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HIRE AND RENTAL NEWS • NOVEMBER 2014
INDUSTRY in FOCUS
New definition of ‘motor vehicle’ is
effective on and from 1 July 2014
The Federal Government has introduced
the Personal Property Securities
Amendment (Motor Vehicles) Regulation
2014. The Regulation amends the definition
of ‘motor vehicle’ set out in regulation
1.7(2)(b) of the Personal Property Securities
Regulation 2010.
On and from 1 July 2014, an item of
personal property (that otherwise meets
the terms of the definition of ‘motor
vehicle’ in the regulation) is only be
considered a ‘motor vehicle’ for the
purposes of the PPSA if it is also:
• capable of travelling at a speed of at
least 10km/h, and
• has one or more motors with a total
power greater than 200 watts.
The former (pre-1 July 2014) definition of
‘motor vehicle’ covers goods that satisfy
either of the above tests and so covered
a very wide variety of items. Note for
property to be a ‘motor vehicle’, it still
also has to meet the other tests in the
definition.
By combining the two parts of the
definition (ie: speed and power output),
the Government intends fewer items will
come within the scope of serial number
registration provisions.
Practical implications
Secured parties such as financiers, asset
lessors, retention of title sellers, hire
companies and businesses selling by
consignment need to be aware of the new
definition to ensure registrations are made
in the correct collateral class. If a security
interest:
• is registered in the collateral class
‘motor vehicle’ when it should be
registered as ‘other goods’; or,
• is registered as ‘other goods’ when
it should be registered as a ‘motor
vehicle’,
then the registration is likely to be
ineffective, which may result in loss of the
asset on customer insolvency.
For some businesses, some goods will be
‘motor vehicles’ under the pre-1 July 2014
definition but will not be under the new
one. The goods will typically then fall in the
collateral class ‘other goods’. Small boom
lifts or scissor lifts are a good example as
they are normally too slow to pass the 10
km/h speed test in the new definition, but
would have been within the pre-1 July
2014 definition because they have power
greater than 200W.
A question arises as to the continued
validity of registrations already made. The
change to the definition takes effect on 1
July 2014 and in our view should not affect
the validity of registrations made before
that time for hires entered into before that
time. The PPS Registrar advises the new
definition only applies to hires and other
security interests entered into on or after 1
July 2014. Unfortunately the Government
has not introduced any specific transitional
provisions to confirm this and it is not
possible to state definitively it is correct.
It is clear for any hire commencing on or
after 1 July 2014, the new definition should
be applied.
Example:
Tim’s Hire only hires out boom
lifts. Tim’s Hire has several boom lifts on
hire to JoeCo Pty Limited, a local builder.
JoeCo is a repeat customer of Tim’s Hire
and has an agreement with Tim’s Hire
confirming the terms of any hire to JoeCo
that may be entered into from time to time.
The existing hires are each for 14-18
month hire terms commencing on
1 February 2014. Tim made a PPSR
registration in the collateral class ‘motor
vehicle’ on the date of commencement of
the hires.
On 1 July 2014 boom lifts of the kind
hired to JoeCo by Tim no longer meet the
definition of ‘motor vehicle’, because of
the definition change. Tim considers there
is no need to make a new registration in
the class ‘other goods’ in respect of the
existing hires.
Tim and JoeCo discuss in August 2014
some new hires and before arranging
delivery Tim makes a new general
registration against JoeCo in the collateral
class ‘other goods’. On 20 August 2014 Tim
delivers for hire a new boom lift to JoeCo.
The new general registration in the ‘other
goods’ class can protect that interest. The
existing registrations in the ‘motor vehicle’
class (whether general or serial number)
would not protect the new boom lift.
Searching
Businesses may also use the PPSR when
they purchase and in this capacity should
also note, when searching whether
particular goods are the subject of a
security interest, registrations may have
been validly made using either the new
or the old definition of ‘motor vehicle’. It
would accordingly be prudent to search
against both ‘other goods’ and ‘motor
vehicle’ collateral classes.
Example:
Tim’s Hire is looking at buying
a used boom lift from Phil in August 2014
and wants to be sure Phil hasn’t granted a
security interest – to a finance company for
example.
The used boom lift would be a ‘motor
vehicle’ under the pre-1 July 2014
definition but would not be a ‘motor
vehicle’ under the new definition.
Tim should search in the collateral class
‘other goods’ as well as in the collateral
class ‘motor vehicle’ to make sure he
finds all registrations. Valid registrations
could have been made under either class
depending on when the security interest
was granted by Phil.
Government review of the PPSA
The review being conducted by Bruce
Whittaker is in the stage of issuing
further consultation papers with a view
to delivering final recommendations by
the end of next January. The hire industry
(through HRIA and EWPA) has been a
vocal and active contributor to the review
and it appears the industry’s views have
been heard, at least to a degree.
The review looks likely to recommend;
• an ‘indefinite’ hire ought not to be
automatically a PPSA security interest;
• the time threshold for a PPSA lease
will be at least one year. The industry
would prefer to see the industry
either excluded altogether or the
time threshold extended so PPSA
only catches transactions that are
functionally equivalent to obtaining
equipment finance.
The industry continues to make
representations.
NB: PPSA is complex and the above is
general information only – readers should
always seek specific advice about the
effect of PPSA on their businesses.
PPSA bites again - continued from p14