Australian mining industry cautioned to protect assets

According to legal experts, the Australian mining industry is exposing itself to the unnecessary risk of losing multimillion-dollar assets, says technology, information and property settlement services provider GlobalX Legal Solutions CEO Peter Maloney.

The Personal Property Securities Register (PPSR) is a national registry in Australia that enables businesses to protect their legal stake in personal property, he explains. Personal property takes many forms – from cranes, scaffolding, inventory and plant to equipment and machinery – and is often most at risk when provided under a leasing or consignment agreement.

Maloney states that the PPSR offers companies a risk-management tool to ensure asset protection and mitigate potential loss. Previously, companies could confidentially rely on the retention of title clauses held within a contract or invoice, but this is no longer the case. He adds that, in the event of liquidation, parties that registered an interest on the PPSR are given certain priority and rights ahead of those who failed to do so.

Maloney suggests that the Australian mining industry is directly impacted on by the register, as mining companies commonly enter into leasing arrangements for the provision of large-scale plant equipment. “Besides equipment leasing arrangements, the PPSR must be considered by an organisation in terms of other types of arrangements, including (but not limited to) joint ventures, the retention of title and intellectual property.”

Companies should always seek legal advice before entering into contractual arrangements, as the process of due diligence ensures that factors such as the protection of assets are considered and, ultimately, assist in mitigating any potential loss or damage, Maloney advises. The PPSR offers a key step in the due diligence process for companies and their legal advisers, he adds.

“There is a perception that the registration process is time consuming, complicated and expensive, but protecting assets and security interests is simple, quick and something that legal advisers and businesses can do.”

However, Maloney avers that, to be enforceable against third parties, the buyer must have signed or accepted the documents which incorporate the retention of title and title holders (suppliers) must have registered their interest on the PPSR.

Multinational legal services firm MinterEllison partner Nick Anson notes that Australia’s Personal Property Securities Act (PPSA) has created a ‘perfect or miss model’, where businesses who failed to correctly perfect an interest by registering a financing statement would lose out on their claim.

“The Australian Financial Securities Authority’s most recent report on PPSR registrations lists more than eight-million active registrations, with 507 895 listings created in the March quarter,” Anson says.

There were more than 1.9-million searches conducted on the PPSR in the March quarter, which is a 6.4% rise, compared with the March quarter of 2015.

The figures are encouraging, Anson says, adding that many businesses are still neglecting to take appropriate measures to secure their assets due to a lack of knowledge about the ramifications of failing to do so.

He advises companies to review their terms of trade and, if they are relying on a security interest, such as a retention of title, they should ensure that they are properly protected.

Maloney states that the legal community will watch the Australian economy closely, as the current climate is resulting in a higher than normal number of companies’ going into liquidation and bringing PPSA cases to fruition.

“Recent cases have highlighted . . . the major risks of failing to properly register on the PPSR, and businesses need to be aware of the potentially devastating consequences,” he says, adding that the number of instances where the PPSA will be cited and the PPSR relied on as evidence in court will inevitably continue to rise as businesses and consumers rightfully exercise their legal stake in ownership.