Essential personal property securities law in Australia [3rd edition.] 9780409340969, 0409340960

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Quick Reference Directory

Part A Background and Overview of Personal Property Securities Law in Australia

This directory should be used to quickly locate Parts in this volume. To use the directory, place the right thumb on the outer edge of this page against the required Part. Then fold back the remaining pages to align the directory with the corresponding page tab. For content not included in the directory, consult the full subject index.

Part B Guide to Registration on the Personal Property Securities Register

Part C Personal Property Securities Act 2009 Personal Property Securities Regulations 2010

Part D Explanatory Memoranda

Part E Determinations and Instruments

Practice Statements

LEXISNEXIS ANNOTATED ACTS

ESSENTIAL PERSONAL PROPERTY SECURITIES LAW IN AUSTRALIA 3RD EDITION

CRAIG WAPPETT BA, LLB (Hons), LLM (Qld) Partner, Johnson Winter & Slattery

LexisNexis Butterworths Australia 2015

LexisNexis AUSTRALIA LexisNexis Butterworths 475–495 Victoria Avenue, Chatswood NSW 2067 On the internet at: www.lexisnexis.com.au ARGENTINA LexisNexis, BUENOS AIRES AUSTRIA LexisNexis Verlag ARD Orac GmbH & Co KG, VIENNA BRAZIL LexisNexis Latin America, SAO PAULO CANADA LexisNexis Canada, Markham, ONTARIO CHILE LexisNexis Chile, SANTIAGO CHINA LexisNexis China, BEIJING, SHANGHAI CZECH REPUBLIC Nakladatelství Orac sro, PRAGUE FRANCE LexisNexis SA, PARIS GERMANY LexisNexis Germany, FRANKFURT HONG KONG LexisNexis Hong Kong, HONG KONG HUNGARY HVG-Orac, BUDAPEST INDIA LexisNexis, NEW DELHI ITALY Dott AGiuffrè Editore SpA, MILAN JAPAN LexisNexis Japan KK, TOKYO KOREA LexisNexis, SEOUL MALAYSIA LexisNexis Malaysia Sdn Bhd, PETALING JAYA, SELANGOR NEW ZEALAND LexisNexis, WELLINGTON POLAND Wydawnictwo Prawnicze LexisNexis, WARSAW SINGAPORE LexisNexis, SINGAPORE SOUTH AFRICA LexisNexis Butterworths, DURBAN SWITZERLAND Staempfli Verlag AG, BERNE TAIWAN LexisNexis, TAIWAN UNITED KINGDOM LexisNexis UK, LONDON, EDINBURGH USA LexisNexis Group, New York, NEW YORK LexisNexis, Miamisburg, OHIO

Edition: ISBNs:

3rd. 9780409340952 (pbk).

9780409340969 (ebk). ©2015 Reed International Books Australia Pty Limited trading as LexisNexis First edition 2012; second edition 2013 This book is copyright. Except as permitted under the Copyright Act 1968 (Cth), no part of this publication may be reproduced by any process, electronic or otherwise, without the specific written permission of the copyright owner. Neither may information be stored electronically in any form whatsoever without such permission. Inquiries should be addressed to the publishers. Typeset in Times New Roman. Printed in Australia. Visit LexisNexis Butterworths at www.lexisnexis.com.au

Publisher’s note LEGISLATION The publisher, authors, contributors and endorsers of this publication each excludes liability for loss suffered by any person resulting in any way from the use of, or reliance of this publication. © LexisNexis. The legislation reproduced in this work does not purport to be an official or authorised version.

CONTRIBUTORS The publishers are grateful for the contribution of Freehills, in particular Helen Cluff and Vicki McNamara, for their input into the development of the table of contents and accuracy of the first edition of this text.

CROSS REFERENCES The text contains extracts from the LexisNexis Personal Property Securities in Australia looseleaf service. This book therefore contains cross-references to other areas of the looseleaf service that have not been extracted. Where this occurs, reference should be made to Personal Property Securities in Australia.

Table of Cases 1151162 Ontario Ltd, Re [1997] OJ No 6521; (1997) 13 PPSAC (2d) 16; 1997 CarswellOnt 5882 …. [PPSA.14.A] 123 1640 Ontario Inc, Re 2007 ONCA 810 …. [PPSA.55.A] 123 Sweden AB v Appleyard Capital Pty Ltd [2014] NSWSC 782; BC201404636 …. [PPSA.293.A] 369413 Alberta Ltd v Pocklington [2000] AJ No 1350; [2000] ABCA 307; 194 DLR (4th) 109; [2001] 4 WWR 423 …. [PPSA.46.A] 674921 BC Ltd v Advanced Wing Technologies Corp 2006 BCCA 49 …. [PPSA.20.A] 994814 Ontario Inc v RSL Canada Inc and En Plas Inc [2005] OJ No 3220; [2005] 14 CBR (5th) 134; [2005] 141 ACWS (3d) 488; [2005] CarswellOnt 3450 …. [PPSA.19.A] — v RSL Canada Inc and En-Plas Inc [2006] OJ No 1907; [2006] 209 OAC 326; 20 CBR (5th) 163; 9 PPSAC (3d) 240 …. [PPSA.19.A], [PPSA.62.A] Abbey National Building Society v Cann [1991] 1 AC 56; [1990] 1 All ER 1085 …. [Pt A.19] Access Cash International Inc v Elliot Lake and North Shore Corp for Business Development [2000] OJ No 3012; [2000] OTC 617; [2000] 1 PPSAC (3d) 209; [2000] 99 ACWS (3d) 19 …. [PPSA.12.A] Agnew v Cmr of Inland Revenue [2001] 2 AC 710 …. [Pt A.18] Agricultural Credit Corporation of Saskatchewan v Royal Bank of Canada [1994] 7 WWR 305 …. [Pt A.64] Agripower Australia Ltd v J & D Rigging Pty Ltd [2013] QSC 164; BC201310475 …. [PPSA.10.A] Agripower Barraba Pty Ltd v Bloomfield [2013] NSWSC 1598; BC201314682 …. [PPSA.10.A] Air Products Canada Ltd v Farini Corp [2000] OJ No 1396; [2000] OTC 264; [2000] 16 CBR (4th) 18; 96 ACWS (3d) 496 …. [PPSA.62.A] Alberta Pacific Leasing Inc v Petro Equipment Sales Ltd [1995] AJ No 877; [1996] 1 WWR 552; [1996] 34 Alta LR (3d) 66; [1996] 10 PPSAC (2d) 69

…. [PPSA.46.A] Apex Gold Pty Ltd, Re [2013] NSWSC 881; BC201310637 …. [PPSA.293.A] Arcabi Pty Ltd (Receivers & Managers Appointed) (in liq), Re [2014] WASC 310; BC201407252 …. [PPSA.10.A], [PPSA.12.A], [PPSA.13.A], [PPSA.55.A] Arnold (Trustee of) v St Thomas Motor Products Inc (1994) 8 PPSAC (2d) 144 …. [PPSA.12.A] Asset Traders Ltd v Favas Sportscar World Ltd (2006) 3 NZCCLR 545; 9 NZCLC 264,138 …. [PPSA.12.A] Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (2000) 202 CLR 588; 171 ALR 568 …. [Pt A.3] Associates Leasing (Canada) Ltd v Humboldt Flour Mills Inc [1998] SJ No 841; 175 SaskR 220; 14 PPSAC (2d) 174; 85 ACWS (3d) 691 …. [PPSA.62.A] Attorney-General (Cth) v RT Co Pty Ltd (No 2) (1957) 97 CLR 146; 31 ALJR 504 …. [PPSA.10.A] Australian Central Credit Union v Commonwealth Bank of Australia (1991) 4 ACSR 145; 9 ACLC 396; (1991) ASC 56-037 …. [Pt A.12] Australian Provincial Assurance Co Ltd v Coroneo (1938) 38 SR (NSW) 700; 55 WN (NSW) 246 …. [PPSA.10.A] Australian Receivables Ltd v Tekitu Pty Ltd (2012) 260 FLR 243 …. [PPSA.8.A] Bank of Montreal v Enchant Resources Ltd (1999) 74 Alta LR (3d) 219; 2 BLR (3d) 58; 182 DLR (4th) 640; [2000] 2 WWR 693 …. [PPSA.8.A] — v Innovation Credit Union [2010] 3 SCR 3 …. [Pt A.29] — v — [2010] SCJ No 47; [2010] ACS no 47; 2010 SCC 47; 2010 CSC 47; [2010] 3 RCS 3 …. [PPSA.12.A] Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567; [1968] 3 All ER 651; [1968] 3 WLR 1097 …. [PPSA.8.A] Barclays Bank plc, Re [2012] NSWSC 1095; BC201208047 …. [PPSA.293.A] Bayview Credit Union Ltd v Doucette [2012] NBJ No 246; 2012 NBQB 200; 392 NBR (2d) 205; 19 PPSAC (3d) 224 …. [PPSA.111.A] Black Opal IP Pty Ltd (subject to Deed of Company Arrangement), Re [2013] NSWSC 1225; BC201313559 …. [PPSA.293.A] Bristol Yacht Sales Inc, Re; Henfrey Samson Belair Ltd v Inland Ind Ltd [1984] BCJ No 2703; 52 BCLR 246; 51 CBR (N.S.) 279; 25 ACWS (2d) 112 …. [PPSA.12.A]

Caisse populaire Desjardins de l’Est de Drummond v Canada (2009) SCC 29; 309 DLR (4th) 323; [2009] 4 CTC 330 …. [PPSA.8.A], [PPSA.12.A], [Pt A.32] Camco Inc v Frances Olsen Realty (1979) Ltd [1986] SJ No 519; [1986] 6 WWR 258; [1986] 50 SaskR 161; [1986] 6 PPSAC 167 …. [PPSA.46.A] Canadian Imperial Bank of Commerce v Williams (2007) 425 AR 271; 287 DLR (4th) 121; 2007 ABCA 340 …. [PPSA.10.A] Canadian Western Bank v Baker (cob Hallwood Holsteins) [1999] SJ No 861; 1999 SKQB 252; [2000] 4 WWR 105; 15 PPSAC (2d) 247 …. [PPSA.12.A] Cancer Care Institute of Australia Pty Ltd (admin apptd), Re (2013) 16 BPR 31,529 …. [PPSA.10.A] Cardinia Nominees Pty Ltd, Re [2013] NSWSC 32; BC201300324 …. [PPSA.293.A] Carey v Smith [2013] NZHC 2291 …. [PPSA.12.A], [PPSA.46.A] — v — [2012] NZHC 455 …. [PPSA.55.A] Carrafa, Goutzos & Lofthouse (as Liquidators of Relux Commercial Pty Ltd) (in liq) v Doka Formwork Pty Ltd [2014] VSC 570; BC201409592 …. [PPSA.13.A], [PPSA.267.A] Carson, Re; Hastie Group Ltd (No 3) [2012] FCA 719; BC201205065 …. [PPSA.267.A] Central Cleaning Supplies (Aust) Pty Ltd v Elkerton (2014) 98 ACSR 52 …. [PPSA.307.A] CFI Trust (Trustee of) v Royal Bank of Canada [2013] BCJ No 2049; 2013 BCSC 1715 …. [PPSA.61.A], [PPSA.70.A] Champion Feed Services Ltd v Hospers 2014 ABQB 490 …. [PPSA.86.A] Chiips Inc v Skyview Hotels Ltd [1994] AJ No 562; 116 DLR (4th) 385; [1994] 9 WWR 727; 7 PPSAC (2d) 23 …. [PPSA.61.A] Church of England Building Society v Piskor [1954] Ch 553 …. [Pt A.19] CIBC v 64576 Man Ltd [1990] MJ No 248; [1990] 5 WWR 419; 67 ManR (2d) 172; 1 PPSAC (2d) 1 …. [PPSA.12.A] — v Otto Timm Enterprises Ltd [1995] OJ No 3827; 26 OR (3d) 724; 130 DLR (4th) 91; 10 PPSAC (2d) 228 …. [PPSA.19.A] Cirillo v Registrar of Personal Property Securities [2013] AATA 733; BC201313909 …. [PPSA.181.A], [PPSA.191.A] Citadel Financial Corp Pty Ltd v Elite Highrise Services Pty Ltd (No 3) [2014]

NSWSC 1926; BC201411793 …. [PPSA.20.A] Clark Equipment of Canada Ltd v Bank Montreal [1984] MJ No 112; 8 DLR (4th) 424; [1984] 4 WWR 519; 4 PPSAC 38 …. [PPSA.20.A] CMIC Mortgage Investment Corp v Rodriguez 2010 BCSC 308 …. [PPSA.10.A] CNH Capital Canada Ltd v Diamond 4 Holdings Ltd 2012 BCSC 942 …. [PPSA.128.A] Commissioner of Inland Revenue v Stiassny [2013] 1 NZLR 140 …. [Pt A.50], [PPSA.69.A], [PPSA.273.A] Commissioner of Stamps (WA) v Whiteman Ltd (1940) 64 CLR 407; 14 ALJR 260 …. [PPSA.10.A] Commissioner of State Revenue v Uniqema Pty Ltd (2004) 9 VR 523; 56 ATR 19 …. [PPSA.10.A] Commissioner of State Revenue (Vic) v Snowy Hydro Ltd [2012] VSCA 145; BC201204715 …. [PPSA.10.A] Compass Capital Ltd v The New Zealand Guardian Trust Company Ltd [2009] NZH 344 …. [PPSA.111.A] Composite Buyers Ltd v State Bank of New South Wales (1990) 3 ACSR 196; 6 BPR 14,040 …. [Pt A.19] Con-Stan Industries v Norwich Winterthur Insurance (Aust) Ltd (1986) 160 CLR 226; 64 ALR 481; 60 ALJR 294; 4 ANZ Ins Cas 60-700 …. [PPSA.8.A] Connolly Brothers Ltd, Re (No 2) [1912] 2 Ch 25 …. [Pt A.19] Contech Enterprises Ltd v Vegherb LLC [2015] BCCA 99 …. [PPSA.12.A] Convoy Supply Canada Ltd v Northern Credit Union Ltd [2001] OJ No 1483; 2 PPSAC (3d) 231; 104 ACWS (3d) 955 …. [PPSA.12.A] Cooper v Bar XH Sales Inc 2011 ABQB 235 …. [PPSA.31.A] CPC Networks Corp v Eagle Eye Investments Inc [2012] SJ No 756; 2012 SKCA 118; [2013] 2 WWR 260; 405 SaskR 86 …. [PPSA.111.A] Cronin Fire Equipment, Re [1993] OJ No 1749; 14 OR (3d) 269; 21 CBR (3d) 127; 5 PPSAC (2d) 219 …. [PPSA.12.A] Crop & Soil Service Inc v Oxford Leaseway Ltd [2000] OJ No 1372; 48 OR (3d) 291; 186 DLR (4th) 85; 15 PPSAC (2d) 202 …. [PPSA.12.A] Crossmark Asia v Retail Adventures Pty Ltd [2013] NSWSC 55; BC201300382 …. [PPSA.20.A], [PPSA.267.A]

D & A Macleod Co v Manhattan Electric Cable Corp; Glengarry A.E.T. Inc (Trustee of) v Manhattan Electric Cable Corp [1986] OJ No 533; 6 PPSAC 112; 37 ACWS (2d) 445 …. [PPSA.12.A] Daimler Chrysler Services Canada Inc v Cameron 2007 BCCA 144 …. [PPSA.12.A] David Morris Fine Cars Ltd v North Sky Trading Inc (1994) 158 AR 117 …. [PPSA.267.A] — v — [1996] AJ No 392; [1996] 7 WWR 332; 39 CBR (3d) 284; 11 PPSAC (2d) 142 …. [PPSA.13.A] Donaghy v CNS Vehicle Leasing [1992] 6 WWR 70 …. [PPSA.267.A] Dunphy v Sleepyhead Manufacturing Co Ltd [2007] 3 NZLR 602; (2007) 10 NZCLC 264, 313 …. [PPSA.19.A], [PPSA.20.A] Dura (Aust) Constructions Pty Ltd (in liq) (recs and mgrs apptd) v Hue Boutique Living Pty Ltd [2014] VSCA 326; BC201411364 …. [PPSA.8.A], [PPSA.12.A], [Pt A.29], [PPSA.267.A] East Central Development Corp v Freightliner Truck Sales (Regina) Ltd [1997] SJ No 25; [1997] 5 WWR 231; 153 SaskR 161; 12 PPSAC (2d) 328 …. [PPSA.13.A] Ellingsen (Trustee of) v Hallmark Ford Sales Ltd [2000] BCJ No 1682; 2000 BCCA 458; 190 DLR (4th) 47; 1 PPSAC (3d) 307 …. [PPSA.8.A] Engel Canada Inc v TCE Capital Corp [2002] OJ No 2361; [2002] OTC 407; 34 CBR (4th) 169; 4 PPSAC (3d) 124 …. [PPSA.61.A] Enviro Pallets (NSW) Pty Ltd, Re [2013] QSC 220 …. [PPSA.293.A] Equitable Trust Company v 604 1st Street SW Inc 2014 ABCA 427 …. [PPSA.133.A] Ericsson (LM) Pty Ltd v Douglas-Brown (1991) 4 WAR 218 …. [Pt A.13] Estevan Credit Union Ltd v Dyer [1997] SJ No 185; 146 DLR. (4th) 490; [1997] 8 WWR 49; 155 Sask R 186 …. [PPSA.46.A] Euroclean Canada Inc v Forest Glade Investments Ltd [1985] OJ No 2307; 49 OR (2d) 769; 16 DLR (4th) 289; 8 OAC 1; 54 CBR (NS) 65; 4 PPSAC 271 …. [PPSA.19.A], [PPSA.61.A] Fairbanx Corp v Royal Bank of Canada [2010] OJ No 2226; 2010 ONCA 385; 319 DLR (4th) 618; 262 OAC 251; 68 CBR (5th) 102; 16 PPSAC (3d) 96 …. [PPSA.164.A], [PPSA.171.A] Fairline Boats Ltd v Leger [1980] OJ No 216; 1 PPSAC 218 …. [PPSA.46.A] Farwest Systems Corp (Receiver Of) v Omron Business Systems Inc [1988]

BCJ No 1051; 69 CBR (NS) 82 …. [PPSA.12.A] Federal Business Development Bank v Bramalea Ltd [1983] OJ No 297; 144 DLR (3d) 410; 45 CBR (NS) 299; 2 PPSAC 317 …. [PPSA.12.A] Flexi-Coil Ltd v Kindersley District Credit Union Ltd [1993] SJ No 546; 107 DLR (4th) 129; [1994] 1 WWR 1; 113 SaskR 298; 5 PPSAC (2d) 192 …. [PPSA.70.A] Florence Land and Public Works Company: Ex parte Moor, Re (1878) 10 Ch D 530 …. [Pt A.21] Future Revelation Ltd v Medica Radiology & Nuclear Medicine Pty Ltd (2013) 283 FLR 122 …. [Pt A.63], [PPSA.164.A] GE Canada Equipment Financing GP v ING Insurance Company of Canada (2009) ONCA 191; 51 CBR (5th) 47; 94 OR (3d) 312; 308 DLR (4th) 127 …. [PPSA.8.A] GE Capital Canada Acquisitions Inc v Dix Performance [1994] BCJ No 2590; [1995] 2 WWR 738; 99 BCLR (2d) 21; 8 PPSAC (2d) 197 …. [PPSA.20.A] GE Capital Canada Acquisitions Ltd v Dix (1994) 8 PPSAC (2d) 197 (BCSC) …. [Pt A.64] Gibbston Downs Wines Ltd v Perpetual Trust Ltd [2013] BCL 361 …. [PPSA.55.A], [PPSA.61.A], [PPSA.153.A] Giffen, Re [1998] 1 SCR 91; (1998) 155 DLR (4th) 332 …. [Pt A.43], [Pt A.63], [PPSA.267.A] GMAC Commercial Credit Corp Canada v TCT Logistics Inc (2004) 238 DLR (4th) 487 …. [PPSA.12.A] Graham v Portacon New Zealand Ltd (2004) 10 TCLR 983; [2004] 2 NZLR 528; (2004) 9 NZCLC 263,517 …. [PPSA.12.A], [PPSA.19.A], [Pt A.24], [Pt A.43], [PPSA.55.A], [Pt A.63] Gray v Royal Bank of Canada (1997) 143 DLR (4th) 179 …. [PPSA.19.A] — v — [1997] BCJ No 151; 143 DLR (4th) 179; 12 PPSAC (2d) 126; 68 ACWS (3d) 534 …. [PPSA.19.A] Greenview (Municipal District No 16) v Bank of Nova Scotia [2013] AJ No 931; 2013 ABCA 302; 556 AR 344; 5 CBR (6th) 69 …. [PPSA.80.A] Guaranty Trust Co of Canada v Canadian Imperial Bank of Commerce [1989] OJ No 1081; 2 PPSAC (2d) 88; 16 ACWS (3d) 349; 1989 CarswellOnt 626 …. [PPSA.62.A] Haibeck v No 40 Taurus Ventures Ltd [1991] BCJ No 2759; 59 BCLR (2d) 229; 2 PPSAC (2d) 171; 29 ACWS (3d) 405 …. [PPSA.19.A]

Healy Holmberg Trading Partnership v Grant [2012] 3 NZLR 614 …. [PPSA.20.A], [PPSA.55.A] Hewett v Court (1983) 46 ALR 87; 57 ALJR 211 …. [Pt A.57] HOJ Franchise Systems Inc v Municipal Savings and Loan Corp [1994] OJ No. 24; 110 DLR (4th) 645; 11 BLR (2d) 282; 6 PPSAC (2d) 302 …. [PPSA.12.A] Holland v Hodgson [1861] All ER Rep 237; (1872) LR7CP 328 …. [PPSA.10.A] i Trade Finance Inc v Bank of Montreal [2011] SCJ No 26; [2011] ACS no 26; 2011 SCC 26; 17 PPSAC (3d) 250 …. [PPSA.8.A], [PPSA.12.A], [PPSA.19.A], [PPSA.254.A] Industrial Progress Corporation Pty Ltd v Wilson [2013] WASC 225; BC201303059 …. [PPSA.307.A] International Harvester Credit Corp of Canada Ltd v Touche Ross (1986) 61 CBR (NS) 193 …. [Pt A.43], [Pt A.63] International Harvester Credit Corporation of Canada Ltd v Trustee of Bell’s Dairy Ltd (1986) 50 Sask R 177; 30 DLR (4th) 387; [1986] 6 WWR 161; (1986) 34 BLR 76 …. [PPSA.267.A] Jackson v Esanda Finance Corp Ltd (1992) 59 SASR 416; 11 ACLC 138 …. [PPSA.8.A] John Deere Credit Inc v Standard Oilfield Services Inc [2000] AJ No 84; 79 Alta LR (3d) 166; 258 AR 266; 16 CBR (4th) 227 …. [PPSA.55.A] John Pettit Pty Ltd (subject to a Deed of Company Arrangement), Re [2014] NSWSC 728; BC201404302 …. [PPSA.267.A] JS Brooksbank & Co (A’asia) Ltd v EXFTX Ltd (in rec and in liq) formerly known as Feltex Carpets Ltd (2009) 10 NZCLC 264, 520; [2009] NZCA 122 …. [PPSA.12.A], [PPSA.19.A] Kasten Energy Inc v Shamrock Oil & Gas Ltd 2013 ABQB 63 …. [PPSA.10.A] KBA Canada, Inc v 3S Printers Inc [2014] BCJ No 544; 2014 BCCA 117 …. [PPSA.55.A], [PPSA.254.A], [Pt A.64] Kinetics Technology International Corporation v Fourth National Bank of Tulsa (1983) 705 F 2d 396 …. [PPSA.46.A] Kubota Canada Ltd v Case Credit Ltd; Re DCD Industries (1995) Ltd [2005] AJ No 329; 2005 ABCA 139; 253 DLR (4th) 171; PPSAC (3d) 251 …. [PPSA.61.A] Lanson v Saskatchewan Valley Credit Union Ltd [1998] SJ No 717; 172 SaskR

106; 14 PPSAC (2d) 71; 84 ACWS (3d) 169 …. [PPSA.32.A] Lees & Leech Pty Ltd v Cmr of Taxation (1997) 97 ATC 4407; 36 ATR 127; 73 FCR 136 …. [PPSA.10.A] Leu v Amodio [2007] OJ No 931; 2007 ONCA 186; 28 BLR (4th) 14; 11 PPSAC (3d) 46 …. [PPSA.12.A] Li v F Vitale & Sons Pty Ltd [2014] VSC 326; BC201405332 …. [PPSA.254.A] Linter Group Ltd (in liq) v Goldberg (1992) 7 ACSR 580; 10 ACLC 739 …. [Pt A.17] Lisec America, Inc v Barber Suffolk Ltd [2012] OJ No 195; 2012 ONCA 37; 288 OAC 360; 86 CBR (5th) 316; 18 PPSAC (3d) 252 …. [PPSA.34.A] Loiero (aka Lero) v Adel Sportswear Pty Ltd (2010) 15 BPR 29,689 …. [PPSA.10.A] McCain Produce Inc v PEI Lending Agency 2010 PECA 4 …. [PPSA.31.A] McCloy v Manukau Institute of Technology [2013] 3 NZLR 390 …. [PPSA.10.A], [PPSA.12.A], [PPSA.24.A], [PPSA.32.A], [PPSA.46.A], [PPSA.123.A] Macintosh v Turner Corporation Ltd (in liq) (1995) 17 ACSR 761; 13 ACLC 1314 …. [Pt A.18] McLeod & Co v Price Waterhouse Ltd [1992] SJ No 104; 101 SaskR 115; 3 PPSAC (2d) 171; 31 ACWS (3d) 1086 …. [PPSA.62.A] MacPhee Chevrolet Buick GMC Cadillac Ltd v S.W.S. Fuels Ltd 2011 NSCA 35 …. [PPSA.62.A] Macquarie Leasing Pty Ltd v DEQMO Pty Ltd [2014] NSWSC 1466; BC201408958 …. [PPSA.182.A] — v Registrar of Personal Property Securities Register [2014] NSWSC 1677; BC201410003 …. [PPSA.182.A] Macquire Leasing v — [2015] NSWSC 94; BC201500888 …. [PPSA.182.A] Maiden Civil (P & E) Pty Ltd, Re; Albarran v Queensland Excavation Services Pty Ltd (2013) 277 FLR 337 …. [PPSA.12.A], [PPSA.19.A], [PPSA.20.A], [Pt A.40], [Pt A.43], [Pt A.63], [PPSA.55.A], [PPSA.110.A], [PPSA.112.A], [PPSA.116.A], [PPSA.238.A], [PPSA.267.A], [PPSA.311.A], [PPSA.322.A] Manormay Investments Pty Ltd, Re [2013] VSC 260; BC201302816 …. [PPSA.184.A] Marac Finance Ltd v Greer [2012] NZCA 45 …. [PPSA.8.A]

Metal Manufactures Ltd v Federal Commissioner of Taxation (1999) 43 ATR 375; 99 ATC 5229 …. [PPSA.10.A] Muirlands (No 4) Pty Ltd v Cmr for Stamp Duties (Tas) (1989) 89 ATC 5241; 20 ATR 1550; [1989] Tas R 235 …. [Pt A.17] National Bank of Canada v Makin Metals Ltd [1994] 4 WWR 707 …. [PPSA.254.A] National Dairies WA Ltd v Commissioner of State Revenue (2001) 24 WAR 70; 47 ATR 31 …. [PPSA.10.A] National Trustees Executors & Agency Co of Australasia Ltd v FCT (1954) 91 CLR 540; [1954] ALR 1119; (1954) 6 AITR 179 …. [PPSA.10.A] National Westminster Bank plc v Spectrum Plus Ltd [2005] All ER (D) 368 …. [Pt A.18] NCO Finance Australia Pty Ltd v Australian Pacific Airports (Melbourne) Pty Ltd [2013] FCCA 2274; BC201316226 …. [PPSA.323A] New Bullas Trading Ltd, Re (1994) 12 ACLC 3203; [1994] 1 BCLC 485; [1994] BCC 36 …. [Pt A.18] New World Screen Printing (cob) New World Print v Xerox Canada Ltd [2003] BCJ No 2559; 2003 BCSC 1685; 126 ACWS (3d) 877 …. [PPSA.20.A] Nichibo Trading Company New Zealand Ltd v Lucich [2011] NZHC 722 …. [PPSA.46.A] Noriega, Re [2003] AJ No 367; 2003 ABQB 265; [2003] 7 WWR 566; 5 PPSAC (3d) 223 …. [PPSA.164.A] North Western Shipping & Towage Co Pty Ltd v Commonwealth Bank of Australia (1993) 118 ALR 453 …. [Pt A.19] Octaviar Ltd, Re (No 7) (2009) 74 ACSR 156 …. [Pt A.15] Octaviar Ltd, Re; Re Octaviar Administration Pty Ltd (2009) 69 ACSR 621 …. [Pt A.15] Ontario (Minister of Training, Colleges and Universities) v Two Feathers Forest Products LP [2013] OJ No 4431; 2013 ONCA 598; 117 OR (3d) 227; 311 OAC 147 …. [PPSA.8.A] Ontario Wilderness Outposts Inc v Nishnawbe Aski Development Fund [2006] OJ No 892; [2006] OTC 235; 9 PPSAC (3d) 222; 41 RPR (4th) 286 …. [PPSA.10.A] Orix New Zealand Ltd v Milne [2007] 3 NZLR 637 …. [PPSA.46.A], [Pt A.63] Paccar Financial Services Ltd v Sinco Trucking Ltd (Trustee of) (Sask C.A.) [1989] SJ No 86; 57 DLR (4th) 438; [1989] 3 WWR 481; 9 PPSAC 7 ….

[PPSA.13.A] Paccar of Canada Ltd v Peterbuilt of Ontario Inc (2005) 18 CBR (5th) 125 …. [PPSA.12.A] Pegasus Gold Australia Ltd v Metso Minerals (Aust) Ltd (2003) 16 NTLR 54 …. [PPSA.10.A] Perimeter Transportation Ltd, Re (2010) BCCA 509 …. [PPSA.267.A] Polymers International Ltd v Toon [2013] NZHC 1897 …. [PPSA.164.A], [PPSA.171.A] Pozzebon v Australian Gaming and Entertainment Ltd (in liq) [2014] FCA 1034; BC201407897 …. [PPSA.21.A], [PPSA.267.A], [PPSA.293.A] Public Trustee of Queensland v Fortress Credit Corp (Aust) 11 Pty Ltd (2010) 241 CLR 286; 269 ALR 253 …. [Pt A.15] Quality Blended Liquor Pty Ltd, Re [2014] QSC 234; BC201408388 …. [PPSA.293.A] Rabobank New Zealand Ltd v McAnulty [2011] NZCA 212 …. [PPSA.13.A], [Pt A.43] — v Stockco Ltd [2010] NZCCLR 25 …. [PPSA.164.A] Reid v Smith (1905) 3 CLR 656; 12 ALR 126 …. [PPSA.10.A] Renovation Boys Pty Ltd (admins apptd), Re [2014] NSWSC 340; BC201402330 …. [PPSA.46.A], [PPSA.47.A], [PPSA.55.A] Renovation Boys Pty Ltd (admins apptd), Re (No 2) [2014] NSWSC 354 …. [PPSA.55.A] Rick Cobby Haulage Pty Ltd (in liq), Re (1992) 7 ACSR 456; 10 ACLC 1251 …. [PPSA.8.A] Rogerson Lumber Co v Four Seasons Chalet Ltd (1980) 113 DLR (3d) 671 …. [PPSA.20.A] Royal Bank of Canada v 216200 Alberta Ltd [1986] SJ No 734; 33 DLR (4th) 80; [1987] 1 WWR 545; 6 PPSAC 277 …. [PPSA.46.A] — v Radius Credit Union Ltd [2010] 3 SCR 38 …. [Pt A.29] — v — [2010] SCJ No 48; [2010] ACS no 48; 2010 SCC 48; 17 PPSAC (3d) 29 …. [PPSA.12.A] — v Ramco Sales Inc 2010 ABQB 1 …. [PPSA.62.A] — v Sparrow Electric Corp [1997] SCJ No 25; [1997] ACS no 25; [1997] 1 SCR 411; 12 PPSAC (2d) 68 …. [PPSA.12.A] Sandhurst Golf Estates Pty Ltd v Coppersmith Pty Ltd [2014] VSC 217;

BC201403647 …. [PPSA.12.A], [PPSA.182.A] Saulnier v Royal Bank of Canada [2008] 3 SCR 166; [2008] SCC 58 …. [PPSA.10.A] Security Trust Co v — [1976] AC 503; [1976] 1 All ER 381; [1976] 2 WLR 437 …. [Pt A.19] Segard Masurel (NZ) Ltd v Nicol [2008] NZCCLR 25; [2008] NZH 109; BC200860085 …. [PPSA.12.A] Seka Pty Ltd v Fabric Dyeworks (1991) 9 ACLC 586 …. [PPSA.8.A] SFS Projects Australia Pty Ltd v Registrar of Personal Property Securities [2014] FCA 846; BC201406315 …. [PPSA.186A], [PPSA.206A] — v Registrar of Personal Property Securities (No 2) [2014] FCA 987; BC201407525 …. [PPSA.186A] Siebe Gorman & Co Ltd v Barclays Bank Ltd [1979] 2 Lloyd’s Rep 142 …. [Pt A.18] Simpson v New Zealand Associated Refrigerated Food Distributors Ltd (2006) 3 NZCCLR 706; [2007] 2 NZLR 130; (2007) 10 NZCLC 264,263 …. [Pt A.63], [PPSA.164.A] Sims Battle Brewster & Associates Inc, Re [1999] AJ No 1285; 1999 ABQB 830; 76 Alta LR (3d) 189; 15 PPSAC (2d) 82 …. [PPSA.12.A] Skybridge Holidays Inc, Re [1998] BCJ No 1296; 54 BCLR (3d) 222; 11 CBR (4th) 126; 13 PPSAC (2d) 387 …. [PPSA.12.A] Sogelease Australia Ltd v Boston Australia Ltd (1991) 26 NSWLR 1 …. [Pt A.19] Sperry Corp v CIBC [1985] OJ No 2481; 50 OR (2d) 267; 17 DLR (4th) 236; 4 PPSAC 314 …. [PPSA.55.A], [PPSA.61.A] Spittlehouse v Northshore Marine Inc (Receiver Of) [1994] OJ No 809; 18 OR (3d) 60; 114 DLR (4th) 500; 7 PPSAC (2d) 67 …. [PPSA.46.A] St George Bank Ltd v Perpetual Nominees Ltd [2011] 1 Qd R 389 …. [Pt A.13] Stelco Inc, Re 2005 253 DLR (4th) 524 …. [PPSA.8.A] Stephanian’s Persian Carpets Ltd, Re [1980] OJ No 156; 34 CBR (NS) 35; 1 PPSAC 119 …. [PPSA.12.A] Stevenson v GMAC Leaseco Ltd (2003) NBCA 26; 227 DLR (4th) 154; 4 PPSAC (3d) 211 …. [PPSA.164.A] Stewart v Atco Controls Pty Ltd (in liq) (2014) 307 ALR 562; 88 ALJR 594 …. [PPSA.55.A]

Stiassny v Commissioner of Inland Revenue [2013] 1 NZLR 453; [2012] NZSC 106 …. [PPSA.69.A] — v North Shore City Council [2009] 1 NZLR 342 …. [PPSA.12.A] StockCo Ltd v Gibson and Stiassny [2012] NZCA 330 …. [PPSA.20.A], [PPSA.34.A], [PPSA.46.A], [Pt A.63] Strategic Finance Ltd (in receivership and in liquidation) v Bridgman [2013] 3 NZLR 650; [2013] NZCA 357 …. [PPSA.10.A], [PPSA.55.A] Swindle v Matakana Estate Ltd (in liquidation) [2011] NZHC 1345 …. [PPSA.46.A], [PPSA.99.A], [PPSA.101.A] Taylor v Bank of New Zealand [2011] 2 NZLR 628 …. [PPSA.111.A] TD Auto Finance (Canada) Inc v Yan, 2015 ABCA 114 …. [PPSA.32.A] TEC Desert Pty Ltd v Commissioner of State Revenue (WA) (2010) 241 CLR 576; 273 ALR 134 …. [PPSA.10.A] THC Holding Pty Ltd v CMA Recycling Pty Ltd [2014] NSWSC 1136; BC201406787 …. [PPSA.12.A] TLK Transport Pty Ltd v Thornthwaite Pty Ltd (t/as Yass Valley Mobile Mechanic) [2014] NSWCATCD 147 …. [PPSA.8.A] Toll Logistics (NZ) Ltd v McKay [2011] NZCA 188; [2011] 2 NZLR 601; (2011) 10 NZCLC 264,909 …. [PPSA.73.A], [PPSA.8.A] Toyerama Ltd, Re; Thorne Riddell Inc v Fleishman [1980] OJ No 157; 34 CBR (NS) 153; 1 PPSAC 126 …. [PPSA.12.A] Transurban CCT Pty Ltd, Re [2014] NSWSC 1909; BC201411634 …. [PPSA.293.A] Tubbs v Ruby 2005 Ltd [2010] NZCA 353 …. [Pt A.63], [PPSA.46.A] Tubbs and Gower as receivers of Waitmate Timber Processing Ltd v — [2011] NZHC 827; BC201162922 …. [PPSA.46.A] Twinsectra Ltd v Yardley [2002] All ER (D) 321 (Mar) …. [PPSA.8.A] UDC Finance Ltd v Brunton [2014] NZHC 2247 …. [PPSA.131.A] United Dominions Investments Ltd v Morguard Trust Company [1986] 1 WWR 78 …. [PPSA.8.A] Universal Distributing Company Ltd (in liq), Re (1933) 48 CLR 171; [1933] ALR 107; (1933) 6 ALJR 428b …. [PPSA.55.A] Urman, Re (1983) 44 OR (2d) 248; 3 DLR (4th) 631 …. [PPSA.8.A] Valley Beef Co-Operative Ltd v Farm Credit Corp [2002] SJ No 499; 2002 SKCA 100; 218 DLR (4th) 86; 5 PPSAC (3d) 1 …. [PPSA.12.A]

Waller v New Zealand Bloodstock Ltd (2005) 11 TCLR 497; [2006] 3 NZLR 629; (2006) 9 NZCLC 263, 944 …. [PPSA.12.A], [PPSA.55.A], [Pt A.43], [Pt A.63] Warehouse Sales Pty Ltd (in liq) & Lewis and Templeton v LG Electronics Australia Pty Ltd (2014) 291 FLR 407 …. [PPSA.32.A], [Pt A.46], [PPSA.46.A], [Pt A.55], [Pt A.63] Wheatland Industries(1990) Ltd v Baschuk [1994] SJ No 625; 127 SaskR 178; 8 PPSAC (2d) 247; 52 ACWS (3d) 662 …. [PPSA.14.A] White v Spiers Earthworks Pty Ltd [2014] WASC 139; BC201402620 …. [PPSA.12.A], [PPSA.21.A], [Pt A.43], [PPSA.55.A], [Pt A.63], [PPSA.123.A], [PPSA.252B.A], [PPSA.261.A], [PPSA.267.A], [PPSA.322.A] Wine National Pty Ltd, Re [2014] NSWSC 1516; BC201409262 …. [PPSA.12.A], [PPSA.13.A] Yorkshire Woolcombers Association Ltd, Re [1903] 2 Ch 284 …. [Pt A.21]

Table of Contents Publisher’s note Table of Cases

Part A Background and Overview of Personal Property Securities Law in Australia

Part B Guide to Registration on the Personal Property Securities Register

Part C Personal Property Securities Act 2009 Personal Property Securities Regulations 2010 Summary of PPSA consequential amendments state legislation

Part D Personal Property Securities Bill 2009 Replacement Explanatory Memorandum Personal Property Securities (Consequential Amendments) Bill 2009 Explanatory Memorandum Personal Property Securities (Corporations and Other Amendments) Bill 2010 Explanatory Memorandum Personal Property Securities (Corporations and Other Amendments) Bill 2011 Explanatory Memorandum Personal Property Securities Regulations 2010 Explanatory Statement

Part E Determinations and Instruments

Practice Statements Index

[page 1]

Part A Background and Overview of Personal Property Securities Law in Australia

[page 3]

Background and Overview to the PPSA Craig Wappett The information in this Background and Overview is current to 1 April 2015.

CONTENTS

Paragraph



Introduction The PPSA: A huge reform in law ….



Outline of pre-PPSA law Significant pre-PPSA law …. Focus of pre-PPSA law ….



Key differences between the PPSA and prior law Key differences between the PPSA and prior law …. Key questions under pre-PPSA law …. Process under pre-PPSA law …. Diagram of current PPSA process ….



[Pt A.1]

[Pt A.2] [Pt A.3]

Reform Background of PPSA reform …. Discussion paper and working group …. Drivers for reform …. Form over substance approach of pre-PPSA legislation …. Overlapping legislation …. Gaps in the pre-PPSA legislation …. Compulsory registration ….

[Pt A.4] [Pt A.5] [Pt A.6] [Pt A.7]

[Pt A.8] [Pt A.9] [Pt A.10] [Pt A.11] [Pt A.12] [Pt A.13] [Pt A.14]



[Pt A.15] [Pt A.16] [Pt A.17] [Pt A.18] [Pt A.19] [Pt A.20]

Cumbersome registration procedures …. The concept of notice …. Further advances and prospective liabilities …. Receivables financing …. Purchase money security interests (PMSIs) …. Conceptually consistent legislative framework ….

Reforms in other countries United States — Article 9 model …. PPS legislation in Canada ….

[Pt A.21] [Pt A.22] [page 4]



Paragraph

Common law provinces of Canada …. New Zealand’s adoption of a Personal Property Securities Act. United Kingdom and recommendations for new law on securities interests …. Consistency between and with overseas Personal Property Securities Act models ….

Overview of the PPSA Based on overseas reforms …. What the PPSA covers …. Definition of a security interest …. Deemed security interests …. Extension of the pre-PPSA approach …. Interests not covered by the PPSA …. Form of security agreements …. Demise of the fixed and floating charge …. Entities covered by the legislation …. Categorisation of collateral …. PPS Register …. Description and classification of property ….

[Pt A.23] [Pt A.24] [Pt A.25] [Pt A.26] [Pt A.27] [Pt A.28] [Pt A.29] [Pt A.30] [Pt A.31] [Pt A.32] [Pt A.33] [Pt A.34] [Pt A.35] [Pt A.36] [Pt A.37] [Pt A.38]



[Pt A.39] [Pt A.40] [Pt A.41] [Pt A.42]

Property requiring unique serial number …. Attachment and perfection of security interests …. Enforceability against third parties …. Perfection …. Priority and extinguishment rules — general priority rules …. Purchase money security interests …. Other special priority rules …. Extinguishment rules …. Transfer of collateral …. Enforcement …. Insolvency ….

Continuing relevance of common law and equity Continuing application of general law ….

[Pt A.43] [Pt A.44] [Pt A.45] [Pt A.46] [Pt A.47] [Pt A.48] [Pt A.49] [Pt A.50]

Changes to and relationship with other legislation Corporations Act …. National Credit Code …. Amendment of other Commonwealth legislation …. Amendment of other state and territory legislation …. Relationship between PPSA and other legislation generally ….

[Pt A.51] [Pt A.52] [Pt A.53] [Pt A.54] [Pt A.55]

Interaction between security interests and other interests in property Interaction between PPSA and the common law …. [Pt A.56] [page 5]

Paragraph

Interests excluded from the PPSA …. Priority of interests arising outside of the PPSA …. Declarations under s 73(2) ….

Constitutional basis of PPSA Constitutional issues ….

[Pt A.57] [Pt A.58] [Pt A.59] [Pt A.60]



Referral of power by the states …. Jurisdiction of courts and tribunals ….

[Pt A.61] [Pt A.62]

Interpreting the PPSA Interpreting the PPSA …. Legislative policies relevant to interpretation ….



Conclusion Statutory review of the PPSA …. Concluding remarks ….



[Pt A.63] [Pt A.64]

[Pt A.65] [Pt A.66]

Introduction [Pt A.1] The PPSA: A huge reform in law The use of personal property as security for credit is a large and essential aspect of Australia’s economy. The law which underpins this has undergone a major overhaul with the introduction of the Personal Property Securities Act 2009 (Cth) (PPSA). The PPSA and the Personal Property Securities Regulations (the PPSR) and the register established under them (the PPS Register) have replaced most preexisting Commonwealth, state and territory laws and registers for company charges, bills of sale, ship mortgages, motor vehicle securities, crop liens, stock mortgages and other securities affecting tangible and intangible personal property rights.1 The PPSA has not only rationalised most laws and registers governing personal property securities, it has also introduced major substantive changes to the law which are particularly important for creditors, equipment lessors, consignors and other retention of title suppliers, purchasers of accounts receivable and insolvency practitioners. The registration commencement time, being the date from which the PPSA and the PPS Register apply, occurred on 30 January 2012. Before examining the reasons for these changes and providing an overview of the PPSA, it is worthwhile briefly outlining the pre-PPSA law and the key differences between that law and the PPSA. In this Background and Overview, references to pre-PPSA law mean Australian law relating to security over personal property prior to the registration commencement time.

Notes 1

Refer to [Pt A.51]–[Pt A1.55] of this Background and Overview for commentary on the repeal or amendment of pre-PPSA securities legislation.

[page 6]

Outline of pre-PPSA law [Pt A.2] Significant pre-PPSA law Australia had a vast array of pre-PPSA laws dealing with security over personal property. The more significant pre-PPSA legislation appears in the table below.2 Table of significant pre-PPSA law Commonwealth

New South Wales

Queensland

Circuit Layouts Act 1989 Copyright Act 2001 Corporations Act 2001 (the CA) Designs Act 1906 Life Insurance Act 1995 National Consumer Credit Protection Act 2009 Patents Act 1990 Plant Breeder’s Rights Act 1994 Plant Variety Rights Act 1987 Shipping Registration Act 1981 Trade Marks Act 1995 Registration of Interests in Goods Act 1986 Security Interests in Goods Act 2005 Bills of Sale and Other Instruments Act 1955 Liens on Crops of Sugar Cane Act 1931 Motor Vehicles and Boats Securities Act 1986

Bills of Sale Act 1886 Goods Securities Act 1986 Liens on Fruit Act 1923 Stock Mortgages and Wool Liens Act 1924 Bills of Sale Act 1900 Stock, Wool and Crop Mortgages Act 1930 Motor Vehicle Securities Act 1984 Chattel Securities Act 1987 Goods Act 1958 Instruments Act 1958

South Australia

Tasmania

Victoria

[page 7]

Western Australia

Table of significant pre-PPSA law Bills of Sale Act 1899 Chattel Securities Act 1987

Australian Capital Territory Northern Territory

Instruments Act 1933 Sale of Motor Vehicles Act 1977 Instruments Act 1935 Registration of Interests in Motor Vehicles and Other Goods Act 1989

Notes 2

The table does not list all the pre-PPSA legislation relating to security interests in personal property. There were many other Acts dealing with worker’s, contractor’s, storer’s and other statutory liens and charges; security over certain types of personal property like mining and petroleum tenements and water rights and security granted by particular legal entities or organisations. In addition, there were laws which affected the taking and enforcement of security over personal property, for example, rural credit legislation.

[Pt A.3] Focus of pre-PPSA law These pre-PPSA laws focused on the form of a security rather than its effects. There was specific legislation directed to company charges, bills of sale, stock

mortgages and liens over particular crops. Other legislation dealt with security over particular kinds of property such as ships, boats, motor vehicles, intellectual property of various types, mining and petroleum tenements, and water rights. However, with the exception of motor vehicles and, in some places, boats, outboard motors and certain agricultural equipment, this legislation only contemplated security interests in the narrow sense of the term (that is, mortgages and charges). Generally speaking, there was no specific legislation concerning the registration of a lessor’s or owner’s interest under a lease or hire-purchase agreement, although there was an ability to register a lessor’s interest in motor vehicles and, in some places, boats, outboard motors and certain agricultural equipment, under the motor vehicles and chattel securities legislation. Unless it could be characterised as a ‘charge’ or ‘bill of sale’ or it related to motor vehicles and, in some places, boats, outboard motors and certain agricultural equipment, a retention of title or commercial consignment arrangement was generally not capable of being registered.3 Nor did it have to comply with any particular legislation relating to security interests. Common law and equity played a large role in supplementing the pre-PPSA legislation. Notes 3

Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (2000) 202 CLR 588; 171 ALR 568; [2000] HCA 25; BC200002277.

[page 8]

Key differences between the PPSA and prior law [Pt A.4] Key differences between the PPSA and prior law The following table provides a general summary of the key differences between the PPSA and the prior law.

Table of key differences between PPSA and prior law

Concept of security interest

PPSA Broad functional approach:



focus on substance over form form and title not relevant



no distinction between fixed and floating security interests as such (although the PPSA and CA distinguish between security interests over ‘circulating’ and ‘noncirculating’ assets for certain limited purposes relating to preferential creditor rights on insolvency) Some types of interest are expressly excluded (PPSA s 8).



Prior law Different approaches in different legislation: most pre-PPSA legislation focused on particular forms of security for example: CA and bills of sale legislation only dealt with charge and mortgage type security; trust and title based interests were not covered some legislation took a functional approach for example: motor vehicles and chattels security legislation

Most pre-PPSA securities legislation had express exclusions.

[page 9] Title

PPSA Not relevant except to the extent a title-based security interest is a purchase money security interest (PMSI).



A title-based security interest loses priority and is ineffective as against an administrator, liquidator or trustee in bankruptcy if not perfected.

Property covered

Grantor

Prior law Generally defeated all other security interests and there was no need to perfect/register.

There was, however, an exception that some title-based interests in motor vehicles and other prescribed goods could be defeated for priority purposes or by third party purchasers for value if they Whether a secured party has title were not registered under motor to collateral can also be relevant vehicles/chattel securities to whether the secured party has a legislation. ‘circulating security interest’ for the purposes of the CA. All ‘personal property’ as defined As specified in the relevant prein PPSA s 10. PPSA legislation which often had limited application. Any individual, corporate entity Any individual or entity unless or other organisation granting a specified otherwise in relevant law. security interest regardless of For example, the CA charges

where it is organised/registered. Effect of unperfected security interests on insolvency

Priority of security interests

provisions only applied to ‘registered bodies’. Not effective even if a title-based Generally not effective (except for security interest. title-based security interests) where a company was the grantor. Where the grantor was not a company the interest was generally effective even if it had not been perfected/registered. Consistent rules apply as per Multiple sets of statutory rules and PPSA for all security interests in significant role for common law personal property. and equity. Subject to certain exceptions (refer to [Pt A.43]–[Pt A.47]) priority is based on first in time perfection and extends to all future advances.

Limitations on priority for future advances were common.

[page 10] Notice of prior unperfected interests — relevance to priority

PPSA Not relevant.

Prior law Could affect priority outcomes.

Extinguishment of security interests in favour of third party transferees

Specific rules apply to supplement any terms expressed or implied in the security agreement.

As expressed or implied from the terms or circumstances of the secured transaction.

Enforcement of security agreements

PPSA rules generally applicable to non-deemed security interests. Some of these rules can be excluded by contract. PPSA rules do not apply to property of a corporation while a person is a receiver or receiver and manager of that property. Continuing role for consumer/debtor protection law in conjunction with PPSA.

Most pre-PPSA legislation did not deal with the position of a third party transferee and third party rights were usually determined having regard to general law principles. Security legislation was usually silent on the issue of enforcement but general property and consumer/debtor protection law legislation often applied.

[Pt A.5] Key questions under pre-PPSA law Under the pre-PPSA law, there were a few key questions which had to be answered to determine the legislation which had to be complied with and where the security interest should be registered (if it was capable of registration). The key questions were: (a) Was the grantor of the security a ‘company’ for the purposes of Chapter 2K of the CA? (b) If the grantor of the security was a company for the purposes of Chapter 2K of the CA, did the proposed security constitute a ‘charge’ which was required to be registered under Chapter 2K of the CA? (c) Irrespective of the answers to the first two questions, did any other state, territory or Commonwealth legislation apply to the security? In answering this question, it was necessary to take account of: (i) the nature of the grantor of the security; (ii) the form of the security (for example, charge, bill of sale, lease, hire-purchase, conditional sale, retention of title); (iii) the nature and location of the property secured; and (iv) the nature and location of the obligations secured. [page 11]

[Pt A.6] Process under pre-PPSA law A diagrammatic representation of the process, referring to the questions at [Pt A.5], appears here:

Diagram showing pre-PPSA process for determining applicable legislation to security interests

# that is, chargor, mortgagor, lessee or hirer, as the case may be. * Examples: (a) Bills of sale legislation; (b) Chattel securities/motor vehicle securities legislation; (c) Crop lien or stock mortgages legislation; (d) Legislation creating or giving effect to the property being secured; (e) Legislation establishing or regulating the entity granting the security; (f) National Credit Code; (g) Shipping legislation; (h) Trade mark, patents, designs legislation. In addition to these factors, if the location or situs of personal property shifted from one jurisdiction to another, it may have been necessary to reperfect any security interest in that property.

[page 12]

[Pt A.7] Diagram of current PPSA process The following diagram showing the PPSA process for determining the legislation applicable to security interests can be contrasted with the diagram above showing the pre-PPSA process. The nature of the grantor has essentially ceased to be a relevant consideration in determining which law applies. The range of property and security interests covered by the PPSA and not subject to other statutory regimes is significantly broader in comparison with the scope of the various pre-PPSA statutes (refer to [Pt A.51]–[Pt A.55] for further commentary). Diagram showing post-PPSA process for determining applicable legislation to security interests

* As defined in PPSA s 10. [page 13]

Reform Key Points Reform was discussed from the 1970s with Law Commissions reviewing and suggesting reforms in the 1990s. Australia’s PPSA is modelled on North American personal property securities laws.

[Pt A.8] Background of PPSA reform Australia’s PPSA has had an extremely long gestation period. The Molomby Committee reporting in 1972 noted that there should be a complete reform of the law relating to security interests in chattels.4 In the early 1990s, the New South Wales Law Reform Commission (NSWLRC), the Law Reform Commission of Victoria (LRCV) and the Queensland Law Reform Commission (QLRC) were asked to carry out reviews of the state of personal property security law in Australia and suggest reforms. The Commonwealth Attorney-General also requested the Australian Law Reform Commission (ALRC) to review federal and other Australian laws relating to the creation and enforcement of security interests in personal property. It was envisaged that the four commissions would cooperate with each other and produce a joint report. However, the QLRC and the LRCV had concerns about the approach being taken by the ALRC. Eventually, the QLRC and the LRCV decided to publish their own discussion paper (QLRC/LRCV Paper).5 This was published in August 1992 and soon after the ALRC (in conjunction with the NSWLRC) produced its discussion paper.6 Following a number of submissions on this discussion paper the ALRC (this time without the NSWLRC) released its Interim Report No 64, Personal Property Securities, in May 1993 (ALRC Report).7 Although there was broad agreement between the four commissions, and they all agreed on the necessity for reform, there were a few significant areas of

conflict between the ALRC Report and the QLRC/LRCV Paper. These disagreements related to: (a) the degree of reliance to be placed on the concepts and drafting style of the various North American personal property security laws; (b) whether reform in Australia should aim to codify the law relating to personal property securities as had occurred in North America or alternatively be limited to broadening the concept of a ‘security’ and addressing the registration and priority shortcomings which presently exist; and (c) the most appropriate vehicle for introducing effective reform given the constitutional limitations which exist in the Australian federal system.8 Notes 4 5

E I Sykes and S Walker, The Law of Securities, 5th ed, The Law Book Company Limited, Sydney, 1993, pp 548–600. Queensland Law Reform Commission, Discussion Paper 39 and Law Reform Commission of Victoria, Discussion Paper 28, Personal Property Securities Law: A Blueprint for Reform, August 1992.

[page 14] 6 7

8

Australian Law Reform Commission, Discussion Paper 52 and the Law Reform Commission of New South Wales, Discussion Paper 28, Personal Property Securities, 1992. A J Duggan, Personal Property Security Law Reform: The Australian Experience To Date, paper presented at the Annual Workshop on Commercial and Consumer Law, University of Toronto, October 1995, p 4. Sykes and Walker, pp 548–600.

[Pt A.9] Discussion paper and working group In January 1995, the Commonwealth Attorney-General issued a discussion paper based on the Australian Law Reform Commission (ALRC) Report9 and this was followed in December 1995 by a workshop convened by Professor David Allan at Bond University. This workshop was attended by representatives of the ALRC, various state governments and the finance industry, and leading academic and practitioner experts from Australia and overseas.10 Ongoing disagreement as to the best approach for reform and a sense of ‘reform fatigue’ resulted in a loss of momentum during the remainder of the 1990s. Undeterred, Professor Allan convened another workshop at Bond University in April 2002 to

promote the so-called Bond Bill (based on the Canadian Personal Property Securities Act model) and consider options for reform implementation.11 Professor Allan and his colleagues then continued to press the finance industry, government and the legal profession to support PPS reform based on the Canadian model. In March 2005, following a presentation from Professor Allan, the Standing Committee of Attorneys-General (SCAG) formed an inter-governmental working group to consider reform of personal property securities laws in Australia, and in April 2006 SCAG released an Options Paper (SCAG Options Paper) for the review of personal property securities laws.12 This was the start of a consultation process inviting submissions on a number of discussion papers and consultation drafts of PPS legislation and hearings before the Legal and Constitutional Affairs Committee of the Senate. The culmination of this process was the enactment of the PPSA in December 2009. Although the consultation process revealed that there continued to be a divergence of opinion as to the desirability of adopting the concepts and drafting style of the various North American personal property securities laws,13 Australia’s PPSA is broadly modelled on these North American antecedents but with some significant departures in both drafting style and policy content.14 The successful adoption of Canadian-style PPS legislation in New Zealand undoubtedly influenced both the nature of and support for similar legislation in Australia: see [Pt A.24]. Another influential factor was that key elements of the ‘functional approach’ to securities law and extinguishment rules favouring third parties were already imbedded in some pre-PPSA laws, in particular the state and territory motor vehicle securities laws which, at least numerically, accounted for a very high percentage of all security interests in personal property. Notes Attorney-General’s Department Discussion Paper, Personal Property Securities: A National Approach, January 1995. 10 Report of the Personal Property Securities Law Workshop, Bond University, 14–17 December, 1995. 11 ‘Special Issue: Proceedings of a Workshop on Personal Property Security’, 14(1) Bond Law Review, December 2002. 12 Standing Committee of Attorneys-General, Options Paper: Review of the Law on Personal Property Securities, April 2006. 9

[page 15]

13 Senate Committee Report, Exposure Draft of the Personal Property Securities Bill 2008, March 2009. 14 Some submissions made during the consultation process made the point that the PPSA should be even more consistent than it is with its Canadian and New Zealand counterparts; note particularly the submissions of Professor Tony Duggan.

[Pt A.10] Drivers for reform15 Personal property, including contract rights, intellectual property and ideas, accounts for most of the wealth generated in advanced economies. Australia needed modern and flexible laws to encourage both business and consumers effectively and conveniently to raise finance, as well as creditors to provide finance on the security of such property. The perceived benefits of the North American approach to personal property security were summarised as follows in the 1993 Australian Law Reform Commission (ALRC) Report: The Article 9 [of the United States Uniform Commercial Code] approach, as applied with local variations in all of the jurisdictions mentioned, is attractive in its simplicity and almost universal applicability. Its use of a functional definition — which looks to the substance of the transaction and not the form — overcomes the complicated and confusing rules which previously applied to different kinds of security interests. Ordinary securities and reverse securities which are similar in commercial or economic effect or purpose, but legally different, are treated alike. A single set of rules applies to all kinds of securities to determine when they are enforceable against third parties. Archaic common law priority rules are dispensed with in favour of a more streamlined set of priority rules. Registration is a voluntary act but there is incentive to register since priority as against third parties cannot be assured without registration or possession. A single regime overcomes the difficulties of choosing which register to file in and of searching many different registers within one jurisdiction. While the single register is open to public inspection, priorities depend not on notice (actual or constructive) but on the date of registration.16

Notes 15 This section draws on Pt 2 of the QLRC/LRCV Paper and Pt 2 of the ALRC Report. See also Attorney-General’s 1995 Discussion Paper and 2006 SCAG Options Paper. 16 ALRC Report at para 3.20.

[Pt A.11] Form over substance approach of prePPSA legislation Many of Australia’s pre-PPSA security laws were derived from legislation

which originated in nineteenth-century England. These laws focused on the particular form of a security or the nature of the entity giving the security rather than the rights of the grantor and the secured party to the property in which those parties have an interest. Some of the pre-PPSA legislation required the inclusion of certain detailed information in security agreements to make them effective,17 regardless of whether that information had any real significance to the objective of obtaining priority for a particular security interest. Notes 17 See, for example, the form and content requirements in Pt 3 of the Bills of Sale and Other Instruments Act 1955 (Qld).

[page 16]

[Pt A.12] Overlapping legislation Some forms of security were regulated by two or more pieces of pre-PPSA legislation and in some circumstances required registration in more than one registry, whereas other forms of security interest did not require registration at all.18 The overlap between legislation also gave rise to priority problems which were not easily resolved. Specific priority problems arose when there was a direct conflict between the provisions relating to a debtor name-indexed security register such as that maintained under former Chapter 2K of the CA and an asset-indexed security register such as those maintained under the state legislation dealing with security interests in motor vehicles and other prescribed goods.19 Anomalies arose because legislation such as former Chapter 2K of the CA only sought to regulate priority as between chargees, while other chattel security legislation sought to also regulate priority as against subsequent purchasers. The status of the grantor, the subject matter of the security interest, and the form of the security interest determined which pre-PPSA laws applied to the security interest and the registrations that were necessary to protect that interest. Although the PPSA is much more comprehensive and consistent in its coverage of security interests and there is less overlap with other legislation, it does not apply to property that is not ‘personal property’ for the purposes of the

PPSA and some security agreements may still require multiple registrations because of this. Other legislation may continue to be relevant to the documentation and authorisations required for taking effective security over particular kinds of property: see [Pt A.53]. Notes 18 For example, prior to the commencement of the PPSA, a charge or mortgage over a motor vehicle which was given by a company in Queensland had to be registered under both the CA and the Motor Vehicles and Boats Securities Act 1986 (Qld) because the latter Act was not a ‘specified law’ for the purposes of former s 273B of the CA. 19 In Australian Central Credit Union v Commonwealth Bank of Australia (1991) 4 ACSR 145; 9 ACLC 396; (1991) ASC 56-037; BC9100520, the Full Court of the Supreme Court of South Australia held that an earlier registration of a security interest under the Goods Securities Act 1986 (SA) was not sufficient to defeat a later charge registered under the precursor to the CA.

[Pt A.13] Gaps in the pre-PPSA legislation While there was a high degree of overlap in the pre-PPSA legislation, there were also gaps so that some security interests did not require registration at all. On the authority of A J Smeman Car Sales v Richardsons Pre-Run Cars20 and Kay’s Leasing Corporation Pty Ltd v Fletcher,21 the Bills of Sale and Other Instruments Act 1955 (Qld) did not apply to instruments entered into outside of Queensland in respect of goods subsequently brought into Queensland.22 Some forms of security required registration in respect of some types of property, subject to the security, but not other property and the benefits of registration only applied in respect of the former. Former Chapter 2K of the CA was a good example of this. Section 279(4) of the CA provided that where a charge related to property of a kind or kinds to which s 262(1) applied and also related to other property, the priority provisions in ss 280–282 only applied to affect the priority of the charge in so far as it related to property specifically referred to in s 262(1) and not any other property. [page 17] Another good example of gaps in the pre-PPSA legislation was provided by the strict limits on the ability to secure future property under s 21 of the Bills of Sale and Other Instruments Act 1955 (Qld). These restrictions were particularly troublesome to inventory financers. Where there was no applicable statutory regime for determining priority

between competing interests in personal property, the common law rules prevailed. Because of this, the form of the security interest was often crucial to the determination of priority.23 Many pre-PPSA laws including the CA and various states’ Property Law Acts did not clearly or consistently address the rights of secured parties on enforcement and the common law that filled in the gaps was often thin or nonexistent.24 Notes 20 (1969) 63 QJPR 150. See also L M Ericsson Pty Ltd v Douglas-Brown (1991) 4 WAR 218. 21 (1964) 116 CLR 124; [1965] ALR 673; (1964) 38 ALJR 335; BC6400830. 22 Note, however, Re State Rail Authority of New South Wales (SC(NSW), Young J, No 3709/1994, unreported). 23 QLRC/LRCV Paper at para 2.2.7. 24 See, for example, St George Bank Ltd v Perpetual Nominees Ltd [2011] 1 Qd R 389; [2010] QSC 57; BC201001012 which dealt with the rights of multiple chargees on the exercise of a power of sale in respect of personal property.

[Pt A.14] Compulsory registration Under many of the pre-PPSA statutes, registration was compulsory for a security interest to be effective or to be effective as against parties other than the grantor and the secured party.25 It was difficult to discern a sound policy basis for such compulsory registration requirements. Rather, registration of a security interest should be left to the parties to determine on the basis that if the secured party wishes to protect its priority and validity on insolvency, then it should register its interest. Compulsory registration for its own sake or as a requirement for validity (absent insolvency) was an anachronism. Notes 25 See, for example, the Bills of Sale and Other Instruments Act 1955 (Qld).

[Pt A.15] Cumbersome registration procedures The registration process itself was unnecessarily cumbersome, confusing and outdated under many of the pre-PPSA statutes. Instrument rather than notice filing was the norm under the CA and many other pre-PPSA securities laws. The necessity of filing the instrument evidencing a security interest was considered to have a number of disadvantages: (a) It was commercially impracticable where the secured property was of

a kind which constantly changes such as accounts receivable or inventory (unless the security was in the form of a floating charge). (b) It precluded the secured party from obtaining registration (and priority) until the grantor had actually signed a security agreement. (c) The length of documentation could involve unnecessary time delays and reproduction of paper records, and in many circumstances it was unnecessary for another party to read the entire text of the document. [page 18] (d) The security agreement may have contained provisions which were confidential to the parties and which they did not want included on a public record. (e) Instrument filing was administratively inconvenient and costly and impeded the computerisation of records.26 Compulsory registration of the details of secured obligations, and changes to those details, as required under some pre-PPSA laws, such as the CA, also hindered document drafting and commercial flexibility.27 Notes 26 QLRC/LRCV Paper at para 2.1.4. 27 Re Octaviar Ltd; Re Octaviar Administration Pty Ltd (2009) 69 ACSR 621; [2009] QSC 037; BC200901301; Re Octaviar Ltd (No 7) (2009) 74 ACSR 156; [2009] QCA 282; BC200908526; Public Trustee of Queensland v Fortress Credit Corp (Aust) 11 Pty Ltd (2010) 241 CLR 286; 269 ALR 253; [2010] HCA 29; BC201006308.

[Pt A.16] The concept of notice Under the CA and some other pre-PPSA personal property security statutes, the basic priority rule was that the first party to register obtained priority for their interest. However, this rule was displaced where the holder of a charge which was executed later in time was registered before an earlier executed charge but where the holder of the charge executed later in time had notice of the earlier charge.28 Notice included constructive notice. This rule detracted from the paramountcy of the register and reduced the effectiveness of registration. Under the PPSA, notice of prior unperfected security interests does not generally affect priority outcomes.29

Notes 28 CA s 280. 29 QLRC/LRCV Paper at para 2.2.3.

[Pt A.17] Further advances and prospective liabilities The pre-PPSA law, with respect to tacking further advances to the priority of the first registered secured party and also the concept of prospective liabilities under the CA, produced unnecessarily complicated rules in relation to determining priorities for further advances.30 The PPSA gives priority on perfection in respect of all future advances. This basic rule can be varied by agreement between competing security holders. Notes 30 The complexity of former s 282 of the CA was made worse by the uncertainty placed on maximum prospective liability clauses as a result of Linter Group Ltd (in liq) v Goldberg (1992) 7 ACSR 580; 10 ACLC 739 and Muirlands (No 4) Pty Ltd v Cmr for Stamp Duties (Tas) [1989] Tas R 235; (1989) 89 ATC 5241; 20 ATR 1550.

[Pt A.18] Receivables financing Where property the subject of a security interest was a debt or other chose in action, the rule in Dearle v Hall31 meant that priority as between competing secured parties could depend on the order in which those secured parties had given notice of their interest to the party obliged to make any particular payment which is subject to the security interest.32 Also, the characterisation of a creditor’s security over receivables as [page 19] an assignment, fixed charge or floating charge, could affect the creditor’s priority as well as its remedies.33 These distinctions were difficult to justify in a commercial sense and they reduced the effectiveness of securities over receivables and the willingness of financiers to lend against this type of collateral. Another issue which affects the taking of security over receivables is that the contract or instrument evidencing the right to the receivable might contain a

prohibition on assignment, mortgaging, charging or otherwise dealing with those rights. Under pre-PPSA law a prohibition on the granting of security over receivables was enforceable with the result that the party purporting to take security was not able to enforce its claim directly against the payment obligor.34 This position severely affected the attribution of value to receivables. The PPSA overrides such contractual prohibitions for the purpose of allowing effective security to be taken over certain receivables: PPSA s 81. This mirrors the position in the USA and Canada. Notes 31 [1824-34] All ER Rep 28; (1828) 3 Russ 1; 38 ER 475. The rule in Dearle v Hall has been given statutory recognition throughout Australia. In Queensland this is found in s 199(1) of the Property Law Act 1974. 32 The rule in Dearle v Hall will determine who the debtor has to pay to legally discharge the obligations over which security has been granted and, in the absence of an applicable statutory priority regime determine priority. 33 For examples of the issue and its consequences, see: Equus Financial Services Ltd v Glengallon Investments Pty Ltd (SC(Qld), White J, 1991, unreported, BC9202406); Siebe Gorman & Co Ltd v Barclays Bank Ltd [1979] 2 Lloyd’s Rep 142; Re New Bullas Trading Ltd (1994) 12 ACLC 3203; [1994] 1 BCLC 485; [1994] BCC 36; Agnew v Cmr of Inland Revenue [2001] 2 AC 710; [2001] UKPC 28; and National Westminster Bank plc v Spectrum Plus Ltd [2005] All ER (D) 368; [2005] UKHL 41. 34 Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85; [1993] 3 All ER 417; [1993] 3 WLR 408 (St Martins Corporations Case); Macintosh v Turner Corporation Ltd (in liq) (1995) 17 ACSR 761; 13 ACLC 1314; and Starelec (Qld) Pty Ltd (in liq) v Kumagai Gumi Co Ltd (SC(Qld), 2002, unreported).

[Pt A.19] Purchase money security interests (PMSIs) A useful definition is: The purchase money security interest is a security interest taken by the seller of goods to secure payment of the price, or by the lender of the money which is used to pay for them. Examples of a purchase money security interest in the Australian context would include the interest of the owner of goods under a hirepurchase agreement, the interests of a lender pursuant to a mortgage taken to secure repayment of a car loan (the mortgage being taken over the car), and the interest of the supplier pursuant to a Romalpa agreement.35

The phrase ‘purchase money security interest’ is derived from North America. Some English and pre-PPSA Australian decisions indicated that a financier advancing money to enable a person to acquire a specific asset should have been entitled to priority with respect to any security interest it obtained at the time that person acquired that asset.36 This outcome was achieved by the courts viewing the acquired asset as being subject to the purchase money financier’s security

interest before or contemporaneously with its acquisition so that there is no moment in time (scintilla temporis) in which the asset is unencumbered by the purchase money financier’s security interest. However, this result [page 20] appeared to contradict the clear priority provisions in pre-PPSA legislation such as the CA and had been criticised by a number of commentators.37 The PPSA provides clear statutory recognition for the super priority of PMSIs.38 Notes 35 QLRC/LRCV Paper at para 3.1.7. 36 See Abbey National Building Society v Cann [1991] 1 AC 56; [1990] 1 All ER 1085; Composite Buyers Ltd v State Bank of New South Wales (1990) 3 ACSR 196; 6 BPR 14,040; BC9002006; Sogelease Australia Ltd v Boston Australia Ltd (1991) 26 NSWLR 1; North Western Shipping & Towage Co Pty Ltd v Commonwealth Bank of Australia (1993) 118 ALR 453; BC9305143. These cases clarified the earlier conflicting authority of Re Connolly Brothers Ltd (No 2) [1912] 2 Ch 25 and Security Trust Co v Royal Bank of Canada [1976] AC 503; [1976] 1 All ER 381; [1976] 2 WLR 437 on the one hand and Church of England Building Society v Piskor [1954] Ch 553 on the other. 37 See, for example, W J Gough, Company Charges, 2nd ed, Butterworths, London, 1996, pp 431–9 and 476–91. 38 PPSA Pt 2.6, Div 3.

[Pt A.20] Conceptually consistent legislative framework Pre-PPSA legislation was underpinned by very different concepts and objectives: (a) Some laws focused only on mortgage and charge type securities while others adopted a functional approach. (b) The most comprehensive pre-PPSA scheme, the register of company charges, only applied to charges given by companies registered in Australia. (c) Significantly, some laws included extinguishment rules defining the rights of third party transferees and some did not. (d) Notice of unregistered interests was often sufficient to allow unregistered or later registered interests to prevail over a registered or

earlier registered interest. The codification of the law relating to personal property securities via the PPSA, although non-exhaustive, has created a conceptually consistent framework regulating the substantive rights and priorities not only as between secured parties but as between secured parties and third party purchasers.

