assignment of security interest ppsr

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Thinking | 25 May 2016

Assignments, late registration and vesting of security interests under the Personal Property Securities Act

The decision in Re Carpenter International Pty Ltd (Administrators Appointed) [2016] VSC 118 again highlights the importance of registering security interests on the Personal Property Securities Register ( PPSR ) within the prescribed timeframes.

The case considers the requirement to register security interests under contracts which are assigned and also the circumstances upon which the Court may exercise its discretion to extend the time for registration.

Carpenter International Pty Ltd ( Carpenter ) was in the live cattle export business. Its business involved purchasing cattle through del credere agents then moving the cattle to a feedlot for quarantine and testing and then, subject to those checks, exporting the cattle. Carpenter went into voluntary administration in March 2015.

The Administrators challenged claims by three livestock agents ( Agents ) that they each had perfected security interests in the cattle. The Court made orders in September 2015 giving the Administrators leave to dispose of the cattle. Consequently, the proceedings concerned the parties’ entitlements to the $4m in proceeds of sale.

The Agents acted as del credere agents for vendor farmers by guaranteeing the purchasers’ payment of the purchase price. The Agents would receive a commission, and if they paid the vendors, they would take assignment of the vendors’ rights under the sale contracts. The Agents contended that they held security interests in cattle on the basis of retention of title clauses in both their own contracts with Carpenter and also the contracts between the vendors and Carpenter which were assigned to them.

In circumstances where the Agents took an assignment of the contracts made between Carpenter and the vendors, the Agents failed to register their security interests within 20 days of those contracts.

Fundamentally, the Court was required to determine whether the Agents had security agreements for the purposes of section 20 of the Personal Property Securities Act 2009 (Cth) (PPSA) and whether their security interests were registered within the prescribed time frame. This involved determination of a “battle of the forms” and whether the Agents’ terms including their retention of title clauses were incorporated into their dealings with Carpenter. There are well settled principles dealing these issues and so this article does not discuss them.

Instead, this article focuses on the Court’s consideration of two important issues, namely:

• Whether an assignment of a security agreement affects the calculation of time under section 588FL of the Corporations Act 2001 (Cth) ( CA ); and
• The grounds upon which a Court will exercise its discretion to extend the time for registering a security interest under section 588FM.

The Honourable Justice Cameron of the Supreme Court of Victoria upheld some of the Agents’ claims (which are not the subject of this article) but also ruled that other security interests in the sale proceeds vested in Carpenter pursuant to section 588FL of the CA.

Vesting of Security Interests

Pursuant to section 588FL CA, where a creditor fails to register a security interest:

• six months before the critical time – in this case, the appointment of the Administrators; or
• within 20 days after the security agreement that gave rise to the security interest came into force;or
• within such later time fixed by the Court (under section 588FM); or
• the security interest vests in the company, effectively extinguishing the creditor’s claims to the collateral.

Effect of assignments

The Court considered the proper construction of the words ‘the security agreement that gave rise to the security interest came into force’ found in section 588FL.

The Court found that the contract between a vendor and Carpenter constituted a security agreement for the purposes of section 20 PPSA since the contract ‘created, gave rise to or provided for’ the relevant security interest. The Court rejected the Agents’ argument that the security interest arose only upon the payment of the purchase price to the vendors and assignment of the contracts to the Agents, and determined that the existing security interest was merely transferred to the Agents and that a new security interest was not created.

The Court held that the assignment of a contract (giving rise to the security interest) does not alter the requirement to register within 20 days of the original contract coming into force. The Court reasoned that it was untenable to permit a new 20 day period each time a security interest was assigned or became enforceable, as this would permit an abuse of the registration system, create uncertainty and the increased vulnerability of vendors.

The Court found that the 20 day period for registration set out under section 588FL commenced from the date of the execution of the contracts. Accordingly, where the Agents had failed to register the security interest within the prescribed timeframe, they vested in Carpenter upon the appointment of the Administrators.

The Court stated that it was the Agents’ responsibility to ensure their security interests were registered and noted that they could have either required the vendor to register the security interests, sought an extension of time for registration under section 588FM, or alternatively, registered a security interest themselves, observing that a creditor could register a finance statement in circumstances where they believed on reasonable grounds that they will become a secured creditor (section 151 PPSA).

Extension of time

Under section 588FM, a Court may extend the time to register a security interest if it is satisfied that the failure to register was accidental or due to inadvertence, and is not of such a nature to prejudice creditors or is otherwise just and equitable to grant relief.

The Agents submitted that its failure to register in time was due to inadvertence because it failed to understand the registration requirements and the effects of an assignment of the contracts. It was argued that the Agents believed it was not required to register the security interest until the contracts had become unconditional (when the cattle had passed quarantine and testing).

The Court considered earlier authorities noting that section 588FM had been applied liberally.

The Court found that the Agents were aware of the registration requirement and of the effects of vesting under section 588FL, but was mistaken as to when the 20 day period commenced. However, the Court determined that the Agents’ failure to register on time was not due to inadvertence. Rather, the evidence showed that the Agents did not have any intention of registering its security interests because it believed that Carpenter could and would pay its debts in the ordinary course.

The Court also considered whether it would have exercised its discretion to grant an extension if the discretion had been enlivened. As to the discretionary factors, the Court stated:-

• Delay in registration – Even if the delay in registration is substantial, it will not itself preclude an extension, because the significance of the passage of time is mainly related to the possibility of competing interests over the same collateral having arisen. There was no evidence of any competing interests having arisen during the delay.
• Prejudice to creditors – The mere fact that an extension would reduce the dividend of other unsecured creditors is not itself sufficient to prevent an extension being granted. Reduction in dividend was the only relevant prejudice that unsecured creditors would suffer, which they would also have suffered if the Agent had registered in time. If some prejudice to unsecured creditors other than a reduced dividend can be shown, the Court may decline to exercise its discretion under section 588FM . The prejudice that must be shown is prejudice from the failure to register in time, not prejudice from the granting of an extension.
• Delay in application – Little weight would be placed on the fact that the extension application was made some months after the appointment of the administrators. The Agent believed that they registered in time to avoid vesting under section 588FL . In its view, there was no need to apply for an extension. Until it was clear that the Administrators were going to argue that the security interest vested in Carpenter, it would not have been necessary for the Agent to seek an extension.
• Timing of Registration – Neither the timing of registration, only hours prior to the appointment of the Administrators, nor the fact it occurred after learning of Carpenter’s potential insolvency precluded the Court from exercising its discretion.
• In the result, the Court determined that even if its discretion had been enlivened, it would not have exercised it due to the reasons behind the Agent’s decision to delay registering their security interests.

