Hire and Rental News - August 2019

will of course also be extra registration costs. Whittaker Report In March 2015 the Government tabled the Whittaker Report on the PPSA which identified the following difficulties arising from the requirement for a financing statement to be registered against a trust’s ABN: • A secured party may not be able to tell whether the grantor holds property in its own right or as trustee of a trust with an ABN. This can force the secured party to make multiple registrations, adding to the cost and clutter on the PPS Register; • A grantor may initially hold collateral in its own right, but then declare it holds such collateral on trust, and obtain an ABN for the trust; and • A grantor may initially hold collateral on trust for a trust that does not have an ABN, but later obtain an ABN for the trust (as was the case in the matter of Psyche Holdings discussed above). The recommendation arising from the Whittaker Report was a registration to perfect a security interest over trust assets should be made against the relevant details for the trustee, rather than the ABN or other identifying details for the trust. If the above ecommendation is enacted, this would certainly alleviate the various issues flowing from the requirement to register against a trust’s identifying details. But what will this mean for secured parties who have existing registrations against trusts on the PPS Register? • Will they be granted transitional validity? And if so, for how long? • How will the PMSI priority of existing registrations be preserved? • Will secured parties with existing registrations be required to make fresh registrations? • If existing registrations against trusts remain effective (and the Whittaker recommendation to do away with registration against trusts is enacted), this will necessitate searches against not only the trustee, but also against the trust in order to reveal ‘historical registrations’. Such a situation would be completely contrary to any stated objectives of making searches of the PPS Register more user friendly. The answers to the above questions cannot be known until the Government determines firstly, to enact the above recommendation contained in the Whittaker Report, and secondly, when the transitional provisions are released. Nearly four years after the Report was tabled there is still no legislation in sight. Reform is needed There is no doubt the PPS register suffers from excess complexity, as the Whittaker Report has found in this and many other respects also. The problem highlighted in Psyche Holdings shows a further dimension to the overcomplication of the register. The same issues would appear to apply to other ‘non-entity’ grantors such as partnerships where the registration is against the ABN of the partnership and not the legal entities who are the partners. The ABN came into the law as part of the Howard Government’s ‘New Tax System’ changes in 2000. It was designed as a marker for tax purposes. An ABN can identify a tax partnership or trust estate which that tax legislation has chosen (confusingly) to label as an ‘entity’. These structures are not legal entities but have a role in identifying the way in which tax law applies – for example in calculating the net income of a trust under tax law. The existence or non- existence of an ABN is not correlated to the existence or non-existence of any identifiable legal person. In our view the ABN never had any place in the PPSA, particularly when one considers the unforgiving and draconian effects of incorrect registration on personal property interests. n Contact Bartier Perry on 02 8281 7940 or visit: www.bartier.com.au HIRE AND RENTAL NEWS AUGUST 2019 P19 INDUSTRY IN FOCUS