PPSA - first case about removal of a PPSR registration 2013

In what appears to be the first reported case on the attempted removal of a registration on the PPS Register, the Administrative Appeals Tribunal affirmed the refusal by the PPS Registrar to amend a registration. 

The decision [Cirillo and Registrar of Personal Property Securities [2013] AATA 733] was handed down on 11 October 2013.

Background
GE Personal Finance loaned money to the borrower (Mr Cirillo) in 2007 to assist with the purchase of a Holden Commodore (the personal property). The loan was re-financed in 2010, and the security in the personal property remained on foot.  

GE Personal Finance's security interest in the personal property was registered on a NSW Register (as noted, the loan commenced before the commencement of the Personal Property Securities Act (PPSA) in 2012). 

On 24 December 2011, GE Personal Finance sold a number of debts, including the one in question, to another financier.  

In 2012, after the PPS Register commenced, the NSW Registration was migrated onto the PPS Register.
 In March 2012, GE Personal Finance notified the change of secured parties to the Registrar of the PPS Register.

In July 2012, the borrower sought to remove the Registration.  

The grounds claimed by the borrower included allegations regarding:
(a) the validity of the original loan agreement;
(b) the validity of the subsequent assignment; and 
(c) the calculation of the debt.

The new financier's response to the notice was that the registration was valid and should not be removed. The new financier provided evidence of the original loan, the assignment, the repayments that were due (and not made) and the current balance owing.  Accordingly, the Registrar refused to remove or amend the Registration on the grounds that the amendment demand was not authorised under the PPSA.

The Administrative Appeals Tribunal agreed with the Registrar’s decision, finding that the borrower continued to owe a debt, secured by the personal property, which debt had been lawfully sold to the new financier and the Registration had been appropriately amended.  

Therefore, the AAT concluded that the borrower's amendment demand was not authorised.

In this case, the keeping of proper records (both of the finance contract and the debt owed), and the accurate documentation of the transfer of the security interest in question by GE Personal Finance and the new financiers were important factors in allowing the Registrar and the AAT to reach their decision. 

W G Stark
Hayden Starke Chambers  

When does the PPSA transitional period end?

As noted on the Personal Properties Securities Register web site, From 30 January 2012, the Personal Properties Securities Act 2009 (Cth) (PPSA) established a new system for the creation, priority and enforcement of security interests in personal property, which is generally all property other than land, fixtures and certain statutory interests.



A transitional security interest (TSI) is an interest in personal property that, in substance, secures payment or performance of an obligation which existed prior to 30 January 2012.


TSI's also include security interests that didn’t exist at 30 January 2012, but were created under a security agreement that existed prior to 30 January 2012 and continued to exist after that time.

An example of this could be goods supplied in 2013 under a retention of title (ROT) agreement that was created in 2011.

If you are a secured party with respect to a TSI that is not yet registered on the Personal Property Securities Register (PPSR), you need to register it on the PPSR before midnight on 31 January 2014 (Canberra time) to take advantage of “temporary perfection” and preserve the priority status of your TSI.

If you don’t do this, temporary perfection for the TSI will not apply from 1 February 2014. Registration of a TSI is free.

Although there will still be the facility to register a TSI on the PPSR after 31 January 2014, choosing to hold off registering until after that date will result in you losing the benefit of the transitional provisions.

What this means is that the ‘perfected’ status of the security interest will only begin from the time of registration on the PPSR, instead of the earlier date allowable under the transitional provisions if you register before the end of 31 January 2014.

If a security interest loses its ‘perfected’ status its priority ranking will not be preserved. This means that another person with a security interest in the same collateral with a higher priority ranking (for example, a secured party who registered during the transitional period) will be paid out ahead of you in the event that grantor (the person who hires or buys the goods, or borrows money) defaults.
There is also the risk that if the grantor enters bankruptcy or insolvency and a security interest has not been perfected at relevant times, the security holder will lose their security interest altogether.

Now is effectively the last opportunity to secure any interest in personal property that was created before 30 January 2012.

W G Stark 
Hayden Starke Chambers