What you should know about the Personal Property Security Register
Most people are aware of the Personal Property Securities Register (Register) under the Personal Property Securities Act 2009 (Cth) (PPSA) which commenced on 30 January 2012.
However rarely do industry participants understand the implications of failing to register its interest in goods. Simply, a failure to register interests under the PPSA Register can lead to your interest in goods or materials being defeated by other registered security holders or liquidators.
Below is merely a snap shot of circumstances which may give rise to a registrable security interest.
Security interests in unfixed goods and materials
Most construction contracts include a regime in which a subcontractor or supplier retains title to goods delivered to site under the contract until payment has been made. These are commonly known as retention of title provisions. It is necessary for a subcontractor to register its interest in the delivered goods to perfect its title to the unpaid goods. Such registration will defeat the clutches of a liquidator if the main contractor, which normally controls the site, enters into liquidation.
Industry participants must seek advice in relation to its retention of title provision to ensure it provides the necessary protection to permit registration.
Registration of 'step-in' rights
Many construction contracts provide a power for a principal or main contractor to step in and 'take work out of the hands' of a contractor or sub-contractor in the event of a substantial default or an insolvency event. In most cases, this power is supplemented by a right to take over and use the plant, materials and equipment of the contractor or sub-contractor in order to complete the relevant work.
A recent case in New Zealand has determined that these 'step-in' rights create a security interest for the purposes of the PPSA. If a principal fails to register this on the Register the principal could beprevented for enforcing such rights.
For principals and contractors the process of registering every such contract can be an onerous and time consuming one. It is therefore important to ensure that measures are in place to enable the speedy registration of such contracts. A single registration can cover multiple agreements against the same subcontractor.
Equipment hire and on-site temporary works
Typically construction sites will include equipment hired from specialist providers such as cranes, trucks, excavators and scaffolding etc. Normally the interest of the equipment owner has been protected through the retention of title provisions.
Under the PPSA, equipment leasing and on-site temporary works can be caught as deemed security interests known as 'PPS Leases' and be registrable. Legal title to equipment will not be sufficient to protect an owner's interests. The contracts governing these arrangements will need to properly describe the equipment/ temporary works and be registered.
Registration is not onerous or costly. Keystone Lawyers are able to assist with advising industry participants on the PPSA and registration of interests.