The scope of the PPSA is very wide
The Personal Property Securities Act 2009 (Cth) (PPSA) is a comprehensive law about taking security over personal property. The central concept is the security interest. Other than certain specific exclusions and carve outs, any interest in personal property that falls within the definition of security interest will be brought within the PPSA regime. If the PPSA applies, then, in most cases, significant incentives exist for the holder of a security interest to protect its interest by registering in the Personal Property Securities Register (PPSR).
The case law that has arisen since the PPSA’s inception reveals a number of occasions where secured parties have failed to register despite these incentives, presumably because they did not understand that the PPSA applied to their transactions. The definition of security interest is, indeed, very broad–any interest in personal property provided for by a transaction that in substance secures payment or performance of an obligation. Examples include interests such as charges, chattel mortgages and pledges, which were clearly recognized as personal property securities under pre-PPSA law as well as under the PPSA.
However, this substance definition also extends to transactions that were not traditionally regarded as personal property securities. When characterizing a security interest, the PPSA disregards the identity of the person who has title to the property and states that the fact that title to property is held by a secured party rather than a grantor does not affect the application of any provision of the PPSA relating to rights, duties, obligations and remedies.
Thus, the PPSA will apply regardless of the location of title meaning that retaining title to the property is no longer sufficient to protect one’s interest in property. It also means that retention of title arrangements and finance leases are subject to the PPSA because they, in substance, create interests in personal property that secure payment. The buyer or lessee is treated as granting a security interest in the goods back to the seller or lessor. The important point is that the seller or lessor is a secured party under the PPSA despite the fact that the seller or lessor continues to own the goods. These sellers and lessors need to register on the PPSR rather than rely on having title.
And if the substance definition of security interest isn’t enough to broaden the traditional scope of personal property securities, the PPSA also deems other interests to be security interests for the purposes of the PPSA even though they do not secure payment or performance of an obligation. These include a lease or bailment of goods for a term of more than two years.
The wide application of the PPSA has caught many business owners unaware that they should be registering under the PPSA to protect their property interests.