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CAFBA PPS Case Study – Serial Numbered Goods

Friday 28, Aug 2020

Recent CAFBA Bulletins have dealt with case studies involving a motor vehicle, describing it as a type of ‘serial numbered good’, as it is generally described in the context of the Personal Property Securities Act 2009 (PPSA), although the Act does not define that term. However, under the PPSA, not all goods with a serial number are, or can be, registered as serial numbered goods. This Bulletin deals with what are serial numbered goods and some key implications of that concept arising from registering on, and searching of, the Personal Property Securities Register (PPSR).

 

Serial Numbered Goods

Not all goods/equipment with a serial number can be registered or searched on the PPSR by that number. There are only 3 types of serial numbered good for PPSA purposes –

  • A motor vehicle
  • A watercraft
  • An aircraft

Each has its own technical and complex definition, with various terms within each definition often also defined – these are found in the Personal Property Securities Regulations 2010.

All other goods which do not fall within those definitions are simply regarded as ‘other goods’, meaning their serial number is irrelevant – registration and searching is on the name of the grantor (customer).

For present purposes, below is a high-level summary of each type of PPSA serial numbered good.

 

Motor Vehicles

A motor vehicle is any equipment which does not run of rails, tram lines or similar and which:

  • either:
    • can be driven at least 10 km/h on land by an internal motor/s with more than 200 W of power; or
    • has wheels and can be attached to, or towed by, a motor vehicle; and
  • has a Vehicle Identification Number (VIN), chassis number or manufacturer’s number

This covers all manner of transport vehicles, e.g. sedans, motor bikes, utes, SUVs, trucks, trailers, caravans etc, as well as types of agricultural and construction equipment, whether capable of being driven or being towed by another vehicle.

Inevitably, it is the combined speed and power criteria which determines what is a motor vehicle or whether it can be towed. For instance, some motorised equipment, such as scissor lifts, may not be regarded as a motor vehicle, but a bulldozer, harvester, road grader, might be a motor vehicle – each ‘vehicle’ needs to be assessed according to both their speed capability and motorised power, or whether they can be towed by another motor vehicle.

 

Watercraft

A watercraft is a boat or vessel which:

  • can be used to navigate on water or for other water-related purposes; and
  • has a hull identification number (HIN) or an official number issued by the Registrar of Ships

This covers both powered and non-powered watercraft, e.g. ships, sailing boats, powered boats (whether powered by inboard or outboard motors), barges (whether powered or towed). Please be aware, outboard motors themselves are not within the watercraft definition and cannot be registered by serial number, even though the boat can be.

 

Aircraft

An aircraft is equipment that:

  • “can derive support in the atmosphere from the reactions of the air, other than the reactions of the air against the earth’s surface”; and
  • has nationality and registration marks assigned to it under the Chicago Convention; or is
  • an aircraft engine; or
  • an airframe; or
  • a helicopter.

Significantly, this covers not only all sorts of flying machines, so long as appropriately registered, but also specific parts, i.e. engine and airframe.

 

Key PPS implications

Correct Categorisation

Whether goods are regarded for PPSA purposes as serial numbered goods is crucial to the management of PPSA risk. It ensures effective PPSR registration by allowing others to search and identify the serial numbered goods to avoid a person buying secured goods free of the security rights. These ‘taking free’ circumstances were discussed in the July 2020 CAFBA bulletin in the context of a broker involved in arranging for a client the private sale of a secured motor vehicle.

 

PPSR Requirements

  • Each of the types of serial numbered goods must be described in their PPSR registration according to their ‘collateral class’, i.e. Motor Vehicle, Watercraft or Aircraft. Any equipment falling outside the definitions of these 3 classes falls within the collateral class of ‘Other Goods’
  • Where any of the 3 types of serial numbered goods are held by an individual, other than for their business purposes with an ABN, PPSR registration is only on the serial number, not the name of the individual grantor – in these circumstances the goods are referred to as ‘consumer property’
  • Where an aircraft engine, airframe, a helicopter or small aircraft is held as ‘commercial property’ (i.e. other than as consumer property), it must be registered by serial number, as well as the name of the grantor (customer)
  • Where the serial numbered goods are a motor vehicle or watercraft and are held as commercial property, it is optional to include the serial number in a PPSR registration, but the name of the grantor must be registered
  • Depending on the type of serial numbered good, there are specific requirements for the type of serial number which must be used

 

Member Relevance & Practical examples

There will be times when secured parties (financiers) ask for brokers and other intermediaries (e.g. dealers) to confirm these requirements and the identity of secured goods/equipment if possible. Also, if private transactions, refinancings or sale and leasebacks of serial numbered goods are involved, brokers will wish to ensure their searching of the PPSR is based on the correct type of serial number for the particular type of good.

Taking these requirements and applying them to some common types of situations will provide a perspective on what serial number requirements are to be met. The following table provides guidance on goods types, their serial numbers, where relevant, and their corresponding collateral classes.

 

Goods – Examples Collateral Class & Serial number
Truck, car, ute. SUV, motor bike Motor Vehicle & VIN
Trailer, caravan Motor Vehicle & VIN
Tractor, ride-on-mower, ATV Motor Vehicle & VIN, but if no VIN, then chassis number, and if neither, manufacturer’s number
Boat, trailer, outboard engine combo
  • Boat = Watercraft & HIN 
  • Trailer = Motor Vehicle & VIN 
  • Outboard engine = Other Goods – this must always be registered and searched under the name of the customer (grantor), regardless of whether consumer or commercial property
Ship Watercraft & Shipping Registration official number
Small aircraft Aircraft & Nationality and Chicago Convention registration marks

 

CreditWise, 24 August 2020