The major reason for going to the trouble of creating a non-ownership register for security interests in relation to most personal property is to address the problem of apparent ownership.¹ Possession or control over property implies ownership to the world at large. However, if persons in possession or control of property (grantors) look like owners, but actually have granted security interests to others (secured parties), creditors dealing with such grantors risk making a loan or extending credit without knowing that the grantor’s assets are already encumbered to others. Creditors in these situations may mis-judge the creditworthiness of the grantor. This is often called the problem of apparent ownership.

The problem of apparent ownership has been long recognised in secured transactions, especially in relation to personal property where the risk of apparent ownership misleading creditors is perhaps the greatest. The company charges system in Chapter 2K of the Corporations Act 2001 (Cth) sought to address the problem of apparent ownership in relation to personal property to some extent. It provided for a limited registration system for mortgages and charges (only) granted by companies over various forms of personal property, including book debts, chattels, intellectual property and certain other property.

The PPSA is an attempt to create a single national register for secured transactions which more comprehensively addresses the apparent ownership problem in respect of personal property, to protect creditors.