PPSA. Shaw Gidley. Presented by: Graeme Scott, Special Counsel

Transcription

1 Hall & Wilcx

2 PPSA Shaw Gidley Presentatin t: Guests f Shaw Gidley Presented by: Graeme Sctt, Special Cunsel Hall & Wilcx 2

3 T have a valid security interest The security interest must attach t the cllateral (s19) The grantr must have rights in the cllateral, r pwer t transfer rights, and value given r act dne Grantr deemed t have rights in gds that are leased r bailed under PPS Lease Must be a security agreement (s20) In writing Grants r prvides fr a security interest Signed r adpted by grantr Hall & Wilcx _2 3

4 Perfectin The creditr s rights must be perfected (s20) Registratin n PPSR Pssessin Cntrl Nt repssessin/seizure limited applicatin t sme financial instruments, including bank accunts Hall & Wilcx _2 4

5 Prceeds Prceeds f cllateral means (s31) Prperty that is derived directly r indirectly frm a dealing with the cllateral A right t an insurance payment fr lss r damage t cllateral If cllateral in intellectual prperty, payments under a licence agreement Specific examples Harvested prduce f crps Prducts f livestck If a dealing with cllateral gives rise t prceeds, the security interest (s32) Cntinues in the cllateral unless the secured party authrised the dispsal r agreed wuld extinguish the security interest Attaches t the prceeds Hall & Wilcx _2 5

6 PMSIs Purchase mney security interest (s14) Secures all r part f purchase price r value give t acquire rights in cllateral Asset finance ROT Interest in a PPS Lease Certain leases and bailments Interest under a cmmercial cnsignment Hall & Wilcx _2 6

7 Pririty f Security Interests The PPSA reslves the pririty f cmpeting claims f secured parties in cllateral (ss55-77) Generally:- earliest registered security interest takes pririty but, PMSI s have super pririty security interest perfected by cntrl and pssessin have pririty ver perfected security interests unperfected security interest is defeated by perfected interests cmpeting unperfected interests first in time prevails Hall & Wilcx _2 7

8 Pririty f Security Interests Security interest created by Cmmnwealth, State r Territry law r by peratin f law has pririty ver ther security interests in the same cllateral (s73) eg, Warehuseman s Liens Act 1935 (NSW). Security interest must be cntinuusly perfected t retain pririty (s56) Factring debts Factr giving new value in an accunt (as riginal cllateral) has pririty ver hlder f PMSI in same cllateral (eg, supplier under ROT) if registered first in time, r ntice within prescribed time (s62) Subrdinatin agreements are effective accrding t their terms (s61) Hall & Wilcx _2 8

9 Vesting f security interest If a creditr des nt perfect its security interest: may vest in grantr upn appintment f administratr / liquidatr / bankruptcy trustee (s267) results in lss f cllateral becme unsecured creditr valid against receiver, but lw pririty ranking Hall & Wilcx _2 9

10 Vesting f security interest Certain interests d nt vest (s268) Interests that d nt secure payment r perfrmance f an bligatin and are: PPS lease f serial numbered gds (unless 1+ years r indefinite term) cmmercial cnsignment Transfer f accunt / chattel paper Hall & Wilcx _2 10

11 Vesting f security interest s588fl A security interest may vest in a cmpany upn an inslvency event if registered Within 6 mnths f the inslvency event Unless registered within 20 days f the security agreement cming int frce. ie, a green security interest hardens after 6 mnths. s588fl Crpratins Act Des nt apply t deemed security interests Shrt term PPS lease f serial numbered gds Cmmercial cnsignment Transfer f cllateral paper Can apply fr extensin f time t register Must be accident r inadvertence, n prejudice t creditrs Hall & Wilcx _2 11

12 Timing f Registratin Effect f failure t cmply:- PMSI may lse high ranking pririty Security interest may vest (subject t exceptins) Hall & Wilcx _2 12

13 PPSR PPSR is ntice bard rather than dcument register 7 year registratin = $8; 7 25 year registratin = $40; n end time (indefinite) = $140 Secured party must have reasnable belief that have right t register, that will becme secured party in relatin t cllateral (s151) Financing statement r financing change statement (s153) Verificatin Statement given by Registrar (s156) 24/7 peratin Hall & Wilcx _2 13

