Despite being more than six years since the Personal Property Securities Act came into effect, many lawyers and business people still do not use or fully understand it.
The PPSA created the Personal Property Securities Register. The PPSR is a public noticeboard for an interest in property other than land, like a non real estate version of mortgages registered at the Lands Titles Office.
Like a mortgage, the PPSA allows a person (secured party) to note on the PPSR that they have an interest in an item of property where that property is being used as security for money owed to the secured party.
An example is where you buy a tractor using equipment finance.
The lender has an interest in that tractor until it is fully paid for. So the lender notes its interest in the tractor using the PPSR.
Another example is providing goods on payment terms. If the suppplier retains title in the goods until payment is made, the supplier can note its interest in the goods by registering it on the PPSR.
One fundamental change arising from the introduction of the PPSA is that a party is required to note an interest in property on the PPSR. If a person does not, it places that person at risk of not being able to enforce the security interest.
Even if you have a legal interest in the property, if another party has registered its interest on the PPSR (such as a bank with a fixed and floating charge), the property can be seized and used to pay creditors other than you.
In a recent case involving a well-known finance company, it lost a $50,000,000 generator when it failed to register an interest in the generator and the mining company that was leasing it went into liquidation. Ouch.
There are many circumstances where the PPSR should be used by the agricultural industry, so make sure you get advice when you are allowing any property to be in someone else's possession when you are owed money for it.
This article was originally published in The Stock Journal on Thursday 8 September 2016