Reforms in other countries Key Points Canadian and New Zealand PPSA reform (based on the United States) have broadly been successful. In the United Kingdom, reforms have been recommended but are yet to be acted upon.

[Pt A.21] United States — Article 9 model The various law reform bodies that considered the issue concluded that the reform of personal property securities laws in Australia should be modelled on the general approach underpinning Article 9 of the United States Uniform Commercial Code.39 The [page 21] Uniform Commercial Code (UCC) represents a comprehensive scheme for almost the entire commercial law of the United States. Article 9 of the UCC relates to secured transactions. The UCC was originally promulgated by the National Conference of Commissioners on Uniform State Laws and the American Law Institute in 1951. It has been amended on a number of occasions. Article 9 is the law in every state of the United States. Article 9 gained rapid acceptance in the United States because of the lack of an adequate inventory financing device in that country. Unlike England where the courts had given life to the floating charge in the latter part of the nineteenth century,40 the American courts generally took a hostile attitude towards transactions under which a lender was given a security interest in assets in respect of which the debtor was free to deal in the ordinary course of business.

Although the English courts had recognised the inappropriateness of having a fixed charge over shifting assets such as inventory and receivables, while at the same time allowing the debtor to carry on business without being required to account for the proceeds of disposition or to hold them on trust for the secured party,41 the American courts imposed a much more severe regime on secured creditors. Under the principle laid down in Benedict v Ratner42 there could be no security interest in shifting assets vis-à-vis a third party unless the secured party closely supervised the debtor’s disposition of the proceeds. The restrictiveness of Benedict v Ratner was significant in leading to the adoption of Article 9.43 Notes 39 ALRC Report at para 4.7 (but note the ALRC supported ‘a regime based on the Article 9 approach but adapted to meet the particular needs of Australian jurisdictions’) and QLRC/LRCV Paper at para 3.1. 40 J Chandler, ‘The Modern Floating Charge’ in M Gillooly (ed), Securities Over Personalty, Federation Press, Sydney, 1994; D Everett, ‘The Nature of Fixed and Floating Charges as Security Devices’, Centre for Commercial Law and Applied Legal Research, Faculty of Law, Monash University, 1988, and W J Gough, Company Charges, 2nd ed, Butterworths, London, 1995. 41 See Re Yorkshire Woolcombers Association Ltd [1903] 2 Ch 284 and Re Florence Land and Public Works Company: Ex parte Moor (1878) 10 Ch D 530. 42 (1925) 268 US 353; 69 L Ed 991. 43 J S Ziegel, ‘Floating Charges and OPPSA: A Basic Misunderstanding’ (1994) 24 Canadian Business Law Journal 470 at 477.

[Pt A.22] PPS legislation in Canada Personal Property Security Acts, broadly based on the same concepts as Article 9, were enacted in each of the common law provinces and territories of Canada (that is, every province and territory except Quebec), commencing with Ontario in 1976. The Canadian PPS legislation is not identical from province to province. However, the basic model for each of the Canadian Personal Property Securities Acts (Canadian PPSAs), other than Ontario’s, is the same. The Canadian PPSAs are not simply a restatement of Article 9. Although they reflect the basic framework of Article 9, the Canadian PPSAs have filled gaps in their operation that the American experience had exposed and introduced new and innovative features. For example, the Canadians developed extremely sophisticated computerised registries to enable registration and searching to be conducted by serial number against consumer goods and equipment in addition to the debtor’s name.

[page 22] Prior to the adoption of PPS legislation, the laws throughout Canada resembled the pre-PPSA laws in Australia, although, Canada’s pre-PPSA legislation was arguably more fragmented and complex. As one Canadian academic has observed: In all common law legal systems, a century and more of ad hoc response to commercial demands for an ever expanding cushion of assets to secure loan and purchase credit produced inevitable fragmentation in the legal doctrine and theories.44

Notes 44 C Walsh, An Introduction to the New Brunswick Personal Property Securities Act, Faculty of Law, University of New Brunswick, 1995, p xxi.

[Pt A.23] Common law provinces of Canada The availability of floating charges and equitable mortgages over afteracquired property in the common law provinces of Canada meant that parties wanting to obtain security over inventory were not faced with the same difficulties as their neighbours in the United States. More or less uniform Conditional Sales Acts, Bills of Sale Acts, Assignment of Book Debts Acts and Corporations Securities Registration Acts were in existence in most of the common law jurisdictions and, in many of the provinces, central registries had been established under these Acts. As a result, most Canadian provinces had a legal framework within which the traditional types of secured financing devices, including inventory financing devices, could function. The overriding deficiency in personal property security law in these provinces was that it contained no systematic or conceptually consistent approach. The law was drawn from the common law, equity and statutes. Superimposed on these concepts were complicated, disparate and overlapping registry requirements. Priority structures were an anomalous mixture of different legal doctrines and statutory rules. Not only did this law substantially ignore the needs of the persons affected by it but, in addition, it lacked a conceptual basis for further development and was poorly equipped to accommodate new business practices and new approaches to business financing. The attractiveness of Article 9 was that it swept away this tangle of established legal doctrine and put in its place a single conceptual basis for all personal property security transactions.45

Notes 45 R C C Cuming, ‘Attachment J’ to the Conference Papers for the Personal Property Security Law Reform Workshop, Bond University, 14–17 December 1995.

[Pt A.24] New Zealand’s adoption of a Personal Property Securities Act Of particular relevance to Australia, especially given Closer Economic Relations46 and ongoing efforts to harmonise commercial law generally between the two countries, was the adoption of a Personal Property Securities Act in New Zealand (New Zealand PPSA). The Personal Property Securities Act 1999 (NZ) commenced on 1 May 2002.47 The basic principles and operation of the New Zealand PPSA are drawn from the Canadian model. [page 23] The registry established under the New Zealand PPSA is a paperless internetbased one and all registration and searching functions can be conducted online. The New Zealand PPSA is the primary legislation dealing with security interests in personal property in New Zealand. It has replaced: (a) the registration of charges provisions in the Companies (Registration of Charges) Act 1993 (NZ); (b) the Motor Vehicle Securities Act 1989 (NZ); and (c) the Chattels Transfer Act 1924 (NZ). A leading New Zealand commentator made the following observations shortly after the commencement of the New Zealand PPSA:48 (a) Despite some implementation problems relating to the new registration system and, in particular the description of ‘collateral’ (that is, secured property), registration procedures are more straightforward than under the prior law and transaction costs are lower. (b) The New Zealand PPSA is a vast improvement over the prior law in terms of conceptual consistency, business accessibility and transparency. (c) Some of the drafting issues that have emerged with the New Zealand

PPSA could have been avoided had New Zealand followed more closely the Canadian legislation on which the New Zealand PPSA is based. (d) New Zealand courts would have been better placed to draw on Canadian case law, had New Zealand stuck more closely to the Canadian drafting when preparing its legislation. (e) Despite the two previous points, there are a couple of areas in which the New Zealand PPSA is an improvement on the Canadian legislation.49 Notwithstanding some teething problems, the overall impression is that the New Zealand PPSA has been a very worthwhile reform and few New Zealand financiers and lawyers would favour a return to the pre-PPSA regime.50 This is consistent with the experience of financiers and lawyers in Canada.51 Notes 46 The Australian–New Zealand Closer Economic Trade Relations Agreement came into effect on 1 January 1983. The original free trade agreement has been expanded to include various matters designed to promote the broad free trade objective. One such expansion has arisen as a result of the Memorandum of Understanding on Coordination of Business Law signed between the two countries in August 2000. The goal of the MOU is the harmonisation of business law between the two countries. 47 The Law Commission of New Zealand had recommended in 1989 that New Zealand adopt personal property security legislation based on the American and Canadian legislation (Law Commission of New Zealand, Report 8, A Personal Property Securities Act for New Zealand, March 1989). 48 M Gedye, New Zealand Personal Property Securities Act — Some of the Difficult Issues, paper delivered at the 20th annual conference of the Banking and Financial Services Law Association, Queenstown, New Zealand, 3 and 4 August 2003. 49 The examples given by Mike Gedye were that in New Zealand the purchase money super priority for inventory financiers is not dependent on giving prior notice to general financiers and the New Zealand PPSA also gives priority to a buyer over an unperfected security interest where the buyer knew of the existence of the prior security interest. 50 S Flynn, PPS Implementation Issues — Some New Zealand Experiences, paper delivered at the 26th annual conference of the Banking and Financial Services Law Association, Gold Coast, July 2009.

[page 24] 51 It is interesting to note that New Zealand experienced some of the same practical issues previously experienced in the Canadian provinces when PPSAs were introduced there. For example, lessors of goods failing to appreciate that their interest is a ‘security interest’ under the New Zealand PPSA which is required to be registered as their title alone is insufficient protection

as against other parties having a ‘security interest’ (see Graham v Portacom New Zealand Ltd [2004] 2 NZLR 528 and the commentary on this case in D Perry, The New Zealand Personal Property Securities Act Current Developments, paper delivered at the 22nd annual conference of the Banking and Financial Services Law Association, Cairns, Queensland, 6–7 August 2005).

[Pt A.25] United Kingdom and recommendations for new law on securities interests In the United Kingdom the Crowther Committee, as part of its report on consumer credit published in 1971, recommended the reform of personal property securities law based on Article 9. The recommendations were not adopted at the time, but they were subject to further consideration in a report completed in 1983 and published in 1986 by the Scottish Law Commission.52 This report, known as the ‘Halliday Report’, supported the broad thrust of the Crowther Committee’s proposals and recommended the implementation in Scotland of a modified version of Article 9. In 1985, the United Kingdom Minister for Corporate and Consumer Affairs commissioned Professor Aubrey Diamond to examine the need for personal property security law reform in the United Kingdom, taking account of both the Crowther Report and the Halliday Report. The Diamond Report was published in 1989 and it concluded that there should be a new law applicable to all security interests, regardless of their form, that secure payment or performance of an obligation, covering companies, partnerships and individuals granting security in the course of their business and a single notice based register. The Diamond Report recommended that the law should be based closely on Article 9 and the Canadian Personal Property Securities Acts.53 The government of the United Kingdom declined to implement these recommendations, claiming that a sweeping reform of personal property securities law is not supported by the relevant interest groups and could not be commercially justified given the high cost which would be likely to be incurred by business and the government. However, the experience of Canada and New Zealand, at least in respect of the issue of cost, has shown that such fears are unfounded. The Law Commission followed developments in New Zealand closely and in 2005 recommended some similar, though more limited, reforms in respect of company charges and receivables financing arrangements.54 More wide ranging reforms based on the Article 9/PPSA approach remain the subject of active consideration in the United Kingdom.55

Notes 52 Scottish Law Commission, Report by Working Party on Security over Moveable Property, (J M Halliday chair), 1986. 53 ALRC Report at 3.17. 54 Law Commission Report, Company Security Interests, Law Com No 296, August 2005. 55 A Duggan and D Brown, Australian Personal Property Securities Law, LexisNexis, Australia, 2012, pp 359–60. For examples of the range of views on the desirability of personal property securities reform in the UK, see: G McCormack, ‘Personal Property Security Law Reform in England and Canada’ [2002] JBL 113; A McKnight, ‘The Reform of English Law Concerning Secured Transactions: Part 1’, (2006) 21(9) JIBLR 497; and A McKnight, ‘The Reform of English Law Concerning Secured Transactions: Part 2’, (2006) 21(1) JIBLR 587.

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[Pt A.26] Consistency between and with overseas Personal Property Securities Act models The general concepts and principles of Article 9 and the personal property securities legislation in Canada and New Zealand are very similar but there are some significant differences of detail and drafting. Some of the differences are deliberate policy choices made by the respective legislatures, others have arisen for historical reasons and a few may be inadvertent. Economic and market change has also played a role. Article 9 and the personal property securities legislation in Canada have not been static. As economies and markets have developed, the legislation has evolved in response to these changes. Different jurisdictions have been faster than others to react to some market developments and policy decisions have meant that different jurisdictions have sometimes reacted in different ways.56 These differences need to be borne in mind when considering the personal property securities case law from these jurisdictions. The degree to which the PPSA has departed from the drafting and policy of the Canadian and New Zealand Personal Property Securities Acts may further affect the utility of case law from those jurisdictions as a guide to the interpretation of Australia’s PPSA.57 Notes 56 C Wappett, L Mayne and T Duggan, Review of the Law of Personal Property Securities: An International Comparison, July 2006, p 45. This paper includes greater detail about the differences between Article 9 and the Canadian and New Zealand Personal Property Securities Acts.

57

In this regard, note the comments of Professor Tony Duggan in various submissions to the Senate Legal and Constitutional Affairs Committee prior to the enactment of the PPSA.

Overview of the PPSA Key Points The PPSA applies to most security interests in personal property. Parties are generally free to negotiate the terms of their security agreements. The PPS Register is accessible on-line and operates on the basis of notice rather than document registration.

[Pt A.27] Based on overseas reforms Australia’s PPSA is modelled on the New Zealand and Canadian Personal Property Securities Acts but with some significant differences and innovations in drafting style and policy.

[Pt A.28] What the PPSA covers With limited exclusions, the PPSA applies to all security interests in both tangible and intangible personal property. Personal property is defined in the PPSA at s 10 to be any kind of property other than land, fixtures, water rights (s 8(1)(i) and (j)) or a right, [page 26] entitlement or authority that is granted by a Commonwealth, state or territory law and declared by that law not to be personal property for the purposes of the PPSA. Certain licences are deemed to be personal property and capable of being the subject of a security interest. This is significant given the value that is often attributed to licences and the uncertainty as to whether a particular licence is property under common law.

[Pt A.29] Definition of a security interest

The PPSA adopts a functional approach to ‘security interests’. This means any interest or right in personal property provided for by a transaction that in substance secures payment or performance of an obligation will be a security interest for the purposes of the legislation regardless of its form or who has title to the collateral (that is, the secured property). The definition of security interest in s 12 expressly includes an interest in personal property provided for by a fixed charge, floating charge, chattel mortgage, conditional sale agreement (including an agreement to sell subject to retention of title), hire purchase agreement, pledge, trust receipt, consignment, lease of goods, assignment, transfer of title or flawed asset arrangement, that in substance secures payment or performance of an obligation. The definition of ‘security interest’ only applies to consensual transactions: see Dura (Australia) Constructions Pty Ltd (in liq) (recs and mgrs apptd) v Hue Boutique Living Pty Ltd (formerly SC Land Richmond Pty Ltd) [2014] VSCA 326; BC201411364 and also note the exclusion of certain non-consensual security interests pursuant to s 8(1)(b) and (c). Given the broad functional definition of ‘security interest’ it might be argued that the PPSA could potentially include interests that are not proprietary in nature. However, when the objectives of the legislation and its various provisions are considered, it seems the better interpretation is that a security interest involves the secured party having a proprietary right or interest in the relevant property that is exercisable against not only the grantor but also against third parties with subsequent interests in the property.58 Although not relevant for matters governed exclusively by the PPSA, a security interest under the PPSA is likely to be characterised as a legal interest when the rights of the secured party are in competition with another person whose interest in property the subject of the security interest arises outside the PPSA.59 While in most cases it will be obvious whether a transaction in substance secures payment or performance of an obligation, there will be occasions when this is not clear. Documents may include clauses that constitute security interests even though those clauses are only incidental to the primary purpose of the document. For example, a guarantee that includes a charging clause covering personal property becomes a security agreement and a subordination agreement or guarantee that includes turnover trust provisions becomes a security agreement if it secures payment or performance of an obligation. It is the charging or turnover trust provisions that change the characterisation of the transaction from unsecured to

secured for PPSA purposes.60 Notes 58

R C C Cuming, C Walsh and R J Wood, Personal Property Security Law, 2nd ed, Irwin Law, Toronto, 2012, p 146; L Widdup and L Mayne, Personal Property Securities Act: A Conceptual Approach, LexisNexis, Wellington, 2002, paras 2.31–2.40.

[page 27] 59 60

Bank of Montreal v Innovation Credit Union [2010] 3 SCR 3; Royal Bank of Canada v Radius Credit Union Ltd [2010] 3 SCR 38. A contractual subordination without any proprietary interest should not be a security interest: PPSA s 12(6).

[Pt A.30] Deemed security interests In addition to the broad functional definition, the PPSA deems certain interests or rights in relation to personal property to be security interests whether or not they secure payment or performance of an obligation (deemed security interests). Under the definition in the PPSA at s 12(3) deemed security interests include: (a) the interest of a transferee under a transfer of an account receivable or chattel paper; (b) the interest of a consignor who delivers goods to a consignee under a commercial consignment; and (c) the interest of a lessor or bailor of goods under a PPS lease.

The ‘chattel paper’ is a new concept in Australia.61 A ‘PPS lease’ refers to a lease or bailment of goods, however, there are some important exclusions to PPS leases to note. These are set out in s 13 of the PPSA and can be summarised in this table: A PPS Lease Means Lease or bailment of goods for more than one year (s 13(1)(a)) Lease or bailment of goods for an indefinite term (s 13(1)(b)) Lease or bailment of goods for term of up to one year that is automatically renewable or renewable at option of one party (s 13(1)(c))

A PPS Lease Excludes Leases by lessors not regularly engaged in leasing goods (s 13(2)(a)) Bailments by bailors not regularly engaged in bailing goods (s 13(2)(b)) Leases of consumer property as part of a lease of land, where use of property is incidental to use and enjoyment of land (s 13(2)(c))

Lease or bailment of goods for term of up to one year, then lessee or bailee retains uninterrupted possession for more than one year after first acquisition (s 13(1)(d)) Lease or bailment of goods with a serial number, either for a term of 90 days or more, or less than 90 days but automatically renewable or renewable at option, or for less than 90 days but lessee or bailee retains uninterrupted possession for 90 days or more after first acquisition (s 13(1)(e))63

Leases or bailments prescribed by regulations for the purposes of this definition (s 13(2)(d))62



The definition of ‘PPS lease’ only applies to a bailment if the bailee provides value. Notes 61

62 63

Chattel paper is writing (including in electronic form) that evidences both a monetary obligation and either or both a security interest in or lease of specific tangible property or specific intellectual property. Chattel paper includes equipment leases, hire purchase agreements, chattel mortgages and possibly certain retention of title supply arrangements. For example, ‘pooling arrangements’ are excluded by reg 1.9. There is a proposal to delete s 13(1)(e) and make certain other consequential amendments to the Act; see Personal Property Securities Amendment (Deregulatory Measures) Bill 2014.

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[Pt A.31] Extension of the pre-PPSA approach Deeming all PPS leases to be security interests is an extension of the approach that existed under the Register of Encumbered Vehicles (REVs) (that is, the state and territory motor vehicle security legislation). It also recognises that it is often difficult to determine if a lease is an operating lease (sometimes referred to as a ‘true’ lease) or a finance lease because the rights and responsibilities relating to the leased property can be shared or allocated as between lessor and lessee in a multitude of ways. A bright line test is achieved by deeming all PPS leases to be security interests for the purposes of the PPSA.64 While not all transfers of accounts receivable are intended to secure payment

or performance of an obligation, many do just this. The degree of recourse to a transferor varies considerably and this makes it difficult to easily determine which transfers are intended to function as a security and which are intended to achieve an outright sale. The PPSA addresses this difficulty by treating all transfers of accounts receivable as security interests unless they occur in connection with the sale of a business or debt collection services. This approach, which follows the approach taken in Canada and New Zealand, enables priority issues as between purchasers of receivables and inventory financiers (whose claims extend to the proceeds of inventory) to be dealt with in a comprehensive and transparent manner. Deeming a transaction to be a security interest for the purposes of the PPSA should not of itself change its characterisation for other legal or accounting purposes. A PPS lease is a security interest under the PPSA but nothing in the PPSA is intended to change its tax or accounting treatment. A security interest does not include a licence65 or an interest of a kind prescribed by the PPS Regulations: PPSA s 12(5). Notes 64

65

The Canadian PPSA legislation did not originally deem all leases for a term of more than one year to be security interests. However, the difficulty encountered by the courts in distinguishing between a ‘true’ lease and a financing/security lease forced the change: [Pt A.29] n 59; L Widdup and L Mayne, Personal Property Securities Act: A Conceptual Approach, LexisNexis, Wellington, 2002, paras 3.6 and 3.7. A licence is not a security interest but a licence is normally considered personal property and is capable of being subject to a security interest.

[Pt A.32] Interests not covered by the PPSA Key provision — s 8 of the PPSA Section 8 of the PPSA lists the interests where the PPSA does not apply. These are summarised in the table below: Summary table of interests where the PPSA does not apply — s 8 Interests of sellers who have shipped Unless there is evidence to create or goods under bills of lading to the order provide security interest in the goods; of seller, or their agent (s 8(1)(a)); Liens, charges, other interests in Unless property-owner agrees to personal property, created or arising or interest provided for under Commonwealth law

(except PPSA) (s 8(1)(b)); [page 29] Summary table of interests where the PPSA does not apply — s 8 Liens, charges, other interests in personal property created or arising or provided for under general law (s 8(1) (c)); Rights of set-off or rights of combination of accounts (s 8(1)(d));66 Rights or interests held or provided for (i) a netting arrangement under any of these defined in the (i) a close-out netting contract Payment Systems and Netting Act (iii) a market netting contract 67 1998 (s 8(1)(e)); Interests provided for by creation of interest or transfer in land (s 8(1)(f)(i)); Interest provided for by creation of interest in right to payment in connection with interest in land (s 8(1) (f)(ii)); Interest provided for by a transfer of an unearned right to payment under contract to a person who performs the obligations (s 8(1)(f)(iii)); Interest provided for by a transfer of present or future remuneration (s 8(1) (f)(iv));



Interest provided for by a transfer of Except a transfer of right to an interest or claim in contract of annuity insurance payment as indemnity or or insurance policy (s 8(1)(f)(v)); compensation for loss of collateral Interest provided for by a transfer of account made, or if the account was



acquired, solely to collect the account (s 8(1)(f)(vi) and s 8(1)(f)(vii)); Interest provided for by the transfer of an account or negotiable interest to satisfy pre-existing indebtedness (s 8(1)(f)(viii)); Interest provided for by sale of an Unless seller remains in apparent account or chattel paper in the sale of a control of business after sale business (s 8(1)(f)(ix)); Interest provided for by transfer of beneficial interests in a monetary obligation where the transferee holds monetary obligation on trust for transferor (s 8(1)(f)(x));



Certain interests under the Bankruptcy (i) Act 1996 (s 8(1)(g));

interest of the Official Trustee or a registered trustee who has taken control of a property (ii) a charge created under s 139ZN of that Act (iii) a charge created under 139ZR of that Act [page 30]



Summary table of interests where the PPSA does not apply — s 8 (iv) an interest created under a personal insolvency agreement under Pt X of that Act

Trust over an amount provided by way If person provided with financial of financial accommodation (s 8(1)(h)); accommodation is required to use amount with a condition Right, entitlement or authority granted under the general law or law of Commonwealth, a state or territory in

relation to control, use or flow of water (s 8(1)(i)) and (5)); Interest in a fixture (s 8(1)(j));



Security interest in personal property taken by a pawnbroker (s 8(1)(ja));



Interests that a person may have in any: (i) (s 8(1)(jb));

as a member of a superannuation fund (as within meaning of Superannuation Industry (Supervision) Act 1993)



(ii) as a member of an approved deposit fund (within meaning of Superannuation Industry (Supervision) Act 1993)



(iii) as a holder of a retirement savings account (within meaning of Retirement Savings Accounts Act 1997)



(iv) in an account kept under the Small Superannuation Accounts Act 1995



(v) as a holder of a superannuation annuity (within meaning of the Income Tax Assessment Act 1997)

Charge created by either of (s 8(1)(jc)); (i)

s 6 of Commonwealth Inscribed Stock Act 1911



(ii) s 5 of Loans Redemption and Conversion Act 1921

Statutory right granted by or under a law of Commonwealth, a state or territory if, when right is granted, or afterwards, right is declared not to be personal property under PPSA (s 8(1) (k));



Interest prescribed by regulations for purposes of s 8 of the PPSA (s 8(1)(l)). Notes 66 While mere rights of set off or combination of accounts are excluded, a ‘flawed asset arrangement’ that constitutes an interest in property and secures payment or performance of an obligation is likely to be a security interest: PPSA s 12(2)(1). The decision of the Canadian Supreme Court in Caisse Populaire Desjardins de l’Est de Drummond v Canada [2009] 2 SCR 94; 2009 SCC 29 includes useful commentary in relation to the characterisation of flawed asset arrangements as security interests. 67 Ibid.

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[Pt A.33] Form of security agreements Subject to satisfying the basic requirements for attachment and perfection (see [Pt A.40]–[Pt A.42]), parties are generally free to negotiate the terms of their security agreement without the need to satisfy prescriptive form requirements. However, other Commonwealth, state or territory laws may still need to be satisfied in respect of matters which go beyond mere form and registration requirements (for example governmental or regulatory authority consents) and to the extent those laws can operate concurrently with the PPSA (see [Pt A.53]): PPSA Pt 7.4. The PPSA does not mandate the use of particular forms of security documentation but it does enable existing forms to be rationalised and simplified, particularly in relation to non-deemed security interests. This is because of the following: (a) The PPSA includes detailed remedies provisions for non-deemed security interests for creditors who wish to rely on these rather than providing for their own contractual remedies.68 (b) A security interest can be created by simply stating that ‘A grants to B a security interest in specific collateral or all of A’s present and future personal property and proceeds to secure the secured obligations’. (c) The PPSA is applicable to individuals and other legal entities and is much more comprehensive than most pre-PPSA laws in terms of the types of property covered by it.

The PPSA makes it clear that a security agreement is any agreement that creates a security interest and a security interest is not constrained by pre-PPSA notions of legal form or title: ss 10 and 12(1), definitions of ‘security agreement’ and ‘security interest’. Particular forms of transaction may still be adopted for tax, accounting or other non-security legal reasons. In some circumstances it may still be appropriate to use traditional language such as ‘retention of title’ rather than use generic ‘security interest’ wording. For example, a supplier of inventory who takes security for the unpaid purchase price will most likely have a ‘circulating security interest’ in inventory for the purposes of the CA unless it retains title. This will be important as it determines the supplier’s priority over preferred creditors such as employee entitlements. Similarly, receivables financing is still likely to be structured as an assignment to the financier for new value, rather than a loan with security over the receivables, due to the operation of Pt 9.5 of the PPSA and the treatment of ‘circulating security interests’ under the CA. Caution will need to be exercised when including clauses creating a security interest in documents that contain information the parties would not want disclosed to other persons. While the Personal Property Securities Register is a notice rather than document filing register, secured parties can be required to provide a copy of the security agreement that provides for the security interest to certain interested persons: s 275.69 Notes 68 There are a number of limitations on the application of the remedies provisions in PPSA Chapter 4. 69 Section 275(6) and (7) provide some protection for confidential information.

[Pt A.34] Demise of the fixed and floating charge The PPSA does not distinguish between ‘fixed’ and ‘floating’ security interests and there is no ongoing relevance for related concepts such as ‘crystallisation’.70 However, it is open to the secured party and the grantor to agree the circumstances in which [page 32] collateral can be disposed of by the grantor.71 In addition, the extinguishment

rules (referred to below at [Pt A.46]) will protect third party transferees where applicable. These rules apply even in the absence of provisions in a security agreement allowing certain property to be disposed of by the grantor in the ordinary course of business. Under the PPSA all security interests are effectively ‘fixed’, to use the traditional parlance, but the terms of the relevant security agreement or the application of the extinguishment rules may enable a third party transferee to take free of the security interest. The extinguishment rules do not generally affect priority contests as between secured parties. Because other legislation and security agreements continue to refer to ‘charges’, ‘fixed charges’ or ‘floating charges’, the PPSA includes provisions which explain how these terms are to be interpreted in the PPSA environment.72 While documents that are drafted as charges and which include crystallisation provisions may still provide effective security, they will be interpreted subject to the PPSA and it is expected these forms of documentation will fade away over time. Notes 70 Section 19 of the PPSA specifies when a security agreement ‘attaches’ to collateral (see [Pt A.40] for further commentary on the concept of attachment) and it expressly provides that any reference in a security agreement to a ‘floating charge’ does not alter the time of attachment. In other words, crystallisation provisions will no longer have any relevance. 71 The agreement will not be able to prevent the grantor from transferring the collateral. The transfer would, however, give rise to a default. See PPSA s 79. 72 PPSA Pt 9.5; note especially s 339. Provisions similar to s 339 have been included in the PPSA consequential amendments legislation introduced by some of the states.

[Pt A.35] Entities covered by the legislation The PPSA applies to security interests given by corporations and other legal entities (irrespective of whether those entities are registered or required to be registered in Australia) as well as individuals. It is also possible to register security interests in respect of registered managed investment schemes, trusts, partnerships and bodies politic.

[Pt A.36] Categorisation of collateral Collateral is categorised into: (a) accounts; (b) authorised deposit-taking institution (ADI) accounts;

(c) (d) (e) (f) (g) (h) (i) (j) (k) (l) (m) (n)

chattel paper; commercial property; consumer property; crops; currency; documents of title; financial products; financial property; goods; intangible property; intellectual property; intellectual property licences; [page 33]

(o) intermediated securities (including rights in an account to which interests in financial products may be credited or debited and which is controlled by an intermediary on behalf of the account holder); (p) inventory; (q) investment instruments (eg shares and interests in managed investment schemes); (r) motor vehicles; and (s) negotiable instruments. These categories are not all mutually exclusive unlike the classes of property prescribed for registration purposes (referred to below at [Pt A.38]). Many of the provisions in the PPSA apply equally to any collateral in any circumstances. However, the different categories of collateral become relevant for the purposes of some specific perfection, priority, extinguishment and enforcement rules that apply to particular categories of collateral generally or in certain circumstances. The meaning of perfection and brief commentary on the priority, extinguishment and enforcement rules appear below.

[Pt A.37] PPS Register

The Personal Property Securities Register (PPS Register)73 is wholly electronic and, subject to maintenance requirements, accessible all the time. It also operates on the basis of notice rather than document registration.74 The notice is known as a ‘financing statement’ and it can be registered before any secured transaction takes place. One registration can also cover multiple security interests provided it is completed appropriately. A person must not apply to register a financing statement, or a financing change statement, that describes collateral, unless the person believes on reasonable grounds that the person described in the statement as the secured party is, or will become, a secured party in relation to the collateral (otherwise than by virtue of the registration itself): PPSA s 151(1). The PPS Register can be searched by reference to either the grantor’s details and, in the case of serial numbered property, the unique serial number referable to that property (for example, the Vehicle Identification Number (VIN) for motor vehicles). Searching the grantor’s details discloses any security interests registered against a particular grantor, while searching against the serial number for serial numbered property discloses any security interest claimed in respect of that property. The grantor’s details are not registered if the security interest relates to collateral that is serial numbered consumer property. The ‘details’ required to be registered in respect of a grantor are prescribed by the PPS Regulations. Registrations for consumer property or property described by serial number may be made for up to seven years and may be renewed for further periods of up to seven years. Registrations for collateral other than consumer property or property described by serial number may be made for an indefinite term or for a term up to 25 years and may also be renewed. It is not mandatory to register security interests and there is no general time limit for registering an interest under the PPSA. However, failure to perfect75 means a security interest can be void on the insolvency of the grantor,76 the secured party may lose [page 34] priority to other perfected security interests77 and the secured party will have greater exposure to third party buyers or lessees of the collateral via the extinguishment rules.

Interested persons (including the grantor or a person with another security interest in collateral) are entitled to obtain from a secured party a copy of their security agreement and other relevant information within 10 business days after a request is received: PPSA ss 275 and 277. See Part B — Guide to Registration on the Personal Property Securities Register. Notes 73 The PPS Register is operated and administered by the Insolvency Trustee Service Australia. 74 The data required to be included in a financing statement is identified in s 153 of the PPSA and the PPS Regulations. The data does not include details of the secured obligations or liabilities. 75 The concept of perfection is explained below at [Pt A.42]. 76 Where the grantor is a company the security interest will vest in the company on insolvency if the security interest is perfected by registration only and it has been registered for less than six months, unless it was registered within 20 business days after the relevant security agreement came into force: s 588FL of the Corporations Act. 77 There are also particular timing requirements for perfecting purchase money security interests: s 62 of the PPSA.

[Pt A.38] Description and classification of property Collateral subject to a financing statement: (a) must be described as either consumer property or commercial property;78 (b) may or must be described by serial number, if allowed or required by the PPS Regulations; and (c) must belong to a single class prescribed by the PPS Regulations (but multiple registrations can be made through one application process): PPSA s 153. The PPS Regulations prescribe the following classes of property: (a) agriculture; (b) aircraft; (c) all present and after-acquired property (the PPS Register describes this class as ‘all present and after acquired property — no exceptions’); (d) all present and after-acquired property except (the PPS Register describes this class as ‘all present and after acquired property — with exceptions’); (e) financial property;

(f) intangible property; (g) motor vehicle; (h) other goods; and79 (i) watercraft. Under the main classes, there are also subclassifications: (a) for agriculture: (i) crops; or (ii) livestock; (b) for intangible property: (i) accounts; (ii) circuit layout; (iii) copyright; (iv) design; [page 35] (v) general intangible; (vi) patent; (vii) plant breeder’s right; or (viii)trade mark; (c) for financial property: (i) chattel paper; (ii) currency; (iii) document of title; (iv) intermediated security; (v) investment instrument; or (vi) negotiable instrument; and (d) for aircraft: (i) aircraft frame; (ii) aircraft engine; (iii) helicopter; or (iv) small aircraft.

The classification of collateral is, to some extent, relevant to determining priority between competing security interests. When the security interest is a PPS lease or a commercial consignment, the relevant class is to be determined having regard to the property being leased or consigned. These classes are defined so that no item of collateral can fall within more than one class apart from ‘all present and after-acquired property’ and ‘all present and after-acquired property except’ specified property which necessarily embrace the other classes. The PPS Regulations also provide a ‘free text field’ functionality, enabling secured parties to further describe the collateral in which a security interest is taken in a customised descriptive form. The field is not available in a financing statement in certain circumstances. In particular, the field does not appear when: (a) the following collateral classes are selected: ‘all present and after acquired property — no exceptions’, or ‘aircraft’; or (b) the collateral classes ‘motor vehicle’ or ‘watercraft’ are selected and the registration is made by serial number in relation to a specific motor vehicle or watercraft.80 When the collateral class ‘all present and after acquired property — with exceptions’ is used, it is mandatory to describe the exceptions by reference to items or classes of personal property.81 Notes 78 ‘Commercial property’ is any personal property that is not consumer property and ‘consumer property’ is any personal property held by an individual, other than in the course or furtherance, to any degree, of carrying on an enterprise to which an ABN has been allocated: PPSA s 10. 79 ‘Other goods’ means personal property that is goods, other than agriculture, aircraft, motor vehicles and watercraft. 80 Refer to [Pt A.39] below as to when registration by serial number is necessary. 81 See the definition of ‘all present and after acquired property, except’ in PPS Regulations reg 1.6.

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[Pt A.39] Property requiring unique serial number The PPS Regulations require that security interests in the following property that is also consumer property must be described by using its unique serial

number: (a) (b) (c) (d)

motor vehicles; watercraft; aircraft; and certain intellectual property (such as designs, patents, plant breeder’s rights and trade marks or licences of them).82 Aircraft that is an aircraft engine, airframe, helicopter or small aircraft, when described as commercial property, must always be described by serial number.83 Motor vehicles and watercraft that are commercial property are able to be described using their serial number, but this is not mandatory. Certain intellectual property (such as designs, patents, plant breeder’s rights and trade marks) are also capable of being described by serial number.84 Different extinguishment rules apply for security interests over serial numbered property (refer below at [Pt A.46]). Notes 82 PPS Regulations Sch 1 cl 2.2(1)(a). 83 PPS Regulations Sch 1 cl 2.2(1)(b). 84 PPS Regulations Sch 1 cl 2.2(1)(c).

[Pt A.40] Attachment and perfection of security interests A security interest attaches to collateral when it meets the requirements for the ‘attachment rule’ in s 19(2) of the PPSA. The rule provides that the grantor must have rights in, or the power to transfer rights in, the collateral, and either value must be given or the grantor must perform an act by which the interest arises. A person may have ‘rights in the collateral’ or ‘the power to transfer rights in the collateral’ sufficient for attachment to occur even though that person is not the owner of the collateral. For example: (a) If a person is a grantor under a transaction that is an ‘in substance’ security interest pursuant to s 12(1) (such as a finance lease) or a deemed security interest pursuant to s 12(3) (such as an operating lease for a term of more than one year), the PPSA treats the person as if they were the owner of the collateral (even though this may not be the case as a matter of general law). This enables the person to give a security interest over the whole of the collateral, that is to say the lessee could

grant security over all of its assets and this would include the leased asset (not merely the lessee’s rights under the lease).85 (b) A right of possession may also be sufficient to give a grantor ‘rights in the collateral’ even though that right of possession does not arise under a transaction which is itself a security interest. However, while a security interest may attach to collateral in which the grantor has such a right of possession, the security interest only attaches to the grantor’s interest in the collateral and will be defeated by the true owner where the transaction giving rise to the grantor’s possessory interest is not a security interest for the purposes of the PPSA. (c) A person who has transferred rights in an account or chattel paper should still have sufficient rights in that account or chattel paper to grant a second transfer [page 37] of that account or chattel paper to a different transferee. This is because the interest of each transferee under a transfer of an account or chattel paper is a security interest, irrespective of whether it in substance secures payment or performance of an obligation: s 12(3). The priority rules in the PPSA would be circumvented if a person could not grant multiple transfers or other forms of security interest in the same account or chattel paper. For more about what constitutes ‘rights in collateral’ or ‘the power to transfer rights in the collateral’, see [PPSA.19.A]. Even though a grantor may have sufficient rights in the collateral for attachment to occur when it grants security, the secured party may not necessarily obtain priority over other security interests to which the PPSA priority rules apply or over interests that are not subject to the PPSA priority rules. Notes 85

Re Maiden Civil (P&E) Pty Ltd; Albarran v Queensland Excavation Services Pty Ltd (2013) 277 FLR 337; [2013] NSWSC 852; BC201310524.

[Pt A.41] Enforceability against third parties

A security interest will generally be enforceable against a third party if the interest is attached to the collateral, as by the ‘attachment rule’ set out in s 19(2), and if the conditions in s 20 are also met. These can be briefly summarised as the party needing to either possess the collateral, have perfected the security interest by control, or there must be a security agreement which is in writing, signed or adopted by the grantor and contains a description of the collateral. The PPSA contemplates that security agreements can be entered into electronically.

[Pt A.42] Perfection A security interest will generally be perfected in relation to collateral if it has attached, it is enforceable against a third party (s 21(1)) and any of the conditions in s 21(2) applies to it. These conditions include registration or possession of collateral,86 or the secured party having control of the collateral in certain instances, such as when the collateral is an ADI account, an intermediated security, investment instrument, negotiable instrument not evidenced by a certificate, a right evidenced by certain letters of credit or a satellite. Perfection by control will be particularly relevant for security interests in ADI accounts,87 investment instruments and intermediated securities. Some security interests are deemed to be temporarily perfected for relatively short time periods and, in limited circumstances, pending perfection by the usual means (that is, registration or possession or control). For example, if goods are brought into Australia and they are subject to a perfected security interest in the jurisdiction they come from, the security interest will be temporarily perfected for a short time after the goods enter Australia to enable the secured party to perfect under the PPSA. Priority is preserved during temporary perfection. Notes 86 87

Taking possession will be a particularly important perfection requirement for a secured party claiming a security interest in chattel paper; PPSA ss 24(5) and 71. The ADI is the only party that can perfect by control; PPSA s 25.

[page 38]

[Pt A.43] Priority and extinguishment rules — general priority rules The following general priority rules will apply: (a) a perfected security interest has priority over an unperfected security interest. This will be the case even where the party with the unperfected security interest has title to the relevant collateral (for example, a lessor or retention of title supplier) and even if the secured party took the perfected security interest with knowledge of the existence of the unperfected security interest;88 (b) perfection by control will ensure priority over perfection by other means. If two interests are perfected by control, priority is determined by the order of perfection if the perfection by control has been continuous; (c) if two interests are perfected other than by control, the first party to take a perfecting step (for example, registration) will have priority; and (d) if there are two unperfected interests, then priority is determined by the order of attachment. The party who has priority will usually have priority to the collateral and any proceeds. Priority will normally extend to future advances. Notes 88

Re Maiden Civil (P&E) Pty Ltd, Albarran v Queensland Excavation Services Pty Ltd (2013) 277 FLR 337; [2013] NSWSC 852; BC201310524; White v Spiers Earthworks Pty Ltd (2014) 99 ACSR 214; [2014]WASC 139; BC201402620; Graham v Portcom New Zealand Ltd (2004) 10 TCLR 983; [2004] 2 NZLR 528; (2004) 9 NZCLC 263,517; Waller v New Zealand Bloodstock Ltd (2005) 11 TCLR 497; [2006] 3 NZLR 629; (2006) 9 NZCLC 263,944; Rabobank New Zealand Ltd v McAnulty [2011] NZCA 212; International Harvester Credit Corp of Canada Ltd v Touche Ross (1986) 61 CBR (NS) 193; Re Giffen [1998] 1 SCR 91; (1998) 155 DLR (4th) 332.

[Pt A.44] Purchase money security interests The major exception to this is for purchase money security interests (PMSIs) which have a super priority. A purchase money security interest is: (a) a security interest taken in collateral, to the extent that it secures all or part of its purchase price; (b) a security interest taken in collateral by a person who gives value for the purpose of enabling the grantor to acquire rights in the collateral to the extent the value is applied to acquire those rights;

(c) the interest of a lessor or bailor of goods under a PPS lease; and (d) the interest of a consignor who delivers goods to a consignee under a commercial consignment.89 A registration in respect of a security interest which is, or is to be, to any extent a PMSI, must indicate this to obtain the super priority benefit.90 Also, the registration must be made within a prescribed timeframe to obtain the PMSI super priority: s 62. Notes 89

A PMSI does not include an interest acquired under a sale and lease back to the seller; an interest in collateral that is chattel paper, an investment instrument, an intermediated security, a monetary obligation or a negotiable instrument; or a security interest in collateral that the grantor intends to use predominantly for personal, domestic or household purposes (unless the collateral is serial numbered property): PPSA s 14.

[page 39] 90

Sections 62(2)(c), 62(3)(c), 153(1), Table Item 7 of the PPSA and PPS Regulations Sch 1 cl 3.1. Also, if a registered financing statement indicates that a security interest is a PMSI to any extent and it is not, then the registration is ineffective: PPSA s 165(c).

[Pt A.45] Other special priority rules Other special priority rules apply for: (a) agricultural security interests including security interests in crops and livestock given for value and to enable the debtor to produce the crops or develop the livestock. The rules will regulate the priority of a security interest in crops as against the interest of a lessor or mortgagee of the land where the crops are grown (PPSA Pt 3.2); (b) security interests in goods that become an accession to other goods (PPSA Pt 3.3); (c) determining proportional priority entitlements where goods subject to different security interests are manufactured, processed, assembled or commingled and as a result the original property loses its identity in the product or mass but the security interests continue in that product or mass (PPSA Pt 3.4); (d) intellectual property and intellectual property licences (PPSA Pt 3.5); and

(e) accounts receivable,91 accounts with authorised deposit-taking institutions (ADIs) (s 75), negotiable instruments, chattel paper,92 negotiable documents of title and non-consensual liens arising by operation of law or equity: PPSA s 73. The priority rules can be displaced by priority or subordination agreements between secured parties. As between a security interest to which the PPSA applies and an interest to which the PPSA (including s 73) does not apply, the general law will determine priority. Notes 91 92

Receivables financiers have a special priority that ranks ahead of PMSI holders in relation to the proceeds of PMSI collateral that is inventory; PPSA s 64. Section 71 of the PPSA means a secured party needs to take possession of chattel paper or ensure no other person can do so without being aware of the secured party’s interest to ensure it has priority over a subsequent transferee; s 24(5) of the PPSA contemplates possession of an authoritative electronic record of chattel paper.

[Pt A.46] Extinguishment rules There are a number of extinguishment rules, also known as ‘taking free’ rules, in the PPSA (Pt 2.5) benefiting third party buyers and lessees:93 (a) unperfected security interests — a buyer or lessee of personal property, for value, takes free of an unperfected security interest, if the buyer or lessee is not a party to the transaction that provides for the security interest; (b) serial numbered property — a buyer or lessee of personal property that may, or must, be described by serial number will take free of a security interest if the buyer or lessee, does not hold the property as inventory or on behalf of a person who would hold the property as inventory, a search of the Register using only the correct serial number would not disclose the security interest, and the buyer or lessee is not a party to the transaction that provides for the security interest; (c) motor vehicles generally — a buyer or lessee, for new value, of a motor vehicle takes the motor vehicle free of a security interest in the motor vehicle if that motor vehicle is of a kind that may, or must, be described by serial number, there is a time during the period between the start of the previous day and the time of

[page 40] the sale or lease when a search of the PPS Register using only the serial number of the motor vehicle would not disclose the security interest, and the seller or lessor is the person who granted the security interest or (if the person who granted the security interest has lost the right to possess the motor vehicle, or is estopped from asserting an interest in the motor vehicle)

(d)

(e)

(f)

(g) (h)

another person who is in possession of the motor vehicle. However, this rule will not apply if the secured party is in possession of the motor vehicle immediately before the time of the sale or lease, or the motor vehicle is bought at a sale held by or on behalf of an execution creditor, or the buyer or lessee holds the motor vehicle as inventory, or the buyer or lessee buys or leases the motor vehicle with actual or constructive knowledge of the security interest; motor vehicles sold or leased by a prescribed person — a buyer or lessee, for new value, of a motor vehicle takes the motor vehicle free of a security interest in the motor vehicle if that motor vehicle is of a kind that may, or must, be described by serial number and the seller or lessor is in a class of persons prescribed by the PPS Regulations for the purposes of this rule.94 However, this rule will not apply if the secured party is in possession of the motor vehicle immediately before the time of the sale or lease, or the motor vehicle is bought at a sale held by or on behalf of an execution creditor, or the buyer or lessee holds the motor vehicle as inventory, or on behalf of a person who would hold the motor vehicle as inventory, or the buyer or lessee buys or leases the motor vehicle with actual or constructive knowledge that the sale or lease constitutes a breach of the security agreement that provides for the security interest; ordinary course of business — a buyer or lessee of personal property who buys or leases that property in the ordinary course of the seller’s or lessor’s business of dealing with property of that kind takes the property free of a security interest that is given by the seller or lessor if the buyer or lessee has no actual knowledge that the sale or lease constitutes a breach of the security agreement under which the security interest was created and, if the property may, or must, may described by serial number, the buyer or lessee does not hold the property as inventory or on behalf of a person who would hold the property as inventory;95 personal, domestic or household property — a buyer or lessee of personal property that is not required or allowed to be described by serial number and is acquired predominantly for personal, domestic or household purposes takes the property free of any security interest if the new value given for the buyer’s or lessee’s interest in the property does not exceed $5000 (or such greater amount prescribed by the regulations) and the buyer or lessee does not have actual or constructive knowledge that the sale or lease constitutes a breach of the security agreement that provides for the security interest; currency — a holder of currency takes the currency free of any security interest if the holder has no actual or constructive knowledge of the security interest; and investment instruments and intermediated securities: (i) a buyer of an investment instrument or an intermediated security in the ordinary course of trading on a prescribed financial market takes the instrument or intermediated security free of a security interest; (ii) a purchaser96 of an investment instrument, other than a secured party, takes the instrument free of a security interest if the purchaser gives value for the instrument, the purchaser takes possession or control of the instrument and the purchaser does not have actual or constructive knowledge that the taking of the instrument constitutes a breach of the security agreement that provides for the security interest; and (iii) a transferee who takes an interest in an intermediated security takes the interest free of a security interest in the intermediated security if the

[page 41] transferee gives value for the interest (unless the interest acquired is itself a security interest), the credit of the interest in the financial product in relation to which the

intermediated security arises is made in accordance with a consensual transaction and at the time the interest is taken, the person in whose name an intermediated security intermediary maintains the intermediated security account does not have actual or constructive knowledge that crediting the interest in the financial product to the account constitutes a breach of a security agreement that provides for a security interest in any intermediated security or financial product.

Another extinguishment rule applies in respect of certain temporarily perfected security interests: s 52. Registration does not constitute notice or impute actual or constructive knowledge of a security interest registration or its contents to other persons: s 300. However, where a transferor and transferee are associated entities certain presumptions about actual or constructive knowledge and value will apply: s 299. The PPSA also contains rules regarding the actual or constructive knowledge of bodies corporate and other entities: s 298. The extinguishment rules in the PPSA are not exhaustive, as the general law rules will continue to apply alongside the PPSA unless they are incapable of operating concurrently. This means, for example, that the ‘buyer in possession’ and ‘seller in possession’ provisions of sale of goods legislation will continue to apply. Also, applicable sale of goods legislation should be considered in determining whether a person is a ‘buyer’ of goods and whether there has been a sale for the purposes of the extinguishment rules.97 Notes 93

94

95 96

97

The extinguishment rules apply in situations where collateral is purchased or leased but not where the buyer or lessee’s interest is itself a security interest except in ss 50 (investment instruments) and 51 (intermediated securities); PPSA s 42. Where a lessee ‘takes free’ of the relevant security interest, it does so only for the duration of its lease. The prescribed class is sellers and lessors of motor vehicles who hold a licence to deal or trade in that kind of motor vehicle and the licence is issued by a licensing authority in the state or territory where the sale or lease of the motor vehicle happens; reg 2.2. This extinguishment rule is, in effect, a codification of the prior law which allowed floating charge property to be disposed of in the ordinary course of business of the chargor. ‘Purchaser’, in this context, means a person who takes the instrument by sale, lease, discount, assignment, negotiation, mortgage, pledge, lien, issue, reissue or any other consensual transaction that creates an interest in personal property. Warehouse Sales Pty Ltd (in liq) & Lewis and Templeton v LG Electronics Australia Pty Ltd (2014) 291 FLR 407; [2014] VSC 644; BC201410780.

[Pt A.47] Transfer of collateral In addition to the extinguishment rules, there are specific priority rules dealing

with what happens when collateral that is the subject of a security interest is transferred in circumstances where none of the extinguishment rules apply and the transferee grants or has previously granted a competing security interest: ss 66, 67 and 68; also refer to s 34. Although many of the priority and extinguishment rules in the PPSA are complex, they inject considerable certainty into an area of law which was formerly confusing and uncertain. [page 42]

[Pt A.48] Enforcement Chapter 4 of the PPSA includes enforcement provisions dealing with seizure, disposal and retention of collateral. These provisions apply to security interests other than deemed security interests. Many of these provisions can be excluded by agreement between the parties when the collateral is not used predominantly for personal, domestic or household purposes: s 115.98 The enforcement provisions also do not apply to security interests in investment instruments that have been perfected by possession or control or to security interests in intermediated securities that have been perfected by control: s 109(3). Some enforcement provisions will not apply in relation to collateral that is used predominantly for personal, domestic or household purposes: s 109(5). The enforcement provisions will not apply to property while a person is a receiver or receiver and manager of property of a corporation, but will apply where any other person is a ‘controller’ (other than a receiver or receiver and manager) unless the parties to the security agreement contract out of the application of any provision of Pt 4.3: ss 116 and 115(7). Security interests in ‘liquid assets’ such as accounts, chattel paper and negotiable instruments can be enforced by giving notice to the person who owes an amount to the grantor: ss 120 and 121. The requirements of the National Credit Code (NCC) continue to regulate the enforcement of security interests to which the NCC applies. To avoid unnecessary duplication or overlapping processes, the PPS Regulations provide that specified provisions of Chapter 4 of the PPSA are taken to have been complied with in specified circumstances if a specified provision of the NCC has been complied with in those circumstances: s 119.

Notes 98

However, if parties to a security agreement contract out of a provision (other than s 142 relating to the redemption of collateral), the provision continues to apply to the extent it gives rights to, or imposes obligations on, persons who are not parties to the security agreement.

[Pt A.49] Insolvency Subject to certain exceptions, an unperfected security interest held by a secured party will generally vest in the grantor on insolvency, effectively voiding the interest: PPSA Pt 8.2.99 While this mirrors the pre PPSA position with respect to charge and mortgage type securities, it is a fundamental shift for deemed security interests where title remains with or is obtained by the secured party.100 A secured party who has title to collateral (for example, a lessor or retention of title supplier) risks losing priority and their interest in the collateral if they do not register their security interest. There is an additional vesting rule where the grantor is a company: s 588FL of the CA. A secured party whose security interest is void on insolvency will be able to claim as an unsecured creditor. Notes 99

The exceptions relate to a transfer of an account or chattel paper, a personal property securities lease for a term between 90 days and one year and commercial consignments which, in each case, do not secure payment or performance of an obligation, and certain turnover trusts.

[page 43] 100 The position under the PPSA is different from the position in New Zealand, where unperfected security interests of all types remain valid as against a liquidator or bankruptcy trustee, and is closer to the approach taken in Canada and the United States.

Continuing relevance of common law and equity Key Points Common law and equity continue to apply to personal property securities to the extent that they are

compatible with the PPSA. Contract and agency law still apply.

[Pt A.50] Continuing application of general law The PPSA is a non-exhaustive codification of the law relating to personal property securities. It is not intended to exclude or limit the operation of the general law or, as discussed below in [Pt A.51], other Commonwealth, state or territory legislation to the extent the general law or other legislation is capable of operating concurrently with the PPSA: s 254(1). ‘General law’ means the principles and rules of the common law and equity: s 10. Apart from the specific PPSA requirements for attachment, most issues concerning the formation and validity of a security agreement continue to be governed by the general law of contract and agency.101 Other general law principles that continue to apply in conjunction with the PPSA include: (a) the concept of sheltering under which a transferee from a transferor who took free of a security interest is entitled to shelter under the transferor’s title as against the secured party; (b) the right of a secured party to bring personal claims against third persons such as: (i) an action in conversion against a transferee from the grantor if there is an unauthorised disposal of collateral; (ii) a restitutionary claim against a wrongdoer for the value of the proceeds obtained by the wrongdoer as a result of a disposal of collateral; and (iii) an action at common law to account for money had and received; (c) the equitable doctrine of marshalling under which a higher ranking secured party can be required to enforce its security interest against collateral not subject to a lower ranking security interest before having recourse to the collateral that is subject to both security interests; (d) the ability to bring an action in tort for the wrongful seizure of collateral; (e) principles of estoppel may affect a person’s ability to rely on the statutory rules in the PPSA. The general law principles of estoppel would supplement the statutory estoppels provided for in PPSA s 283; (f) the right to bring an action for slander of title; and

[page 44] (g) subrogation when a person other than the grantor satisfies the obligations secured by a security interest and is subrogated to the rights of the secured party.102 General law principles of tracing are relevant to tracing proceeds for the purposes of the PPSA but there are particular considerations when applying those principles in the PPSA context.103 Notes 101 See [Pt A.29] n 58, Cuming, Walsh and Wood, p 50. 102 See [Pt A.29] n 58, Cuming, Walsh and Wood, pp 50, 51, 488, 641, 676 and 684–90; M Gedye, R C C Cuming and R J Wood, Personal Property Securities in New Zealand, Thomson, Wellington, 2002, pp 13–19; Commissioner of Inland Revenue v Stiassny [2012] NZCA 93. 103 See [Pt A.29]; n 58, Cuming, Walsh and Wood, pp 567–9; and above at n 102, Gedye, Cuming and Wood, pp 181–91.

Changes to and relationship with other legislation Key Points Amendments have been made to the CA to align it with the PPSA. National Credit Code operates concurrently. Other Commonwealth, state and territory legislation has been amended.

[Pt A.51] Corporations Act The Personal Property Securities (Corporations and Other Amendments) Act 2010 (Cth) and the Personal Property Securities (Corporations and Other Amendments) Act 2011 (Cth) amended the CA from the PPSA registration commencement time. The CA has been aligned with the PPSA by: (a) amending terminology in provisions dealing with charges to incorporate the ‘functional approach’ under the PPSA; (b) introducing the concept of a ‘PPSA security interest’, a ‘security interest’ and a ‘secured party’;

(c) extending the concept of property of a company to include the ‘retention of title property’ under the PPSA in appropriate circumstances; (d) repealing Chapter 2K, which dealt with the registration and priority of company charges, while retaining the substantive effect of ss 266 and 267 (as new ss 588FL and 588FP) which provided that charges were void against an administrator or liquidator in certain circumstances; and (e) changing references to floating charges to ‘circulating security interests’, while purporting to maintain existing rights such as employee preferences in s 561 (priority of employees’ claims over floating charges). [page 45] The Personal Property Securities (Corporations and Other Amendments) Act 2010 (Cth) also introduced transitional arrangements for security interests existing before the operation of the new scheme, and inserted relevant new definitions for compatibility with the PPSA. Section 588FL of the Corporations Act effectively replaces the 45-day registration rule for company charges under pre PPSA law with a 20-businessday registration rule for security interests given by a company (including security interests where another party has title to the collateral, if that security interest secures payment or performance of an obligation: s 588FN. The 20business-day period runs from when the relevant security agreement is entered into. To the extent a security interest is a ‘circulating security interest’ under s 51C of the Corporations Act, it will rank behind employee entitlements: s 561 of the Corporations Act. This is only relevant for ‘circulating assets’ under s 340 of the PPSA. Secured parties may wish to retain or acquire title to collateral so that the interest in the collateral will not be a ‘circulating security interest’ (as defined in s 51C). Alternatively, if the grantor has title to the collateral, the secured party can take steps to ensure it has ‘control’ of that collateral so that it is not a circulating asset under s 340 of the PPSA.104 Notes

104 The concept of ‘control’ in Pt 9.5 of the PPSA is different from perfection by control under Pt 2.3 of the PPSA.

[Pt A.52] National Credit Code Where collateral is used for consumer purposes and the National Credit Code (NCC) applies to the relevant security interest, the PPSA and the NCC operate concurrently and a secured party has to comply with both the requirements in the PPSA and in the NCC. The NCC and the PPSA contain similar requirements for enforcement, but they also contain requirements not shared with the other. As noted in [Pt A.48], where both the NCC and the PPSA contain similar obligations relating to enforcement, the PPS Regulations provide that a secured party who has complied with the relevant provision of the NCC is deemed to have complied with the corresponding obligations in the PPSA. The PPS Regulations deem compliance, where the provisions in the PPSA and the NCC are similar and where it is considered there would be no significant impact on the rights of the parties as a consequence of the deemed compliance.105 Notes 105 Paragraphs 4.24–4.31 in the EMPPSB.

[Pt A.53] Amendment of other Commonwealth legislation In addition to the amendments to the CA referred to above in [Pt A.51], other Commonwealth legislation has been amended from the PPSA registration commencement time: (a) to ensure compatibility of that legislation with the PPSA; (b) to facilitate implementation of the PPSA reforms including the transitional arrangements; and (c) so that security interests in particular types of property are primarily dealt with under the PPSA. [page 46] The Personal Property Securities (Consequential Amendments) Act 2009

(Cth) amended more than two dozen Commonwealth statutes including: (a) Admiralty Act 1988; (b) Air Services Act 1995; (c) Bankruptcy Act 1966; (d) Commonwealth Inscribed Stock Act 1911; (e) Corporations (Aboriginal and Torres Strait Islander) Act 2006; (f) Designs Act 2003; (g) Fisheries Management Act 1991; (h) Health Insurance Act 1973; (i) Insurance Act 1973; (j) Marine Navigation Levy Collection Act 1989; (k) Marine Navigation (Regulatory Functions) Levy Collection Act 1991; (l) Navigation Act 1912; (m) Patents Act 1990; (n) Plant Breeder’s Rights Act 1994; (o) Privacy Act 1988; (p) Protection of the Sea (Civil Liability) Act 1981; (q) Protection of the Sea (Harmful Anti-fouling Systems) Act 2006; (r) Protection of the Sea (Prevention of Pollution from Ships) Act 1983; (s) Protection of the Sea (Shipping Levy Collection) Act 1981; (t) Quarantine Act 1908; (u) Shipping Registration Act 1981; (v) Torres Strait Fisheries Act 1984; (w) Trade Marks Act 1995; and (x) Wool International Act 1993; In addition, the Offshore Resources Legislation Amendment (Personal Property Securities) Act 2011 (Cth) has amended both the Offshore Minerals Act 1994 (Cth) and the Offshore Petroleum and Greenhouse Gas Storage Act 2006 (Cth) by declaring certain licences under those Acts not to be personal property for the purposes of the PPSA. Other interests under these Acts have been prescribed under the regulations pursuant to PPSA s 8(1)(l) so that the PPSA does not apply to them.106 Notes

106 PPS Regulations subregs (1A) and (1B).

[Pt A.54] Amendment of other state and territory legislation Some existing state and territory securities laws listed in the table above at [Pt A.2] — Table of significant pre-PPSA law have not yet been repealed due to transitional and other issues. However, most of those laws have ceased to apply to new security interests from the registration commencement time of the PPSA.107 Each of the states and territories have also enacted their own consequential amendments legislation to: (a) facilitate implementation of the PPSA reforms including the transitional arrangements; (b) repeal pre-PPSA securities legislation; (c) ensure other legislation is compatible with the PPSA; [page 47] (d) declaring certain interests to be statutory interests to which s 73(2) of the PPSA applies; and (e) in some cases, to exclude certain property or interests from the application of the PPSA. See the table at [C.2] for further details on PPSA-related amendments in state and territory legislation. Notes 107 For example, the Personal Property Securities Act 2010 (ACT) has repealed the Instruments Act 1933 (ACT) effective from the registration commencement time of the PPSA.

[Pt A.55] Relationship between PPSA and other legislation generally If a law of a state or territory requires or enables a person to register a security interest or an assignment of a security interest, a failure to register under that law will not affect the validity, priority or enforceability of the security interest or the

validity of the assignment: ss 261 and 262. Similarly, if a prescribed state or territory law has the effect of requiring a security agreement or an assignment of a security agreement to be in a particular form or to be witnessed or executed in a particular way, a failure to satisfy those requirements will not affect the validity, priority or enforceability of the security interest or the validity of the assignment: s 263. To the extent a state or territory law would otherwise restrict or affect attachment or perfection under the PPSA, it will be inoperative: s 264. These provisions do not extend to other Commonwealth laws and they are only relevant to the extent the security interest is one to which the PPSA otherwise applies. Subject to the provisions mentioned in the previous paragraph, the PPSA is not intended to exclude the operation of Commonwealth, state or territory laws or the general law, to the extent they are capable of operating concurrently with the PPSA: s 254.108 The regulations may also be used to resolve certain inconsistencies between the PPSA and other laws: s 255.109 A referring state may also exclude the application of the PPSA (or parts of it) to specified matters: ss 258 and 259. As a consequence, other Commonwealth, state and territory laws may still affect who can take security over personal property and the authorisations and consents that may be required for it. If there is an inconsistency between the PPSA and any one of the Payment Systems and Netting Act 1998 (Cth), Cheques Act 1986 (Cth) or the Bills of Exchange Act 1909 (Cth), those other Acts will prevail: s 256. Legislation other than the PPSA may also continue to apply to security interests in property that is not personal property for the purposes of the PPSA. Notes 108 See, for example, Warehouse Sales Pty Ltd (in liq) & Lewis and Templeton v LG Electronics Australia Pty Ltd (2014) 291 FLR 407; [2014] VSC 644; BC201410780. Also note ss 245(2) and 257 of the PPSA. 109 See, for example, PPS Regulations reg 7.1.

[page 48]

Interaction between security interests and other interests in property

Key Points Non-consensual security interests (liens) are unaffected by the PPSA. Priority of interests arising outside the PPSA.

[Pt A.56] Interaction between PPSA and the common law Although one of the key objectives of the PPSA is to implement a consistent regime for the regulation of almost all types of security interests in all forms of personal property, there are a number of notable exclusions from the provisions of the PPSA: refer to [Pt A.32]. Where other types of interests in property are excluded from the operation of the PPSA, it becomes necessary to consider the interaction between the PPSA and the common law, or other legislation which gives rise to, and regulates the priority of that type of other interest. This part of the Background and Overview deals with the interaction between PPSA security interests and general law and statutory liens as well as other types of dealings in property that are not covered by the PPSA.

[Pt A.57] Interests excluded from the PPSA The PPSA does not apply to certain security and security-like interests. Most notably, non-consensual security interests remain unaffected by the PPSA: s 8(1) (b) and (c). Liens, charges and other interests in personal property created by, or arising by way of a law of the Commonwealth, a state or a territory, are excluded. Likewise, liens, charges and other interests created by, or arising by way of the general law (such as a repairer’s lien, landlord’s lien, solicitor’s lien, subcontractor’s lien and agent’s lien) are not affected by the PPSA. Additionally, the states and territories may specify state or territory licences, interests, authorities or entitlements to which the PPSA does not apply: s 8(1) (k).110 The PPSA expressly states that its provisions will not apply to tradeable water rights and access entitlements and goods affixed to land (s 8(1)(i) and (j)); security interests in these forms of ‘property’ will remain governed by the laws of the state or territory to which the property relates. These provisions reflect the public policy interest of preserving the capacity of states and territories to control the issuing of licences and their assignment after issue. The interest of the Official Trustee or a registered trustee who has taken control of a debtor’s or

grantor’s property and certain charges created under the Bankruptcy Act 1966 (Cth) are declared not to be security interests, for the purposes of the PPSA: s 8(1)(g). [page 49] Section 8 of the PPSA sets out a range of security or other interests to which the PPSA does not apply. The continued operation of these, and other liens, will ensure that this distinct, and highly developed field of law will remain largely unaffected by the implementation of the PPSA. It is important to note that subject to s 8(2) and (3) the PPSA does not apply to these interests in their entirety. Therefore, where a non-PPSA security interest is involved, the existing law pertaining to enforcement of those security interests, and the respective rights and obligations of the parties will remain unchanged. Holders of a possessory interest in personal property via operation of a non consensual lien should therefore take care to ensure the (often stringent) requirements of the law pertaining to that lien are complied with. A useful discussion of the various duties of the holder of the benefit of various liens (including, for example, duties to retain property subject to the lien, serve notices and obtain the consent of the court prior to disposal) may be found in Hewett v Court.111 The PPSA does not apply to a small number of transactions which, in the simplest sense, constitute an assignment or conveyance, but might otherwise have been considered to be a security interest, as a result of the functional approach to, or deeming of, security interests under the PPSA. Such interests include those arising from a simple assignment of accounts (for the purpose of collection of those accounts), an assignment of an account or negotiable instrument to satisfy (either wholly or partly) a pre-existing indebtedness, and the interest of a seller who has shipped goods to a buyer under a negotiable bill of landing: s 8(1)(f)(vi), (vii), (viii) and (1)(a). The exclusion of these interests from the operative provisions of the PPSA ensures that the PPSA’s functional approach to the regulation of security interests will not operate so as to deem common commercial transactions not intended to give rise to a security interest, to create such an interest. In doing so, the PPSA maintains the general law with regard to these interests.

Notes 110 Also note the definition of ‘personal property’ in s 10 of the PPSA. 111 Hewett v Court (1983) 46 ALR 87; 57 ALJR 211; [1983] HCA 7; BC8300065 per Deane J at 221.

[Pt A.58] Priority of interests arising outside of the PPSA The PPSA establishes a general priority rule in relation to personal property to which a non-consensual security interest pertains. This rule deals with the determination of priority disputes regarding property affected by both a lien (or other non-consensual security interest) and a PPSA security interest: s 73(1). The PPSA also contemplates there may be a specific statutory priorities regime in relation to certain interests in collateral, where a law of the Commonwealth, a state or a territory declares an interest of the type in question to be of a kind to which different priority rules will apply: s 73(2). Section 73(1) essentially provides that an interest in collateral taking the form of a non-consensual lien arising by way of operation of the general law (or pursuant to a law of the Commonwealth, a state or territory) will take priority over a security interest arising under the PPSA. However, there are important limitations to s 73(1). The supply of the goods or services giving rise to the lien must take place in the ordinary course of the suppliers [page 50] business, the holder of the benefit of the lien must have provided the goods or services giving rise to the lien, and no other law of the Commonwealth, state or a territory may provide for the determination of priority as between the lien and the security interest.

[Pt A.59] Declarations under s 73(2) Section 73(2) provides the Commonwealth, state and territory legislatures with the ability to declare certain interests in collateral to be interests of a kind whose priority will be determined in accordance with another Commonwealth, state or territory law. In order for this to be the case, the other statute must expressly state that the security interest in question is of a kind which s 73(2) of

the PPSA applies. This provision may be utilised effectively only where the ‘other’ interest has arisen after the declaration has occurred. For example, the Personal Property Securities (Consequential Amendments) Act 2009 (Cth) specifies a number of amendments to other Commonwealth legislation, which have the effect of declaring security interests arising under those Acts to be security interests to which s 73(2) of the PPSA will apply. The Mutual Assistance in Criminal Matters Act 1987 (Cth) has been amended so as to render charges created pursuant to that Act to be dealt with according to its own priority provisions, while the Proceeds of Crime Act 2002 (Cth) has been similarly amended. These amendments have the effect of rendering the priorities provisions of the PPSA inapplicable to the determination of the priority of charges and other security interests arising by way of these two Commonwealth statutes. Over time, the Commonwealth, states and territories are expected to make additional amendments to other legislation along these lines.112 While the PPSA is broad in its application, there remain a number of important interests to which the PPSA does not pertain. Most notably, the operation of various general law and statutory liens is preserved under the PPSA. The continued existence of liens and other interests have resulted in the inclusion of various provisions in the PPSA (specifically, in Pt 2.6 of Chapter 2) which deal with the determination of priorities disputes where personal property is affected by both a non-consensual security interest, and a PPSA security interest. Generally, these provisions provide that a lien, or other such interest shall take priority over a PPSA interest; however, regard must be had to the important exceptions and qualifications to this rule. Additionally, the PPSA provides an avenue by which the priorities provisions of other Commonwealth, state and territory legislation may continue to favour certain interests in priority to PPSA security interests. Section 73(7) and (8) of the PPSA provide that the Minister may make a legislative instrument for the purpose of determining priority between PPSA security interests and certain general law interests in collateral that arise after the making of the instrument. Notes 112 Refer to the table at [C.2] regarding interests declared by the states and territories for the purposes of s 73(2).

[page 51]

Constitutional basis of PPSA Key Points States have referred to the Commonwealth their power in relation to the ‘matter of security interests in personal property’. PPSA confers jurisdiction on the state and federal courts to adjudicate on disputes arising in relation to personal property securities.

[Pt A.60] Constitutional issues The PPSA relies on powers conferred on the Commonwealth by the Constitution, and a comprehensive referral of the states’ power to regulate certain security interests in personal property to the Commonwealth. The PPSA implements a uniform, nationally consistent approach to the regulation of security interests in personal property. Each state has passed legislation referring its jurisdiction in relation to security interests in personal property and incidental matters to the Commonwealth.113 Notes 113 Refer to the table at [C.2].

[Pt A.61] Referral of power by the states The referral of power enables the Commonwealth to amend the law of personal property securities, as it sees fit, without the undue burden of obtaining a consensus from the states for each amendment. The ease with which a Commonwealth personal property securities regime may be reformed should ensure that the law remains consistent over time across multiple jurisdictions, and enable the PPSA to be easily modified when considered necessary or desirable. The referral of power to the Commonwealth also offers the added advantage of conferring concurrent jurisdiction on the federal and state courts. Where the Commonwealth securities legislation differs to that of a state, the Commonwealth law will prevail, to the extent of any inconsistency: s 109 of the Constitution. However, where the states have expressly limited the nature of the referral of their power to the Commonwealth (for example, to reserve the right to exclude from the Commonwealth personal property securities regime certain

permits and licences granted by the states) any Commonwealth legislation attempting to override that exclusion will be ineffectual. The new legislation will override any earlier, or more general Commonwealth legislation to the extent of any inconsistency.

[Pt A.62] Jurisdiction of courts and tribunals The PPSA confers jurisdiction to adjudicate disputes pertaining to security interests in personal property on the federal and state courts. The Federal Circuit Court, the Federal Court, and state District Courts and Supreme Courts therefore have jurisdiction to hear and decide such matters.114 As the referral of power by the states involves a conferral of [page 52] jurisdiction on the Commonwealth, the Constitutional limitations on the vesting of judicial functions pertaining to Commonwealth powers in non-judicial or quasi-judicial institutions apply. Consequently, tribunals and other such entities not exhibiting the true attributes of a court of law (ss 71 and 77(iii) of the Constitution) are prevented from hearing matters pertaining to the matter of security interests in personal property. The exclusion of tribunals and other such forums from the range of bodies which may adjudicate personal property securities related disputes is a significant aspect of the referral of powers by the states to the Commonwealth. It limits the ability of consumers and other interested parties to access the Commercial and Consumer Tribunals (or equivalent) in each of the states, and in doing so, restricts access to an expedient and low-cost means of resolving disputes pertaining to security interests in personal property. Notes 114 Judiciary Act 1903 (Cth).

Interpreting the PPSA Key Points

Interpreting the PPSA. A security interest is a proprietary interest. Different categories of personal property are significant in the context of priority.

[Pt A.63] Interpreting the PPSA The PPSA is fundamentally different to the pre-PPSA law. There is a danger that lawyers may seek to interpret the PPSA in light of their past experience and understanding of the pre-PPSA law instead of having proper regard to the purpose and objectives of the new legislation. Section 15AA of the Acts Interpretation Act 1901 (Cth) relevantly provides: In the interpretation of a provision of an Act, a construction that would promote the purpose or object underlying the Act (whether that purpose or object is expressly stated in the Act or not) shall be preferred to a construction that would not promote that purpose or object.