14 Searching the PPSR Anyne can search Exact match searching system Grantr Serial number Linking t prir registratins Hall & Wilcx _2 14

15 Registratin A financing statement cnsists f:- Secured party Grantr Cllateral details Cnsumer/cmmercial May r must be described by serial number Cllateral class - ne per registratin, eg ALLPAP, ALLPAP except, ther gds, mtr vehicle etc Descriptin f prceeds, eg all present and after acquired prperty End time fr registratin Subrdinatin PMSI Other matter, eg Transitinal Hall & Wilcx _2 15

16 Cllateral Class Agriculture Aircraft All present and after-acquired prperty All present and after acquired prperty, except Financial prperty Intangible prperty Mtr vehicles include equipment capable f being twed Other gds Water craft Hall & Wilcx _2 16

17 PPSR Registratin Certificate Registratin number Transitinal? Start & end dates Part 1 search criteria Grantr details Part 2 registratin details Cllateral details Hall & Wilcx 17

18 PPSR Registratin Certificate Cllateral type Cllateral class Prceeds descriptin Secured party details Hall & Wilcx 18

19 PPSR Registratin Certificate Part 3 attachment certificate Hall & Wilcx 19

20 Examples f Registratins Registratin against multiple classes Security interest ver mtr vehicle (serial numbered gds), parts (ther gds), related cntract rights under a lease (intangible) When t register by serial number Mandatry fr cnsumer gds Legal and practical benefits Prtect against sme taking free rules Prtect high value gds Hall & Wilcx _2 20

21 Seriusly misleading defect Registratin ineffective if seriusly misleading (s164) Can a searching party ascertain the existence f a security interest ver the cllateral? Ptential defects Incrrect cllateral descriptin r cllateral class PMSI nt described as PMSI Cllateral nt described as inventry if sld/leased as inventry Overreaching registratins Hall & Wilcx _2 21

22 Statutry defects Registratin ineffective if statutry defect (s165) N r incrrect serial number fr cnsumer prperty - aircraft, intangible prperty, mtr vehicles and water craft cmmercial prperty - aircraft Grantr s details incrrect ABN (eg, crprate trustee), ACN (cmpany), grantr s name (individual) Nn-PMSI described as PMSI Nn-Transitinal security interest claimed as Transitinal security interest Hall & Wilcx _2 22

23 Enfrcement T enfrce security interest, must have effective registratin which cvers the cllateral (s163) Parties rights in PPSA in additinal t thse in security agreement Must be exercised hnestly and in a cmmercially reasnable manner Des nt apply t receivers and cntrllers Rights t seize, retain gds, garnishee accunts Obligatins t higher security interests Hall & Wilcx _2 23

24 What t d in a pririty dispute Search PPSR Request cpy f secured agreement Des security agreement create r prvide fr security interest and cver the cllateral? Battle f the frms Check registratin carefully Des registratin cver cllateral? Defects? Hall & Wilcx _2 24

25 Taking Free A third party takes cllateral subject t security interests unless taking free prvisins apply Taking free rules Unperfected interests (s43) Serial numbered defects (s44) Mtr vehicles (s45) Ordinary curse f business (s46) Persnal, dmestic and husehld gds (s47) If taking free prvisins apply, secured party may retain interest in prceeds and rights as against grantr (s32) Hall & Wilcx _2 25

26 Taking Free Mtr Vehicles (s45) A buyer r lessee, fr new value takes a mtr vehicle free f a security interest if a search f the PPSR (during the perid between the start f the previus day and the date f the sale r lease) wuld nt disclse the registratin Ordinary Curse f Business (s46) A buyer r lessee takes persnal prperty free f a security interest if sld r leased in the rdinary curse f business Rules d nt apply if mtr vehicle/persnal prperty is held by buyer r lessee as inventry Hall & Wilcx _2 26

27 Lessns learned When in dubt, register and register ften Eg, des the supply f equipment fr the purpse f prviding a service create a bailment (which is a PPS Lease)? Avid the argument with liquidatr One prperly wrded registratin can perfect multiple security interests in the same cllateral class Update trading terms (including invice / statements) Include bligatin fr custmer t register their wn security interests Dcument inter-cmpany arrangements Risk vesting f asset-hlding cmpany interests r lss f pririty If taking a guarantee, crrect registratin f primary security crucial May invalidate guarantee if supplier agreed t take security interest Hall & Wilcx _2 27

