The Personal Property Securities regime was introduced in January, 2012 and bought with it a number of complications and headaches for small businesses including cane farmers.

Recent amendments to the PPS regime have reduced red tape and McKays sees this as a win in reducing the paper work and financial burden for small businesses (such as farms).

Previously, any hire or lease of personal property (for example machinery such as harvesters, tractors, hall-out trucks etc) that were out of your possession for a term greater than one (1) year, needed to be registered on the Personal Property Securities Register (PPSR). If they weren’t registered on the PPSR and the person who had possession of the equipment went into liquidation or was declared a bankrupt, the person who legally owned the equipment could lose their rights to claim back the machinery and it could be sold off to help clear the debts of the liquidated company or the bankrupt.

This exact situation happened in a recent case in New South Wales this year where turbines were leased to a company to use in a power station for a two (2) year period. The hirer company did not register the turbines on the PPSR and therefore lost US$44 million in equipment! This is a war story on a very large scale, however it demonstrates that everyone who hires out their equipment needs to be aware of the PPS regime to ensure they protect their property from being taken.

The recent amendments to the PPSR regime that came into effect on 20 May, 2017 have extended the lease or hire term from one (1) year to two (2) years. This means for leases and hires of plant and equipment entered into after 20 May, 2017, the requirement is only to register on the PPSR if the hire exceeds two (2) years or is for an indefinite period of time that will run for greater than two (2) years.

So now, if the lease term is under two (2) years, then you do not have to register on the PPSR, however, may choose to do so for added piece of mind.
The PPSA not only applies to hiring of equipment.
  1. Do you have share farm arrangements in place for either all or part of your farm and/or allow others to farm on your land?
  2. Have you dropped off excess farming equipment to a local equipment dealer for sale?
  3. Are you transferring or storing your crops someplace but wanting to keep ownership of them despite them not being stored on your land?
 
Depending on how the above deals are structured, they may be caught by the PPS regime.

We strongly encourage anyone who is involved in any of the following scenarios to speak to the PPSA team at McKays to obtain legal advice specific to your situation.

To illustrate an example of where a farmer could be caught out by the PPSR regime -

Example:

Gary (“Gambling Gary”) runs his own farm at Pleystowe. Next to him is Pete’s farm. Pete has taken over this farm from his father recently and is not interested in being a farmer and doesn’t grow any cane, however Pete has a number of pieces of machinery that Gary would like to borrow. Pete lends Gary a harvester and hall out truck on a handshake deal for as long as Gary needs them.
Some two and a bit years later, Gary's gambling problem has unfortunately gotten out of control and he is forced to declare bankruptcy. Gary's bankruptcy trustee takes over the farm, including possession of the harvester and hall out truck (that are owned by Pete). The bankruptcy trustee searches the PPSR to see if there are any registrations over the farming equipment, but there are none. As such, the bankruptcy trustee is entitled to take Gary's entire farm, including all plant equipment on it even though some of this is legally owned by Pete.
Had Pete sought legal advice at the start of the PPS lease, he would have been advised to enter into a written lease with Gary and also register his interest in the plant and equipment on the PPSR. Now, as he had not, he has no rights to the plant and equipment, despite him being the legal owner.
 
If you think you need advice about the impacts of the PPS regime, please contact your solicitor to assist as soon as possible.
 
At McKays, we have our own team of experienced lawyers that can assist you with attending to the above steps. If you would like to find out more, please contact us and one of our friendly solicitors can provide you with an estimate of fees to assist you.