Practical implications

• An assignment of a security agreement does not necessarily create a new security interest.
• Upon taking an assignment of a security agreement, assignees must be aware that they may be taking on an unperfected security interest and that they are at risk. Accordingly, a prospective assignee should first ascertain whether the assignor has registered its security interest.
• Where the performance of a contract is conditional upon the happening of an event, the time to register a security interest provided for by the security agreement starts when the contract comes into force and not when it becomes unconditional.
• When considering the granting of an application for an extension of time, the prejudice that must be shown is prejudice from the failure to register in time, not prejudice from the granting of an extension.

Katherine Payne

Katherine is an insolvency and commercial litigation specialist with a focus on the PPSA and its implications.

Alexandra Lane

Senior associate.

Alexandra is a commercial litigator with a broad practice in commercial disputes and insolvency matters.

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Registering Security Interests on the PPSR | Practical Law

Registering Security Interests on the PPSR

Practical law anz practice note w-012-1454  (approx. 37 pages).

Implementing Guidelines for the Registering of Notices on Security Interest Involving Personal Property

On March 13, 2022, the Land Registration Authority (LRA) released Circular No. 09-2022 which provides for the guidelines on the registration of notices on security interests in personal property.

The guidelines provide that any person may submit a notice for registration provided that:

• They must create a user account in accordance with LRA Circular No. 11-2011;
• They must provide information in the required fields in a notice;
• They must pay the prescribed fees.

If the grantor is a natural person, the initial notice shall identify them through the name appearing in government-issued identification documents. Whereas if the grantor is a juridical person, the grantor shall be identified through its name as appearing in the most recently registered Articles of Incorporation or in any document or instrument constituting the legal person. The initial notice shall also provide for addresses of the Grantor and secured Creditor or its Agents.

With respect to the description of collateral in registration notices, it will be considered as sufficient if it reasonably identifies the collateral. In the notice, the description of the collateral must:

• A generic description that refers to all assets within a category of movable assets including all of the grantor’s present and future assets within the specific category;
• A generic description that refers to all of the grantor’s movable assets including all present and future assets; and
• A motor vehicle not held as inventory must be described by a serial number or chassis number.

To register an initial notice, a user must log into the Registry System using a valid User Account and provide the following details:

• Grantor information (mandatory);
• Debtor information (optional);
• Secured creditor information (mandatory);
• Collateral information (mandatory); and,
• Transaction information (mandatory).

Under transaction information, the user shall state the:

• Transaction amount (mandatory)
• Term details

a. Start date (optional); and,

b. End date (mandatory).

Users may add more than one grantor, debtor, creditor, and collateral information details. Upon submission of the notice, the PPSR shall display the breakdown of fees due. After receipt of payment, the system shall then generate the Notice of Registration Number. An email will be sent to the registered email address of the parties of the notice, payment confirmation, and Notice of Registration Report.

Amendments to initial notices may be filed by a registration of an Amendment Notice by the:

• Creator of the initial notice;
• Any of the Creditor who created the Initial Notice;
• Any of the grantors who created the initial notice; and
• Registry sub-users who were assigned privilege, as a result of a Compulsory Court Order.

These eligible users shall be able to change details of an initial notice.

A grantor of a notice shall be able to edit the:

• Collateral, provided that they are authorized by the grantor in writing; and
• Grantor, provided that they must be authorized by the changed/added grantor in writing.

As regards Termination Notices, the following rules shall be observed:

• In case there is at least one creditor, the termination shall be considered only with respect to the creditor who shall be deleted from the Notice. This shall be done by filing an Amendment Notice, and the status of the notice shall remain “Active.”
• In case all creditors or the last creditor is terminated from the notice, the status shall be deemed “Terminated.”

Termination Notices can be filed by the

• Creditors who created the initial notice;
• Grantors who created the initial notice; and
• LRA Registry Sub-uses with assigned privilege, as a result of a Compulsory Court Order.

Upon payment, the System shall generate the Notice Registration Number. The Registry may also notify all remaining creditors affected by the Notice through SMS or email using the contact information provided in the Registry, if so provided by the party who registered the notice, once the Termination Notice has been successfully registered.

Notably, lapsed information or expired notices shall not be accessible to the public. The Registry shall, however, maintain the records lapsed and terminated notices for a period of 10 years.

In case of data corrections during registration of Amendment Notices, the LRA shall also be able to amend Notices which include correction of errors,

The full circular can be accessed here .

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Home » Insights » Myth Busted – Understanding the removal and release of PPS interests

Myth Busted – Understanding the removal and release of PPS interests

Authors: Athena Krisanaleela , Gillian Xu , Greg Conomos

Service: Banking & Finance Sector: Financial Services

There is a common misconception that the removal of a security interest from the Personal Property Securities Register ( PPSR ) is conclusive evidence that the secured party has discharged the underlying security agreement. Normal market practice to evidence the formal discharge of the underlying security agreement calls for either:

• a ‘Release and Undertaking to Amend Registration’ form to be signed and dated by the secured party; or
• a formal deed of release to be provided by the secured party. This deed is more appropriate when dealing with multiple security agreements and guarantee and indemnities, among other securities.

Understanding the PPSR and Security Agreements  

The PPSR is an online register which records security interests in personal property. The PPSR acts as a national  noticeboard  which informs individuals about whether personal property, such as cars, equipment and company assets, among other things, are the subject of security interests. Chapter 5 of the  Personal Property Securities Act 2009  (Cth)   ( PPSA ) sets out rules detailing the process of registration, searching and removing of security interests.    

This noticeboard concept is very similar to the concept surrounding the registration of a caveat in respect of a title deed on a Torrens Title register, being that it is merely a notice to the world evidencing the existence of an underlying security.   

It is also important to understand that normal market practice is for the underlying security agreement to contain security interests and charges (among other things) over all real property and all personal property (as applicable), this is namely to address any issues that may arise in respect of the secured party being exposed to administration risk.  

Access and Registration   

Section 150 of the PPSA   allows a person to register a financing statement, or financing change statement, with respect to a security interest. 1  Registering a security interest correctly on the PPSR protects the secured party (e.g. a lender) and may offer further protection by way of perfection of the security interest. Section 170 of the PPSA allows for anyone to access and search the PPSR for information relating to a security interest or personal property. 2  A search of the PPSR may be useful to enquire whether someone has a security interest over particular personal property, to find the historical details of a PPSR registration or to check if a registration is expired.   

