PPSA, done right, equals upgraded payment security

Ben Mackay, August 26, 2016

A useful piece of Australian legislation can help grain growers to protect their interests when entering into grain sale contracts, as NSW solicitor Ben Mackay explains.

Aus Coat of Arms
Many are not aware that the Personal Property Securities Act 2009 (PPSA) gives growers an opportunity to safeguard their hard earned crop before it is too late.

The PPSA created the Personal Property Securities Register, which from 30 January 2012 replaced many other registers, including, for example, the NSW REVS (register of encumbered vehicles).  It draws on similar legislation in a number of other countries, including New Zealand and parts of the USA and Canada.

Personal property is property that is not real property. Put simply, a grantor can grant a security interest in personal property to a secured party to secure a debt owed.

So, for example, if you purchase a motor vehicle (or farm equipment) subject to finance, you will probably be asked by the financier to grant to the financier a security interest in the vehicle/equipment.  You own it, but they have a secured interest.  The financier will then register their security interest in the PPS register, and will obtain rights as a secured creditor.

The PPSA applies to many different types of personal property, and many different situation, some of which might come as a surprise, such as where goods are hired or bailed to a third party.

Before the PPSA, sellers of goods (including grain) could include a term in their contract for sale which stated that they (the seller) retained title to the goods until they received payment.  If the buyer became bankrupt, or had a liquidator, administrator, or receiver appointed under the Corporations Act 2001, then there was a chance the seller would be able to collect their goods for resale, or sometimes do a deal with the insolvency practitioner which saw them receiving payment ahead of other unsecured creditors.

Under the PPSA, sellers of goods have an opportunity to ensure that their contractual terms provide for the buyer to grant a security interest in their favour, and together with appropriate registration of that security interest, a seller can now rank as a secured creditor, including in relation to commingled goods and proceeds of sale.

If a grain buyer subsequently enters into an insolvency scenario, although in some cases there still may not be enough money to pay all debts owed even to secured creditors, if I had to choose between sitting at the table with the banks or waiting with unsecured creditors in the hope of a crumb falling from the table, I know where I would rather be.

This article is not intended as advice for your particular situation.  Liability limited by a scheme approved by Professional Standards Legislation.

Ben Mackay is a Solicitor at Matthews Williams Solicitors & Conveyancers, and a NSW Law Society Accredited Specialist in Commercial Litigation (Insolvency).  He has a particular interest in both agribusiness and insolvency law.


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  1. Craig Dennis, August 29, 2016

    The Grains Industry has a little more complexity in relation to grain transactions then just title over the grain. Direct to any End User may be easier than through a Trade String of companies. Through our experience and research (Legal Advice) a Personal Money Security Interests (PMSI) may be more applicable in these circumstances. See for more information.

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