Regard for the purpose and objectives of the legislation will need to be at the forefront of any consideration of issues such as: (a) the irrelevance of title under the PPSA115 — each jurisdiction that has introduced PPSA legislation seems to have had one or two cases early on regarding the competition between an unperfected title-based security interest and a perfected non-title-based security interest, for example, unregistered lessor versus all registered assets charge holder;116 (b) the scope of functional definition of security interest — while the emphasis must be on substance over form a security interest is nevertheless a proprietary interest, it cannot be a mere personal or contractual right;117 [page 53] (c) the significance of the different categories of personal property in the context of the priority and extinguishment rules and the classifications and sub-classification system for registration purposes; and the time at which these categories/classes are to be determined; (d) whether a collateral description is ‘seriously misleading’ in the context of a notice based registration system;118 (e) the irrelevance of concepts relating to floating charges and crystallisation to the extent security is taken over personal property;

(f)

and the scope of ordinary course of business dealings (for extinguishment purposes) in the context of the PPSA.119

Notes 115 Subject to the limited exceptions relating to ‘circulating security interests’ in ‘circulating assets’ under Pt 9.5 of the PPSA and relevant provisions of the Corporations Act as noted above. 116 For example, Re Maiden Civil (P&E) Pty Ltd; Albarran v Queensland Excavation Services Pty Ltd (2013) 277 FLR 337; [2013] NSWSC 852; BC201310524; White v Spiers Earthworks Pty Ltd (2014) 99 ACSR 214; [2014] WASC 139; BC201402620; Graham v Portacom New Zealand Ltd (2004) 10 TCLR 983; [2004] 2 NZLR 528; (2004) 9 NZCLC 263,517 and Waller v New Zealand Bloodstock Ltd (2005) 11 TCLR 497; [2006] 3 NZLR 629; (2006) 9 NZCLC 263,944; International Harvester Credit Corp of Canada Ltd v Touche Ross (1986) 61 CBR (NS) 193; and Re Giffen [1998] 1 SCR 91; (1998) 155 DLR (4th) 332. 117 There is, however, some debate on this point. 118 Note the observations of the New Zealand Court of Appeal in Simpson v NZ Associated Refrigerated Food Distributors Ltd [2007] 2 NZLR 130 and the New South Wales Supreme Court in Future Revelation Ltd v Medica Radiology & Nuclear Medicine Pty Ltd (2013) 283 FLR 122; [2013] NSWSC 1741; BC201319052. 119 Warehouse Sales Pty Ltd (in liq) & Lewis and Templeton v LG Electronics Australia Pty Ltd (2014) 291 FLR 407; [2014] VSC 644; BC201410780; Orix New Zealand Ltd v Milne [2007] 3 NZLR 637; Stock Co Ltd v Gibson [2012] NZCA 330 and Tubbs v Ruby 2005 Ltd [2010] NZCA 353.

[Pt A.64] Legislative policies relevant to interpretation Some of Canada’s leading commentators on the Personal Property Securities Act have noted that it is founded on certain legislative policies that should inform its interpretation.120 These policies include: (a) the advancement of commercial certainty and predictability. In this regard, the Supreme Court of British Columbia has observed:121 [W]hen interpreting commercial legislation of this nature and where it is consistent with the wording of the statute, the Court should try to achieve the objectives of simplicity and certainty. The Court ought to strive for interpretations that, where possible, recognize the importance to the business and financial community of being able to achieve compliance with regulatory requirements in as simple and in as certain a manner as is consistent with the intention of the Legislature as expressed in the language of the statute. In striving for simplicity, judicial interpretation should minimize to the extent possible the cost of regulatory compliance; achieving the equally important goal of certainty will similarly minimize the generation of post filing litigation challenging such compliance; …

(b) the preservation of internal coherence within the Personal Property Securities Act, which requires that individual provisions in the

Personal Property Securities Act be interpreted not in isolation but in light of the implications of [page 54] a particular reading on the logic or workability of other provisions. In this context, the Saskatchewan Court of Appeal has stated:122 The applicable canons of interpretation dictate that the section be interpreted contextually and be read in relation to the whole Act. Using this approach one quickly recognizes that the underlying concept of PPSA is a rejection of the system of ‘transaction filing’ and the adoption of the system of ‘notice filing’.

The extensive use of ‘Guides’ and ‘Notes’ throughout Australia’s PPSA should assist to promote this interpretative approach;123 (c) promoting autonomy and flexibility in the relationship between the secured party and the grantor, so that constraints on freedom of contract should not be readily implied in the absence of clear legislative direction; and (d) fostering increased efficiency for all participants in, or affected by, a secured transaction so as to promote greater access to secured credit at lower cost. An important example is the rejection of the role of knowledge in ordering priority among competing secured parties. This policy has particular significance in the context of the Personal Property Securities Act registration system and the rules dealing with the adequacy of a registration, because it is in this context that the need to balance the interests of the secured party and the public becomes most prominent. Notes 120 See [Pt A.29] n 59, Cuming, Walsh and Wood, pp 51–2. 121 GE Capital Canada Acquisitions Ltd v Dix (1994) 8 PPSAC (2d) 197 (BCSC) as quoted in [Pt A.29] n 10, Personal Property Security Law at p 51. Similar observations have been made more recently by the British Columbia Court of Appeal in KBA Canada, Inc v 3S Printers Inc [2014] BCJ No 544; 2014 BCCA 117. 122 Agricultural Credit Corporation of Saskatchewan v Royal Bank of Canada [1994] 7 WWR 305 (Sask CA) as quoted in [Pt A.29] n 59, Cuming, Walsh and Wood, p 52. 123 In this regard note s 15AB of the Acts Interpretation Act 1901 (Cth).

Conclusion

[Pt A.65] Statutory review of the PPSA As required by s 343 of the PPSA, the Australian Attorney-General has caused a review of the Act to be conducted by Mr Bruce Whittaker.124 The Final Report of the review was tabled in Parliament in March 2015. The terms of reference for the review included: (a) the effects of the reforms introduced by the PPSA on: (i) Australian businesses, particularly small business; (ii) Australian consumers; (iii) the market for business finance in Australia; and (iv) the market for consumer finance in Australia; (b) the level of awareness and understanding of the PPSA at all levels of business, particularly small business; (c) the incidence and, where applicable, causes of non-compliance with the requirements of the PPSA particularly among small business; [page 55] (d) opportunities for minimising regulatory and administrative burdens, including costs, on businesses, particularly small business, and consumers; (e) opportunities for further efficiencies in the PPSA regime including (but not limited to) simplification of the PPS Register and its use; (f) the scope and definitions of personal property covered by the PPSA; (g) the desirability of specifying thresholds for the operation of the PPSA regime in respect of particular types of personal property; and (h) the interaction of the PPSA with other legislation including the Corporations Act. The review found there was broad support for the overall framework of the PPSA and that the PPSA has significantly improved consistency in Australian secured transactions law. However, the review also found that further refinement of the legislation and, most critically, the functionality of the PPS Register are required to ensure the PPSA reaches its full potential and that many businesses (particularly small businesses) are still unaware of the PPSA or do not appreciate the extent to which it can impact on their activities.125

After releasing its Interim Report in July 2014, the review published four consultation papers seeking the views of stakeholders in connection with a number of issues and proposed recommendations.126 The Final Report of the review contains a significant number of recommendations, including proposed amendments of the PPSA.127 The proposed amendments are directed at clarifying and simplifying the scope and operation of the Act and PPS Register and addressing various drafting anomalies and inconsistencies. The recommendations include: (a) the deletion of the definition of ‘interest’ in s 10 of the PPSA; (b) the removal of all references to ‘chattel paper’ from the PPSA; (c) the removal of all references to ‘bailment’ in the definition of ‘PPS lease’ in s 13; (d) a lease for an indefinite term only becoming a PPS lease after the lessee retains possession for one year; (e) that state, territory and Commonwealth Governments consider reversing legislation that removes statutory rights from the operation of the PPSA, and that consideration be given to deleting provisions in the Act that allow such licences to be removed from its ambit; (f) that security interests in water rights be brought within the scope of the PPSA; (g) deletion of the definition of ‘fixture’ in s 10 so it is clear the general law meaning applies; (h) that consideration be given to fixtures being brought within the scope of the Act, potentially along the lines of the Canadian PPSAs; (i) recommendations regarding the meaning of, and requirements for perfection against, intermediated securities and investment instruments; (j) clarifying the application of the taking free, priority and vesting rules in the context of leasing and sub leasing chains; (k) clarification of s 32; (l) deletion of the inventory exceptions from the taking free rules in ss 44, 45 and 46; (m) that Pt 3.4 of the PPSA be recast to provide separate rules for processed goods on the one hand and commingled goods on the other;

[page 56] (n) that the definition of PMSI in s 14 be amended so that it extends to any assets used predominantly for personal, domestic or household purposes, not just serial-numbered property; (o) s 14(5) be expanded to make it clear that a security interest that replaces a PMSI can also be a PMSI with the replaced PMSI’s priority status; (p) changes to s 62 — regarding the timing and content of registrations to perfect a PMSI; (q) changes to s 64 regarding the priority afforded to accounts financiers; (r) clarification of the application of Chapter 4 — enforcement generally and a number of specific amendments to various provisions in that chapter; (s) that the vesting rule in s 267 not apply to PPS leases that do not secure payment or performance of an obligation; (t) that ss 340–341A be amended so that collateral is only a ‘circulating asset’ of a grantor if it is inventory (in the ordinary meaning) of the grantor (other than inventory that is subject to a PMSI) or its proceeds; (u) that s 588FL of the Corporations Act be repealed; (v) that the constitutional, judicial and other supporting provisions in the Act be relocated into a separate piece of legislation; (w) removing the requirement for a registration to indicate whether collateral is ‘consumer property’ or ‘commercial property’ and deleting these terms from the Act; (x) providing that registrations against individuals will have a maximum duration of seven years; (y) providing that all registrations against serial-numbered property and registrations using the serial number will not identify the grantor, if the grantor is an individual; (z) removing the requirement for a registration to indicate if the collateral may include inventory or may be subject to control, each for the purposes of Pt 9.5 of the PPSA; (aa) removing the ability to indicate in a registration if a security interest is subordinated to any other security interest;

(bb) allowing registrations to cover more than one class of collateral with a common free text field being available to describe the collateral and simplify the classes of collateral under the PPS Regulations; (cc) removing the requirement for a registration to indicate if a PMSI is being claimed; (dd) registrations in respect of aircraft may no longer have to include a serial number (making this optional); (ee) simplifying the grantor ‘details’ requirements specified in the PPS Regulations; (ff) clarifying and extending s 151 of the PPSA; (gg) amending the provisions relating to registration amendment demands; and (hh) clarifying the powers of the courts and registrar to amend the PPSR. It remains to be seen which, if any, of the recommendations in the Final Report of the review are adopted by the Australian Government and enacted by Parliament. Notes 124 Review of the Personal Property Securities Act 2009, Final Report (Feburary 2015) (Final Report) 125 Final Report, Chapter 3.

[page 57] 126 The four consultation papers dealt with the following subjects: CP1 Reach of the Act CP2 Creation and perfection of security interests; taking free rules; priority rules; and other dealings in collateral CP3 Enforcement of security interests; vesting of security interests on a grantor’s insolvency; interaction with other legislation; governing law rules; other provisions in the Act; layout of the Act and related matters CP4 The register 127 A complete list of the recommendations appears in Annexure E to the Final Report.

[Pt A.66] Concluding remarks Many observers maintain that the PPSA is long, prescriptive and complex. Several points can be made in relation to this:

(a) The PPSA has replaced a multitude of statutes and registers and, to the extent they are inconsistent with the PPSA, many common law and equitable rules. In this context the PPSA is not particularly long or complex. (b) The pre-PPSA law was complex, fragmented, dispersed and far less certain than the PPSA. (c) The key PPSA provisions are relatively simple but there is considerable complexity around some of the more specific priority and extinguishment rules, although much less so than under the old law. (d) The PPSA has minimal and consistent formal requirements for security agreements and registration compared with the pre-PPSA law and these requirements are necessary to ensure the PPS Register operates effectively as a notice-based register. Although there is undoubtedly scope for further improvement and refinement to the PPSA and the functionality of the PPS Register, the PPSA has introduced significant improvements to Australia’s commercial law including greater consistency, transparency and predictability.

[page 59]

Part B Guide to Registration on the Personal Property Securities Register

[page 61]

Guide to Registration on the Personal Property Securities Register Craig Wappett The information in this Guide to Registration is current to 1 April 2015. [Important: This Guide (including the various examples) is not legal advice and is intended to provide general commentary on the registration of financing statements on the PPS Register. It (including the various examples) is not exhaustive. The manner of registration and the risks associated with decisions to register in a particular way need to be considered having regard to all of the circumstances of the relevant security interests.]

CONTENTS





Introduction and scope …. Grantor and secured party details …. Corporate grantor or secured party details …. Individual grantor or secured party details …. Partner grantor or secured party details (whether partner grantors or secured parties are companies or individuals) …. Trustee grantor or secured party details (whether trustee grantors or secured parties are companies or individuals) …. Body politic grantor or secured party details …. Collateral description …. Serial numbered collateral …. Collateral that can be perfected by control and taking possession of certain collateral …. Duration and other information required for registration of a financing statement ….

Paragraph [Pt B.1] [Pt B.9] [Pt B.10] [Pt B.13]

[Pt B.17]

[Pt B.20] [Pt B.23] [Pt B.26] [Pt B.41] [Pt B.44] [Pt B.47]



Registration on registers other than the PPS Register …. Secured party group numbers, access codes and registration tokens issued by the PPS Register …. Verification statements …. Transfers of security interests or collateral and other amendments to financing statements ….



[Pt B.51] [Pt B.52] [Pt B.59] [Pt B.60]

Schedule — Using free text collateral descriptions in financing statements Preliminary issues …. [Pt B.61] Benefits of properly using the free text field …. [Pt B.65] [page 62]

Limitations on using the free text descriptions …. Problems that can arise from using the free text field …. Considerations when preparing free text descriptions …. Table Guide for using free text field in PPS Register financing statements ….

Paragraph [Pt B.67] [Pt B.69] [Pt B.71] [Pt B.72]

[Pt B.1] Introduction and scope This Guide outlines the process of registration of a financing statement in respect of a security interest on the PPS Register.1 It also specifies the information the secured party needs to perfect its security interest by registration of a financing statement on the PPS Register. Documents that evidence such security interests are referred to generically in this Guide as security agreements. This Guide does not deal with migrated security interests. Notes 1

Interests other than security interests may also be the subject of a registration on the PPS Register; PPSA s 154. This Guide deals only with non migrated security interest registrations.

[Pt B.2] Certain parts of this Guide may not be relevant to every type of security agreement or security interest. In particular, different issues arise for security

interests: (a) over all present and after acquired property compared with security interests over one or more specific assets; (b) over consumer property on the one hand and commercial property on the other (the meanings of these terms is explained in [Pt B.27] of this Guide); (c) over serial numbered property (refer to [Pt B.41] of this Guide).

[Pt B.3] This Guide uses the language of the PPSA. Where reference is made to a grantor of a security interest, this includes, but is not limited to, a mortgagor or chargor, the lessee under a lease agreement, a purchaser under a title retention supply agreement, a hirer under a hire purchase agreement or an assignor/transferor under a debtor financing or factoring arrangement. A secured party under a security interest includes, but is not limited to, a mortgagee or chargee, the lessor under a lease agreement, a seller under a title retention supply agreement, an owner under a hire purchase agreement or an assignee/transferee under a debtor financing or factoring agreement. Collateral is the property subject to a security interest.

[Pt B.4] It is not mandatory to register a financing statement and there is no general time limit for registering an interest under the PPSA. However, failure to perfect (whether by registration or otherwise) will generally result in a security interest vesting in the grantor on the insolvency of the grantor and the secured party may lose priority to other security interests. A secured party will also have greater exposure to third party buyers or lessees of the collateral via the extinguishment rules if it fails to perfect its security interest. In addition, where the grantor is a company, s 588FL of the Corporations Act provides that the security interest will vest in the company on insolvency if the security interest is [page 63] perfected by registration only and it has been registered for less than six months, unless it was registered within 20 business days after the relevant security

agreement came into force. There are also particular timing requirements for perfecting purchase money security interests: PPSA s 62.2 Notes 2

This Guide does not detail all of the timing requirements and considerations for registration under the PPSA.

[Pt B.5] To register on the PPS Register the secured party must complete a financing statement which is the online registration ‘form’ available on the PPS Register website: . In order to complete a financing statement the secured party will need to: (a) indicate whether the collateral is commercial property or consumer property (see [Pt B.27] of this Guide); (b) indicate whether the secured party’s interest is a transitional security interest3; (c) include the relevant secured party group number (see [Pt B.52]–[Pt B.58] of this Guide); (d) indicate the applicable collateral class (see [Pt B.26]–[Pt B.40] of this Guide); (e) include any free text description to be used in conjunction with the specific collateral class (see [Pt B.26]–[Pt B.40] of this Guide) or serial number, if the registration is to include the serial number (see [Pt B.41]–[Pt B.43] of this Guide); (f) indicate the duration of the registration and other information relating to the registration (see [Pt B.47]–[Pt B.50] of this Guide); (g) include the grantor and secured party details (see [Pt B.9]–[Pt B.25] of this Guide). Notes 3

A security interest will only be a ‘transitional security interest’ if it is provided for under a security agreement that was in force prior to the registration commencement time, that is before 30 January 2012: see PPSA ss 307 and 308.

[Pt B.6] A financing statement can have more than one ‘grantor’ or ‘secured party’.

[Pt B.7] A financing statement can relate to security interests arising under one or more security agreements.

[Pt B.8] A registration will be ineffective if it has a ‘seriously misleading’ defect in any data relating to the registration or if it contains a defect mentioned in PPSA s 165.4 [page 64]

Notes 4

PPSA s 164.

[Pt B.9] Grantor and secured party details The details used to describe grantors and secured parties in a financing statement are set out in [Pt B.10]–[Pt B.25] of this Guide.

[Pt B.10] Corporate grantor or secured party details5 Where the grantor or secured party is a body corporate that: (a) is a trustee of a registered scheme and has an ARSN; or (b) is not a trustee of a trust that has an ABN,6 the information referred to in the table below (refer to the Details column) must be recorded in a financing statement on the PPS Register. Notes 5 6

Refer to Personal Property Securities Regulations 2010 (PPSR) Sch 1 Pt 1.3. Where the body corporate is a trustee of a trust that has an ABN refer to [Pt B.20]–[Pt B.22] of this Guide.

[Pt B.11] The means of identification available with the lowest item number in the list

must be used.

[Pt B.12] The source of the grantor’s information should be recorded and retained in the secured party’s records. Item Body corporate 1 Body corporate that is the responsible entity of a registered scheme, if the scheme has an ARSN 2 Body corporate that has an ACN 3 Body corporate that has an ARBN 4 Any other body corporate

Details Registered scheme’s ARSN

Source National Names Index

ACN

National Names Index

ARBN

National Names Index

Name of body Body corporate’s corporate, as provided constitution or for in body corporate’s equivalent document constitution or equivalent document

[Pt B.13] Individual grantor or secured party details7 Where the grantor is an individual, unless the security interest relates to serial numbered property that is also consumer property (in which case refer to [Pt B.16] and [Pt B.41]–[Pt B.43] of this Guide), the individual’s surname, given names and date of birth must be recorded in a financing statement on the PPS Register. [page 65]

Notes 7

Refer to PPSR Sch 1 Pt 1.2. For the purposes of registration an ‘individual’: (a) includes a sole trader who has an ABN for the enterprise for which the security interest

is granted or held; and (b) does not include an individual who is a partner in a partnership or a trustee of a trust if the partnership or trust has an ABN for the enterprise for which the security interest is granted or held.

[Pt B.14] The grantor or secured party’s surname and given names and, in the case of a grantor, date of birth must be verified by the information referred to in the table below. The means of identification available with the lowest item number in the list in the table below must be used.

[Pt B.15] The source of the grantor’s information should be recorded and retained in the secured party’s records. Item 1

2

3

Individual Individual grantor who is known to the secured party, because of the operation of the Anti-Money Laundering and Counter-Terrorist Financing Act 2006 (Cth) (AML-CTF Act) Individual who holds a current driver’s licence

Details Individual’s surname, given names and (in the case of a grantor) date of birth, as known to the secured party, because of the operation of the AMLCTF Act

Source Current data known by the secured party, because of the operation of the AMLCTF Act

Individual’s surname, given names and (in the case of a grantor) date of birth, as recorded on the individual’s driver’s licence Individual who holds a Individual’s surname, current proof of given names and (in identity or current the case of a grantor) proof of age card date of birth, as recorded on a proof of identity or proof of age

Current driver’s licence issued by state or territory licensing authority to the individual

Current proof of identity or current proof of age card issued by state or territory body to the individual

4

5

card issued by state or territory body Individual who holds a Individual’s surname, current Australian given names and (in passport the case of a grantor) date of birth, as recorded on the individual’s current Australian passport Individual who holds a Individual’s surname, current visa, issued by given names and (in the Australian the case of a grantor) Government date of birth, as recorded on the individual’s current visa

Current Australian passport issued to the individual

Current visa issued for the individual

[page 66] Item 6

Individual Individual who holds a current passport other than an Australian passport

7

Any other individual

Details Individual’s surname, given names and (in the case of a grantor) date of birth, as recorded on the individual’s current passport issued by the jurisdiction in which the individual ordinarily resides Individual’s surname, given names and (in the case of a grantor) date of birth, as recorded on the individual’s birth

Source Current passport issued by the jurisdiction in which the individual ordinarily resides

Birth certificate issued for the individual

certificate

[Pt B.16] Where the security interest relates only to serial numbered property that is also consumer property (refer to [Pt B.27] of this Guide), the individual grantor’s name and date of birth should not be recorded in a financing statement. The financing statement must record the relevant serial number (refer to [Pt B.41]–[Pt B.43] of this Guide).

[Pt B.17] Partner grantor or secured party details (whether partner grantors or secured parties are companies or individuals)8 Where the grantor or secured party is a partnership, the Partnership ABN (obtained from the Australian Business Register) must be recorded in a financing statement on the PPS Register. If there is no ABN, refer to Pt 1.4 of Sch 1 of the PPSR for the partner details to be used. Notes 8

PPSR Sch 1 Pt 1.4.

[Pt B.18] If the security interest is intended to cover the non-partnership property of the partner grantors, the registration should show both the partnership and the persons comprising the partnership as separate grantors.9 One registration can have more than one ‘grantor’. Notes 9

Note the definition of ‘individual’ in PPSR Sch 1 Item 1.1.

[Pt B.19] The source of the grantor’s information should be recorded and retained in the secured party’s records.

[Pt B.20] Trustee grantor or secured party details

(whether trustee grantors or secured parties are companies or individuals)10 Where the grantor or secured party is a trustee but not a body corporate with an ARSN11, the ABN relevant to the trust (obtained from the Australian Business Register), [page 67] if any, must be recorded in a financing statement on the PPS Register. If there is no ABN, refer to Pt 1.5 of Sch 1 of the PPSR for the trustee details to be used. Notes 10 PPSR Sch 1 Pt 1.5. 11 If the trustee is a body corporate with an ARSN refer to [Pt B.10]–[Pt B.12] of this Guide.

[Pt B.21] The source of the grantor’s information should be recorded and retained in the secured party’s records.

[Pt B.22] If a grantor is entering into a security interest transaction in both its trust capacity and its personal capacity, the registration should record these capacities as separate grantors. One registration can have more than one ‘grantor’.

[Pt B.23] Body politic grantor or secured party details12 Where the grantor or secured party is a body politic, the information referred to in the table below must be recorded in a financing statement on the PPS Register. Notes 12 PPSR Sch 1 Pt 1.6.

[Pt B.24] The means of identification available with the lowest item number in the list must be used.

[Pt B.25] The source of the grantor’s information should be recorded and retained in the secured party’s records. Item 1

2

Body corporate Body politic that holds or has an interest in collateral in course of, or for, an enterprise that has been allocated an ABN Body politic that holds or has an interest in collateral other than in the course of, or for, an enterprise that has been allocated an ABN

Details ABN

Source Australian Business Register

Name of body politic, Constitution of body in accordance with politic constitution of body politic

[Pt B.26] Collateral description It is critical that the collateral is correctly described in the security agreement13 and in the financing statement. [page 68]

Notes 13 PPSA s 20.

[Pt B.27] In the financing statement the collateral must be described as either consumer property or commercial property.14 ‘Consumer property’ is defined as 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. ‘Commercial property’ is defined as personal property other than consumer property. Notes 14 If a security agreement or security interest covers both consumer property and commercial property, then two registrations will be necessary.

[Pt B.28] Two or more types of collateral that belong to separate classes or sub-classes must be described in separate registrations. However, two or more registrations can be effected through a single application. A security agreement may cover collateral in more than one class or sub class and it will be necessary to perfect the security interests under that agreement in respect of each relevant class or sub class of collateral.15 The PPS Register does not permit the amendment of a financing statement to change the collateral class. Notes 15 See [Pt B.39] of this Guide.

[Pt B.29] In the financing statement collateral must be identified as fitting into one of the following prescribed classes: (a) agriculture;16 (b) aircraft;17 (c) all present and after acquired property (the PPS Register describes this class as ‘all present and after acquired property — no exceptions’); (d) all present an after acquired property — except (the PPS Register describes this class as ‘all present and after acquired property with exceptions’); (e) financial property;18 (f) intangible property; (g) motor vehicles;19 (h) other goods;20 and

(i) watercraft.21 When using the PPS Register to register a financing statement, the PPS Register refers to the collateral classes agriculture, aircraft, motor vehicles, other goods and watercraft collectively as ‘tangible property’ and it refers to the collateral classes all present and after acquired — no exceptions property and all present and after acquired property — with exceptions collectively as ‘general property’. These expressions are not otherwise significant. Notes 16 Defined in PPS Regulations Reg 1.6 as livestock or crops: see [Pt B.33]. 17 Defined in PPS Regulations Reg 1.6: see [Pt B.34].

[page 69] 18 ‘Financial property’ includes intermediated securities for registration purposes. See PPSR Sch 1 Item 2.1. 19 Defined in PPS Regulations reg 1.7. 20 That is, goods other than agriculture, aircraft, motor vehicles and watercraft. See PPSR Sch 1 Item 2.3. 21 Defined in PPS Regulations reg 1.6. Also note the transitional meaning of ‘watercraft’ in PPS Regulations reg 9.1.

[Pt B.30] Agriculture, aircraft, financial property and intangible property have subclassifications that also must be identified in the financing statement (refer to [Pt B.33]–[Pt B.36]. These classes and sub classes of collateral are defined by the PPSA and the PPSR so that no item of collateral can fall within more than one class, apart from ‘all present and after acquired property’ and ‘all present and after acquired property with exceptions’ which may include items of property in the other classes.

[Pt B.31] The PPS Register provides a ‘free text field’ functionality, enabling secured parties to further describe the collateral in which a security interest is taken in a customised descriptive form. The free text field will not be available in a financing statement in certain circumstances. In particular, the field will not appear when:

(a) the collateral classes ‘all present and after acquired property — no exceptions’ or ‘aircraft’ are selected; (b) the collateral classes ‘motor vehicle’ or ‘watercraft’ are selected and the registration is made by serial number in relation to a specific motor vehicle or watercraft.22 When the collateral class ‘all present and after acquired property — with exceptions’ is used, it is mandatory to describe the exceptions by reference to items or classes of personal property.23 Great care must be taken if you use free text in a collateral description as it has the potential to make the collateral description seriously misleading or unduly narrow. Guidance on the use of the free text collateral description functionality is set out in the schedule to this Guide. Notes 22 Refer to [Pt B.41]–[Pt B.42] as to when registration by serial number is necessary. 23 See the definition of ‘all present and after-acquired property, except’ in PPS Regulations Reg 1.6.

[Pt B.32] [Pt B.41]–[Pt B.43] of this Guide identify certain types of personal property which may or must be described by way of reference to a serial number. The requirements identified in [Pt B.41]–[Pt B.43] should be read in conjunction with this [Pt B.26]–[Pt B.40].

[Pt B.33] Agriculture has two sub-classifications, being: (a) Crops — meaning any crops whether mature or not and whether naturally grown or planted, that have not been harvested. These include the products of [page 70] agriculture or aquaculture and trees. Once the crop is harvested, the secured party’s security interest will include the harvested produce of the crops, if the produce is identifiable or traceable, due to the proceeds provisions in the PPSA; or

(b) Livestock — includes alpacas, cattle, fish, goats, horses, llamas, ostriches, poultry, sheep, swine and other animals and their unborn young. Livestock also includes the products of the livestock (for example, meat and wool) if the products are identifiable or traceable, due to the proceeds provisions in the PPSA. However, livestock are not proceeds merely because they are the unborn young or offspring of livestock that is collateral.24 Notes 24 Refer to the definitions of ‘crops’ and ‘livestock’ in PPSA s 10 and also PPSA s 31(4), (5) and (6).

[Pt B.34] Aircraft has four sub-classifications, being:25 (a) Airframe — means airframes that when appropriate aircraft engines are installed are of a type certified by the competent aviation authority to transport at least eight passengers, including crew, or goods in excess of 2750 kilograms together with all installed, incorporated or attached accessories, parts and equipment and all related data, manuals and records; (b) Aircraft engine — means aircraft engines powered by jet propulsion or turbine or piston technology and in the case of jet propulsion aircraft engines have at least 1750 lb of thrust or its equivalent and in the case of turbine powered or piston aircraft engines, have at least 550 rated take-off shaft horsepower or its equivalent together with all modules and other installed, incorporated or attached accessories, parts and equipment and all related data, manuals and records; (c) Helicopter — means helicopters which are certified by the competent aviation authority to transport at least five persons, including crew, or goods in excess of 450 kilograms together with all installed, incorporated or attached accessories, parts and equipment (including rotors) and all related data, manuals and records; (d) Small aircraft — means an aircraft other than an airframe, aircraft engine or helicopter. Notes 25 The definitions of ‘airframe’, ‘aircraft engine’ and ‘helicopter’ expressly exclude airframes, aircraft engines and helicopters respectively that are used in military, customs or police services.

Refer to these definitions in reg 1.6 of the PPSR and the Protocol on Matters Specific to Aircraft Equipment, done at Cape Town on 16 November 2001 pursuant to the Cape Town Convention on International Interests in Mobile Equipment of the same date.

[Pt B.35] Financial property has six sub-classifications, being: (a) Chattel paper — means a written instrument that evidences a monetary obligation and either or both of the following: (i) a security interest in or lease of specific goods; [page 71] (ii) a security interest in specific intellectual property or a specific intellectual property licence, but does not include a document of title, investment instrument or a negotiable instrument. Chattel leases and hire purchase agreements are examples of chattel paper; (b) Currency — means currency authorised as a medium of exchange by the law of Australia or of any other country; (c) Document of title — means a written instrument that is issued or addressed to a bailee that covers goods in the bailee’s possession that are identified or are fungible portions of an identified mass, if it is stated in the writing that the goods identified in it will be delivered: (i) to a named person or its transferee; (ii) to the bearer of the written instrument; or (iii) to the order of the named person. An example of such a document of title is where a person stores goods with a warehouseman or other storage provider. The warehouseman or other storage provider may issue a document of title to the person for whom it stores the goods to confirm the nature and the amount of the goods in storage. A specific security agreement over such a document of title for the storage of goods will have collateral categorised as financial property, with a sub-category of document of title; (d) Intermediated security — has the meaning given by PPSA s 15 and it may include shares on the CHESS system;26

Investment instrument — means any of the following financial (e) products: (i) a share; (ii) a debenture, stock or bond issued or proposed to be issued by a government; (iii) a derivative; (iv) a foreign exchange contract that is not a derivative; (v) as assignable option to have an allotment of an investment instrument made to the holder of the option. For example, this will include assignable share options; (vi) an interest in, or a unit in an interest in, a managed investment scheme; (vii) a unit in a share in a body; (viii)a financial product that is traded on a financial market;27 (ix) any other financial product that is prescribed by the PPSR. These currently include: an Australian carbon credit unit, within the meaning of s 5 of the Carbon Credits (Carbon Farming Initiative) Act 2011; a carbon unit, within the meaning of s 5 of the Clean Energy Act 2011; each eligible international emissions unit mentioned in paras (a), (b), (c) and (d) of the definition of eligible international emissions unit in section 4 of the Australian National Registry of Emissions Units Act 2011; or28 (x) any financial product that is a combination of any two or more of the financial products listed above. [page 72]

(f)

A specific security agreement over shares will have collateral categorised as financial property, with a subcategory of investment instrument (except for shares held on the CHESS system which will be intermediated securities). Negotiable instrument — means:

(i) (ii) (iii) (iv)

a bill of exchange; a cheque; a promissory note; any other writing that evidences a right to payment of currency and that is of a kind that in the ordinary course of business is transferred by delivery with any necessary endorsement or assignment or which satisfies the requirements for negotiability under the law governing negotiable instruments; or (v) a letter of credit that states it must be presented on claiming payment. A specific security agreement over a letter of credit will have collateral categorised as financial property, with a sub-category of negotiable instrument. Notes 26 Intermediated securities are only ‘financial property’ for registration purposes; see PPSR Pt 2.1 of Sch 1. In the PPSA itself, intermediated securities are not ‘financial property’ — refer to the definition of ‘financial property’ in PPSA s 10. 27 Note the qualifications in para (g) of the definition of ‘investment instrument’ in PPSA s 10. 28 PPSR reg 1.10.

[Pt B.36] Intangible property has eight sub-classifications, being: (a) Accounts — Account has the meaning given to it by s 10 of the PPSA which does not include an ADI account. An example of an account is a receivable or book debt. If a debt does not fall within the definition of ‘account’, it may be a ‘general intangible’; (b) Circuit layout;29 (c) Copyright;30 (d) Design;31 (e) General intangible — means any other intangible property that does not fall within any other specific sub-category of intangibles; (f) Patent;32 (g) Plant breeder’s right;33 and (h) Trade mark.34

Notes 29 30 31 32 33 34

Refer to the definition of ‘intellectual property’ in PPSA s 10. Refer to the definition of ‘intellectual property’ in PPSA s 10. Refer to the definition of ‘intellectual property’ in PPSA s 10. Refer to the definition of ‘intellectual property’ in PPSA s 10. Refer to the definition of ‘intellectual property’ in PPSA s 10. Refer to the definition of ‘intellectual property’ in PPSA s 10.

[page 73]

[Pt B.37] ‘General intangibles’ will include things like ADI accounts, intellectual property that does not fall within any of the intellectual property sub classifications mentioned in [Pt B.36] (b), (c), (d), (f), (g) or (h) and general contract rights.

[Pt B.38] ‘Other goods’ will cover personal property that are goods, other than agriculture, aircraft, motor vehicles and watercraft.

[Pt B.39] The collateral class ‘all present and after acquired property — with exceptions’ may be able to be used if the secured party is taking security over: (a) all of the grantor’s personal property related to a particular business, joint venture or geographic location but not other property; and (b) property falling within multiple collateral classes but not all of the grantor’s property. If this collateral class is used, the free text field must be used to indicate the items or classes of personal property not covered by the relevant security interests.35 Another approach would be to register financing statements against each relevant specific collateral class. This alternative could be extremely cumbersome where numerous specific collateral classes are, or may be, relevant to the security being taken. Notes

35 The definition of ‘all present and after acquired property, except’ is in PPS Regulations reg 1.6,

[Pt B.40] The following diagram illustrates the various collateral classes and sub classes. [page 74]

* Intermediated Securities are only ‘financial property’ for registration purposes; PPSR Sch 1 Pt 2.1 [page 75]

[Pt B.41] Serial numbered collateral The relevant security agreement may cover collateral that is serial numbered property (as listed in [Pt B.42]). Where the secured party registers a financing statement in respect of its security interest against the ‘serial number’ of collateral in relation to the classes of collateral listed in [Pt B.42] below, care must be taken to record the serial number which pertains to that collateral in the relevant financing statement. Registration by serial number is not mandatory for the perfection of a security interest in commercial property (other than aircraft that is an aircraft engine, airframe, helicopter or small aircraft),36 but it can provide some added protection against a buyer or lessee of the property when the

sale or lease occurs outside the ordinary course of business. Registration against the serial number of serial numbered collateral is mandatory where that collateral is of a type referred to in [Pt B.42] and it is also consumer property (also refer to [Pt B.13], [Pt B.16] and [Pt B.27]).37 Registration by serial number can occur even though the relevant security agreement does not identify the specific collateral by its serial number. Serial number registrations can only be made for a period of up to seven years, although they can be renewed. Notes 36 PPSR Sch 1 Pt 2.2(1)(b). 37 PPSA Pt 2.5.

[Pt B.42] The following classes of collateral may or must (refer to [Pt B.41] and [Pt B.27] of this Guide) be described by serial number: (a) aircraft; (b) intangible property that is: (i) a design; (ii) a patent; (iii) a plant breeder’s right; (iv) a trade mark; and (v) a licence over any intangible property mentioned in (i) to (iv); (c) motor vehicles; and (d) watercraft.

[Pt B.43] Where a registration using a serial number is to be made, the following information must be included in a financing statement:38 (a) for an aircraft that is an aircraft engine, airframe or helicopter: (i) the manufacturer’s number39; and (ii) the manufacturer’s name; and (iii) the manufacturer’s generic model designator; (b) for a small aircraft — the nationality and registration marks assigned to it under the Chicago Convention;

(c) for a motor vehicle: (i) the vehicle identification number; or40 (ii) if it has no vehicle identification number but has a chassis number — the chassis number; or41 [page 76]

(d)

(e)

(f)

(g)

(h)

(iii) if it has no vehicle identification number or chassis number — the manufacturer’s number;42 for watercraft: (i) the official number; or (ii) if it does not have an official number — the hull identification number; or43 (iii) if it is an outboard motor — the manufacturer’s number;44 for a design: (i) the design number issued by IP Australia; or (ii) if it does not have a design number — the design application number issued by IP Australia; for a patent: (i) the patent number issued by IP Australia; or (ii) if it does not have a patent number — the patent application number issued by IP Australia; for a plant breeder’s right: (i) the plant breeder’s right number issued by IP Australia; or (ii) if it does not have a plant breeder’s right number — the plant breeder’s right application number issued by IP Australia; (iii) if it does not have a patent number or a patent application number — a PCT number;45 and for a trade mark: (i) the trade mark number issued by IP Australia; or (ii) if it does not have a trade mark number — the trade mark application number issued by IP Australia.

Notes 38 PPSR Sch 1 Pt 2.2(3). A separate registration is required for each serial numbered item where the registration uses a serial number. 39 Refer to the definition of ‘manufacturer’s number’ in PPS Regulations reg 1.6. 40 ‘Vehicle identification number’ is defined in PPS Regulations reg 1.6. 41 ‘Chassis number’ is defined in PPS Regulations reg 1.6. 42 Refer to the definition of ‘manufacturer’s number’ in PPS Regulations reg 1.6. 43 ‘Hull identification number’ is defined in PPS Regulations reg 1.6. 44 Refer to the definition of ‘manufacturer’s number’ in PPS Regulations reg 1.6. 45 ‘PCT number’ is defined in PPSR Sch 1 Pt 2.2(4).

[Pt B.44] Collateral that can be perfected by control and taking possession of certain collateral Where the collateral includes property of the types specified in [Pt B.45], the secured party should consider perfecting its security interest by taking ‘control’ of that property. Perfection by control will provide a superior priority for these types of property and prevent another secured party or transferee obtaining priority over the secured party in respect of this property.46 Notes 46 PPSA ss 21, 57 and Pt 2.3.

[page 77]

[Pt B.45] Property that can be perfected by control includes: (a) ADI accounts (for example, accounts with a bank, building society or credit union) but only where the secured party is the ADI; (b) intermediated securities (for example, managed funds or shares on CHESS); (c) investment instruments (for example, shares other than those on CHESS); (d) negotiable instruments (for example, bills of exchange, promissory notes or cheques) that are not evidenced by a certificate; (e) letters of credit that state the letter of credit must be presented on

(f)

claiming payment or requiring the performance of an obligation; and satellites and other space objects.

[Pt B.46] Where the collateral includes chattel paper (for example, leases and hire purchase agreements held by the grantor as owner of the leased equipment), negotiable instruments or negotiable documents of title, the secured party should consider taking possession of the relevant documents or instruments or adopting other measures to ensure priority is maintained in respect of this collateral.47 Notes 47 PPSA ss 70, 71 and 72.

[Pt B.47] Duration and other information required for registration of a financing statement A financing statement relating to commercial property that is not described by serial number in the financing statement can be made for an indefinite period or any period up to 25 years. A financing statement relating to consumer property or any property described by serial number in the financing statement can be made for any period up to seven years.48 Registrations can be renewed before they expire. Notes 48 PPSA s 153(1), table item 5.

[Pt B.48] An address for the giving of notices to the secured party in relation to a registration and the details of any identifier provided for the purposes of giving such notices must also be included in a financing statement.49 Notes 49 PPSA s 153(1) table item 3, and PPSA s 289. An address can include an email address.

[Pt B.49]

The financing statement should also indicate if: (a) any of the collateral (if it is commercial property) may include ‘inventory’ for the purposes of Pt 9.5 of the PPSA;50 (b) the secured party may have control of any collateral (if it is commercial property) that is: [page 78] an account;51 an ADI account (other than a term deposit); currency; inventory (within its ordinary meaning and not as defined in s 10 of the PPSA); or (v) a negotiable instrument, for the purposes of Pt 9.5 of the PPSA.52 (c) the collateral includes any proceeds. The financing statement should generally indicate that the collateral includes proceeds and these should generally be described as ‘all present and after acquired property’ because the proceeds of the original collateral may take any form. (i) (ii) (iii) (iv)

Notes 50 PPS Regulations Sch 1 Pt 4.1. This cannot be done in a registration against ‘all present and after acquired property’ but can be done in a specific registration in relation to security interests arising under an all assets general security deed. 51 Note the qualifications relating to accounts for the purposes of PPSA s 340(5) and therefore PPSA Pt 9.5. 52 PPSR Sch 1 Pt 4.1. This cannot be done in a registration against ‘all present and after acquired property’ but can be done in a specific registration in relation to security interests arising under an all assets general security deed. Control for the purposes of PPSA Pt 9.5 is not the same as perfection by control (refer to [Pt B.44]–[Pt B.46] of this Guide).

[Pt B.50] A financing statement registration will need to indicate if the secured party is claiming a purchase money security interest (PMSI) to any extent.53 However, the registration will be ineffective if the financing statement claims a PMSI and

the relevant security interest is not in fact a PMSI to any extent.54 Notes 53 This cannot be done in a registration against ‘all present and after acquired property’ but can be done in a specific registration in relation to a PMSI arising under an all assets general security deed. Also note the other limitations on claiming a PMSI in PPSA ss 14 and 62 and the general timing requirements for registering a security interest granted by a company under CA s 588FL. Certain types of collateral cannot be the subject of a PMSI — note especially PPSA s 14(2) and (2A). 54 PPSA s 165(c).

[Pt B.51] Registration on registers other than the PPS Register Registrations on registers other than the PPS Register may be required for property that is not personal property to which the PPSA applies, if security over such property is held by the secured party. Examples of property not covered by PPSA include: (a) land; (b) water rights; and (c) mineral and resource tenements. Registration on these other registers may also require additional specific security documentation in registrable form. [page 79]

[Pt B.52] Secured party group numbers, access codes and registration tokens issued by the PPS Register A secured party or a service provider (for example, a law firm) who prepares a financing statement must consider the use and transfer of secured party group numbers, access codes and registration tokens. These identifiers are vital in the creation, amendment, renewal, discharge and transfer of security interest registrations.

[Pt B.53] A secured party group number is required before a person can make a financing statement registration on the PPS Register. It is obtained by creating a secured party group. Each secured party group can be made up of one or more entities and a secured party may have multiple secured party group numbers attributed to it which may include different contact and address for service details. Every secured party group number is given a corresponding access code and together the number and/or the code permit the secured party to record and maintain its details on the PPS Register and to complete, amend, transfer, renew or discharge security interest registrations. A secured party group number and its access codes are distributed electronically to the email address for service notified at the time of creation.55 Notes 55 Notification can be sent by post if the secured party so requests.

[Pt B.54] When a financing statement is to be made, the person doing this needs to ascertain if the secured party has already been issued with a secured party group number and, if so, whether that secured party group number is appropriate to use for that registration. Where a pre-existing number is inappropriate a new number will be needed. For example, in some transactions it may be necessary for a secured party to create a new secured party group number where it is fulfilling a particular role (for example, as security trustee) or it requires notices and other communications relating to the particular security interest registration to be provided to a different email or postal address to that normally used by the secured party.56 Notes 56 Changing the address for service for a secured party group is not registration specific and will affect all registrations in respect of that secured party group registered on the PPS Register. A secured party or service provider should not change a secured party group’s details for a particular transaction unless all previous and future registrations are to have the same change made to it.

[Pt B.55] Where a secured party relies on a service provider to complete a financing statement registration, including the creation of a new secured party group

number, it will need to determine what the initial address for service will be. This is significant because the address for service will be the place to which the secured party group number, access code, verification statement and registration token will be sent. Where the secured party wants the service provider to receive these identifiers in the first instance, the secured party may need to have the secured party group number, access code and registration token subsequently transferred to it. Once this occurs, the secured party can update the [page 80] address for service information for the secured party group to reflect its own details. Because these identifiers are provided electronically they can be easily transferred to the secured party without the need to initiate any further action on the PPS Register.

[Pt B.56] Where a secured party relies on a service provider to complete a financing statement registration and uses a pre-existing secured party group number, any verification statements and registration tokens issued by the PPS Register will be sent to the email or postal address for service relevant to that secured party group number. A service provider who completes any financing statement registrations in this situation will not need to transfer any identifiers to the secured party, but will need to confirm with the secured party that the verification statement and registration token have been properly delivered to the secured party.

[Pt B.57] Each successful registration of a financing statement will generate a token in addition to the verification statement.57 The token is sent electronically to the email address for service specified for the secure party group at the time of registration. The token is unique to the particular registration.58 Where the address for service is not the secured party’s it will need to ensure the registration token is subsequently transferred to it by the service provider. Because registration tokens are provided electronically, they can easily be transferred to the secured party without any need to undertake further action on the PPS Register.

Notes 57 Notifications can be sent by post if the secured party so requests. 58 A new token can be reissued to the address for service specified in the secured party group details if a current token is lost.

[Pt B.58] If a secured party wants to amend, renew, discharge or transfer a security interest registration, it will need to use either the registration number and token or the registration number, secured party group number and access code to do this. This highlights the importance of properly managing the creation and dissemination of these identifiers. Failure do so may limit the secured party’s ability to manage its own security interests.

[Pt B.59] Verification statements A secured party must give a notice of the verification statement relating to a registration to the grantor as soon as is reasonably practicable after the registration.59 However, this does not apply if the relevant collateral is commercial property and the grantor has waived the right to receive notice of the verification statement.60 Notes 59 PPSA s 157(1) and Personal Property Securities (Approved Form) Instrument 2013. 60 PPSA s 157(3).

[page 81]

[Pt B.60] Transfers of security interests or collateral and other amendments to financing statements Transfers of a security interest or collateral or other changed circumstances may necessitate the amendment of existing registrations via a financing change statement or the making of further registrations on the PPS Register to ensure the secured party maintains a perfected security interest.61 These requirements are beyond the scope of this Guide.

Notes 61 Note PPSA ss 34, 60 and 160.

Schedule — Using free text collateral descriptions in financing statements [Pt B.61] Preliminary issues Financing statements may include a free text field functionality which will enable secured parties to further describe the collateral in which a security interest is taken. However, the free text field functionality will not always be available. In particular, the field will not appear in a financing statement in the following circumstances: (a) when the collateral classes ‘all present and after acquired property — no exceptions’ or ‘aircraft’ are selected; or (b) when the collateral classes ‘motor vehicle’ or ‘watercraft’ are selected and the registration is made by serial number in relation to a specific motor vehicle or watercraft. The free text field should appear in all other instances, including when collateral is a design, patent, plant breeder’s right or trade mark which is described by serial number. Where the collateral class ‘all present and after acquired property — with exceptions’ is used, it is mandatory to describe the exceptions by reference to items or classes of personal property.

[Pt B.62] Because the online registration process is completely automated the free text field functionality will appear, or not appear, based on the selections made by the person completing the online registration.

[Pt B.63] The free text field does not contain unlimited space to record details of the collateral. Secured parties will only have up to 500 characters to use in this field.

[Pt B.64] A table, including examples, on the use of free text descriptions appears at the

end of this schedule. Apart from when the collateral class ‘all present and after acquired property — with exceptions’ is used, it is not mandatory to complete the free text field [page 82] to effect a registration. Merely selecting the appropriate collateral class will be sufficient to perfect a security interest by registration. However, using the free text field can have benefits for the secured party and/or the grantor if it is used appropriately.

[Pt B.65] Benefits of properly using the free text field The primary benefit of using free text will be to limit enquiries from persons searching the register about what property the secured party actually has security in and the nature and extent of the security interest. If a secured party registers a financing statement identifying a collateral class without a serial number or free text description that secured party will be covered for all security interests in collateral of that class and this may result in enquiries from other persons also having an interest in property that falls within that collateral class. Of course, if the secured party wants to be covered for all property in a particular class and the secured party and the grantor are not concerned about responding to enquiries that may arise from such a broad description, it is not necessary to restrict the scope of the registration by using the free text functionality.

[Pt B.66] While registration on the PPS Register does not by itself constitute notice to third parties of a secured party’s interest, parties searching the PPS Register can acquire actual knowledge of information disclosed by a registration including in the free text field.

[Pt B.67] Limitations on using the free text descriptions While one registration with an appropriate free text description can cover

multiple security interests, the free text description cannot be used to cover property which belongs to another collateral class. This will be the case even when the security agreement contemplates security being taken over property that falls within different collateral classes. For example, a secured party who registers a financing statement which identifies the collateral class as ‘other goods’ and includes the wording ‘all goods financed by the secured party under any master asset finance agreement between the grantor and the secured party’ in the free text field will have a registered security interest for collateral that falls within the ‘other goods’ collateral class. However, the registration will not be effective where the secured party finances motor vehicles under that master asset finance agreement. Despite the broad application of the free text description a separate registration which identifies the collateral class as ‘motor vehicles’ will need to be made by the secured party.

[Pt B.68] If the free text description is narrowly drafted the secured party will need to either amend its registration, or register a separate financing statement, to cover the collateral that falls outside the free text description of the collateral (refer to the examples in the following table). Such amendments or further registrations will only be effective from when they are made. The PPS Register does not permit the amendment of a financing statement to change the nominated collateral class.

[Pt B.69] Problems that can arise from using the free text field Inappropriate use of the free text field can cause a number of problems for a secured party. These problems include but are not limited to: (a) the registration being ‘seriously misleading’ and therefore ineffective; or [page 83] (b) the registration being unduly narrow which may have the effect of requiring the secured party to make an additional registration or the secured party’s interest not being perfected because certain property

does not fit within the free text description.

[Pt B.70] These issues highlight the importance of taking care when using free text in collateral descriptions.

[Pt B.71] Considerations when preparing free text descriptions The following factors should be taken into account when using a free text description in a financing statement: (a) what items or types of collateral is the financing statement intended to cover now and in the future; (b) do not include inaccurate or misleading information about the collateral; (c) do not unnecessarily restrict the scope of the collateral description by the use of free text, including the provision of too much detailed information; and (d) for collateral classes and sub-classes that can be described by serial number it will usually be better to use the applicable serial number rather than free text if specific items of property are to be identified, especially if the relevant serial numbered property is the only collateral, it is of significant value and it should not be sold or otherwise disposed of in the ordinary course of the grantor’s business of dealing with property of that kind.

[Pt B.72] The examples in the following table illustrate these issues.62 Notes 62

Note that serial number registrations can only be made for a period of up to seven years, although they can be renewed.

Table — Guide for using free text field in PPS Register financing statements The examples in this table are examples only and any information actually recorded in the free text field of a financing statement should have regard to the particular transaction and the collateral the relevant

security agreements or security interests are intended to cover at the time they are granted and in the future. Collateral class All assets



All present and after acquired property — no exceptions All present and after acquired property — with exceptions

Free text field availability No free text field will be available

Guide and examples for using free text fields No free text field will be available

The free text field will be available

The free text field must be used to describe the ‘exceptions’. Example: The collateral does not include any property located at, used in connection with or related to the grantor’s feedlot business at [Greenacre].

[page 84] Collateral class Tangible property

Motor vehicles

Free text field availability A free text description will only be available when not describing the collateral by serial number



















Guide and examples for using free text fields Registrations when describing the motor vehicle by serial number No free text field will be available if the motor vehicle is to be described by serial number. Registrations when not describing the motor vehicle by serial number A free text field will be available. The free text field may be useful when: The security interest is over a large number of motor vehicles where the secured party does not wish to make separate serial number registrations for each vehicle. The security interest relates to motor vehicles which are acquired by the grantor under a master finance agreement including vehicles to be acquired by the grantor at a later date. The security interest relates to floor plan financing where the motor vehicles are inventory of the grantor. Example 1: All motor vehicles leased by the secured party to the grantor from time to time. The wording in example 1 will ensure that a registration will cover security interests in all motor vehicles leased from time to time. This free text description may be useful when the secured party leases to the grantor a fleet of vehicles and the leased vehicles are replaced/updated on a regular basis (for example courier vehicles used by a courier company). However, this description would not cover vehicles supplied other than by way of a lease.

[page 85]

Collateral class



Free text field availability



















Guide and examples for using free text fields Example 2: All BMW motor vehicles owned by the grantor. Example 2 will restrict the registration to BMW vehicles owned by the grantor. This description is rather narrow and would not extend to vehicles of a different make or vehicles that are not owned by the grantor (for example leased vehicles). Specifying a make, model or other specific description in the free text will limit a registration to that make, model or other specific detail. Such descriptions should only be used if the secured party is sure that no other vehicles will become within the particular security agreement. Example 3: All motor vehicles leased to the grantor by the secured party under the Master Lease Agreement dated 31 October 2011 and each lease entered into pursuant to it. Using the wording in example 3 will mean that the registration is only in respect of motor vehicles leased by the secured party under the specified agreements. References to a specific agreement should be avoided where the motor vehicles are going to be leased under various agreements. Example 4: All motor vehicles leased to the grantor by the secured party or otherwise financed by the secured party from time to time. Using wording similar to example 4 will ensure that the secured party has an effective registration over all motor vehicles financed by the secured party, whether leased, loan financed or acquired

[page 86] Collateral class





Watercraft

Only available when not describing the collateral by serial number



Aircraft

No free text field will be available



Agriculture

Free text field availability

A free text field will be available

Guide and examples for using free text fields under a hire purchase agreement, but not any vehicles financed by someone else. Registrations when describing the watercraft by serial number No free text field will be available if the watercraft is described by serial number. Registration when not describing the watercraft by serial number A free text field will be available. Refer to the commentary and examples for motor vehicles. Registration when describing the aircraft by serial number No free text field will be available for collateral that is an aircraft engine, airframe, helicopter or small aircraft as the financing statement will only permit these sub-classes of collateral to be described by serial number. A free text field will be available to further describe







collateral that is agriculture. Crops (for example, wheat, corn and fruit crops before they are harvested) Example 1: All corn crops. Example 1 will limit the effectiveness of the financing statement to corn crops even if the security agreement might cover other types of crops as well. Example 2: All granny smith apple crops. Example 2 limits the effectiveness of the financing statement to a particular variety of apples. This will not be appropriate if other varieties are intended to be covered. Example 3: All crops grown on the property known as ‘Whiteacre’, at 125 Johnsons Road, Farmerville, Victoria.

[page 87] Collateral class



Free text field availability















Other goods

A free text field will be available

Guide and examples for using free text fields Example 3 limits the effectiveness of the financing statement to crops at the designated location. This will not be appropriate if other locations are intended to be covered. The secured party should not use the word ‘harvested’ in the free text description as harvested crops are not ‘crops’ under the PPSA, rather they are the proceeds of crops. Crops that have been harvested will be ‘other goods’ as original collateral. Livestock Example 1: All cattle and sheep. Example 1 limits the effectiveness of the financing statement to livestock that are cattle or sheep. This will not be appropriate if other types of livestock (for example, horses and pigs) are intended to be covered. Example 2: All freshwater fish grown by the grantor. Example 2 is limited to freshwater fish grown by the grantor. It would not extend to fish which are from a salt water environment or purchased (rather than ‘grown’) by the grantor. A free text field will be available to further describe collateral which is ‘other goods’ (that is, property that does not fall within the collateral classes of motor vehicle, watercraft, aircraft or agriculture). Use of the free text field will be important to distinguish the particular collateral or types of collateral in which the security interest is granted. Example 1: Bottling equipment.

[page 88]

Collateral class



Free text field availability









Accounts

A free text field will be available

Guide and examples for using free text fields Example 2: Bottling machine manufactured by BottleCo of Korea bearing manufacturer’s number KCP62578. Example 3: Rotary drill mining equipment. Example 4: Rotary mining drill manufactured by DrillCo, model number 6477XP, year of manufacture 2011. A free text description should contain enough information to identify the collateral or type of collateral. However, the secured party should avoid using information that is too detailed or unnecessarily limiting, for example including manufacturer numbers and year of manufacture for the goods. The descriptions in examples 1 and 3 attempt to strike a balance between too little and too much information. Examples 2 and 4 could end up being misleading (if any of the details in the descriptions are wrong) or too narrow (if the relevant security agreement is intended to cover replacement machinery etc fitting the more general descriptions in examples 1 and 3). Example 5: All goods sold, hired, leased or otherwise supplied by the secured party to the grantor from time to time. The wording in example 5 might be appropriate for ongoing retention of title supply and/or hiring and/or other PMSI arrangements. The ‘goods’ being supplied could be described with more specificity if required. A free text field will be available to further describe collateral which is an account. Example 1: All accounts assigned to the secured party under the Invoice Discounting Agreement dated 31 October 2011

[page 89] Collateral class



Free text field availability







Guide and examples for using free text fields Example 1 limits the effectiveness of the financing statement to accounts assigned pursuant to the specified agreement. This will not be appropriate if the registration is intended to cover accounts assigned under various agreements from time to time. In example 1 the words ‘assigned to’ will not be appropriate if the relevant security agreement does not contemplate an assignment. Using this language in the free text description may render the registration ineffective in respect of accounts that have not been ‘assigned’. Example 2: All of the grantor’s accounts related to the lease or hiring agreements entered into between the grantor and its customers from time to time



General intangible A free text field will be available

Example 2 limits the effectiveness of the financing statement to accounts relating to a particular activity, namely the grantor’s leasing and hiring business. It will usually be preferable not to identify specific account obligors in a free text description as this will limit the effectiveness of the registration to account relating to the nominated account obligors. A free text field will be available to further describe collateral which is a general intangible. A general intangible will be any intangible property that is not an account, design, patent, circuit layout, trade mark, copyright or plant breeder’s right. This will include such things as ADI accounts, statutory licences, contract rights and intellectual property that does not fall within the PPSA definition of ‘intellectual property’.

[page 90] Collateral class



Free text field availability













Guide and examples for using free text fields Statutory licences Example: The collateral includes all of the grantor’s rights in relation to Queensland Taxi Service Licence, number [#####]. When using the free text field to describe a statutory licence, permit or authority it will be sufficient to only refer to the licence and its applicable identification (if any). When describing the licence, permit or authority, the actual name of that licence, permit or authority should be used rather than colloquial nicknames or industry abbreviations of it. Contract rights Example 1: The supply contract between the grantor and XYZ Pty Ltd entitled ‘Gas Supply Agreement’ dated [ ]. When using the free text field to describe a specific contract right to be secured provide the name of the agreement, the description of the parties (for example, grantor and the name of the other parties) and the date of the agreement. Example 2: All sales contracts between the grantor and its customers for the sale of stationery by the grantor to its customers. If the contract rights to be secured relate to multiple contracts between the same parties, then describe the type of contracts. Refer to example 2 above. The other parties to these contracts could be identified if this is commercially appropriate and not too limiting. Example 3: All contracts between the grantor and its customers relating to the sale of goods or the provision of services by the grantor to its customers.

[page 91] Collateral class



Free text field availability



Intellectual property

A free text field will be available







Guide and examples for using free text fields Example 3 limits the registration against ‘general intangibles’ to a broad class of contracts. However, this wording may still be too restrictive if some of the contracts intended to be covered relate to the ‘hiring’ of goods and not just the ‘sale’ of goods. A free text field will be available to further describe collateral that is intellectual property. Where the intellectual property is a particular design, patent, plant breeder’s right or trade mark which has a serial number the registration can be made using that particular subclass and serial number. This collateral class can also be used when the secured party wants to register its security interest over a number of different items or types of ‘intellectual property’ (as defined in the PPSA) and it does not wish to make separate serial number registrations over each specific item or if the secured party wishes to register for longer than the seven-year period permitted for serial number registrations. Example: All intellectual property owned by or licensed to the grantor from time to time in connection with its micro chip business. This example limits the registration to intellectual property relating to a particular business. It would not cover intellectual property unrelated to that business. If the registration is in respect of the same type of intellectual property and the secured party does not want to make

[page 92] Collateral class



Free text field availability



Circuit layout

A free text field will be available



Copyright

A free text field will be available

Guide and examples for using free text fields separate serial number registrations for each item of collateral the registration should be made using the particular subclass. A free text field will be available to further describe collateral that is a circuit layout. A free text field will be available to further describe collateral that is copyright. Example: All copyright and intellectual property rights of the grantor in respect of [insert the name of the particular musical composition, song, artwork, writing etc.] When using the free text field to describe copyright it will be sufficient to identify rights and the musical composition, song, art work, writing or other creation to which those rights correspond.









Design



Patent

A free text field will be available, including when describing the collateral by serial number. A free text field will be available, including when describing the collateral by serial number.

The secured party should avoid only specifying the name of the musical composition, song, artwork, writing or other creation in which copyright is owned or licensed. For example, avoid a short description such as ‘The Birds’. Instead use ‘All copyright and intellectual property rights of the grantor in respect of the novel entitled “The Birds”’. A free text field is available, even when describing the design by serial number. A free text field is available, even when describing the patent by serial number.

[page 93] Collateral class



Trade mark



Chattel paper

Free text field availability A free text field will be available, including when describing the collateral by serial number. A free text field will be available, including when describing the collateral by serial number. A free text field will be available









Document of title

A free text field will be available



Intermediated security Investment instrument Negotiable instrument

A free text field will be available



Plant breeder’s right

A free text field will be available A free text field will be available

Guide and examples for using free text fields A free text field is available, even when describing the plant breeder’s right by serial number. A free text field is available, even when describing the trade mark by serial number. A free text field will be available to further describe collateral which is chattel paper. Example: All motor vehicle lease or hiring agreements between the grantor and its customers. Using the free text description in this example will ensure that the secured party’s registration will cover all lease or hire agreements for motor vehicles between the grantor and its customers. This would mean the registration would not be effective for leases/hiring agreements for ‘other goods’. The secured party should avoid using specific document or product names when describing the chattel paper as each document or product may be labeled differently and this labeling may change over time. A free text field will be available to further describe collateral that is a document of title. A free text field will be available to further describe collateral that is an intermediated security. A free text field will be available to further describe collateral that is an investment instrument. A free text field will be available to further describe collateral that is a negotiable instrument.

[page 95]

Part C Personal Property Securities Act 2009 Personal Property Securities Regulations 2010

[page 97]

Personal Property Securities Act 2009 TABLE OF PROVISIONS Section

Title



CHAPTER 1 — INTRODUCTION [ss 1–15] PART 1.1 — PRELIMINARY [ss 1–3] 1 2 3

Short title …. Commencement …. Guide to this Act ….

[PPSA.1] [PPSA.2] [PPSA.3]

PART 1.2 — GENERAL APPLICATION OF THIS ACT [ss 4–8] 4 5 6 7 8

Guide to this Part …. Crown to be bound …. Connection with Australia …. Application in the external Territories …. Interests to which this Act does not apply ….

[PPSA.4] [PPSA.5] [PPSA.6] [PPSA.7] [PPSA.8]

PART 1.3 — DEFINITIONS [ss 9–15] DIVISION 1 — INTRODUCTION [s 9]

9

Guide to this Part ….

[PPSA.9]

DIVISION 2 — THE DICTIONARY [ss 10, 11]

10 11

The Dictionary …. Application of the Acts Interpretation Act 1901 ….

[PPSA.10] [PPSA.11]

DIVISION 3 — CONCEPTS RELATING TO SECURITY INTERESTS AND PERSONAL PROPERTY [ss 12–15]

12 13 14 15

Meaning of security interest …. Meaning of PPS lease …. Meaning of purchase money security interest …. Meaning of intermediated security and related terms ….

[PPSA.12] [PPSA.13] [PPSA.14] [PPSA.15] [page 98]

Section

Title



CHAPTER 2 — GENERAL RULES RELATING TO SECURITY INTERESTS [ss 16–81] PART 2.1 — GUIDE TO THIS CHAPTER [s 16] 16

Guide to this Chapter ….

[PPSA.16]

PART 2.2 — SECURITY INTERESTS: GENERAL PRINCIPLES [ss 17–22] 17 18 19 20 21 22

Guide to this Part …. General rules about security agreements and security interests …. Enforceability of security interests against grantors — attachment …. Enforceability of security interests against third parties …. Perfection — main rule …. Perfection — goods possessed by a bailee ….

[PPSA.17] [PPSA.18] [PPSA.19] [PPSA.20] [PPSA.21] [PPSA.22]

PART 2.3 — POSSESSION AND CONTROL OF PERSONAL PROPERTY [ss 23–29] 23 24 25 26 27

Guide to this Part …. Possession …. Control of an ADI account …. Control of intermediated securities …. Control of investment instruments ….

[PPSA.23] [PPSA.24] [PPSA.25] [PPSA.26] [PPSA.27]

Control of a letter of credit …. Control of negotiable instruments that are not evidenced by a certificate ….

28 29

[PPSA.28] [PPSA.29]

PART 2.4 — ATTACHMENT AND PERFECTION: SPECIFIC RULES [ss 30– 40] DIVISION 1 — INTRODUCTION [s 30]

30

Guide to this Part ….

[PPSA.30]

DIVISION 2 — PROCEEDS AND TRANSFER [ss 31–34]

31 32 33

Meaning of proceeds …. Proceeds — attachment …. Proceeds — perfection and temporary perfection …. Transferred collateral — temporary perfection after transfer ….

34

[PPSA.31] [PPSA.32] [PPSA.33] [PPSA.34]

DIVISION 3 — COLLATERAL RETURNED TO GRANTOR OR DEBTOR [ss 35–38]

35

Returned collateral — from bailee ….

[PPSA.35] [page 99]

Section

36 37 38

Title

Returned collateral — negotiable instruments and investment instruments …. Returned collateral — following sale or lease …. Returned collateral — accounts and chattel paper ….

[PPSA.36] [PPSA.37] [PPSA.38]

DIVISION 4 — RELOCATION OF COLLATERAL OR GRANTOR TO AUSTRALIA ETC [ss 39, 40]

39 40

Relocation — main rule …. Relocation — intangible property and financial property ….

[PPSA.39] [PPSA.40]

PART 2.5 — TAKING PERSONAL PROPERTY FREE OF SECURITY

INTERESTS [ss 41–53] 41 42 43 44

45 46 47 48 49

50 51 52 53

Guide to this Part …. Application of this Part …. Taking personal property free of unperfected security interest …. Taking personal property free of security interest if serial number incorrect or missing …. Taking motor vehicles free of security interest …. Taking personal property free of security interest in ordinary course of business …. Taking personal, domestic or household property free of security interest …. Taking currency free of security interest …. Taking investment instrument or intermediated security free of security interest in the ordinary course of trading …. Taking investment instrument free of security interest …. Taking intermediated security free of security interest …. Taking personal property free of temporarily perfected security interest …. Rights of secured party and transferee on taking personal property free of security interest ….

[PPSA.41] [PPSA.42] [PPSA.43]

[PPSA.44] [PPSA.45] [PPSA.46] [PPSA.47] [PPSA.48]

[PPSA.49] [PPSA.50] [PPSA.51] [PPSA.52] [PPSA.53]

PART 2.6 — PRIORITY BETWEEN SECURITY INTERESTS [ss 54–77] DIVISION 1 — INTRODUCTION [s 54]

54

Guide to this Part ….

[PPSA.54]

DIVISION 2 — PRIORITY OF SECURITY INTERESTS GENERALLY [ss 55–61]

55 56 57

Default priority rules …. How a security interest is continuously perfected …. Priority of security interests perfected by

[PPSA.55] [PPSA.56]

control ….

[PPSA.57] [page 100]

Section

58 59 60 61

Title

Priority of advances …. Priority rules and intervening security interests …. Transfer of security interests does not affect priority …. Voluntary subordination of security interests ….

[PPSA.58] [PPSA.59] [PPSA.60] [PPSA.61]

DIVISION 3 — PRIORITY OF PURCHASE MONEY SECURITY INTERESTS [ss 62–65]

62 63 64 65

When purchase money security interests take priority over other security interests …. Priority between competing purchase money security interests in collateral …. Non-purchase money security interests in accounts …. Possession of goods shipped by a common carrier ….

[PPSA.62] [PPSA.63] [PPSA.64] [PPSA.65]

DIVISION 4 — PRIORITY OF SECURITY INTERESTS IN TRANSFERRED COLLATERAL [ss 66– 68]

66 67 68

Application of this Division …. Priority when transferor-granted interest has been continuously perfected …. Priority when there is a break in the perfection of the transferor-granted interest ….

[PPSA.66] [PPSA.67] [PPSA.68]

DIVISION 5 — PRIORITY OF CREDITORS, AND PURCHASERS OF NEGOTIABLE INSTRUMENTS, CHATTEL PAPER AND NEGOTIABLE DOCUMENTS OF TITLE [ss 69–72]

69 70

Priority of creditor who receives payment of debt …. Priority of person who acquires a negotiable instrument or an interest in a negotiable

[PPSA.69]

instrument …. Priority of person who acquires chattel paper or an interest in chattel paper …. Priority of holder of negotiable document of title ….

71 72

[PPSA.70] [PPSA.71] [PPSA.72]

DIVISION 6 — PRIORITY OF OTHER INTERESTS [ss 73–77]

73

Priority between security interests and declared statutory interests …. Execution creditor has priority over unperfected security interest …. Priority of security interests held by ADIs …. Priority of security interests in returned goods …. Priority of certain security interests if there is no foreign register ….

74 75 76 77

[PPSA.73] [PPSA.74] [PPSA.75] [PPSA.76] [PPSA.77]

PART 2.7 — TRANSFER OF INTERESTS IN COLLATERAL [ss 78–81] 78 79

Guide to this Part …. Transfer of collateral despite prohibition in security agreement ….

[PPSA.78] [PPSA.79] [page 101]

Section

80 81

Title



Rights on transfer of account or chattel paper — rights of transferee and account debtor …. Rights on transfer of account or chattel paper — contractual restrictions and prohibitions on transfer ….

[PPSA.80]

[PPSA.81]

CHAPTER 3 — SPECIFIC RULES FOR CERTAIN SECURITY INTERESTS [ss 82–106] PART 3.1 — GUIDE TO THIS CHAPTER [s 82]

82

Guide to this Chapter ….

[PPSA.82]

PART 3.2 — AGRICULTURAL INTERESTS [ss 83–86] 83 84 84A

85 86

Guide to this Part …. Relationship between security interest in crops and interest in land …. Attachment of security interests to crops while they are growing and to the products of livestock …. Priority of crops …. Priority of livestock ….

[PPSA.83] [PPSA.84]

[PPSA.84A] [PPSA.85] [PPSA.86]

PART 3.3 — ACCESSIONS [ss 87–97] 87 88 89 90 91

92 93 94 95 96 97

Guide to this Part …. Continuation of security interests in accessions …. Default rule — interest in accession has priority …. Priority interest in whole — before security interest in accession is perfected …. Priority interest in whole — security interest in accession attaches after goods become accession …. Secured party must not damage goods when removing accession …. Reimbursement for damage caused in removing accessions …. Refusal of permission to remove accession …. Secured party must give notice of removal of accession …. When person with an interest in the whole may retain accession …. Court order about removal of accession ….

[PPSA.87] [PPSA.88] [PPSA.89] [PPSA.90]

[PPSA.91] [PPSA.92] [PPSA.93] [PPSA.94] [PPSA.95] [PPSA.96] [PPSA.97]

PART 3.4 — PROCESSED OR COMMINGLED GOODS [ss 98–103] 98

Guide to this Part ….

[PPSA.98]

99 100

Continuation of security interests in goods that become processed or commingled …. Perfection of security interest in goods that become processed or commingled applies to product or mass ….

[PPSA.99]

[PPSA.100] [page 102]

Section

101 102

103

Title



Limit on value of priority of goods that become part of processed or commingled goods …. Priority where more than one security interest continues in processed or commingled goods …. Priority of purchase money security interest in processed or commingled goods ….

[PPSA.101]

[PPSA.102] [PPSA.103]

PART 3.5 — INTELLECTUAL PROPERTY [ss 104–106] 104 105 106

Guide to this Part …. Implied references to intellectual property rights …. Intellectual property licences and transfers of intellectual property ….