Request for Information  

Section 275(1)(a) of the PPSA provides for an interested party to make a request to the secured party for evidence (i.e. a copy of the underlying security agreement) supporting their security interest in the collateral. 3  This information must be provided before the end of 10 business days after the date that the request is received. 4  If the secured party fails to provide this information within that time frame, the interested party may make a formal amendment demand in writing that will require the secured party to remove the security interest within 5 business days after the date that the formal demand is issued. 5  

Removal and Release  

Pursuant to section 178(1) of the PPSA, a person with an interest in collateral (i.e. personal property) that is described in a registration, may give an amendment demand,  in writing ,   to the secured party for a financing change statement to be registered to remove the security interest. 6  A release of the underlying security must also be obtained  in the market accepted form provided by the Australian Banker’s Association ( ABA )  ‘Release and Undertaking to Amend Registration’  ( PPS Release and Undertaking ). The PPS Release and Undertaking must be dated and signed pursuant to section 127 of the  Corporations Act 2001  (Cth)   for a company or in the alternate ‘signed, sealed and delivered’ by an individual.   

It is not sufficient to merely remove the security interest notation from the PPSR, as this does not provide evidence of the discharge of the underlying security agreement and is merely removing the security interest notation from the PPSR / ‘noticeboard’ which you (as an incoming lender or otherwise) would now be on notice of its existence. In order to have conclusive evidence that the secured party will discharge the underlying security agreement, the incoming secured party  must  also obtain a signed PPS Release and Undertaking.  

In respect of a PPS Release and Undertaking evidencing a full discharge, after signing the PPS Release and Undertaking, the security interest notation on the PPSR must be removed pursuant to the market acceptable undertaking to register a financing change statement on the PPSR within 10 business days. For a partial release, the property being released needs to be specified in the ‘Released Property’ section of the PPS Release and Undertaking to evidence the partial release of the specific property from the underlying security agreement, and normal practice is that a financing change statement will not be registered in respect of this partial release.   

• The PPSR acts merely as a noticeboard which notifies the world of the existence of security interests pursuant to an underlying security agreement.   
• It is not sufficient to merely remove the security interest notation from the PPSR as this does not provide evidence of the formal discharge of the underlying security agreement.  
• In order to have conclusive evidence that the secured party has discharged the security interests and the underlying security agreement, the incoming secured party must obtain a signed PPS Release and Undertaking in usual market acceptable form.  

For further information relating to the PPS register and protecting a lender’s interest, please contact Banking and Finance Partner, Greg Conomos.  

[1] Personal Property Securities Act 2009 (Cth) s 150.

[2] Personal Property Securities Act 2009 (Cth) s 170.

[3] Personal Property Securities Act 2009 (Cth) s 275(1)(a).

[4] Personal Property Securities Act 2009 (Cth) s 277.

[5] Personal Property Securities Act 2009 (Cth) s 179(1).

[6] Personal Property Securities Act 2009 (Cth) s 178(1).

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Personal Property Securities Register (PPSR) – An Essential Guide

In an ever-changing business and financial landscape, ensuring that your interests are protected is paramount. This is where the Personal Property Securities Register (PPSR) steps in.

The PPSR is a critical legal tool that plays a pivotal role in safeguarding the rights of creditors and businesses by providing a centrali s ed platform to register and search security interests in personal property .

What is the PPSR?  

The PPSR is a government-operated online database established to manage and record security interests in personal property . Personal property , in this context, refers to movable assets such as equipment, vehicles, inventory, intellectual property, and more.

By registering security interests on the PPSR, creditors and lenders can establish their priority in case of insolvency or default by the debtor. This priority determines who has the first claim on the assets and can greatly influence the outcome of debt recovery proceedings.  

How does the PPSR work?  

Registration of security interests.

Individuals and businesses can register their security interests on the PPSR. A security interest is a legal right that a person or entity has in someone else’s property as collateral for a debt or obligation. This could include situations like loans, leases, hire purchase agreements , or consignments.  

Searching the Register

Anyone can search the Personal Property Securities Register to find out if there are existing security interests registered against specific personal property. This helps potential buyers, lenders, and other parties assess whether the property they are dealing with has existing claims or encumbrances on it.  

Information Included

The PPSR provides information about the secured party (the person or entity with the security interest), the grantor (the owner of the property), and details about the security interest itself. This information helps parties understand the nature of the interest and the collateral involved.  

Secured Transactions

When parties enter into transactions involving personal property as collateral, they can check the PPSR to ensure that the property isn’t subject to existing security interests. This helps in making informed decisions and mitigating risks.  

Priority of Interests

The PPSR also establishes the priority of competing security interests. In case multiple parties have claims over the same property, the order of registration can determine who has a higher priority claim in case of default or insolvency.  

Termination and Amendments

Security interests can be removed or amended on the PPSR when the underlying obligations are fulfilled, the collateral is sold, or other changes occur. This keeps the register up-to-date and accurate.  

Legal Protections

Registering a security interest on the PPSR provides legal protections to the secured party. If the grantor defaults on their obligations, the secured party has a better chance of recovering the property or its value.  

Online Access

The PPSR is accessible online, making it convenient for users to conduct searches and registrations from anywhere with an internet connection.  

Why is the PPSR important?  

The PPSR is of paramount importance for several different reasons:  

Creditor Protection

The PPSR offers a crucial layer of protection for creditors and lenders. When lending money or extending credit, there’s always a risk that the borrower might default or become insolvent. By registering their security interests on the PPSR, creditors can establish a legal claim to the borrower’s assets in case of default. This significantly increases the likelihood of recovering the owed amounts, thus providing a measure of security to creditors.  

Priority and Fairness

The PPSR establishes a clear framework for determining the priority of competing claims from different creditors. In situations where multiple parties have a stake in the same collateral, the PPSR helps determine the order in which they are paid. This ensures fairness and predictability, preventing disputes and legal battles over the rights to specific assets.  

Transparency

The PPSR promotes transparency by allowing interested parties, including potential buyers, lenders, and investors, to search and ascertain whether personal property has any existing security interests. This information is crucial for making informed decisions and assessing risks before entering into transactions involving valuable assets.  

Risk Mitigation

Businesses and individuals engaging in transactions involving personal property often face risks associated with hidden debts or liabilities attached to those assets. The Personal Property Securities Register mitigates these risks by providing a reliable source of information about existing security interests. This allows parties to identify potential pitfalls and make strategic decisions to minimise their exposure to risk.  