28 Lessns learned Search the register regularly t cnfirm that interests recrded against the client are accurate $4 search fee Prcess f remval f incrrect registratins Appint PPSA cmpliance fficer Maintain a register diarise registratin end dates, change in cllateral etc Hall & Wilcx _2 28

29 Lessns learned Mst cmmn issue Retentin f title claims Simple r all mneys Cnsider battle f the frms PMSI fr unpaid gds When were gds/equipment supplied? Still need t identify unpaid gds Nn-PMSI fr gds which have been paid fr May be lwer ranking pririty Can claim prceeds, even if nt cvered by security agreement Hall & Wilcx _2 29

30 Lessns learned In a vluntary administratin r liquidatin, there are cmmercial imperatives time cnstraints mixed with: uncertainty f PPSA little jurisprudence = negtiate cmmercial utcmes Hall & Wilcx _2 30

31 Defence t unfair preference Retentin f title security interest prvides ptential defence t recvery f vidable preference by liquidatr (s588fa and s51 Crpratins Act) Payment f unsecured debt in 6 mnths prir t winding up may be vid against liquidatr What is amunt f secured debt? Unsecured t extent nt reflected in value f security Running accunt Hall & Wilcx _2 31

32 PPSA Cases 1. Failure t register PPS lease resulted equipment vesting in cmpany. Receiver had superir claim t wner : Maiden Civil, NSW Sup Crt (June 2013) 2. Befre the Curts: Frge Grup v APR Energy, $50m turbines leased t Frge Grup, PPS Lease but nt registered. Outcme? 3. Extensins f time t register security interests inadvertence, n prejudice t creditrs: Barclays Bank; Cardinia, Black Opal 4. Strage f rare cins. N PPS Lease because n bailment r cmmercial cnsignment. Depsitrs nt in business f bailing gds: Re Arcabi Pty Ltd, WA Sup Crt (2014) 5. Registratin f security interest 20+ days after security agreement, vesting f security interest: Carrafa & Anr v Dka Frmwrk, Vic Sup Ct (Nv 2014) Hall & Wilcx _2 32

33 PPSA Cases 6. Transitinal security agreement did nt cntain ROT giving rise t security interest. N security interest. Central Cleaning Supplies v Elkertn, Vic Sup Crt (2014) 7. Payment int curt under rder nt a security interest: Dura (Australia) Cnstructins Pty Ltd v Hue Butique Living, VSCA (2014) Obiter payment held as security depsit may give rise t security interest eg, tenant s security depsit? Hall & Wilcx _2 33

34 Case Study Dzer s R Us Pty Ltd 6 mnth hire agreement Dynamic Rentals Pty Ltd $100,000 lan Bank Limited All Steel Supplies Pty Ltd All mneys ROT $20,000 lan Dzer s R Us Pty Ltd Last Resrt Pty Ltd Hall & Wilcx _2 34

35 Case Study - Scenari 1 Last Resrt Pty Ltd GSA dated 31 March 2015 expressed t secures all advances Registered ALLPAP security interest n 1 April 2015 Bank Limited GSA dated 1 March 2015 Junir lawyer left GSA in T D tray, fund it after a mnth and registered ALLPAP immediately n 2 April 2015 Dynamic Rentals Pty Ltd Registered n PPSR against Dzer s R Us within 10 days after enter security agreement/pssessin, but nt serial number All Steel Supplies Pty Ltd Registered PMSI befre delivered stck, but n separate nn-pmsi Prceeds Hall & Wilcx _2 35

36 Case Study Scenari 1 Dzer s R Us Pty Ltd Manufactured 10 bulldzers and sld 5 t Jims Farming Pty Ltd Paid All Steel Supplies fr half f steel delivered Brrwed additinal $20,000 frm Last Resrt Pty Ltd n 1 May 2015 Bank Limited appints Receiver and Manager n 1 June 2015 Members reslve t wind up n 1 July 2015 Hlds frklift as P&E, nt inventry Hall & Wilcx _2 36