[PPSA.104] [PPSA.105] [PPSA.106]

CHAPTER 4 — ENFORCEMENT OF SECURITY INTERESTS [ss 107–144] PART 4.1 — GUIDE TO THIS CHAPTER [s 107] 107

Guide to this Chapter ….

[PPSA.107]

PART 4.2 — GENERAL RULES [ss 108–121] 108 109 110 111

Guide to this Part …. Application of this Chapter …. Rights and remedies …. Rights and duties to be exercised honestly and

[PPSA.108] [PPSA.109] [PPSA.110]

112 113

114 115 116 117 118 119 120 121

in a commercially reasonable manner …. Rights and remedies under this Chapter …. Recovering judgment or issuing execution does not extinguish a security interest in collateral …. Rights and remedies under this Chapter are cumulative …. Contracting out of enforcement provisions …. Application while there is a receiver or another controller of property …. Obligations secured by interests in personal property and land …. Enforcing security interests in accordance with land law decisions …. Relationship with consumer credit legislation …. Enforcement of security interests in liquid assets — general …. Enforcement of security interests in liquid assets — notice to higher priority parties and grantor ….

[PPSA.111] [PPSA.112]

[PPSA.113] [PPSA.114] [PPSA.115] [PPSA.116] [PPSA.117] [PPSA.118] [PPSA.119] [PPSA.120]

[PPSA.121] [page 103]

Section

Title

PART 4.3 — SEIZURE AND DISPOSAL OR RETENTION OF COLLATERAL [ss 122–138C] DIVISION 1 — INTRODUCTION [s 122]

122

Guide to this Part ….

[PPSA.122]

DIVISION 2 — SEIZING COLLATERAL [ss 123–127]

123 124

Secured party may seize collateral …. Secured party who has perfected a security interest in collateral by possession or control ….

[PPSA.123]

[PPSA.124]

125 126 127

Obligation to dispose of or retain collateral …. Apparent possession of collateral …. Seizure by higher priority parties — notice ….

[PPSA.125] [PPSA.126] [PPSA.127]

DIVISION 3 — DISPOSING OF COLLATERAL (INCLUDING BY PURCHASING COLLATERAL) [ss 128–133]

128 129 130 131 132 133

Secured party may dispose of collateral …. Disposal by purchase …. Notice of disposal of collateral …. Duty of secured party disposing of collateral to obtain market value …. Secured party to give statement of account …. Disposing of collateral free of interests ….

[PPSA.128] [PPSA.129] [PPSA.130] [PPSA.131] [PPSA.132] [PPSA.133]

DIVISION 4 — RETAINING COLLATERAL [ss 134–136]

134 135 136

Proposal of secured party to retain collateral …. Notice of retention of collateral …. Retaining collateral free of interests ….

[PPSA.134] [PPSA.135] [PPSA.136]

DIVISION 5 — OBJECTION TO PURCHASE OR RETENTION [ss 137,138]

137 138

Persons entitled to notice may object to proposal …. Person making objection may be requested by secured party to prove interest ….

[PPSA.137] [PPSA.138]

DIVISION 6 — SEIZURE AND DISPOSAL OR RETENTION OF CROPS AND LIVESTOCK [ss 138A–138C]

138A 138B 138C

Meaning of take and water source …. Seizure and disposal or retention of crops …. Seizure and disposal or retention of livestock ….

[PPSA.138A] [PPSA.138B] [PPSA.138C]

PART 4.4 — RULES APPLYING AFTER ENFORCEMENT [ss 139–144] 139 140

Guide to this Part …. Distribution of proceeds received by secured party ….

[PPSA.139] [PPSA.140]

[page 104] Section

141 142 143 144

Title



Secured party may take steps to reflect transfer of title …. Entitled persons may redeem collateral …. Entitled persons may reinstate security agreement …. When certain enforcement notices are not required ….

[PPSA.141] [PPSA.142] [PPSA.143] [PPSA.144]

CHAPTER 5 — PERSONAL PROPERTY SECURITIES REGISTER [ss 145–203] PART 5.1 — GUIDE TO THIS CHAPTER [s 145] 145

Guide to this Chapter ….

[PPSA.145]

PART 5.2 — ESTABLISHMENT OF THE REGISTER [ss 146–148] 146 147 148

Guide to this Part …. Personal Property Securities Register …. What the register contains ….

[PPSA.146] [PPSA.147] [PPSA.148]

PART 5.3 — REGISTRATION [ss 149–158] 149 150 151 152 153 154 155

Guide to this Part …. Registration — on application …. Registration — belief about security interest …. Registration — location of personal property and interested persons outside Australia …. Financing statements with respect to security interests …. Financing statements with respect to prescribed property …. Meanings of verification statement and registration event ….

[PPSA.149] [PPSA.150] [PPSA.151] [PPSA.152] [PPSA.153] [PPSA.154] [PPSA.155]

156

Verification statements — Registrar to give to secured parties …. Verification statements — secured parties to give notice to grantors …. Verification statements — publication as alternative

157 158

[PPSA.156] [PPSA.157] [PPSA.158]

PART 5.4 — WHEN A REGISTRATION IS EFFECTIVE [ss 159–168] 159 160 161 162 163 164 165 166 167 168

Guide to this Part …. Registration time — general …. Registration time — security agreements and interests …. Registration time — transfers …. Effective registration …. Defects in registration — general rule …. Defects in registration — particular defects …. Defects in registration — temporary effectiveness …. Security interest in certain property becomes unperfected …. Maintenance fees ….

[PPSA.159] [PPSA.160] [PPSA.161] [PPSA.162] [PPSA.163] [PPSA.164] [PPSA.165] [PPSA.166] [PPSA.167] [PPSA.168] [page 105]

Section

Title

PART 5.5 — ACCESSING THE REGISTER TO SEARCH FOR DATA [ss 169–176]

169 170 171 172 173 174

Guide to this Part …. Search — general …. Search — criteria …. Search — by reference to details of grantor who is an individual …. Search — interference with privacy …. Search — written search results and evidence etc ….

[PPSA.169] [PPSA.170] [PPSA.171] [PPSA.172] [PPSA.173] [PPSA.174]

175 176

Copies of financing statements and verification statements …. Reports by Registrar ….

[PPSA.175] [PPSA.176]

PART 5.5A — CONDITIONS ON DATA ACCESS [ss 176A–176C] 176A 176B 176C

Guide to this Part …. Access to registered data — conditions …. Access to third party data ….

[PPSA.176A] [PPSA.176B] [PPSA.176C]

PART 5.6 — AMENDMENT DEMANDS [ss 177–182] DIVISION 1 — INTRODUCTION [ss 177,178]

177 178

Guide to this Part …. How amendment demands are given ….

[PPSA.177] [PPSA.178]

DIVISION 2 — AMENDMENT DEMANDS: ADMINISTRATIVE AND JUDICIAL PROCESS [ss 179– 182]

Subdivision A — Administrative Process [ss 179–181] 179 180 181

Scope of Subdivision …. Administrative process — amendment notices …. Administrative process — registration amendments ….

[PPSA.179] [PPSA.180] [PPSA.181]

Subdivision B — Judicial Process [s 182] 182

Judicial process for considering amendment demand ….

[PPSA.182]

PART 5.7 — REMOVAL OF DATA AND CORRECTION OF REGISTRATION ERRORS [ss 183–188] 183 184 185 186 187

Guide to this Part …. Removal of data — general grounds …. Removal of data — registration ineffective for 7 years or more …. Incorrectly removed data — restoration …. Records of removed data ….

[PPSA.183] [PPSA.184] [PPSA.185] [PPSA.186] [PPSA.187]

188

Correction of registration errors ….

[PPSA.188] [page 106]

Section

Title

PART 5.8 — FEES, ADMINISTRATIVE REVIEW AND ANNUAL REPORTS [ss 189–192]

189 190 191 192

Guide to this Part …. Registration and search fees …. Review of decisions …. Annual reports ….

[PPSA.189] [PPSA.190] [PPSA.191] [PPSA.192]

PART 5.9 — REGISTRAR OF PERSONAL PROPERTY SECURITIES [ss 193–203] 193 194 195 195A 196 197 198 199 200 201 202 203

Guide to this Part …. Registrar — establishment of office …. Registrar — functions and powers …. Registrar — investigations …. Registrar — acting appointments …. Registrar — delegation …. Registrar — resignation …. Registrar — termination …. Deputy Registrar — establishment of office …. Deputy Registrar — functions and powers …. Deputy Registrar — resignation …. Deputy Registrar — termination ….

[PPSA.193] [PPSA.194] [PPSA.195] [PPSA.195A] [PPSA.196] [PPSA.197] [PPSA.198] [PPSA.199] [PPSA.200] [PPSA.201] [PPSA.202] [PPSA.203]

CHAPTER 6 — JUDICIAL PROCEEDINGS [ss 204–231] PART 6.1 — GUIDE TO THIS CHAPTER [s 204] 204

Guide to this Chapter ….

[PPSA.204]

PART 6.2 — JUDICIAL PROCEEDINGS GENERALLY [ss 205–219] DIVISION 1 — INTRODUCTION [ss 205, 206]

205 206

Guide to this Part …. Scope of this Part ….

[PPSA.205] [PPSA.206]

DIVISION 2 — CONFERRAL OF JURISDICTION [ss 207–209]

207 208 209

Jurisdiction of courts …. Cross-jurisdictional appeals …. Courts to act in aid of each other ….

[PPSA.207] [PPSA.208] [PPSA.209]

DIVISION 3 — TRANSFERS BETWEEN COURTS [ss 210–217]

210 211

Application of this Division …. Exercise of transfer power ….

[PPSA.210] [PPSA.211] [page 107]

Section

212 213 214 215 216 217

Title

Criteria for transfers between courts …. Initiating transfers between courts …. Documents and procedure …. Conduct of transferred proceedings …. Entitlement to practise as barrister or solicitor …. Limitation on appeals ….

[PPSA.212] [PPSA.213] [PPSA.214] [PPSA.215] [PPSA.216] [PPSA.217]

DIVISION 4 — REGISTRAR’S ROLE IN JUDICIAL PROCEEDINGS [ss 218, 219]

218 219

Intervention in judicial proceedings …. Initiation of judicial proceedings ….

[PPSA.218] [PPSA.219]

PART 6.3 — CIVIL PENALTY PROCEEDINGS [ss 220–231] DIVISION 1 — INTRODUCTION [ss 220, 221]

220 221

Guide to this Part …. What is a civil penalty provision? ….

[PPSA.220] [PPSA.221]

DIVISION 2 — OBTAINING AN ORDER FOR A CIVIL PENALTY [ss 222–225]

222

Federal Court may order person to pay pecuniary penalty for contravening civil

223 224 225

penalty provision …. Contravening a civil penalty provision is not an offence …. Persons involved in contravening civil penalty provision …. Recovery of a pecuniary penalty ….

[PPSA.222] [PPSA.223] [PPSA.224] [PPSA.225]

DIVISION 3 — CIVIL PENALTY PROCEEDINGS AND CRIMINAL PROCEEDINGS [ss 226–229]

226 227 228 229

Civil proceedings after criminal proceedings …. Criminal proceedings during civil proceedings …. Criminal proceedings after civil proceedings …. Evidence given in proceedings for penalty not admissible in criminal proceedings ….

[PPSA.226] [PPSA.227] [PPSA.228] [PPSA.229]

DIVISION 4 — ENFORCEABLE UNDERTAKINGS RELATING TO CONTRAVENTIONS OF CIVIL PENALTY PROVISIONS [ss 230, 231]

230 231

Acceptance of undertakings relating to contraventions of civil penalty provisions …. Enforcement of undertakings ….

[PPSA.230] [PPSA.231]

CHAPTER 7 — OPERATION OF LAWS [ss 232–264] PART 7.1 — GUIDE TO THIS CHAPTER [s 232] 232

Guide to this Chapter ….

[PPSA.232] [page 108]

Section

233 234 235

Title

PART 7.2 — AUSTRALIAN LAWS AND THOSE OF OTHER JURISDICTIONS [ss 233–241] Guide to this Part …. Scope of this Part …. Meaning of located ….

[PPSA.233] [PPSA.234] [PPSA.235]

236 237 238 239 240 241

Commonwealth laws may provide for governing law …. Express agreement …. Governing laws — goods …. Governing laws — intangible property …. Governing laws — financial property and rights evidenced by letters of credit …. Governing laws — proceeds ….

[PPSA.236] [PPSA.237] [PPSA.238] [PPSA.239] [PPSA.240] [PPSA.241]

PART 7.3 — CONSTITUTIONAL OPERATION [ss 242–252B] DIVISION 1 — INTRODUCTION [s 242]

242

Guide to this Part ….

[PPSA.242]

DIVISION 2 — CONSTITUTIONAL BASIS [ss 243–252]

243 244 245 246 247 248 249 250 251 252

Constitutional basis for this Act …. Meaning of referring State …. Meaning of referred PPS matters …. Non-referring State operation — overview …. Non-referring State operation — persons …. Non-referring State operation — activities …. Non-referring State operation — interests …. Non-referring State operation — inclusion of data in register …. Personal property taken free of security interest when Act begins to operate …. Priority between constitutional and nonconstitutional security interests ….

[PPSA.243] [PPSA.244] [PPSA.245] [PPSA.246] [PPSA.247] [PPSA.248] [PPSA.249] [PPSA.250] [PPSA.251] [PPSA.252]

DIVISION 3 — CONSTITUTIONAL GUARANTEES [ss 252A, 252B]

252A 252B

No constitutional preference to one State over another …. No unjust acquisition of property ….

[PPSA.252A] [PPSA.252B]

PART 7.4 — RELATIONSHIP BETWEEN AUSTRALIAN LAWS [ss 253– 264] DIVISION 1 — INTRODUCTION [s 253]

253

Guide to this Part ….

[PPSA.253] [page 109]

Section

Title



DIVISION 2 — CONCURRENT OPERATION [ss 254, 255]

254 255

Concurrent operation — general rule …. Concurrent operation — regulations may resolve inconsistency ….

[PPSA.254] [PPSA.255]

DIVISION 3 — WHEN OTHER LAWS PREVAIL [ss 256–260]

256 257 258

259 260

When other laws prevail — certain other Commonwealth Acts …. When other laws prevail — security agreements …. When other laws prevail — personal property, security interests and matters excluded from State amendment referrals …. When other laws prevail — exclusion by referring State law or Territory law …. When other laws prevail — no constitutional preference to one State over another [Repealed] ….

[PPSA.256] [PPSA.257]

[PPSA.258] [PPSA.259]

[PPSA.260]

DIVISION 4 — WHEN THIS ACT PREVAILS [ss 261–264]

261 262 263 264

When this Act prevails — registration requirements …. When this Act prevails — assignment requirements …. When this Act prevails — formal requirements relating to agreements …. When this Act prevails — attachment and perfection of security interests ….

[PPSA.261] [PPSA.262] [PPSA.263] [PPSA.264]

CHAPTER 8 — MISCELLANEOUS [ss 265–303]

PART 8.1 — GUIDE TO THIS CHAPTER [s 265] 265

Guide to this Chapter ….

[PPSA.265]

PART 8.2 — VESTING OF CERTAIN UNPERFECTED SECURITY INTERESTS [ss 266–269] 266 267

267A 268 269

Guide to this Part …. Vesting of unperfected security interests in the grantor upon the grantor’s winding up or bankruptcy etc …. Vesting in grantor of security interest that attaches after winding up etc …. Security interests unaffected by section 267 …. Certain lessors, bailors and consignors entitled to damages ….

[PPSA.266]

[PPSA.267] [PPSA.267A] [PPSA.268] [PPSA.269] [page 110]

Section

Title

PART 8.3 — EXERCISE AND DISCHARGE OF RIGHTS, DUTIES AND OBLIGATIONS [ss 270–273]

270 271 272 273

Guide to this Part …. Entitlement to damages for breach of duties or obligations …. Liability for damages …. Application of Act not affected by secured party having title to collateral ….

[PPSA.270] [PPSA.271] [PPSA.272] [PPSA.273]

PART 8.4 — PROVISION OF INFORMATION BY SECURED PARTIES [ss 274–283] 274 275 276

Guide to this Part …. Secured party to provide certain information relating to security interest …. Obligation to disclose successor in security interest when request made ….

[PPSA.274] [PPSA.275] [PPSA.276]

277 278 279 280 281 282 283

Time for responding to a request …. Application to court for exemption or extension of time to respond to requests …. Persons may recover costs arising from request …. Application to court for response to request etc …. Application to court in relation to costs charged …. Consequences of not complying with court order …. Estoppels against persons who respond to a request ….

[PPSA.277] [PPSA.278] [PPSA.279] [PPSA.280] [PPSA.281] [PPSA.282] [PPSA.283]

PART 8.5 — NOTICES AND TIMING [ss 284–294] 284 285 286 287 288 289 290 291 292 293 294

Guide to this Part …. Application of this Part — notices etc …. Notices — writing …. Notices — registered secured parties …. Notices — more than one registered secured party …. Notices etc must be given to persons registered as secured parties using identifier …. Notices — deceased persons …. Notices — Court orders …. Notices — formal defects …. Timing — applications for extension of time …. Timing — references to time in this Act ….

[PPSA.284] [PPSA.285] [PPSA.286] [PPSA.287] [PPSA.288] [PPSA.289] [PPSA.290] [PPSA.291] [PPSA.292] [PPSA.293] [PPSA.294]

PART 8.6 — ONUS OF PROOF AND KNOWLEDGE [ss 295–300] 295 296

Guide to this Part …. Onus of proof ….

[PPSA.295] [PPSA.296] [page 111]

Section

297 298 299 300

Title



Meaning of constructive knowledge …. Actual or constructive knowledge by bodies corporate and other entities …. Actual or constructive knowledge in relation to certain property transfers …. Registration of data does not constitute constructive notice ….

[PPSA.297] [PPSA.298] [PPSA.299] [PPSA.300]

PART 8.7 — FORMS AND REGULATIONS [ss 301–303] 301 302 303

Guide to this Part …. Approved forms …. Regulations ….

[PPSA.301] [PPSA.302] [PPSA.303]

CHAPTER 9 — TRANSITIONAL PROVISIONS [ss 304–343] PART 9.1 — GUIDE TO THIS CHAPTER [s 304] 304

Guide to this Chapter ….

[PPSA.304]

PART 9.2 — KEY CONCEPTS [ss 305–308] 305 306 307 308

Guide to this Part …. Meaning of migration time and registration commencement time …. Meaning of transitional security agreement …. Meaning of transitional security interest ….

[PPSA.305] [PPSA.306] [PPSA.307] [PPSA.308]

PART 9.3 — INITIAL APPLICATION OF THIS ACT [ss 309–318] 309 310 311 312 313

Guide to this Part …. When this Act starts to apply, and in relation to which matters …. Enforceability of transitional security interests against third parties …. Declared statutory security interests …. Enforcement of security interests in intellectual property licences ….

[PPSA.309] [PPSA.310] [PPSA.311] [PPSA.312] [PPSA.313]

314

Enforcement of security interests provided for by security agreements …. Starting time for registrations …. Governing laws …. Constitutional and non-constitutional interests …. References to charges and fixed and floating charges ….

315 316 317 318

[PPSA.314] [PPSA.315] [PPSA.316] [PPSA.317] [PPSA.318] [page 112]

Section

Title

PART 9.4 — TRANSITIONAL APPLICATION OF THIS ACT [ss 319–337A] DIVISION 1 — INTRODUCTION [s 319]

319

Guide to this Part ….

[PPSA.319]

DIVISION 2 — ATTACHMENT, PERFECTION AND PRIORITY OF TRANSITIONAL SECURITY INTERESTS [ss 320–324]

320 321 322 322A

323 324

Guide to priority rules for transitional security interests …. Attachment rule …. Perfection rule …. Priority rule — priority between transitional security interest and security interest perfected by control …. Priority rule — priority otherwise undetermined …. Priority rule — certain security interests upon insolvency or bankruptcy ….

[PPSA.320] [PPSA.321] [PPSA.322]

[PPSA.322A] [PPSA.323] [PPSA.324]

DIVISION 3 — NON-PROTECTED PRIORITY FOR OTHER TRANSITIONAL SECURITY INTERESTS [Repealed] DIVISION 4 — TAKING FREE AND VESTING OF TRANSITIONAL SECURITY INTERESTS IN CERTAIN SITUATIONS [Repealed]

DIVISION 5 — TAKING FREE AND VESTING OF TRANSITIONAL SECURITY INTERESTS IN OTHER SITUATIONS [Repealed] DIVISION 6 — MIGRATION OF PERSONAL PROPERTY INTERESTS [ss 330–335]

330 331 332 333 334 335

Scope of Division …. Requirement for Commonwealth officers etc to provide data …. Meaning of migrated security interest …. Registration with respect to migrated data …. Incorrectly registered migrated data …. No requirement for notice of verification statement ….

[PPSA.330] [PPSA.331] [PPSA.332] [PPSA.333] [PPSA.334] [PPSA.335]

DIVISION 7 — PREPARATORY REGISTRATION RELATING TO TRANSITIONAL SECURITY INTERESTS [s 336]

336

Preparatory registration — transitional security interests ….

[PPSA.336]

DIVISION 8 — TRANSITIONAL SECURITY INTERESTS: REGISTRATION DEFECTS [ss 337, 337A]

337 337A

Registration effective despite certain defects …. Registration defective if collateral is not covered by transitional security agreement ….

[PPSA.337]

[PPSA.337A] [page 113]

Section

Title

PART 9.5 — CHARGES AND FIXED AND FLOATING CHARGES [ss 338– 341A]

338 339 340 341

Guide to this Part …. References to charges and fixed and floating charges …. Meaning of circulating asset …. Meaning of control and inventory ….

[PPSA.338] [PPSA.339] [PPSA.340] [PPSA.341]

341A

Control of an ADI account ….

[PPSA.341A]

PART 9.6 — REVIEW OF OPERATION OF ACT [ss 342, 343] 342 343

Guide to this Part …. Review of operation of Act ….

[PPSA.342] [PPSA.343]

[page 115]

Personal Property Securities Act 2009 TABLE OF AMENDMENTS Personal Property Securities Act No 130 of 2009, assented 14 December 2009, commenced on 15 December 2009, as amended by: Amending Legislation

Date of Assent

Date of Commencement

Personal Property Securities Act 2009 No 130

14 December 2009

15 December 2009

Personal Property Securities (Consequential Amendments) Act 2009 No 131

14 December 2009

Schedule 4 (items 1–7, 9–35, 37– 64): (a) Schedule 4 (items 8, 36): 1 April 2010 (see s 2(1))

Personal Property Securities (Corporations and Other Amendments) Act 2010 No 96

6 July 2010

Sch 2 (items 1–107, 109–153): 6 July 2010; Sch 2 (item 108): 30 January 2012

Personal Property Securities (Corporations and Other Amendments) Act 2011 No 35

26 May 2011

Sch 2: 26 May 2011

Personal Property Securities Amendment (Registration Commencement) Act 2011 No 138

29 November 2011

Sch 1 (items 1–6): 29 November 2011

Federal Circuit Court of Australia (Consequential Amendments) Act 2013 No 13

14 March 2013

Sch 1 items 466, 467; Sch 2 item 1: 12 April 2013

Statute Law Revision Act 2013 Act 103 of 2013

29 June 2013

Sch 1 (items 1–72): 29 June 2013; Sch 1 item 73: 18 November 2012

International Interests in Mobile Equipment (Cape Town Convention) (Consequential Amendments) Act 2013 No 92

28 June 2013

Sch 1 item 4: 28 June 2013

Statute Law Revision Act (No 1) 2014 No 31

27 May 2014

24 June 2014

Statute Law Revision Act (No 1) 2015 No 5

25 February 2015

25 March 2015

[page 116] Annotations to the Act The annotations to the Personal Property Securities Act 2009 are written by Craig Wappett, Partner, Johnson Winter & Slattery. The information contained in the annotations to the Act is current as at 1 April 2015. The PPSA case law from other PPSA jurisdictions, including New Zealand and Canada, should be considered having regard to the differences between the legislation of the relevant jurisdictions. The commentary included in the annotations is not legal advice and is intended to provide general commentary on the provisions of the legislation. It is not exhaustive.

[page 117] An Act relating to personal property securities, and for related purposes

CHAPTER 1 — INTRODUCTION [ss 1–15] PART 1.1 — PRELIMINARY [ss 1–3] [PPSA.1] Short title 1 This Act may be cited as the Personal Property Securities Act 2009.

[PPSA.2] Commencement 2 This Act commences on the day after it receives the Royal Assent. ____________________ Commentary References For further discussion please refer to commentary at [6.100].

____________________

[PPSA.3] Guide to this Act 3 Overview This Act is a law about security interests in personal property. A security interest is an interest in personal property provided for by a transaction that secures payment or the performance of an obligation. The form of the transaction and the identity of the person who has title to the property do not affect whether an interest is a security interest. Personal property includes many different kinds of tangible and intangible property, other than real property. Examples include motor vehicles, household goods, business inventory, intellectual property and company shares. Personal property is known as collateral if it is (or is anticipated to be) the subject of a security interest. A security interest is enforceable against a grantor when it attaches to collateral. A security interest attaches to collateral when a person gives value for acquiring the security interest (or does something else to acquire it), and in return, the person gains rights in the collateral. A security interest is enforceable against third parties when it has attached to the collateral and either the secured party has possession or control of the collateral, or a security agreement covers the collateral. If a security interest in collateral is perfected, it takes priority over another security interest that is unperfected when the security interest comes to be enforced. A security interest is perfected if:

(a) it has attached to collateral; and (b) it is enforceable against third parties; and (c) certain extra steps (possession or control of the collateral, or registration on the Register of Personal Property Securities) have been taken to protect the interest. Certain security interests are also declared to be temporarily perfected, or perfected, under this Act. The secured party whose security interest has the highest priority is entitled to enforce that interest ahead of secured parties with security interests that have a lower priority.

[page 118] Between perfected security interests, perfection by control has a higher priority than other forms of perfection. The next level of priority is given (subject to certain rules) to perfected purchase money security interests. If no other way of working out priority between perfected interests is provided, the highest priority is given to the security interest that has been continuously perfected for the longest period. The Register of Personal Property Securities enables secured parties to give notice of actual or prospective security interests. Notice is given by the recording of data about secured parties, grantors and collateral. The register may be kept electronically, for example in a form that is interactive and accessible over the internet. Summary Chapter 1 deals with some preliminary matters, including the general application of the Act (Part 1.2) and its interpretation (Part 1.3). Chapter 2 sets out general rules relating to security interests. These include the following: (a) general principles relating to security agreements, security interests, attachment and perfection (Part 2.2); (b) interpretation provisions about possession and control (Part 2.3); (c) rules about when attachment and perfection of security interests occurs in particular situations (Part 2.4); (d) the circumstances in which personal property is taken free of a security interest in the property (Part 2.5); (e) how to work out the priority between competing security interests (and in some cases, other sorts of interests) in personal property (Part 2.6);

(f) rules about the transfer of interests in collateral (Part 2.7). Chapter 3 contains specific rules about the following: (a) agricultural interests (Part 3.2); (b) security interests in accessions to personal property and their priority (Part 3.3); (c) security interests in personal property that is processed or commingled and their priority (Part 3.4); (d) intellectual property and intellectual property licences (Part 3.5). Chapter 4 deals with how to enforce a security interest in personal property. Parties can contract out of some of the provisions of Chapter 4. Chapter 5 provides for the establishment and maintenance of a register with respect to personal property securities and certain prescribed personal property (the Register of Personal Property Securities). The Registrar of Personal Property Securities is responsible for maintaining the register. Chapter 5 also deals with how the register can be searched, and how certain non-registered data can be provided through the register (as a portal). A search by reference to the details of an individual grantor must be made for an authorised purpose set out in the Act. A person who carries out an unauthorised search, or uses data from an unauthorised search, may be liable to pay compensation or a civil penalty (or both). Chapter 6 deals with the role of the courts in proceedings that relate to security interests in personal property. It confers jurisdiction on courts and provides rules for the transfer of proceedings between courts. It also describes the Registrar’s role in judicial proceedings and contains provisions about proceedings for contravention of a civil penalty provision. Chapter 7 deals with how this Act interacts with foreign laws, the constitutional operation of this Act and the relationship between this Act and other Australian laws. [page 119]

Chapter 8 deals with the following: (a) rules about the vesting of certain unperfected interests (Part 8.2); (b) rights to damages and compensation in relation to contraventions of this Act (Part 8.3); (c) requests to secured parties for information, how notices may be given and certain other procedural and administrative matters (Parts 8.4 to 8.7).

Chapter 9 deals with the initial application of this Act. The Act starts to apply under Part 9.3 at the registration commencement time, which is 1 February 2012 (the first day of the month that is 26 months after this Act was given the Royal Assent), or another time determined by the Minister. Chapter 9 also deals with references to charges and fixed and floating charges in this Act and in security agreements, and provides for the review of the operation of the Act within 3 years after it starts to apply. [s 3 am Act 96 of 2010 s 3 and Sch 2 items 1–3, opn 6 July 2010; Act 35 of 2011 s 3 and Sch 2 item 1, opn 26 May 2011; Act 138 of 2011 Sch 1 item 1, opn 29 Nov 2011]

____________________ Commentary References For further discussion please refer to commentary at [2.100]–[2.400], [2.5000], [2.7000], [2.7100], [2.7400].

____________________

PART 1.2 — GENERAL APPLICATION OF THIS ACT [ss 4–8] [PPSA.4] Guide to this Part 4 This Part contains general rules about the application of this Act. These deal with the following matters: (a) binding the Crown; (b) geographical rules; (c) particular interests to which this Act does not apply.

[PPSA.5] Crown to be bound 5 This Act binds the Crown in each of its capacities. ____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 22 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 3(3) of the Saskatchewan (Canada) Personal Property Security Act 1993.

____________________

[PPSA.6] Connection with Australia 6 (1) This Act applies to a security interest in goods or financial property if: (a) the location of the goods or property is in Australia; or (b) the grantor is an Australian entity.

Note: For when personal property is located in a jurisdiction, see section 235.

[page 120] (1A) This Act applies to a security interest in an intermediated security if: (a) the intermediary in relation to the intermediated security is located in Australia; or (b) the grantor is an Australian entity. Note: For when a person is located in a jurisdiction, see section 235. [subs (1A) am Act 96 of 2010 s 3 and Sch 2 items 133 and 134, opn 6 July 2010]

(2) This Act applies to a security interest in intangible property if: (a) the grantor is an Australian entity; or (b) the intangible property is an account that is payable in Australia; or (c) the security interest is an interest of a transferor under a transfer of intangible property that consists of an account or chattel paper, and: (i) the transferor is an Australian entity; or (ii) the account or chattel paper is payable in Australia; or (d) the intangible property is an ADI account; or (e) the intangible property is created, arises or is provided for by either or both of the following: (i) a law of the Commonwealth, a State or a Territory; (ii) the general law (to the extent to which it applies in Australia, a State or a Territory). Note: For the application of Australian and foreign law in relation to a security interest, see Part 7.2. [subs (2) am Act 96 of 2010 s 3 and Sch 2 item 4, opn 6 July 2010]

____________________ Commentary References For further discussion please refer to commentary at [4.6.950], [4.9.1400], [5.50], [5.650]–[5.800].

____________________

[PPSA.7] Application in the external Territories 7 (1) Extension to Norfolk Island This Act extends to Norfolk Island. (2) A reference in this Act to “Australia” includes a reference to Norfolk Island.

(3) Extension to other external Territories This Act extends to such other external Territories (if any) as are prescribed by the regulations for the purposes of this section. (4) Without limiting subsection (3), if an external Territory is prescribed for the purposes of this section, regulations prescribing the external Territory may provide that: (a) only some of the provisions of this Act apply in the external Territory; and (b) provisions that apply in the external Territory only apply in specified circumstances. (5) If: (a) an external Territory is prescribed by the regulations for the purposes of this section; and (b) in a provision of this Act that applies (either generally or in particular circumstances) in the external Territory there is a reference to “Australia” or a reference to a term the definition of which includes a reference to “Australia”; then, unless the contrary intention appears, the reference to “Australia” in that provision as so applying, or in that definition as applying for the purposes of that provision as so applying, includes a reference to that external Territory. [page 121] (6) Acts Interpretation Act 1901 definition of Australia To avoid doubt, this section applies despite paragraph 17(a) of the Acts Interpretation Act 1901 (definition of Australia). ____________________ [PPSA.7.A] Annotations to s 7 Prescribed External Territories (s 7(3)) The Territories of Christmas Island and Cocos (Keeling) Islands are prescribed: see reg 1.3 at [PPSR1.3].

____________________

[PPSA.8] Interests to which this Act does not apply 8 (1) This Act does not apply to any of the following interests (except as

provided by subsection (2) or (3)): (a) the interest of a seller who has shipped goods to a buyer under a negotiable bill of lading, or its equivalent, to the order of the seller, or to the order of an agent of the seller, unless the parties have otherwise evidenced an intention to create or provide for a security interest in the goods; (b) a lien, charge, or any other interest in personal property, that is created, arises or is provided for under a law of the Commonwealth (other than this Act), a State or a Territory, unless the person who owns the property in which the interest is granted agrees to the interest; (c) a lien, charge, or any other interest in personal property, that is created, arises or is provided for by operation of the general law; (d) any right of set-off or right of combination of accounts (within the ordinary meaning of the term “accounts”); (e) any right or interest held by a person, or any interest provided for by any transaction, under any of the following (as defined in section 5 of the Payment Systems and Netting Act 1998): (i) an approved netting arrangement; (ii) a close-out netting contract; (iii) a market netting contract; (f) an interest provided for by any of the following transactions: (i) the creation or transfer of an interest in land; (ii) the creation of an interest in a right to payment, or the creation or transfer (including a successive transfer) of a right to payment, in connection with an interest in land, if the writing evidencing the creation or transfer specifically identifies that land; (iii) a transfer (including a successive transfer) of an unearned right to payment under a contract to a person who is to perform the transferor’s obligations under the contract; (iv) a transfer of present or future remuneration (including wages, salary, commission, allowances or bonuses) payable to an individual as an employee or a contractor; (v) a transfer of an interest or claim in, or under, a contract of annuity or policy of insurance, except a transfer of a right to an insurance payment

[page 122] or other payment as indemnity or compensation for loss of, or damage to, collateral (or proceeds of collateral); (vi) a transfer of an account made solely to facilitate the collection of the account on behalf of the person making the transfer; (vii) without limiting subparagraph (vi), a transfer of an account, if the transferee’s sole purpose in acquiring the account is to collect it; (viii) a transfer of an account or negotiable instrument to satisfy (either wholly or partly) a pre-existing indebtedness; (ix) a sale of an account or chattel paper as part of a sale of business, unless the seller remains in apparent control (within the ordinary meaning of that term) of the business after the sale; (x) a transfer of the beneficial interest in a monetary obligation where, after the transfer, the transferee holds the monetary obligation on trust for the transferor; (g) the following interests in property created under the Bankruptcy Act 1966: (i) the interest of the Official Trustee or a registered trustee who has taken control (within the meaning of section 50 of that Act) of a debtor’s or grantor’s property under that section; (ii) the interest of the Official Trustee or a registered trustee in property of a debtor or grantor that has vested in the Official Trustee or the registered trustee under section 58 of that Act; (iii) a charge created under section 139ZN of that Act; (iv) a charge created under section 139ZR of that Act; (v) an interest created under a personal insolvency agreement under Part X of that Act; (h) a trust over some or all of an amount provided by way of financial accommodation, if the person to whom the financial accommodation is provided is required to use the amount in accordance with a condition under which the financial accommodation is provided; (i) a right entitlement or authority, whether or not exclusive, that is granted by or under the general law or a law of the Commonwealth, a State or a Territory in relation to the control, use or flow of water; Note: See also subsection (5).

(j) an interest in a fixture; (ja) a security interest in personal property taken by a pawnbroker, if subsection (6) applies to the security interest; (jb) an interest that a person has: (i) as a member of a superannuation fund (within the meaning of the Superannuation Industry (Supervision) Act 1993); or (ii) as a member of an approved deposit fund (within the meaning of the Superannuation Industry (Supervision) Act 1993); or (iii) as a holder of a retirement savings account (within the meaning of the Retirement Savings Accounts Act 1997); or (iv) in an account kept under the Small Superannuation Accounts Act 1995 in the name of the person; or [page 123] (v) as a holder of a superannuation annuity (within the meaning of the Income Tax Assessment Act 1997); (jc) a charge created by section 5 of the Loans Redemption and Conversion Act 1921; (k) a particular right, licence or authority (the statutory right) granted by or under a law of the Commonwealth, a State or a Territory, if, at the time when the statutory right is granted, or at any time afterwards, a provision of that law declares that kind of statutory right not to be personal property for the purposes of this Act (no matter whether the provision remains in force); Note: Personal property does not include such a statutory right if it has been declared by such a law not to be personal property for the purposes of this Act (see section 10). (l) an interest of a kind prescribed by the regulations for the purposes of this section. [subs (1) am Act 96 of 2010 s 3 and Sch 2 items 5–12, opn 6 July 2010; Act 103 of 2013 s 3 and Sch 1 item 73, opn 18 Nov 2012]

(2) Exceptions to subsection (1) The following table has effect: Provisions of this Act that apply to interests mentioned in subsection (1) Item Despite subsection (1), the following applies in relation to the following interest provision: mentioned in subsection (1): 1 section 73 (a) a lien, charge or other interest in personal property of a kind described in paragraph (1)(b) or (c); and

2 3

section 80 sections 117 and 118

4

paragraph 140(2)(a)

5

paragraph 148(c) and regulations made for the purposes of that paragraph a provision prescribed by regulations made for the purposes of this item

6

(b) an interest provided for by a transaction described in subparagraph (1)(f)(ii). a right of set-off (see paragraph (1)(d)). an interest provided for by the creation or transfer of an interest in land (see subparagraph (1)(f)(i)). a lien, charge or other interest in personal property of a kind described in paragraph (1)(b) or (c). a lien, charge or other interest in personal property of a kind described in paragraph (1)(b) or (c). an interest mentioned in subsection (1) (including an interest prescribed by regulations made for the purposes of paragraph (1)(l)) that is prescribed by regulations made for the purposes of this item.

(3) The regulations may provide that, despite subsection (1), this Act applies in relation to a kind of interest prescribed by the regulations for the purposes of this subsection. (4) Transfer of interests and rights To avoid doubt, the interest provided for by a transfer of an interest or right (see paragraph (1)(f)) is the interest that the transferee has to claim against the transferor. [subs (8) am Act 96 of 2010 s 3 and Sch 2 item 13, opn 6 July 2010]

[page 124] (5) Water rights In paragraph (1)(i), the reference to a right in relation to the control, use or flow of water includes, but is not limited to, a reference to a right that a person has against another person to receive (or otherwise gain access to) water. [subs (5) insrt Act 96 of 2010 s 3 and Sch 2 item 14, opn 6 July 2010]

(6) Pawnbroker security interests For the purposes of paragraph (1)(ja), this subsection applies to a security interest taken by a pawnbroker if: (a) the pawnbroker holds a licence or is otherwise expressly authorised (for example, by registration) by a law of a State or Territory to carry on a pawnbroking business (however described in that law); and (b) the taking of the security interest is authorised by that licence or authorisation, and is not in contravention of that law of the State or Territory; and (c) the security interest is taken in the ordinary course of the pawnbroker’s business as a pawnbroker; and (d) at the time the security interest is taken, the market value of the

payment or obligation secured by the security interest is less than or equal to: (i) $5,000; or (ii) if a greater amount has been prescribed by regulations made for the purposes of subsection 47(1) — that amount; and (e) at the time the security interest is taken, the pawnbroker believes, and it is actually the case, that the market value of the personal property is less than or equal to: (i) $5,000; or (ii) if a greater amount has been prescribed by regulations made for the purposes of paragraph 47(2)(c) — that amount; and (f) the personal property is not of a kind that the regulations provide may, or must, be described by serial number in a registration. Note: Section 47 deals with taking personal, domestic or household property free of a security interest. [subs (6) insrt Act 96 of 2010 s 3 and Sch 2 item 14, opn 6 July 2010]

____________________ [PPSA.8.A] Interests to which this Act does not apply — Annotations to s 8 Cases Scope of exclusion for statutory and general law liens (subs 8(1)(b) and (c)) Dura (Australia) Constructions Pty Ltd (in liq) (recs and mgrs apptd) v Hue Boutique Living Pty Ltd [2014] VSCA 326; BC201411364 — an equitable charge arising in favour of a judgment creditor over moneys paid into an account in the joint names of the judgment debtor’s solicitors and the judgment creditor’s solicitors, in compliance with a court order, was a lien, charge or other interest in personal property, arising by operation of the general law within the meaning of s 8(1)(c), PPSA. TLK Transport Pty Ltd v Thornthwaite Pty Ltd (t/as Yass Valley Mobile Mechanic) [2014] NSWCATCD 147; BC201407548 — repairer’s lien not usually subject to the PPSA. Toll Logistics (NZ) Ltd v McKay [2011] NZCA 188; [2011] 2 NZLR 601; (2011) 9 NZBLC 103, 226; BC201161701 — contractual liens which secure payment or performance of an obligation can be security interests for the purposes of the NZ PPSA and are not excluded by s 23(b) of the NZ PPSA (the equivalent of subs 8(1)(b) and (c) of the PPSA) which only excludes liens created by other legislation or the general law (ie on-consensual liens). The NZ Court of Appeal concluded that a general packer’s lien was not recognised as a matter of common law in New Zealand. The

[page 125] court also held that if such a lien was recognised it would have been displaced or superceded by the particular contractual lien agreed between the parties which contained detailed provisions conferring rights and powers extending well beyond the rights which would otherwise have been available under a common law lien. In particular, a power of sale would not have been available at common law. Pre-PPSA Australian

cases that have considered whether a contractual lien or charge is intended to displace a general law lien include Re Rick Cobby Haulage Pty Ltd (in liq) (1992) 7 ACSR 456; 10 ACLC 1251; BC9200406; Jackson v Esanda Finance Corp Ltd (1992) 59 SASR 416; 11 ACLC 138; Seka Pty Ltd v Fabric Dyeworks (1991) 9 ACLC 586; BC9103057; Con-Stan Industries v Norwich Winterthur Insurance (Aust) Ltd (1986) 160 CLR 226; 64 ALR 481; 60 ALJR 294; 4 ANZ Ins Cas 60-700 and Australian Receivables Ltd v Tekitu Pty Ltd (2012) 260 FLR 243; [2012] NSWSC 170; BC201200992. i Trade Finance Inc v Bank of Montreal [2011] SCJ No 26; [2011] ACS no 26; 2011 SCC 26; 17 PPSAC (3d) 250 — rights and interests in the nature of a constructive trust or equitable lien resulting from a court order were not transactions that in substance create security interests. These were non-consensual equitable interests to which the Ontario PPSA did not apply (although note the operation of PPSA s 73 in relation to some non-consensual interests in the context of Australia’s PPSA). Ellingsen (Trustee of) v Hallmark Ford Sales Ltd [2000] BCJ No 1682; 2000 BCCA 458; 190 DLR (4th) 47; 1 PPSAC (3d) 307 — a majority of the British Columbia Court of Appeal found the interest of an unpaid car dealer in a motor vehicle arose under a constructive trust and not under a security interest. Non-application of PPSA to right of set-off (s 8(1)(d)) Caisse populaire Desjardins de l’Est de Drummond v Canada 2009 SCC 29; (2009) 309 DLR (4th) 323; [2009] 4 CTC 330 — while a mere right of set-off will not be a security interest, a deposit subject to restrictions on withdrawal and transfer to preserve the depositee’s set off rights may constitute a security interest. Non-application of PPSA to the creation of an interest in a right to payment in connection with an interest in land (s 8(1)(f)(ii)) Marac Finance Ltd v Greer [2012] NZCA 45 — In this case, Equitable Property Holdings held registered real property mortgages from Petherick over two buildings from December 2003. In July 2007, Marac made a loan to Petherick and took a general security deed as security. The GSD was perfected by registration on the NZ PPSR. Equitable Property Holdings also took a GSD and registered on the PPSR in March 2009. In July 2009, Petherick defaulted and in October 2009, Marac appointed receivers and managers under its GSD. Soon after, Equitable Property Holdings also appointed a receiver. Equitable Property Holdings and Marac both claimed to be entitled to the rental income arising under leases of the two properties, the subject of the mortgages to Equitable Property Holdings. The NZ Court of Appeal held: the NZ PPSA did not apply to Equitable Property Holdings’ interest in the rent due to Petherick because of s 23(e)(ii), NZ PPSA (similar to s 8(1)(f)(ii) in Australia’s PPSA); and Equitable Property Holdings, as a first ranking mortgagee of the real property, had a better right to the rent from the mortgaged property than receivers appointed under a GSD from the moment the mortgagee enforced its mortgage. The court was of the view that enforcement could be by way of receivership or possession. The wording of the exclusion in s 23(e)(ii), NZ PPSA is not the same as s 8(1)(f)(ii), PPSA. In particular, the Australian exclusion only applies “if the writing evidencing the creation or transfer specifically identifies the land”. See also Re Urman (1983) 44 OR (2d) 248; 3 DLR (4th) 631; United Dominions Investments Ltd v Morguard Trust Company [1986] 1 WWR 78 and Bank of Montreal v Enchant Resources Ltd (1999) 74 Alta LR (3d) 219; 2 BLR (3d) 58; 182 DLR (4th) 640; [2000] 2 WWR 693.

[page 126] Non-application of PPSA to transfer of interest under contract of insurance (s 8(1)(f)(v)) GE Canada Equipment Financing GP v ING Insurance Company of Canada 2009 ONCA 191; 51 CBR

(5th) 47; 94 OR (3d) 312; 308 DLR (4th) 127 (Ont CA) — the equivalent Ontario provision was held to apply only where the relevant transfer creates a security interest in the insurance policy. Re Stelco Inc 2005 253 DLR (4th) 524 (Ont CA) — Ontario Court of Appeal held the exclusion in s 4(1) (c) of the Ontario PPSA being the equivalent of s 8(1)(f)(v), PPSA covers an assignment of unearned premium under a policy of insurance in connection with a premium funding arrangement. Non-application of PPSA to certain trusts over amounts provided by way of financial accommodation (s 8(1)(h)) The Canadian and New Zealand PPSAs do not include a provision equivalent to s 8(1)(h) of Australia’s PPSA. However, in Ontario (Minister of Training, Colleges and Universities) v Two Feathers Forest Products LP [2013] OJ No 4431; 2013 ONCA 598; 117 OR (3d) 227; 311 OAC 147, the Ontario Court of Appeal considered whether grant moneys advanced by the Ontario Government to a First Nations (ie Aboriginal) limited partnership, but not spent before the limited partnership sought to dissolve and appoint an interim receiver, were subject to a “Quistclose trust” for the benefit of the Ontario Government. The relevant funding agreement specifically provided that any unused funds would constitute a debt owing to the Ontario Government. The Ontario Court of Appeal found the unused funds were not held on a Quistclose trust. The court did not override the express agreement of the parties that any unused funds would constitute a debt and instead imply a trust. The court also found the limited partnership was given significant discretion under the funding agreement for the largest part of the grant monies, that is, those moneys were essentially at the free disposal of the limited partnership rather than for a specific purpose. As to the nature of “Quistclose trusts”, see Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567; [1968] 3 All ER 651; [1968] 3 WLR 1097 and Twinsectra Ltd v Yardley [2002] All ER (D) 321 (Mar); [2002] UKHL 12; [2002] 2 AC 164; [2002] 2 All ER 377. It is not clear if “financial accommodation” under s 8(1)(h) will be limited to loans, bill facilities and analogous arrangements or whether the concept might also include other funding arrangements such as government grants. Furthermore, it is not certain how specific a “condition” as to the use of financial accommodation will need to be in order for s 8(1)(h) to apply. Because the Ontario Court of Appeal in the Two Feathers decision found there was no Quistclose trust, it did not need to decide if such a trust was a security interest for the purposes of the Ontario PPSA. Ignoring the effect of s 8(1)(h) in the Australian context, it is arguable that a Quistclose trust would not be a security interest subject to the PPSA because it does not secure an obligation of the person receiving the funds to repay them; that is, the trust relates to the funds not being used for a specific purpose rather than the recipient’s obligation to repay funds that have been applied for the specific purpose. Cross references Non-application of PPSA to an interest in fixtures (s 8(1)(j)) The PPSA does not apply to an interest in “fixtures” and this has the meaning in s 10. Refer to the commentary at [PPSA.10.A] as to the meaning of “fixtures”. Statutory right (s 8(1)(k)) See Ch 4.11 Licences and Authorities. Prescribed interest (s 8(1)(l)) This Act does not apply to a right or interest in personal property mentioned in s 260-5 of Sch 1 of the Taxation Administration Act 1953, except for an interest mentioned in s 8(1)(k). It also does not apply to an interest in an authority, lease, licence or permit of any kind that is created under the Offshore Minerals Act 1994 or the Offshore Petroleum and Greenhouse Gas Storage Act 2006: see reg 1.4 at [PPSR1.4].

[page 127]

Prescribed interest (s 8(2)) See reg 1.4(2) at [PPSR1.4]. Prescribed interest (s 8(3)) See reg 1.5(1) at [PPSR1.4].

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 23 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 4 of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [1.500], [1.650], [1.2150], [1.2350], [1.4050], [2.300], [2.1050], [2.1100]–[2.2150], [4.1.950], [4.2.700], [4.4.300], [4.6.950], [4.6.1150], [4.7.200], [4.8.700], [4.8.1000], [4.8.1300]–[4.8.1400], [4.9.1100], [4.10.950], [4.10.3050], [4.11.50], [4.11.200], [4.11.700], [4.12.150], [4.13.700], [4.13.750], [4.13.850], [4.13.2700], [4.13.2750].

____________________

PART 1.3 — DEFINITIONS [ss 9–15] DIVISION 1 — INTRODUCTION [s 9]

[PPSA.9] Guide to this Part 9 This Part is about the terms that are defined in this Act. Division 2 contains the Dictionary. The Dictionary is a list of every term defined in this Act. A term will either be defined in the Dictionary itself, or in another provision of this Act. If another provision defines the term, the Dictionary will have a signpost to that definition. Division 3 contains some longer definitions. These include the definition of security interest (in section 12). A security interest is an interest in personal property provided for by a transaction that secures payment or the performance of an obligation. The form of the transaction and the identity of the person who has title to the property do not affect whether an interest is a security interest. Certain transactions that do not secure payment or the performance of an obligation may also give rise to a security interest: transfers of accounts, consignments and certain long-term leases and bailments (called PPS leases).

____________________ Commentary References For further discussion please refer to commentary at [1.2200].

____________________

DIVISION 2 — THE DICTIONARY [ss 10, 11]

[PPSA.10] The Dictionary 10 In this Act: ABN (short for Australian Business Number) has the meaning given by section 41 of the A New Tax System (Australian Business Number) Act 1999. [page 128] accession to other goods means goods that are installed in, or affixed to, the other goods, unless both the accession and the other goods are required or permitted by the regulations to be described by serial number. account means a monetary obligation (whether or not earned by performance, and, if payable in Australia, whether or not the person who owes the money is located in Australia) that arises from: (a) disposing of property (whether by sale, transfer, assignment, lease, licence or in any other way); or (b) granting a right, or providing services, in the ordinary course of a business of granting rights or providing services of that kind (whether or not the account debtor is the person to whom the right is granted or the services are provided); but does not include any of the following: (c) an ADI account; (d) chattel paper; (e) an intermediated security; (f) an investment instrument; (g) a negotiable instrument. Example: An account that is a credit card receivable is covered by paragraph (b). [def am Act 96 of 2010 s 3 and Sch 2 items 133 and 135, opn 6 July 2010]

account debtor means a person who is obligated under an account or chattel paper. ADI (short for authorised deposit-taking institution) has the same meaning as in the Banking Act 1959. ADI account means an account, within the ordinary meaning of that term,

kept by a person (whether alone or jointly with one or more other persons) with an ADI that is payable on demand or at some time in the future (as agreed between the ADI and the person or persons). Example: A savings account, or a term deposit, kept with an ADI.

advance: (a) means the payment of currency, the provision of credit or the giving of value; and (b) includes any liability of a debtor to pay interest, credit costs and other charges or costs payable by the debtor in connection with the advance or the enforcement of a security interest securing the advance. after-acquired property means personal property acquired by the grantor after a security agreement is made. agency includes an authority or instrumentality. amendment demand has the meaning given by section 178. amendment notice has the meaning given by section 180. amendment time, of a registration, has the meaning given by section 160. approved form has the meaning given by section 302. [page 129] attaches has the meaning given by section 19. Australia has a meaning affected by section 7. Australian entity means any of the following entities: (a) an individual who is located in Australia; Note: For the location of individuals, see section 235.

(b) a company or registrable Australian body (within the meaning of the Corporations Act 2001); (c) a corporation sole established under a law of the Commonwealth, a State or a Territory; (d) a public authority or an agency or instrumentality of the Crown in right of the Commonwealth, a State or a Territory. bankruptcy has the same meaning as in paragraph 51(xvii) of the

Constitution. Note: Other parts of speech and grammatical forms of “bankruptcy” (for example, “bankrupt”) have a corresponding meaning (see section 18A of the Acts Interpretation Act 1901).

business day means a day other than: (a) a Saturday or a Sunday; or (b) a day which is a public holiday for the whole of: (i) any State; or (ii) the Australian Capital Territory; or (iii) the Northern Territory; or (c) a day that falls between Christmas Day and New Year’s Day; or (d) a day on which the Registrar has refused access to the register, or otherwise suspended the operation of the register, in whole or in part (see subsection 147(5)); or (e) a day that is prescribed by the regulations for the purposes of this definition. carrying on an enterprise has the meaning given by section 41 of the A New Tax System (Australian Business Number) Act 1999. chattel paper means one or more writings that evidence a monetary obligation and either or both of the following: (a) a security interest in, or lease of, specific goods, or specific goods and accessions to the specific goods (even if the description of the goods (and accessions) is taken to include a description of intellectual property, or an intellectual property licence, under section 105); (b) a security interest in specific intellectual property or a specific intellectual property licence; but does not include any of the following: (c) a document of title; (d) an intermediated security; (e) an investment instrument; (f) a negotiable instrument. [def am Act 96 of 2010 s 3 and Sch 2 items 133 and 136, opn 6 July 2010]

circulating asset has the meaning given by section 340. civil penalty provision has the meaning given by section 221.

[page 130] clearing and settlement facility has the meaning given by Chapter 7 of the Corporations Act 2001. collateral: (a) means personal property to which a security interest is attached; and (b) in relation to a registration with respect to a security interest — includes personal property described by the registration (whether or not a security interest is attached to the property). Note: Section 161 authorises the registration of a financing statement that describes personal property before or after a security agreement is made covering the property, or a security interest has attached to the property.

commercial consignment means a consignment if: (a) the consignor retains an interest in goods that the consignor delivers to the consignee; and (b) the consignor delivers the goods to the consignee for the purpose of sale, lease or other disposal; and (c) the consignor and the consignee both deal in goods of that kind in the ordinary course of business; but does not include an agreement under which goods are delivered to: (d) an auctioneer for the purpose of sale; or (e) a consignee for sale, lease or other disposal if the consignee is generally known to the creditors of the consignee to be selling or leasing goods of others. commercial property means personal property other than consumer property. commingled: goods that are commingled include goods that are mixed with goods of the same kind. company means: (a) a company registered under Part 2A.2 or Part 5B.1 of the Corporations Act 2001; or (b) a registrable body (within the meaning of that Act) that is registered under Division 1 or 2 of Part 5B.2 of that Act. constitutional corporation means a corporation to which paragraph 51(xx) of the Constitution applies.

constructive knowledge has the meaning given by section 297. Note: Section 298 deals with knowledge in relation to bodies corporate and other entities.

consumer property means 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. continuously perfected has the meaning given by section 56. control has the meaning given by Part 2.3. Note: Control has an extended meaning in section 341 (control of inventory and accounts in relation to fixed and floating charges).

crops means crops (whether matured or not and whether naturally grown or planted) that have not been harvested, including: [page 131] (a) the products of agriculture or aquaculture, if the products have not been harvested; and (b) trees (but only if they are personal property), if the trees have not been harvested. currency means currency authorised as a medium of exchange by the law of Australia or of any other country. debtor means: (a) a person who owes payment or performance of an obligation that is secured by a security interest in personal property (whether or not the person is also the grantor of the security interest); or (b) a transferee of, or successor to, an obligation mentioned in paragraph (a). defect, in relation to a registration, includes an irregularity, omission or error in the registration. Deputy Registrar means a Deputy Registrar of Personal Property Securities. Note: See Part 5.9 for the office of Deputy Registrar.

description of personal property (including collateral and proceeds) means: (a) in the case of a particular item of personal property — a description that identifies the item, or that identifies a class to which the item belongs; or

(b) in the case of a class of personal property — a description that identifies the class, including a description that identifies the class by identifying a larger class of personal property that wholly includes the class. Example 1: A description that identifies collateral as “sheep” (a type of livestock) is sufficient to identify collateral that is sheep wool (a product of livestock, which is a class of collateral wholly included in the larger class of “sheep”). Example 2: A description that identifies collateral as “fruit” is sufficient to identify collateral that is apples. [def am Act 96 of 2010 s 3 and Sch 2 item 15, opn 6 July 2010]

document of title means a writing issued by or addressed to a bailee: (a) that covers goods in the bailee’s possession that are identified or are fungible portions of an identified mass; and (b) in which it is stated that the goods identified in it will be delivered: (i) to a named person, or to the transferee of that person; or (ii) to the bearer; or (iii) to the order of a named person. effective: a registration is effective with respect to particular collateral if it is effective with respect to that collateral under Part 5.4. enterprise has the meaning given by section 9-20 of the A New Tax System (Goods and Services Tax) Act 1999. evidential burden, in relation to a matter, means the burden of adducing or pointing to evidence that suggests a reasonable possibility that the matter exists or does not exist. execution creditor means a creditor who has recovered judgment and issued execution against a grantor. [page 132] expenses, in relation to the enforcement of a security interest in collateral, includes advances, costs and taxes for obtaining possession of, protecting (including insuring), maintaining, preserving or repairing the collateral. Example: For collateral that is intellectual property, expenses include the costs of legal proceedings against infringers of the intellectual property.

Note: Reasonable expenses in relation to the enforcement of a security interest are taken to be secured by a security interest unless the parties agree otherwise (see subsection 18(5)).

express amendment, of this Act, has the meaning given by section 244. Family Court means the Family Court of Australia. Federal Circuit Court means the Federal Circuit Court of Australia. [def insrt Act 13 of 2013 s 3 and Sch 1 item 466, opn 12 Apr 2013]

Federal Court means the Federal Court of Australia. financial product: (a) for the purposes of the definition of investment instrument in this section — has the meaning given by the Corporations Act 2001; and (b) for any other purposes — means any of the following, or an interest in any of the following, other than cash: (i) shares; (ii) bonds; (iii) any other financial instrument; (iv) any other financial asset. [def subst Act 96 of 2010 s 3 and Sch 2 item 16, opn 6 July 2010]

financial property means any of the following personal property: (a) chattel paper; (b) currency; (c) a document of title; (d) an investment instrument; (e) a negotiable instrument. financing change statement means data amending a registered financing statement. financing statement means data registered (or that is to be registered) pursuant to an application for registration under subsection 150(1). Note: For requirements relating to financing statements, see Part 5.3 (Registration).

fish means any of the following, while alive: (a) marine, estuarine or freshwater fish, or other aquatic animal life, at any stage of their life history; (b) oysters and other aquatic molluscs, crustaceans, echinoderms, beachworms and other aquatic polychaetes; but does not include any fish prescribed by the regulations for the purposes of this definition.

fixtures means goods, other than crops, that are affixed to land. foreign jurisdiction has the meaning given by section 39. [page 133] future advance means: (a) an advance secured by a security interest (whether or not made pursuant to an obligation), if the advance is made after the security agreement was made; or (b) expenses in relation to the enforcement of a security interest that are secured by the security interest. Note: For the meaning of expenses, see the definition elsewhere in this section. Reasonable expenses in relation to the enforcement of a security interest are taken to be secured by the security interest unless the parties agree otherwise (see subsection 18(5)).

general law means the principles and rules of the common law and equity. goods means personal property that is tangible property, including the following: (a) crops; (b) livestock; (c) wool; (d) minerals that have been extracted (including hydrocarbons) in any form, whether solid, liquid or gaseous and whether organic or inorganic; (e) satellites and other space objects; but does not include financial property or an intermediated security. [def am Act 96 of 2010 s 3 and Sch 2 items 133 and 137, opn 6 July 2010]

grantor means: (a) a person who has the interest in the personal property to which a security interest is attached (whether or not the person owes payment or performance of an obligation secured by the security interest); or (b) a person who receives goods under a commercial consignment; or (c) a lessee under a PPS lease; or (d) a transferor of an account or chattel paper; or (e) a transferee of, or successor to, the interest of a person mentioned in

(f)

paragraphs (a) to (d); or in relation to a registration with respect to a security interest: (i) a person registered in the registration as a grantor; or (ii) a person mentioned in paragraphs (a) to (e).

[def am Act 96 of 2010 s 3 and Sch 2 item 17, opn 6 July 2010]

insolvency has the same meaning as in paragraph 51(xvii) of the Constitution. Note: Other parts of speech and grammatical forms of “insolvency” (for example, “insolvent”) have a corresponding meaning (see section 18A of the Acts Interpretation Act 1901).

intangible property means personal property (including a licence) that is not any of the following: (a) financial property; (b) goods; (c) an intermediated security. [def am Act 96 of 2010 s 3 and Sch 2 items 133 and 138, opn 6 July 2010]

intellectual property means any of the following rights (including the right to be a party to proceedings in relation to such a right): (a) the right to do any of the things mentioned in paragraphs 10(1)(a) to (f) of the Designs Act 2003 in relation to a design that is registered under that Act; [page 134] (b) the right to exploit or work an invention, or to authorise another person to exploit or work an invention, for which a patent is in effect under the Patents Act 1990; (c) the rights held by a person who is the registered owner of a trade mark that is registered under the Trade Marks Act 1995; (d) the right to do, or to license another person to do, an act referred to in section 11 of the Plant Breeder’s Rights Act 1994 in relation to propagating material of a plant variety; (e) the right to do an act referred to in section 17 of the Circuit Layouts Act 1989 in relation to an eligible layout during the protection period of the layout; (f) the right under the Copyright Act 1968 to do an act comprised in the

copyright in a literary, dramatic, musical or artistic work or a published edition of such a work, or in a sound recording, cinematograph film, television broadcast or sound broadcast; (g) a right under or for the purposes of a law of a foreign country that corresponds to a right mentioned in any of paragraphs (a) to (f). [def am Act 96 of 2010 s 3 and Sch 2 item 18, opn 6 July 2010]

intellectual property licence means an authority or licence (within the ordinary meaning of that term) to exercise rights comprising intellectual property. interest, in personal property, includes a right in the personal property. [def am Act 35 of 2011 s 3 and Sch 2 item 2, opn 26 May 2011]

intermediary has the meaning given by section 15. [def insrt Act 96 of 2010 s 3 and Sch 2 item 19, opn 6 July 2010]

intermediated security has the meaning given by section 15. [def insrt Act 96 of 2010 s 3 and Sch 2 item 20, opn 6 July 2010]

inventory means personal property (whether goods or intangible property) that, in the course or furtherance, to any degree, of an enterprise to which an ABN has been allocated: (a) is held by the person for sale or lease, or has been leased by the person as lessor; or (b) is held by the person to be provided under a contract for services, or has been so provided; or (c) is held by the person as raw materials or as work in progress; or (d) is held, used or consumed by the person, as materials. investment entitlement [def rep Act 96 of 2010 s 3 and Sch 2 item 21, opn 6 July 2010]

investment entitlement account [def rep Act 96 of 2010 s 3 and Sch 2 item 22, opn 6 July 2010]

investment entitlement intermediary [def rep Act 96 of 2010 s 3 and Sch 2 item 23, opn 6 July 2010]

investment instrument means any of the following financial products: (a) a share in a body, or a debenture of a body; (b) a debenture, stock or bond issued or proposed to be issued by a government; (c) a derivative;

[page 135] (d) a foreign exchange contract that is not a derivative; (e) an assignable option to have an allotment of an investment instrument (apart from this paragraph) made to the holder of the option; (f) an interest in, or a unit in an interest in, a managed investment scheme; (g) a unit in a share in a body; (h) a financial product that is traded on a financial market that is: (i) operated in accordance with an Australian market licence; or (ii) exempt from the operation of Part 7.2 of the Corporations Act 2001; (i) any other financial product that is prescribed by the regulations; (j) any financial product that consists of a combination of any 2 or more of the financial products mentioned in paragraphs (a) to (i); but does not include any of the following: (k) the creation or transfer (including a successive transfer) of a right to payment in connection with interests in land, if the writing evidencing the creation or transfer does not specifically identify that land; (l) a document of title; (m) an intermediated security; (n) a negotiable instrument. A word or expression used in this definition has the same meaning as in the Corporations Act 2001, subject to this Part. [def am Act 96 of 2010 s 3 and Sch 2 items 133 and 139, opn 6 July 2010]

jurisdiction, in which personal property, or an individual, is located, has a meaning affected by subsections 235(6) and (7). land includes all estates and interests in land, whether freehold, leasehold or chattel, but does not include fixtures. land law has the meaning given by section 117. law of the Commonwealth, a State or a Territory means: (a) an Act of the Commonwealth, the State or the Territory; or (b) an instrument made under such an Act.

licence means either of the following, if it is transferable by the licensee (whether or not the right, entitlement, authority or licence is exclusive, and whether or not a transfer is restricted or requires consent): (a) a right, entitlement or authority to do one or more of the following: (i) to manufacture, produce, sell, transport or otherwise deal with personal property; (ii) to provide services; (iii) to explore for, exploit or use a resource; (b) an intellectual property licence; but does not include a right, entitlement or authority that is: (c) granted by or under a law of the Commonwealth, a State or a Territory; and (d) declared by that law not to be personal property for the purposes of this Act. Note: A right, entitlement or authority to which paragraph (c) or (d) applies is not personal property for the purposes of this Act (for the meaning of personal property, see elsewhere in this section).

[page 136] livestock includes: (a) while they are alive — alpacas, cattle, fish, goats, horses, llamas, ostriches, poultry, sheep, swine and other animals; and (b) the unborn young of animals mentioned in paragraph (a); and (c) the products of livestock before they become proceeds (for example, the wool on a sheep’s back before the sheep is shorn). [def am Act 96 of 2010 s 3 and Sch 2 item 24, opn 6 July 2010]

located, in relation to personal property, or a person, has the meaning given by section 235. lower court has the meaning given by section 211. matter includes act, omission, body, person and thing. migrated security interest has the meaning given by section 332. modification includes addition, omission and substitution. motor vehicle has the meaning given by the regulations. National Credit Code means Schedule 1 to the National Consumer Credit Protection Act 2009, and includes regulations made under section 329 of that Act for the purposes of that Schedule. negotiable instrument means: (a) a bill of exchange (within the meaning of the Bills of Exchange Act 1909); or (b) a cheque (within the meaning of the Cheques Act 1986); or (c) a promissory note (within the meaning of section 89 of the Bills of Exchange Act 1909); or (d) any other writing that evidences a right to payment of currency, if: (i) the writing is of a kind that, in the ordinary course of business, is transferred by delivery with any necessary endorsement or assignment; or (ii) the writing satisfies the requirements for negotiability under the law governing negotiable instruments (including, but not limited to, instruments that are negotiable instruments within the meaning of this definition); or

(e) a letter of credit that states that it must be presented on claiming payment; but does not include any of the following: (f) the creation or transfer (including a successive transfer) of a right to payment in connection with interests in land, if the writing evidencing the creation or transfer does not specifically identify that land; (g) a document of title; (h) an intermediated security. [def am Act 96 of 2010 s 3 and Sch 2 items 25, 133 and 140, opn 6 July 2010]

new value means value other than value provided to reduce or discharge an earlier debt or liability owed to the person providing the value. [def am Act 96 of 2010 s 3 and Sch 2 item 26, opn 6 July 2010]

non-referring State means a State that is not a referring State. Note: For the meaning of referring State, see section 244.

[page 137] notice of objection has the meaning given by section 137. penalty unit has the meaning given by section 4AA of the Crimes Act 1914. perfected has the meaning given by section 21. personal property means property (including a licence) other than: (a) land; or (b) a right, entitlement or authority that is: (i) granted by or under a law of the Commonwealth, a State or a Territory; and (ii) declared by that law not to be personal property for the purposes of this Act. Note: This Act does not apply to certain interests even if they are interests in personal property (see section 8).

possession has a meaning affected by section 24. PPS lease (short for Personal Property Securities lease) has the meaning given by section 13. PPS matter (short for Personal Property Securities matter) has the meaning given by section 206.

predominantly: personal property is intended to be used predominantly for personal, domestic or household purposes if: (a) the personal property: (i) is intended to be used only for those purposes; or (ii) is intended to be used for other purposes as well, but is intended to be mostly used for personal, domestic or household purposes; and (b) the personal property is not acquired as an investment. present liability means a liability: (a) that has arisen; and (b) whose extent or amount is fixed or capable of being ascertained; whether or not the liability is immediately due to be met. proceeds has the meaning given by section 31. provides: a security agreement provides for a security interest if the interest arises under the agreement. purchase money security interest has the meaning given by section 14. receiving court has the meaning given by section 210. referred PPS matters (short for referred Personal Property Securities matters) has the meaning given by section 245. [def insrt Act 96 of 2010 s 3 and Sch 2 item 27, opn 6 July 2010]

referring State has the meaning given by section 244. register means the Personal Property Securities Register established under section 147. registered data conditions has the meaning given by section 176B (access to registered data). [def insrt Act 35 of 2011 s 3 and Sch 2 item 3, opn 26 May 2011]

[page 138] Registrar means the Registrar of Personal Property Securities. Note: See Part 5.9 for the office of Registrar.

registration means a registered financing statement (as amended by any registered financing change statement) with respect to: (a) a security interest; or

personal property prescribed by regulations made for the purposes of paragraph 148(c). registration commencement time has the meaning given by section 306. registration event has the meaning given by section 155. registration time, with respect to collateral described in a registration, has the meaning given by: (a) section 160; or (aa) section 333 (registration with respect to migrated data); or (b) section 336 (preparatory registration with respect to transitional security interests). (b)

[def am Act 96 of 2010 s 3 and Sch 2 item 28, opn 6 July 2010]

relevant superior court has the meaning given by section 211. secured party: (a) means a person who holds a security interest for the person’s own benefit or for the benefit of another person (or both); and (b) if the holders of the obligations issued, guaranteed or provided for under a security agreement are represented by a trustee as the holder of the security interest — includes the trustee; and (c) in relation to a registration with respect to a security interest — includes a person registered as a secured party in the registration. securities account has the meaning given by section 15. [def insrt Act 96 of 2010 s 3 and Sch 2 item 29, opn 6 July 2010]

security agreement means: (a) an agreement or act by which a security interest is created, arises or is provided for; or (b) writing evidencing such an agreement or act. security interest has the meaning given by section 12. serial number, in relation to collateral, means a serial number by which the regulations require, or permit, the collateral to be described in a registration. State Family Court, in relation to a State, means a court of that State to which section 41 of the Family Law Act 1975 applies because of a Proclamation made under subsection 41(2) of that Act. superior court has the meaning given by section 211. take has the meaning given by section 138A.

