When the Personal Property Securities Act 2009 (Cth) (PPS Act) came into effect in 2012, it introduced a new concept of ‘serial numbered collateral’. The concept is important for secured parties to understand as there are specific rules concerning registration of a security interest in serial numbered collateral. If the rules are not followed, the registration of a security interest may be deemed to be defective.

What is serial numbered collateral?

Nearly all goods will have a serial number of some sort but not every good that has a serial number is ‘serial numbered collateral’ for the purposes of the PPS Act.

Serial numbered collateral for the purposes of the PPS Act is limited to a class of Goods and Intangible Property by which the Personal Property Securities Regulations 2010 (Cth) (PPS Regulations)  require, or permit, to be described by their serial number when registered on the Personal Property Securities Register (PPSR). The limited classes are:

1. Motor Vehicles;
2. Watercraft;
3. Aircraft; and
4. Certain intangible property (i.e. patent, trade mark, plant breeder’s right and design).

The registration requirements for security interests in serial numbered collateral vary depending on whether the property is consumer or commercial property.

What is Consumer and Commercial Property

Consumer Property is defined in s 10 of the PPS Act to be ‘personal property held by an individual, other than personal property held in the course or furtherance, to any degree, of carrying on an enterprise to which an ABN has been allocated’. You can practically read this down to personal property held by an individual for private and domestic use.

In contrast, Commercial Property is defined in s 10 of the PPS Act to be all personal property that is not Consumer Property. Commercial Property is generally accepted to be property held by the grantor in the course of carrying on a business to which an ABN has been allocated.

Registration Requirements for Serial Numbered Collateral

Registration of a security interest on the PPSR must comply with the data requirements detailed in s 153 of the PPS Act.

One of the requirements is that the collateral must be described in the registration as being either commercial or consumer property. Another requirement is that the collateral be correctly described in the registration by serial number if required under the PPSR Regulations.

The PPSR Regulations provide that the following may be described by serial number:

• commercial property that is:
  • Motor vehicle
  • Watercraft
  • Certain intangible property (i.e. patent, trade mark, plant breeder’s right and design).

If the collateral is serial numbered collateral and it is commercial property (save for aircraft), then the financing statement may set out the serial number but must include the grantor details in accordance with Schedule 1 of the PPS Regulations.

The PPSR Regulations provide that the following must be described by serial number:

• consumer property that is:
  • Motor vehicle
  • Watercraft
  • Certain intangible property (i.e. patent, trade mark, plant breeder’s right and design)
  • Aircraft

• commercial property that is aircraft.

If the collateral is serial numbered collateral and it is either consumer property or commercial property that is aircraft, then the collateral in the financial statement must be described by the serial number. You may include the grantor’s details in the registration.

Pursuant to s 165(a) of the PPS Act, a security interest registration will be considered defective if the collateral must be described by serial number and a search of the serial number is unable to identify the registration (i.e. there is an error in the serial number or no serial number was included in the registration).

ERA Legal Serial Numbered Collateral Series

The above is a general overview of serial numbered collateral and registration on the PPSR. Over the coming months, ERA Legal will be releasing a series of articles specifically focusing on the registration requirements for common serial numbered collateral in both a consumer and commercial context.

In Part 2 of our PPSR series we discuss registering security interest on the PPSR against motor vehicles.