KERR’S HIRE
14th May 2014
Bruce Whittaker
Dear Bruce
Congratulations on your appointment to lead the Statuary review on the PPSA Legislation.
My wife and I are owners of a hire company in Geelong and have been operating the business for thirty two years and I have been in the industry for over 40 years. We employee sixteen staff and I would rate ourselves as a very successful small business operation. Since the introduction of the PPS legislation in 2010 I would have to say that it has added an unparalleled amount of stress and anxiety that that I have ever encountered in my business life.
Not only do we have to endure the risks of business downturns from recessions and a global financial crisis, theft, damage by customers to our equipment and premises and gross over regulation we now have the biggest threat of all, losing our equipment to a liquidator.
The majority of the businesses hire is tosmall, medium and large contractors in the construction and building industries. Things like inclement weather, rostered days off, safety stoppages, project variations etc. all add up to our customers unable to give us a definite time frame on the time they wish to hire the equipment.
The terminology of “indefinite period” in rule 13(b) is the biggest concern to the hire industry as it is run on an indefinite hire regime. Strangely there is no explanation in the dictionary of the PPS act describing this term so how do we know when a hire becomes indefinite. It completely overrides the ninety day and 1 year rule if the customer cannot give us a definite hire period.
You might say why not just register it to be safe but when you are doing between fifty and sixty transactions a day I would have to employ a person solely to register and deregister equipment on a daily basis. A customer may want it for three days but if it rains the hire could extend to two weeks and if my staff don’t inform me of it and I don’t register it I am at risk of losing my equipment and livelihood. This terminology should be removed from the act as it is an infringement on business.
Toadd to the confusion is regulation 1.7 “meaning of a motor vehicle” Under the PPS act it states:
1.7 2 (a) is built to be propelled, wholly on land by a motor that forms part of the property, and
(b) either:
(i) is capable of a speed of at least 10km/h; or
(ii) has 1 or more motors that have a total power greater than 200 W
I have attached in this submission a picture of a bicycle that has a 1200 watt motor and capable of speeds of up to 30 kilometers per hour and if you were hiring such a unit it would come under this legislation. I have also included manufacturer’s specification documentation of equipment that vary from one model to another where some come under the act and some don’t. In my opinion very little research was done in determining these figures.
The contradiction here is that under the definition of a motor vehicle in the Tax Assessment Act 1997:
“motor vehicle” means any motor – powered road vehicle (including a 4 wheel drive vehicle)
“car”means a “motor vehicle” (except a motorcycle or similar vehicle)designed
to carry a load of less than 1 tonne and fewer than 9 passengers
In relation to the definition of a “motor vehicle”, the explanatory memorandum confirms that if the main function of the vehicle is not related to public road use or of the vehicle’s ability to travel on a public road is secondary to its main function then it will not be considered a motor vehicle (e.g. tractors, combine harvesters, graders etc.,) this would have to be the case of the equipment that I have included in this submission.
The definition of hire in the dictionary which is “toobtain the temporary use of (something)for an agreed payment” and a lease is a contract by which one party conveys, land, property, services etc. to another for a specified time, usually in return for a periodic payment.
What I can’t understand is why the hire industry is caught up in this legislation. When anybody hires an item of equipment at no stage does the hirer believe that he or she has or will ever have ownership of the equipment? A bailment involves only a transfer of possession or custody, not of ownership. Nobody should have the right to sell or acquire the property of a bailor especially a liquidator as it never was “owned” by the liquidated party.
I have also included in this submission pictures of items of equipment that are clearly identified as belonging to Kerr’s Hire, a copy of a hire agreement signed by the customer, a Vic roads current certificate of registration, a service history of it as well, which indicates that it has been maintained according to workplace regulations on equipment supplied to a customer in Victoria. An asset register with the item clearly identified for depreciation purposes for taxation.
In the event of a company going into liquidation the liquidator notices equipment on the site that has my name on it. Under this legislation all he has to do is look up the PPSR registration and put in the serial number of the equipment and if it is not identified on the register he just notifies me to supply proof of PPS registration and if I can’t he can sell it to collect income to pay the secured creditors and himself first. In my case it could be that I have the item registered but if I have entered the wrong information e.g. an incorrect serial number the registration is invalid and I have no recourse in getting my equipment back.
All of the information above where I have of proof of ownership means nothing.
I also have acopy of the hire purchase agreement with the Westpac bank that is covered by a PMSI. The liquidator would see that the registered item would belong to Westpac and he would have to contact them to prove that they have documentation to that effect. The issue then is what happens to me. If I don’t have it registered on the PPS register is Westpac compelled to return it to me, if so why do I need to register it.
I am led to believe that if the machine was not registered by me making the customer the grantor I would lose the item, the bank would not have any claim over the item so I would then still have to pay the bank any outstanding monies owing on the machine. Furthermore if the liquidated company was a client of Westpac any monies raised on the sale of my equipment would be used to pay of any monies owing to Westpac on a loan so Westpac would get a double dip. If that is so then this legislation is abhorrent!!
Another anomaly is the ninety day and one year rule for leases. How would that figure have been arrived at. I have thirty current hire purchase agreements with Westpac bank and each agreement is for a definite period of 4 years. I have contacted my bank (document provided) and they inform me that that the average agreement is around 4-5 years so why does the hire industry have to be subjected to a hire period of 1 year before I would have to register it if it was a long term hire why not three or four years like the financial institutions.
This act by its poor governance and its effect on the hire industry is devastating. Already millions of dollars has been lost by unsuspecting businesses and this needs to be addressed immediately. Nobody should be at risk in losing their lively hood for the sake of satisfying liquidators and finance groups with funds from confiscated equipment from a liquidation that morally does not belong to them.
I appreciate that your role is to find a solution to this issue and by your appointment by the federal government clearly shows that whoever concocted this act did so with little forethought or appreciation of its effect on business especially the hire industry. The registration of assets on the PPS register is important tool for identification of ownership of property and equipment only, not to be so complicated in its administration and being detrimental to the livelihoods and survival of small business owners.
Please feel free to contact me on 0352786011 or email
at any time for any further information
Yours Faithfully
Gary Kerr
Managing Director
Kerr’s Hire