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HIRE AND RENTAL NEWS • NOVEMBER 2014
INDUSTRY in FOCUS
WA Court case
In White v Spiers Earthworks Pty Limited
[2014] WASC 139, Spiers agreed to sell
a business and equipment to BEM
Equipment Pty Limited and also entered
into a hire agreement with BEM in relation
to certain vehicles and trailers.
The hire agreement was entered into in
2010 and included terms under which BEM
paid instalments in aggregate equivalent
to the purchase price of the equipment
plus a margin. The agreed market value of
the equipment was more than $1.4million.
The Western Australian Supreme Court
found this arrangement was an ‘in
substance’ security interest under PPSA
as well as being a ‘PPS lease’ (deemed
security interest) under the legislation.
A contest arose in the case because BEM
had given a charge over all its assets
to NAB in February 2011. BEM become
insolvent and appointed voluntary
administrators in July 2013. Shortly after
that, NAB appointed receivers.
WA The Court found no PPSA transitional
protection was available to Spiers because
Spiers had not registered its interest under
the predecessor to the PPSA in WA, the
Chattel Securities Act 1987.
The Court held the equipment therefore
vested in BEM which meant it became
effectively part of the NAB’s security and
Spiers lost ownership.
The vibe? Fans of the movie ‘The Castle’
will recall the ultimate triumph of ‘the vibe’
(also known as the ‘just terms’ provision
found in s.51(xxxi) of the Commonwealth
Constitution). Interestingly, in this case,
Spiers attempted to invoke s.51(xxxi) and
argued the vesting of its interest in the
hired equipment in BEM would result in
an acquisition of its property, because the
vesting would wholly extinguish Spiers’
proprietary interest in the equipment
and vest it in BEM. Spiers argued such
an acquisition of property was not on
‘just terms’ because Spiers would receive
nothing in return.
The Court referred to High Court decisions
a statutory provision is not one for the
‘acquisition of property’ within s.51(xxxi)
of the Constitution where the provision is
not one for the acquisition of property as
PPSA bites again
Bartier Perry’s PPSA specialist Oliver Shtein reviews the latest developments in
PPSA law and the hire industry.
such, but rather part of a general regulatory
scheme aimed at the ‘adjustment of
competing rights and liabilities’. In this
case the Court found the vesting inflicted
on Spiers was only adjusting the rights of
secured and unsecured creditors.
We can observe Spiers would have the
undoubtedly cold comfort of proving for its
loss as an ‘adjusted’ unsecured creditor of
BEM. With PPSA now more than two years
old outcomes like this are becoming quite
common in our experience.
PPSA gets a trim – amendments
introduced affecting serial number
registrable property
The Government has introduced
amendments to the PPSA contained in the
Personal Property Securities Amendment
(Deregulatory Measures) Bill 2014.
The Bill was introduced as part of the
Government’s ‘repeal day’ package of red
tape reduction measures.
The Bill proposes to amend the PPSA so
leases for 90 days or more of serial number
registrable goods will no longer be deemed
to be PPS leases for the purposes of the
PPSA. Currently PPSA deems leases of
certain items of such goods (such as motor
vehicles, boats and aircraft) to be PPS
leases where the leases are for 90 days or
more. If this change becomes law, it will
mean hire businesses will not need to
register hires with a term of less than 12
months. It will align the PPSA with similar
personal property securities regimes
in countries such as New Zealand. The
Bill is not expected to face opposition in
Parliament. However it is critical for hire
businesses to note:
• the changes will not (yet – see below)
remove the part of the definition of
‘PPS lease’ that deems a hire for an
‘indefinite’ term to be a PPS lease
security interest. If a hire business
provides equipment for ‘as long as
the customer needs it’ or on similar
indefinite terms, this is still a PPS lease
and a security interest from inception.
• The changes do not affect any
arrangement which as well as being
a PPS lease is also an ‘in substance’
security interest – such as a hire
purchase (as in the Spiers case above)
or a deferred purchase or ‘rent to buy’
arrangement. So for eg: an agreement
to hire goods with title to pass after
three quarterly instalments are paid, or
with an option to purchase during the
hire can be an ‘in substance’ security
interest even if the PPS lease time
threshold is not exceeded.
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