Another case, another PPSA nightmare – are you sure you know what you're doing?

Car insurance agent send a pen to his customers sign the insuran

The Personal Property Securities Act 2009 (Cth) (PPSA) has been around for the last 7 years – it's not new anymore.

While businesses are starting to pay attention to the PPSA, many are not getting their compliance systems and processes right and are paying a (very expensive) price for getting it wrong.

Even BMW Australia Finance Limited (BMW), a major finance company in Australia, which implemented a PPSA compliance system, got it wrong.

The recent decision in the case of BMW Australia Finance Limited v @Civic Park Medical Centre Pty Ltd as trustee for @Civic Park Medical Centre Unit Trust [2019] FCA 999 is a reminder that strict compliance with the PPSA is critical.

Are you sure you know what you're doing?

The Facts

  • BMW provided finance to its customers to purchase motor vehicles.

  • As security for repayment, those customers granted BMW a security interest over the motor vehicles.  BMW was entitled to a 'super priority' for this security interest if BMW complied with registration requirements under the PPSA.

  • From the commencement of the PPSA, BMW has used computer software to record information about each finance contract to ensure that BMW perfects each of its security interests by registration on the Personal Property Securities Register (PPSR).

  • In October 2017, a liquidator asserted that a BMW registration on the PPSR was defective.

  • BMW investigated the issue and found that the liquidator was correct, and the issue also affected a number of BMW's other registrations on the PPSR!

The Issue

BMW found that its computer system was making registrations on the PPSR for customers who were a trustee of a trust by registering against the ACN of the corporate trustee instead of against the ABN of the trust, as the PPSA requires.

This meant that:

  • those PPSR registrations were defective;

  • BMW did not have a perfected security interest over the financed motor vehicles the subject of the defective registrations (let alone a super priority!);

  • other secured creditors may have priority ahead of BMW in relation to those PPSR registrations; and

  • BMW could lose its secured property to another creditor or to an insolvency practitioner appointed to BMW's customer.

The Result

BMW tried to fix the problem by lodging new registrations on the PPSR, but for many of the finance contracts it was too late, and BMW had to apply to the court for an extension of time to:

  • fix its defective registrations; and

  • maintain its super priority security position as if BMW had registered effective PPSR registrations, on time, in the first instance.

Luckily for BMW, the Court granted the extension of time (unlike in other recent cases where the courts have not been so forgiving).

The Lesson

Even those who are seemingly aware of the PPSA and have implemented compliance structures and processes can end up in court fighting to save their security interests and even their own assets if those compliance systems and processes are deficient.

If your business engages in transactions which give rise to security interests in personal property including finance arrangements, mortgages, sales of goods on a retention of title basis, leasing, bailments, hire purchases and consignments, then it is very important that you comply precisely with the requirements of the PPSA.  Download our free guide to the PPSA to understand how your business could be affected.

How can we help?

If your business is engaged in any of the types of transactions described above and you are unsure of your rights and obligations under the PPSA, or you need to review your processes for PPSR registrations, please do not hesitate to contact Charles Cheah or Suzanne Howari.



Charles Cheah

Suzanne Howari