In our May 2014 Finance News (click here), we spoke about the Personal Property Securities Amendment (Deregulatory Measures) Bill 2014 (Cth) (Bill) which was introduced into parliament. The effect of the bill was “cut red tape” and to deregulate the registration requirements for PPS Leases under the Personal Property Securities Act 2009 (Cth) (PPSA).
Amendments to the Act
On 1 October 2015, the repeal of section 13(1)(e) of the PPSA took effect.
Before its repeal, the effect of section 13(1)(e) of the PPSA was to make the lease or bailment of serial numbered goods (vehicles for examples) for periods of over 90 days, a PPS Lease within the meaning of the Act.
This is to be contrasted with the balance of section 13 of the PPSA, the effect of which is that only leases or bailments of goods (other than serial numbered goods) for periods of over 12 months would be PPS Leases within the meaning of the PPSA.
This distinction between leases or bailments of serial numbered goods and all other goods was confusing to consumers of the PPSA and had the potential for great detriment to be caused to the leasing party.
As you would all know by now, section 267 of the PPSA has the effect that if a lessor with assets the subject of a PPS Lease fails to register its security interest in those assets on the Personal Property Securities Register (PPSR), the asset(s) the subject of that lease would vest in the lessee in its insolvency.
With the repeal of section 13(1)(e) of the PPSA, the position has been simplified.
Lavan Legal comment
Simply put section 13(1) of the PPSA now defines a PPS Lease as a lease or bailment of goods for periods of longer than 12 months (subject of course to the carve outs in section 13(2) of the PPSA).
For insolvency professionals reviewing the various security interests granted by an insolvent company, it is important to note:
Only leases or bailments of goods for periods of over 12 months need to be registered on the PPSR. If there is no registration, it may be the case that the collateral the subject of that lease or bailment has vested in the insolvent company.
The changes to the PPSA are not retrospective. That is, leases or bailments of serial numbered goods for periods of over 90 days which commenced prior to 1 October 2015, still need to be registered on the PPSR. Again, if there is no registration, the collateral the subject of that PPS Lease may vest in the insolvent company notwithstanding the amendments to the PPSA.
The practical effect of the changes for those in the business of leasing or bailing goods is that they will simply rely on proof of ownership of the goods if the lessee enters external administration.