Streamlined Legal Framework

Before the establishment of the PPSR, the rules governing security interests in personal property were often complex and varied from jurisdiction to jurisdiction. The PPSR streamlines and harmonises these rules, creating a consistent legal framework that is easier to understand and follow. This simplification benefits both creditors and debtors by reducing confusion and potential legal disputes.  

Support for Business Transactions

The PPSR supports a wide range of commercial transactions, such as secured lending, leasing, and trade credit. For businesses, this means that they can confidently engage in these transactions, knowing that their interests are recorded and protected. This support for business activities contributes to economic growth and stability.  

Efficient Debt Recovery

In cases of debtor default or insolvency, the PPSR plays a pivotal role in determining the priority of creditors’ claims. The registration of security interests on the PPSR can significantly impact the outcome of debt recovery proceedings, making the process more efficient and structured.  

Cross-Border Transactions

In today’s globalised economy, cross-border transactions are common. The PPSR provides a standardised platform that facilitates the recognition of security interests across different jurisdictions. This is essential for international trade and investment.  

Who manages the PPSR?  

The PPSR is overseen by the Registrar of Personal Property Securities, appointed by the Attorney General’s Department. This office is part of the Australian Financial Security Authority (AFSA), which is an agency in the Attorney-General’s portfolio.  

The Registrar’s role involves ensuring responsible management of the PPSR, making it accessible and reliable. They decide what can be registered, manage availability, and investigate any misuse. The Registrar can delegate these powers as needed.  

The AFSA Service Centre supports day-to-day PPSR operations. They assist with online searches and can provide phone-based searches at a higher cost. They also handle general inquiries for information not found on the website.  

What are the Best Practices and Considerations when using the PPSR?  

When using the PPSR, there are several best practices and considerations to keep in mind to ensure effective and accurate use of the system:  

Understand the Basics

Familiarise yourself with the purpose and functioning of the PPSR.  

Understand the terminology used, such as “security interest,” “secured party,” “grantor,” etc.  

Conduct Thorough Searches

Always perform searches on the PPSR before entering into transactions involving personal property. This helps you identify any existing security interests on the property.  

Search using accurate details to ensure you retrieve relevant information.  

Accurate Registration

When registering a security interest, provide accurate and complete information about the parties involved and the collateral.  

Double-check the details before submitting the registration to avoid errors.  

Prioritise Timeliness

Register your security interest as soon as possible to establish your priority over potential future security interests.  

Monitor and Update

Regularly monitor the PPSR to identify any changes or terminations of security interests that may affect your transactions.  

Verify Parties’ Information

Verify the identity and legal status of the parties involved in transactions to ensure they have the authority to register or grant security interests.  

Seek Legal Advice

If you’re unsure about the legal implications of a transaction or the registration process, consider seeking legal advice to ensure compliance with relevant laws. Our team at Progressive Legal has the necessary expertise to help you out.   

Keep Records

Maintain records of your PPSR searches and registrations for future reference and evidence in case of disputes.  

Understand Priority Rules

Learn about the rules governing the priority of security interests to understand how competing claims are resolved.  

Continuous Education

Stay informed about any updates or changes to PPSR regulations, procedures, or guidelines.  

Due Diligence

Conduct thorough due diligence before entering into transactions, especially larger ones involving substantial property interests.  

Use Authorised Channels

Access the PPSR through official and secure channels to ensure data privacy and accuracy.  

Regularly Review Procedures

If you are a business, establish internal procedures for PPSR usage, and periodically review and update them to ensure compliance and accuracy.  

Be Cautious with Online Services

If using third-party services for PPSR searches or registrations, ensure they are reputable and reliable.  

Stay Organised

Keep well-organised records of your PPSR activities, including registrations, searches, and relevant communications.  

Key Takeaways

In a modern world characterised by dynamic economic activities and complex financial transactions, the Personal Property Securities Register serves as a safeguard for businesses and individuals alike.

By providing clarity, transparency, and legal protection for security interests in personal property, the PPSR contributes to a more secure and efficient commercial environment. Embracing the PPSR and understanding its nuances empowers us to navigate the intricacies of modern commerce with confidence.  

If you need legal advice on using the PPSR, feel free to contact our team at Progressive Legal. Simply give us a call on 1800 820 083  or make an enquiry below.  

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February 21, 2019 by

Perfection under the PPSA is more than registration

Perfecting a security interest takes more than registering on the ppsr.

A secured party is well-advised to perfect its security interest to protect its rights in the personal property subject to the security interest.  The PPSA provides for three different perfection steps:  registration, possession and control. Registration on the PPSR is the most common perfection step.  One common misconception is that the act of registration itself has the legal effect of perfecting a security interest.  In actual fact, registering is merely a necessary component of “perfecting” a security interest.  More is required. In particular, it is necessary to have an underlying document evidencing that the owner of the personal property (or a buyer on credit) is granting a security interest to the secured party.

A security interest is perfected if all of the following apply:

• The security interest is attached to collateral;
• The security interest is enforceable against a third party; and
• A registration is effective with respect to the collateral (unless the security interest could be perfected by possession or control). See section 21.

In general terms, attachment requires that the grantor of the security interest has an interest in the property and the secured party has given value for the security interest.  Attachment can, therefore, occur even if the security agreement is an oral security agreement.  Attachment means the security interest is enforceable against the grantor. But, to achieve a perfected security interest, the security interest must also be enforceable against a third party.  This requires the security agreement to be evidenced in writing.  Therefore, a secured party with an oral security agreement cannot perfect its security interest even if the secured party registers.    In addition to being in writing, a security agreement must “cover the collateral” before it becomes enforceable against third parties and capable of being perfected.  The security agreement must:

• be either signed by the grantor, or otherwise “adopted or accepted” by the grantor; and
• contain a “description of the particular collateral” or a statement that a security interest is taken in all of the grantor’s present and after-acquired property or a statement that a security interest is taken in all of the grantor’s present and after-acquired property except specified items or classes of personal property.

The Federal Court of Australia in Pozzebon (Trustee) v Australian Gaming and Entertainment Ltd, in the matter of Australian Gaming and Entertainment Ltd (in liq) [2014] FCA 1034 (Pozzebon), addressed whether a security interest was “perfected by registration, and by no other means”. The Court found that attachment and enforceability are “mandatory prerequisites to the perfection of a security interest” and that all the elements of section 21(1)(b) must be satisfied to perfect a security interest.

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PPSR Registrations – what are they and why are they so important for businesses?

