Farmers who sell crops on
consignment, agist cattle and lease out machinery could risk losing
their assets if they don't register on the new Personal Property
Securities Register ("PPS" Register) which came into effect in late
January. The old saying "possession is nine-tenths of the law" has
never been more true than as of 30 January 2012 with the
introduction of the Personal Property Securities Act, warns one of
our Commercial
Team Partners, Felix Hoelscher. This law significantly changes the
long established principles about who legally owns the assets.
While the new regime will not directly affect real estate, the
changes could impact businesses that supply goods valued over $5000
including motor vehicles, machinery, crops and livestock. Andersons
recommends that people who supply goods on retention of title
terms, have goods or assets located at other people's premises or
who rent, lease or hire goods to others (including to related
parties), need to familiarise themselves with the new law.
In very simple terms: If Farmer Bill owned some
cattle and had it being agisted at Farmer Joe's property, and
Farmer Joe went broke, then Joe's bank could possibly deal with the
cattle as part of Farmer Joe's personal property and sell it
up. In this kind of scenario, Farmer Bill could ensure this
doesn't happen by firstly ensuring he has a written agreement with
Farmer Joe and secondly by registering his interest in the cattle
on the PPS Register. There was a case in New Zealand, which has a
similar law, where a stallion was leased to a company and that
company was later placed into receivership. The Court found that
despite the stallion's owner having legal title, a third party had
the right to sell him because it had "perfected" its security
interest by registration while the owner had not registered its
interest at all. Any suppliers who sell goods that are subject to
retention of title are no longer able to rely on their title to
protect their interests in those goods. Instead they are
required to register their interest on the new national Personal
Property Securities Register in order to preserve their priority
over the goods that have been sold. Failure to do so will
mean that the supplier may lose the right to re-take possession of
the goods, if not paid. Obviously there are complexities with the
legislation that mean every situation will be different, so people
need to consult the government website www.ppsr.gov.au and consider
taking legal advice to determine whether they need to update their
practices and documents to ensure that they have a right or ability
to register a security interest over their personal property.
Previously the interests of banks and other third parties in motor
vehicles and other assets were registered in different ways in
different States. This new register aims to bring it all into
one national register - so there will be benefits for receivers and
liquidators when it comes to working out who owns what assets.
While there is a transitional period for transactions which
pre-date the commencement of the new legislation, there were still
situations where it would be best to "perfect" those past interests
with the PPS Register. Even licences or leases that are in place
with related entities as asset protection measures should be
reviewed and "perfected" during the transition phase. Want to know
more? You're more than welcome to get in direct contact with
the writer of today's blog, Andersons Partner, Felix
Hoelscher. Please note, this Blog is posted in Adelaide,
South Australia. It relates to Australian Federal
legislation.