintain the performance of the PPSR will mean users will be unable to add an attachment to a registration. A solution to restore this functionality is being investigated. Please note that this does not impact on the ability to complete new PPSR registrations. 

Release 3 was put into effect in early December 2014.

With almost 2 years having elapsed, I thought I'd write to the PPSR asking them how their investigation into "a solution to restore this functionality" was progressing.

I got an answer this morning advising:

A solution to restore attachment functionality is still being investigated.  No timeframe has been provided.

I can't help but suspect, given that attaching documents to a registration has no positive impact on the effectiveness of that registration, this is not a functionality we will ever see restored, however, I am disappointed that the PPSR are claiming that, already two years into a continuing investigation, there is no indication they've been able to find a solution. Either the claims of an investigation taking place are being grossly exaggerated or the PPSR has been throwing a load of money away on a long-running investigation to restore something that simply isn't necessary.

Unfortunately, I've now gone from not really caring about adding attachments to registrations to being very interested in how this long-running investigation of theirs unfolds!  

Progress of the PPSR Review Report

It's been around 18 months since Bruce Whittaker's final report of the Review of the Personal Property Securities Act was tabled in parliament.  The report made a little under 400 recommendations concerning ways in which the PPSR could be improved - many of which involved substantial simplifications to the registration process.

So, in the absence of any update as to progress in following up the report's recommendations I decided to write to the Attorney General's Department to ask how things were progressing.  In truth, I had almost forgotten I'd done so, but, this afternoon, I received a reply.

I reproduce the body of the reply, in full, below (drafting errors included), but first I'll show you my original request, and leave it to you to judge to what extent the response addresses the request.

My request:

It's been about 18 months since Bruce Whittaker's Final Report of the Review of the Personal Property Securities Act was tabled in Parliament.   

I'd like to know what progress has been made since that time in moving to implement its recommendations, both legislatively and operationally.  I'd also appreciate an indication as to the timetable for implementation.

The AGD's response:

Dear Mr Miller,
  

Thank you for your enquiry regarding the progress of the independent statutory review (the Review) of the Personal Property Securities Act 2009 (the Act). The Review makes 394 recommendations aimed at reducing complexity and improving the accessibility of both the Act and the Personal Property Securities Register and includes number of recommendations which would reduce the regulatory burden on the equipment hire industry.
  

The Government is working towards implementation of these reforms while ensuring that the rights and interests of all parties are given due consideration. Reform to the Act will have an economy-wide impact and must be executed with due care and diligence. The Act carefully balances the rights of secured parties, lessors and financiers on the one hand, against those of grantors, lessees and borrowers on the other. The response to the Review must be progressed as a comprehensive package rather than in an ad hoc fashion, if it is to achieve the aim of reductions in complexity and regulatory burden without prejudicing the interests of any party.
  

The Attorney-General’s Department hopes to be in a position to provide information about implementation time frames in the near future.

 Thank you again for your enquiry.