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PPSA
NOVEMBER 2012 | HIRE
AND
RENTAL
NEWS
| 11
INDUSTRY IN FOCUS
the equipment may have been owned by
businesses who thought they didn’t have to
register.
In any event the Court found the
administrator could sell the unclaimed
equipment and dissipate the proceeds even
though some of it was probably owned
by businesses that had registered against
Hastie. This case shows a registration
won’t protect you if you don’t act on
correspondence from the administrator.
Should hire businesses wait and see?
No, the reality is the uncertainties can
be managed now. There are ways to
structure documents and make registrations
to be sure of protection. I do worry hire
businesses may be lulled into a false sense
of security. My fear is in insolvencies like
Hastie, Kell & Rigby, Reed and others that
might be imminent, there is likely to be
equipment that has or will vest and be lost
in those insolvencies.
Just because the hire businesses have
recovered and re-hired the equipment
in some of these situations so far doesn’t
mean the liquidators may not be looking at
recovering it. We have a very clear warning
from New Zealand cases, that recovering
possession won’t cure a problem if the
security interest was unperfected at the
critical time of insolvency.
Some businesses may be waiting to see
if PPSA really operates in the way we’ve
been warning people. I don’t recommend
that ‘wait and see’ approach unless you are
prepared to lose equipment.
There is a big issue around sub-hire in
PPSA.
Under PPSA the interest of a hire business
that allows its customer to sub-hire is
dependent on the steps the customer takes
to protect itself. The equipment can be lost
because of matters beyond the control of
the hire business if the customer on-hires
and doesn’t look after the interest in the
equipment. Contrast that with the old
law when as long as you could find the
equipment it remained yours and could be
regained even if it had been sub-hired.
This adds a new level of risk that can’t be
effectively controlled by hire businesses. It
is leading to a loss of confidence between
some hire businesses. Some businesses may
be viewed as more vulnerable to the PPSA
rules because they don’t protect themselves
and they may be seen as more dangerous
to cross-hire to. This is already an issue up
the chain as the banks realise equipment
on finance lease to hire companies is at risk
if the hire company doesn’t manage PPSA
issues.
What should hire businesses do to become
PPSA-ready?
Well in summary:
• brace yourself for some complexity
• read the HRIA guidance material
• have someone with an aptitude for legal
and systems issues take charge of your
PPSA project
• seek good advice on exactly how to
document and register your hires
• get an occasional health check to ensure
no systemic problems are emerging
• don’t forget PPSA is not only about hire
and leasing. In particular you need to
consider it if selling by consignment and
when buying equipment from other
businesses.
HR
Getting PPSA compliant – don’t wait
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