[def insrt Act 96 of 2010 s 3 and Sch 2 item 30, opn 6 July 2010]

term deposit means a deposit made with an ADI that matures on a particular date (whether or not the ADI can be required to repay the deposit before that date). third party data has the meaning given by section 176C (access to third party data). [def insrt Act 35 of 2011 s 3 and Sch 2 item 4, opn 26 May 2011]

[page 139] third party data conditions has the meaning given by section 176C (access to third party data). [def insrt Act 35 of 2011 s 3 and Sch 2 item 5, opn 26 May 2011]

this Act includes the regulations. time of execution has the meaning given by section 74. transfer matter has the meaning given by section 210. transferring court has the meaning given by section 210. transitional register has the meaning given by section 330. transitional security agreement has the meaning given by section 307. transitional security interest has the meaning given by section 308. value: (a) means consideration that is sufficient to support a contract; and (b) includes an antecedent debt or liability; and (c) in relation to the definition of purchase money security interest — has a meaning affected by section 14. verification statement has the meaning given by section 155. water source has the meaning given by section 138A. [def insrt Act 96 of 2010 s 3 and Sch 2 item 31, opn 6 July 2010]

wool means the natural fibre from any livestock that produce fleece that can be shorn (such as sheep, goats, alpacas and llamas). writing includes: (a) the recording of words or data in any way (including electronically), if, at the time the recording was made, it was reasonable to expect that the words or data would be readily accessible so as to be useable for subsequent reference; and

(b) the display, or other representation, of words or data by any form of communication (including electronic), if: (i) the display or representation is recorded in any way (including electronically); and (ii) at the time the recording was made, it was reasonable to expect that the words or data would be readily accessible so as to be useable for subsequent reference. ____________________ [PPSA.10.A] Annotations to the definitions Meaning of “motor vehicle” See reg 1.7 at [PPSR1.7]. Cases Meaning of “account” The definition of “account” is narrower in its scope than the definition of “account receivable” found in the NZ PPSA and the definition of “account” in the various Canadian Acts. The key differences are the qualifications in paras (a) and (b) in the s 10 definition. Also, the definition in s 10 expressly excludes ADI accounts in para (c). By way of example, the term “account

[page 140] receivable” is defined in s 16 of the NZ PPSA as “a monetary obligation that is not evidenced by chattel paper, an investment security, or by a negotiable instrument, whether or not that obligation has been earned by performance.” In considering the meaning of the definition of “account receivable” in the NZ PPSA the New Zealand Court of Appeal has made the following observations (Strategic Finance Limited (in receivership and in liquidation) v Bridgman [2013] 3 NZLR 650; [2013] NZCA 357; BC201364875): “monetary obligation” in the context of the PPSA means an existing obligation imposed on, or assumed by, one party to pay a certain sum of money to the other party on a specific or ascertainable future date; when “monetary” and “obligation” are read together, the liability must be to pay an identifiable sum on an ascertainable date. A possible liability to pay an unidentifiable sum at an unascertainable future date will not suffice; despite the definition saying a monetary obligation “need not have been earned by performance”, the definition does not include wholly executory contracts under which monetary obligations have not yet been earned by performance. An executory contract exists when the parties have exchanged promises to perform certain obligations in the future but have not yet performed them. No monetary obligation arises until performance by which the other party earns the right to be paid occurs; conversely, existing monetary obligations may arise under a deed, statute or by virtue of a court order, independently of any need for performance; for an amount to be “receivable”, it must be currently owed to a party who is entitled to expect its payment without undertaking further performance. In the absence of any obligation being earned, there will be no existing obligation and therefore no account receivable;

an existing right to payment is one which is definite, even if maturing in the future, whereas a contingent claim is one which may not materialise. The latter does not constitute an existing monetary obligation; a “monetary obligation” does not include an existing right to claim damages in tort or equity. In the absence of a judgment of the court, such claims do not involve an existing liability to pay with a matching legally enforceable right to receive. Meaning of “commercial consignment” As to when a consignee is generally known to its creditors to be selling or leasing the goods of others, see Re Arcabi Pty Ltd (Receivers & Managers Appointed) (in liq) [2014] WASC 310; BC201407252. See also Canadian Imperial Bank of Commerce v Williams (2007) 425 AR 271; 287 DLR (4th) 121; 2007 ABCA 340. Meaning of “fixtures” and relevance to the definitions of “personal property” and “land” The PPSA does not apply to an interest in fixtures being goods, other than crops, that are affixed to land. To ascertain if particular goods have become fixtures for the purposes of s 10 it is not clear if any affixation of those goods to the land will suffice to make them a fixture or if it will be necessary to satisfy the general law requirements for being a fixture. At general law the principles to be applied in determining if goods, which have been attached or affixed to land, are fixtures depends on the intention of the entity which affixed them to the land. Intention is imputed from the degree of annexation and the object or intention of annexation. Prima facie, goods affixed to land, to any extent other than by their own weight, will be a fixture. However, each case depends on its facts and a variety of circumstances can be taken into consideration (see, for example, Holland v Hodgson (1872) LR7CP 328; [1861–73] All ER Rep 237; Reid v Smith (1905) 3 CLR 656; 12 ALR 126; BC0500022; Commissioner of Stamps (WA) v Whiteman Ltd (1940) 64 CLR 407; 14 ALJR 260; BC4090104; Lees & Leech Pty Ltd v Cmr of Taxation (1997) 73 FCR 136; 97 ATC 4407; 36 ATR 127; BC9702029; Australian Provincial Assurance Co Ltd v Coroneo (1938) 38 SR (NSW) 700; 55 WN (NSW) 246); Loiero (aka Lero)

[page 141] v Adel Sportswear Pty Ltd (2010) 15 BPR 29,689; [2010] NSWSC 1133; BC201007558; Attorney-General (Cth) v RT Co Pty Ltd (No 2) (1957) 97 CLR 146; 31 ALJR 504; BC5700320; Metal Manufactures Ltd v Federal Commissioner of Taxation (1999) 99 ATC 5229; 43 ATR 375; BC9908011; National Dairies WA Ltd v Commissioner of State Revenue (2001) 24 WAR 70; 47 ATR 31; [2001] WASCA 112; BC200101603; Pegasus Gold Australia Ltd v Metso Minerals (Australia) Ltd (2003) 16 NTLR 54; [2003] NTCA 3; BC200300346; TEC Desert Pty Ltd v Commissioner of State Revenue (WA) (2010) 241 CLR 576; 273 ALR 134; [2010] HCA 49; BC201009579; Commissioner of State Revenue v Uniqema Pty Ltd (2004) 9 VR 523; 56 ATR 19; [2004] VSCA 82; BC200402775; Commissioner of State Revenue (Vic) v Snowy Hydro Ltd [2012] VSCA 145; BC201204715; Agripower Australia Ltd v J & D Rigging Pty Ltd [2013] QSC 164; BC201310475; Re Cancer Care Institute of Australia Pty Ltd (admin apptd) (2013) 16 BPR 31,529; [2013] NSWSC 37; BC201300325; Agripower Barraba Pty Ltd v Bloomfield [2013] NSWSC 1598; BC201314682). Re Cancer Care Institute of Australia Pty Ltd (admin apptd) (2013) 16 BPR 31,529; [2013] NSWSC 37; BC201300325 — A landlord and the mortgagee of the real property claimed linear accelerator equipment used by the tenant (CCIA) for the treatment of cancer patients was a fixture and therefore part of the landlord’s premises. The court noted that the equipment was purchased on credit by CCIA and the terms and conditions provided that the supplier would retain a purchase money security interest in the equipment and all proceeds until payment in full of all sums due. The court accepted that this indicated CCIA had not intended the equipment would become a fixture. Other relevant factors taken into consideration in

determining the equipment was not a fixture included: the equipment cost CCIA approximately $9 million and, in the context of CCIA not having a formal lease with the landlord, it was “inherently unlikely that CCIA would objectively intend” the equipment would become the property of the landlord; removal of the equipment from the premises would not destroy or damage the equipment and the value of the equipment was well in excess of the estimated cost of removing it from the premises; removal of the equipment, other than a base plate which the court found to be separate from the equipment, would not cause substantial damage to the premises; evidence that this type of equipment was regularly removed and relocated and the time to remove the equipment would be limited to several days; the premises were developed for medical facilities for cancer treatment and radiology procedures, but the design of the relevant part of the premises facilitated the use of radiation equipment generally and could be used for equipment other than linear accelerators. Accordingly, the landlord would be able to lease the premises to another tenant that used similar medical equipment. The court commented that even if the equipment had been a fixture it should be treated as tenant’s fixtures and removable by the tenant. In contrast to the Australian PPSA, the Canadian PPSAs treat fixtures, other than building materials that have been affixed to real property, as personal property. The Canadian PPSAs regulate the removal of fixtures and priority between the holder of a PPSA security interest in fixtures and a person with an interest in real property to which fixtures may be attached. Apart from excluding building materials, the Canadian PPSAs do not seek to define the meaning of a fixture and this is determined having regard to the general law; see, for example, CMIC Mortgage Investment Corp v Rodriguez 2010 BCSC 308. Ontario Wilderness Outposts Inc v Nishnawbe Aski Development Fund [2006] OJ No 892; [2006] OTC 235; 9 PPSAC (3d) 222; 41 RPR (4th) 286 — four cabins were held not to be fixtures for the purposes of the Ontario PPSA. The court concluded the cabins were not attached to land other than by their own weight. The degree and object of annexation were considered and it was determined the cabins were not intended to form part of the land and were therefore personal property subject to a security interest under the PPSA.

[page 142] Meaning of “inventory” McCloy v Manukau Institute of Technology [2013] 3 NZLR 390; [2013] NZHC 936; BC201363460 — hoists used by a contractor in the performance of works under a construction contract were held not to be inventory for the purposes of the definition of “inventory” in the NZ PPSA. Meaning of “personal property” — application to licences Personal property will include a “licence” as defined in s 10 unless the licence is excluded by the operation of s 8(1)(k). However, because “property” is not defined in the PPSA it may be that a licence that does not fall within the definition of licence in s 10 and which is not expressly excluded from the application of the Act under s 8(1)(k) may nevertheless be personal property for the purposes of the PPSA. Refer to [4.11.50] and note the decision of the Supreme Court of Canada in Saulnier v Royal Bank of Canada [2008] 3 SCR 166; 2008 SCC 58. See also Kasten Energy Inc v Shamrock Oil & Gas Ltd 2013 ABQB 63. National Trustees Executors & Agency Co of Australasia Ltd v FCT (1954) 91 CLR 540; [1954] ALR 1119; (1954) 6 AITR 179; BC5400630 — the High Court of Australia held a statutory right can be property even if it is not assignable.

____________________

Comparative Legislation Comparable sections of New Zealand legislation: s 16 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 2 of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [1.500], [1.2550], [2.100], [2.200], [2.300], [2.600]–[2.700], [2.2200], [2.2300], [2.2350], [2.2450], [2.2500], [2.2900], [2.2950], [2.3600], [2.4600], [2.4700], [2.10600], [4.1.50], [4.1.1150], [4.4.250], [4.6.1750], [4.7.200], [4.9.150], [4.10.300], [4.10.550], [4.10.1550], [4.11.50], [4.12.700], [4.13.550], [4.13.650], [4.13.2250].

____________________

[PPSA.11] Application of the Acts Interpretation Act 1901 11 (1) The Acts Interpretation Act 1901, as in force at the start of the day on which this Act receives the Royal Assent, applies to this Act. (2) Amendments of the Acts Interpretation Act 1901 made after that time do not apply to this Act. ____________________ Commentary References For further discussion please refer to commentary at [1.4700].

____________________

DIVISION 3 — CONCEPTS RELATING TO SECURITY INTERESTS AND PERSONAL PROPERTY [ss 12–15]

[PPSA.12] Meaning of security interest 12 (1) A security interest means an interest in personal property provided for by a transaction that, in substance, secures payment or performance of an obligation (without regard to the form of the transaction or the identity of the person who has title to the property). Note: For the application of this Act to interests, see section 8. [subs (1) am Act 35 of 2011 s 3 and Sch 2 item 6, opn 26 May 2011]

(2) For example, a security interest includes an interest in personal property provided by any of the following transactions, if the transaction, in substance, secures payment or performance of an obligation: (a) a fixed charge; [page 143]

(b) a floating charge; (c) a chattel mortgage; (d) a conditional sale agreement (including an agreement to sell subject to retention of title); (e) a hire purchase agreement; (f) a pledge; (g) a trust receipt; (h) a consignment (whether or not a commercial consignment); (i) a lease of goods (whether or not a PPS lease); (j) an assignment; (k) a transfer of title; (l) a flawed asset arrangement. [subs (2) am Act 35 of 2011 s 3 and Sch 2 item 6, opn 26 May 2011]

(3) A security interest also includes the following interests, whether or not the transaction concerned, in substance, secures payment or performance of an obligation: (a) the interest of a transferee under a transfer of an account or chattel paper; (b) the interest of a consignor who delivers goods to a consignee under a commercial consignment; (c) the interest of a lessor or bailor of goods under a PPS lease. [subs (3) am Act 35 of 2011 s 3 and Sch 2 item 7, opn 26 May 2011]

(3A) A person who owes payment or performance of an obligation to another person may take a security interest in the other person’s right to require the payment or the performance of the obligation. [subs (3A) insrt Act 96 of 2010 s 3 and Sch 2 item 32, opn 6 July 2010]

(4) Without limiting subsection (3A): (a) an account debtor, in relation to an account or chattel paper, may take a security interest in the account or chattel paper; and (b) an ADI may take a security interest in an ADI account that is kept with the ADI. [subs (4) subst Act 96 of 2010 s 3 and Sch 2 item 32, opn 6 July 2010]

(4A) [subs (4A) rep Act 96 of 2010 s 3 and Sch 2 item 32, opn 6 July 2010] (5) A security interest does not include: (a) a licence; or

(b) an interest of a kind prescribed by the regulations for the purposes of this section. (6) A security interest is not created only by an agreement or undertaking to do either of the following: (a) to postpone or subordinate a person’s right to payment or performance of all or any part of a debtor’s obligation to another person’s right to payment or performance of all or any part of another of the debtor’s obligations; (b) to postpone or subordinate all or any part of a secured party’s rights under a security agreement to all or any part of another secured party’s rights under another security agreement with the same grantor. ____________________ [PPSA.12.A] Meaning of security interest — Annotations to s 12 Prescribed interest (s 12(5)(b)) The extinguishment of a beneficial interest in an account or chattel paper is not a security interest: see reg 1.8 at [PPSR1.8].

[page 144] Cases Meaning of security interest and like treatment of both title and non-title based security interests (s 12) Waller v New Zealand Bloodstock Ltd (2005) 11 TCLR 497; [2006] 3 NZLR 629; (2006) 9 NZCLC 263, 944; [2005] NZCA 254 — confirms that a secured party who has a title based security interest in goods (ie as lessor or seller on ROT terms) and does not register that interest on the PPSR will lose in a priority contest to a secured party who has perfected their security interest. A security interest over all of a grantor’s present and future assets will include goods which are leased to it under a lease that is also a security interest. See also Re Maiden Civil (P & E) Pty Ltd; Albarran v Queensland Excavation Services Pty Ltd (2013) 277 FLR 337; [2013] NSWSC 852; BC201310524 — involving unperfected security interests being PPS leases of excavation equipment. The particular leases were transitional security interests that were registerable (but not registered) under pre-PPSA law; and White v Spiers Earthworks Pty Ltd [2014] WASC 139; BC201402620 — involving an unperfected security interest under a hire purchase agreement. The hire purchase agreement was a transitional security interest that was registrable (but not registered) under pre PPSA law. Graham v Portacom New Zealand Ltd (2004) 10 TCLR 983; [2004] 2 NZLR 528; (2004) 9 NZCLC 263, 517; BC200469215 — a lessor of portable buildings who leased the buildings for an indefinite period and failed to register its security interest lost priority to a bank which had an all assets debenture charge from the lessee before the leases were entered into. Interest provided for by a transaction (s 12) The PPSA only applies to consensual transactions — Dura (Australia) Constructions Pty Ltd (in liq)

(recs and mgrs apptd) v Hue Boutique Living Pty Ltd [2014] VSCA 326; BC201411364; Sandhurst Golf Estates Pty Ltd v Coppersmith Pty Ltd [2014] VSC 217; BC201403647; i Trade Finance Inc v Bank of Montreal [2011] SCJ No 26; [2011] ACS no 26; 2011 SCC 26; 17 PPSAC (3d) 250; CIBC v 64576 Man Ltd [1990] MJ No 248; [1990] 5 WWR 419; 67 ManR (2d) 172; 1 PPSAC (2d) 1; Valley Beef Co-Operative Ltd v Farm Credit Corp [2002] SJ No 499; 2002 SKCA 100; 218 DLR (4th) 86; 5 PPSAC (3d) 1. Note that this is subject to the operation of s 73 PPSA in the Australian context. A claim over personal property based on obtaining equitable relief from a court is not a consensual transaction; Sandhurst Golf Estates Pty Ltd v Coppersmith Pty Ltd [2014] VSC 217; BC201403647. An equitable charge arising in favour of a judgment creditor over moneys paid into an account in the joint names of the judgment debtor’s solicitors and the solicitors for the judgment creditor, in compliance with a court order, did not arise out of a consensual transaction and was not a “security interest” for the purposes of s 12; Dura (Australia) Constructions Pty Ltd (in liq) (recs and mgrs apptd) v Hue Boutique Living Pty Ltd [2014] VSCA 326; BC201411364. Whether a trust constitutes a security interest (s 12(1)) Stiassny v North Shore City Council [2009] 1 NZLR 342; [2008] NZCA 522 — a mere proprietary interest of a beneficiary under a trust is not a security interest for the purposes of the PPSA. The beneficiary’s interest must secure the payment or performance of an obligation for it to be a security interest. In the circumstances of the case the court did not think a trust was established in respect of payments received from retailers by EXCPL, but if it had been the court considered it would have had the purpose of securing payment or performance of an obligation which was not coterminous with the trust itself. The court found EXCPL was required to pay NSCC in respect of sales of relevant goods irrespective of whether retailers had paid EXCPL. See also Re Skybridge Holidays Inc [1998] BCJ No 1296; 54 BCLR (3d) 222; 11 CBR (4th) 126; 13 PPSAC (2d) 387.

[page 145] Whether option to purchase constitutes a security interest (s 12(1)) Asset Traders Ltd v Favas Sportscar World Ltd (2006) 3 NZCCLR 545; 9 NZCLC 264,138 — financing statements had been registered by the applicant in respect of alleged security interests in two cars arising from an oral contract providing the applicant with an option to purchase one of the two cars. The court found: there was no concluded contract but even if there had been, it would not have amounted to a security interest for the purposes of the NZ PPSA; an option to purchase creates personal rights and obligations as between the parties to the agreement as opposed to a security interest in the property the subject of the option. See also Leu v Amodio [2007] OJ No 931; 2007 ONCA 186; 28 BLR (4th) 14; 11 PPSAC (3d) 46 where the Ontario Court of Appeal agreed with the trial judge’s conclusion that the contractual arrangement between the parties was an option to purchase and not a security interest to which the Ontario PPSA applied. The judgment at first instance indicates that H and J had entered into an “Acknowledgment” in connection with the purchase of certain property by 1292650 Ontario Ltd. The Acknowledgment recorded that: because H had provided the funds to enable 1292650 Ontario Ltd to purchase the property, ownership of all of the shares in 1292650 Ontario Ltd would belong to H; J was not entitled to ownership of 50% of the shares in 1292650 Ontario Ltd until he paid to H 50% of the costs related to the purchase of the property; the proposed 50% of the shares intended to go to J once the payments to H had been made were “fully pledged as security” and held by H “in trust”.

Whether a particular sale agreement constituted a security interest (subs 12(1), 12(2)(d)) THC Holding Pty Ltd v CMA Recycling Pty Ltd [2014] NSWSC 1136; BC201406787 — the interest of a purchaser under a contract for the sale of scrap metal, in respect of which payment had been made and property passed, even though the vendor retained possession of the scrap metal, was not a security interest as it did not secure the payment of performance of any obligation of the vendor. The only “obligation” the vendor had was that of a bailee to deliver the goods to the purchaser, or at its direction. The court accepted that the interest of an owner/bailor in the owner’s bailed goods is not an interest that “in substance” secures the bailee’s obligation to deliver the goods to the owner or make them available for collection. Segard Masurel (NZ) Ltd v Nicol [2008] NZCCLR 25; [2008] NZHC 109; BC200860085 — a sales contract for wool provided: “Payment will be made cash on delivery on the contracted date of delivery, or actual received date if delivery has been delayed, or receipt of invoice if invoice not received until after delivery date.” The contract did not include a retention of title clause. Cooper J rejected the notion that title did not pass because payment had not occurred in circumstances where wool had been delivered but not paid for at the time of delivery. He found the seller was an unsecured creditor. Even if the seller had had a retention of title provision in its contract it would have constituted an unperfected security interest ranking behind the bank’s perfected all assets security. JS Brooksbank & Co (Australasia) Ltd v EXFTX Ltd (in rec and in liq) formerly known as Feltex Carpets Ltd [2009] NZCA 122; (2009) 10 NZCLC 264, 520 — the New Zealand Court of Appeal held that an agreement for the sale of goods which provided that the buyer would obtain possession and title to the goods only after it made payment to the seller did not give rise to a security interest when the goods were delivered in error before payment was made. The court found the supply agreement did not provide for possession to be given prior to title passing. When the buyer obtained possession of the goods prior to obtaining title by making payment, it did not, in the court’s view, have any rights in the goods or any obligation to pay for them. It was held the goods were not delivered in accordance with the supply agreement and the buyer had no rights to use the goods and was obliged to return them. Had the supply agreement given rise to a security interest and not been perfected, the bank holding an all assets security from the buyer would have had priority to the goods.

[page 146] Transfer of equipment upon termination of construction contract due to contractor’s receivership McCloy v Manukau Institute of Technology [2013] 3 NZLR 390; [2013] NZHC 936; BC201363460 — on 8 June 2011 Mainzeal entered into a construction contract with Hobson Gardens to carry out work at an apartment building. Part of the work undertaken by Mainzeal involved placing two hoists onto the exterior of the building to enable construction materials and personnel to be hoisted to higher levels of the building. Under cl 16.5.1 of the construction contract, Hobson Gardens could terminate the construction contract if Mainzeal went into receivership and if the receivers failed, within ten working days, to take over the contract work within ten working days. Clause 16.7.1 of the construction contract provided that if Hobson Gardens ended the contract pursuant to cl 16.5.1: [Hobson Gardens is] deemed to be in possession of the contract works. [Mainzeal’s] interest in the contract works and in the materials, fittings and construction machinery on the site is transferred to [Hobson Gardens]. [Hobson Gardens] is entitled to: (a) complete the contract work; use the materials, fittings, construction machinery for that purpose; and employ any other person; (b) recover from [Mainzeal] any reasonable costs incurred in completing the contract works as certified by the architect; (c) sell by public auction or in some other way agreed to by [Mainzeal] any surplus materials or fittings, and [Hobon Gardens’] interest in the construction machinery. The net proceeds are to

be deducted from [Mainzeal’s] liability to [Hobson Gardens]. Hobson Garden’s must pay any balance to [Mainzeal]. Receivers were appointed to Mainzeal and on 20 February 2013, they gave notice to Hobson Gardens that they would not continue the construction work. The following day Hobson Gardens gave notice to the receivers under cl 16.5.1 of the construction contract that the contract was at an end. In its notice, Hobson Gardens asserted that it was now lawfully in possession of the two hoists. Mainzeal had entered into various security agreements with Bank of New Zealand (BNZ) and as a result BNZ and Hobson Gardens had competing claims to the two hoists. The court held that cl 16.7.1 of the contract in substance secured payment or performance of Mainzeal’s obligations to Hobson Gardens and was therefore a security interest for the purposes of s 17(1)(a) of the NZ PPSA (being the equivalent of s 12(1) of the PPSA). The court found that Hobson Gardens acquired this security interest when cl 16.7.1 was “invoked” by Hobson Gardens on 21 February 2013, not when the construction contract was entered into on 8 June 2011. The court’s view as to when the security interest “invoked” raises some interesting issues. These include: when does the security agreement that gives rise to such a security interest come into force? This would be relevant under s 588FL of the Corporations Act in the Australian context; does “invoked” have the same meaning as attachment? By making cl 16.7.1 conditional on the termination of the contract following the appointment of a receiver, did the parties effectively agree that the security interest would attach at that time? (note s 19(3), PPSA). Power of attorney to effect transfer of property upon termination of agency agreement Re Sims Battle Brewster & Associates Inc [1999] AJ No 1285; 1999 ABQB 830; 76 Alta LR (3d) 189; 15 PPSAC (2d) 82 — Sims conducted business as an insurance agency under an agency agreement with Royal Insurance. Sims advised Royal that Sims was facing bankruptcy and Royal removed the business books and files from the office of Sims. A receiving order under bankruptcy legislation became effective the next day. Royal then entered into a contract for the sale of the business book of Sims and applied the amount realised from the sale against the amount due from Sims to Royal. The agency agreement between Sims and royal included the following clause: If this Agreement is terminated or suspended and all monies payable by the Broker [Sims] to the Company [Royal] have not been paid by the Broker to the Company (other than current

[page 147] amounts payable which are in the process of normal account reconciliation between the Broker and the Company), then, unless the Company gives notice to the Broker to the contrary: (i) the records, ownership and use and control of all the Broker’s customer lists and files relating to the policyholders of the Company including without limitation, all goodwill attached thereto and all computer data, information on disks and electronically stored information shall be vested in the Company and shall be deemed to be the property of the Company, (ii) none of the provisions of section 3.4 shall apply and (iii) any sale thereof shall be in the sole discretion of the Company on terms determined by the Company and in the event of sale the Company shall account for and pay over to the Broker only the excess of payment received by the Company over the Broker’s indebtedness to the Company and in any event the Broker shall continue to be liable for any deficiency following such sale. The Broker hereby irrevocably authorizes and appoints the Company as its agent and hereby irrevocably grants to the Company a power of attorney, for and in the name of and on behalf of the Broker to deal with third parties for the purposes of providing access to the Company to the Broker’s records and policyholder and policy information. The Broker covenants not to retain or use and to surrender to the Company any information relating to the policyholders and policies of the Company in circumstances of termination or suspension of this Agreement as provided in this section and the Broker covenants and agrees to cooperate fully with the

Company and to provide such authorizations and directions to third parties as to the Company may require. [Emphasis added] The court held the particular terms of this agency agreement, constituted a security interest and because this was not perfected by registration under the Alberta PPSA it was not effective against the trustee in bankruptcy. Sale and buy-back agreement Carey v Smith [2013] NZHC 2291; BC201365296 — In February 2008 Brumac and the Careys entered into a sale and buy-back agreement with NZ Peat for a pile of peat. The agreement provided that NZ Peat would sell the peat, while retaining certain rights to buy back the peat at a future date, and that the “investors” (being Brumac and the Careys) would purchase half of the peat each, while having a put option to sell the peat back to NZ Peat at a future date. The buy-back price was defined by rates set out in a schedule to the agreement. The purchase price was NZ$250,000 plus GST, to be paid by each investor, calculated at the rate of NZ$25 plus GST per cubic metre. The put price was NZ$33.74 plus GST per cubic metre. From the date of sale, the peat was to be kept in a separate pile at NZ Peat’s premises for a nominal storage rental of $1 per annum. NZ Peat agreed to keep the peat in good condition, and NZ Peat agreed to take out insurance for the peat on behalf of Brumac and the Careys. Brumac and the Careys agreed to reimburse NZ Peat for the cost of the insurance. Brumac and the Careys agreed that they would not remove the peat from NZ Peat’s premises, or sell, transfer, use as security, or in any way encumber the peat at any time until after the expiry of NZ Peat’s buyback option on 31 December 2009. Each of the investors granted NZ Peat the option to buy back all or some of the peat from each investor at the quantity and at the times and dates decided by NZ Peat in its sole discretion at the buy-back price, providing that such option could only be exercised by NZ Peat between 1 March 2009 and 31 December 2009. The option could be exercised as many times as NZ Peat decided within the option period. To exercise the option, NZ Peat was required to provide written notice to the investors. Once such notice was given to the investors, they were required to provide NZ Peat with a GST invoice from each of them for half of the quantity stipulated in NZ Peat’s notice. Payment of the invoice was due on the first of the month following NZ Peat’s notice, following which NZ Peat would then acquire the quantity of peat stipulated in this notice. NZ Peat was required to prepare a statement each month showing the amount of the peat removed from the stockpile and the amount of peat remaining in the stockpile. In the event that NZ Peat bought back all of the peat during the term of the agreement and there was still some product remaining in the stockpile, then the remaining amount was to be deemed to belong to NZ Peat, and no further payment was required to be made to the investors.

[page 148] In the agreement NZ Peat granted each investor a put option to require NZ Peat to buy back each investor’s half share of any remaining peat that had not already been bought back by NZ Peat as at 2 December 2009 at the put price. The option was to be exercised by the investors providing written notice to NZ Peat no later than 2 November 2009. The agreement also provided for a purchase price refund. If the Official Cash Rate increased at any time during the term of the agreement (being from the date of sale until 31 December 2009) by more than 0.5% above the Official Cash Rate at the date of sale, then NZ Peat would refund part of the purchase price to each investor at the rate of NZ$25 plus GST per cubic metre of peat, multiplied by the percentage amount of increase in the Official Cash Rate above 0.5% adjusted on a per annum basis. Any refund was to be paid on 14 January 2010. The court held the particular characteristics of the sale and buy-back agreement constituted an in

substance security interest. Sale and repurchase arrangements that involve an absolute transfer of property, in circumstances where the transferor does not retain any interest in the transferred property and the transferee is obliged to retransfer to the transferor equivalent or fungible property should probably be distinguished from the arrangement considered in Carey v Smith but this is an area of some uncertainty. Flawed asset arrangements (subs 12(2)(1)) Caisse populaire Desjardins de l’Est de Drummond v Canada 2009 SCC 29; (2009) 309 DLR (4th) 323; [2009] 4 CTC 330 — the Supreme Court of Canada held a deposit account subject to restrictions on withdrawal and transfer to preserve the Caisse’s rights to compensation (civil law concept analogous to set off) was a security interest. The court concluded this combination did constitute a proprietary interest. The decision related to the meaning of security interest under certain Canadian taxation legislation but the concept in that legislation was substantially the same as in the Canadian PPSA legislation. Not all “flawed asset” arrangements will be security interests. Subsection 12(2) requires the flawed asset arrangement to be an interest in personal property that in substance secures payment or performance of an obligation. While an interest includes a right in personal property (s 10 definition of interest), it seems this still requires a proprietary right in, and not a mere contractual right to, property. Characterisation of security interests Bank of Montreal v Innovation Credit Union [2010] SCJ No 47; [2010] ACS no 47; 2010 SCC 47; 2010 CSC 47; [2010] 3 RCS 3 and Royal Bank of Canada v Radius Credit Union Ltd [2010] SCJ No 48; [2010] ACS no 48; 2010 SCC 48; 17 PPSAC (3d) 29 — these Canadian cases involved priority contests between competing security interests taken by credit unions under the provincial PPSA of Saskatchewan and by banks under the Canadian federal Bank Act. A similar contest between federal and state security interests should not arise under Australia’s PPSA. However, in order to determine priority in this context, it was necessary for the Canadian Supreme Court to characterise the PPSA security interests as a matter of general property law. Similar characterisation issues may be relevant in Australia if a PPSA security interest is competing against an interest in personal property subject to that security interest, where the latter interest is not governed by the PPSA. The Canadian Supreme Court held that while the PPSA does not contain any provisions which identify the nature of a PPSA security interest in proprietary terms, PPSA security interests should be characterised as legal interests in the relevant collateral, even if they are not perfected. The court found that at the time the banks took their security under the federal Bank Act the credit unions already held “statutory interests” in the same collateral (being their PPSA security interests) which, in general proprietary terms, equated to a fixed charge. Therefore, the banks could only take their interests subject to the prior legal interests of the credit unions. See also i Trade Finance Inc v Bank of Montreal [2011] SCC 26, discussed at [PPSA.19.A].

[page 149] Royal Bank of Canada v Sparrow Electric Corp [1997] SCJ No 25; [1997] ACS no 25; [1997] 1 SCR 411; 12 PPSAC (2d) 68 — a PPSA security interest is in the nature of a fixed legal charge that can attach to both present and after-acquired property. Leases that secure payment or performance of an obligation Although a lessor’s interest under a PPS lease will be a deemed security interest under s 12(3), the difference between a lease that is an “in substance” security interest under s 12(1) and a PPS lease that does not meet the requirements of s 12(1) is important. The former are subject to all of the provisions of the PPSA while the latter are not subject to the enforcement provisions (s 109(1)(c), PPSA) and some PPS leases are not subject to the insolvency vesting rules (s 268, PPSA).

A range of factors have been taken into consideration by courts in Canada to determine if a lease secures payment or performance of an obligation and therefore meets the requirements of s 12(1) — refer to the commentary at [4.3.350]: A residual value guarantee in a lease is indicative that the lease is in substance a security interest — Crop & Soil Service Inc v Oxford Leaseway Ltd [2000] OJ No 1372; 48 OR (3d) 291; 186 DLR (4th) 85; 15 PPSAC (2d) 202; HOJ Franchise Systems Inc v Municipal Savings and Loan Corp [1994] OJ No. 24; 110 DLR (4th) 645; 11 BLR (2d) 282; 6 PPSAC (2d) 302. If the lessee has the same benefits and burdens as an owner, including profit or loss on a resale of the leased goods, the lease may be an in-substance security interest — Re Cronin Fire Equipment [1993] OJ No 1749; 14 OR (3d) 269; 21 CBR (3d) 127; 5 PPSAC (2d) 219. A lease will be an in substance security interest if the lessee is required to purchase the leased goods at the end of the lease term — Federal Business Development Bank v Bramalea Ltd [1983] OJ No 297; 144 DLR (3d) 410; 45 CBR (NS) 299; 2 PPSAC 317, affirmed by the Ontario Court of Appeal (1983) 150 DLR (3d) 768. In contrast, the inclusion of an option to purchase will not, by itself, be determinative. The terms of the option need to be considered to ascertain its effect — Canadian Western Bank v Baker (cob Hallwood Holsteins) [1999] SJ No 861; 1999 SKQB 252; [2000] 4 WWR 105; 15 PPSAC (2d) 247. The absence of limitations on the lessee’s use of the leased goods, the lessee’s liability for all maintenance and operating costs and the fact the leased goods have no real value at the end of the lease term while the lessor has recovered its capital cost and financing charges (ie the notional interest component of the lease payments) are factors indicating the lease is in the nature of a financing transaction and in substance a security interest — Arnold (Trustee of) v St Thomas Motor Products Inc (1994) 8 PPSAC (2d) 144. See also GMAC Commercial Credit Corp Canada v TCT Logistics Inc (2004) 238 DLR (4th) 487; Paccar of Canada Ltd v Peterbuilt of Ontario Inc (2005) 18 CBR (5th) 125 and Daimler Chrysler Services Canada Inc v Cameron 2007 BCCA 144. PPS lease (subs 12(3)(c)) Re Maiden Civil (P&E) Pty Ltd; Albarran v Queensland Excavation Services Pty Ltd (2013) 277 FLR 337; [2013] NSWSC 852; BC201310524 — the lease of excavation equipment from QES to Maiden was not in writing and there was no evidence of any agreed term. The hire was continuous, for a period of more than a year, and Maiden retained uninterrupted possession of the equipment for more than one year. The court held PPSA s 13(1)(b) and/or (d) was satisfied. Because the equipment had a serial number and was in Maiden’s possession for more than 90 days, s 13(1)(e)(ii) and/or (iii) was also satisfied. There was nothing to suggest that any of the exclusions in s 13(2) applied. The court therefore held the lease of the equipment by QES to Maiden was a PPS lease within the meaning of PPSA s 13 and that QES’ interest as lessor was a “security interest” within PPSA s 12(3)(c). Although the court referred to Maiden retaining uninterrupted possession of the equipment for more than one year, s 13(1)(b) will apply if no term is specified and in this event the relevant lease will be a PPS lease from its commencement.

[page 150] Consignments that secure payment or performance of an obligation A consignor’s interest under a commercial consignment will be a deemed security interest under s 12(3) but the difference between a consignment that is an “in substance” security interest under s 12(1) and a commercial consignment that does not meet the requirements of s 12(1) is important. The former are subject to all of the provisions of the PPSA while the latter are not subject to the enforcement provisions (s 109(1) (d)) or the insolvency vesting rules (s 268).

A consignment that does not in substance secure payment or performance of an obligation and is not a commercial consignment is not subject to the PPSA because neither s 12(1) or s 12(3)(b) applies. If a consignee is obliged to purchase the consigned goods from the consignor or account to the consignor for a pre-determined amount regardless of whether the consigned goods are sold to a third party, it is very likely to be an “in substance” security interest; see Re Bristol Yacht Sales Inc; Henfrey Samson Belair Ltd v Inland Ind Ltd [1984] BCJ No 2703; 52 BCLR 246; 51 CBR (N.S.) 279; 25 ACWS (2d) 112; Convoy Supply Canada Ltd v Northern Credit Union Ltd [2001] OJ No 1483; 2 PPSAC (3d) 231; 104 ACWS (3d) 955. To determine the substance of an agreement the courts will likely consider both the terms of the agreement and, if inconsistent with those terms, the conduct of the parties in relation to it. A range of factors can be relevant to the characterisation of an agreement as a consignment; see Re Arcabi Pty Ltd (Receivers & Managers Appointed) (in liq) [2014] WASC 310; BC201407252 (“Arcabi”); Access Cash International Inc v Elliot Lake and North Shore Corp for Business Development [2000] OJ No 3012; [2000] OTC 617; 1 PPSAC (3d) 209; 99 ACWS (3d) 19 (“Access Cash”); Re Toyerama Ltd; Thorne Riddell Inc v Fleishman [1980] OJ No 157; 34 CBR (NS) 153; 1 PPSAC 126 (“Toyerma”); Farwest Systems Corp (Receiver Of) v Omron Business Systems Inc [1988] BCJ No 1051; 69 CBR (NS) 82; Re Stephanian’s Persian Carpets Ltd [1980] OJ No 156; 34 CBR (NS) 35; 1 PPSAC 119 (“Stephanian”); D & A Macleod Co v Manhattan Electric Cable Corp; Glengarry A.E.T. Inc (Trustee of) v Manhattan Electric Cable Corp [1986] OJ No 533; 6 PPSAC 112; 37 ACWS (2d) 445 (“Glengarry”). Based on the decisions in the Arcabi, Stephanian, Toyerma, Glengarry and Access Cash cases, if a consignee is only liable to pay the consignor for consigned goods once they have been on sold to a third party, in respect of unsold consigned goods, there is no amount owing and therefore nothing secured by the consignor’s interest in those goods. Even if there is no “in substance” security interest in respect of unsold consigned goods for the purposes of s 12(1), there could be an “in substance” security interest in relation to accounts payable by the purchasers of consigned goods once they have been sold or the proceeds of such accounts. The terms of each consignment agreement need to be carefully considered to ascertain if this is the case. Bailment for storage purposes A bailment of goods for storage purposes was not an “in substance” security interest for the purposes of s 12(1) or a PPS lease for the purposes of ss 12(3) and 13; Re Arcabi Pty Ltd (Receivers & Managers Appointed) (in liq) [2014] WASC 310; BC201407252. This decision was referred to in Re Wine National Pty Ltd [2014] NSWSC 1516; BC201409262. Also refer to [PPSA.13.A]. Licences — s 12(5)(a) Section 12(5)(a) provides that a security interest does not include a licence. Licence is defined to include an intellectual property licence (s 10). However, it may be that a so-called licence is, in substance, a conditional sale agreement that secures payment or performance of an obligation, and therefore a security interest. In Contech Enterprises Ltd v Vegherb LLC 2015 BCCA 99 the British Columbia Court of Appeal held that the purpose of a licence of IP was to secure payment

[page 151] of the purchase price of a total package of business assets (including the relevant IP) under an asset sale agreement. Once the purchase price for the assets was paid in full, title to the IP would pass to the buyer/licensee.

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 17 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: ss 2(1)(qq), 3(1) and

9(4) of the Saskatchewan (Canada) Personal Property Security Act 1993. Note the definition of “security interest” in Art 1 (1–201) of the Uniform Commercial Code (UCC) in the USA provides more specific guidance as to leases that will be security interests in the context of Art 9, UCC. Commentary References For further discussion please refer to commentary at [1.650], [1.2200], [1.2250], [2.100], [2.150], [2.400], [2.500], [2.550], [2.1650], [2.4000], [2.7600], [2.11400], [4.1.750], [4.2.100], [4.2.500]–[4.2.650], [4.2.850], [4.3.300], [4.3.350], [4.4.650], [4.4.900], [4.8.150], [4.8.350]–[4.8.450], [4.8.550], [4.8.600], [4.9.950], [4.10.400], [4.10.850]–[4.10.950], [4.12.150], [4.13.50], [4.13.200], [5.350]. Relevant Cases See also Rabobank New Zealand Limited v McAnulty [2011] NZCA 212.

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[PPSA.13] Meaning of PPS lease 13 (1) A PPS lease means a lease or bailment of goods: (a) for a term of more than one year; or (b) for an indefinite term (even if the lease or bailment is determinable by any party within a year of entering into the lease or bailment); or (c) for a term of up to one year that is automatically renewable, or that is renewable at the option of one of the parties, for one or more terms if the total of all the terms might exceed one year; or (d) for a term of up to one year, in a case in which the lessee or bailee, with the consent of the lessor or bailor, retains uninterrupted (or substantially uninterrupted) possession of the leased or bailed property for a period of more than one year after the day the lessee or bailee first acquired possession of the property (but not until the lessee’s or bailee’s possession extends for more than one year); or (e) for goods that may or must be described by serial number in accordance with the regulations, if the lease or bailment is: (i) for a term of 90 days or more; or (ii) for a term of less than 90 days, but is automatically renewable, or is renewable at the option of one of the parties, for one or more terms if the total of all the terms might be 90 days or more; or (iii) for a term of less than 90 days, in a case in which the lessee or bailee, with the consent of the lessor or bailor, retains uninterrupted (or substantially uninterrupted) possession of the leased or bailed property for a period of 90 days or more after the day the lessee or bailee first acquired possession of the property, (but not until the lessee’s or bailee’s possession extends for 90

days or more). (2) However, a PPS lease does not include: (a) a lease by a lessor who is not regularly engaged in the business of leasing goods; or (b) a bailment by a bailor who is not regularly engaged in the business of bailing goods; or (c) a lease of consumer property as part of a lease of land where the use of the property is incidental to the use and enjoyment of the land; or [page 152] (d) a lease or bailment of personal property prescribed by the regulations for the purposes of this definition, regardless of the length of the term of the lease or bailment. (3) Bailments for value only This section only applies to a bailment for which the bailee provides value. [subs (3) subst Act 96 of 2010 s 3 and Sch 2 item 33, opn 6 July 2010]

____________________ [PPSA.13.A] Annotations to s 13 Prescribed PPS lease (s 13(2)(d)) See reg 1.9 at [PPSR1.9]. Lease for an indefinite term A lease of formwork equipment for an indefinite term, by a company regularly engaged in leasing goods, was a PPS lease for the purposes of s 13(1)(b); see Carrafa, Goutzos & Lofthouse (as Liquidators of Relux Commercial Pty Ltd) (in liq) v Doka Formwork Pty Ltd [2014] VSC 570; BC201409592. Lease or bailment subject to s 13(1)(d) or s 13(1)(e)(iii) The PPSA only applies to a lease or bailment referred to in s 13(1)(d) or s 13(1)(e)(iii) once the lessee’s or bailee’s possession extends for more than one year or 90 days, as applicable. This has implications for the commencement of the time periods for purchase money security interest priority under s 62 and the application of the vesting rule in s 588FL of the Corporations Act. It is likely that the grantor’s possession of goods, for the purposes of s 62, will commence when the grantor has possession under a security agreement to which the PPSA applies; that is, when the lessee or bailee has had possession for more than one year or 90 days, as applicable (refer to [PPSA.62.A]). Similarly, it is arguable that a security agreement to which s 13(1)(d) or s 13(1)(e)(iii) applies “comes into force” for the purposes of s 588FL of the Corporations Act when the lessee’s or bailee’s possession extends for more than one year or 90 days, as applicable. The definition of “security agreement” in s 10 means an agreement or act by which a security interest is created, arises or is provided for; or writing evidencing such an agreement or act. The act of the lessee or bailee retaining possession of goods beyond one year or 90 days, as applicable, likely causes the relevant

security agreement to arise and come into force. The alternative view is that a security agreement to which s 13(1)(d) or s 13(1)(e)(iii) applies “comes into force” when it is first executed, notwithstanding that it is only deemed to give rise to a security interest after one year or 90 days, as applicable. The significance of including bailment in the definition of PPS lease In Canada and New Zealand there is no “PPS lease” concept. Instead there is a concept of a “lease for more than one year”. The definition of “lease for more than one year” in the PPSA legislation in Canada and New Zealand does not have anything equivalent to the 90 day rule for serial numbered property (see s 13(1)(e), PPSA). Furthermore, the Canadian PPSAs do not refer to “bailment” in their definition of lease for a term of more than one year and the NZ PPSA makes only one reference to “bailment” in its corresponding definition. Despite there being only one reference to bailment in para (a) of the NZ PPSA definition of “lease for a term of more than 1 year”, the New Zealand Court of Appeal has indicated that it considers “the references to ‘lease’ in paras (b) and (c) must also be read as shorthand references back to the phrase ‘lease or bailment of goods’ in para (a)” — see Rabobank New Zealand Ltd v McAnulty [2011] NZCA 212 at [25] (McAnulty). However, the court in McAnulty observed at [20]–[22] that “bailment is a much broader concept than lease” and it is not clear why the NZ PPSA (unlike the Canadian PPSAs) includes bailment

[page 153] in the definition of “lease for a term of more than 1 year”. The court speculated that this may simply be a reflection of the historical use of the definition “instrument by way of bailment” in the Chattels Transfer Act 1924 (NZ) to describe a chattel lease. The Chattels Transfer Act was replaced by the NZ PPSA. The Canadian PPSAs did not originally deem all leases for a term of more than one year to be security interests. However, the difficulty encountered by the Canadian courts in distinguishing between a “true” (ie operating) lease on the one hand and a finance lease (which was considered to secure payment or performance of an obligation) on the other, prompted the change (refer to the case annotations at [PPSA.12.A]). This was a recognition that it is often difficult to determine which of these categories a lease falls under because the rights and responsibilities relating to the leased property can be shared or allocated as between the lessor and lessee in a multitude of ways. A bright-line test was achieved by deeming all leases for a term of more than one year to be security interests for the purposes of the Canadian PPSAs. Deeming leases for more than one year to be security interests was never intended to bring every kind of bailment in which apparent ownership could result from a separation of ownership and possession within the scope of the Canadian legislation. Lease and bailment arrangements which do secure payment or performance of an obligation, and therefore fall under s 12(1) of the PPSA, will be security interests. The open question remains whether a bailment arrangement that does not satisfy the functional definition of a security interest and which is not in the nature of a lease or rental arrangement can nevertheless be a PPS lease and therefore be deemed to be a security interest under s 12(3) of the PPSA, assuming the other requirements of s 13 are satisfied. It is worth noting that PPS leases that do not also satisfy s 12(1) are not subject to the enforcement provisions in Ch 4 of the PPSA (s 109(1)(c)) and PPS leases for a term of between 90 days and one year in respect of serial numbered property are not subject to the insolvency vesting rules (s 268(1)(a)(ii)). Section 13 of the PPSA does not expressly distinguish between types of bailment. Nevertheless, it is arguable that: The purpose of the PPS lease concept is not intended to be materially different to the “lease for a term of one year” in the overseas models, notwithstanding the extension to short term transactions relating to serial numbered property. Section 13 is intended to cover leases and similar bailment arrangements and the section only refers

to bailments as an adjunct to leases. Possession or delivery of goods as an incidental aspect of a contract or for a purpose which relates to the provision of a service to the bailor (for example, a construction contract or EPC contract term dealing with principal (ie bailor) supplied items for incorporation in the contract works being performed by the contractor (ie bailee); the delivery of goods by a bailor for repair by a bailee; or the carriage of goods under a transportation agreement, which may in fact involve a series of bailments) is not a bailment to which the PPSA is intended to apply as a “PPS lease”. This interpretation could be seen as being more consistent with the rationale for deeming certain transactions, including PPS leases, to be security interests where it might otherwise prove difficult to determine if the transaction secured payment on the performance of an obligation. If this view is correct, to the extent s 13 refers to “bailment”, it should be interpreted as being limited to the hiring or rental type of bailment arrangements that are often used in a similar context to leases. Such a narrow interpretation appears consistent with the views of the New Zealand Court of Appeal (see McAnulty at [40]): The reason for the deeming provision is to ensure that lease/bailment transactions that are not easily distinguishable from finance leases are treated as if they are finance leases. Bailment transactions that could not possibly be confused for finance leases do not need to be drawn into that net, and there is nothing to indicate that Parliament intended that they should be.

[page 154] The use of the word “term” to describe the duration of a PPS lease may also lend some support to this interpretation of s 13. The type of incidental bailment referred to above and bailment associated with the provision of services by the bailee to the bailor does not usually have a “term” (although the contract of which it is an incidental part may do so). On the other hand, because s 13(1)(b) contemplates some PPS leases may have an indefinite term, an unspecified duration for a bailment might be more likely to result in it being a PPS lease. Section 13 only applies to a bailment for which the bailee provides value (s 13(3)). However, the definition of “value” in s 10 encompasses any consideration that is sufficient to support a contract. This could mean that any bailment under a contract for which the bailee provides consideration, including a promise to provide particular services, is potentially a PPS lease, even though the bailment aspect of the contract is merely incidental to its performance. An alternative interpretation, more consistent with a narrower reading of the references to bailment in s 13, is that s 13(3) requires specific consideration to be given by the bailee for the bailment (not merely general consideration for the broader contract in respect of which a bailment provision is merely incidental). The NZ PPSA has no express requirement for the provision of value by a bailee in connection with a “lease for a term of more than 1 year” but the New Zealand Court of Appeal in McAnulty considered “bailments in respect of which the bailor is not receiving (or intending to receive) consideration with a view to making a profit” ought not be covered by this definition. The requirement for a bailor to be “regularly engaged in the business of bailing goods” (s 13(2)(b)) is somewhat ambiguous. Many bailment arrangements may be incidental aspects of particular types of contract but are, nevertheless, likely to be something of a regular occurrence in the everyday course of business. However, the New Zealand Court of Appeal has observed that (see McAnulty at [40]): “the words “in the business of leasing goods” should be read as importing a requirement that the owner actually be intending to profit from the bailment or lease. This would exclude gratuitous bailments where the bailor was not receiving any payment for the use of the goods and bailments where the bailee is in the business of bailments, not the bailor.” A similar interpretation was adopted in Re Arcabi Pty Ltd (Receivers & Managers Appointed) (in liq)

[2014] WASC 310; BC201407252, where there was a number of bailors of rare coins and bank notes with Arcabi (the bailee). The business of Arcabi included the storage and sale of rare coins and bank notes. To the extent the bailors could be said to operate businesses, they were in the business of profiting from the exchange of rare coins and bank notes rather than the bailment of them. However, most of the bailors engaged in the exchange of the rare coins and bank notes as a hobby rather than a business. In a chambers decision, it was held that there was no PPS lease. See also Re Wine National Pty Ltd [2014] NSWSC 1516; BC201409262. Unfortunately, the Explanatory Memorandum to the Personal Property Securities Bill 2009 does not shed any light on the reasons for the inclusion of the express references to “bailment” in the definition of PPS lease. The Attorney General’s Department’s revised commentary on the Exposure Draft Personal Property Securities Bill 2008 (which first introduced the PPS lease concept) of December 2008 is not conclusive, but it may lend some weight to the view that the references to “bailment” in the definition of PPS lease should be read narrowly and as an adjunct to the lease concept. An extract from the Revised Commentary on the Exposure Draft PPS Bill, December 2008, Appendix B: Summary of Key Changes to the Draft PPS Bill since May 2008 at pp 156–157 is set out below: PPS Leases B14 The Bill applies to leases over personal property security, an interest in which may be a “purchase money security interest” regardless of whether the interest secures payment or the performance of an obligation. The rules applying to leases form an important part of taking a

[page 155] functional approach to PPS reform. Certain lease property would be subject to rules that currently do not apply such as requirements to be in writing and signed and voluntary registration for priority purposes. B15 The Bill has been amended to include a definition for “PPS lease” (section 31) rather than a “lease for more than one year”. The definition picks up those arrangements under which the lessee or bailee of the property maintains an outward appearance of ownership. There is a general rule, and a special rule aimed at serial numbered tangible property (such as motor vehicles, boats, aircraft and other prescribed property). PPS leases would include bailments in which the bailor provides value to the bailee in respect of the bailment (section 31(3)). [Note s 13(3), PPSA requires the bailee to provide value. The reference here to the bailor providing value appears to be a typographical error.] B16 Reflecting the previous definition, a “PPS lease” would include leases for a term of more than one year (section 31(1)(a)). It would also cover leases of an indefinite term, leases of less than one year that are renewable, and leases where the lessee or bailee might retain (substantially) uninterrupted possession of the property for more than one year with the consent of the lessor or bailor (section 31(1)(b), (c) and (d)). For serial numbered tangible property the same rules apply, although the relevant term is 90 days rather than one year. B17 A carve-out removes from the definition of “PPS lease” those leases and bailments made by persons that are not regularly engaged in the business of leasing or bailing the tangible property as well as prescribed leases and bailments (section 31(2)). The question of whether a lease of personal property, in substance, secures payment or performance of an obligation would be determined by the facts (section 30(1)). However, the Bill provides guidance relating to the value provided by the lessee, rights of possession and use and the economic life of the leased property. The effect is that in determining whether a lease of personal property in substance secures payment or performance of an obligation the key consideration is whether the lease is for the economic life of the property (section 30). [Emphasis added.

Note the provisions referred to in the third and fourth sentences of the last paragraph were subsequently removed from the Bill. This extract references the section numbers that appeared in the PPS Bill at the time.] The broader drafting of the “PPS lease” concept in Australia’s PPSA, especially the repeated references to bailments and the special 90 day rule for serial numbered property means that the Canadian and New Zealand case law in this area will need to be approached with caution. While the 90 day rule for serial numbered goods clearly expands the application of the PPSA to short term hiring and rental agreements for serial numbered goods, it is arguable, for the reasons noted above, that the references to “bailment” in the definition of the PPS lease should be read narrowly. However, until the courts have clarified the scope of s 13, it would be prudent to assume it may be interpreted very broadly. Lessor/bailor not regularly engaged in the business of leasing/bailing goods (s 13(2)(a), (b)) Rabobank New Zealand Ltd v McAnulty [2011] NZCA 212 — This case involved a one off bailment of a race horse with a stud farm, which, at least in terms of duration, met the requirements for a “lease for a term of more than 1 year”, being the NZ equivalent of a PPS lease. However, the NZ Court of Appeal found this was a lease/bailment by a lessor/bailor who was not “regularly engaged” in the business of leasing/bailing goods and therefore the NZ PPSA did not apply. The court did not follow a number of Canadian decisions which have found a single transaction could constitute “regular engagement” in the business of leasing (David Morris Fine Cars Ltd v North Sky Trading Inc [1996] AJ No 392; [1996] 7 WWR 332; 39 CBR (3d) 284; 11 PPSAC (2d) 142; East Central Development Corp v Freightliner Truck Sales (Regina) Ltd [1997] SJ No

[page 156] 25; [1997] 5 WWR 231; 153 SaskR 161; 12 PPSAC (2d) 328; Paccar Financial Services Ltd v Sinco Trucking Ltd (Trustee of) (Sask C.A.) [1989] SJ No 86; 57 DLR (4th) 438; [1989] 3 WWR 481; 9 PPSAC 7).

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 17 (see definition of “lease for a term of more than 1 year”) of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 2(1)(y) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [1.2250], [2.750], [4.3.400], [4.4.650], [4.4.700], [4.4.900], [4.5.350].

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[PPSA.14] Meaning of purchase money security interest 14 (1) General definition A purchase money security interest means any of the following: (a) a security interest taken in collateral, to the extent that it secures all or part of its purchase price;

(b) a security interest taken in collateral by a person who gives value for the purpose of enabling the grantor to acquire rights in the collateral, to the extent that the value is applied to acquire those rights; (c) the interest of a lessor or bailor of goods under a PPS lease; (d) the interest of a consignor who delivers goods to a consignee under a commercial consignment. (2) Exceptions However, a purchase money security interest does not include: (a) an interest acquired under a transaction of sale and lease back to the seller; or (b) an interest in collateral (as original collateral) that is chattel paper, an investment instrument, an intermediated security, a monetary obligation or a negotiable instrument; or (c) a security interest in collateral that (at the time the interest attaches to the collateral) the grantor intends to use predominantly for personal, domestic or household purposes. [subs (2) am Act 96 of 2010 s 3 and Sch 2 items 133 and 141, opn 6 July 2010]

(2A) Despite paragraph (2)(c), a purchase money security interest includes an interest if: (a) the interest is covered by subsection (1); and (b) the interest is in collateral that (at the time the interest attaches to the collateral) the grantor intends to use predominantly for personal, domestic or household purposes; and (c) the collateral is of a kind that is required or permitted by the regulations to be described by serial number. (3) Mixed securities If a security interest in collateral secures obligations covered by subsection (7) (purchase money obligations) and other obligations, the security interest is a purchase money security interest only to the extent that it secures the purchase money obligations. (4) If a security interest is granted in personal property (purchase money collateral) that secures a purchase money obligation, together with other collateral, the security interest is a purchase money security interest only to the extent that it is granted in the purchase money collateral. [page 157]

(5) Renewal etc A purchase money security interest does not lose its status as such only because the purchase money obligation is renewed, refinanced, consolidated or restructured (whether or not by the same secured party). (6) Application of payments to obligations In any transaction, if the extent to which a security interest is a purchase money security interest depends on the application of a payment to a particular obligation, the payment must be applied: (a) in accordance with any method of application to which the parties agree; or (b) if the parties do not agree on a method — in accordance with any intention of the debtor manifested at or before the time of the payment; or (c) if neither paragraph (a) nor (b) applies — in the following order: (i) to obligations that are not secured, in the order in which those obligations were incurred; (ii) to obligations that are secured, but not by purchase money security interests, in the order in which those obligations were incurred; (iii) to obligations that are secured by purchase money security interests, in the order in which those obligations were incurred. (7) Purchase money obligations This subsection covers an obligation of a debtor incurred: (a) as all or part of the purchase price of the collateral; or (b) for value given to enable the grantor to acquire or use the collateral (provided the collateral is so acquired or used). (8) References to purchase price and value In this section, a reference to a purchase price, or value, includes a reference to credit charges and interest payable for the purchase or loan credit. ____________________ [PPSA.14.A] Annotations to s 14 Cases Subsection 14(2)(a) of the PPSA expressly excludes a sale and lease back to the seller. It is possible that other arrangements would also be considered not to genuinely add to the grantor’s pool of assets — Wheatland Industries(1990) Ltd v Baschuk [1994] SJ No 625; 127 SaskR 178; 8 PPSAC (2d) 247; 52 ACWS (3d) 662 and Re 1151162 Ontario Ltd [1997] OJ No 6521; 13 PPSAC (2d) 16; 1997 CarswellOnt 5882.

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 16(1) (see definition of

“purchase money security interest”) of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 2(jj) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [1.2950], [2.8900]– [2.9050], [2.9150]–[2.9400], [2.9600], [4.1.4050], [4.1.4100], [4.1.4450], [4.2.4100], [4.3.550], [4.5.350], [4.8.850], [4.10.2600], [4.11.1550], [4.13.2300].

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[PPSA.15] Meaning of intermediated security and related terms 15 (1) Meaning of intermediated security An intermediated security is the rights of a person in whose name an intermediary maintains a securities account. [page 158] (2) Meaning of intermediary An intermediary is: (a) a person (including a central securities depository) who holds an Australian financial services licence (within the meaning of the Corporations Act 2001) permitting the person, in the course of business or other regular activity, to maintain securities accounts: (i) on behalf of others; or (ii) on behalf of others as well as on the person’s own behalf; or (b) a person who operates a clearing and settlement facility under an Australian CS facility licence (within the meaning of the Corporations Act 2001), other than such a person prescribed by regulations made for the purposes of this paragraph; or (c) a person (including a central securities depository) who holds a licence issued under the law of a foreign jurisdiction permitting the person, in the course of business or other regular activity, to maintain securities accounts: (i) on behalf of others; or (ii) on behalf of others as well as on the person’s own behalf. (3) An intermediary does not include a central bank. (4) An intermediary (including a central securities depository) is an intermediary only while acting in the capacity of an intermediary.

(5) A person is not an intermediary for the purposes of paragraph (2)(a) or (c) merely because the person maintains a securities account on behalf of the issuer of the financial products to which the account relates. [subs (5) am Act 35 of 2011 s 3 and Sch 2 item 8, opn 26 May 2011]

(6) Without limiting subsection (5), a person is not an intermediary for the purposes of paragraph (2)(a) or (c) merely because the person: (a) acts as a central securities depository, registrar or transfer agent for an issuer of a financial product; or (b) records details of interests in financial products in the person’s own books, being interests credited to securities accounts in the names of other persons for whom the person acts as manager or agent or otherwise in a purely administrative capacity. [subs (6) am Act 35 of 2011 s 3 and Sch 2 item 8, opn 26 May 2011]

(7) Meaning of securities account In this Act: securities account means: (a) an account to which interests in financial products may be credited or debited; or (b) in the case of an intermediary mentioned in paragraph 15(2)(b) — a record of holdings and transfers of interests in financial products. [def subst Act 35 of 2011 s 3 and Sch 2 item 9, opn 26 May 2011] [s 15 subst Act 96 of 2010 s 3 and Sch 2 item 34, opn 6 July 2010]

____________________ Comparative Legislation Comparable sections of Canadian legislation: s 2 (pp 2) (refer to concept of “security entitlement”) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [4.10.500], [4.10.550], [4.10.700].

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[page 159]

CHAPTER 2 — GENERAL RULES RELATING TO SECURITY INTERESTS [ss 16–81] PART 2.1 — GUIDE TO THIS CHAPTER [s 16] [PPSA.16] Guide to this Chapter 16 This Chapter sets out general rules relating to security interests in personal property. Part 2.2 contains some general principles relating to these security interests, the agreements that govern them and their enforceability. The Part describes how a security interest is attached to personal property and perfected. Part 2.3 deals with the concepts of possession and control of personal property. Part 2.4 contains some rules about attachment and perfection of security interests in particular situations. Part 2.5 sets out circumstances in which a person takes an interest in personal property free of a security interest in the property. Part 2.6 sets out how to work out the priority between competing security interests (and in some cases, other sorts of interests) in personal property. If a specific rule does not deal with the priority between security interests, then the priority is determined in accordance with the default rules in section 55. Part 2.7 contains some rules about transferring and assigning interests in collateral.

PART 2.2 — SECURITY INTERESTS: GENERAL PRINCIPLES [ss 17–22] [PPSA.17] Guide to this Part 17 This Part sets out some general principles about security interests. These principles relate to the enforceability of security agreements against grantors of security interests and third parties. A security interest is only effective if it has attached to collateral. A security interest attaches to collateral when the grantor has rights in the collateral, or can transfer it to the secured party, and value is given, or the security interest otherwise arises. A security interest is only enforceable against a third party if it has attached to collateral and the secured

party possesses the collateral, has perfected the security interest by controlling the collateral or has entered into a written security agreement that describes the collateral. This Part also contains rules about how a security interest is perfected and how it is continuously perfected. A perfected security interest has priority over an unperfected security interest, and the security interest that has been continuously perfected for the longest time generally has the highest priority (see Part 2.6 for priority rules). [page 160] Perfection occurs when a security interest has attached to collateral and any further steps needed to make the security interest effective against third parties have been taken. These steps involve registration on the Personal Property Securities Register or possession or control of the collateral. In certain situations this Act provides for perfection, or temporary perfection, by the operation of the Act itself.

[PPSA.18] General rules about security agreements and security interests 18 (1) A security agreement is effective according to its terms. (2) A security agreement may provide for security interests in after-acquired property. (3) A security interest in after-acquired property attaches without specific appropriation by the grantor. (4) A security agreement may provide for future advances. (5) A security interest is taken to secure reasonable expenses in relation to the enforcement of the security interest, unless the parties agree otherwise. ____________________ Comparative Legislation Comparable sections of New Zealand legislation: ss 35, 43, 44 and 71 and see also ss 104(2) and 132(1)(b) of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: ss 9(1), 13(1) and 14(1) and see also s 59(2)(a) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [1.2400], [2.3550], [2.4050], [2.4100], [2.4200], [2.5400], [2.5550], [4.3.600], [4.8.3500], [4.9.350], [4.13.1050], [4.13.3550].

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[PPSA.19] Enforceability of security interests against grantors — attachment 19 (1) Attachment required for enforceability A security interest is enforceable against a grantor in respect of particular collateral only if the

security interest has attached to the collateral. (2) Attachment rule A security interest attaches to collateral when: (a) the grantor has rights in the collateral, or the power to transfer rights in the collateral to the secured party; and (b) either: (i) value is given for the security interest; or (ii) the grantor does an act by which the security interest arises. (3) Time of attachment Subsection (2) does not apply if the parties to a security agreement have agreed that a security interest attaches at a later time, in which case the security interest attaches at the time specified in the agreement. (4) To avoid doubt, a reference in a security agreement to a floating charge is not a reference to an agreement that the security interest created by the floating charge attaches at a time later than provided under subsection (2). (5) Goods leased, bailed, consigned or sold under a conditional sale agreement For the purposes of paragraph (2)(a), a grantor has rights in goods that are leased or bailed to the grantor under a PPS lease, consigned to the grantor, or sold to the [page 161] grantor under a conditional sale agreement (including an agreement to sell subject to retention of title) when the grantor obtains possession of the goods. [subs (5) am Act 96 of 2010 s 3 and Sch 2 item 35, opn 6 July 2010]

(6) Subsection (5) does not limit any other rights the grantor may have in the goods. Note: A security interest may attach to crops while they are growing, and to the products of livestock, before they become proceeds of the crops or livestock (for example, wool before it is shorn). See subsections 31(4) and (5) (meaning of proceeds) and section 84A (security interests in crops and livestock). [s 19 am Act 96 of 2010 s 3 and Sch 2 item 36, opn 6 July 2010]

____________________ [PPSA.19.A] Enforceability of security interests against grantors — attachment — Annotations to s 19 Case Whether a security agreement which is not “signed or assented to” by the debtor is enforceable against third parties (interpretation of ss 36 and 40 of the NZ PPSA)

Dunphy v Sleepyhead Manufacturing Co Ltd [2007] 3 NZLR 602; (2007) 10 NZCLC 264, 313; [2007] NZCA 241; BC200761373 — a liquidator was found not to be a third party but the court commented that other secured creditors would be. Unlike s 36 of the NZ PPSA, s 20 of the PPSA provides a security agreement will be enforceable against third parties if it is signed by the grantor or if it is adopted or accepted by the grantor by an act or omission that reasonably appears to be done with the intention of adopting or accepting the writing. This wording appears to provide greater latitude in establishing that a security agreement will be enforceable against third parties, such as other secured creditors. When does a grantor have rights in collateral i Trade Finance Inc v Bank of Montreal [2011] SCJ No 26; 2011 SCC 26; 2011 CSC 26; 17 PPSAC (3d) 250 — i Trade provided finance to Webworx on the basis of representations that it had substantial contracts with a large U.S. corporation. These representations were fraudulent. The loan funds provided by i Trade to Webworx were made available to Webworx’s president (A) and his spouse to purchase shares credited to an investment account with an affiliate of the Bank of Montreal. The bank extended additional credit to A and his spouse and obtained a pledge of the shares as security. The bank was not aware of any interest of i Trade in the funds that had been used to acquire the pledged shares. After the fraud was discovered, the shares were sold and both the bank and i Trade claimed to be entitled to the proceeds. i Trade’s claim was made pursuant to an order it obtained authorising it to trace the funds into the hands of persons other than bona fide purchasers for value without notice. The bank contended that it had an enforceable PPSA security interest granted by A and his wife which made the bank a bona fide purchaser for value without notice. The Supreme Court of Canada held that: The bank had obtained a security interest in the shares that had attached and been perfected under the Ontario PPSA. i Trade’s equitable interest (in the nature of a constructive trust or equitable lien) was a nonconsensual interest outside the application of the Ontario PPSA. The priority rules in the PPSA were not applicable to the dispute between the bank and i Trade. The pledge granted to the bank was a statutory (legal) security interest under the Ontario PPSA and the bank was a bona fide purchaser for value without notice of iTrade’s interest. i Trade lost its ability to trace funds into the shares that were pledged to the bank. The court considered that the Ontario PPSA applied to the bank’s interest in the shares and the requirements for attachment under the Ontario PPSA were met when A and his wife pledged the shares to the bank. The grantors signed a security agreement that identified the collateral as the

[page 162] shares credited to the investment account and the bank gave value to the grantors by extending further credit. i Trade had voluntarily passed title to the monies it had lent to Webworx. Before i Trade discovered the fraud, Webworx had i Trade’s consent to use the money advanced. Webworx was therefore able to pass its interest in the funds to A, and i Trade had to bear the risk of loss. The grantors had rights in the shares when they were pledged to the bank even though those rights were voidable due to the fraud. The court noted that “rights” in collateral encompasses a range of interests beyond legal and equitable title. If A and his wife did not have rights in the collateral, then by the operation of the nemo dat rule, the bank could not have acquired a statutory security interest that would be enforceable against third parties. Possession as a sufficient right in collateral If a person is a grantor under a transaction that is an “in substance” security interest pursuant to s 12(1) or a deemed security interest pursuant to s 12(3), the PPSA treats the person as if they were the owner of the collateral (even though this may not be the case as a matter of general law). This enables the person to give a security interest over the whole of the collateral.

Re Maiden Civil (P&E) Pty Ltd; Albarran v Queensland Excavation Services Pty Ltd (2013) 277 FLR 337; [2013] NSWSC 852; BC201310524 — a lessee under a PPS lease had rights in the leased equipment to which a security interest could attach. These rights are not limited to possessory rights, but include proprietary rights. The court referred to a number of New Zealand and Canadian decisions and quoted the following paragraphs from the decision of Rodney Hansen J in Graham v Portacon New Zealand Ltd (2004) 10 TCLR 983; [2004] 2 NZLR 528; (2004) 9 NZCLC 263,517; BC200469215: The rights of a lessee in leased goods referred to in s 40(3) of the Act [NZ PPSA] are not therefore confined to the lessee’s possessory rights. As against the lessee’s secured creditors, the lessee has rights of ownership in the goods sufficient to permit a secured creditor to acquire the rights in priority to those of the lessor. The conceptual basis for this is explained in an article by Bridge, Macdonald, Simmonds and Walsh, “Formalism, Functionalism and Understanding the Law of Secured Transactions” (1999) 44 McGill LJ 567 at pp 602–603. The authors reject the thesis that for the purpose of art 9 of the United States Uniform Commercial Code and the Canadian legislation, a creditor’s interest in collateral attaches only to the debtor’s possessory rights. They go on to say: The internal logic of the Article 9 and PPSA priority regime is premised on a rejection of derivative title theory in favour of registration as the principal mechanism for ranking priority both among secured creditors and as between the secured creditor and the debtor’s general creditors including the trustee in bankruptcy. To give effect to this intent, “rights in the collateral” must be understood as requiring a mere bare right to possession or a power to convey a greater interest than has the debtor, a point confirmed in PPSA jurisprudence and expressly stated in some of the more recent PPSAs. On this interpretation, ostensible ownership — in the radical sense of bare possession or control of the collateral — has effectively replaced derivative title for the purposes of determining the scope of the secured debtor’s estate at the priority level. Thus, by the very act of deeming a true lease to be a PPSA security interest, ownership in the leased assets is effectively vested in the lessee as against the lessee’s secured creditors and trustee in bankruptcy. [Emphasis added] The court then concluded that: The Commonwealth Parliament, in enacting legislation that was modelled on the New Zealand and Canadian legislation, should be taken to have intended the same approach, which was by then wellestablished in Canada and New Zealand, to apply. A right of possession under a transaction which is itself a security interest for the purposes of the PPSA is sufficient for the grantor to have “rights in the collateral” for the purposes of s 19(2)(a) — Euroclean Canada Inc v Forest Glade Investments Ltd [1985] OJ No 2307; 49 OR (2d) 769; 16 DLR (4th) 289; 8 OAC 1; 54 CBR (NS) 65; 4 PPSAC 271; Haibeck v No 40 Taurus Ventures

[page 163] Ltd [1991] BCJ No 2759; 59 BCLR (2d) 229; 2 PPSAC (2d) 171; 29 ACWS (3d) 405 and CIBC v Otto Timm Enterprises Ltd [1995] OJ No 3827; 26 OR (3d) 724; 130 DLR (4th) 91; 10 PPSAC (2d) 228. This principle is not limited to the types of transactions mentioned in s 19(5) PPSA. It is worth noting s 19(5) refers to PPS leases but does not refer to leases that are “in substance” security interests under s 12(1) PPSA. At the same time, s 19(5) refers to consignments rather than being restricted to commercial consignments. This suggests s 19(5) is illustrative rather than definitive as to when possession will give a grantor sufficient rights in collateral. A right of possession may also be sufficient to give a grantor “rights in the collateral” even though that right of possession does not arise under a transaction which is itself a security interest (whether “in substance” or deemed). However, while a security interest may attach to collateral in which the grantor has such a right of possession, the security interest only attaches to the grantor’s interest in the collateral and

will be defeated by the true owner based on the nemo dat principle where the transaction giving rise to the grantor’s possessory interest is not a security interest for the purposes of the PPSA — Gray v Royal Bank of Canada [1997] BCJ No 151; 143 DLR (4th) 179; 12 PPSAC (2d) 126; 68 ACWS (3d) 534, where the court found, based on common law authority, that a person had acquired a bare possessory interest in a motor home and that interest was adequate to grant a security interest to a bank subject to the proprietary right of the true owner. A grantor may have sufficient rights in collateral for a security interest to attach to that collateral but this does not mean the security interest will have priority under the PPSA (if the PPSA priority rules are applicable) or under the general law (if the grantor only has a right of possession under a transaction which is not itself a security interest so that the PPSA priority rules are not applicable). The decision of the Ontario Court of Appeal in 994814 Ontario Inc v RSL Canada Inc and En-Plas Inc [2006] OJ No 1907; 209 OAC 326; 20 CBR (5th) 163; 9 PPSAC (3d) 240 appears to be difficult to reconcile with Gray v RBC and the other decisions referred to above. In RSL and En-Plas, En-Plas had arranged for the delivery of three plastic moulding machines to RSL’s premises. RSL was placed in receivership and 994814 Ontario Inc, the holder of a perfected general security agreement over all of the assets of RSL, claimed to be entitled to the three pieces of equipment on the basis En-Plas had an unperfected security interest in the form of a conditional sale contract between it and RSL. The equipment had been delivered to RSL’s premises, however, the court found that on the facts the relevant documentation did not confer on RSL any rights to the equipment until the machines were “electrical safety approved” and En-Plas had made them operational. Although the equipment was physically located at RSL’s premises, the court was of the opinion that RSL “never became a debtor and never acquired any rights in the three machines” and so 994814 Ontario Inc’s GSA could not attach to the machines. The reasoning of the court may have been influenced by a number of decisions of the Canadian courts as to when a grantor obtains possession of collateral as a debtor/grantor for the purposes of the PMSI priority rules (although this is not clear from the judgment): see [PPSA.62.A]. This decision may be distinguishable on the grounds that the mere physical presence of the machines at RSL’s premises did not amount to RSL having possession of them as a matter of law due to the fact En-Plas could not provide the necessary safety certification for the sale and operation of the machines in Ontario (however, this is also not clear from the judgment). It is worth noting the decision at first instance (994814 Ontario Inc v RSL Canada Inc and En Plas Inc [2005] OJ No 3220; 14 CBR (5th) 134; 141 ACWS (3d) 488; 2005 CarswellOnt 3450) held that En-Plas’ commitment to obtain electrical safety approval was a condition precedent to its security agreement and because this condition precedent was not satisfied, there was no security agreement. Accordingly, as there was no security agreement and title had not passed as a matter of general law, the court held En-Plas was entitled to reclaim the machines. In JS Brooksbank & Co (Australasia) Ltd v EXFTX Ltd (in rec and in liq) formerly known as Feltex Carpets Ltd [2009] NZCA 122 it was held that a bank’s security interest had not attached to wool in the possession of the bank’s customer, Feltex, because the goods were not “sold” to Feltex under the terms of the supply agreement and Feltex had no lawful right of possession as against the supplier. See also [PPSA.12.A].

