New CTH Personal Properties Securities Amendment Bill

Monday 18 May 2015 @ 11.33 a.m. | Trade & Commerce

On 14 May 2014, the Personal Property Securities Amendment (Deregulatory Measures) Bill 2014 (the Bill) passed through the House of Representatives for Commonwealth and was introduced to the Senate. This Bill proposes to amend the Personal Property Securities Act 2009 (the PPS Act) so that leases of serial numbered goods of 90 days or more will no longer be deemed to be PPS leases for the purposes of the PPS Act.

Background to the Bill

The Bill is part of the Australian Government's 2014 Autumn Repeal Day Measures, which aim to cut $1 billion in red tape every year. As part of that plan, there are tabled two parliamentary repeal days every year to cut unnecessary and costly legislation and regulation.

Current PPSA Leases

Under the PPSA, a party is required to register a security interest in order to preserve its priority against any other future claims that might conflict with that party's interest. The definition of security interest under the PPSA is broad, and certain leases and bailments of goods, called Personal Properties Securities leases (PPS Leases), are deemed to be security interests under the PPSA.

The PPSA also deems the following leases and bailments of goods to be PPS Leases:

a lease or bailment for a term of more than one year;
a lease or bailment for an indefinite term; and
a lease or bailment of serial-numbered goods for 90 days or more.

Amendments Contained in the Bill

This Bill proposes to amend the PPSA so that leases of serial numbered goods of 90 days or more will no longer be deemed to be PPS leases for the purposes of the PPS Act. This will simplify the deeming provisions in the PPS Act and minimise the need for small and medium hire businesses to make registrations in respect of leases of a term of less than 12 months.

The change will bring the PPSA into alignment with personal property securities (PPS) regimes in other common law countries (such as New Zealand and Canada) where a lease is deemed to be subject to PPS laws where the lease is for more than 12 months or an indefinite term. To the extent that their activities cross over into these jurisdictions, this alignment may have benefits for Australian financiers, businesses and legal practitioners.

The change will not materially affect the status of the Personal Property Securities Register as a record of interests in personal property and by reducing the number of transactions giving rise to PPS leases, the Bill will reduce the compliance cost born by small and medium hire businesses.

Effect of the Amendments in the Bill

According to lawyers at Allens:

"The amendment was precipitated by agitation from the leasing industry, and will primarily benefit businesses in this industry. Many transactions would fall outside the definition of PPS lease for the first time. For leases of one year or less, proof of ownership would be sufficient to enforce the leasing party's interest in the event of a customer's insolvency. "

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