However, at some stage, some of you (and certainly your clients) would have considered arranging security for payments for goods and services. Terms such as “chargor”, “mortgagor”, “fixed and floating charge”, “crystallisation of debt” and “release” were all terms of common usage. However, many of those terms and some of the associated legal and commercial practices are now disappearing into Australian legal history with the commencement of the Personal Property Security Act 2009 (C’th) (“PPSA”) and the associated PPS Register. The PPSA and the PPS Register commenced in January 2012 following delays associated with the technology used to establish and maintain the PPS Register.
The PPSA affects industry in a number of different ways. For example, the PPSA affects importers that supply goods to their customers or distributors, who retain title until payment is made. It may also affect those asserting rights over goods to recover fees for services providedIf parties have not taken the necessary steps, goods or security for payments may be at risk. But do not despair. Parties are still able to take steps to protect goods, assets and payments. However, given some forecasts of difficult economic conditions, do not wait until there are failures to make payments as it may be too late.What is the PPSA and how does it affect business?
The PPSA replaces over 70 pieces of law in relation to “security interests” in “personal property”. Personal property is not just consumer property. It is all forms of property other than land and certain statutory licences. Commercial equipment and stock are common examples of personal property.
Security interests include charges, consignments, agreements containing retention of title clauses, leases of goods and hire purchase agreements. The majority of these arrangements are now under a single Federal regime in the PPSA. However, some (but not all) liens claimed in industry will still be preserved without need for recourse to the PPSA. Mind you, industry needs to be careful and check which liens are and are not covered.
Those that do not have possession of their personal property (e.g. owners, stock and equipment supplied or hired to customers) must:
have a security agreement in place that satisfies the requirements of the PPSA; and
register their security interest on the PPS Register.
Those that do not take these and other steps may not have the ability to seize or otherwise deal with their personal property upon a customer’s default.
What you need to do now?
If your business is not already prepared, you will now need to act urgently. The PPSA demands some very significant changes to the way your business operates.
We recommend that you take the following steps:
- Make a list of your customers to whom goods and services are supplied before being paid in full.
- If, hypothetically, any of those customers did not pay you for the goods or services, would you want the ability to hold or take back the goods or recover the proceeds of their prior sale?
- If your answer to question 2 is “yes”, then you should take the following steps:
(a) as a preliminary step, where appropriate, search the PPS Register to check whether your customer has granted security interests to other suppliers or secured parties;
(b) have your Terms and Conditions of Sale reviewed to ensure that your terms of sale comply with the PPSA and give you all the rights and remedies which you may need;
(c) where appropriate, contract out of some provisions of the PPSA which may limit right of enforcement;
(d) where possible, have your customer sign your Terms and Conditions of Sale before you supply the goods and services;
(e) register any security interests on the PPS Register before you supply the goods and services;
(f)remove your security interest once it has been discharged (i.e. after you have been paid in full); and;
(g) enforce your rights!
- Seek legal advice as to any other impacts of the PPSA on your business.
This article only touches the surface in terms of the impacts of the PPSA. All unsecured and secured transactions are affected by these changes and the changes are complex.