Personal Property Securities Act: Don't become a victim of the change in the definition of Motor Vehicle

The definition of a “motor vehicle” under the Personal Property Securities Act 2009 (PPSA) was amended on 1 July 2014. From 1 July 2014, only personal property that:

• is capable of travelling at more than 10km/hr; AND
• has a total motor power greater than 200W,

will fall within the definition of a motor vehicle for the purposes of the PPSA.

That is, the definition has been significantly narrowed and now excludes a great deal of motorised equipment that was previously subject to the motor vehicle provisions.

People who have security interests in motorised equipment that may be affected by this change should carefully consider the speed AND power capability of the equipment to determine whether it is still regarded as a “motor vehicle”.

While this amendment may seem insignificant, it can have drastic implications if a business fails to:

• conduct both “pre 1 July 2014” and “post 1 July 2014” searches of the Personal Property Securities Register (Register); and
• register motorised equipment under the correct collateral class, taking into account the narrower definition of “motor vehicle”.

Methods of Searching the Register

Now, when a person searches the Register in relation to motorised equipment, in addition to searching by the specific serial number, it is imperative to also conduct a Grantor search to capture interests over equipment that was once required to be described by its serial number but now, by virtue of the amended definition of a “motor vehicle”, can be described in other ways. That is, both a “pre 1 July 2014” serial number search and a “post 1 July 2014” Grantor search must be undertaken to determine whether there are any pre-existing security interests over the equipment.  

Change in Registration Procedures

When a person is registering a security interest on the Register, consideration must now be given to whether or not the motorised equipment continues to fall within the definition of a “motor vehicle”. If a piece of equipment once was, but is not now, a “motor vehicle” under the PPSA, it is no longer appropriate to register the equipment under the motor vehicle collateral class. Rather, an alternative collateral class, such as “other goods”, must be used.

Importantly, all registrations made before 1 July 2014 over motorised equipment that fall within the old definition of “motor vehicle” continue to be valid notwithstanding the change in status of that equipment. However, where a security interest is granted over that same equipment after 1 July 2014, a new registration will be required.  Consideration of this issue is particularly important to organisations in the business of leasing motorised equipment.

If you would like further information on this change, or any assistance with the operation of the PPSA, please contact:

Joanne D'Andrea
Principal
Harwood Andrews
T: 03 5226 8567
E: jdandrea@harwoodandrews.com.au

Nicole Stornebrink
Lawyer
Harwood Andrews
T: 03 5225 5209
E: nwhelan@harwoodandrews.com.au