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Katherine Payne, Snr Counsel at Hall & Wilcox in Melbourne, has authored this neat little article on the recent changes to the Personal Property Securities Act (PPSA). Her article and links to other H&W publication can be found here. I have for convienence published the article below:

On 1 July 2014, the Personal Property Securities Amendment (Motor Vehicles) Regulation 2014 (MV Regulation) commenced. As we foreshadowed in our previous Update of 7 April 2014, the MV Regulation amends the definition of “motor vehicle” used by the Personal Property Securities Regulations 2009 and associated Act.

Now, to be classified as a “motor vehicle” the asset must:
1. be capable of a speed of at least 10 km/h; and
2. have on or more motors that have a total power greater than 200W; and
3. has a VIN, manufacturers number, or chassis number; and
4. not run on rails, tram lines or other fixed path.

The seemingly small amendment from the word “or” to the word “and” at the end of requirement 1 above is intended to raise the preconditions for an asset to be classified as a “motor vehicle”. Time will determine whether this has the desired effect of reducing the number of assets classified as a “motor vehicle”.

In addition, it is anticipated that the definition of PPS Lease will soon be amended to remove the “90 day rule” for serial numbered goods (including motor vehicles). The result will be that an arrangement will only classify as a PPS Lease if the term of the agreement is, for all property, no end time or more than 12 months. The relevant Bill remains before Parliament and has not yet commenced.

I understand that this change is as a result of pressure brought about by concerns raised by small and medium hire businesses about the operation of the PPS Act. The industry was generally concerned with the wide application of what a ‘motor vehicle’ could be and therefore the narrowing of this definition through the use of “and” certainly helps.

Notwithstanding the above change, some of the concerns raised by the industry appear to remain unresolved. These particularly relate to the deeming of a lease to be a PPS Lease where it is of an indefinate term. Often hire documentation may state that whilst a lease that is for a term of less than 12 months it can be brought to an end earlier by agreement of the parties. Therefore it may be narrowly interpreted as being a lease of an indefinite term and therefore a PPS Lease. Similarly, it is common within the industry to lease to client on an indefinite basis (ie lease the goods for as long as a client needs them). A consequence of this is that these arrangements will be deemed to be PPS leases and security interests for the purposes of the Act and require registration to protect the lessor’s interests in the property in the event of a client’s insolvency. We are yet to see how these concerns are addressed.

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