At Coulter Roache we build insightful legal partnerships to help you meet the challenges of today while planning for tomorrow.

What are PPSR Registrations?

The Personal Property Securities Register (PPSR) is an online register of security interests in personal property, such as cars, goods, or company assets. Anyone can search the PPSR to see if there is a registered interest in personal property.

You have a security interest in property if you have an agreement that you can reclaim property if a debt is not repaid to you. For example, secured car loans, hire-purchase agreements for goods, or leases.

Personal property is anything other than land, buildings and fixtures, including:

• Crops and livestock
• Patents and copyright
• Debts and bank accounts
• Commercial licenses

By registering your security interest on the PPSR, you publicly declare that you have an interest in the property that you have supplied. This means that you will have a legal right to be a priority to be paid or get your goods back.

How do I register a security interest?

Registrations to the PPSR can be made on the PPSR website. A separate registration needs to be made over each security interest you wish to register.

A registration can last for 7 years, 25 years, or have no end date.

Some registrations can only be made for a maximum of seven years. These include registrations made over property to be used by individuals rather than companies, and registrations made using the serial-number of goods, such as cars and boats.

There are different registration fees payable at the time of registration, based on the length of registration.

When do I need to register my security interest?

Registrations on the PPSR should be made as soon as possible. A registration needs to be made within 20 working days of the security agreement being signed by the customer or more than six months before the customer starts insolvency.  If more than one secured party has a security interest in the same property, there are rules about who has priority. The secured party with the highest priority also has the highest claim to the collateral. A failure to register a security interest promptly can result in a situation where a third party’s registration has priority over yours.

You can renew your registration any time before it expires.

You should discharge a registration within 5 working days from the day that you are aware there is no longer a security interest, such as when a deal is no longer going ahead or when the debt is repaid.

Why are PPSR Registrations Important?

Registering your security interest on the PPSR provides you extra protections, including:

• Giving you more legal protection than a written agreement
• Helping you get your goods back if your customer goes insolvent, rather than the goods being sold for the benefit of all creditors
• Giving you priority to get your money back over unregistered creditors if your client goes insolvent
• Allowing an insolvency practitioner to find you by searching the PPSR

Some examples of circumstances where PPSR Registrations are especially important include:

• If you provide equipment or machinery to contractors through a hire purchase arrangement or lease, PPSR registration can, in some circumstances, allow you to retake possession of the goods if the contractor stops paying.
• Registration can help keep you first in line to reclaim or be paid for the goods even if your customer has sold the goods you have an interest in.
• When buying a business, goods or equipment, searching the PPSR will give you peace of mind that there aren’t any other registered interests in the items you are purchasing.

What businesses can do to enforce the security interest after a default?

Generally, you can enforce your security interest, for example, by repossessing your goods, if your customer defaults on the security agreement. It is important to remember that, when enforcing your security interest, you can only get back what you are owed under the security agreement, plus your legal costs. Any amount left over must go to other secured parties and the customer.

If there is more than one secured party with a security interest in the same property, there are rules about whose interest is a priority. The secured party with the highest priority has the first claim to the goods and can seize them from any secured party with a lower priority.

The first step to enforce your interest is to seize the goods from the customer. Where you have supplied goods to the customer, this means physically seizing the goods by a lawful method. Where your agreement covers other property, such as a bank account, license, or patent, seize the goods by giving the customer a notice of seizure.

Once the goods are seized, you can:

1. Sell the goods

You can sell the goods to recover the amount owed to you once you have notified the customer and any higher priority secured parties.

You must sell the goods for market value or a reasonably obtainable amount. The sale proceeds will go to the secured parties in order of priority, to cover the amount they are owed. Any extra goes to the customer.

Selling the goods will end all security interests in the goods.

2. Keep the goods

Keeping the goods means that any security interest in the goods will end, except for any that are higher ranking than your own.

You will only be able to keep the goods if you notify the customer and anyone else with a registered security interest, and that the other secured parties do not object.

3. Redeem the goods

Before you sell or keep the goods, the customer or a secured party can ‘redeem’ them by paying you the full amount they owe you, plus your enforcement expenses. They will then own the goods and you will no longer have a security interest in them.

4. Reinstate the security agreement

Before you sell or keep the goods, the security agreement can be reinstated if they pay you the full amount owed to you, plus your enforcement expenses.

You will then return the goods to the customer, and the security agreement will then continue as if there had not been a default.

What can Coulter Legal do to assist?

Our experienced Corporate & Commercial lawyers are able to assist you with the preparing security agreements to allow you to register a security interest,  registration of and enforcing your security interest on the PPSR.

Find the legal expertise you need and get in touch today.

Get started with our easy online form, send us an email or simply give us a call.

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PPSR Registrations – the importance of getting it right

With the commencement of the Personal Property Securities Act 2009 (Cth) ( PPSA ) now more than seven years behind us, the importance of registering your security interests and getting the registrations right has become very apparent. A number of cases over these years demonstrate the cost of not having appropriate procedures in place for making registrations on the Personal Property Securities Register ( PPSR ).

Failure to Register

In the first series of cases below, the secured party (eg lessor, chargee) has a security interest but has not made a registration on the PPSR (and not “perfected” by other means).

Registration on the PPSR is the most common and available method of “perfecting” security interests under the PPSA.

Where a security interest over a company is not perfected and one of the following occurs:

• an order is made, or a resolution is passed, for the winding up of the company;
• an administrator is appointed to the company; or
• the company executes a deed of company arrangement,

then the security interests will “vest” in the grantor and be extinguished. A security interest over an individual that is not perfected will also vest if a sequestration order is made against the individual or the individual becomes a bankrupt. (Refer, for example, to section 267 of the PPSA.)

This will mean, for example, that the assets of the grantor will cease to be subject to the security interest or leased assets will become assets of the grantor free and clear of the security interest. The secured party/lessor will then be an unsecured creditor.

Forge Group Power Case

This headline case was an expensive lesson involving equipment valued at around $44 million.

In this case, the lessor of four gas turbine generators did not register its security interest over the equipment. The court held that the interest of the lessor was a PPS Lease under the PPSA and so it was an unperfected security interest.

The lessee appointed voluntary administrators and the security interest vested (ie. was extinguished) with the turbines becoming part of the lessee’s property.

Flown Pty Ltd v Goldrange Pty Ltd

In this case, a landlord loaned $460,000 to its tenant and took a charge over the plant and equipment acquired with the loan funds. The landlord did not register its security interest.

