PPSA: The Basics
|What area(s) of law does this episode consider?||Nicholas talks about the operation of the Personal Properties and Securities Act 2009 (PPSA) and Jason provides practical guidance on PPS considerations in an external administration.|
|Why is this topic relevant?||While the Personal Properties and Securities Register (PPSR) does not operate as a system of title by registration, instead working more like a ‘noticeboard’ for security interests, there are very real priority consequences for companies and individuals who fail to register or inaccurately register their interests. While the PPSA has been in place since 2012, it is an area that still hasn’t been explored in great detail by case law.|
|What legislation is considered in this episode?|
|The main provisions of the PPSA that Nicholas talks about are:|
|What cases are considered in this episode?||1. Auburn Shopping Village Pty Ltd v Nelmeer Hoteliers Pty Ltd  NSWSC 1230 (14 September 2017) (Ward CJ In Eq).|
In this case Nelmeer agreed to sell poker machine permits to Auburn with Auburn claiming that the agreement was that Nelmeer had to sell the permits without any encumbrances. Nelmeer’s permits had PPSR registrations against them and as such Auburn repudiated the contract. However, the court upheld that PPSR registrations are not encumbrances.
2. Allied Distribution Finance Pty Ltd v Samwise Holdings Pty Ltd  SASC 163.
The court in this case considered the principle in s62(2)(b)(i) of the PPSA of when a grantor ‘obtains possession of the inventory’ in order to determine out of Allied and Samwise who had priority over the motorcycles. The dispute arose from previous transactions whereby Commercial Distribution Finance Pty Ltd provided finance to Bill’s Motorcycles, retaining ownership of the motorcycles and registering a PMSI. Bill Motorcycle’s then granted an all assets security interest to Samwise. Allied later entered into a finance agreement with Bill’s Motorcycle’s and registered a PMSI and Commercial Distribution Finance Pty Ltd transferred the motorcycles to Allied. Ultimately the South Australia Supreme Court held that the possession referred to Allied taking possession in capacity as a grantor of the PSMI.
3. Project Blue Sky v Australian Broadcasting Authority  HCA 28 (28 April 1998) (Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ).
In this case the High Court established principles of statutory analysis in interpreting s 160(d) of the Broadcasting Services Act 1992 (Cth) (‘the Act’) requiring the Australian Broadcasting Authority (ABA) to operate consistent with Australia’s international obligations. Clause 9 of the ABA’s standards stated that 55% of Australian programs had to broadcast 6am-12am. An existing trade agreement between Australia and New Zealand provided that both Australia and New Zealand would offer equal access, treatments to persons, and services of the other country, thereby constituting an international obligation for the purposes of s 160(d) of the Act. The High Court held that the ABA’s standard was unlawful but not invalid.
4. Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27.
This is yet another case on statutory interpretation where the court appeared to favour a more literal approach by considering the words of the legislation itself. It reaffirmed that it is important to consider the mischief that the statute is designed to address in order to make a proper interpretation. The case concerned calculation of tax for Alcan according to s 41 of the Taxation (Administration) Act (NT) which defined what a lease is and expressly excludes ‘an option to renew a lease.’ The High Court held that the Court of Appeal of the Northern Territory erred in their calculation of tax as including the option to renew in the value of the leases.
5. Central Cleaning Supplies (Aust) Pty Ltd v Elkerton  VSCA 92 (Maxwell P, Tate and Beach JJA).
Central Cleaning supplied cleaning equipment on retention of title terms to Swan Services. Central Cleaning and Swan Services had entered into a master agreement in the form of a credit application before the commencement of the PPSA. Goods were supplied after the commencement of the PPSA under separate purchase orders, and when delivered were accompanied by invoices containing the retention of title terms. Central Cleaning had not made a PPSA registration and therefore had to rely on the transitional provisions of the Personal Property Securities Act 2009 (Cth) (PPSA). Swan Services went into liquidation (with Elkerton appointed as liquidator).
The Court of Appeal reversed the decision at first instance and held that although there had been no PPSA registration, Central Cleaning would be able to enforce its ROT terms as a security interest as they established the existence of a ‘transitional security interest’ under s 308 of the PPSA – that is, that it was provided for by a security agreement made before the commencement of the PPSA.
6. In the matter of Gelpack Enterprises Pty Ltd (in liquidation)  NSWSC 1558 (03 September 2015) (Brereton J).
Primaplas supplied resin to Gelpack for the production of plastic products. This was supplied on credit terms where retention of title applied. Upon liquidation of Gelpack, Primaplas, through its PMSI, sought an accounting of its stock on hand with the liquidators as well as proceeds of sale of its resin and products. Gelpacks’ finance manager submitted a credit application in 2007, stating that all future supplies would be subject to general terms and conditions of trade and Primaplas could change terms at any time, but would undertake reasonable efforts to notify the customer of the change. In August 2012, the plaintiff sent a generic letter to their customers, including the Company, attaching new T&Cs which included a ROT clause and the grant of security interest under the PPSA.
The Court held that:
7. Trenfield v HAG Import Corporation (Australia) Pty Ltd  QDC 107 (McGill SC, DCJ).
In 2011, prior to the PPSA commencement, Lineville signed a credit application with HAG stating that goods would be supplied on ROT terms. HAG registered its interest on the PPSR as ‘transitional’ according to s 308 of the PPSA. Lineville paid HAG for the goods then went into liquidation. Lineville’s liquidator sought to recover those payments to HAG as preferential payments in respect of an unsecured debt. The Queensland District Court found that the credit application was not a contract for providing security interests and that the transitional registration was ineffective to perfect the security interest made after the goods were supplied (after PPSA commencement). However, the court also found that the payments were not preferential as they were not made for an unsecured debt.
|What are the main points?|
|What are the practical takeaways?|
|Show notes||Auburn Shopping Village Pty Ltd v Nelmeer Hoteliers Pty Ltd  NSWSC 1230|
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