December 5, 2017
The Personal Property Securities Register (PPSR) is now over 5.5 years old, but secured parties are still getting things wrong resulting in additional time, effort and costs.
The recent Victorian Supreme Court decision Re Amotran[1] is at least the 10th decision in 2017 where an application was made to the court to “cure” a later time for the registration of a security interest on the PPSR.
Looking at information available on AustLII, in 2015, there were 2 “extension of time” cases decided by the courts. In 2016, there were 4. As at October 2017, there were already 10. In order to learn from these cases, let us start with what the law says.
While it is not mandatory to register a security interest under the Personal Property Securities Act 2009 (Cth) (PPS Act), and there is no general time limit for making a registration, section 588FL of Corporations Act 2001 (Cth) (Corporations Act) provides that where a security interest is given by a company and is perfected by registration only, it will vest in the company on insolvency if it has been registered for less than 6 months, unless the security interest is registered within 20 business days after the security agreement came into force. Under section 588FM of the Corporations Act, a court may “cure” the secured interest by extending the time for registration, if it is satisfied that the failure to register the security interest earlier was accidental, due to inadvertence, due to some other sufficient cause, or the failure is not of such a nature as to prejudice the position of creditors or shareholders. A court may also make the order if it will be just and equitable to grant the relief.
In Re Amotran, the court had to consider a technical question relating to notice (whether notice of the application ought to be given to anyone). Perhaps a more practical and relevant lesson for us in Re Amotran relates to the fact that the court accepted the applicant's explanation for its failure to properly register its security was due to inadvertence, and that the application has been brought promptly, once the error was discovered. Looking at this and the many earlier “extension of time” cases, if a secured party did not register a security interest within the prescribed timeframes by error, it should act quickly to apply to the court for an extension of time to make the registration. It would assist the application if it could, among other things, demonstrate that the late registration would not affect any other accrued or accruing rights.
More importantly, secured parties should always perfect a security interest as soon as possible by observing the prescribed timeframes. Early and timely registration will minimise the risk of having an unperfected security interest that is subject to any “vesting risk”.
SAI Global has helped many customers develop strategies to manage PPS registrations, including to make registrations in a timely manner. Discover how we can help you protect your assets by contacting us for a free consultation today.
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[1] Re Amotran Pty Ltd [2017] VSC 637 (18 October 2017), full decision available on AustLII.