When the lessee appointed a voluntary administrator, the security interest in those assets vested in the lessee (ie it was extinguished).

Registrations made late

There are a number of different timeframes under the PPSA and the Corporations Act 2001 (Cth) ( Corporations Act ) by which registrations on the PPSR need to be made. Failure to register within these timeframes may cause the secured party to lose certain rights against the grantor or the security interest to vest in the grantor.

Relux Commercial Pty Ltd (in liq) v Doka Formworks Pty Ltd

In this case, formwork equipment was leased to the grantor by the secured party. A PPSR registration was made, however, this was more than 20 business days after the first equipment was provided.

Under section 588FL of the Corporations Act, if registration is made against a company more than 20 business days after the relevant security agreement came into force, but less than six months before the occurrence of one of the items in paragraphs (a) to (c) above, then the security interest can vest in the grantor.

Accordingly, the court held that, in respect of any equipment provided under leases commencing more than 20 business days before the PPSR registration, the security interest had vested.

The relevant property or “collateral” was valued at over $1 million.

Mistakes in registrations

While most secured parties are now aware of the need to make PPSR registrations, we see a number of cases and matters where registrations do not comply with the requirements for registrations under the PPSA.

It is vital for secured parties to ensure that they have in place appropriate procedures and training for staff making PPSR registrations, as well as legal oversight of the preparation of those procedures.

In the below series of cases, registrations have been made on the PPSR, but not necessarily correctly.

OneSteel Manufacturing Pty Ltd

This case involved $23 million worth of equipment provided under a lease.

The secured party did made a registration on the PPSR, however, the registration was made against the ABN of the grantor, whereas the PPSA and its regulations require that the registration in this case should have been against the ACN.

The court found that:

• the PPSR registrations were defective – ie never made correctly or effective;
• in addition, a registration will be specifically ineffective under the PPSA if a search of the PPSR by what a registration should have been made against is not capable of disclosing the registration – this was held to be the case; and
• finally, as searchers using the ACN would not discover the ABN registration, it was found that the ABN registration had a defect that was “seriously misleading” which will also make the registration ineffective under the PPSA.

In the matter of Assta Labels Pty Ltd

In this case, which Gadens wrote about in 2018, registrations were similarly mistakenly made against the ABNs when they should have been made against the ACN.

What is the correct identifier?

While in the above cases, the registrations on the PPSR should have been made against the ACN rather than the ABN, in other situations the registrations should be made against the ABN. Determining the correct identifier for a PPSR registration in each situation can be complex and, given the risk if it is not correct, it is important that advice is sought to ensure that registrations are made against the correct identifier.

As can be seen from the above cases, it can be a very costly mistake if a security interest is not registered on the PPSR or is registered incorrectly.

It is vital that any business that might have security interests have in place appropriate PPSR registration procedures given the technical nature of the requirements of the PPSA.

If a secured party does have issues with its security interest registrations, then there may be steps that can be taken, however, it is important that these are taken as soon as possible. Legal advice should be sought in this circumstance and, even if these steps are taken, priority of ranking may be lost.

Authored by:

Matthew Trinca, Senior Associate

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A practical look at what the Personal Property Securities Register means for companies

Contributor.

The new Personal Property Securities (PPS) regime, which was established in Australia under the Personal Property Securities Act 2009 (Cth) (PPSA), has been in operation for over three months now. Many affected by the PPSA have come to terms with the requirement to register security interests on the Personal Property Securities Register (PPSR) and a substantial number of registrations have been made. But the PPSA also has some practical implications that will impact on the day-to-day operations of many companies, including joint venture arrangements, business sale and purchase agreements, and even the requirements of a company to maintain a register of charges. In addition, companies need to appreciate the broad meaning of security interest under the PPSA in the context of their commercial arrangements, including dealings with consignment stock and the retention of title of goods. Whilst you may have received one of our other publications on the more technical aspects of the PPSA, this article is aimed at some of the practical implications for companies.

Quick recap of the PPSA

The introduction of the PPSA saw the replacement of a number of federal, state and territory laws. In essence, the position now under the PPSA is that a party with a security interest in personal property bears the responsibility of ensuring that its interest is perfected, usually by registration on the PPSR. It is important to be aware that the PPSA applies equally to individuals and companies as well as to both consumer and commercial property.

Any transaction that in substance has the effect of providing an interest in personal property as security for the payment or performance of any obligations will now be treated as a security interest under the PPSA. Some transactions are also deemed to be a security interest even if they do not secure any obligations (eg an absolute assignment of a book debt and a PPS lease).

In very broad terms, personal property means any asset other than real property and, subject to certain exceptions, covers all forms of moveable goods as well as intangible property (such as intellectual property, financial products and accounts DLA Piper 2 receivable). However, goods that are affixed to land are excluded.

The PPSA also introduced new terminology, which companies need to understand. In particular, the personal property over which a security interest is granted is called collateral. The entity giving the security interest is called the grantor, the entity liable for the secured obligation is the debtor and the holder of the security interest is the secured party.

The consequences of failing to perfect a security interest are discussed further below - the main risk being that a secured party's interest in the relevant property may be lost if they have not perfected their interest.

Some practical implications

Some of the matters which a company will need to consider following the implementation of the PPS regime are set out below.

Corporate considerations

Are companies required to maintain a register of charges?

The old section 271 of the Corporations Act 2011 (Cth) (Act) required a company to keep a copy of all documents relating to registrable charges on its property and to keep a register of charges affecting its property (both those it created and those on property that it acquired). From the introduction of the PPSA, the position changed so that the requirement to maintain a register of charges ceased to apply in relation to registrable charges on 30 January 2012. However, companies are still required to maintain a register of charges in respect of charges arising prior to 30 January 2012.

Is the PPSA relevant to company constitutions?

Generally speaking, most constitutions will contain provisions that have the effect of creating a security interest under the PPSA. For example, provisions that impose a lien over shares where monies are owed to the company or provide that a shareholder will forfeit their shares if they fail to pay a call will typically create a security interest over the relevant shares the subject of the lien or call. This is because shares are personal property and, in these cases, such provisions would usually be considered to be securing the performance of an obligation. Other types of provisions of constitutions that might give rise to the creation of security interests include provisions which require the compulsory transfer of shares in circumstances where a shareholder is in default of certain of its obligations. By contrast, it is unlikely that standard pre-emptive provisions in a constitution would create a security interest in the relevant shares as these provisions typically do not secure the performance of any obligation.

