Personal Properties Securities Act

Anyone with a view to how this works?

Just read the press release, http://www.harness.org.au/news-artic...?news_id=17562 and must admit I was bemused at how a horse could be sold from under the owner.

Further research gave me this info;
"The PPSA is based on similar legislation in Canada and New Zealand and the major case study for the Act is indeed based on a racing case. In Waller v NZ Bloodstock Limited, NZ Bloodstock leased the stallion Generous to Glenmorgan Farm for an initial period of three years on terms specifying that title remainsed at all times with NZB. This created a PPS Lease which was never registered on the PPS Register. When Glenmorgan defaulted on the lease payments, NZB terminated their agreement and re-took possession of the stallion. However, prior to the Generous contract, Glenmorgan had granted a debenture over “all its present and future assets” to a third party which was entered onto the PPS Register. When Glenmorgan also defaultd on payments to the Third Party, the unfortunate result was that the Third Party was able to argue that it had a registered interest in the horse that took priority and its subsequent sale and the $2 million proceeds of the sale. NZB received nothing." http://clanbrooke.com/

Still unsure how this could happen. Anyone care to explain it in layman terms that I may understand.

"An example is where a horse is leased to a trainer who has mortgaged their stables to a bank. The bank registers an interest over all the trainer’s assets including the stables and horses, but the horse owner fails to register an interest in the horse they have leased. The trainer defaults on the loan and the bank takes possession of all the assets. As the horse owner has not registered their interest, the bank may be entitled to take possession of the animal"
I understand if you have a handshake deal with a trainer how this PPSA is important you are registering your financial interest in the horse. Now i'm not a lawyer but if i've got a formal lease in place that is registered with the appropriate HR authority that has me listed as the owner and the trainer listed as the leasee - then doesn't that automatically show that i have a financial interest in the horse.
Can a lawyer explain it so us normal people that rely on common sense can understand it.

Found the following when looking into the GENEROUS case.
I remember the case quite well.Essentially Norman is right except that having a lease registered with a HR authority only does not provide you any great protection.
Essentially as I understand it as it applies in NZ...
1..You have leased your horse for a period of greater than 1 year to a Joe Bloggs.
2.. You have not registered your interest in the horse (Leasor) with the Personal Property Registry.
3.. Joe Bloggs has a mortgage with a bank or lender which is registered by the bank or lender (mortgageor) with the Personal Property Registry.
4.. Joe Bloggs defaults on the mortgage.
5.. The mortgageor can seize all Joe Bloggs' assets including any but not solely which the bank or lendor has a registered interest to discharge the defaulted mortgage.

“Generous” was a racehorse, a stallion. Generous was owned by New Zealand Bloodstock Limited. NZ Bloodstock Ltd entered into a lease-to-purchase agreement with Glenmorgan Farm Limited which provided that ownership of Generous was not to pass to Glenmorgan until Generous was paid for.

As the lease on Generous was for more than a year it fell into a category requiring to be registered on the Personal Properties Securities Register (PPSR) within 10 days of being signed. It was not registered. Prior to taking the lease of Generous, Glenmorgan had granted a debenture to a third party, SH Lock New Zealand Limited, which was registered on the PPSR when that Act came into force in 2002.

All bets were off when Lock appointed a receiver under its debenture: Who had the right to Generous? Court action ensued.

The Court of Appeal1 held Generous belonged to Lock on the basis that Lock’s security was registered. NZ Bloodstock Ltd may have “owned” Generous but on the basis it had not registered a specific security interest, and Glenmorgan had an interest by virtue of its lease of the horse, Lock’s all-encompassing debenture entitled it to Generous.

A similar scenario occurred in the Portacom2 case; NDG Pine Limited was in possession of portable buildings leased to it by Portacom (think temporary structures such as pre-fab classrooms or a temporary site-manager’s office on a building site, or Portaloos leased for more than one year). Nothing was registered on the PPSR, the buildings were owned by Portacom and NDG merely rented them. When NDG went into receivership out of the woodwork appeared The Hong Kong and Shanghai Banking Corporation (HSBC), its debenture (or general security agreement) being registered on the PPSR, it seized the buildings on the basis that a security interest was created in the lease to NDG. Portacom lost its buildings and the Court upheld HSBC were rightfully entitled to them.

While possession may not quite be 9/10 of the law the effect of the PPSR and the developing case law is that merely having residual title to goods or personal property does not provide you with a guaranteed win; when a security interest pursuant to a lease for more than 1 year or hire-purchase arrangement is granted to a debtor your interest may be trumped by the registration of a general security over all the debtor’s personal property by some other creditor, such as a bank or lending institution unless you register a specific security interest (also known as a Purchase Money Security Interest or PMSI) on the PPSR.