Are you a business owner having trouble coming to grips with the PPSA? Good news: you’re not alone.
Where are things up to?
In April 2014, the Commonwealth Attorney General announced that the Government would undertake a review into the Personal Property Securities Act 2009 (Cth) (PPSA). This review is provided for under section 343 of the PPSA which requires a review of the operation of the PPSA to be undertaken within three years of commencement. So far, following a consultation process with relevant stakeholders, an interim report was submitted to the Government on 31 July 2014 by review chair, Bruce Whittaker. Now a series of consultation papers are being released for comment ahead of a final report which is due to be completed by 31 January 2015.
Why do we need a review of the PPSA?
Quite simply, this is a complex piece of legislation that still has problems that go beyond mere teething issues.
When drafting the PPSA, the Government recognised that it was complex legislation, and that it was indeed re-writing the rules for an important area of economic activity: the law and practical operation of secured transactions involving personal property. In recognition of this, provision was made for a review of the operation of the PPSA to be completed by 30 January 2015.
The white elephant in the room
As highlighted in the ‘Review of the Personal Property Securities Act 2009 - Interim Report’, what has become apparent from the submissions to the review are:
- the PPSA and the Personal Property Securities Register (the “register”) are too complex; and
- despite Government's efforts to raise awareness of the Act and its implications, both in the lead-up to the commencement date and subsequently, many businesses are still unaware of the Act, or do not appreciate the extent to which the Act can impact on their activities.
This lack of awareness mentioned above is especially virulent amongst small businesses. The New South Wales Small Business Commissioner notes, for example, that:
…there is a very low level of awareness amongst small businesses of the [Act] and the Personal Property Securities Register.
The Australian Bankers' Association notes in its submission that part of this lack of awareness is due to small businesses not accepting/understanding that they are no longer sufficiently protected by being the owner of their assets:
One factor that seems to be prevalent is small businesses not coming to grips with the notion that title to personal property has become subordinated to the notion of a security interest. This has led to a consequential lack of knowledge by a business on how the Act is able to protect the business' interests where personal property moves beyond the control of the business.
Repeal the PPSA?
So the question needs to be asked, and has been raised in submissions, should the Government return back to the good old pre-PPSA days? I don’t think so.
As pointed out in the first consultation paper entitled, Consultation Paper 1 – Reach of the Act (released on 22 September; closing date for comments is 3 November), "it would be a retrograde step to repeal the Act and to revert to the confused and fragmented system of laws and registration systems that preceded it." The PPSA has delivered on its objective of increased consistency of secured finance law in Australia by replacing a fragmented set of rules – rules that were scattered across more than 70 Commonwealth, state and territory statutes and the general law – with one set of rules that apply to security interests in personal property regardless of their form, the location or nature of the grantor or the location or nature of the collateral.
But the clear message from the submissions is that if the PPSA is to achieve all its objectives, it needs to be "clarified and simplified".
Clarification and simplification of course (as much as this is possible given that some PPSA concepts are not that easy to simplify). But how?
The interim report provided that there should be a set of criteria to guide the assessment of the merits of proposed PPSA amendments. The criteria are set out in Annexure C to the interim report and include, amongst other things, the overall objective of the PPSA.
The overall objective of the PPSA is to facilitate the creation and enforcement of security interests in personal property. The rules for the creation of security interests should not prescribe the form that parties must use, but rather identify the outcome a transaction needs to achieve (in order to be covered). The legal effect should deal with the effectiveness of the security interest against third parties (for example buyers and lessees). Enforcement provisions should provide a set of enforcement remedies available to use where the security agreement is deficient.
Do you have an issue? Tell us!
Set out below is a timetable for the consultation process for the next stage of the PPSA review.
Click here to view table.
If you have a particular issue that your business wants to raise that is not covered in the consultation paper recommendations, let us know. In particular, we can assist you with any grief you are experiencing with the register. The register is one part of the PPSA that can have a regular, if not daily, impact on business activity. As the interim report notes, it is clear "that much can and needs to be done to make the conduct of registrations and searches on the register simpler, more comprehensible and more certain." Unlike the PPSA itself, small businesses are forced to directly interact with the register.