Companies should consider the terms of their constitutions to determine whether any of its provisions has the effect of creating any security interests and, if so, whether as a result, such interests should be registered on the PPSR. For companies with a large number of shareholders, registration on the PPSR is likely to be impractical.

Companies should also consider whether their Constitutions should be updated in any event, having regard to the introduction of the PPSA.

Shareholder and joint venture arrangements

An obvious example of the creation of a security interest in a shareholder/joint venture arrangement is where the relevant agreement contains cross charges between shareholders over their respective shareholdings in the joint venture company to secure their respective obligations under the agreement. This is because, as mentioned above, shares are personal property and they are being used to secure the performance of the obligations of shareholders under the agreement.

Similarly, where a shareholder or joint venture agreement contains a right to acquire the shares of another party, for example, on the occurrence of an event of default or forfeiture event, this could potentially create a security interest capable of registration. Similar issues may also arise where a put/call option is granted over shares to secure the performance of obligations of a party.

Due diligence in the sale and purchase context

The PPSA also has some practical implications for due diligence enquiries in the context of a sale and purchase of a business. Previously, a typical due diligence process would involve a search of the Australian Securities and Investments Commission's (ASIC's) database to ascertain whether any charges had been registered against the target company. A copy of the relevant instrument creating the charge could also be obtained from ASIC and it was therefore a relatively straightforward process.

Now, however, due diligence should involve a search of the PPSR (currently by the Australian Company Number, Australian Business Number and name of the target entity) to confirm whether any registrations exist. A search of the PPSR may also reveal registrations relating to interests which previously were not captured on ASIC's register, including security interests over particular assets arising as a result of a retention of title clause in a commercial contract, for example.

The information provided in respect of security interests on the PPSR is fairly limited and a thorough due diligence process should involve considering each of the security interests registered against the target company, with queries likely to be required to be made of the secured party (via the target company) if this is possible. However, it is unlikely that queries will be able to be raised in a hostile acquisition context and therefore only the limited information provided on the PPSR may be available to a proposed purchaser.

It is also prudent to carry out an ASIC company search in a due diligence process. This is because there were some issues with the migration of charges from the ASIC register to the PPSR and there are instances where charges have been incorrectly migrated or not migrated at all.

Consideration should also be given as to whether any of the terms of the sale and purchase agreement have the effect of creating a security interest for the purposes of the PPSA. For example, provisions such as a party agreeing to hold the benefit of a material contract on trust for another party for a period of time may create a security interest capable of registration.

As an aside, it would be prudent for a company to carry out a search of the PPSR on itself to crosscheck the registrations entered against it in order to ensure that any errors in the PPSR migration or any other incorrect registrations can be addressed as soon as possible.

Other commercial arrangements

The critical point that companies need to be aware of is that simple ownership rights in personal property are no longer sufficient to protect the owner's interests in that property where the company is relying on its ownership to secure the performance of an obligation by another party. The result is that companies will need to put in place mechanisms to ensure that their interests are protected, including registering their security interests on the PPSR before any personal property/goods are supplied. This is important even if a company's standard terms of business specifically restrict the manner in which a customer is able to deal with the property as regards third parties because the PPSA makes it clear that notwithstanding such restrictions, dealings with third parties can occur and in the absence of perfection by registration by the secured party, such dealings will be effective. Some examples of commercial arrangements where the PPSA may be relevant are described below.

Retention of title terms

Retention of title clauses are common in procurement and supply contracts. In essence, these clauses provide that ownership of the relevant goods remains with the supplier until they have been paid for in full by the customer. Under the PPSA, a security interest includes an interest in personal property provided by way of a conditional sale agreement (including an agreement to sell subject to retention of title ) (see section 12(2)(d) of the PPSA).

Generally, if a company supplies goods on retention of title terms, their interest in the goods will be a Purchase Money Security Interest (PMSI). Provided that the company registers the PMSI on the PPSR within strict timeframes, the company will have the benefit of a superior priority (which prevails over most other competing security interests) and their position under the PPSA will largely be the same as the pre-PPSA law position. However, if the PMSI is not registered on the PPSR, the company's ownership of the goods may be lost because of subsequent dealings with the goods by the customer (see further below).

Consignment stock

Consignment stock is, broadly, goods that are provided to a customer which are typically held in a warehouse arrangement until they are sold by that customer. Ownership of the consignment stock is generally not passed from the supplier until the stock is sold or issued by the customer. This type of arrangement will generally fall within the scope of the PPSA as the PPSA provides that a security interest includes an interest in personal property provided by way of a consignment transaction DLA Piper 4 (whether or not a commercial consignment) (see section 12(2)(h) of the PPSA).

Similar to retention of title clauses, provisions relating to the interests of a consignor who delivers goods to a consignee under a commercial consignment will also be a PMSI and will therefore have a super priority provided that the interest is perfected by registration on the PPSR within the required timeframes.

Equipment leases

The PPSA deems certain contractual arrangements to be security interests. These include a PPS Lease, which extends to a lease or bailment of goods for a term of more than one year or an indefinite period, or, for serial numbered goods (ie motor vehicles, watercraft or aircraft), for a term of 90 days or more or for an indefinite term. In addition, if the customer retains uninterrupted possession of the goods for any of these periods, a PPS Lease will arise, which is deemed to be a security interest.

A PMSI also arises in respect of the interest of a lessor or bailor of goods under a PPS Lease. Again, this will mean that upon proper registration on the PPSR, the owner of the goods will have a super priority interest in the goods.

Other examples where a security interest may arise in this context include demonstrator stock (ie stock that is provided to a customer for the purposes of display or demonstration to its customers) and other equipment (such as display stands or cabinets) made available but not sold to customers.

Confidentiality considerations

It will be necessary to weigh up the benefits of registration of the security interest on the PPSR against other potential issues. For example, under the PPSA, an interested person (which includes a person with another security interest in the collateral) may request a secured party to make available a copy of the security agreement that provides for a security interest. There are exceptions to this rule where, for example, the secured party and the debtor have agreed in writing (at or before the time that the security agreement is entered into) that the underlying agreement should not be disclosed.

The right of an interested person to request such information applies in respect of all security interests (not just those that have been registered on the PPSR). However, when considering whether to register a security interest on the PPSR, it will be important to keep in mind that the registration of a security interest may bring attention to, or highlight the existence of, a particular security interest, which may prompt an interested person to request further information.

In the context of a transaction, consideration should also be given as to whether the parties should enter into confidentiality arrangements early on in respect of security interests that may be created in the future. For example, it may be worthwhile including specific confidentiality obligations in a letter of intent or heads of agreement entered into by the parties at the start of a transaction.