[page 164] Successive transfers of accounts or chattel paper As noted above, if a person is a grantor under a transaction that is a security interest, the PPSA treats the person as if they were the owner of the collateral (even though this may not be the case as a matter of general law). This enables a person to grant more than one transfer of an account or chattel paper, even though, as a matter of general law they may no longer have any rights in the account or chattel paper following the first transfer. Section 19(2)(a) provides that a security interest attaches to collateral when the grantor has rights in the collateral or the power to transfer rights in the collateral to the secured party. A number of provisions in the Act strongly suggest that a grantor has sufficient rights in an account or chattel paper after a previous

transfer to enable attachment of a subsequent transfer or that the grantor has power to transfer rights in the account or chattel paper despite a previous transfer. For example: the interest of a transferee under a transfer of an account or chattel paper is a security interest, irrespective of whether it in substance secures payment or performance of an obligation (s 12(3)); section 55 provides clear default priority rules as between security interests. These rules would be stripped of meaning if a person could not grant multiple transfers or other forms of security interest in the same account or chattel paper.

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 40 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 12(1) and (2), and see also s 70(2) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [1.2450], [1.2750], [2.5050], [2.5150], [2.5200], [2.5300], [2.5450], [2.5500], [2.5600], [4.2.2650], [4.2.2950], [4.3.450], [4.6.650], [4.9.1350], [4.11.1250], [4.12.2900], [4.13.1550], [7.550].

____________________

[PPSA.20] Enforceability of security interests against third parties 20 (1) General rule A security interest is enforceable against a third party in respect of particular collateral only if: (a) the security interest is attached to the collateral; and (b) one of the following applies: (i) the secured party possesses the collateral; (ii) the secured party has perfected the security interest by control; (iii) a security agreement that provides for the security interest covers the collateral in accordance with subsection (2). Note: For possession and control of collateral, see Part 2.3.

(2) Written security agreements A security agreement covers collateral in accordance with this subsection if: (a) the security agreement is evidenced by writing that is: (i) signed by the grantor (see subsection (3)); or (ii) adopted or accepted by the grantor by an act, or omission, that reasonably appears to be done with the intention of adopting or accepting the writing; and (b) the writing evidencing the agreement contains: (i) a description of the particular collateral, subject to subsections (4) and (5); or

a statement that a security interest is taken in all of the grantor’s (ii) present and after-acquired property; or [page 165] (iii) a statement that a security interest is taken in all of the grantor’s present and after-acquired property except specified items or classes of personal property. [subs (2) am Act 96 of 2010 s 3 and Sch 2 item 37, opn 6 July 2010]

(3) Methods of signing writing Without limiting subparagraph (2)(a)(i), for the purposes of that subparagraph a grantor is taken to sign writing if, with the intention of identifying the grantor and adopting, or accepting, the writing, the person applies: (a) writing (including a symbol) executed or otherwise adopted by the person; or (b) writing wholly or partly encrypted, or otherwise processed, by the person. Note: For the meaning of writing, see section 10.

(4) Personal property descriptions — consumer property, equipment and inventory If particular personal property is described using the term “consumer property” or “commercial property” in the writing evidencing a security agreement, subparagraph (2)(b)(i) is satisfied only if the personal property is more particularly described, in addition, by reference to item or class. [subs (4) am Act 35 of 2011 s 3 and Sch 2 item 10, opn 26 May 2011]

(5) If particular personal property is described using the term “inventory” in the writing evidencing a security agreement, subparagraph (2)(b)(i) is satisfied only while the personal property is held or leased by the grantor as inventory. (6) Proceeds A security interest in proceeds is enforceable against a third party whether or not the security agreement providing for the security interest contains a description of the proceeds. Note: Section 32 deals with whether a security interest in collateral attaches to proceeds of the collateral.

____________________ [PPSA.20.A] Enforceability of security interests against third parties — Annotations to s 20 No written security agreement Re Maiden Civil (P & E) Pty Ltd; Albarran v Queensland Excavation Services Pty Ltd (2013) 277 FLR 337; [2013] NSWSC 852; BC201310524 — Justice Brereton observed that a lessor’s security interest was

vulnerable not only because it was not perfected by registration, but also because there was no written security agreement (a lease). Therefore, the lessor’s security interest was not enforceable against third parties under s 20. While this is true for non-transitional security interests, it is not the case for transitional security interests, such as the leases in this case, because of s 311. Refer to [PPSA.311.A]. Citadel Financial Corp Pty Ltd v Elite Highrise Services Pty Ltd (No 3) [2014] NSWSC 1926; BC201411793 — an invoice issued by Citadel to Elite on 9 August 2013 specified the particular collateral (scaffolding) supplied by Citadel and contained a retention of title clause and a clause purporting to grant a security interest. The invoice was not signed by Elite but Citadel claimed its terms had been adopted by Elite pursuant to emails passing between Citadel and Elite in June 2013. Brereton J found that these emails could not evidence acceptance or adoption of the terms of the invoice because the emails pre dated the issuance of the invoice. The emails themselves did not sufficiently identify the collateral or the terms of any security interest. The court also rejected the proposition that Elite’s retention of the scaffolding after receipt of the invoice from Citadel constituted acceptance or adoption of the written terms of the invoice for the purposes of s 20(2)(a)(ii) of the PPSA, given that the invoice was created well after the sale and delivery of the scaffolding. Section 20 is not a priority rule Refer to the commentary on Healy Holmberg Trading Partnership v Grant [2012] 3 NZLR 614; [2012] NZCA 451 at [PPSA.55.A].

[page 166] It should not matter whether the evidentiary requirement for a written security agreement is satisfied by a secured party before or after this requirement is satisfied by another secured party provided the requirement is satisfied before the two security interests come into conflict; see also Rogerson Lumber Co v Four Seasons Chalet Ltd (1980) 113 DLR (3d) 671; 674921 BC Ltd v Advanced Wing Technologies Corp 2006 BCCA 49. Whether a security agreement which is not “signed or assented to” by the debtor is enforceable against third parties (interpretation of ss 36 and 40 of the NZ PPSA) Dunphy v Sleepyhead Manufacturing Co Ltd [2007] 3 NZLR 602; (2007) 10 NZCLC 264, 313; [2007] NZCA 241; BC200761373 — a liquidator was found not to be a third party but the court commented that other secured creditors would be. Unlike s 36 of the NZ PPSA, s 20 of the PPSA provides a security agreement will be enforceable against third parties if it is signed by the grantor or if it is adopted or accepted by the grantor by an act or omission that reasonably appears to be done with the intention of adopting or accepting the writing. This wording appears to provide greater latitude in establishing that a security agreement will be enforceable against third parties, such as other secured creditors. Adequacy of description by item or class — ss 20(2)(b)(i) and 20(4) StockCo Ltd v Gibson and Stiassny [2012] NZCA 330 — interpreting the wording of s 36 NZ PPSA which requires the security agreement to include “an adequate description of the collateral … that enables the collateral to be identified.” In this case, the collateral was described as “750 M/A cows” and in the circumstances of the case, this was held not to be sufficient. Unlike s 36 NZ PPSA, s 20(2)(b)(i) and (4) do not require the description to “enable the collateral to be identified”. GE Capital Canada Acquisitions Inc v Dix Performance [1994] BCJ No 2590; [1995] 2 WWR 738; 99 BCLR (2d) 21; 8 PPSAC (2d) 197; Clark Equipment of Canada Ltd v Bank Montreal [1984] MJ No 112; 8 DLR (4th) 424; [1984] 4 WWR 519; 4 PPSAC 38 and New World Screen Printing (cob) New World Print v Xerox Canada Ltd [2003] BCJ No 2559; 2003 BCSC 1685; 126 ACWS (3d) 877 — indicate that the Canadian courts have been prepared to allow considerable flexibility in relation to the adequacy of collateral descriptions in security agreements. It remains to be seen if Australian courts will follow suit.

Evidentiary issues as to contract formation Crossmark Asia v Retail Adventures [2013] NSWSC 55; BC201300382 — illustrates the evidentiary issues that can arise as to the terms of the contract between the parties. This case involved supply agreements entered into by way of offer and acceptance using pro forma invoice and purchase order forms.

____________________ Comparative Legislation Comparable sections of New Zealand legislation: ss 36(1), 37, 38 and 39 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: ss 10(1) and (3)–(5) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [1.2800], [2.3750], [2.4600], [2.4650], [2.6250]–[2.6350], [2.6450]–[2.6550], [2.6650]–[2.6800], [2.7000], [2.12700], [4.1.2050]–[4.1.2150], [4.1.2700], [4.1.2750], [4.1.3250], [4.1.3300], [4.2.300], [4.2.3000], [4.3.500], [4.6.100], [4.6.1250], [4.6.1300], [4.8.2850], [4.8.3150], [4.11.1300], [4.13.1200], [4.13.3050].

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[PPSA.21] Perfection — main rule 21 (1) A security interest in particular collateral is perfected if: (a) the security interest is temporarily perfected, or otherwise perfected, by force of this Act; or [page 167] (b) all of the following apply: (i) the security interest is attached to the collateral; (ii) the security interest is enforceable against a third party; (iii) subsection (2) applies. [subs (1) am Act 96 of 2010 s 3 and Sch 2 item 38, opn 6 July 2010]

(2) This subsection applies if: (a) for any collateral, a registration is effective with respect to the collateral; or (b) for any collateral, the secured party has possession of the collateral (other than possession as a result of seizure or repossession); or (c) for the following kinds of collateral, the secured party has control of the collateral: (i) an ADI account; (ii) an intermediated security; (iii) an investment instrument;

(iv) a negotiable instrument that is not evidenced by a certificate; (v) a right evidenced by a letter of credit that states that the letter of credit must be presented on claiming payment or requiring the performance of an obligation; (vi) satellites and other space objects. Note: For what constitutes possession and control of collateral, see Part 2.3. [subs (2) am Act 96 of 2010 s 3 and Sch 2 items 39, 133 and 142, opn 6 July 2010; Act 35 of 2011 s 3 and Sch 2 item 11, opn 26 May 2011]

(3) A security interest may be perfected regardless of the order in which attachment and any step mentioned in subsection (2) occur. (4) A single registration may perfect one or more security interests. ____________________ [PPSA.21.A] Annotations to s 21 In relation to temporary perfection for the purposes of s 21(1)(a), see Re Maiden Civil (P & E) Pty Ltd; Albarran v Queensland Excavation Services Pty Ltd [2013] NSWSC 852; BC201310524 and White v Spiers Earthworks Pty Ltd [2014] WASC 139; BC201402620 — refer to [PPSA.322.A]. Section 21(1)(b) requires attachment and enforceability plus one of the means set out in s 21(2) (ie registration or possession or control) as necessary requirements for perfection of a security interest in all cases other than cases of temporary perfection. When s 588FL(2)(a)(ii) of the Corporations Act refers to a security interest that “is perfected by registration and by no other means” that section is distinguishing registration as a means of perfection from possession or control; see Pozzebon v Australian Gaming and Entertainment Ltd (in liq) [2014] FCA 1034; BC201407897.

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 41 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: ss 19, 24, 24.1, 25 and 43(5) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [1.2850], [2.5950], [2.7000], [2.7100], [2.7200], [2.7350], [2.8700], [4.1.2200], [4.1.2800], [4.1.3350], [4.1.3700], [4.2.2750], [4.2.3050], [4.3.500], [4.8.3100], [4.8.3700], [4.10.1550], [4.11.1350], [4.12.2500].

____________________ [page 168]

[PPSA.22] Perfection — goods possessed by a bailee 22 (1) Perfection of security interest A security interest that has attached to goods in the possession of a bailee (other than the grantor or the debtor) is perfected if any of the following applies, regardless of when the security interest attached to the goods:

(a) the security interest is perfected by registration, as provided by section 21; (b) the security interest is perfected by possession, as provided by section 21, because the bailee possesses the property on behalf of the secured party; (c) the bailee issues a document of title to the goods in the name of the secured party; (d) the bailee issues a negotiable document of title to the goods, and the secured party has a perfected security interest in the document. (2) Temporary perfection while negotiable document of title in transit A security interest in goods in the possession of a bailee (other than the grantor or the debtor) is temporarily perfected for the period: (a) starting at the time the bailee issues a negotiable document of title to the goods; and (b) ending at the end of the day the secured party takes possession of the document. (3) The security interest in the goods becomes unperfected at the end of the period mentioned in subsection (2), unless the security interest is perfected otherwise than under subsection (2) before the end of the period. (4) However, subsection (2) does not apply, and is taken never to have applied, unless, before the end of the period of 5 business days after the day of issue of the negotiable document of title: (a) the secured party takes possession of the document; or (b) the security interest is perfected otherwise than under that subsection. ____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 50 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: ss 26 and 27 of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.4750], [2.7700], [4.5.1850], [4.12.2300]–[4.12.2400].

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PART 2.3 — POSSESSION AND CONTROL OF PERSONAL PROPERTY [ss 23–29]

[PPSA.23] Guide to this Part 23 This Part deals with the concepts of possession and control of personal property. A grantor and secured party cannot both have possession of collateral. There are special rules about possession of the following: (a) goods transported by a common carrier; [page 169] (b) negotiable instruments not evidenced electronically; (c) chattel paper evidenced electronically; (d) investment instruments evidenced by a certificate. Control of certain types of personal property is effective to perfect a security interest in the property (see paragraph 21(2)(c)). This Part includes some special rules about control of the following: (a) ADI accounts; (b) intermediated securities; (c) investment instruments; (d) letters of credit; (e) negotiable instruments not evidenced by a certificate. [s 23 am Act 96 of 2010 s 3 and Sch 2 items 133 and 143, opn 6 July 2010]

[PPSA.24] Possession 24 (1) Possession by one party exclusive of possession by others A secured party cannot have possession of personal property if the property is in the actual or apparent possession of the grantor or debtor, or another person on behalf of the grantor or debtor. (2) A grantor or debtor cannot have possession of personal property if the property is in the actual or apparent possession of the secured party, or another person on behalf of the secured party. (3) Timing rule for possession of goods transported by common carrier A grantor or debtor to whom goods are transported by a common carrier acquires possession of the goods only when the earlier of the following occurs: (a) the grantor or debtor, or another person at the request of the grantor or debtor, actually acquires possession of the goods; (b) the grantor or debtor, or another person at the request of the grantor or debtor, acquires possession of a document of title to the goods. (4) Possession of certain negotiable instruments A person (the first person)

has possession of a negotiable instrument that is not evidenced by an electronic record if, and only if, the first person, or another person on behalf of the first person, takes physical possession of the instrument. Note: For possession of investment instruments, see subsection 24(6).

(5) Possession of chattel paper that is evidenced electronically A secured party has possession of chattel paper that is evidenced by an electronic record if, and only if: (a) a single authoritative copy of the record exists which is unique, identifiable and unalterable (except as set out below); and (b) the authoritative copy identifies the secured party as the transferee of the record; and (c) the authoritative copy is communicated to, and maintained by, the secured party or the secured party’s agent; and (d) copies or revisions of the record that change the transferee of the authoritative copy can be made only with the participation of the secured party; and [page 170] (e) each copy of the authoritative copy (or any copy of such a copy) is readily identifiable as a copy that is not the authoritative copy; and (f) any revision of the authoritative copy is readily identifiable as an authorised or unauthorised copy. [subs (5) am Act 96 of 2010 s 3 and Sch 2 item 40, opn 6 July 2010]

(6) Possession of investment instruments Despite subsections (1) and (2), a person (the possessor) has possession of an investment instrument that is evidenced by a certificate if, and only if: (a) the certificate specifies the person who is entitled to the investment instrument; and (b) a transfer of the investment instrument may be registered on books maintained for that purpose by or on behalf of the issuer (or the certificate states that a transfer of the instrument may be so registered); and (c) any of the following applies: (i) the possessor has possession of the certificate;

another person (other than the grantor or the debtor) has (ii) possession of the certificate on behalf of the possessor; (iii) the registered owner (who is not the grantor or debtor) of the investment instrument acknowledges in writing that he, she or it has possession of the investment instrument on behalf of the possessor. ____________________ [PPSA.24.A] Annotations to s 24 McCloy v Manukau Institute of Technology [2013] 3 NZLR 390; [2013] NZHC 936; BC201363460 — a secured party (the principal under a construction contract) was not in possession of equipment (ie the collateral) prior to the grantor (ie the construction contractor) defaulting under the construction contract (which included provisions constituting a security interest). The grantor had apparent control or possession of the equipment until that time even though the equipment was located at the secured party’s premises where works were being carried out by the grantor. The secured party obtained apparent control or possession upon the grantor’s default. The court held this amounted to seizure which cannot constitute possession for perfection purposes. In this regard, note s 123(4) of the PPSA.

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 18 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: ss 2(5), 10(2) and 24(2) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.5750]–[2.5900], [2.6000], [4.8.2000], [4.10.1450], [4.10.1500].

____________________

[PPSA.25] Control of an ADI account 25 A secured party has control of an ADI account for the purposes of section 21 (perfection — main rule) if, and only if, the secured party is the ADI. Note: Control has an extended meaning in relation to ADIs in sections 341 and 341A (control in relation to fixed and floating charges). [s 25 subst Act 35 of 2011 s 3 and Sch 2 item 12, opn 26 May 2011]

____________________ [page 171] Commentary References For further discussion please refer to commentary at [4.2.1950], [4.8.3700], [4.10.2750].

____________________

[PPSA.26] Control of intermediated securities

26 (1) Main rule A person has control of an intermediated security that is credited to or recorded in a securities account if, and only if, this section so provides. [subs (1) am Act 35 of 2011 s 3 and Sch 2 item 13, opn 26 May 2011]

(2) Control by agreement A secured party has control of an intermediated security if: (a) one of the following conditions is satisfied: (i) there is an agreement in force between the grantor, the secured party and the intermediary who maintains the securities account; (ii) there is an agreement in force between the grantor and the intermediary; (iii) there is an agreement in force between the grantor and the secured party, and notice of the agreement is given to the intermediary; and (b) the agreement has the effect that: (i) the intermediary must not comply with instructions given by the grantor in relation to the intermediated security without seeking the consent of the secured party (or a person who has agreed to act on the instructions of the secured party); or (ii) the intermediary must comply, or must comply in one or more specified circumstances, with instructions (including instructions to debit the account) given by the secured party in relation to the intermediated security without seeking the consent of the grantor (or any person who has agreed to act on the instructions of the grantor). (3) If the intermediary who maintains the securities account is an intermediary because of paragraph 15(2)(b), a reference to the intermediary in subparagraphs (2)(a)(i) to (iii) of this section includes a reference to a person prescribed by regulations made for the purposes of this subsection. Note 1: Under paragraph 15(2)(b), a person is an intermediary if the person operates a clearing and settlement facility under an Australian CS facilities licence (within the meaning of the Corporations Act 2001), other than such a person prescribed by regulations made for the purposes of that paragraph. Note 2: The regulations may prescribe a person by reference to a class or classes of persons (see subsection 33(3A) of the Acts Interpretation Act 1901).

(3A) A secured party has control of an intermediated security if there is an agreement in force under which the secured party (or a person who has agreed to act on the instructions of the secured party) is able to initiate or control the sending of some or all electronic messages or other electronic communications

by which the intermediated security could be transferred or otherwise dealt with. [subs (3A) insrt Act 35 of 2011 s 3 and Sch 2 item 14, opn 26 May 2011]

(4) Control by secured party in whose name securities account is maintained A secured party has control of an intermediated security if: (a) the securities account is maintained in the secured party’s name; or [page 172] (b) the securities account is maintained in the name of another person (who is not the grantor or debtor), and that person acknowledges in writing that he, she or it holds the intermediated security on behalf of the secured party. [s 26 subst Act 96 of 2010 s 3 and Sch 2 item 41, opn 6 July 2010]

____________________ Comparative Legislation Comparable sections of Canadian legislation: ss 2(1.1)(c) and 2(1.1)(d) and see also s 2(1.1)(e) of the Saskatchewan (Canada) Personal Property Security Act 1993. See also ss 25 and 26 of the Securities Transfer Act. Commentary References For further discussion please refer to commentary at [4.10.1700], [4.10.1750].

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[PPSA.27] Control of investment instruments 27 (1) Main rule A person has control of an investment instrument if, and only if, this section so provides. (2) Control of any investment instrument A person, other than the debtor or grantor, has control of an investment instrument (whether or not the instrument is evidenced by a certificate) if the issuer of the instrument registers the person as the registered owner of the instrument. (3) Control of investment instruments evidenced by certificates A person (the controller) has control of an investment instrument that is evidenced by a certificate if: (a) the controller has possession of the instrument; and (b) the controller (or a person who has agreed to act on the instructions of the controller) is able to: (i) transfer the instrument to the controller, or to another person; or (ii) otherwise deal with the instrument.

(4) Control of investment instruments not evidenced by certificates A person has control of an investment instrument that is not evidenced by a certificate if: (a) there is an agreement in force between the person and the grantor; and (b) the agreement has the effect that the person (or a person who has agreed to act on the instructions of the first person) is able to initiate or control sending instructions by which the investment instrument could be transferred or otherwise dealt with. (5) A person (the controller) has control of an investment instrument that is not evidenced by a certificate if: (a) either: (i) the issuer of the instrument registers another person (who is not the grantor or debtor) as the registered owner of the investment instrument on behalf of the controller; or (ii) the registered owner (who is not the grantor or debtor) of the investment instrument acknowledges in writing that he, she or it holds the investment instrument on behalf of the controller; and (b) there is an agreement in force under which the controller (or a person who has agreed to act on the instructions of the controller) is able to initiate or control the sending of some or all electronic messages or other electronic communications by which the investment instrument could be transferred or otherwise dealt with. [page 173] (6) For the purposes of this section, a person has control of an investment instrument even if the registered owner of the investment instrument (who might be the grantor) retains the right: (a) to make substitutions for the instrument; or (b) to originate instructions to the issuer; or (c) to otherwise deal with the instrument. ____________________ Comparative Legislation Comparable sections of Canadian legislation: s 2(1.1)(a) of the Saskatchewan (Canada) Personal Property Security Act 1993. See also s 23 of the Securities Transfer Act. Commentary References For further discussion please refer to commentary at [4.10.1800]–[4.10.1950].

____________________

[PPSA.28] Control of a letter of credit 28 A secured party does not have control of a right evidenced by a letter of credit, to the extent of any right to payment or performance of an obligation by the issuer or a nominated person, unless the issuer or nominated person has consented to assigning the proceeds of the letter of credit to the secured party.

[PPSA.29] Control of negotiable instruments that are not evidenced by a certificate 29 (1) A secured party has control of a negotiable instrument that is not evidenced by a certificate if, and only if: (a) the instrument is able to be transferred in accordance with the operating rules of a clearing and settlement facility; and (b) there is an agreement in force under which the secured party (or a person who has agreed to act on the instructions of the secured party) controls the sending of some or all electronic messages or other electronic communications by which the instrument could be transferred. (2) For the purposes of subsection (1), a secured party has control of a negotiable instrument even if the registered owner (who might be the grantor) retains the right: (a) to make substitutions for the instrument; or (b) to originate instructions to the issuer; or (c) to otherwise deal with the instrument. ____________________ Commentary References For further discussion please refer to commentary at [4.10.2050].

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PART 2.4 — ATTACHMENT AND PERFECTION: SPECIFIC RULES [ss 30–40] DIVISION 1 — INTRODUCTION [s 30]

[PPSA.30] Guide to this Part 30 This Part contains rules about when attachment and perfection (including, in some circumstances, temporary perfection) of security interests occurs in particular situations. [page 174] Division 2 deals with security interests in the proceeds of collateral, and in collateral after it is transferred. Proceeds of collateral are identifiable or traceable personal property that is derived from dealings with the collateral. Proceeds also includes certain insurance or indemnity rights, payments in redemption of certain intangible collateral, certain rights of licensors of intellectual property, and certain rights relating to investment instruments and intermediated securities. A security interest in collateral continues in the proceeds (except in certain cases). Division 2 also includes some other rules about the perfection of such interests and their enforcement. Special provisions are made for the perfection and temporary perfection of security interests in proceeds, and for the temporary perfection of security interests in collateral after it is transferred. Division 3 deals with the perfection (and temporary perfection) of security interests in goods that are returned to the grantor or the debtor. After goods are returned for certain dealings (for example, sale or exchange), a security interest in the goods that had previously been perfected otherwise than by registration may be temporarily perfected for 5 business days. The same period of temporary perfection is provided in similar circumstances if possession or control of a negotiable instrument or investment instrument is returned to the grantor or debtor. If goods are taken free of a security interest, but are repossessed by the grantor or debtor, the security interest reattaches to the goods, and (if the security interest had been perfected by registration) the perfection status of the security interest is unaffected. Division 3 also provides special rules for the attachment and perfection of a security interest in goods if a sale or lease of the goods creates an account or chattel paper that is transferred to another person. Division 4 deals with situations where collateral or a grantor of a security interest is relocated from a foreign jurisdiction to Australia. The security interest in the collateral is temporarily perfected if certain conditions are met. [s 30 am Act 96 of 2010 s 3 and Sch 2 items 133 and 144, opn 6 July 2010]

DIVISION 2 — PROCEEDS AND TRANSFER [ss 31–34]

[PPSA.31] Meaning of proceeds 31 (1) In this Act: proceeds of collateral to which a security interest is (or is to be) attached means identifiable or traceable personal property of the following types, subject to subsections (2) and (3): (a) personal property that is derived directly or indirectly from a dealing

with the collateral (or proceeds of the collateral); (b) a right to an insurance payment or other payment as indemnity or compensation for loss of, or damage to, the collateral (or proceeds of the collateral); (c) a payment made in total or partial discharge or redemption of the collateral (or proceeds of the collateral), if the collateral (or proceeds) consists of any of the following: (i) chattel paper; (ii) intangible property; (iii) an investment instrument; [page 175] (iv) an intermediated security; (v) a negotiable instrument; (d) if the collateral is intellectual property (or an intellectual property licence) — in addition to any other proceeds, the right of a licensor of the property (whether or not the property is itself a licence) to receive payments under any licence agreement in relation to the collateral; (e) if the collateral is an investment instrument or intermediated security — any of the following: (i) rights arising out of the collateral; (ii) property collected on the collateral; (iii) property distributed on account of the collateral. [def am Act 96 of 2010 s 3 and Sch 2 items 133, 145 and 146, opn 6 July 2010] Note: In section 140 (distribution of proceeds received by secured party) proceeds has its ordinary meaning, so this definition does not apply.

(2) Whether proceeds are traceable Proceeds are traceable whether or not there is a fiduciary relationship between the person who has a security interest in the proceeds, as provided in section 32, and the person who has rights in or has dealt with the proceeds. (3) Restriction to proceeds in which grantor has a transferable interest However, personal property is proceeds only if: (a) either:

(i) the grantor has an interest in the proceeds; or (ii) the grantor has the power to transfer rights in the proceeds to the secured party (or to a person nominated by the secured party); and (b) the interest in the proceeds does not arise because of the operation of paragraph 140(2)(f). Note: Paragraph 140(2)(f) provides for the distribution of an amount or proceeds to the grantor upon the enforcement of a security interest.

(4) Crops and livestock The proceeds of collateral that is crops include the harvested produce of the crops, if the produce is identifiable or traceable. (5) The proceeds of collateral that is livestock include products of the livestock (for example, meat or wool), if the products are identifiable or traceable. (6) However, livestock are not the proceeds of collateral merely because they are the unborn young, or the offspring, of livestock that are collateral. ____________________ [PPSA.31.A] Annotations to s 31 As to the requirement that proceeds be derived from a dealing (s 31(1) (a)); see McCain Produce Inc v PEI Lending Agency 2010 PECA 4. As to the requirement that the grantor must have an interest in the proceeds (s 31(3)(a)(i)); see Cooper v Bar XH Sales Inc 2011 ABQB 235.

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 16 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 2(1)(hh) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.12550], [2.12600], [3.550], [4.1.2250], [4.2.850], [4.7.300], [4.7.800], [4.9.1100].

____________________ [page 176]

[PPSA.32] Proceeds — attachment 32 (1) Continuation of security interest in collateral, and attachment to proceeds Subject to this Act, if collateral gives rise to proceeds (by being dealt with or otherwise), the security interest: (a) continues in the collateral, unless: (i) the secured party expressly or impliedly authorised a disposal

giving rise to the proceeds; or (ii) the secured party expressly or impliedly agreed that a dealing giving rise to the proceeds would extinguish the security interest; and (b) attaches to the proceeds, unless the security agreement provides otherwise. Note 1: The effect of paragraph (a) is to extinguish the security interest in the collateral if the secured party expressly or impliedly authorised the dealing mentioned. Note 2: A transferee can also take the collateral free of the security interest because of the operation of another provision of this Act (for example, under Part 2.5). [subs (1) am Act 96 of 2010 s 3 and Sch 2 item 42, opn 6 July 2010]

(2) Enforcement of security interest against collateral and proceeds If the secured party enforces a security interest against both collateral (other than an investment instrument or an intermediated security) and proceeds, the amount secured by the security interest in the collateral and proceeds is limited to the market value of the collateral immediately before the collateral gave rise to the proceeds. Note: For the enforceability of a security interest against a third party in relation to proceeds, see also subsection 20(6). [subs (2) am Act 96 of 2010 s 3 and Sch 2 items 133 and 147, opn 6 July 2010]

(3) However, subsection (2) does not apply if, at the time of the transfer of the collateral, the transferee has actual or constructive knowledge that the transfer was in breach of a security agreement that provides for the security interest in the collateral. (4) To avoid doubt, subsection (2) does not affect any right the secured party may have to recover the amount secured without enforcing the security interest. (5) Priority of proceeds For the purposes of section 55 (default priority rules), the time of registration or possession in relation to original collateral, or the time of perfection of a security interest in original collateral, is also the time of registration, possession or perfection in relation to the proceeds of the original collateral. Note: The effect of subsection (5) is that the security interest in the proceeds has the same default priority as the security interest in the original collateral.

____________________ [PPSA.32.A] Annotations to s 32 A disposal of collateral may be authorised subject to conditions but this should be distinguished from conditions specified for the treatment of proceeds received from an authorised disposal — Lanson v Saskatchewan Valley Credit Union Ltd [1998] SJ No 717; 172 SaskR 106; 14 PPSAC (2d) 71; 84 ACWS (3d) 169. Despite Note 1 following s 32(1), it seems to be implied that a secured party can consent to a disposal of

original collateral subject to its security interest continuing in the original collateral, even though this is not expressly provided for in s 32. Section 34(1)(c)(i) supports this implication. If a security agreement prohibits certain dealings with collateral, or specifies that the secured party must consent to a dealing, then any conditions to the secured party’s consent, such as the continuing attachment of the security interest to the relevant collateral, should be given effect (subject to the “taking free” rules in Pt 2.5 of the PPSA). Section 34(1)(c)(i) suggests that s 32(1)(a) should be restricted to those situations where the disposal is authorised without being subject to conditions.

[page 177] Express or implied authorisation for disposal Warehouse Sales Pty Ltd (in liq) & Lewis and Templeton v LG Electronics Australia Pty Ltd [2014] VSC 644; BC201410780 — supply terms included retention of title provisions but expressly authorised the onsale of the goods supplied. However, one supplier’s terms expressly prohibited sales to a third party for further re-sale unless the third party had entered into a distribution agreement with the supplier. Refer to [PPSA.46.A]. McCloy v Manukau Institute of Technology [2013] 3 NZLR 390; [2013] NZHC 936; BC201363460 — the court held that a bank had not expressly or impliedly consented to the transfer of equipment pursuant to the terms of a construction contract entered into by a contractor. The contractor had granted various security agreements to the bank. The court found there was no evidence that the bank had any knowledge of the relevant terms of the construction contract (refer to [PPSA.12.A]) providing for the transfer of the equipment following the appointment of a receiver to the grantor. If a similar situation arose in Australia, even if the bank was aware of the contract terms, it is doubtful whether s 32 would apply because: a transfer or disposal in these circumstances arguably does not give rise to proceeds; the transferee’s interest is itself a security interest (refer to [PPSA.12.A] for further commentary on the McCloy decision) and so the contest between it and the bank is really a priority issue to be determined under the priority rules; although not directly relevant to the application of s 32, it is worth noting that the taking free rules in Pt 2.5 of the PPSA do not generally apply where the transferee’s interest is itself a security interest; s 42(b). TD Auto Finance (Canada) Inc v Yan, 2015 ABCA 114 — TD registered its security interest under the Alberta PPSA against the purchaser of a car under a conditional sale contract. The car’s original VIN was removed and replaced with a fraudulent VIN. Yan purchased the “cloned” car from a person who was not the original purchaser. The Alberta Court of Appeal held: implied authorisation for the purposes of the equivalent provision to s 32 must mean informed authorisation. A secured party must have knowledge of a dealing before it can be found to impliedly authorise it; the time to consider if implied authorisation existed was when the dealing actually occurred not a later time; the express prohibition in TD’s conditional sale contract (ie security agreement) on selling or dealing with the car should have been considered in determining if there was implied authorisation to sell the car; and the security interest of TD continued in the collateral and prevailed over Yan as a subsequent bona fide purchaser. This final result would likely have been different under Australia’s PPSA given the effect of the taking free rule for temporarily perfected security interests under s 52, PPSA.

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 45 of the New Zealand

Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 28(1) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.7500], [2.9850], [2.12650], [2.12800], [2.13050], [4.2.4050], [4.3.750], [4.8.4050], [4.9.1100]. Relevant Cases See also StockCo Limited v Gibson and Stiassny [2012] NZCA 330.

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[PPSA.33] Proceeds — perfection and temporary perfection 33 (1) Perfection by reference to perfection of security interest in original collateral A security interest in proceeds is perfected if the security interest in the original collateral is perfected by a registration that: [page 178] (a) describes the proceeds, if the description complies with any regulations made for the purposes of paragraph (d) of item 4 of the table in section 153 (financing statements with respect to security interests); or (b) covers the original collateral, if the proceeds are of a kind that are within the description of the original collateral; or (c) covers the original collateral, if the proceeds consist of currency, cheques or an ADI account, or a right to an insurance payment or any other payment as indemnity or compensation for loss or damage to the collateral or proceeds. (2) Temporary perfection in other situations If a security interest in original collateral is perfected, but a security interest in the proceeds is not perfected under subsection (1), the security interest in the proceeds is temporarily perfected for the period starting at the time the security interest in the original collateral attaches to the proceeds and ending at the end of 5 business days afterwards. (3) However, the security interest in the proceeds under subsection (2) becomes unperfected at the end of the period mentioned in that subsection, unless the security interest in the proceeds is perfected otherwise than under the subsection before the end of the period.

____________________ Comparative Legislation Comparable sections of New Zealand legislation: ss 46 and 47 of the New Zealand Personal Property Securities Act 1999. See s 68 regarding time of registration. Comparable sections of Canadian legislation: s 28(2) and (3) of the Saskatchewan (Canada) Personal Property Security Act 1993. See s 35(3) regarding time of registration. Commentary References For further discussion please refer to commentary at [2.7450], [2.7850], [2.8750], [2.9600], [2.12750], [3.900], [4.1.2250], [4.1.3400], [4.1.2850], [4.2.4050], [4.8.3750], [4.13.1950].

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[PPSA.34] Transferred collateral — temporary perfection after transfer 34 (1) Security interest is temporarily perfected If collateral is transferred, and at the time of the transfer a secured party held a perfected security interest in the collateral, the security interest is temporarily perfected for the period starting at the time of the transfer and ending at the earliest of the following times: (a) the end of the month that is 24 months after the time of the transfer; (b) if the security interest was perfected by registration at the time of the transfer — the end time for the registration (as registered at the time of the transfer); (c) if another security interest attaches to the collateral at or after the time of the transfer, and the other security interest is perfected: (i) in a case in which the original secured party consented to the transfer — the end of 5 business days after the day of the transfer; or (ii) in a case in which the original secured party otherwise acquires the actual or constructive knowledge required to perfect the original secured party’s interest by registration (or to re-perfect the interest by an amendment of a registration) — the end of 5 business days after the day the original secured party acquires the knowledge. Note: The knowledge required is the knowledge of the transferee’s (the new grantor’s) details. Unless these are registered, the original secured party’s registration may be ineffective under section 165.

[page 179]

(2) Security interest becomes unperfected However, the security interest becomes unperfected immediately after the earliest time mentioned in subsection (1), unless, at or before that time, the security interest is perfected otherwise than under subsection (1). (3) Transfer free of security interest This section does not apply in relation to a transfer of collateral if the transferee takes the collateral free of the security interest. ____________________ [PPSA.34.A] Annotations to s 34 Refer to ss 67 and 68 regarding the priority of security interests in transferred collateral. Also note the effect of s 52 in respect of a buyer or lessee “taking free” of a temporarily perfected security interest. Section 34 does not apply in relation to a transfer of collateral if the transferee takes free of the security interest: s 34(3). Sections 67 and 68 should also be construed in this context. Lisec America, Inc v Barber Suffolk Ltd [2012] OJ No 195; 2012 ONCA 37; 288 OAC 360; 86 CBR (5th) 316; 18 PPSAC (3d) 252 — considering the equivalent provisions in the Ontario PPSA. In this case, Lisec sold a waterjet glass cutting machine (waterjet equipment) to Barber Suffolk and two other pieces of equipment to a related company, Barber Glass, on 16 July 2007. On the same date, Barber Suffolk purported to transfer its interest in the waterjet equipment to Barber Glass (without Lisec’s knowledge). Lisec perfected its security interests as PMSIs by registering financing statements against both Barber Suffolk (in respect of the waterjet equipment) and Barber Glass (in respect of the other two equipment items). All three items of equipment were delivered to Barber Glass’s premises, as per the respective contract terms, in June 2008. In July 2008, Lisec discharged its registration against Barber Glass following a request from Barber Glass and its prospective financier, Roynat. Roynat then registered a financing statement against Barber Glass and advanced funds to Barber Glass and some of those funds were used to pay amounts owing by Barber Glass to Lisec for the two items of equipment previously sold to Barber Glass by Lisec. In November 2010, Barber Glass was placed in receivership and later that month, Lisec registered a financing change statement naming Barber Glass as grantor after learning that the waterjet equipment had been sold by Barber Suffolk to Barber Glass. Lisec’s security interests against Barber Suffolk and Barber Glass arose under equipment purchase agreements that granted security interests in the specific pieces of equipment sold to each purchaser. Barber Glass did not at any time sign a security agreement granting Lisec a security interest in the waterjet equipment. Lisec’s financing statements against Barber Suffolk and Barber Glass did not describe any particular items of equipment. Lisec and Roynat disputed priority to the waterjet equipment. The Ontario Court of Appeal found in favour of Lisec and in doing so held: There is nothing in the PPSA that prevents a secured party from having a perfected security interest in collateral in more than one way or through registration against one or more entity. The discharge of Lisec’s registration against Barber Glass in July 2008 did not discharge Lisec’s registration against Barber Suffolk. The preservation of the Barber Suffolk priority through the operation of ss 39 and 48(2) of the Ontario PPSA (equivalent to s 34 PPSA) did not constitute a revival of the Barber Glass registration. The security interest granted by Barber Suffolk in July 2007 and perfected, initially against Barber Suffolk, and then against Barber Glass in November 2010 (following the requirements of the Ontario equivalent of s 34) prevailed against Roynat’s security interest. The PPSA priority rules adequately dealt with the priority contest between Lisec and Roynat and there was no need to consider whether the common law doctrine of nemo dat was relevant in these circumstances.

[page 180] It should be noted that none of the “taking free” rules (Pt 2.5 in Australia’s PPSA) would have applied to Barber Glass’s acquisition of the waterjet equipment from Barber Suffolk. Also note s 34(3), PPSA. Meaning of “transfer” — application to leases StockCo Ltd v Gibson and Stiassny [2012] NZCA 330 — the New Zealand Court of Appeal accepted that a “lease for a term of more than 1 year” will be a transfer for the purposes of s 88 of the NZ PPSA because the definition of “transfer” in s 87(3) of the NZ PPSA expressly includes “the creation of a security interest” (at [105]) and a lease for a term of more than 1 year is a security interest. It should be noted: the court’s comments on this point were obiter; the definition of “transfer” in s 87(3) of the NZ PPSA is prefaced by the words “In this section”. It is not clear that “transfer” is intended to have the same meaning in s 88 NZ PPSA; “transfer” is not generally defined in Australia’s PPSA and it may need to be interpreted in the context of the particular provisions in which it is used; s 34 in Australia’s PPSA (the broad equivalent of s 88 in the NZ PPSA) is not co-located with s 79 (the broad equivalent of s 87 in the NZ PPSA). The equivalent provisions in the Canadian PPSAs are also not co located; unlike s 79 in Australia’s PPSA, s 34 in Australia’s PPSA does not use the words “including by sale, by creating a security interest or under proceedings to enforce a judgement” to scope the concept of a “transfer” and there is nothing to suggest that “transfer” is intended to have an identical meaning in both sections of Australia’s PPSA; ss 67 and 68 in the Australian PPSA are also relevant to the priority of security interests in transferred collateral. Some other considerations regarding whether and, if so, how s 34 applies to leases that are security interests include: s 34 could only apply if the lessee does not “take free” of the lessor secured party’s security interest (s 34(3)); the distinction between the lessor secured party’s security interest in the leased asset and the lease itself. The leased asset might be “transferred” by a lease but the lease itself would be an asset of the lessor unless it is also transferred; s 34 deals with the perfection of transferor — granted security interests in relation to transferred collateral but ss 66–68 deal with the priority between the transferor — granted security interest and a transferee — granted security interest. Sections 66–68 would not apply to the priority contest between the lessor’s security interest under the lease (which should be a PMSI) and another security interest granted by the lessee (s 62 would usually resolve this priority contest); s 34 would only apply when the relevant lease is entered into after the lessor secured party takes its security. Section 34 only applies if collateral is the subject of a perfected security interest when the “transfer” occurs. It would be a strange outcome if the lessor could grant security over its rights in the leased asset and the lease to a secured party after entering into the lease and that secured party could rely upon its security over the lessor’s PMSI to defeat a competing security interest held by a lessee secured party in respect of the leased asset but this outcome could not be achieved by a lessor secured party who had taken similar security before the lease was entered into; even if the lessor secured party’s security interest becomes unperfected in respect of an asset that is leased by the lessor because the lessor secured party does not re-perfect against the lessee under s 34, that may not mean the lessor secured party’s security interest in the leased asset is unperfected when that asset is returned to the lessor upon the expiry of the lease or as a result of enforcement. Provided the lessor secured party has maintained its security agreement and registration as against the lessor, the perfection of the lessor secured party’s security interest against the asset once

returned

[page 181] to the lessor would appear to be consistent with the scheme of the PPSA (note, for example, s 37 — where the “taking free” rules do apply to a lease; and also the super priority afforded to a lessor as a PMSI secured party). This would necessitate reading s 34(2) so that the lessor secured party’s security interest only becomes unperfected in respect of the leased asset while it remains with the lessee under the terms of the lease; the lessor secured party may need to maintain its registration against the lessor and also perfect by registration against the lessee if s 34 applies and treats the lease as a “transfer” of the leased asset. It is not entirely clear whether a lease that is a security interest is intended to be a “transfer” for the purposes of s 34. However, if it is and s 34 applies when none of the “taking free” rules are applicable (s 34(3)), the lessor’s perfection of its PMSI security interest under the lease should result in it having priority in respect of the leased asset as against a secured party who has been granted a security interest by the lessee. If the lessor has also granted a security interest to a secured party that covers the leased asset and the lessor’s rights in the relevant chattel paper, the lessor secured party should be able to rely on the lessor’s PMSI having priority over the lessee secured party to indirectly achieve priority over the lessee secured party, even if the lessor secured party has not re-perfected against the lessee under s 34. While the lessor secured party may become unperfected as against the leased asset in the hands of the lessee if s 34(2) applies, the lessor secured party should be able to rely upon its perfected security interest in the lessor’s perfected PMSI to achieve the same effective outcome had it re-perfected in accordance with s 34. Leases that are security interests need to be perfected by the lessor as a PMSI to ensure that the lessor has priority ahead of any security interest granted by the lessee. It is arguable that a secured party who has security over the assets of a grantor (or at least the grantor’s rights to assets that it leases and its rights as lessor under PMSI leases) should not need to also register against the lessee in order to perfect in respect of the lessor’s rights to the leased asset, including the asset itself once the lease has been validly terminated. Original secured party acquires actual or constructive knowledge Refer to ss 297 and 298, PPSA. Also refer to the comments of the New Zealand Court of Appeal in StockCo Ltd v Gibson and Stiassny [2012] NZCA 330 at [90]–[102].

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 88 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 51 of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.7500], [2.7750], [2.8250], [2.9850], [2.9900], [2.12250], [4.3.750], [4.3.900].

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DIVISION 3 — COLLATERAL RETURNED TO GRANTOR OR DEBTOR [ss 35–38]

[PPSA.35] Returned collateral — from bailee 35 (1) Security interest is temporarily perfected A security interest in goods that is perfected by possession of the goods or a negotiable document of title to the goods under subsection 22(1) is temporarily perfected for the period covered by subsection (2) of this section if possession of the goods or document is given to the grantor or the debtor at a particular time (the action time) for the purpose of any of the following actions in relation to the goods: (a) sale; (b) exchange; [page 182] (c) any other action in preparation for sale or exchange, including (but not limited to) the following: (i) loading; (ii) unloading; (iii) storing; (iv) shipping; (v) manufacturing; (vi) processing; (vii) packaging. Note: Subsection 22(1) provides for the perfection of a security interest in goods possessed by a bailee.

(2) This subsection covers the period starting at the action time and ending at the end of 5 business days after the day the action time occurs. (3) Security interest becomes unperfected after 5 business days However, the security interest in the goods or document becomes unperfected at the end of the period covered by subsection (2), unless the security interest is perfected otherwise than under subsection (1) before the end of the period. ____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 49 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 26(1)(b) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.7550], [4.12.2450].

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[PPSA.36] Returned collateral — negotiable instruments and investment instruments 36 (1) Security interest is temporarily perfected A security interest in a negotiable instrument or an investment instrument that is perfected by possession or control is temporarily perfected for the period covered by subsection (2) if possession or control of the instrument is given to the grantor or the debtor at a particular time (the action time) for the purpose of any of the following actions in relation to the instrument: (a) sale; (b) exchange; (c) presentation; (d) collection; (e) renewal; (f) registration (other than under this Act) for the purposes of a transfer. [subs (1) am Act 31 of 2014 s 3 and Sch 1 items 55, 56, opn 24 June 2014]

(2) This subsection covers the period starting at the action time and ending at the end of 5 business days after the day the action time occurs. (3) Security interest becomes unperfected after 5 business days However, the security interest in the instrument becomes unperfected at the end of the period covered by subsection (2), unless the security interest in the instrument is perfected otherwise than under subsection (1) before the end of the period. ____________________ [page 183] Comparative Legislation Comparable sections of New Zealand legislation: s 48 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 26(1)(a) of the Saskatchewan (Canada) Personal Property Security Act 1993.

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[PPSA.37] Returned collateral — following sale or lease 37 (1) Reattachment of security interest If a grantor or debtor sells or leases goods that are subject to a security interest, and the buyer or lessee takes the

goods free of the security interest because of the operation of this Act, the security interest reattaches to the goods at a particular time (the repossession time) if, at that time, the goods come into the possession of the grantor or debtor, or of a transferee of chattel paper created by the sale or lease, in any of the following circumstances: (a) in the case of a sale — the contract of sale is rescinded; (b) in the case of a lease — the lease expires or is rescinded; (c) the transferee seizes the goods in the exercise of a right in enforcing a security agreement; (d) the grantor or debtor repossesses the goods in the exercise of a right in enforcing the contract of sale or the lease; (e) any other circumstances prescribed by the regulations. Note: Section 76 deals with the priority of a security interest that reattaches under this section.

(2) Perfection of security interest The perfection of the security interest, and the time of registration or perfection of the security interest, are to be determined as if the goods had not been sold or leased, if: (a) the security interest reattaches to the goods under subsection (1); and (b) the security interest was perfected by registration immediately before the time of the acquisition; and (c) the registration is effective at the repossession time. ____________________ Comparative Legislation Comparable sections of Canadian legislation: s 29(1) and (2) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.7600], [2.10400], [2.11650], [4.2.4300], [4.3.750].

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[PPSA.38] Returned collateral — accounts and chattel paper 38 (1) Deemed goods security interest If a sale or lease of goods creates an account or chattel paper, and the account or chattel paper is transferred to another person, the transferee is taken to have a security interest (the deemed goods security interest) in the goods if, at a particular time (the repossession time) the goods come into the possession of the transferor, or of the transferee, in any of the following circumstances:

(a) in the case of a sale — the contract of sale is rescinded; (b) in the case of a lease — the lease expires or is rescinded; (c) the transferee seizes the goods in the exercise of a right in enforcing a security agreement; (d) the transferor repossesses the goods in the exercise of a right in enforcing the contract of sale or the lease; (e) any other circumstances prescribed by the regulations. Note: Section 76 deals with the priority of a security interest that reattaches under this section.

[page 184] (2) The deemed goods security interest attaches to the goods at the repossession time. (3) Deemed goods security interest temporarily perfected for 5 business days If the transferee has a security interest in the account or chattel paper that is perfected by possession or registration at the repossession time, the deemed goods security interest is temporarily perfected for the period starting at the possession time and ending at the end of 5 business days after the day the repossession time occurs. (4) Deemed goods security interest becomes unperfected after 5 business days However, the deemed goods security interest becomes unperfected at the end of the period mentioned in subsection (3), unless the deemed goods security interest is perfected otherwise than under subsection (3) before the end of the period. Note: Section 76 deals with the priority of a deemed goods security interest.

____________________ Comparative Legislation Comparable sections of Canadian legislation: s 29(3) and (4) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [4.2.900], [4.2.1400], [4.2.4300], [4.3.850].

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DIVISION 4 — RELOCATION OF COLLATERAL OR GRANTOR TO AUSTRALIA ETC [ss 39, 40]

[PPSA.39] Relocation — main rule 39 (1) Continuous perfection prior to move to Australia A security interest in collateral that has been located in a jurisdiction (the foreign jurisdiction) outside Australia, and is relocated to Australia, is taken to have been continuously perfected for the period covered by subsection (2) if, immediately before the collateral became located in Australia, and at the time it became so located: (a) the security interest was effective; and (b) the security agreement providing for the security interest was enforceable against third parties. Note: For when personal property is located in a jurisdiction, see section 235.

(2) This subsection covers the period: (a) starting at whichever of the following times is applicable: (i) if the law of the foreign jurisdiction provides for the perfection (and the effect of perfection or non-perfection) of the security interest — when the security interest last became perfected under that law; (ii) if subparagraph (i) does not apply to the law of the foreign jurisdiction, but that law provides for the public registration or recording of the security interest, or of a notice relating to the security interest — when the security interest, or such a notice, was so registered or recorded (or was last so registered or recorded); (iii) if neither subparagraph (i) nor (ii) applies to the law of the foreign jurisdiction — when the security interest last became enforceable against third parties under that law; and (b) ending when the property becomes located in Australia. [page 185] (2A) However, a security interest in collateral is not taken to have been continuously perfected under subsection (1) if, immediately before the collateral became located in Australia: (a) in a case in which the law of the foreign jurisdiction provides for the perfection (and effect of perfection or non-perfection) of the security

interest — the security interest was not perfected under that law; or (b) in a case in which paragraph (a) does not apply to the law of the foreign jurisdiction, but that law provides for the public registration or recording of the security interest, or of a notice relating to the security interest — the security interest, or such a notice, was not so registered or recorded. (3) Temporary perfection after move to Australia If a security interest in collateral is continuously perfected under subsection (1), the security interest in the collateral is temporarily perfected for the period: (a) starting at the time the property becomes located in Australia; and (b) ending at the earlier of the following times: (i) the end of 56 days after the day the collateral becomes located in Australia; (ii) the end of 5 business days after the day the secured party has actual knowledge that the collateral has become located in Australia. (4) However, the security interest in the collateral becomes unperfected at the end of the period mentioned in subsection (3), and is taken never to have been temporarily perfected, unless the security interest is perfected otherwise than under subsection (3) before the end of the period. ____________________ Comparative Legislation Comparable sections of New Zealand legislation: ss 27 and 28 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 5(3), (4) and (5) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.7650], [4.12.2000], [4.12.2100]–[4.12.2200].

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[PPSA.40] Relocation — intangible property and financial property 40 (1) Continuous perfection prior to relocation event If the law of a foreign jurisdiction has governed a security interest in intangible property, or financial property, the security interest is taken to have been continuously perfected for the period covered by subsection (2) if: (a) either of the following events (the relocation event) occurs: (i) the grantor becomes located in Australia;

(ii) the grantor transfers the collateral to a person who is located in Australia; and (b) immediately before the relocation event, and at the time of that event: (i) the security interest was effective; and (ii) the security agreement providing for the security interest was enforceable against third parties; and [page 186] (c) as a result of the occurrence of the relocation event, the perfection (and the effect of perfection or non-perfection) of the security interest becomes governed by the law of Australia. Note 1: For when bodies corporate, bodies politic or individuals are located in a jurisdiction, see section 235. Note 2: For when laws of other jurisdictions govern a security interest, see Part 7.2.

(2) This subsection covers the period: (a) starting at whichever of the following times is applicable: (i) if the law of the foreign jurisdiction provides for the perfection (and the effect of perfection or non-perfection) of the security interest — when the security interest last became perfected under that law; (ii) if subparagraph (i) does not apply to the law of the foreign jurisdiction, but that law provides for the public registration or recording of the security interest, or of a notice relating to the security interest — when the security interest, or such a notice, was so registered or recorded (or was last so registered or recorded); (iii) if neither subparagraph (i) nor (ii) applies to the law of the foreign jurisdiction — when the security interest last became enforceable against third parties under that law; and (b) ending when the relocation event occurs. (2A) However, a security interest is not taken to have been continuously perfected under subsection (1) if, immediately before the relocation event: (a) in a case in which the law of the foreign jurisdiction provides for the perfection (and effect of perfection or non-perfection) of the security

interest — the security interest was not perfected under that law; or (b) in a case in which paragraph (a) does not apply to the law of the foreign jurisdiction, but that law provides for the public registration or recording of the security interest, or of a notice relating to the security interest — the security interest, or such a notice, was not so registered or recorded. (3) Temporary perfection after relocation event If a security interest in collateral is continuously perfected under subsection (1), the security interest in the collateral is temporarily perfected for the period: (a) starting at the time of the relocation event; and (b) ending at the earlier of the following times: (i) the end of 56 days after the day of the relocation event; (ii) the end of 5 business days after the day the secured party has actual knowledge of the relocation event. (4) However, the security interest in the collateral becomes unperfected at the end of the period mentioned in subsection (3), and is taken never to have been temporarily perfected, unless the security interest is perfected otherwise than under subsection (3) before the end of the period. (5) Exceptions This section does not apply to: (a) intellectual property, an intellectual property licence or an ADI account; or (b) a negotiable instrument. [page 187] Note: The property mentioned in paragraph (5)(a) is intangible property; negotiable instruments are financial property (see section 10).

____________________ Comparative Legislation Comparable sections of New Zealand legislation: see s 30 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: see s 7 of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [4.10.2300], [4.12.2000], [4.12.2100]–[4.12.2200].

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PART 2.5 — TAKING PERSONAL PROPERTY FREE OF SECURITY INTERESTS [ss 41–53] [PPSA.41] Guide to this Part 41 This Part is about taking personal property free of security interests. Rules are set out for when personal property may be bought or leased free of a security interest in relation to the following: (a) unperfected security interests; (b) serial number defects; (c) motor vehicles; (d) taking in the ordinary course of business; (e) personal, domestic or household property; (f) currency; (g) taking investment instruments or intermediated securities in the ordinary course of trading; (h) investment instruments; (i) intermediated securities; (j) temporarily perfected security interests. If a transferee takes personal property (or an accession) free of a security interest by the operation of this Part, the secured party’s rights are subrogated to the rights of the transferor. Payment of the purchase price before the transferee receives notice of subrogation discharges the transferee’s obligation (to the extent of the payment). [s 41 am Act 96 of 2010 s 3 and Sch 2 items 133 and 148, opn 6 July 2010]

[PPSA.42] Application of this Part 42 This Part: (a) applies to a security interest: (i) whether or not the security interest is perfected (except in sections 43 (unperfected interests) and 52 (temporarily perfected interests)); and (ii) whether the security interest attaches to personal property as original collateral or as proceeds; and (b) does not apply to the acquisition of an interest in personal property free of a security interest if the interest that is taken is itself a security interest (except in sections 50 (investment instruments) and 51 (intermediated securities)).

[page 188] Note: Some acquisitions to which section 50 applies, and all acquisitions to which section 51 applies, consist of the taking of security interests (see subsections 50(3) and 51(1)). [s 42 am Act 96 of 2010 s 3 and Sch 2 items 133 and 149, opn 6 July 2010]

____________________ Commentary References For further discussion please refer to commentary at [1.3050], [2.11700], [2.13000], [4.10.2850].

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[PPSA.43] Taking personal property free of unperfected security interest 43 (1) Main rule A buyer or lessee of personal property, for value, takes the personal property free of an unperfected security interest in the property. (2) Exception Subsection (1) does not apply if the unperfected security interest was created or provided for by a transaction to which the buyer or lessee is a party, unless the personal property concerned is of a kind prescribed by the regulations for the purposes of this subsection. ____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 52 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 30 and see also s 20(3) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.7200], [2.11800], [4.3.600], [4.3.900], [4.4.800], [4.11.1700], [4.12.1050], [6.100], [6.1700].

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[PPSA.44] Taking personal property free of security interest if serial number incorrect or missing 44 (1) Main rule A buyer or lessee of personal property takes the personal property free of a security interest in the property if: (a) the regulations provide that personal property of that kind may, or must, be described by serial number in a registration; and (b) searching the register, immediately before the time of the sale or lease,

by reference only to the serial number of the property, would not disclose a registration that perfected the security interest. (2) Exceptions Subsection (1) does not apply if: (a) the buyer or lessee holds the personal property: (i) as inventory; or (ii) on behalf of a person who would hold the collateral as inventory; or (b) the security interest was created or provided for by a transaction to which the buyer or lessee is a party, unless the personal property concerned is of a kind prescribed by regulations for the purposes of this paragraph. [subs (2) am Act 96 of 2010 s 3 and Sch 2 item 43, opn 6 July 2010]

(3) Within the period of 24 months after the registration commencement time, subsection (1) does not apply if the security interest is a transitional security interest, other than: [page 189] (a) a migrated security interest in a motor vehicle; or (b) a migrated security interest in a watercraft within the meaning of the regulations. [subs (3) insrt Act 35 of 2011 s 3 and Sch 2 item 15, opn 26 May 2011]

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 55 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 30(6) and (7) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.11850], [4.1.4700], [4.3.600], [4.3.900], [4.4.700], [4.4.800], [4.5.1700], [4.5.2400], [4.9.350].

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[PPSA.45] Taking motor vehicles free of security interest 45 (1) Incorrect or missing serial number A buyer or lessee, for new value, of a motor vehicle of a kind prescribed by the regulations for the purpose of this section, takes the motor vehicle free of a security interest in the motor vehicle if:

(a) the regulations provide that motor vehicles of that kind may, or must, be described by serial number; and (b) there is a time during the period between the start of the previous day and the time of the sale or lease by reference to which a search of the register (by reference otherwise only to the serial number of the motor vehicle) would not disclose a registration that perfected the security interest; and (c) the seller or lessor is: (i) the person who granted the security interest; or (ii) if the person who granted the security interest has lost the right to possess the motor vehicle, or is estopped from asserting an interest in the motor vehicle — another person who is in possession of the motor vehicle. (2) Subsection (1) does not apply if: (a) the secured party is in possession of the motor vehicle immediately before the time of the sale or lease; or (b) the motor vehicle is bought at a sale held by or on behalf of an execution creditor; or (c) the buyer or lessee holds the motor vehicle: (i) as inventory; or (ii) on behalf of a person who would hold the motor vehicle as inventory; or (d) the buyer or lessee buys or leases the motor vehicle with actual or constructive knowledge of the security interest. (3) Taking from prescribed persons A buyer or lessee, for new value, of a motor vehicle of a kind prescribed by the regulations for the purpose of this section takes the motor vehicle free of a security interest in the motor vehicle if: (a) the regulations provide that motor vehicles of that kind may, or must, be described by serial number; and (b) the seller or lessor is in a class of persons prescribed by the regulations for the purposes of this subsection. (4) Subsection (3) does not apply if: (a) the secured party is in possession of the motor vehicle immediately before the time of the sale or lease; or

[page 190] (b) the motor vehicle is bought at a sale held by or on behalf of an execution creditor; or (c) the buyer or lessee holds the motor vehicle: (i) as inventory; or (ii) on behalf of a person who would hold the motor vehicle as inventory; or (d) the buyer or lessee buys or leases the motor vehicle with actual or constructive knowledge that the sale or lease constitutes a breach of the security agreement that provides for the security interest. ____________________ [PPSA.45.A] Annotations to s 45 Prescribed motor vehicle (subs 45(1) and (3)) See reg 2.1 at [PPSR2.1]. Prescribed person (s 45(3)(b)) See reg 2.2 at [PPSR2.1].

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 58 and see generally Pt 6 of the New Zealand Personal Property Securities Act 1999. Commentary References For further discussion please refer to commentary at [2.11900], [2.11950], [4.1.4700], [4.3.600], [4.3.900], [4.3.950].

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[PPSA.46] Taking personal property free of security interest in ordinary course of business 46 (1) Main rule A buyer or lessee of personal property takes the personal property free of a security interest given by the seller or lessor, or that arises under section 32 (proceeds — attachment), if the personal property was sold or leased in the ordinary course of the seller’s or lessor’s business of selling or leasing personal property of that kind. (2) Exceptions Subsection (1) does not apply if: (a) in a case in which personal property of that kind may, or must, be described by serial number — the buyer or lessee holds the personal

property: (i) as inventory; or (ii) on behalf of a person who would hold the collateral as inventory; or (b) in any case — the buyer or lessee buys or leases the personal property with actual knowledge that the sale or lease constitutes a breach of the security agreement that provides for the security interest. ____________________ [PPSA.46.A] Taking personal property free of security interest in ordinary course of business — Annotations to s 46 Cases The NZ and Canadian PPSA cases dealing with sales in the ordinary course of business need to be considered in light of the exception in s 46(2)(a) for buyers who hold the purchased property (being serial numbered property) as inventory. This exception does not appear in the NZ or Canadian PPSAs.

[page 191] Section 32(1)(a) also needs to be considered as it may apply even though s 46 does not; see Warehouse Sales Pty Ltd (in liq) & Lewis and Templeton v LG Electronics Australia Pty Ltd [2014] VSC 644; BC201410780. Paragraph 2.90 in the Explanatory Memorandum to the Personal Property Securities Bill 2009 states: … a person would not take free in the ordinary course of the seller’s business if the sale is made at a time of financial stress and the sale would not have been made but for the seller’s stress. The Alberta Court of Appeal in 369413 Alberta Ltd v Pocklington [2000] AJ No 1350; 2000 ABCA 307; 194 DLR (4th) 109; [2001] 4 WWR 423 at [29] has noted that secured parties rely heavily on the protection against sales other than in the ordinary course of business when a debtor/grantor is on the verge of insolvency and the temptation to divest assets to raise cash is the greatest. Meaning of “sale” and “buyer” There is no definition of “buyer” or “sale” in the PPSA. Warehouse Sales Pty Ltd (in liq) & Lewis and Templeton v LG Electronics Australia Pty Ltd [2014] VSC 644; BC201410780 — held that there is no reason why applicable sale of goods legislation should not be considered in determining whether a person is a “buyer” of goods and whether there has been a “sale” under s 46, PPSA. The court held the PPSA discloses no intention to displace existing law relating to the sale of goods (as opposed to the operation of security interests over property). This conclusion is consistent with the decision of the Saskatchewan Court of Appeal in Royal Bank of Canada v 216200 Alberta Ltd [1986] SJ No 734; 33 DLR (4th) 80; [1987] 1 WWR 545; 6 PPSAC 277 but at odds with the decision of the Ontario Court of Appeal in Spittlehouse v Northshore Marine Inc (Receiver Of) [1994] OJ No 809; 18 OR (3d) 60; 114 DLR (4th) 500; 7 PPSAC (2d) 67. The 216200 Alberta Ltd case concerned the rights of persons who had paid part of the purchase price for furniture in the possession of 216200 Alberta Ltd when it went into receivership. The court held that where there was a sale of a specific item of furniture in the possession of 216200 Alberta Ltd, which was in a deliverable state and identified in some fashion as being the goods purchased, title passed on the making of

the contract, notwithstanding that the full amount of the purchase price had not been paid. However, where there was furniture of the type described in the contract of sale but it was not identified as belonging to the buyer, there was no appropriation of goods as contemplated by relevant sale of goods legislation, title did not pass, and the buyer was an unsecured creditor. The sale contracts involved in the 216200 Alberta Ltd case do not appear to have included any retention of title terms securing the unpaid balance of the purchase price. In Spittlehouse a buyer signed a contract to purchase a boat from Northshore Marine and paid 90% of the purchase price. The contract provided that title to the boat would only be transferred to the buyer upon payment of the full purchase price. In the course of the boat being delivered, a secured creditor of Northshore Marine appointed a receiver. The court held there had been a sale for the purposes of s 28(l) of the Ontario PPSA (being the equivalent of s 46 in Australia’s PPSA) and the issue of whether title had passed for the purposes of sale of goods legislation was not relevant in the context of s 28(l). The court specifically declined to follow the 216200 Alberta Ltd decision. Some commentators have suggested that Spittlehouse reached the correct decision but for the wrong reasons. This is on the basis the sale contract in Spittlehouse was itself a security agreement, in the form of a conditional sale contract, and the PPSA treats conditional sale contracts as if they are an outright sale with a security interest back to the seller to secure the unpaid purchase price. It is argued that where the sale contract is also a security agreement the issue of whether title has passed to the buyer (grantor) for the purposes of sale of goods legislation is not relevant. Assuming this analysis is correct, if a sale contract is also a security agreement, and title has not passed to the buyer, property would still need to be sufficiently identified or appropriated to the contract for there to be a “sale” for the purposes of s 46. There may also be

[page 192] an issue as to whether a buyer (grantor) under a conditional sale contract has sufficient rights in the collateral for attachment to occur in accordance with s 19. If the buyer has neither title to, nor possession of, the relevant goods, it is difficult to see how a security agreement can attach to those goods. If the security agreement has not attached to the goods, the argument that the PPSA should nevertheless characterise the agreement as a sale might be somewhat tenuous. In the Warehouse Sales case a retention of title clause in favour of the seller only applied to lay-by sales. Most of the sales did not also constitute security interests in favour of the seller. It remains to be seen how an Australian court will tackle the issue of whether a sale has occurred in the kind of fact situation encountered in Spittlehouse; that is, where the sale contract includes retention of title provisions, at least part of the purchase price remains unpaid, goods have been identified or appropriated to the contract and the seller also remains in possession of the relevant property. See also Swindle v Matakana Estate Limited (in liquidation) [2011] NZHC 1345 and Kinetics Technology International Corporation v Fourth National Bank of Tulsa (1983) 705 F 2d 396. McCloy v Manukau Institute of Technology [2013] 3 NZLR 390; [2013] NZHC 936; BC201363460 — a transfer of equipment pursuant to the terms of a construction contract which provided for the transfer upon the contractor’s default under the contract did not constitute a “sale” for the purposes of s 53 of the NZ PPSA (being the equivalent of s 46 of the PPSA). The court held that even if the transfer had been a sale it would not have been in the ordinary course of business. Because the transfer upon default provisions in the construction contract were held to constitute an in substance security interest (refer to [PPSA.12.A]) s 42(b) of the PPSA would also be relevant in a comparable situation in Australia. Buyer’s rights may be subject to administrator’s lien If there has been a sale to a buyer in the ordinary course of business and s 46 of the PPSA applies, or s 47 of the PPSA applies, and the relevant property remains in the seller’s possession, an administrator appointed

to the seller may have an equitable lien for costs in identifying, preserving and making such property available to the buyer. Such an equitable lien may be available even if the administrator cannot rely on the statutory lien under s 443F of the Corporations Act (for example, because the relevant property is PPSA retention of title property); Re Renovation Boys Pty Ltd (admins apptd) [2014] NSWSC 340; BC201402330. Incomplete manufactured goods remaining in the seller’s possession Kinetics Technology International Corporation v Fourth National Bank of Tulsa (1983) 705 F 2d 396 — a contract for the sale of custom-made furnaces was held to be a sale in the ordinary course of the manufacturer’s business. The court held a sale had occurred even though the fabrication was not complete and the incomplete goods remained at the manufacturer’s premises when the bank enforced its security over the manufacturer’s inventory. This case involved a consideration of the then equivalent provision to s 46 under Art 9 of the United States Uniform Commercial Code. Meaning of “ordinary course of the seller’s or lessor’s business of selling or leasing personal property of that kind” Alberta Pacific Leasing Inc v Petro Equipment Sales Ltd [1995] AJ No 877; [1996] 1 WWR 552; 34 Alta LR (3d) 66; 10 PPSAC (2d) 69; Fairline Boats Ltd v Leger [1980] OJ No 216; 1 PPSAC 218; Camco Inc v Frances Olsen Realty (1979) Ltd [1986] SJ No 519; [1986] 6 WWR 258; 50 SaskR 161; 6 PPSAC 167 and 369413 Alberta Ltd v Pocklington [2000] AJ No 1350; 2000 ABCA 307; 194 DLR (4th) 109; [2001] 4 WWR 423 — the wording of s 46 requires the sale or lease to be in the seller’s or lessor’s business of selling or leasing personal property of that kind. The italicised wording does not appear in the equivalent provisions in the Canadian or NZ PPSAs but it is not clear if s 46 should be interpreted differently to those provisions or, in particular, that it should be confined to sales or leases of inventory. In Alberta Pacific Leasing, it was held that a sale may be in the ordinary course of the seller’s business even though it occurs infrequently. In that case the seller was in the business of leasing

[page 193] cranes but occasionally sold its cranes as they became obsolete. The court found the sale of a crane was in the ordinary course of the seller’s business. The Explanatory Memorandum for the PPSA (at 2.92) uses these same facts as an example of when s 46 would not apply. In Camco, a seller of residential apartments included certain household appliances as part of the sale package. The court held the sale of the appliances as part of the sale of the apartments was in the ordinary course of the seller’s business even though it was only an incidental part of that business. In Fairline and Alberta Pacific Leasing, the courts identified a number of issues to be considered in determining if a sale is in the ordinary course of the seller’s business including: the nature of the transaction (and any unusual features of it in the context of the seller’s business); the parties to it; where the transaction occurs (for example, whether the transaction occurs at the seller’s usual place of business); the price; the business’s advertising; and the quantity of items sold. In Pocklington, the court also considered the significance of the transaction, the reason for the transaction, the frequency of the transaction and whether the transaction was at arms’ length. Application of the ordinary course of business extinguishment rule Orix New Zealand Ltd v Milne [2007] 3 NZLR 637 — considered the application of s 53 of the NZ PPSA (being the equivalent provision to s 46 of the PPSA). Orix made secured loans to Comquip in 2002 to enable it to purchase three paving machines. Milne was the sole shareholder of Comquip. In June 2003 Comquip transferred the machines to a related company, Pavement, of which Milne was also sole shareholder. The machines were then sold to third parties. The proceeds of sale were not paid to Orix. They

were used to pay other creditors. Comquip and Pavement failed to maintain loan repayments. Comquip went into liquidation and Pavement was struck off the companies register. Orix unsuccessfully sought to recover one of the machines from a purchaser, Nicholls. When Nicholls bought the machine in February 2004 it did not ascertain that Orix had registered its security under the NZ PPSA. Nicholls claimed it was protected because the machine was sold to it in the ordinary course of business (s 53 of the NZ PPSA). Points to note are: This decision does not appear to have had proper regard to the court’s finding that Orix had consented to the transfer of the machines to Pavement (Rodney Hansen J specifically commented that “I have already found that Mr Johnson [an accountant contracted to Comquip and Pavement] did obtain Orix’s agreement to the transfer of the machines to Pavement”). In these circumstances Orix should have amended its PPSA registration to reflect the transfer of the collateral from Comquip to Pavement; ss 89 and 90, NZ PPSA (the equivalent provisions in Australia’s PPSA are ss 34, 67 and 68). Orix’s failure to amend its registration should have resulted in its security interest being subordinated to Nicholls’s interest as buyer under ss 89 and 90 rather than Nicholls taking free of the security interest based on s 53, NZ PPSA (being the equivalent of s 46, PPSA). This oversight appears to be a crucial defect in this decision. Section 53 of the NZ PPSA refers to “goods” only whereas s 46 of the PPSA refers to “personal property”. This case highlights the importance of ascertaining who is selling personal property. Section 53 of the NZ PPSA and s 46 of the PPSA only apply in respect of a security interest given by the seller or lessor. The fact that sales were made infrequently, were only a small part of Comquip’s business and may have been made as principal or agent did not affect the conclusion that Comquip was in the business of selling paving machines. When determining if s 53 of the NZ PPSA applies there is a two step process: 1. determine the business of the seller; and 2. determine whether the sale was made in the ordinary course of that business. Section 46 of the PPSA not only requires personal property be sold or leased in the ordinary course of business of the seller or lessor, it also requires the sale or lease to be in the ordinary course of the seller’s or lessor’s business of selling or leasing personal property of that kind.