37 Case Study Scenari 1 Dynamic Rentals Written hire agreement Bulldzer is mtr vehicle, serial numbered gd Deemed security interest - PPS lease s13(1)(e) Must register within 15 days f taking pssessin fr PMSI All Steel Supplies Credit applicatin dated 1 January 2011 with T&C s Term that title des nt pass until all mneys paid in full ROT is in cnditinal sale agreement (s12(2)(d)) Must register security interest befre delivered stck Hall & Wilcx _2 37

38 Case Study Scenari 1 Dynamic Rentals Registered within time frame, s PMSI super pririty Higher (super) pririty ver Last Resrt Pty Ltd Right t retake pssessin f frklift All Steel Supplies Must be recrded as transitinal Registered befre delivery, s PMSI Pririty fr steel nt paid fr and traceable prceeds f sale f bulldzers Steel cmmingled with ther gds t make bulldzers - Rights in bulldzers in pssessin f Dzer s R Us Pty Ltd N security interest in steel paid fr Hall & Wilcx _2 38

39 Case Study Scenari 1 Bank Limited GSA nt registered within 20 day f security agreement and registered later than 6 mnths befre liquidatr appinted Security interest vests: s588fl Bank has n security. T late t apply fr extensin Hand cntrl f cmpany t Liquidatr Last Resrt Pty Ltd GSA registered within prescribed timeframes Valid security interest ver all persnal prperty fr all advances Hall & Wilcx _2 39

40 Case Study - Scenari 2 Dynamic Rentals Pty Ltd entered int an pen-ended hire agreement with Dzers R Us Pty Ltd and did nt register security interest On 15 May 2015, Dzer s R Us sld the frklift t Sctt s Tyre Factry Pty Ltd Held by Sctt s Tyre Factry Pty Ltd as equipment Sctt s perfrmed PPSR search n frklift with nil result Sctt s Tyre Factry Pty Ltd has granted a GSA t its wn bankers Dynamic Rentals Pty Ltd fund ut abut the sale f its frklift and recrded a security interest against Sctt s Tyre Factry Pty Ltd as grantr. On 1 May 2015, Dzer s R Us Pty Ltd enters factring agreement with Indebted 2U Pty Ltd Indebted 2U Pty Ltd registers a security interest and gives the prescribed ntice (s64) t All Steel Supplies Pty Ltd and Last Resrt Pty Ltd Hall & Wilcx _2 40

41 Case Study - Scenari 2 Sctt s Tyre Factry Transfer f cllateral withut cnsent f Dynamic Rentals Pty Ltd Security interest cntinues in cllateral, subject t taking free rules Purchased fr new value. Takes the frklift free f the security interest held by Dynamic Rentals Wuld nt have therwise satisfied rdinary curse f business rule Can issue an Amendment Demand n Dynamic Rentals fr remval f security interest Dynamic Rentals Pty Ltd PPS Lease, indefinite term Security interest vests upn liquidatin Nt saved by s268, because nt shrt term PPS Lease f serial numbered gds under s13(1)(e)-(g) Hall & Wilcx _2 41

42 Case Study - Scenari 2 Dynamic Rentals Pty Ltd (cnt d) Lses frklift and right t prceeds f sale What if Dynamic Rentals had registered a security interest by the serial number f the frklift? - Sctt s Tyre Factry wuld nt take free - Dynamic Rentals wuld have 5 business days t re-perfect - Otherwise, becmes unperfected; lses pririty t secured creditr f Indebted 2U Pty Ltd Sctt s Tyre Factry hlding GSA Has pririty ver All Steel Supplies and Last Resrt Pty Ltd fr accunts after 16 May 2015 Hall & Wilcx _2 42

43 Case Study Scenari 2 All Steel Supplies Pty Ltd Pririty ver ther security interests fr - steel which is identifiable and which is nt paid fr - any traceable prceeds nt subject t security f Indebted 2U Pty Ltd Hall & Wilcx _2 43

44 Cntact us Graeme Sctt, Special Cunsel Cmmercial Dispute Reslutin Phne graeme.sctt@hallandwilcx.cm.au Hall & Wilcx 44

45 Thank yu _2 45