What happens if a company as a secured party does not register its security interests on the PPSR?

Key to the PPS regime is the concept of the perfection of a security interest. Perfection can generally be achieved by:

• Registration of the security interest on the PPSR
• The secured party taking possession of the relevant property
• The secured party taking control of the relevant property, although this is limited to certain financial assets.

The general rules for determining the priority of security interests are set out in section 55 of the PPSA. In summary, the rules are that:

• A perfected security interest has priority over an unperfected interest
• Priority between perfected security interests is determined by the order of perfection (except in the case of perfection by control which has priority over any other form of perfected security interest)
• Priority between unperfected interests is determined by the order of attachment (as defined in the PPSA).

The above rules are also affected by the priority rules relating to PMSIs (as mentioned above).

There are also other consequences of not perfecting a security interest, including for example:

• That generally a buyer or lessee of personal property, for value, takes the personal property free of an unperfected security interest in the property
• In circumstances of a winding up or other specified external administration, most security interests that are unperfected will vest in the grantor.

As a result, whilst registration of a security interest on the PPSR is not compulsory, if a secured party does not register a security interest (or otherwise perfect the interest), its interest in the relevant property (including ownership interests) may be lost.

© DLA Piper

This publication is intended as a general overview and discussion of the subjects dealt with. It is not intended to be, and should not used as, a substitute for taking legal advice in any specific situation. DLA Piper Australia will accept no responsibility for any actions taken or not taken on the basis of this publication.

DLA Piper Australia is part of DLA Piper, a global law firm, operating through various separate and distinct legal entities. For further information, please refer to www.dlapiper.com

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September 2014

A simple formula: prerequisites to ppsa perfection.

• > Restructuring & Insolvency

By Ariel Borland, Partner

In Pozzebon (Trustee) v Australian Gaming and Entertainment Ltd (in liq) [2014] FCA 1034, Collier J was asked to interpret s 588FL of the Corporations Act 2001 (Cth) ( CA ) and s 21 of the Personal Property Securities Act 2009 (Cth) ( PPSA ). The decision confirms that a security interest must “ attach ” to collateral and be “ enforceable ” against third parties before it can be “ perfected ” under the PPSA.

In Pozzebon , the applicant’s security interest vested in the respondent company pursuant to s 588FL of the CA. Although the applicant’s security interest was registered at the date of the company’s administration, the applicant had failed to: (a) register within the strict time limits under s 588FL(2)(b); or (b) perfect the security interest by “ other means ” as required by s 588FL(2)(a).

The applicant, Mr and Mrs Pozzebon (together, the Pozzebons ), were the joint trustees of the Pozzebon Family Superannuation Fund. On or about 24 December 2013, the Pozzebons loaned to the respondent, Australian Gaming and Entertainment Ltd ( AGEL ), $250,000. The loan was secured against AGEL’s personal property. It was not in dispute that the underlying security agreement gave rise to a “ security interest ” which had “ attached ” to AGEL’s personal property and was “ enforceable ” against third parties within the meaning of the PPSA.

On 19 May 2014, the Pozzebons registered the relevant security interest on the Personal Property Securities Register ( PPSR ). On 26 May 2014 administrators were appointed to AGEL. Liquidators were subsequently appointed to AGEL on 6 June 2014. It was not in dispute that the Pozzebons’ registration on the PPSR perfected the relevant security interest. AGEL subsequently informed the Pozzebons that the security interest had vested in AGEL pursuant to s 588FL of the CA.

Section 588FL

Section 588FL of the CA provides that a PPSA security interest will vest in a company immediately before the appointment of a liquidator, administrator or deed administrator if:

• at the “ critical time ” the security interest is enforceable against third parties under the law of Australia; and
• the security interest is perfected by registration and by no other means; and
• 6 months before the critical time; or
• the time that is the end of 20 business days after the security agreement that gave rise to the security interest came into force, or the time that is the critical time, whichever time is earlier.

There are other criteria under s 588FL(2)(b), however, the above are the most common and were relevant in Pozzebon .

The “ critical time ”, is the day on which a winding up or administration is taken to have begun. Plainly, the Pozzebons’ PPSR registration fell foul of s 588FL(2)(b), as it occurred within 6 months of the appointment of administrators and in excess of 20 days after entering into the relevant security agreement. However, the Pozzebons argued that the security interest was perfected by registration and “ other means ” such that it did not fall foul of s 588FL(2)(a).

The Pozzebons’ arguments were novel in this regard: they argued that the security interest was “ perfected by attachment and enforceability and effective registration ” and that “ attachment and enforceability are not always necessary for perfection, and that an example of this is in respect of temporary perfection of which attachment and enforceability are not necessarily elements ”: at [35].

The Decision

Collier J did not mince words when she described the Pozzebons’ position as “ wrong ” and “ misconceived ”. Her Honour made clear that attachment and enforceability are “ mandatory prerequisites ” to perfection under s 21 of the PPSA. Furthermore, the PPSA lists the limited ways in which a security interest may be perfected: by registration; possession or control. The only exception under the PPSA is where the perfection is “ temporary ”, in which case the PPSA deems the security interest to be perfected in absence of attachment and enforceability. As the Pozzebons had only perfected the security interest by registration and “ by no other means ”, the security interest had vested in AGEL under s 588FL of the Corporations Act.

However, Collier J omits to note that attachment, enforceability and registration need not occur in this order – they are merely prerequisites to perfection occurring. For example, it is possible (and often advisable) to register a security interest on the PPSR prior to entering a security agreement giving rise to the relevant (and registered) security interest. In this example, registration occurs first, then attachment and enforceability (at around the same time). This confers advantages on the secured party: it gives them the earliest possible priority time and means that they will not fall foul of the requirements in s 588FL(2)(b) (as the registration will not occur 20 days after the entry of the security agreement).

Pozzebon confirms a simple formula: “ attachment and enforceability plus one of the final means [of perfection] set out in s 21(2) of the PPSA… are necessary requirements for perfection of a security interest ”: at [49]. The decision has important lessons for secured parties and insolvency practitioners alike. On the one hand, secured parties should register a security interest before (or as soon as possible after) entry into a security agreement to avoid potentially disastrous consequences under s 588FL of the Corporations Act. On the other, insolvency practitioners should be alert to secured parties who have not met the requirements of s 21 of the PPSA and s 588FL of the Corporations Act, as that party’s security interest has most likely vested in the company immediately prior to the practitioners’ appointment.

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