[page 194] Whether sale was in the ordinary course of business Warehouse Sales Pty Ltd (in liq) & Lewis and Templeton v LG Electronics Australia Pty Ltd [2014] VSC 644; BC201410780 — various suppliers supplied goods to WHS subject to retention of title provisions. Some goods were on sold or transferred to WHS2, a subsidiary of WHS, as well as certain other non-retail customers. Retail customers purchased goods from both WHS and WHS2. WHS2 had no direct contractual arrangements with the suppliers. One of the suppliers, Panasonic, had supply terms that prohibited the sale of goods by WHS to a third party for further re-sale unless that third party entered into a distribution agreement with Panasonic. The other suppliers did not have such a restriction. The court found: the suppliers did not have any security interest in goods sold by WHS to its retail customers other than layby sales because such sales were specifically authorised by the suppliers (in this regard s 32(1)(a)(i) applied) and other than layby sales, these sales took place; the suppliers (other than Panasonic) did not have any security interest in the goods sold by WHS to WHS2 because these goods were sold in the ordinary course of the business of WHS and such sale

or disposition was authorised by the suppliers other than Panasonic; because the suppliers’ security interest (other than Panasonic’s) were extinguished following the sale or disposition to WHS2, the goods (other than those supplied by Panasonic) were not subject to any security interest and purchasers from WHS2 were not affected. After referring to the Canadian and New Zealand authorities on the interpretation of the equivalent provisions to s 46 in the Canadian and New Zealand PPSAs, the court held the sale of goods between WHS and WHS2 was in the ordinary course of the business of WHS. WHS’s business activity was not limited to retail sales of white goods. Goods were also regularly sold to WHS2 (for on-sale to its retail customers) and to other non-retail customers. The court noted that a seller may do business in a particular way that is not consistent with more general industry practices and this does not prevent reliance on s 46. The court considered there were no factors that pointed to the sales to WHS2 being unusual or extraordinary and the sales to WHS2 being below market value or for the same price paid by WHS and the quantities of goods involved in the sales to WHS2 were not determinative. Because Panasonic’s terms of supply to WHS contained the prohibition against sale to third parties for further re-sale, the sales by WHS to WHS2 were not subject to ss 32 and 46(2)(b) prevented reliance on s 46(1). Panasonic’s security interest therefore continued to cover the goods sold to WHS2. StockCo Limited v Gibson and Stiassny [2012] NZCA 330 (StockCo) — the purpose of s 53 of the NZ PPSA (being the NZ PPSA equivalent of s 46 PPSA) is to limit the protection of creditors when a buyer takes goods in the ordinary course of the seller’s business. This purpose reflects the policy behind the provision which is to permit commerce to proceed expeditiously without the need for a purchaser of goods to check into the title of the seller in the ordinary course of their business. However, it is equally important to ensure that secured parties who provide credit on the security of the debtor’s/grantor’s property are not unfairly deprived of the benefit of their security (see StockCo at [45]–[49]). Section 53 of the NZ PPSA applies to all sales of goods sold in the ordinary course of business, including sales to the public at large, but probably not private sales between individual buyers. Sales to persons who are not ordinary consumers, such as dealers or financial institutions, may be protected under s 53, depending on the circumstances. (However, this will not be the case under s 46 PPSA if the relevant personal property is serial numbered property and held by the buyer or lessee as inventory). While the reference to the business of “the seller” introduces a subjective element in that the focus should be on the ordinary course of the seller’s business and not on the ordinary course of the seller’s type of business, the inquiry should still be an objective one.

[page 195] In determining the ordinary course of the seller’s business, the focus should be on the trading activities of the seller at the time of the sale and whether the sale was a straightforward deal in the mainstream of the seller’s business. In determining whether the sale was made in the ordinary course of the seller’s business, a range of factual considerations may be relevant, including the way in which the deal was negotiated, agreed and implemented. In this context the purpose or effect of the transaction may also be relevant. Where the sale is part of a deal or a wider transaction the court will look at the whole deal or wider transaction to determine if it was in the ordinary course of business. StockCo involved a sale of 4000 year one heifers by Plateau to StockCo with StockCo then leasing those heifers to Nugen. The court held this sale was not in the ordinary course of the seller’s business because: The sale itself was unique and unprecedented in that the seller had not previously sold its entire herd of year one heifers. The sale was an integral part of a unique and unprecedented transaction in that the seller had not

previously sold livestock as part of a broader arrangement to purchase land. The way in which the overall transaction was negotiated, agreed and implemented was remarkable involving negotiations between the seller’s principal director and lawyer and the buyer’s principal director, last minute restructuring and receipt of the sale proceeds into the lawyer’s trust account for an immediate undocumented and unsecured loan to another company related to the seller but outside the group (including the seller) that had provided security to the banks (Charging Group). The initially unsecured loan of the proceeds from the sale by the seller to Nugen, a further integral part of the transaction, was not only in breach of the seller’s covenants with its banks but was also not in the economic interest of the seller in that the seller did not receive the benefit of the funds and any cashflow needs of the Charging Group were not addressed. The proceeds of the sale were not used within the Charging Group’s business to purchase replacement cows or as working capital or to repay debt. (This was seen as providing a basis for distinguishing the decision of the NZ Court of Appeal in Tubbs v Ruby 2005 Ltd [2010] NZCA 353, discussed below). The lease back of the heifers by the buyer to Nugen with the heifers continuing to graze on Charging Group farms at Charging Group expense indicated the absence of any economic benefit from the transaction for the Charging Group. The NZ Court of Appeal accepted that in the circumstances of the StockCo case, where the business of each member of the Charging Group was essentially to play its part in carrying out the integrated business of the Charging Group, it is appropriate to consider the business of the Charging Group as a whole, not merely the seller (at [52]). The Court of Appeal did not accept that s 53 should be interpreted in a way that would allow a grantor to make a sudden change of business strategy which would have the effect of narrowing the protection provided to a secured party (at [69]). In Tubbs v Ruby 2005 Ltd [2010] NZCA 353 (Tubbs), Ruby’s corporate shareholder was controlled by the directors and shareholders of Waimate. Waimate and Ruby entered into an agreement under which Ruby would purchase timber from Waimate at market value when Waimate needed to achieve sales. The timber purchased by Ruby (the Ruby stock) was stored in the Waimate yard, separate from the Waimate stock, to wait for a purchaser to be identified. The Ruby stock did not form part of Waimate’s inventory. Waimate agreed not to take or use the Ruby stock unless: it had a customer to whom the stock could be sold, in which case the stock would either be sold to that customer in the name of Ruby or Waimate would sell in its own name, and account for the sale proceeds to Ruby; or Waimate was able to effect a physical swap of timber. This was allowed to occur in the event the Ruby stock contained timber of a particular type wanted by a customer and Waimate had stock on hand of equivalent value which it could use to replenish the Ruby stock.

[page 196] Between August 2005 and October 2008, sales were made on this basis from Waimate to Ruby. The funds provided by Ruby to Waimate were always for the purchase of specific quantities of timber at full market value and invoiced as such. Ruby had no staff independent of Waimate which performed the marketing of the Ruby timber. From December 2007, Waimate’s manager allegedly breached the agreement by taking timber from the Ruby stock and selling it as Waimate stock, despite the fact that Waimate did not have sufficient cash to pay Ruby nor stock to replace the timber taken. The manager prepared invoices purporting to be on Ruby’s behalf and showing a sale by Ruby of its timber to Waimate. If effective they would make Ruby an unsecured creditor of Waimate contrary to the agreement between the two companies. By early 2009, most of Ruby’s stock had been sold to third parties without payment to Ruby.

The manager’s actions were allegedly unauthorised as well as a breach of the contract between Waimate and Ruby. Waimate was insolvent from May 2009. By the end of July 2009 Waimate had physically replenished half of the depleted Ruby stock with the remaining half being replenished by early September 2009. In October 2009 Ruby sold the Ruby stock to offshore clients of Waimate who had placed orders with Waimate. Instructions were given to the freight forwarding agent to show Ruby rather than Waimate as the shipper of the timber. The documents created to give effect to the transactions included invoices dated October 2009 showing the sale of the timber by Waimate to Ruby. This was said to be done to cancel or balance out the GST effect of the earlier unauthorised invoices raised by the manager. On 29 October 2009 Waimate’s bank appointed receivers to Waimate. Following their appointment, the receivers gained access to Waimate’s financial records, including those relating to the October 2009 transactions involving Ruby. The records appeared to show Ruby attempting to offset its unsecured debt from its related company Waimate by taking timber in lieu of payment and its directors diverting a sales opportunity belonging to Waimate so as to allow Ruby to benefit. In November 2009 the receivers notified Ruby that they considered the sale of the timber to Ruby in October 2009 to be outside the ordinary course of Waimate’s business, so that the timber and the proceeds of its sale remained subject to the bank’s security interest. At the time the receivers were unaware of the 2005 agreement between Waimate and Ruby and of the alleged unauthorised actions of Waimate’s manager. The matter came before the Court of Appeal by way of an appeal by the receivers against the first instance refusal of their application for an injunction to freeze the proceeds of sale in the hands of Ruby. The Court of Appeal considered the sales of timber by Waimate to Ruby between 2005 and 2008 had the practical effect of enabling Waimate to sell its timber earlier than it would otherwise have done. This was in the interests of Waimate and its creditors. The transactions removed Waimate’s inventory from the reach of the bank’s security, but replaced that inventory with cash. The fact these sales were to a related party was considered to be immaterial. There was no suggestion there was otherwise a breach of the bank’s security agreement. While Ruby had paid cash at full market value in the 2005–2008 transactions, the 2009 “sales” from Waimate to Ruby were not for cash. They were in satisfaction either of Ruby’s existing claim for conversion (if the manager’s actions were unknown and unauthorised) or of Waimate’s debt to Ruby (if Ruby’s directors had known of the manager’s actions). Unlike the earlier sales, the 2009 transactions had the effect of undermining the bank’s security. The Court of Appeal granted the injunction sought by the receivers on the basis the 2009 transactions were arguably not sales and were outside the ordinary course of business. The Court of Appeal does not appear to have considered if the 2005–2008 sales might have been outside the scope of the ordinary course of business extinguishment rule on the basis that the arrangements between Waimate and Ruby were security interests rather than true sales. It was acknowledged that the arrangements had been entered into because Waimate had been

[page 197] experiencing on-going cash flow issues, Ruby never took possession of the timber sold to it, Ruby did not have any premises or staff and only sold timber to customer’s introduced to it by Waimate. If the arrangements between Waimate and Ruby were security interest transactions the contest between Ruby’s interest and that arising under the bank’s security should have been analysed as one of priority rather than extinguishment. In the context of Australia’s PPSA note the operation of s 42(b). In the subsequent judgement of Tubbs and Gower as receivers of Waitmate Timber Processing Ltd v Ruby 2005 Ltd [2011] NZHC 827, the NZ High Court held that the 2009 transactions were also ordinary course of business sales to which s 53 of the NZ PPSA applied.

The provision of value for the sales and the prior course of conduct of the parties over a lengthy time period seem to have been key to the courts’ determinations that the sales were ordinary course of business sales, even though other facts (as noted above) suggested that the sales were anything but ordinary and should perhaps have been characterised as security interests rather than true sales. Swindle v Matakana Estate Limited (in liquidation) [2011] NZHC 1345 also involved sales between related parties (in this case sales of grapes and wine juice). Adopting the reasoning of the NZ Court of Appeal in Tubbs (referred to above), the NZ High Court concluded: The wine was sold to the buying companies in the ordinary course of the business of the sellers. The arrangements between the buyers and sellers, who were related companies, had been in place for more than eight years and sales had been made in the same way, each year, to each buyer company, since then. The grower contracts were entered into annually with the selling companies. In effect, the sellers acquired grapes and juice as intermediaries for the buying companies. The arrangement could have been restructured, so the buying companies bought direct from the growers. The grower contracts provided that the selling companies could resell grapes before payment in full. The court found that but for the arrangements whereby the buying companies acquired the juice from the selling companies, the selling companies would never have obtained the grapes in the first place. There was no detriment to the interests of the selling companies’ secured creditors. The sale transactions since 2001 had served their interests, as well as those of the selling companies. But for the transactions with the buying companies, the injection of cash from those companies would have not occurred. The sales were at market value (the buyers paying the same price paid by the selling companies when they purchased grapes and juice from the growers). The fact that the buyers and sellers were related is a neutral consideration provided value and payment for the product sold is evident. Carey v Smith [2013] NZHC 2291 — NZ Peat was a harvestor and processor of peat. NZ Peat’s customers were wholesalers in the gardening and horticultural industry. NZ Peat was not in the business of selling large amounts of unprocessed stockpiled peat to other persons. NZ Peat entered into a sale and buyback agreement for a pile of unprocessed peat with Brumac and the Careys who were shareholders in NZ Peat (further details of this agreement are noted at [PPSA.12.A]). The court considered there were a number of factors regarding the sale of the peat under the sale and buy-back agreement that meant it was outside the ordinary course of NZ peat’s business. These factors were: The sale was not to the usual or ordinary customers of NZ Peat, and further, the sale was not to arms-length customers, but to persons with an interest in NZ Peat as shareholders. The size of the peat pile and NZ Peat retaining possession of this peat, with it being stored in an unprocessed state, set it apart from the other sales, so that it was clearly a one-off event. The terms of the sale and buy-back agreement required: Brumac and the Careys to leave the peat in NZ Peat’s possession and prevented them from dealing with it themselves in any way whatsoever until NZ Peat’s rights to re-acquire the peat under the agreement had expired;

[page 198] NZ Peat, on the exercise of the put option by Brumac and the Careys, to re-acquire the peat pile, or any part of it that remained unsold at the time the put option was exercised, at a predetermined fixed price of $33.74 per cubic metre, when the original sale price was $25 per cubic metre and when the put option price made no allowance for any downwards change in the market price of peat. The absence of any evidence to show that the peat was originally sold under the sale and buy-back agreement at the current market value, or that the pre-determined price under the put option

represented a fair and reasonable estimate of the anticipated current market value of the peat at the time of its re-acquisition by NZ Peat (by no later than 31 December 2009). The purpose of the sale and buy-back agreement, which was to provide NZ Peat with a means of paying for the costs of harvesting the unusual bumper crop that became available in 2008 so that it could be stockpiled and available for sale to NZ Peat’s regular customers, or alternative customers to be found at a later date. The sale and buy-back agreement was devised by a senior company officer, who at the time was a director and chairman of NZ Peat, and this distinguished the transaction from the usual sales made by NZ Peat. There was no advertising of the peat pile for sale. The intent of the transaction, as admitted in evidence by Brumac’s director and Mr Carey was to give the “investors” security for the funds they were advancing to NZ Peat in the event that NZ Peat did not perform under the sale and buy-back agreement (the court found the agreement did constitute an in substance security interest; see [PPSA.12.A])… There was little, if anything about the sale and buy-back agreement that resembled the other sales undertaken by NZ Peat. The court distinguished this transaction from the transactions considered in Tubbs v Ruby 2005 Ltd [2010] NZCA 353. A key factor which distinguished the buy-back arrangement in Tubbs from the sale and buy-back agreement in Carey v Smith was that in Tubbs, there was no put option that obliged Tubbs to reacquire the goods at a pre-determined fixed price. In the context of Australia’s PPSA note the operation of s 42(b). Whether buyer knew the sale would breach the relevant security agreement Nichibo Trading Company New Zealand Ltd v Lucich [2011] NZHC 722 — An employee of the vendor was one of the buyers of a car subject to a security interest in favour of the vendor’s financier, Nichibo. The court found the purchase price indicated the sale was a normal commercial transaction. The court noted it was the vendor’s failure to account for the sale proceeds to the secured party that constituted a breach of Nichibo’s security agreement and not the sale itself and, in any event, there was no evidence the employee buyer knew of the specific terms of the security agreement. Under s 46 in Australia’s PPSA a buyer is not entitled to rely on s 46 if it has actual knowledge the sale constitutes a breach of the relevant security agreement. This decision may be contrasted with Estevan Credit Union Ltd v Dyer [1997] SJ No 185; 146 DLR. (4th) 490; [1997] 8 WWR 49; 155 Sask R 186 where a car dealer sold a large number of motor vehicles comprising half the dealer’s inventory to a friend in circumstances where the dealer was experiencing cash flow problems. This sale was held not to be in the ordinary course of the dealer’s business.

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 53 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 30(2) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.12000], [4.1.4700], [4.3.600], [4.3.900], [4.6.700], [4.12.2950].

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[PPSA.47] Taking personal, domestic or household property free of security interest 47 (1) Main rule A buyer or lessee of personal property, for new value, that the buyer or lessee intends (at the time of purchase or lease) to use predominantly for personal, domestic or household purposes takes the personal property free of a security interest in the property if the market value (worked out at the time each part of the total new value is given) of the total new value given for the personal property is not more than: (a) $5,000; or (b) if a greater amount has been prescribed by regulations for the purposes of this subsection — that amount. (2) Exceptions Subsection (1) does not apply if: (a) the personal property is of a kind that the regulations provide may, or must, be described by serial number in a registration; or (b) the buyer or lessee buys or leases the personal property with actual or constructive knowledge that the sale or lease constitutes a breach of the security agreement that provides for the security interest; or (c) at the time the contract or agreement providing for the sale or lease is entered into, the buyer or lessee believes, and it is actually the case, that the market value of the personal property is more than: (i) $5,000; or (ii) if a greater amount has been prescribed by regulations for the purposes of this paragraph — that amount. ____________________ [PPSA.47.A] Annotations to s 47 Cases Re Renovation Boys Pty Ltd (admins apptd) [2014] NSWSC 340; BC201402330 — refer to the commentary on this case at [PPSA.46.A].

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 54 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 30(3) and (4) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.12050], [4.3.600], [4.3.900].

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[PPSA.48] Taking currency free of security interest 48 A holder of currency takes the currency free of a security interest in the currency if the holder acquires the currency with no actual or constructive knowledge of the security interest. _________________________ Comparative Legislation Comparable sections of New Zealand legislation: s 94 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 31(1) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.12100], [4.10.2650], [4.10.2900].

_________________________ [page 200]

[PPSA.49] Taking investment instrument or intermediated security free of security interest in the ordinary course of trading 49 A person who buys an investment instrument or an intermediated security in the ordinary course of trading on a prescribed financial market (within the meaning of the Corporations Act 2001) takes the instrument or intermediated security free of a security interest in the instrument or intermediated security. [s 49 am Act 96 of 2010 s 3 and Sch 2 items 133 and 150, opn 6 July 2010]

____________________ Comparative Legislation Comparable sections of Canadian legislation: s 30(11) and (12), and s 31.1 (preserving rights under the Securities Transfer Act) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.12150], [4.10.2950].

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[PPSA.50] Taking investment instrument free of security interest 50 (1) Main rule A purchaser (see subsection (3)) of an investment instrument, other than a secured party, takes the instrument free of a security

interest in the instrument if: (a) the purchaser gives value for the instrument; and (b) the purchaser takes possession or control of the instrument. (2) Exception Subsection (1) does not apply if the purchaser takes the instrument with actual or constructive knowledge that the taking constitutes a breach of the security agreement that provides for the security interest. (3) In this section: purchaser, in relation to an investment instrument, means a person who takes the instrument by sale, lease, discount, assignment, negotiation, mortgage, pledge, lien, issue, reissue or any other consensual transaction that creates an interest in personal property. ____________________ Comparative Legislation Comparable sections of Canadian legislation: s 30(11) and (12), and s 31.1 (preserving rights under the Securities Transfer Act) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.12200], [4.10.3000].

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[PPSA.51] Taking intermediated security free of security interest 51 (1) Main rule A person (the transferee) who takes an interest in an intermediated security takes the interest free of a security interest in the intermediated security if: (a) the transferee gives value for the interest (unless the interest acquired is itself a security interest); and (b) the credit of the interest in the financial product in relation to which the intermediated security arises is made in accordance with a consensual transaction. [subs (1) am Act 96 of 2010 s 3 and Sch 2 items 133 and 151, opn 6 July 2010]

(2) Exception Subsection (1) does not apply if, at the time the interest is taken, the transferee has actual or constructive knowledge that crediting the interest in the financial [page 201]

product constitutes a breach of a security agreement that provides for a security interest in any intermediated security or financial product. [subs (2) subst Act 96 of 2010 s 3 and Sch 2 item 45, opn 6 July 2010] [heading am Act 96 of 2010 s 3 and Sch 2 item 45, opn 6 July 2010]

____________________ Comparative Legislation Comparable sections of Canadian legislation: s 30(11) and (12), and s 31.1 (preserving rights under the Securities Transfer Act) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.12200], [4.10.3050].

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[PPSA.52] Taking personal property free of temporarily perfected security interest 52 (1) Main rule A buyer or lessee, for new value, of the proceeds of personal property, or of goods or a negotiable document of title, takes the proceeds, goods or document free of a security interest that is temporarily perfected by force of this Act (other than a transitional security interest perfected by force of section 322) immediately before the time of the sale or lease, if the security interest is not otherwise perfected at that time. Note: Section 322 provides for the perfection of transitional security interests. [subs (1) am Act 96 of 2010 s 3 and Sch 2 items 46 and 47, opn 6 July 2010; Act 35 of 2011 s 3 and Sch 2 item 16, opn 26 May 2011]

(2) Exception Subsection (1) does not apply if the buyer or lessee has actual knowledge that the sale or lease constitutes a breach of the security agreement that provides for the security interest at: (a) the time new value is first given for the sale or lease, if the personal property is bought or leased with the intention of using it predominantly for personal, domestic or household purposes; or (b) in any other case — the time of sale or of entry into agreement for the lease. ____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 56 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 30(5) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [1.3050], [2.12250], [4.3.1000], [4.5.1800], [4.12.2950], [6.1700].

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[PPSA.53] Rights of secured party and transferee on taking personal property free of security interest 53 (1) Scope This section applies if: (a) a person (the transferee) acquires personal property from another person (the transferor); and (b) as a result, the transferee takes the personal property, or an accession to the property, free of a secured party’s security interest because of the operation of this Part. (2) Rights of secured party The rights of the secured party are subrogated, in relation to the property, to the rights (if any) of the transferor and any predecessor of the transferor (including the right to receive any part of the purchase price for the property which has not been paid). [page 202] (3) Rights of transferee If a person who is liable to pay the purchase price of personal property makes a payment before receiving notice of a secured party’s right under subsection (2), the payment discharges the obligation of the person to the extent of the payment. ____________________ Comparative Legislation Comparable sections of New Zealand legislation: see ss 62 and 65 (in relation to rights of secured party in relation to motor vehicles) of the New Zealand Personal Property Securities Act 1999. Commentary References For further discussion please refer to commentary at [2.12300].

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PART 2.6 — PRIORITY BETWEEN SECURITY INTERESTS [ss 54–77] DIVISION 1 — INTRODUCTION [s 54]

[PPSA.54] Guide to this Part 54

This Part deals with how to work out the priority between competing security interests in collateral (and in some cases, other kinds of interests). Priority rules are relevant when the same personal property is subject to 2 or more security interests. If the debtor defaults, the rules determine the order of priority in which the various secured parties can enforce their security interests under Chapter 4. Division 2 sets out the default rules that apply if this Act provides no other way of determining that priority. Unless otherwise provided: (a) perfected interests have priority over unperfected interests; and (b) priority between perfected interests amongst themselves, and unperfected interests amongst themselves, is determined on a first-in-time basis. The Division contains other rules of general application (such as the priority that applies to the proceeds of collateral). Security interests perfected by control have the highest priority. For example, a security interest held by an ADI in an ADI account with the ADI has priority over any other security interest in the ADI account. An ADI has control over an ADI account held with the ADI (see section 25). Only the ADI with which an ADI account is held may perfect a security interest in the ADI account by control (see section 21). A security interest perfected by control has priority over any other security interest in the same collateral (see section 57). Division 3 deals with the priority rules that apply when one of the security interests is a perfected purchase money security interest. These interests are exceptions to the first-in-time rule (except for certain security interests in an account dealt with in section 64). A perfected purchase money security interest that is granted to a seller, lessor or consignor takes priority over a perfected purchase money security interest that is granted to others. Division 4 deals with priority of security interests in transferred collateral where a transferor and a transferee have both granted security interests in the transferred collateral. Provided the transferorgranted security interest has remained perfected, that security interest will take priority. [page 203] Division 5 deals with the priority of certain creditors who have their debts repaid. The priority of those who purchase negotiable instruments, chattel paper and negotiable documents of title is also dealt with. Generally, the purchaser’s interest will take priority over a security interest in the negotiable instrument, chattel paper or negotiable document of title. Division 6 deals with priorities in relation to the following: (a) interests that arise under law; (b) interests of execution creditors; (c) security interests in returned goods; (d) security interests in accounts, financial property or intermediated securities if a foreign law governs their perfection but does not provide for public registration. [s 54 am Act 96 of 2010 s 3 and Sch 2 items 48 and 49, opn 6 July 2010]

____________________ Commentary References For further discussion please refer to commentary at [2.8200].

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DIVISION 2 — PRIORITY OF SECURITY INTERESTS GENERALLY [ss 55–61]

[PPSA.55] Default priority rules 55 (1) This section sets out the priority between security interests in the same collateral if this Act provides no other way of determining that priority. Note: For other rules about priorities, see the following:

(a) the remaining provisions of this Part; (b) Chapter 3 (agricultural interests, accessions and commingling); (c) Part 9.4 (transitional application of this Act). (2) Priority between unperfected security interests Priority between unperfected security interests in the same collateral is to be determined by the order of attachment of the security interests. (3) Perfected security interest has priority over unperfected security interest A perfected security interest in collateral has priority over an unperfected security interest in the same collateral. (4) Priority for perfection in other ways Priority between 2 or more security interests in collateral that are currently perfected is to be determined by the order in which the priority time (see subsection (5)) for each security interest occurs. (5) For the purposes of subsection (4), the priority time for a security interest in collateral is, subject to subsection (6), the earliest of the following times to occur in relation to the security interest: (a) the registration time for the collateral; (b) the time the secured party, or another person on behalf of the secured party, first perfects the security interest by taking possession or control of the collateral; (c) the time the security interest is temporarily perfected, or otherwise perfected, by force of this Act. (6) A time is a priority time for a security interest only if, once the security interest is perfected at or after that time, the security interest remains continuously perfected. [page 204]

Note: A security interest in the proceeds of original collateral has the same default priority as the security interest in the original collateral (see subsection 32(5)).

____________________ [PPSA.55.A] Default priority rules — Annotations to s 55 Cases Default priority rules Re Maiden Civil (P & E) Pty Ltd; Albarran v Queensland Excavation Services Pty Ltd (2013) 277 FLR 337; [2013] NSWSC 852; BC201310524 — the unperfected security interests of a lessor of excavation equipment lost priority to a secured party with a perfected security interest over all assets of the lessee. Refer to commentary at [PPSA.12.A], [PPSA.19.A], [PPSA.20.A], [PPSA.21.A], [PPSA.112A], [PPSA.116A], [PPSA.267.A] and [PPSA.322.A]. See also White v Spiers Earthworks Pty Ltd [2014] WASC 139; BC201402620. Waller v New Zealand Bloodstock Ltd (2005) 11 TCLR 497; [2006] 3 NZLR 629; (2006) 9 NZCLC 263, 944; [2005] NZCA 254 — confirms that a secured party who has a title based security interest in goods (ie as lessor or seller on ROT terms) and does not register that interest on the PPSR will lose in a priority contest to a secured party who has perfected their security interest. A security interest over all of a grantor’s present and future assets will include goods which are leased to it under a lease that is also a security interest. Graham v Portacom New Zealand Ltd (2004) 10 TCLR 983; [2004] 2 NZLR 528; (2004) 9 NZCLC 263, 517; BC200469215 — it was enough that the lessee had “rights” in the buildings to bring them under the NZ PPSA, so it can “grant a security interest in the buildings themselves, not just its leasehold interest in them”. The bank’s debenture charged “all the lessee’s right, title and interest … in, to, under or derived from [all assets … of whatever kind …]” and this was sufficient to cover both the lessee’s leasehold interest, and the “ownership” interest, in the buildings. The court noted the dispute is one of priority to the personal property and not ownership of it. See also Carey v Smith [2012] NZHC 455 — application for summary judgement declined. The bank’s perfected general security interest prevailed over an unperfected security interest arising under a sale and buy back agreement. Meaning of “priority time” — s 55(5) Healy Holmberg Trading Partnership v Grant [2012] 3 NZLR 614; [2012] NZCA 451 — this case concerned the relationship between the residual priority rule in s 66 of the NZ PPSA (being the equivalent of s 55, PPSA) and s 36 of the NZ PPSA (being the equivalent of s 20, PPSA). The Healy Holmberg Trading Partnership was first to register a financing statement in relation to its security interest but other secured parties (referred to in the judgment as the Riga parties) were the first to perfect their security interest. The Riga parties contended that s 36 of the NZ PPSA provided for a “way of determining priority between security interests in the same collateral” for the purposes of s 66 of the NZ PPSA and therefore the priority determined under s 36 applied in preference to the residual priority rule in s 66. On this view, the security interest of the secured party that first perfected its interest would have priority even though the other secured party registered its financing statement first. Although the NZ Court of Appeal determined the appeal on other grounds, it held that in a situation where both secured parties have perfected by registration, the time of registration not the time of perfection is determinative of priority. The NZ Court of Appeal considered that this approach was consistent with the plain wording of s 36, which deals with enforceability of security interests against third parties, not with priority. In reaching this conclusion the NZ Court of Appeal considered the equivalent provisions in Australia’s PPSA and observed that: s 55 in Australia’s PPSA states that priority between perfected security interests is determined by the “registration time for the collateral”; and

[page 205] to make it clear that this residual priority rule in s 55 is not subject to s 20, or other rules about attachment or enforceability, the note following s 55(1) in Australia’s PPSA sets out the other rules about priorities to which the residual priority rule is subject. Time for determining priority In certain circumstances, the time at which the priority rules are applied will be relevant to determining a priority outcome. For example, if there are two unperfected security interests in the same collateral and one of the secured parties registers a financing statement after the grantor defaults and the other secured party has already appointed a receiver, determining priority as at the time of the appointment of the receiver (as occurred in Sperry Corp v CIBC [1985] OJ No 2481; 50 OR (2d) 267; 17 DLR (4th) 236; 4 PPSAC 314) will produce a different priority outcome to a determination of priority at a time after the first-mentioned secured party has registered its financing statement; see also John Deere Credit Inc v Standard Oilfield Services Inc [2000] AJ No 84; 79 Alta LR (3d) 166; 258 AR 266; 16 CBR (4th) 227; Re 123 1640 Ontario Inc 2007 ONCA 810. Gibbston Downs Wines Ltd v Perpetual Trust Ltd [2013] BCL 361; [2013] NZCA 506 — although it was not necessary to determine the issue in this case, the New Zealand Court of Appeal commented on when will be the appropriate date for determining priority between competing security interests. The Court of Appeal indicated the view that the appropriate time to determine priorities as between secured parties is the date of receivership “has much to recommend it in the particular circumstances applicable here”. The judgment of the court at first instance referred to the Sperry decision and concluded the appropriate date for determining the priority of the respective security interests was the date that “the competing interests came into conflict” which in this case was held to be when the grantor was placed in receivership. See also Strategic Finance Limited (in receivership and in liquidation) v Bridgman [2013] NZCCLR 19; [2013] NZCA 357 at [86]. The alternative view to that which has been adopted by the Canadian and New Zealand courts is that priority should be determined when the enforcement process has been finalised and the collateral realised. The time for determining priority may have less practical significance under Australia’s PPSA because of the vesting rules in s 267 of the PPSA and s 588FL of the Corporations Act (including the 20 business day period allowed for perfection by registration in the case of the latter vesting rule). Interaction between the general law and PPSA priority rules for competing security interests See KBA Canada, Inc v 3S Printers Inc [2014] BCJ No 544; 2014 BCCA 117 — refer to the commentary at [PPSA.254.A]. Secured party’s priority could be subject to lien of administrator, liquidator or receiver Although the court did not have to decide the issue, an administrator may have an equitable lien for costs in identifying, preserving and making property available to a secured party. Such an equitable lien may be available even if the administrator cannot rely on the statutory lien under s 443F of the Corporations Act; Re Renovation Boys Pty Ltd (admins apptd) [2014] NSWSC 340; BC201402330; Re Renovation Boys Pty Ltd (admins apptd) (No 2) [2014] NSWSC 354. Where a liquidator creates a fund, a secured creditor may not be able to take the benefit of that fund under its security without first bearing the costs, charges and expenses incurred by the liquidator in the fund’s creation; Stewart v Atco Controls Pty Ltd (in liq) (2014) 307 ALR 562; 88 ALJR 594; [2014] HCA 15; BC201403244 and Re Universal Distributing Company Ltd (in liq) (1933) 48 CLR 171; [1933] ALR 107; (1933) 6 ALJR 428b; BC3300034. A receiver may be entitled to an indemnity and lien for costs and expenses incurred, and the associated remuneration of the receivers, which relate to work undertaken in identifying and returning stock belonging to third parties. These costs and expenses were an incidental aspect of identifying, caring for and preserving

property that did belong to the company in receivership. Similarly, the receivers were also entitled to an indemnity and lien for insurance payments to the

[page 206] extent they related to goods ultimately found to belong to a third party; see Re Arcabi Pty Ltd (Receivers & Managers Appointed) (in liq) [2014] WASC 310; BC201407252.

____________________ Commentary Legislation Comparable sections of New Zealand legislation: s 66 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 35(1) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.8400], [2.8450], [2.8550], [2.11150], [2.11250], [4.3.550], [4.6.3200], [4.11.1550], [4.12.1050], [6.1850]. Relevant Cases See also Rabobank New Zealand Limited v McAnulty [2011] NZCA 212; Re Dryland Contracting Ltd (In Receivership); Simpson v Reymer Contracting Ltd [2008] NZCCLR 17; International Harvester Credit Corporation of Canada Ltd v Trustee of Bell’s Dairy Ltd [1986] 6 WWR 161; 34 BLR 76; 61 CBR (NS) 193; 50 Sask R 177; Re Giffen [1998] 1 SCR 91; 155 DLR (4th) 332; [1998] 7 WWR 1; 1 CBR (4th) 115; JR Investments v Moncton Flying Club Estate 2011 NBQB 256.

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[PPSA.56] How a security interest is continuously perfected 56 (1) For the purposes of this Act, a security interest is continuously perfected after a particular time if the security interest is, after that time, perfected under this Act at all times. (2) A security interest may be continuously perfected after a particular time even if, after that time, it is perfected in 2 or more different ways: (a) at any particular time; or (b) at different times. Examples: A security interest could be perfected in 2 or more different ways as follows: (a) by possession and by a registration; (b) by 2 different registrations.

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 42 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 23(1) of the Saskatchewan (Canada) Personal Property Security Act 1993.

Commentary References For further discussion please refer to commentary at [2.8250].

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[PPSA.57] Priority of security interests perfected by control 57 (1) Priority interests A security interest in collateral that is currently perfected by control has priority over a security interest in the same collateral that is currently perfected by another means. Note: Only security interests in certain kinds of property can be perfected by control (see paragraph 21(2) (c) and Part 2.3).

(2) Priority between 2 or more security interests in collateral that are currently perfected by control is to be determined by the order in which the interests were perfected by control (where the perfection by control has been continuous). (2A) A perfected security interest (the priority interest) in the proceeds of original collateral has priority over any other security interest in the proceeds, except a security interest in the proceeds as original collateral that is perfected by control, if: [page 207] (a) the security interest in the first-mentioned original collateral was perfected by control when the collateral gave rise to proceeds; and (b) the priority interest is not perfected by control. [subs (2A) insrt Act 96 of 2010 s 3 and Sch 2 item 50, opn 6 July 2010]

(3) Control priority takes precedence over any other priority rule This section applies despite the application of any other provision of this Part. ____________________ Comparative Legislation Comparable sections of Canadian legislation: s 35(2) and see also s 35.1(2) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.8600], [2.8650], [2.8750], [2.9600], [4.1.4500], [4.8.2350], [4.8.3800], [4.10.2550].

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[PPSA.58] Priority of advances 58 A security interest provided for by a security agreement has the same

priority in respect of all advances (including future advances), and the performance of all obligations, secured by the agreement. Note: This section is subject to section 68 (transfer of collateral that is not registered with a serial number).

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 72 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 35(5) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.8300].

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[PPSA.59] Priority rules and intervening security interests 59 A security interest (the first security interest) has priority over another security interest (the last security interest) if, by the operation of this Act (including this section): (a) the first security interest has priority over security interests of a particular kind (the intermediate security interests); and (b) the intermediate security interests have priority over the last security interest. ____________________ Commentary References For further discussion please refer to commentary at [2.8350], [4.2.4250].

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[PPSA.60] Transfer of security interests does not affect priority 60 If a security interest in collateral is transferred, the transferred interest has the same priority immediately after the transfer as it had immediately before the transfer. Note: Division 4 deals with transfer of collateral.

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 69 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 23(2) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [1.3100], [2.3950].

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[page 208]

[PPSA.61] Voluntary subordination of security interests 61 (1) A secured party may (in a security agreement or otherwise) subordinate the secured party’s security interest in collateral to any other interest in the collateral. (2) The subordination: (a) is effective according to its terms between the parties; and (b) may be enforced by a third party if the third party is the person, or one of a class of persons, for whose benefit the subordination is intended. ____________________ [PPSA.61.A] Annotations to s 61 The subordination may be in a security agreement or otherwise evidenced. Section 61(2)(b) specifically contemplates that third parties may enforce a subordination agreement if they are an intended beneficiary. A number of Canadian cases (referred to below) have considered whether a secured party under a general security agreement over all assets of the grantor has, via certain representations and warranties or negative pledge provisions, subordinated its security interest to a PMSI holder who fails to perfect within the time stipulated in the Canadian PPSA provisions that are equivalent to ss 62 and 63. A representation and warranty in a general security agreement that the collateral is free of encumbrances other than permitted security interests should not, by itself, constitute a subordination agreement enforceable by third parties; Sperry Corp v CIBC [1985] OJ No 2481; 50 OR (2d) 267; 17 DLR (4th) 236; 4 PPSAC 314 (Sperry); Kubota Canada Ltd v Case Credit Ltd; Re DCD Industries (1995) Ltd [2005] AJ No 329; 2005 ABCA 139; 253 DLR (4th) 171; PPSAC (3d) 251. In Sperry the relevant representation and warranty read as follows: 4.

Ownership of Collateral

The undersigned represents and warrants that, except for the security interest created hereby and except for purchase money obligations, the undersigned is, or with respect to Collateral acquired after the date hereof will be, the owner of Collateral free from any mortgage, lien, charge, security interest or encumbrance. “Purchase money obligations” means any mortgage, lien or other encumbrance upon property assumed or given back as part of the purchase price of such property, or arising by operation of law or any extension or renewal or replacement thereof upon the same property, if the principal amount of the indebtedness secured thereby is not increased. However, a negative pledge covenant in an all assets security agreement that permitted the creation of certain security interests in favour of other secured parties has been held to be a subordination agreement where the covenant expressly stated that the permitted security interests would rank in priority (see: Euroclean Canada Inc v Forest Glade Investments Ltd [1985] OJ No 2307; 49 OR (2d) 769; 16 DLR (4th) 289; 4 PPSAC 271 (Euroclean)). The wording of the covenant in Euroclean provided: (e) Not Encumber — The Corporation shall not, without the consent in writing of the Holder, create any mortgage, hypothec, charge, lien or other encumbrance upon the mortgaged property or any part thereof ranking or purporting to rank in priority to or pari passu with the charge created by this

Debenture, except that the Corporation may give mortgages or liens in connection with the acquisition of property after the date hereof or may acquire property subject to any mortgage, lien or other encumbrance thereon existing at the time of such acquisition and any such mortgage, lien or other encumbrance shall rank in priority to the charge hereby created. (Emphasis added) A negative pledge covenant in an all assets security that prohibited the creation of security ranking in priority to the security interests created under that security agreement but permitted

[page 209] certain security interests was held to constitute a subordination agreement on the basis that the covenant wording implied the permitted security interests would have priority (see Chiips Inc v Skyview Hotels Ltd [1994] AJ No 562; 116 DLR (4th) 385; [1994] 9 WWR 727; 7 PPSAC (2d) 23 (Chiips). The covenant wording in Chiips was: 6.01 The Company covenants and agrees with the Holder that, so long as this Debenture is outstanding, the Company shall not: (c) create or permit any mortgage, charge, lien or other encumbrance upon any part or all of the Mortgaged Property ranking or purporting to rank in priority to or pari passu with the Security in order to secure any monies, debts, liabilities, bonds, debentures, notes or other obligations other than this Debenture and the Series of Mortgages and Debentures referred to in Section 8.01(n), hereof which are intended to rank in priority [as] pari passu with this Debenture; provided, however, that this covenant shall not apply to, nor operate to prevent, and there shall be permitted: (i) the assuming or giving of purchase money mortgages or other purchase money liens on property acquired by the Company or the giving of mortgages or liens in connection with the acquisition or purchase of such property or the acquiring of property subject to any mortgage, lien or encumbrance thereon existing at the time of such acquisition; provided that such purchase money mortgages or purchase money liens shall be secured only by the property being acquired by the Company and no other property of the Company; … (Emphasis added) In Engel Canada Inc v TCE Capital Corp [2002] OJ No 2361; [2002] OTC 407; 34 CBR (4th) 169; 4 PPSAC (3d) 124 (Engel) the covenants considered did not refer to any priority or ranking of the permitted security interests but the court still found that, on the terms of the covenants, the secured party had agreed to subordinate. Despite the decision in Engel, the better view is that a negative pledge that prohibits the existence or creation of other security interests except for certain permitted security interests (without referring to or acknowledging the priority or ranking of those permitted security interests) should not constitute a subordination agreement for the purposes of s 61(2)(b). Some of the Canadian decisions have considered the “commercial reality” that exceptions or carve outs to negative pledge provisions are intended to allow the grantor to carry on business and that PMSI suppliers will not supply a business if their security interest is not given priority. The first part of this logic is correct but a PMSI supplier is perfectly capable of ensuring it achieves priority by perfecting its PMSI within the required timeframe and it should not be necessary to imply an agreement to subordinate where none is clearly intended in order to protect PMSI holders who do not protect themselves. Gibbston Downs Wines Ltd v Perpetual Trust Ltd [2013] BCL 361; [2013] NZCA 506 — a subordination agreement was binding between the relevant secured parties and their assigns notwithstanding the expiry of a PPSR registration noting the subordination. See also CFI Trust (Trustee of) v Royal Bank of Canada [2013] BCJ No 2049; 2013 BCSC 1715.

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Comparative Legislation Comparable sections of New Zealand legislation: s 70 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 40 of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.11250], [2.11300], [2.11400], [4.8.2400].

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DIVISION 3 — PRIORITY OF PURCHASE MONEY SECURITY INTERESTS [ss 62–65]

[PPSA.62] When purchase money security interests take priority over other security interests 62 (1) Scope This section sets out when a perfected purchase money security interest that is granted by a grantor in collateral or its proceeds has priority over a perfected security interest that is granted by the same grantor in the same collateral, but that is not a purchase money security interest. Note: This section is subject to section 57 (perfection by control).

(2) Inventory The purchase money security interest has priority if: (a) the purchase money security interest is in inventory or its proceeds; and (b) the purchase money security interest is perfected by registration at the time: (i) for inventory that is goods — the grantor, or another person at the request of the grantor, obtains possession of the inventory; or (ii) for any other kind of inventory — the purchase money security interest attaches to the inventory; and (c) the registration that perfects the purchase money security interest states, in accordance with item 7 of the table in section 153, that the interest is a purchase money security interest. Note: This subsection is subject to sections 64 (non-purchase money security interest in accounts) and 71 (chattel paper).

(3) Personal property other than inventory The purchase money security interest has priority if:

(a) the interest is in personal property, or its proceeds, other than inventory; and (b) the purchase money security interest is perfected by registration before the end of 15 business days after whichever of the following days applies: (i) for goods — the day the grantor, or another person at the request of the grantor, obtains possession of the property; (ii) for any other property — the day the interest attaches to the property; and (c) the registration that perfects the purchase money security interest states, in accordance with item 7 of the table in section 153, that the interest is a purchase money security interest. Note: The period mentioned in paragraph (b) may be extended by a court under section 293. [subs (2) am Act 96 of 2010 s 3 and Sch 2 item 51, opn 6 July 2010]

____________________ [PPSA.62.A] When purchase money security interests take priority over other security interests — Annotations to s 62 Cases Time and capacity of protection Guaranty Trust Co of Canada v Canadian Imperial Bank of Commerce [1989] OJ No 1081; 2 PPSAC (2d) 88; 16 ACWS (3d) 349; 1989 CarswellOnt 626, McLeod & Co v Price Waterhouse Ltd [1992] SJ No 104; 101 SaskR 115; 3 PPSAC (2d) 171; 31 ACWS (3d) 1086, Associates Leasing (Canada) Ltd v Humboldt Flour Mills Inc [1998] SJ No 841; 175 SaskR 220; 14 PPSAC (2d) 174; 85 ACWS (3d) 691, Air Products Canada Ltd v Farini Corp [2000] OJ No 1396; [2000] OTC 264; 16 CBR (4th) 18; 96 ACWS (3d) 496 — a number of decisions in the Canadian courts have held that the time of “possession” for the purposes of the provisions equivalent to s 62 should

[page 211] be measured from when the relevant security agreement is executed and value is given, despite the fact that physical possession was obtained earlier. In effect, these decisions have interpreted the relevant Canadian PPSA provisions so that the time period in which the PMSI is to be perfected in order to obtain super priority runs from when the debtor (which term includes a grantor) has possession of the collateral as a debtor. See also 994814 Ontario Inc v RSL Canada Inc and En-Plas Inc [2006] OJ No 1907; 209 OAC 326; 20 CBR (5th) 163; 9 PPSAC (3d) 240. Refer to [PPSA.19.A]. This approach was approved in principle by the Nova Scotia Court of Appeal but found not to be applicable on the facts in MacPhee Chevrolet Buick GMC Cadillac Ltd v S.W.S. Fuels Ltd 2011 NSCA 35. In this case the grantor (Dixon Fuels) had possession of the relevant collateral (a truck) from 2004 under a lease from GMAC. In 2005 Dixon Fuels granted SWS a general security agreement over all of its assets to secure a line of credit. SWS’s security interest was perfected by registration under the Nova Scotia PPSA.

In 2007 GMAC sold the truck to MacPhee and Dixon Fuels entered into a new lease with MacPhee. This new lease was also perfected by registration under the PPSA. MacPhee sought to claim a PMSI in order to rank ahead of SWS. Significantly, MacPhee had entered into a new lease with Dixon Fuels rather than taking an assignment of the earlier lease with GMAC. The grantor had remained in possession of the truck at all relevant times. There was no evidence as to whether the earlier GMAC lease had been properly perfected as a PMSI or why the GMAC lease was not simply assigned to MacPhee. The court was concerned that MacPhee could take a transfer of title from GMAC (although not a transfer of the GMAC lease) and obtain PMSI priority over SWS if the approach taken in Guaranty Trust and the other cases mentioned above was adopted. The court found MacPhee had a security interest which, being a lessor’s interest under a lease, was a PMSI, but Dixon Fuels had obtained possession of the truck before the relevant time period prescribed under the equivalent provision of s 62(3)(b). The court approached its analysis based on whether the PMSI priority rule could be relied upon by MacPhee and it does not seem to have considered the implications of MacPhee acquiring the truck from GMAC subject to SWS’s security interest, assuming GMAC did not in fact have priority over SWS. While these decisions may influence how Australian courts will interpret the meaning of “possession” and the timing requirements in s 62 it is worth noting the following points: the drafting of s 62 is considerably different to the equivalent Canadian provisions but it is not clear if a different policy outcome was intended regarding the meaning and timing of “possession”; the Canadian PPSAs all have a bifurcated definition of “debtor” that covers both the obligor in respect of the secured obligations and the grantor of the security interest; the Canadian PPSAs specifically refer to the debtor obtaining possession of the collateral and collateral means personal property that is subject to a security interest. The Australian PPSA does not use the term collateral in s 62(2) or (3). (Intriguingly, s 63 does refer to when the grantor obtains possession of the collateral); While s 62 refers to the grantors obtaining possession of the “inventory” or “property”, as applicable, rather than the collateral, the definition of grantor means a person with an interest in personal property to which a security interest is attached; the Ontario PPSA equivalent of s 62 (but not the other Canadian PPSA equivalent provisions) specifically refers to the debtor having possession of the collateral as a debtor; the argument that the date of physical possession should be determinative because it clothes the grantor with ostensible ownership of the property which might be relied upon by other secured parties to their detriment has not persuaded the Canadian courts that possession, for the purposes of the Canadian provisions equivalent to s 62, means mere physical possession. Refer also to [PPSA.13.A] in relation to security interests to which s 13(1)(d) or s 13(1)(e)(iii) applies.

[page 212] Evidence regarding the secured party’s usual business practices may be considered by a court in determining the time the grantor takes possession for the purposes of s 62; see Royal Bank of Canada v Ramco Sales Inc 2010 ABQB 1. The date on which a secured party approves a transaction, rather than an earlier date on which a security agreement expressed to be subject to the secured party’s approval is signed by the grantor, may be relevant in determining the date of the grantor’s possession; see McLeod & Co v Price Waterhouse Ltd [1992] SJ No 104; 101 SaskR 115; 3 PPSAC (2d) 171; 31 ACWS (3d) 1086.

____________________ Comparative Legislation Comparable sections of New Zealand legislation: ss 73, 74 and 75 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: ss 34(2)(a)

and (b) and 34(3) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [1.1400], [1.2950], [2.8850], [2.9450], [4.1.2200], [4.1.2800], [4.1.3350], [4.1.3700], [4.2.4100]–[4.2.4250], [4.6.1900].

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[PPSA.63] Priority between competing purchase money security interests in collateral 63 A perfected purchase money security interest (the priority interest) that is granted by a grantor in collateral or its proceeds to a seller, lessor or consignor of the collateral has priority over any other perfected purchase money security interest that is granted by the same grantor in the same collateral if the priority interest is perfected: (a) if the collateral is inventory that is goods — at the time the grantor, or another person at the request of the grantor, obtains possession of the collateral; or (b) if the collateral is inventory and is not goods — at the time the priority interest attaches to the collateral; or (c) if the collateral is not inventory, and is goods — before the end of 15 business days after the day the grantor, or another person at the request of the grantor, obtains possession of the collateral; or (d) if the collateral is not inventory, and is not goods — before the end of 15 business days after the day the priority interest attaches to the collateral. Note 1: This section is subject to section 57 (perfection by control). Note 2: The periods mentioned in paragraphs (c) and (d) may be extended by a court under section 293. [s 63 am Act 96 of 2010 s 3 and Sch 2 item 51, opn 6 July 2010]

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 76 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 34(5) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [1.1400], [2.9500], [4.1.1550].

____________________

[PPSA.64] Non-purchase money security interests in accounts

64 (1) Non-purchase money security interest in account as original collateral has priority over purchase money security interest in account as proceeds of inventory Despite subsection 62(2), a non-purchase money security interest (the priority interest) granted for new value in an account as original collateral and perfected by registration has priority over a perfected purchase money security interest that is granted by the same grantor in the account as proceeds of inventory, if: [page 213] (a) the registration time in respect of the priority interest occurs before the earlier of the following times: (i) the time at which the purchase money security interest is perfected; (ii) the registration time in respect of the purchase money security interest; or (b) both of the following conditions are met: (i) the secured party holding the priority interest gives a notice in accordance with subsection (2) to the secured party holding the purchase money security interest; (ii) the notice is given at least 15 business days before the earlier of the day on which the registration time for the account occurs and the day the priority interest attaches to the account. Note 1: This section is subject to sections 57 (perfection by control) and 71 (chattel paper). Note 2: The period mentioned in paragraph (b) may be extended by a court under section 293. [subs (1) am Act 96 of 2010 s 3 and Sch 2 item 52, opn 6 July 2010]

(2) A notice is given in accordance with this subsection if: (a) the notice is in the approved form; or (b) the notice: (i) contains a description of the inventory to which the notice relates; and (ii) sets out the effect of subsection (1). (3) Perfected purchase money security interest in both proceeds and new value If a person has a purchase money security interest in an account as proceeds of inventory that is subordinate to a non-purchase money security

interest under subsection (1): (a) the person is taken to have a purchase money security interest in both the proceeds of the inventory and in the new value mentioned in subsection (1); and (b) the purchase money security interest in the new value is taken to be perfected by the registration that perfected the purchase money security interest in the proceeds; and (c) the new value is taken to be an account for the purposes of this Act (except for the purposes of this section or paragraph 12(3)(a) (account transferee’s interest taken to be security interest)). [subs (3) am Act 96 of 2010 s 3 and Sch 2 item 53, opn 6 July 2010]

(4) However, if the new value mentioned in paragraph (3)(c) would be an account for the purposes of this Act in the absence of that paragraph, the paragraph does not prevent the new value from being an account for the purposes of this section or paragraph 12(3)(a). [subs (4) insrt Act 96 of 2010 s 3 and Sch 2 item 54, opn 6 July 2010]

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 75A of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 34(6) and (7) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.7900], [4.1.4500], [4.2.4250], [4.3.800], [4.8.3600].

____________________ [page 214]

[PPSA.65] Possession of goods shipped by a common carrier 65 For the purposes of this Division, if goods are shipped by common carrier to a grantor, or to a person designated by the grantor, the grantor does not obtain possession of the goods until the grantor, or a third party at the request of the grantor, obtains actual possession of the goods or a document of title to the goods, whichever is earlier. ____________________ Comparative Legislation Comparable sections of Canadian legislation: s 22(2) of the Saskatchewan

(Canada) Personal Property Security Act 1993.

____________________

DIVISION 4 — PRIORITY OF SECURITY INTERESTS IN TRANSFERRED COLLATERAL [ss 66–68]

[PPSA.66] Application of this Division 66 (1) This Division sets out the priority between 2 security interests (a transferor-granted interest and a transferee-granted interest) if: (a) a grantor transfers collateral (the transferred collateral) to a transferee; and (b) immediately before the transfer, a security interest (the transferorgranted interest) is attached to the collateral; and (c) the transferee grants (whether before or after the transfer) a security interest (the transferee-granted interest) in the transferred collateral; and (d) neither the transferor-granted interest nor the transferee-granted interest is currently perfected by control. Note 1: If either or both of the interests are currently perfected by control under paragraph 21(2)(c), section 57 applies. Note 2: If the priority between a transferor-granted interest and a transferee-granted interest is not covered by this section, then section 55 applies. Note 3: For attachment and perfection in relation to transferred collateral, see section 34. Note 4: For a grantor’s rights in relation to transferring collateral, see section 79.

(2) This Division does not prevent a secured party from perfecting a security interest in any way in order to have priority over another security interest.

[PPSA.67] Priority when transferor-granted interest has been continuously perfected 67 The transferor-granted interest has priority if: (a) it was perfected immediately before the transfer; and (b) it has been continuously perfected since the transfer. ____________________ Comparative Legislation Comparable sections of New Zealand legislation: ss 88, 89, 90 and 91 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 51(1), (2) and (4) of the Saskatchewan (Canada) Personal Property Security Act 1993.

Commentary References For further discussion please refer to commentary at [2.9900], [4.3.750].

____________________ [page 215]

[PPSA.68] Priority when there is a break in the perfection of the transferor-granted interest 68 (1) The transferor-granted interest in the transferred collateral has priority (except as mentioned in subsection (2)) if: (a) the transferred collateral is not registered with a serial number (see subsection (4)); and (b) the interest was perfected by registration immediately before the transfer; and (c) the interest becomes unperfected; and Note: See subsection 34(3) for one situation in which a security interest may become unperfected following a transfer of collateral.

(d) the interest is later re-perfected; and (e) a notice is given (whether before or after the interest is re-perfected as mentioned in paragraph (d)) to all other secured parties who have a registration that describes the transferred collateral; and (f) the notice is given in accordance with subsection (5); and (g) the interest has been continuously perfected since it was re-perfected as mentioned in paragraph (d). (2) However, the transferee-granted interest has priority if: (a) subsection (1) applies in relation to the transferor-granted interest; and (b) the transferee-granted interest is perfected immediately before the transferor-granted security is re-perfected as mentioned in paragraph (1)(d); and (c) the transferee acquires the collateral without actual or constructive knowledge that the acquisition constitutes a breach of the security agreement that provides for the transferor-granted interest; and (d) the transferee-granted interest secures performance of an advance made, or an obligation incurred, by the transferee’s secured party before:

the transferor-granted interest is re-perfected as mentioned in paragraph (1)(d); and (ii) the notice is given under paragraph (1)(e); but only to the extent of the advance or obligation. (i)

[subs (2) am Act 96 of 2010 s 3 and Sch 2 items 55 and 56, opn 6 July 2010]

(3) Subsection (2) applies despite section 58 (priority of advances). (4) For the purposes of this section, the transferred collateral is registered with a serial number at a particular time only if a search of the register by reference to that time and by reference only to the serial number of the collateral is capable of disclosing the registration. (5) A notice is given in accordance with this subsection if: (a) the notice is in the approved form; or (b) the notice: (i) states that the secured party expects to perfect a security interest in the transferred collateral; and (ii) contains a description of the transferred collateral; and (iii) sets out the effect of subsections (1) and (2). ____________________ [page 216] [PPSA.68.A] Priority when there is a break in perfection of the transferor — granted interest — Annotations to s 68 Sections 67 and 68 need to be read in conjunction with s 34. The reference to s 34(3) in the note to s 68(1)(c) should be a reference to s 34(2).

____________________ Comparative Legislation Comparable sections of New Zealand legislation: ss 88, 89, 90 and 91 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 51(1), (2) and (4) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.9950].

____________________

DIVISION 5 — PRIORITY OF CREDITORS, AND PURCHASERS OF NEGOTIABLE INSTRUMENTS, CHATTEL PAPER AND NEGOTIABLE DOCUMENTS OF TITLE [ss 69–72]

[PPSA.69] Priority of creditor who receives payment of debt 69 (1) The interest of a creditor who receives payment of a debt owing by a debtor through a payment covered by subsection (3) has priority over a security interest (whether perfected or unperfected) in: (a) the funds paid; and (b) the intangible that was the source of the payment; and (c) a negotiable instrument used to effect the payment. Example: A bank account from which the funds were paid is an example of an intangible that was the source of the payment.

(2) Subsection (1) does not apply if, at the time of the payment, the creditor had actual knowledge that the payment was made in breach of the security agreement that provides for the security interest. (3) Payments made by a debtor are covered by this subsection if they are made through the use of: (a) an electronic funds transfer; or (b) a debit, transfer order, authorisation, or similar written payment mechanism executed by the debtor when the payment was made; or (c) a negotiable instrument. ____________________ [PPSA.69.A] Priority of creditor who receives payment of debt — Annotations to s 69 Case Whether PPSA prevents a person asserting an in personam claim; circumstances in which s 69 applies Commissioner of Inland Revenue v Stiassny [2013] 1 NZLR 140; [2012] NZCA 93 — the New Zealand Court of Appeal held that s 95 of the NZ PPSA (being the equivalent of s 69 of the PPSA) does not prevent in personam claims being made by the debtor against the creditor where, for example, a payment is based on mistake. However, a claim by a secured party (or a debtor for the benefit of a secured party) would be contrary to the purpose of s 95. In this instance, the court held that a restitutionary claim based on a mistake of law could not succeed. Receivers had paid GST on the sale of partnership assets in the mistaken belief that they may have been personally liable to pay the GST.

[page 217] It should also be noted that s 95 applies whether or not the creditor had knowledge of the security interest at the time of the payment to it. In contrast, s 69 of the PPSA does not apply if, at the time of payment, the

creditor had actual knowledge that the payment was made in breach of the security agreement that provides for the security interest. The court was satisfied that the priorities established by a payment falling within s 95 of the NZ PPSA are not controlled by who has title to (or the beneficial interest in) the funds from which the payment is made. It is sufficient if the payment is initiated by the debtor through any means stipulated in s 95(3). Issues as to whether security interests have “crystallised” and whether the payment was made in the ordinary course of business are not relevant to s 95. This decision was affirmed by the Supreme Court of New Zealand in Stiassny v Commissioner of Inland Revenue [2013] 1 NZLR 453; [2012] NZSC 106.

____________________ Commentary Legislation Comparable sections of New Zealand legislation: s 95 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: ss 31(2) and (3) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.10000], [2.12100], [4.10.2650], [4.10.2900].

____________________

[PPSA.70] Priority of person who acquires a negotiable instrument or an interest in a negotiable instrument 70 (1) This section applies if, by a consensual transaction, a person acquires an interest consisting of: (a) a negotiable instrument; or (b) an interest in a negotiable instrument. (2) The interest of the person in the negotiable instrument has priority over a perfected security interest in the negotiable instrument if: (a) the person gave value for the interest; and (b) the person: (i) in the case of a person who acquired the interest in the ordinary course of the person’s business of acquiring interests of that kind — acquired the interest without actual or constructive knowledge that the acquisition constitutes a breach of the security agreement that provides for the security interest; or (ii) otherwise — acquired the interest without actual or constructive knowledge of the security interest; and (c) the person took possession or control of the negotiable instrument. ____________________ [PPSA.70.A] Annotations to s 70

Cases Flexi-Coil Ltd v Kindersley District Credit Union Ltd [1993] SJ No 546; 107 DLR (4th) 129; [1994] 1 WWR 1; 113 SaskR 298; 5 PPSAC (2d) 192 at 200; CFI Trust v Royal Bank of Canada [2013] BCJ No 2049; 2013 BCSC 1715.

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 96 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 31(4) and (6) of the Saskatchewan (Canada) Personal Property Security Act 1993.

[page 218] Commentary References For further discussion please refer to commentary at [2.10150], [4.10.2700], [4.12.2750], [4.12.2800].

____________________

[PPSA.71] Priority of person who acquires chattel paper or an interest in chattel paper 71 (1) This section applies if: (a) a person acquires an interest consisting of: (i) chattel paper; or (ii) an interest in chattel paper; and (b) the interest is acquired: (i) by a consensual transaction; and (ii) in the ordinary course of the person’s business of acquiring interests of that kind; and (iii) for new value. Note: For rights relating to the transfer of chattel paper, see section 80. [subs (1) am Act 96 of 2010 s 3 and Sch 2 item 57, opn 6 July 2010]

(2) The interest of the person in the chattel paper has priority over the following security interests in the chattel paper: (a) if the person took possession of the chattel paper without actual or constructive knowledge of a perfected security interest in the chattel paper — the perfected security interest; (b) in any case — a security interest that has attached to proceeds of inventory as original collateral. (3) This section applies despite sections 62 and 64.

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 98 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 31(7) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.10100], [4.3.800], [4.3.850], [4.8.2000], [4.8.3650].

____________________

[PPSA.72] Priority of holder of negotiable document of title 72 The interest of a holder of a negotiable document of title has priority over a perfected security interest in the document of title if: (a) the holder gave value for the document of title; and (b) the holder: (i) in the case of a holder who acquired the document of title in the ordinary course of the holder’s business of acquiring documents of title of that kind — acquired the interest without actual or constructive knowledge that the acquisition constitutes a breach of the security agreement that provides for the security interest; or [page 219] (ii) otherwise — acquired the document of title without actual or constructive knowledge of the security interest. [s 72 am Act 96 of 2010 s 3 and Sch 2 item 58, opn 6 July 2010]

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 99 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 31(5) and (6) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.4800], [2.10150], [4.12.2750], [4.12.2850].

____________________

DIVISION 6 — PRIORITY OF OTHER INTERESTS [ss 73–77]

[PPSA.73] Priority between security interests and declared statutory interests 73 (1) Interests arising under a law etc in the ordinary course of business An interest (the priority interest) in collateral has priority over a security interest in the collateral if: (a) the priority interest arises (by being created, arising or being provided for): (i) under a law of the Commonwealth, a State or a Territory, unless the person who owns the collateral in which the priority interest is granted agrees to the interest; or (ii) by operation of the general law; and (b) the priority interest arises in relation to providing goods or services in the ordinary course of business; and (c) the person who holds the priority interest provided those goods or services; and (d) no law of the Commonwealth, a State or a Territory provides for the priority between the priority interest and the security interest; and Example: A law of the Commonwealth, a State or a Territory to which subsection (2) applies is a law that provides for the priority between the priority interest and the security interest.

(e) the person who holds the priority interest acquired the interest without actual knowledge that the acquisition constitutes a breach of the security agreement that provides for the security interest. Note: The priority interest might be an interest to which this Act would otherwise not apply (see subsection 8(2)).

(2) Statutory interests declared by law The priority between an interest in collateral (the statutory interest) that arises, by being created, arising or being provided for, under a law of the Commonwealth, a State or a Territory (the relevant jurisdiction) and a security interest in the same collateral is to be determined in accordance with that law if, and only if: (a) that law declares that this subsection applies to statutory interests of that kind; and [page 220]

(b) the statutory interest arises after the declaration comes into effect. Note: The statutory interest might be an interest to which this Act would otherwise not apply (see subsection 8(2)).

(3) However, for the purposes of subsection (2), as it applies to a law of the Commonwealth: (a) the Minister may, by an instrument made under subsection (4), make the declaration required by paragraph (2)(a); and (b) the priority mentioned in subsection (2) may be determined in accordance with that instrument. (4) The Minister may make a legislative instrument containing a declaration, or determining priority, or both, for the purposes of subsection (3). (5) Subsection (2) is subject to subsection (1). (6) Rights to payment in connection with specifically identified land An interest (the priority interest) in collateral has priority over a security interest in the collateral if the priority interest is an interest of a kind mentioned in subparagraph 8(1)(f)(ii) (certain rights to payment in respect of land). (7) Interests arising under the general law The priority between an interest in collateral (the general law interest) that arises by operation of the general law and a security interest in the same collateral is to be determined in accordance with an instrument made under subsection (8) if, and only if: (a) no law of the Commonwealth (other than this Act and that instrument) provides for the priority between the general law interest and the security interest; and (b) the instrument provides that this subsection applies to general law interests of that kind; and (c) the general law interest arises after the instrument comes into effect. (8) The Minister may make a legislative instrument for the purposes of subsection (7). (9) Subsection (7) is subject to subsection (1). Note: This section does not apply to priorities in relation to interests that arise before the registration commencement time (within the meaning of section 306). Priorities in relation to such interests are unaffected by this Act (see section 312).

____________________ [PPSA.73.A] Priority between security interests and declared statutory interests — Annotations to s 73 Case

Priority between liens and security interests (subs 73(1)) Toll Logistics (NZ) Ltd v McKay [2011] NZCA 188; [2011] 2 NZLR 601; (2011) 10 NZCLC 264,909; BC201161701 — a lien referred to in s 93 of the NZ PPSA (which deals with priority between liens and security interests) refers to liens that are not security interests under the NZ PPSA. Section 93 of the NZ PPSA is similar to s 73(1) of the PPSA although the latter refers to ‘interests’ in collateral rather than liens and is more restrictive as to when it will apply.

____________________ Commentary References For further discussion please refer to commentary at [SL1.2], [1.4100], [1.4150], [2.10200], [4.4.750], [4.4.850], [4.10.3050], [4.11.1600].

____________________ [page 221]

[PPSA.74] Execution creditor has priority over unperfected security interest 74 (1) The interest of an execution creditor in collateral has priority over any security interest in the same collateral that is not perfected at the time covered by subsection (4) (even if such a security interest is later perfected). (2) To avoid doubt, an execution creditor does not include a landlord who exercises a right of distress. (3) This section applies despite any other section in this Part. (4) Time of seizure or execution This subsection covers the following times: (a) if the collateral is seized by the execution creditor or by another person on behalf of the execution creditor — the time of seizure; (b) in any other case — the time when: (i) an order is made by a court in respect of a judgment in relation to the execution creditor; or (ii) a garnishee order is made in relation to the execution creditor. ____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 103 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 20(1) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.10350].

____________________

[PPSA.75] Priority of security interests held by ADIs 75 To avoid doubt, a perfected security interest, held by an ADI, in an ADI account with the ADI has priority over any other perfected security interest in the ADI account. Note 1: A security interest that is held by an ADI in an ADI account is perfected by control (see paragraph 21(2)(c) and section 25). Note 2: This provision does not affect any right of set-off the grantor might have in relation to the account (see paragraph 8(1)(d)). [s 75 am Act 35 of 2011 s 3 and Sch 2 items 17–19, opn 26 May 2011]

____________________ Commentary References For further discussion please refer to commentary at [2.8700], [4.2.1950], [4.2.3800], [4.2.4200], [4.8.2200].

____________________

[PPSA.76] Priority of security interests in returned goods 76 (1) Security interest held by account transferee A perfected security interest in goods that has reattached to the property under subsection 37(1) has priority over a security interest in the goods that is granted by the operation of subsection 38(1) to a transferee of an account. Note: Section 37 deals with security interests that reattach when goods are returned. Section 38 provides for a security interest in an account or chattel paper to arise automatically when goods are returned.

(2) A security interest in goods that is granted by the operation of subsection 38(2) to a transferee of chattel paper has priority over the following perfected security interests: (a) a perfected security interest in the goods that is granted by the operation of subsection 38(2) to a transferee of an account; [page 222] (b) if the transferee takes possession of the chattel paper in the ordinary course of business of acquiring chattel paper of that kind and for new value: (i) a perfected security interest in the goods that has reattached under

subsection 37(1); or (ii) a perfected security interest in the goods as after-acquired property that attaches when the goods come into the possession of the grantor or transferee in the circumstances mentioned in paragraph 37(1)(d). (3) Security interest granted by buyer or lessee A security interest (the priority interest) in goods that is granted by a person who acquires an interest in the property has priority over a security interest in the goods that reattaches under section 37, or is granted by the operation of section 38, if: (a) the priority interest attaches while the goods are in the possession of the person; and (b) immediately before the repossession time (referred to in paragraph 37(1)(d) or 38(1)(d)), the priority interest is perfected. ____________________ [PPSA.76.A] Annotations to s 76 Section 76(3) provides that the “priority interest” has priority over a security interest that reattaches under s 37, or is granted by the operation of s 38. It does not say that the priority interest has priority over a security interest of the seller or lessor to the “person who acquires an interest in the property”.

____________________ Comparative Legislation Comparable sections of Canadian legislation: s 29(5), (6) and (7) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.2800], [2.10400], [4.2.4300].

____________________

[PPSA.77] Priority of certain security interests if there is no foreign register 77 (1) Scope This section applies to a security interest (the priority interest) in an account, financial property or an intermediated security if the law of the jurisdiction that governs the perfection, and the effect of perfection or nonperfection, of the priority interest does not provide for the public registration or recording of the priority interest, or a notice relating to the priority interest. Note: For when laws of other jurisdictions govern a security interest, see Part 7.2. [subs (1) am Act 96 of 2010 s 3 and Sch 2 items 133 and 152, opn 6 July 2010]

(2) Security interests in accounts A priority interest in an account has priority, in proceedings in an Australian court, over another interest in the account (whether or not the other interest is a security interest) if the priority

interest is perfected by registration under this Act before the other interest attaches to the account. (3) Security interests in financial property and intermediated securities A priority interest in personal property that is financial property or an intermediated security has priority, in proceedings in an Australian court, over another interest in the personal property (whether or not the other interest is a security interest) if: (a) the priority interest is perfected by registration under this Act before the other interest attaches to the personal property; and (b) when the other interest arises in the personal property: [page 223] (i) the personal property is located in Australia; and (ii) the secured party does not have possession or control of the personal property. Note: For when personal property is located in a jurisdiction, see section 235. [subs (3) am Act 96 of 2010 s 3 and Sch 2 items 59–61, opn 6 July 2010]

(4) Relationship with sections 239 and 240 Subsections (2) and (3) apply in proceedings in an Australian court even if the law of another jurisdiction applies in the proceedings in relation to a security interest in an account or financial property under subsection 239(2) or 240(4) or (5). [subs (4) am Act 96 of 2010 s 3 and Sch 2 item 62, opn 6 July 2010]

____________________ Commentary References For further discussion please refer to commentary at [2.10450], [4.10.2800], [4.12.350], [4.12.2900], [5.650]–[5.750], [5.1300].

