The knight in rusty armour
It seems hard to believe that as you read this, it will have been around six and a half years since the Personal Properties Securities Act 2009 (PPSA) was introduced in 2012. I recall in the build-up to the launch of this new legislation statements being touted such as "making security claims black and white", "simplifying the law in regard to securities" and even as far as "the biggest piece of legislation since the introduction of the GST". So how far has the PPSA really gone in achieving its goals and objectives, or is it not all it's cracked up to be?
As an insolvency practitioner, I think the PPSA has succeeded in creating more uncertainty and difficulty than ever seemed to exist prior to its introduction. I have little doubt that it has also succeeded in delivering substantial losses to financiers who before the PPSA would have generally had little to worry about when an insolvency practitioner was appointed. Before 2012, I could probably count on zero fingers the amount of times I recovered a financed asset free of an existing security claim, for instance, a motor vehicle through a leasing company. Today however, and despite the PPSA being over half a decade old and purportedly 'simple', it is almost standard to either be telling a financier we think they have a problem, or engaging in heated arguments about whether a particular registration is “perfected”. What ensues from these discussions is whether the nasty insolvency practitioner will sell their asset despite their security, usually because of some minor compliance error that the PPSA defines as a "serious defect". For something so ‘black and white’ there still appears, to me at least, to be an element of subjectivity about whether certain registrations have been perfected or not.
Previous articles in our newsletters have touched on the broad registration requirements between a company and a company acting as a trustee. In theory, it's pretty simple. If the grantor is a company, the security must be registered against the ACN. If the grantor is a trustee, the security must be registered against the ABN. Despite this apparent simplicity, in many Worrells’ administrations, we have been successful on various occasions in recovering assets improperly registered against the ACN/ABN as required.
Recently, a new trend has emerged to circumvent this.
Financiers, tired of the inherently costly risks of making an incorrect registration, have introduced contractual terms to define a grantor as either/or—regardless of whether it may act as a trustee or not. These terms typically state something along the lines of "where the grantor is a trustee, the grantor acknowledges that it enters into this agreement in both its own capacity and in its capacity as trustee". This, it seems, is intended to be relied upon to defeat the PPSA requirements noted earlier as it seeks to allow the secured party to register against either the ACN or the ABN as they please.
But, how will the above stack up if challenged? Who knows; all I know is that what on the face of it appears simple, is now not so simple and what was supposed to be black and white, is greyer than ever. And what of the poor old financiers losing their assets at record rates and in circumstances they previously never had to worry about? I can only imagine what their thoughts must be on the success or otherwise of the PPSA. As for me? I'll facetiously give it a 10 out of 10 as it has helped us on more than one occasion make substantial recoveries that never previously existed in insolvency administrations and that's about as simple as it gets.