____________________

PART 2.7 — TRANSFER OF INTERESTS IN COLLATERAL [ss 78–81] [Heading subst Act 96 of 2010 s 3 and Sch 2 item 63, opn 6 July 2010]

[PPSA.78] Guide to this Part 78

This Part deals with the transfer of interests in collateral. Collateral may be transferred despite a contrary provision in a security agreement (or a provision declaring the transfer to be a default), if the grantor and transferee consent, or by the operation of law. The rights of a transferee of an account or chattel paper are subject to the contract between the account debtor and the transferor, and certain general law claims the account debtor may have against the transferor. A modification of the contract (or a substituted contract) between the account debtor and the transferor is effective against the transferee except in certain situations (dishonesty, commercial unreasonableness or adverse effects on the transferee’s rights or the transferor’s ability to perform the contract). A term in a contract between an account debtor and a transferor that imposes certain restrictions on the transfer of an account or chattel paper binds the transferor to the extent of making the transferor liable in damages for breach of contract, but is unenforceable against third parties. [s 78 am Act 96 of 2010 s 3 and Sch 2 item 64, opn 6 July 2010]

[PPSA.79] Transfer of collateral despite prohibition in security agreement 79 (1) If collateral would be able to be transferred (including by sale, by creating a security interest or under proceedings to enforce a judgment) but for a provision in a security agreement prohibiting the transfer or declaring the transfer to be a default, the collateral may be transferred, despite the provision: (a) by consent between the grantor and the transferee; or (b) by operation of law. Note: See section 32 in relation to security interests in proceeds that arise as a result of a transfer.

[page 224] (2) A transfer mentioned in subsection (1) does not prejudice the rights of the secured party under the security agreement or otherwise, including the right to treat a prohibited transfer as an act of default. ____________________ [PPSA.79.A] Annotations to s 79 As provided in s 273, the fact that title to collateral is in a secured party rather than a grantor does not affect the application of any provision of the PPSA relating to rights, duties, obligations or remedies. Section 79(1) should be read as confirming a grantor’s ability to sell or grant a further security interest in collateral even though it does not have ownership or title to it as a matter of general law and even though a security agreement may prohibit such a dealing. This interpretation facilitates the operation of the “taking free” rules in Pt 2.5, the priority rules in Pt 2.6 and various other provisions in the Act in the manner contemplated by s 273. Whether a buyer “takes free” of a security interest will depend on the applicability of the rules under Pt

2.5. Section 79(1) does not intrude into the actual application of those rules and a secured party can still claim for a breach of contract to the extent a dealing with the collateral is contrary to the terms of the security agreement (see s 79(2)). Also note the commentary on possession being a sufficient right in collateral for the purposes of s 19, PPSA (see [PPSA.19.A]). Also note the commentary on transferred collateral at [PPSA.34A].

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 87 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 33 of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [1.3100], [2.2400], [2.2650], [2.3950], [2.9650]–[2.9750], [2.9800], [2.13350], [4.8.1950].

____________________

[PPSA.80] Rights on transfer of account or chattel paper — rights of transferee and account debtor 80 (1) Rights of transferee subject to contractual terms and defences The rights of a transferee of an account or chattel paper (including a secured party or a receiver) are subject to: (a) the terms of the contract between the account debtor and the transferor, and any equity, defence, remedy or claim arising in relation to the contract (including a defence by way of a right of set-off); and (b) any other equity, defence, remedy or claim of the account debtor against the transferor (including a defence by way of a right of set-off) that accrues before the first time when payment by an account debtor to the transferor no longer discharges the obligation of the account debtor under subsection (8) to the extent of the payment. (2) Subsection (1) does not apply if the account debtor makes an enforceable agreement not to assert defences to claims arising out of the contract. (3) Effect of modification or substitution of contract on transferee Unless the account debtor has otherwise agreed, a modification of, or substitution for, the contract between the account debtor and the transferor is effective against the transferee (including a secured party or a receiver) if: (a) the account debtor and the transferor have acted honestly in modifying or substituting the contract; and [page 225]

(b) the manner in which the modification or the substitution is made is commercially reasonable; and (c) the modification or substitution does not have a material adverse effect on: (i) the transferee’s rights under the contract; or (ii) the transferor’s ability to perform the contract. Note: For the meaning of modification, see section 10.

(4) Subsection (3) applies: (a) to the extent that a transferred right to payment arising out of the contract has not been fully earned by performance; and (b) even if there has been notice of the transfer to the account debtor. (5) If a contract has been modified or substituted in the manner described in subsection (3), the transferee obtains rights that correspond to the rights of the transferor under the contract as modified or substituted. (6) Nothing in subsections (3) to (5) affects the validity of a term in a transfer agreement that provides that a modification or substitution mentioned in subsection (3) is a breach of contract by the transferor. (7) Payment by account debtor after transfer If an account or chattel paper is transferred, the account debtor may continue to make payments under the contract to the transferor: (a) until the account debtor receives a notice that: (i) states that the amount payable or to become payable under the contract has been transferred; and (ii) states that payment is to be made to the transferee; and (iii) identifies the contract (whether specifically or by class) under which the amount payable is to become payable; or (b) after receiving a notice under paragraph (a) (other than a notice from the transferor), if: (i) the account debtor requests the transferee to provide proof of the transfer; and (ii) the transferee fails to provide proof before the end of 5 business days after the day of the request. (8) Payment by an account debtor to a transferee in accordance with a notice under paragraph (7)(a) (including in the circumstances described in paragraph (7)(b)) discharges the obligation of the account debtor to the extent of the payment.

____________________ [PPSA.80.A] Annotations to s 80 A secured party’s security interest in accounts is subject to the grantor’s entitlement to the account; Greenview (Municipal District No 16) v Bank of Nova Scotia [2013] AJ No 931; 2013 ABCA 302; 556 AR 344; 5 CBR (6th) 69.

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 102 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 41(1) and (2) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [4.2.1700], [4.2.2250], [4.2.2450], [4.3.850], [4.8.1650], [4.8.1850], [4.8.4400].

____________________ [page 226]

[PPSA.81] Rights on transfer of account or chattel paper — contractual restrictions and prohibitions on transfer 81 (1) Scope This section applies to a term in a contract if: (a) the contract is between an account debtor and a transferor; and (b) the term restricts or prohibits transfer of any of the following for currency due or to become due: (i) the whole of an account that is the proceeds of inventory; (ii) the whole of an account that arises from granting a right (other than a right granted under a construction contract), or providing services (other than financial services), in the ordinary course of a business of granting rights or providing services of that kind (whether or not the account debtor is the person to whom the right is granted or the services are provided); (iii) the whole of an account that is the proceeds of an account mentioned in subparagraph (ii); (iv) chattel paper. (2) Statutory restriction on contracts The term in the contract: (a) is binding on the transferor, but only to the extent of making the transferor liable in damages for breach of contract; and

(b) is unenforceable against third parties. ____________________ Comparative Legislation Comparable sections of Canadian legislation: s 41(9) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [1.1350], [4.2.2200], [4.3.850].

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[page 227]

CHAPTER 3 — SPECIFIC RULES FOR CERTAIN SECURITY INTERESTS [ss 82–106] PART 3.1 — GUIDE TO THIS CHAPTER [s 82] [PPSA.82] Guide to this Chapter 82 This Chapter contains specific rules for certain security interests. Part 3.2 contains some specific rules relating to agricultural interests (such as security interests in crops and livestock). Part 3.3 deals with security interests in accessions to personal property. Part 3.4 deals with security interests in personal property that loses its identity by being processed or commingled. Part 3.5 deals with security interests in intellectual property.

PART 3.2 — AGRICULTURAL INTERESTS [ss 83–86] [PPSA.83] Guide to this Part 83 This Part includes rules on 3 topics: (a) the relationship between a security interest in crops and interests in the land on which the crops are growing; and (b) the capacity for a security interest to attach to crops while they are growing, and to the products of livestock, before the crops or products become proceeds (for example, the wool on a sheep’s back before it is shorn); and (c) the priority to be given to security interests in crops (and proceeds) granted to enable the crops to be produced, and security interests in livestock (and proceeds) granted to enable the livestock to be fed and developed. Other provisions of this Act that deal with agricultural interests are subsections 31(4), (5) and (6) (meaning of proceeds of crops and livestock) and Division 6 of Part 4.3 (enforcement of security interests in crops and livestock). [s 83 subst Act 96 of 2010 s 3 and Sch 2 item 65, opn 6 July 2010]

____________________ Commentary References For further discussion please refer to commentary at [4.7.50]–[4.7.150].

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[PPSA.84] Relationship between security interest in crops and interest in land 84 (1) Effect of security interest in crops on lessor or mortgagee of land A security interest in crops does not prejudicially affect the rights of a lessor or mortgagee of land on which the crops are growing if: (a) those rights existed at the time the security interest was created; and [page 228] (b) the lessor or mortgagee has not consented in writing to the creation of the security interest. (2) Effect of sale etc of land on perfected security interest in crops Subject to subsection (1), a perfected security interest in crops is not prejudicially affected by a subsequent sale, lease or mortgage of, or other encumbrance on, the land on which the crops are growing. ____________________ Comparative Legislation Comparable sections of New Zealand legislation: ss 100 and 101 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 37 of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [4.7.200], [4.7.1350].

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[PPSA.84A] Attachment of security interests to crops while they are growing and to the products of livestock 84A (1) Security interest in crops while they are growing To avoid doubt, a security interest may attach to crops while they are growing. (2) Security interest in the products of livestock To avoid doubt, a security interest may attach to the products of livestock before they become proceeds (for

example, the wool on a sheep’s back before the sheep is shorn). Note 1: Livestock includes the products of livestock before they become proceeds (see section 10). Note 2: For what are the proceeds of crops and livestock, see subsections 31(4), (5) and (6). [s 84A insrt Act 96 of 2010 s 3 and Sch 2 item 66, opn 6 July 2010]

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 51 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 12(3)(a), (b) and (d) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [4.7.750].

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[PPSA.85] Priority of crops 85 A perfected security interest (the priority interest) that is granted by a grantor in crops or the proceeds of crops has priority over any other security interest that is granted by the same grantor in the same crops or proceeds if: (a) the priority interest is granted for value; and (b) the priority interest is granted to enable the crops to be produced; and (c) either: (i) the security agreement providing for the priority interest is made while the crops are growing; or (ii) the crops are planted during the period of 6 months after the day the security agreement providing for the priority interest is made. [s 85 am Act 96 of 2010 s 3 and Sch 2 item 67, opn 6 July 2010]

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 51 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 34(11) of the Saskatchewan (Canada) Personal Property Security Act 1993.

[page 229] Commentary References For further discussion please refer to commentary at [4.7.1000]–[4.7.1050].

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[PPSA.86] Priority of livestock 86 A perfected security interest (the priority interest) that is granted by a

grantor in livestock or the proceeds of livestock has priority over any other security interest (other than a purchase money security interest) that is granted by the same grantor in the same livestock or proceeds if: (a) the priority interest is granted for value; and (b) the priority interest is granted to enable the livestock to be fed or developed; and (c) either: (i) the livestock are held by the grantor at the time the security agreement providing for the priority interest is made; or (ii) the livestock are acquired by the grantor during the period of 6 months after the day the security agreement providing for the priority interest is made. [s 86 am Act 96 of 2010 s 3 and Sch 2 item 68, opn 6 July 2010]

____________________ [PPSA.86.A] Annotations to s 86 Champion Feed Services Ltd v Hospers 2014 ABQB 490 — considered the equivalent provision in the Alberta PPSA. The holder of the priority interest was not entitled to priority for any advances made before it registered in respect of its security interest.

____________________ Comparative Legislation Comparable section of Canadian legislation: s 34(11) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [4.7.300], [4.7.1000], [4.7.1100].

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PART 3.3 — ACCESSIONS [ss 87–97] [PPSA.87] Guide to this Part 87 This Part deals with security interests in accessions to personal property. A security interest in goods that become an accession to other goods continues in the accession. The Part sets out the priority between an interest (whether or not a security interest) in an accession and the goods to which the accession is affixed. A security interest arising in an accession before it is affixed to goods has priority over a security interest in the goods as a whole. However, there are exceptions relating to interests in the whole created after the accession is affixed and before the security interest in the accession is perfected. A security interest arising in an accession after it is affixed will ordinarily be subordinate to an existing interest in the other goods (unless, for example, the holder of the existing interest

[page 230] agrees otherwise) and to a later interest in the other goods that arises before the interest in the accession is perfected. The Part also deals with the removal of accessions by a secured party who has an interest in the accession.

____________________ Commentary References For further discussion please refer to commentary at [2.10600].

____________________

[PPSA.88] Continuation of security interests in accessions 88 A security interest in goods that become an accession to other goods continues in the accession. Note: However, a person might take an interest in the accession free of the security interest because of another provision of this Act.

____________________ Comparative Legislation Comparable sections of New Zealand legislation: see s 78 of the New Zealand Personal Property Securities Act 1999. Commentary References For further discussion please refer to commentary at [2.10650], [4.1.2300].

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[PPSA.89] Default rule — interest in accession has priority 89 Except as otherwise provided in this Act, a security interest in goods that is attached at the time when the goods become an accession has priority over a claim to the goods as an accession made by a person with an interest in the whole. ____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 79 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 38(2) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.10700].

____________________

[PPSA.90] Priority interest in whole — before security interest in accession is perfected 90 The interest of any of the following persons has priority over a security interest in goods that is attached at the time when the goods become an accession: (a) a person who acquires for value an interest in the whole after the goods become an accession, but before the security interest in the accession is perfected; (b) an assignee for value of a person with an interest in the whole at the time when the goods become an accession, but before the security interest in the accession is perfected; (c) a person with a perfected security interest in the whole who makes an advance under the security agreement relating to the security interest after the goods become an accession, but before the security interest in the accession is perfected, and only to the extent of the advance; [page 231] (d) a person with a perfected security interest in the whole who acquires the right to retain the whole in satisfaction of the obligation secured after the goods become an accession, but before the security interest in the accession is perfected. ____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 80 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 38(3) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.10750].

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[PPSA.91] Priority interest in whole — security interest in accession attaches after goods become accession 91 A security interest in goods that attaches after the goods become an accession is subordinate to the interest of:

(a) a person who has an interest in the other goods at the time when the goods become an accession and who: (i) has not consented to the security interest in the accession; and (ii) has not disclaimed an interest in the accession; and (iii) has not entered into an agreement under which another person is entitled to remove the accession; and (iv) is otherwise entitled to prevent the grantor from removing the accession; or (b) a person who acquires an interest in the whole after the goods become an accession, but before the security interest in the accession is perfected. ____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 81 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 38(4) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.10800].

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[PPSA.92] Secured party must not damage goods when removing accession 92 A secured party who is entitled to remove an accession under section 123 (seizure of collateral) must remove the accession from the whole in a manner that causes no greater damage to the other goods, or that puts the person in possession of the whole to no greater inconvenience, than is necessarily incidental to the removal of the accession. ____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 125 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 38(7) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.14250].

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[PPSA.93] Reimbursement for damage caused in removing accessions 93 (1) A person, other than the grantor, who has an interest in the other goods at the time the goods become an accession is entitled to reimbursement for any damage to that person’s interest in the other goods caused by the removal of the accession. (2) Any reimbursement payable under subsection (1) does not include reimbursement for a reduction in the value of the property caused by the absence of the accession or by the necessity of the replacement of the accession. ____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 126 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 38(8) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.14250].

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[PPSA.94] Refusal of permission to remove accession 94 A person entitled to reimbursement under section 93 may refuse permission to remove the accession until the secured party has given adequate security for the reimbursement. ____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 127 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 38(9) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.14250].

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[PPSA.95] Secured party must give notice of removal of accession 95 (1) Notice required to be given by secured party A secured party who is entitled to remove an accession from the whole must give notice of the secured party’s intention to remove the accession to each of the following persons in accordance with subsections (2) and (3):

(a) the grantor; (b) a secured party with a security interest in the accession that has a higher priority. (2) The secured party must give a notice to a person: (a) at least 10 business days before the day the accession is removed; or (b) if the person has given a written notice to the secured party specifying a smaller number of days to apply for the purposes of this section — at least that number of days before the accession is removed. (3) A notice must contain the following: (a) the name of the secured party giving the notice; (b) a description of the accession and of the other goods; (c) a statement of the obligation owed to the secured party, and the value of the accession if the accession were removed from the other goods; (d) a statement of intention to remove the accession, unless the obligation secured by the security interest in the accession is discharged, or the value of the accession is paid, before the end of the period to which subsection (2) applies. [page 233] (4) The notice may be given in the approved form. (5) When notice is not required The secured party is not required to give a notice to a person under subsection (1) if, after the debtor defaults, the person gives written consent to the secured party to remove the accession without receiving a notice. (6) The secured party is not required to give a notice to any person under subsection (1) if: (a) the secured party believes on reasonable grounds that the accession will decline substantially in value if it is not disposed of immediately after default; or (b) the cost of expenses for the retention of the accession that are secured against the accession is disproportionately large in relation to its value. Note: In addition, a secured party is not required to give a notice in any of the circumstances set out in section 144 (when certain enforcement notices are not required).

(7) A person is not entitled to a notice under subsection (1) in relation to an

accession to goods only because the person has an interest in another accession to the same goods. ____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 129 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 38(12) and (13) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.14250], [4.13.3650].

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[PPSA.96] When person with an interest in the whole may retain accession 96 A person, other than the grantor, who has an interest in the whole of goods that under this Act is subordinate to a security interest in an accession, may retain the accession if: (a) the obligation to the secured party with a security interest that has priority over all other security interests in the accession is performed; or (b) the secured party mentioned in paragraph (a) is paid the value of the accession at the time of payment, if the accession were to be removed from the goods. ____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 130 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 38(11) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.10850].

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[PPSA.97] Court order about removal of accession 97 A court may, on the application of a person entitled to receive a notice under section 95 (notice of removal of an accession), make an order: (a) postponing the removal of the accession; or (b) determining the amount payable to the secured party under section 96 for the retention of the accession. Note: For which courts have jurisdiction, and for transfers between courts, see Part 6.2.

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[page 234] Comparative Legislation Comparable sections of New Zealand legislation: ss 128 and 131 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 38(10) and (15) of the Saskatchewan (Canada) Personal Property Security Act 1993.

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PART 3.4 — PROCESSED OR COMMINGLED GOODS [ss 98–103] [PPSA.98] Guide to this Part 98 This Part deals with security interests in goods that become an unidentifiable part of a larger product or mass. A security interest in the original goods continues in the product or mass. The Part sets out perfection and priority rules that apply in this situation.

[PPSA.99] Continuation of security interests in goods that become processed or commingled 99 (1) A security interest in goods that subsequently become part of a product or mass continues in the product or mass if the goods are so manufactured, processed, assembled or commingled that their identity is lost in the product or mass. Note: A person might take an interest in the product or mass free of the security interest because of the operation of another provision of this Act.

(2) Without limiting subsection (1), the identity of goods that are manufactured, processed, assembled or commingled is lost in a product or mass if it is not commercially practical to restore the goods to their original state. ____________________ [PPSA.99.A] Continuation of security interests in goods that become processed or commingled — Annotations to s 99 Cases The provisions in Pt 3.4 apply if goods become part of a product or mass as a result of manufacturing, processing or commingling. Goods that are consumed in the course of manufacturing or processing other goods are unlikely to be covered by these provisions. For example, fuel or catalysts that are used as part of a manufacturing or refining process for metals, but which are consumed as part of that process and do not

form part of the manufactured or refined end product, are unlikely to be covered by these provisions. In First National Bank of Brush v Bostron 564 P.2d 964 (Colorado Court of Appeals, 1977) it was held that cattle feed did not undergo the requisite transformation as required by a similar provision in the US Uniform Commercial Code. Once eaten the feed not only lost its identity but it ceased to exist and did not become part of the product or mass. See also In re McDougall 60 B.R. 635 (1986) and Farmers Co-Op Elevator Co v Union State Bank 409 N.W. 2d 178 (1987). Swindle v Matakana Estate Limited (in liquidation) [2011] NZHC 1345 — involving the commingling of grapes and wine juice.

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 82 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 39(1) of the Saskatchewan (Canada) Personal Property Security Act 1993.

[page 235] Commentary References For further discussion please refer to commentary at [2.10950], [2.11000], [4.1.2300], [4.7.1550].

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[PPSA.100] Perfection of security interest in goods that become processed or commingled applies to product or mass 100 For the purposes of section 55 (default priority rules), perfection of a security interest in goods that subsequently become part of a product or mass is to be treated as perfection of the security interest in the product or the mass. ____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 83 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 39(3) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.11000], [2.11050], [4.7.1550].

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[PPSA.101] Limit on value of priority of goods that become part of processed or commingled goods 101 Any priority that a security interest continuing in the product or mass has over another security interest in the product or mass is limited to the value of the goods on the day on which they became part of the product or mass. ____________________ [PPSA.101.A] Limit on value of priority of goods that become part of processed or commingled goods — Annotations to s 101 Cases Swindle v Matakana Estate Limited (in liquidation) [2011] NZHC 1345 — involving the commingling of grapes and wine juice.

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 84 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 39(5) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.11000], [4.7.1550].

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[PPSA.102] Priority where more than one security interest continues in processed or commingled goods 102 (1) A perfected security interest continuing in a product or mass has priority over an unperfected security interest continuing in the same product or mass. (2) If more than one perfected security interest continues in the same product or mass, each perfected security interest is entitled to share in the product or mass according to the ratio that the obligation secured by the perfected security interest bears to the sum of the obligations secured by all perfected security interests in the same product or mass. (3) If more than one unperfected security interest continues in the same product or mass, each unperfected security interest is entitled to share in the product or mass [page 236]

according to the ratio that the obligation secured by the unperfected security interest bears to the sum of the obligations secured by all unperfected security interests in the same product or mass. (4) For the purposes of this section, the obligation secured by a security interest does not exceed the value of the goods on the day on which the goods became part of the product or mass. ____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 85 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 39(2) and (4) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.11100], [2.11150], [4.7.1550].

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[PPSA.103] Priority of purchase money security interest in processed or commingled goods 103 Despite section 102, a perfected purchase money security interest in goods that continues in the product or mass has priority over: (a) a non-purchase money security interest in the goods that continues in the product or mass; and (b) a non-purchase money security interest in the product or mass given by the same grantor. ____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 86 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 39(6) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [4.7.1550].

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PART 3.5 — INTELLECTUAL PROPERTY [ss 104– 106] [PPSA.104] Guide to this Part 104

This Part includes some rules with a particular application to security interests in intellectual property and intellectual property licences. If the exercise of rights by a secured party in relation to goods necessarily involves the exercise of intellectual property rights covered by the security interest, this Act applies to the intellectual property rights in the same way as it applies to the goods. The Part also deals with a transfer of intellectual property that is the subject of a licence (or sub-licence) in which a security interest is granted. The security agreement binds the successors in title to the licensor or sub-licensor.

____________________ Commentary References For further discussion please refer to commentary at [4.9.50].

____________________ [page 237]

[PPSA.105] Implied references to intellectual property rights 105 (1) Act applies to intellectual property rights etc This Act applies to intellectual property rights (including rights exercisable under an intellectual property licence), in relation to goods, in the same way as it applies to the goods, if: (a) the exercise by a secured party of rights in relation to the goods arising under a security agreement necessarily involves an exercise of the intellectual property rights; and (b) the payment or obligation secured by the security interest is (in addition) secured by a security interest that is attached to the intellectual property rights. (2) Description of goods taken to include a description of intellectual property rights For the purposes of this Act, if a registration perfects the security interest in goods mentioned in subsection (1), the following descriptions are taken to include a description of the intellectual property rights concerned, or of an intellectual property licence required to exercise those rights: (a) a description of the goods in the security agreement; (b) the registered description of the goods; (c) a description of the goods included in a notice under this Act. (3) Subsection (2) applies subject to a contrary intention in the security

agreement, registration or notice. ____________________ Commentary References For further discussion please refer to commentary at [4.9.150], [4.9.1200].

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[PPSA.106] Intellectual property licences and transfers of intellectual property 106 (1) If: (a) a security interest is granted in an intellectual property licence; and (b) the intellectual property in which the licence is granted is later transferred; and (c) the licensee of the intellectual property licence continues to hold the licence after the transfer; the security agreement that provides for the security interest binds every successor in title to the licensor of the intellectual property licence to the same extent as the security agreement was binding on the licensor. (2) If: (a) a security interest is granted in a sub-licence granted under an intellectual property licence; and (b) the intellectual property licence under which the sub-licence is granted is later transferred; and (c) the licensee of the sub-licence continues to hold the sub-licence after the transfer; the security agreement that provides for the security interest binds every successor in title to the licensor of the sub-licence to the same extent as the security agreement was binding on the licensor. ____________________ Commentary References For further discussion please refer to commentary at [4.9.950], [4.9.1000].

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[page 238]

CHAPTER 4 — ENFORCEMENT OF SECURITY INTERESTS [ss 107–144] PART 4.1 — GUIDE TO THIS CHAPTER [s 107] [PPSA.107] Guide to this Chapter 107 This Chapter deals with how to enforce a security interest in personal property. Parties can contract out of some of the provisions of this Chapter. Security interests in liquid assets can be enforced by giving a notice to the person who owes an amount to the grantor. Other kinds of assets can be seized and disposed of under Part 4.3. A secured party can also retain or purchase the collateral. Proceeds arising from the disposal of collateral must be distributed in accordance with Part 4.4. That Part also contains other rules of general application in relation to the enforcement of security interests.

____________________ Commentary References For further discussion please refer to commentary at [2.13300].

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PART 4.2 — GENERAL RULES [ss 108–121] [PPSA.108] Guide to this Part 108 This Part provides general rules about the rights and remedies available to a party to a security agreement for enforcing a security interest in personal property. The Part does not apply to certain kinds of security interests. Important rules include the following: (a) a general standard of honesty and commercial reasonableness is to apply to enforcement actions; (b) parties can contract out of specified provisions of this Chapter; (c) if the same obligation is secured by both personal property and an interest in land, a secured party may decide to enforce the personal property interest in the same way as the interest in the

land would be enforced, or to enforce the security interest under this Chapter; (d) rules for the enforcement of security interests in certain liquid assets (accounts, chattel paper and negotiable instruments) by giving notice to specified persons or seizing proceeds; (e) rules relating to the enforcement of security interests in crops and livestock. [s 108 am Act 96 of 2010 s 3 and Sch 2 item 69, opn 6 July 2010]

[PPSA.109] Application of this Chapter 109 (1) Security interests to which this Chapter does not apply This Chapter does not apply to security interests that are provided for by the following: [page 239] (a) a transfer of an account or chattel paper that does not secure payment or performance of an obligation; (b) a security interest that is incidental to a security interest referred to in paragraph (a); (c) a PPS lease that does not secure payment or performance of an obligation; (d) a commercial consignment that does not secure payment or performance of an obligation. (2) This Chapter does not apply to security interests in goods that are located outside Australia. Note: For where personal property is located, see section 235.

(3) Security interests in investment instruments or intermediated securities that are perfected by possession or control This Chapter (apart from sections 110, 111, 113 and 140) does not apply in relation to a person who has perfected a security interest in: (a) an investment instrument by taking possession or control of the instrument; or (b) an intermediated security by taking control of the intermediated security. [subs (3) am Act 96 of 2010 s 3 and Sch 2 items 133 and 153, opn 6 July 2010]

(4) To avoid doubt, subsection (3) applies whether the person has perfected the security interest only by possession or control, or by another method as well.

(5) Sections that do not apply to household property The following provisions do not apply in relation to collateral that is used by a grantor predominantly for personal, domestic or household purposes: (a) sections 117 and 118 (relationship with land laws); (b) section 120 (enforcement of security interests in liquid assets); (ba) section 126 (apparent possession of collateral); (c) paragraphs 128(2)(b) and (c) (disposal of collateral by lease or licence); (d) section 129 (disposal by purchase); (e) section 134 (retention of collateral). [subs (5) am Act 96 of 2010 s 3 and Sch 2 item 70, opn 6 July 2010]

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 105 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 55(2) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [1.3150], [2.13600], [2.13700], [4.2.1350], [4.2.4500], [4.3.650], [4.8.4350], [4.10.3350], [4.13.3300], [4.13.3350], [4.13.3450].

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[PPSA.110] Rights and remedies 110 This Act does not derogate in any way from the rights and remedies the following parties to a security agreement have, apart from this Act, against each other in relation to a default by the debtor under the security agreement: (a) the debtor; (b) the grantor; (c) a secured party. ____________________ [page 240] [PPSA.110.A] Annotations to s 110 Re Maiden Civil (P & E) Pty Ltd; Albarran v Queensland Excavation Services Pty Ltd (2013) 277 FLR 337; [2013] NSWSC 852; BC201310524 — the court noted the enforcement rights and remedies available under the terms of the security agreement.

____________________ Commentary References For further discussion please refer to commentary at [2.13300], [4.3.650].

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[PPSA.111] Rights and duties to be exercised honestly and in a commercially reasonable manner 111 (1) All rights, duties and obligations that arise under this Chapter must be exercised or discharged: (a) honestly; and (b) in a commercially reasonable manner. (2) A person does not act dishonestly merely because the person acts with actual knowledge of the interest of some other person. ____________________ [PPSA.111.A] Annotations to s 111 Section 111 is restricted in its application to rights, duties and obligations that arise under Ch 4. The section does not apply to rights, duties and obligations that arise under other parts of the PPSA or under the security agreement (including remedies and enforcement rights provided for contractually, at least to the extent those rights can be exercised either without regard to duties and obligations in Ch 4 or those duties and obligations can be contracted away under s 115). Also, note the specific provisions in s 131 regarding the duty to obtain market value on a disposal of collateral under s 128. Section 111 may not apply to the appointment of a receiver either because of s 116 or because the appointment of a receiver is a right under the security agreement rather than Ch 4. Cases Compass Capital Limited v The New Zealand Guardian Trust Company Ltd [2009] NZHC 344 — interpreting s 25 of the NZ PPSA which has broader application to all rights, duties and obligations under a security agreement or the Act and refers to good faith and reasonable standards of commercial practice. Taylor v Bank of New Zealand [2011] 2 NZLR 628 — interpreting s 25 of the NZ PPSA in relation to the appointment of receivers. CPC Networks Corp v Eagle Eye Investments Inc [2012] SJ No 756; 2012 SKCA 118; [2013] 2 WWR 260; 405 SaskR 86 — interpreting s 65(3) of the Saskatchewan PPSA which requires all rights, duties and obligations under a security agreement or the Act or other applicable law to be exercised or discharged in good faith and in a commercially reasonable manner. This case involved the assignment of an “all money” security agreement and a previously unsecured debt owed to the assignee being claimed to be secured by the assigned security agreement. Bayview Credit Union Ltd v Doucette [2012] NBJ No 246; 2012 NBQB 200; 392 NBR (2d) 205; 19 PPSAC (3d) 224 — interpreting s 65(2) of the New Brunswick PPSA. Leaving a vehicle in a parking lot and exposing it for sale on a limited basis without any other exposure or advertising to the general public was not sufficient to constitute a commercially reasonable sale by a secured party.

____________________ Commentary References For further discussion please refer to commentary at [2.13450]. Comparative Legislation Comparable sections of New Zealand legislation: see s 25 (imposing a general standard of reasonableness in respect of all rights, duties and obligations) of the New Zealand Personal

[page 241] Property Securities Act 1999. Comparable section of Canadian legislation: note s 65(3) and (4) of the Saskatchewan (Canada) Personal Property Security Act 1993.

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[PPSA.112] Rights and remedies under this Chapter 112 (1) In exercising rights and remedies provided by this Chapter, a secured party may deal with collateral only to the same extent as the grantor would be entitled to so deal with the collateral. (2) However, subsection (1) does not apply: (a) if the secured party had title to the collateral immediately before starting to exercise any right or remedy provided by this Part; or (b) to the extent that it would otherwise prevent the secured party from dealing with the collateral by way of transfer because a transfer by the grantor would be prohibited or declared to be a default under a security agreement. Note: See section 79 (transfer of collateral despite prohibition in security agreement). [subs (2) am Act 35 of 2011 s 3 and Sch 2 item 20, opn 26 May 2011]

(3) Without limiting subsection (1), under this Chapter a secured party may only seize, purchase or dispose of a licence subject to: (a) the terms and conditions of the licence; and (b) any applicable law of the Commonwealth, a State or a Territory. ____________________ [PPSA.112.A] Annotations to s 112 There do not appear to be provisions equivalent to s 112 in the PPSAs of New Zealand or Canada. Section 112(1) is only relevant to the exercise of rights or remedies “provided by this Chapter”, it does not apply in respect of rights or remedies under other laws or arising under the terms of the security agreement (note s 110). The “note” at the end of s 112(2) suggests s 112 should be read in conjunction with s 79. Section 112 should be interpreted in a way which is consistent with the approach taken to title in the PPSA. As provided in s 273, the fact that title to collateral is in a secured party rather than a grantor does not affect the application of any provision of the PPSA relating to rights, duties, obligations or remedies. The purpose of s 112 may be related to the situation where a secured party’s security interest has attached to collateral in which the grantor has rights but another person also has an interest in that property that is not a PPSA security interest. In this situation: the grantor’s ability to deal with the collateral as against that other person will be determined under

the general law; and the general law will also determine who has priority as between the secured party and that other person. Note the commentary on possession being a sufficient right in collateral for the purposes of s 19, PPSA even where possession occurs other than in connection with a security interest (see [PPSA.19.A]). Reading s 112 with this purpose in mind would appear to be consistent with s 79 and would not circumvent the priority rules in Pt 2.6. It should also be noted that a disposal of collateral under s 128 means a person takes free of the interest of the grantor, the secured party and lower priority security interests, but it does not affect other interests: see s 133. This also indicates that s 112 should be interpreted as only applying when the priority rules in Pt 2.6 do not apply to an interest that is in competition with a security interest.

[page 242] Cases Re Maiden Civil (P & E) Pty Ltd; Albarran v Queensland Excavation Services Pty Ltd (2013) 277 FLR 337; [2013] NSWSC 852; BC201310524 — in relation to s 112, Brereton J observed that: The New Zealand and Canadian legislation do not appear to contain provisions equivalent to s 112. Nonetheless, in the light of the Canadian and New Zealand authorities, and the adoption in s 19(5) of a provision closely analogous to those on which they were founded, it would be surprising if s 112 were intended to reinstate, as between competing security interests, the nemo dat rule. Section 112 should be interpreted in a manner consistent with the approach taken to title and priorities in the PPSA. In my view, the purpose of s 112 is illuminated by subs (3). While expressed to be “without limiting subs (1)”, it provides illustrations of what the draftsperson had in mind. The concern was not with the nemo data principle, title or priority, which were otherwise addressed; but with other limitations or restrictions imposed by law on a grantor’s ability to deal with the collateral. A requirement in a licence that it not be assigned without the consent of the licensor is an example. So would be a law that imposed preconditions to the grantor dealing with the collateral. Accordingly, the purpose of s 112 is to confirm that limitations and restrictions imposed by law on a grantor’s ability to deal with collateral apply also to the secured party in enforcement action under Ch 4. But it does not detract from the effect of PPSA in treating ostensible ownership, through possession, as a sufficient right in collateral for a PPS lessee to deal with it, to the extent of creating in a third party a valid security interest which, on perfection, prevails over the lessor’s unperfected interest. This construction is fortified by the circumstance that s 112 is expressed to apply only to enforcement under Ch 4, and not otherwise, indicating that it is no more than a restriction on the remedies given by Ch 4, rather than a general limitation on the rights of a party holding a perfected security interest. [Emphasis added] While these observations are insightful, Brereton J did not consider whether nemo dat is still relevant to contests that do not involve two competing security interests for the purposes of the PPSA. Contests between security interests and interests not covered by the PPSA may also provide the rationale for the inclusion of s 112 in the Act. The court also noted that the plaintiffs in this case were not asserting statutory rights to possession under Ch 4 but were seeking to enforce contractual rights under their security agreement.

____________________ Commentary References For further discussion please refer to commentary at [2.13350].

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[PPSA.113] Recovering judgment or issuing execution does not extinguish a security interest in collateral 113 The fact that a secured party has recovered judgment, or issued execution, against a grantor in relation to collateral does not extinguish the security interest in the collateral. ____________________ Comparative Legislation Comparable sections of Canadian legislation: s 55(7) of the Saskatchewan (Canada) Personal Property Security Act 1993.

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[PPSA.114] Rights and remedies under this Chapter are cumulative 114 The rights and remedies provided by this Chapter are cumulative. ____________________ Comparative Legislation Comparable sections of Canadian legislation: s 55(3) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.13350].

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[PPSA.115] Contracting out of enforcement provisions 115 (1) Collateral not used predominantly for personal, domestic or household purposes The parties to a security agreement that provides for a security interest in collateral that is not used predominantly for personal, domestic or household purposes may contract out of the following provisions in relation to the collateral (to the extent, if any, mentioned): (a) section 95 (notice of removal of accession), to the extent that it requires the secured party to give a notice to the grantor; (b) section 96 (when a person with an interest in the whole may retain an accession); (c) section 117 (obligations secured by interests in personal property and land); (d) section 118 (enforcing security interests in accordance with land law decisions), to the extent that it allows a secured party to give a notice to the grantor; (e) section 120 (enforcement of liquid assets); (f) subsection 121(4) (enforcement of liquid assets — notice to grantor); (g) section 123 (right to seize collateral); (h) section 125 (obligation to dispose of or retain collateral); (i) section 126 (apparent possession); (j) section 128 (secured party may dispose of collateral); (k) section 129 (disposal by purchase); (l) section 130 (notice of disposal), to the extent that it requires the

(m) (n) (o) (p) (pa) (q) (r)

secured party to give a notice to the grantor; paragraph 132(3)(d) (contents of statement of account after disposal); subsection 132(4) (statement of account if no disposal); subsection 134(1) (retention of collateral); section 135 (notice of retention); Division 6 of Part 4.3 (seizure and disposal or retention of crops and livestock), or any particular provision of that Division; section 142 (redemption of collateral); section 143 (reinstatement of security agreement).

[subs (1) am Act 96 of 2010 s 3 and Sch 2 item 71, opn 6 July 2010; Act 35 of 2011 s 3 and Sch 2 item 21, opn 26 May 2011]

(2) However, if parties to a security agreement contract out of a provision, the provision continues to the extent that it gives rights to, and imposes obligations in relation to, persons who are not parties to the security agreement. Example: Parties to a security agreement contract out of the right to seize property under section 123. A secured party who is not a party to the security agreement may seize the property under section 123.

[page 244] (3) Despite subsection (2), if parties to a security agreement contract out of section 142 (redemption of collateral), the provision does not give any person (whether or not the person is a party to the agreement) a right to redeem collateral under section 142. (4) [subs (4) rep Act 96 of 2010 s 3 and Sch 2 item 72, opn 6 July 2010] (5) Contracts between persons other than the grantor A person (including a secured party, but not including the grantor) who is entitled to receive a notice from a secured party under one or more provisions in this Chapter may contract with the secured party out of one or more of those provisions. (6) 2 secured parties may contract out of the right of one of the secured parties to receive an amount under subsection 127(6) (payment of enforcing party’s expenses) from the other secured party. (7) Contracting out in relation to controllers (other than receivers etc) Subject to subsections (2), (3), (5) and (6), the parties to a security agreement may contract out of the application under subsection 116(2) of any provision of

Part 4.3 (seizure and disposal or retention of collateral) in relation to property. Note: Subsection 116(2) provides for the application of this Chapter while a person is a controller of the property other than a receiver, or a receiver and manager, of the property within the meaning of the Corporations Act 2001. [subs (7) insrt Act 35 of 2011 s 3 and Sch 2 item 22, opn 26 May 2011]

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 107 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 56(3) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [1.3150], [2.3550], [2.13900], [4.1.5150], [4.3.650], [4.5.3400], [4.12.900], [4.13.1100].

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[PPSA.116] Application while there is a receiver or another controller of property 116 (1) This Chapter does not apply in relation to property while a person is a controller of the property in either of the following capacities: (a) receiver; (b) receiver and manager. Note: See Part 5.2 of the Corporations Act 2001 for the powers, functions and duties of receivers, and other controllers, of the property of corporations.

(2) This Chapter (except section 131) applies in relation to property while a person is a controller of the property in a capacity other than those mentioned in subsection (1) of this section. Note 1: Section 131 requires a secured party disposing of collateral to obtain market value for the collateral. Section 420A of the Corporations Act 2001 similarly requires a controller exercising a power of sale to obtain market value for the property sold. Note 2: Subsection 115(7) enables the parties to a security agreement to contract out of the application of Part 4.3 under subsection (2) of this section.

(3) Despite subsection (1), if a grantor of a security interest in property is an individual, this Chapter applies in relation to the security interest while a person is a receiver, or a receiver and manager, of the property. [page 245] (4) In this section, each of the following terms, in relation to property of a corporation, has the same meaning as in the Corporations Act 2001:

(a) controller; (b) receiver; (c) receiver and manager. [s 116 subst Act 35 of 2011 s 3 and Sch 2 item 23, opn 26 May 2011]

____________________ [PPSA.116.A] Annotations to s 116 Re Maiden Civil (P & E) Pty Ltd; Albarran v Queensland Excavation Services Pty Ltd (2013) 277 FLR 337; [2013] NSWSC 852; BC201310524 — the court indicated that equipment leased to a corporation could be property of the corporation to which receivers had been appointed by another secured party, pursuant to an all assets security agreement, for the purposes of s 116. This is notwithstanding the definition of “property” in s 9 of the Corporations Act and also the meaning of “PPSA retention of title property” in s 51F of the Corporations Act.

____________________ Comparative Legislation Comparable sections of New Zealand legislation: see s 106 of the New Zealand Personal Property Securities Act 1999. Commentary References For further discussion please refer to commentary at [1.3150], [2.13800], [2.13850], [4.8.4350], [4.12.900], [4.13.1100].

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[PPSA.117] Obligations secured by interests in personal property and land 117 (1) Scope This section applies if: (a) the same obligation is secured by: (i) a security interest in personal property; and (ii) an interest in land; and (b) either: (i) the secured party’s security interest in the personal property has the highest priority; or (ii) every other secured party with a security interest in the personal property that has a higher priority has agreed in writing to the secured party’s making a decision under this section. Note 1: This section does not apply in relation to collateral that is used predominantly for personal, domestic or household purposes (see subsection 109(5)). Note 2: Also, this section does not apply in relation to a security interest in collateral to which consumer credit legislation applies (see section 119). Note 3: The interest in land might be an interest to which this Act would otherwise not apply (see subsection 8(2)).

(2) Decision by secured party The secured party may:

make a decision to enforce the security interest in the personal property under this Chapter; or (b) make a decision to enforce the security interest in the personal property in the same way as the interest in the land may be enforced under the land law. (3) In making a decision under subsection (2), the secured party must act reasonably and only take into account the following matters: (a) the respective values of the personal property and the land; (a)

[page 246] (b) whether there is any connection between, and the nature of any connection between, the personal property and the land; (c) whether the land and the personal property are both located in the same State or Territory; (d) such other matters as are relevant to the efficient enforcement of the security interest and the interest in the land. (4) Decision to enforce the security interest under this Chapter Enforcing the security interest in the personal property under this Chapter, in accordance with a decision under paragraph (2)(a), does not limit the secured party’s rights, remedies and duties with respect to the land. (5) Meaning of land law In this Act: land law, in relation to an obligation mentioned in paragraph (1)(a), means those provisions of a law of a State or Territory, or of the general law, that relate to the enforcement of the interest in land that secures the obligation. ____________________ Comparative Legislation Comparable sections of Canadian legislation: s 55(4) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.13950].

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[PPSA.118] Enforcing security interests in accordance with land law decisions

118 (1) Scope This section applies if: (a) a secured party makes a decision (under paragraph 117(2)(b)) to enforce the security interest in the personal property in the same way as the interest in the land may be enforced under the land law; and (b) unless section 144 applies, the secured party gives a notice in accordance with subsection (2) to the following persons: (i) the grantor; (ii) a secured party with a security interest in the personal property that is perfected immediately before the decision under paragraph 117(2)(b) is made; (iii) any person who, by the time the secured party gives the notice, has notified the secured party in writing that the person claims an interest in the personal property. (2) A notice is given in accordance with this subsection if: (a) the notice is in the approved form; or (b) the notice: (i) contains a description of the personal property to which the notice relates; and (ii) sets out the effect of this section. (3) How security interest is to be enforced The secured party may enforce the security interest in the same way, with any necessary modification, as the interest in the land may be enforced under the land law. (4) Subject to this section, and with any necessary modification, law in the same terms as that of the land law applies under this Act for the purposes of the enforcement of the security interest. [page 247] Example: The secured party has the same rights, remedies and duties in relation to the enforcement of the security interest in the personal property as the secured party has in relation to the enforcement of the interest in the land. Note: The effect of this subsection is not to adopt the land law as such, but to apply law to the same effect as the land law (with any necessary modification, and subject to this section).

(5) The regulations may modify the law that applies by virtue of subsection (4) in order to facilitate its application to the enforcement of security interests in

the personal property. Note: For the meaning of modification, see section 10.

(6) Additional law that applies Section 140 (distribution of proceeds), section 117 and this section apply to the enforcement of the security interest in the personal property. Otherwise, this Chapter does not apply to the enforcement of the security interest in the personal property. (7) In addition: (a) the decision of the secured party (the first secured party) under paragraph 117(2)(b) does not limit the rights of any other secured party (the other secured party) who has a security interest in the personal property (whether granted before or after the first secured party’s security interest); and (b) the other secured party has standing in proceedings taken by (or on behalf of) the first secured party in enforcing the first secured party’s security interest under this section; and (c) the other secured party may apply to a court for the conduct of a judicially supervised sale for the purposes of enforcing the first secured party’s security interest under this section; and (d) the court may grant the application. Note: For which courts have jurisdiction, and for transfers between courts, see Part 6.2.

(8) Exercise of powers etc under applied law The Minister may make an agreement with the appropriate Minister of a State or Territory in relation to the exercise or performance of a power, duty or function (not being a power, duty or function involving the exercise of judicial power) by an authority of the State or Territory for the purposes of the law that applies by virtue of subsection (4). (9) If such an agreement is in force, the power, duty or function may or must be exercised or performed accordingly. (10) The Minister may make an agreement with the appropriate Minister of a State or Territory for the variation or revocation of an agreement made under this section in relation to the State. (11) An agreement made under subsection (8) or (10) is not a legislative instrument. (12) This section does not affect land laws To avoid doubt, nothing in this section is intended to modify a land law, or to affect its operation. ____________________ Comparative Legislation Comparable sections of Canadian legislation: s 55(4), (5) and (6) of the

Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.13950], [2.15400].

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[PPSA.119] Relationship with consumer credit legislation 119 (1) This Chapter, except sections 117 and 118, applies in relation to a security interest in collateral to which the National Credit Code applies. (2) The regulations may provide that a specified provision of this Chapter is taken to have been complied with in specified circumstances if a specified provision of the National Credit Code has been complied with in those circumstances. ____________________ [PPSA.119.A] Annotations to s 119 Specified provisions (s 119(2)) See reg 4.1 at [PPSR4.1].

____________________ Commentary References For further discussion please refer to commentary at [2.13500], [4.13.3800].

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[PPSA.120] Enforcement of security interests in liquid assets — general 120 (1) This section applies if: (a) an obligation (the secured obligation) is secured by a security interest in collateral in the form of one of the following: (i) an account; (ii) chattel paper; (iii) a negotiable instrument; and (b) one or more persons owe an amount to the grantor on the collateral; and

(c) the debtor defaults on the secured obligation. Note: This section does not apply in relation to collateral that is used predominantly for personal, domestic or household purposes (see subsection 109(5)).

(2) Rights of secured party A secured party may do either or both of the following: (a) give a written notice to a person mentioned in paragraph (1)(b) that: (i) sets out the effect of subsection (3); or (ii) is in the approved form; (b) seize any proceeds of the collateral to which the secured party is entitled under section 32. Note: A secured party might be prevented from taking action under this subsection by a higher priority party (see subsection 121(3)).

(3) A person who receives a notice under paragraph (2)(a) must pay, to the secured party, any amount that the person owes to the grantor on the collateral before the end of 5 business days after the later of: (a) the day the notice is received; or (b) the day the amount becomes due and payable. Note: The period mentioned in this subsection may be extended by a court under section 293.

(4) The secured party must apply any amount received under paragraph (2)(b) or subsection (3) towards the secured obligation.

[page 249] (5) If any amount is received under paragraph (2)(b) or subsection (3) in the form of currency, then the amount must be distributed in accordance with section 140. ____________________ Commentary References For further discussion please refer to commentary at [2.15000]–[2.15100], [4.2.4550], [4.3.850], [4.10.3400].

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[PPSA.121] Enforcement of security interests in liquid assets — notice to higher priority parties and grantor 121 (1) Notice to higher priority parties Unless section 144 applies, a secured party (the enforcing party) who proposes to take action under subsection 120(2) in relation to a security interest in collateral must give a written notice to any other secured party (a higher priority party) with a security interest in the collateral that has a higher priority. (2) The notice must: (a) contain the name of the secured party giving the notice; and (b) contain a description of the collateral; and (c) state that the enforcing party proposes to take action under paragraph 120(2)(a) or (b), as the case requires; and (d) state the address to which a notice may be given under subsection (3); and (e) be given to each higher priority party: (i) at least 10 business days before the day the action is to be taken; or (ii) if a higher priority party has given a written notice to the enforcing party specifying a shorter period to apply for the purposes of this subsection — before the end of that period. Note: The period mentioned in paragraph (e) may be extended by a court under section 293.

(3) A higher priority party who is given a notice under subsection (1) may, before any action is taken under subsection 120(2), give a written notice to the enforcing party informing the enforcing party of the higher priority party’s proposal to take action under that subsection. If the higher priority party gives such a notice, the enforcing party is not entitled to take action under that subsection. (4) Notice to grantor A secured party must give a written notice to the grantor of any action the secured party takes in accordance with subsection 120(2). (5) The notice under subsection (4) must be given: (a) before the end of 5 business days after the day the action is taken; or (b) if the grantor has given a written notice to the secured party specifying a shorter period to apply for the purposes of this subsection — before the end of that period. Note: The period mentioned in paragraph (a) may be extended by a court under section 293.

____________________ Commentary References For further discussion please refer to commentary at [4.3.850], [4.10.3400].

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PART 4.3 — SEIZURE AND DISPOSAL OR RETENTION OF COLLATERAL [ss 122–138C] DIVISION 1 — INTRODUCTION [s 122]

[PPSA.122] Guide to this Part 122 This Part deals with the seizure and disposal or retention of collateral following default by a debtor under a security agreement. Division 2 contains rules about when and how a secured party may seize collateral. Division 3 deals with the disposal of collateral by a secured party after seizure of the collateral. Division 4 deals with the retention of collateral by a secured party after seizure of the collateral. If a secured party proposes to dispose of, or retain, collateral, the party must give notice to the grantor

and any other secured party with a security interest in the collateral that has a higher priority. A notice of disposal may be given in the approved form, while a notice of retention must be given in the approved form. A person may object if a secured party proposes to enforce a security interest by purchasing or retaining the collateral (see Division 5). A person exercising or discharging rights, duties and obligations arising under this Part must act honestly and in a commercially reasonable manner (see section 111). [s 122 am Act 96 of 2010 s 3 and Sch 2 item 74, opn 6 July 2010]

DIVISION 2 — SEIZING COLLATERAL [ss 123–127]

[PPSA.123] Secured party may seize collateral 123 (1) A secured party may seize collateral, by any method permitted by law, if the debtor is in default under the security agreement. Note: For seizure of accessions, see sections 95 to 97.

(2) Seizing intangible property For the purposes of this Act, unless subsection (3) applies, a secured party may seize intangible property only by giving a notice, stating that the giving of the notice constitutes seizure of the property, to the following persons: (a) the grantor; (b) if the intangible property is a licence — either: (i) the licensor; or (ii) the licensor’s successor. (3) Intangible property may be seized by another method, if so agreed between: (a) the parties to the security agreement; or (b) if the intangible property is a licence — the parties to the security agreement together with the licensor or the licensor’s successor. (4) No perfection by seizure A secured party who seizes collateral under this section does not perfect the secured party’s security interest in the collateral. ____________________ [page 251] [PPSA.123.A] Annotations to s 123 Refer to commentary at [PPSA.24.A] regarding McCloy v Manukau Institute of Technology [2013] 3 NZLR 390; [2013] NZHC 936; BC201363460.

In relation to s 123(4), see White v Spiers Earthworks Pty Ltd [2014] WASC 139; BC201402620.

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 109 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 58(2)(a) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.14100], [2.14150], [2.14350], [4.3.650], [4.13.3600].

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[PPSA.124] Secured party who has perfected a security interest in collateral by possession or control 124 (1) This section applies if: (a) a secured party has perfected a security interest in collateral by possession or control of the collateral; and (b) the debtor is in default under the security agreement. (2) A secured party may seize the collateral under section 123 by giving a notice to: (a) the grantor; and (b) if the collateral is a licence — either: (i) the licensor; or (ii) the licensor’s successor. (3) To avoid doubt, this section applies whether the secured party has perfected the security interest only by possession or control, or by another method as well. ____________________ Commentary References For further discussion please refer to commentary at [2.14150].

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[PPSA.125] Obligation to dispose of or retain collateral 125 (1) A secured party who seizes collateral under section 123 must: (a) dispose of the collateral in accordance with Division 3; or (b) take action to retain the collateral in accordance with Division 4.

(2) Before disposing of or taking action to retain the collateral, the secured party is, subject to the security agreement that covers the collateral, entitled to a reasonable period in which: (a) to secure, store and value the collateral; and (b) to determine how to deal with the collateral. (3) The secured party may delay disposing of, or taking action to retain, the whole or part of the collateral beyond the reasonable period mentioned in subsection (2). However, the delay must: [page 252] (a) if the security agreement providing for the security interest allows for the delay — be in accordance with the security agreement; or (b) otherwise — be reasonable in the circumstances. ____________________ Comparative Legislation Comparable sections of New Zealand legislation: see ss 109 and 120 (these confer a right of the disposal and retention on the secured party) of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: see ss 59 and 61 (these confer a right of the disposal and retention on the secured party) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.14350], [4.13.3600].

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[PPSA.126] Apparent possession of collateral 126 (1) If: (a) collateral cannot be readily moved from a grantor’s premises; or (b) adequate storage facilities are not readily available for collateral; a secured party may seize the collateral under section 123 by taking apparent possession of the collateral. Note: This section does not apply in relation to collateral that is used predominantly for personal, domestic or household purposes (see subsection 109(5)). [subs (1) am Act 96 of 2010 s 3 and Sch 2 item 75, opn 6 July 2010]

(2) A secured party who takes apparent possession of collateral may dispose of the collateral under section 128 on the grantor’s premises. However, the secured party must not cause the grantor any greater cost or inconvenience than

is necessarily incidental to the disposal. (3) To avoid doubt, a secured party who takes apparent possession of collateral in accordance with this section does not perfect the secured party’s security interest in the collateral. ____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 111 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 58(2)(b) and (c) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.14200].

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[PPSA.127] Seizure by higher priority parties — notice 127 (1) Scope This section applies if, at any time while collateral is seized by a secured party (the enforcing party) (whether under section 123 or otherwise) for the purposes of enforcement, another secured party (the higher priority party) has a security interest in the collateral that has a higher priority under this Act. (2) Notice requiring enforcing party to give possession of collateral to higher priority party The higher priority party may give a written notice to the enforcing party, requiring the enforcing party to give the higher priority party possession of the seized collateral. Note: If a person has a perfected security interest in the collateral that ranks higher than that of the secured party, and the person does not give a notice under this section, the person retains a security interest in the collateral.

(3) However, the higher priority party must not give a notice to the enforcing party under subsection (2) unless the higher priority party would be entitled to seize the [page 253] collateral (in the higher priority party’s own right) in accordance with section 123, had the enforcing party not first seized the collateral. (4) An enforcing party who is given a notice under subsection (2) must comply with the notice before the end of the following period:

(a) the period of 5 business days after the day the notice is received; (b) such further period as is reasonable in the circumstances. Note: The period may also be extended by a court under section 293.

(5) A higher priority party who is given possession of collateral under this section is taken to have complied with the requirements of subsection 123(2) (notice of seizure) in relation to the seizure of the collateral. (6) Payment of enforcing party’s expenses A higher priority party who is given possession of collateral under this section must, subject to subsections (7) and (8), pay the enforcing party the amount of any reasonable expenses paid or incurred by the enforcing party, in relation to the enforcement of the security interest in the collateral. Note: 2 secured parties can contract out of this provision (see subsection 115(6)).

(7) A higher priority party must pay an amount of expenses under subsection (6) only to the extent that, before the higher priority party disposes of the collateral and any proceeds of the collateral sufficient to meet the expenses, the enforcing party gives the higher priority party evidence showing that the enforcing party incurred the amount. (8) The amount payable under subsection (6) is the lesser of the following amounts: (a) the amount mentioned in the subsection; (b) the amount of any proceeds from the higher priority party’s disposal of the collateral. (9) A higher priority party must pay an amount of expenses under subsection (6) before the end of 20 business days after the later of the following days: (a) the day the higher priority party disposes of the collateral; (b) the day the enforcing party gives the higher priority party evidence showing that the enforcing party incurred the amount. Note: The period may be extended by a court under section 293.

(10) The amount under subsection (6) is a debt due to the enforcing party. (11) The enforcing party may apply to a court to recover the amount of the debt, and the court may grant the application. Note: For which courts have jurisdiction, and for transfers between courts, see Part 6.2.

____________________ Commentary References For further discussion please refer to commentary at [2.14300].

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DIVISION 3 — DISPOSING OF COLLATERAL (INCLUDING BY PURCHASING COLLATERAL) [ss 128–133]

[PPSA.128] Secured party may dispose of collateral 128 (1) A secured party may dispose of collateral if the secured party has seized the collateral in the exercise of a right to seize the collateral on default by the debtor (whether under section 123 or otherwise). Note 1: A secured party may dispose of collateral by purchasing the collateral (see section 129).

[page 254] Note 2: The person who takes the collateral as a result of the disposal does so free of certain security interests (see section 133). Note 3: The secured party may act as agent for the grantor in transferring title (see section 141).

(2) Method of disposal A secured party may dispose of collateral under this section: (a) by private or public sale (including auction or closed tender); or (b) by lease, if the security agreement so provides; or (c) if the collateral is intellectual property — by licence. Note 1: A different rule applies in relation to disposal by purchase (see subsection 129(3)). Note 2: Paragraph (2)(b) does not apply in relation to collateral that is used predominantly for personal, domestic or household purposes (see subsection 109(5)).

(3) For the purposes of this Act, if collateral is disposed of by lease or licence, the disposal occurs at the time the lease or licence is entered into. (4) The power to dispose of collateral by a lease or licence must be exercised in accordance with the terms and conditions of the security agreement. (5) A secured party may, under subsection (1), dispose of the whole or part of the collateral. Note: The secured party must apply any proceeds etc of a disposal under this section in accordance with section 140.

(6) Disposal of licences The power to dispose of a licence must be exercised subject to: (a) the terms and conditions of the licence; and (b) any applicable law of the Commonwealth, a State or a Territory. ____________________

[PPSA.128.A] Annotations to s 128 CNH Capital Canada Ltd v Diamond 4 Holdings Ltd 2012 BCSC 942 — where the court held that an on line auction constituted a public sale for the purposes of a similar provision in the British Columbia PPSA.

____________________ Comparative Legislation Comparable sections of New Zealand legislation: ss 109 and 113 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 59(2), (3) and (4) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.14350]–[2.1450], [4.9.1050], [4.13.3700].

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[PPSA.129] Disposal by purchase 129 (1) A secured party may, under subsection 128(1), dispose of collateral by purchasing the collateral. Note: This section does not apply in relation to collateral that is used predominantly for personal, domestic or household purposes (see subsection 109(5)).

(2) However, the secured party may dispose of the collateral by purchasing it only if: (a) the secured party gives a notice under section 130 stating that the secured party proposes to purchase the collateral; and (b) no notice of objection is given to the secured party in accordance with subsection 137(2). (3) Despite subsection 128(2) and section 131, a secured party may purchase collateral only: [page 255] (a) by public sale (including auction or closed tender); and (b) by paying at least the market value at the time of the purchase. Note: Section 296 deals with the onus of proving matters under this subsection.

____________________ Comparative Legislation Comparable sections of Canadian legislation: s 59(13) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.14500].

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[PPSA.130] Notice of disposal of collateral 130 (1) Unless subsection (5) of this section or section 144 applies, a secured party who proposes to dispose of collateral on default by the debtor (whether or not under section 128) must give a notice, in accordance with this section, to: (a) the grantor; and (b) any other secured party with a security interest in the collateral that has a higher priority. (2) A notice must: (a) contain the name of the secured party giving the notice; and (b) contain a description of the collateral; and (c) state that the secured party proposes to dispose of the collateral, unless an obligation is performed, or an amount is paid, to satisfy the obligation secured by the security interest in the collateral, on or before the day specified in accordance with subsection (3); and (d) state that the notice is given for the purposes of this Act; and (e) if the secured party is proposing to dispose of the collateral by purchase: (i) contain details of rights of objection under Division 5; and (ii) contain the address to which a notice of objection may be given under section 137; and (f) contain any other matter required by the regulations for the purposes of this subsection. Note: The period under paragraph (c) may be extended by a court under section 293.

(3) For the purposes of paragraph (2)(c), the day specified in a notice given to a person: (a) must be at least 10 business days after the day the notice is given; or (b) if the person has given a written notice to the secured party specifying a shorter period to apply for the purposes of this section — before the end of that period. (4) The notice may be given in the approved form. (5) When notice is not required The secured party is not required to give a notice to any person under subsection (1) if: (a) the secured party believes on reasonable grounds that the secured party was induced to enter into the relevant security agreement by fraud on the part of the debtor or the grantor; or

(b) the secured party believes on reasonable grounds that the collateral might perish before the end of 10 business days after the day the collateral is seized; or (c) the secured party believes on reasonable grounds that there will be a material decline in the value of the collateral if it is not disposed of immediately after the day the collateral is seized; or [page 256] (d) the secured party believes on reasonable grounds that the expense of preserving the collateral is disproportionately large in relation to its value; or (e) the collateral is foreign currency; or (f) the collateral is to be disposed of in accordance with the operating rules of a clearing and settlement facility. ____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 114 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 59(6), (7) and (16) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.14500], [2.14550], [2.14750].

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[PPSA.131] Duty of secured party disposing of collateral to obtain market value 131 A secured party who disposes of collateral under section 128 (other than by purchasing the collateral) owes a duty, to any other person with a security interest in the collateral, and to the grantor, immediately before the disposal, to exercise all reasonable care: (a) if the collateral has a market value at the time of disposal — to obtain at least that market value; or (b) otherwise — to obtain the best price that is reasonably obtainable at the time of disposal, having regard to the circumstances existing at that time. Note: A different rule applies in relation to disposal by purchase (see subsection 129(3)).

____________________ [PPSA.131.A] Annotations to s 131 The duty under s 131 only extends to persons with a security interest in the collateral and the grantor. The definition of “grantor” does not include a guarantor (the definition of “debtor” does include a guarantor). This position differs from that under the equivalent provisions in New Zealand and Canada; see, for example, UDC Finance Ltd v Brunton [2014] NZHC 2247. However, similar duties arising under other statutes or the general law may also apply, including for the benefit of guarantors. In this regard note the effect of s 254, PPSA.

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 110 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: note s 65(3) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.14450], [4.3.650].

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[PPSA.132] Secured party to give statement of account 132 (1) Statement of account following disposal Unless section 144 applies, a secured party must, on request by any other person with a security interest in the collateral, or the grantor, give the person (or grantor) a written statement of account, if the first-mentioned secured party disposes of collateral under section 128 (including by purchasing the collateral in accordance with section 129). [page 257] (2) A statement of account under subsection (1) must be given to a person before the end of: (a) the period of 20 business days after the day the person requests the statement; or (b) such further period as is reasonable in the circumstances. Note: The period may also be extended by a court under section 293.

(3) A statement of account under subsection (1) must show: (a) in the case of a disposal by a lease or licence — the total amount received, and expected to be received, during the period: (i) starting when the secured party seized the collateral; and (ii) ending at the end of the lease or licence; and

(b) in any other case — the total amount received from the disposal of the collateral (or in the case of disposal by purchase, paid by the secured party) during the period: (i) starting when the secured party seized the collateral; and (ii) ending at the time of the disposal of the collateral; and (c) in any case — the amount of expenses relating to the disposal; and (d) any amounts paid to other secured parties; and (e) the balance owing by the secured party to the grantor, or by the debtor to the secured party, as the case may be. (4) Statement of account if no disposal A secured party who has not disposed of collateral before the end of 6 months after the day the collateral is seized must, in accordance with subsections (5) and (6), give a written statement of account for each period of 6 months after seizing the collateral, until the collateral is disposed of. (5) The statement of account for a 6 month period must be given to any other person with a security interest in the collateral, or the grantor, if the other person (or the grantor) requests the statement for that period. (6) A statement of account under subsection (4) must be given to a person before the end of: (a) the period of 20 business days after the day the person requests the statement; or (b) such further period as is reasonable in the circumstances. Note: The period may also be extended by a court under section 293.

(7) A statement of account under subsection (4) must: (a) state that the secured party has not disposed of the collateral; and (b) show the total amount received in relation to the collateral during the period: (i) starting when the secured party seized the collateral; and (ii) ending at the time the statement is given; and (c) show the amount of expenses relating to the retention of the collateral before the disposal. ____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 116 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 60(3) of the Saskatchewan (Canada) Personal Property Security Act 1993.

Commentary References For further discussion please refer to commentary at [2.14600].

____________________ [page 258]

[PPSA.133] Disposing of collateral free of interests 133 (1) If collateral has been disposed of under section 128 (including by a secured party purchasing the collateral), a person takes the collateral as a result of the disposal free of all of the following interests in the collateral: (a) the interest of the grantor; (b) the security interest of the secured party who disposed of the collateral; (c) all security interests in the collateral that have a lower priority than the security interest of that secured party. Note: If a person has a perfected security interest in the collateral that ranks higher than that of the secured party, the person retains a security interest in the collateral.

(2) Subsection (1) applies in relation to a disposal of collateral (other than a disposal by a secured party purchasing the collateral) even if the requirements of this Chapter have not been complied with. ____________________ [PPSA.133.A] Annotations to s 133 Equitable Trust Company v 604 1st Street SW Inc 2014 ABCA 427 — considering the equivalent provision of s 133(1)(c) in the Alberta PPSA.

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 115 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 59(14) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.14650].

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DIVISION 4 — RETAINING COLLATERAL [ss 134–136]

[PPSA.134] Proposal of secured party to retain collateral

134 (1) A secured party may retain collateral if the secured party has seized the collateral in the exercise of a right to seize the collateral on default by the debtor (whether under section 123 or otherwise). Note 1: This section does not apply in relation to collateral that is used predominantly for personal, domestic or household purposes (see subsection 109(5)). Note 2: The secured party may act as agent for the grantor in transferring title (see section 141).

(2) However, the secured party may retain the collateral only if: (a) the secured party gives a notice under section 135 to retain the collateral; and (b) no notice of objection is given to the secured party in accordance with subsection 137(2). ____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 120 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 61(1) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.14700].

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[PPSA.135] Notice of retention of collateral 135 (1) A secured party (the retaining party) who proposes to retain collateral under section 134 must (unless section 144 applies) give a notice of the proposal, in accordance with this section, to: [page 259] (a) the grantor; and (b) if the security interest of the retaining party is not a purchase money security interest — a secured party who, at the time the retaining party gives the notice, has a registration that describes the collateral; and (c) if the security interest of the retaining party is a purchase money security interest — a secured party over whom (or which) the retaining party has priority under section 62 or 63, but only if, at the time the retaining party gives the notice, the secured party has a registration that describes the collateral. (2) The secured party must give a notice to a person:

(a) at least 10 business days before the day the first steps are taken to retain the collateral; or (b) if the person has given a written notice to the secured party specifying a shorter period to apply for the purposes of this section — before the end of that period. Note: The period mentioned in paragraph (a) may be extended by a court under section 293.

(3) A notice must: (a) contain the name of the secured party giving the notice; and (b) contain a description of the collateral; and (c) state that the secured party proposes to retain the collateral, unless an obligation is performed, or an amount is paid, as mentioned in paragraph (d), on or before a specified day (being a day that is at least 10 business days after the day the notice is given); and (d) state the obligation to be performed, or the amount of the payment required, before the day specified in accordance with paragraph (c), to satisfy the obligation secured by the security interest in the collateral; and (e) contain details of rights of objection under Division 5; and (f) contain the address to which a notice of objection may be given under section 137; and (g) contain any other matter required by the regulations for the purposes of this subsection. (4) The notice must be given in the approved form. [subs (4) am Act 96 of 2010 s 3 and Sch 2 item 76, opn 6 July 2010]

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 120(2) of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 61(1) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.14750].

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[PPSA.136] Retaining collateral free of interests 136 (1) Retaining collateral free of interests if notices have been given in accordance with section 135 If: (a) a secured party gives one or more notices in accordance with section

135 to retain collateral; and (b) no notice of objection is given to the secured party in accordance with subsection 137(2); then, at the end of the day specified in accordance with paragraph 135(3)(c), the secured party is entitled to take steps to have title to the collateral pass to the secured party. [page 260] (2) At the time the title to the collateral passes to the secured party, the secured party takes the collateral free of all of the following interests in the collateral: (a) the interest of the grantor; (b) the security interest of the secured party to whom title passes; (c) all security interests that have a lower priority than the security interest of that secured party. (3) Acquiring collateral that has been retained free of interests if notices have not been given in accordance with section 135 A person takes collateral free of the interests referred to in subsection (2) if: (a) a secured party is required to give one or more notices in relation to the collateral in accordance with section 135; and (b) the secured party has not done so; and (c) the person acquires the collateral from the secured party for new value; and (d) the person has no actual knowledge that the requirements of section 135 have not been complied with. (4) Subsection (3) applies in relation to a security interest referred to in paragraph (2)(c) whether or not a registration with respect to the security interest is effective. (5) Extinguishment of obligation owed to the secured party If a secured party (the retaining secured party) takes collateral under this section free of the interests referred to in subsection (2): (a) the debt or other obligation secured by the security interest held by the retaining secured party is extinguished; but (b) paragraph (2)(c) does not have the effect that a debt or other obligation

secured by another security interest in the collateral is extinguished, if the other security interest has a lower priority than the security interest of the retaining secured party. [subs (5) insrt Act 96 of 2010 s 3 and Sch 2 item 77, opn 6 July 2010]

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 123 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 61(3) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [1.3050], [2.14850]– [2.14950].

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DIVISION 5 — OBJECTION TO PURCHASE OR RETENTION [ss 137,138]

[PPSA.137] Persons entitled to notice may object to proposal 137 (1) This section applies if: (a) a person is entitled to a notice under section 130 or 135; and (b) a secured party gives the person one of the following notices: (i) a notice under section 130 that the secured party proposes to purchase collateral; (ii) a notice under section 135 that the secured party proposes to retain collateral. [page 261] (2) Before the end of the day specified in accordance with subsection 130(3) or 135(3), the person may give the secured party a notice (the notice of objection) objecting to the purchase or retention. Note: The secured party may request the person to provide proof of the person’s interest under section 138.

(3) The secured party must sell or lease the collateral in accordance with section 128 if the secured party is given a notice of objection in accordance with subsection (2).

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 121 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 61(2) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.14800].

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[PPSA.138] Person making objection may be requested by secured party to prove interest 138 (1) A secured party who, in accordance with subsection 137(2), is given a notice of objection by a person (other than the grantor) may request the person to provide proof of that person’s interest. (2) The notice of objection is taken not to have been given by the person in accordance with subsection 137(2) if the person does not provide proof of the person’s interest before the end of 10 business days after the day the secured party’s request is made. Note: The period may be extended by a court under section 293.

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 122 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 61(5) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.14800].

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DIVISION 6 — SEIZURE AND DISPOSAL OR RETENTION OF CROPS AND LIVESTOCK [ss 138A–138C] [Div 6 insrt Act 96 of 2010 s 3 and Sch 2 item 78, opn 6 July 2010]

[PPSA.138A] Meaning of take and water source 138A In this Act: take fish includes: (a) catch or kill fish; and (b) gather or collect fish; and (c) remove fish from any rock or other matter.

Note: Livestock includes fish (see section 10).

water source means: (a) a river, lake, creek or pond, tidal waters or any other land that is submerged by water (whether permanently or intermittently or whether naturally or artificially); or (b) any part of such a river, lake, creek or pond, tidal waters or submerged land. [page 262]

[PPSA.138B] Seizure and disposal or retention of crops 138B (1) Without limiting section 123 (secured party may seize collateral), for the purposes of seizing collateral under that section that is crops, or the proceeds of crops, the secured party may: (a) take possession of the crops or the proceeds; or (b) cut, gather or harvest the crops or the proceeds. (2) The secured party may dispose of, or retain, collateral that is crops, or the proceeds of crops, after they have been taken, cut, gathered or harvested, subject to Divisions 2, 3, 4 and 5 (seizure, disposal or retention of collateral and objections). (3) For the purposes of exercising a power under subsection (1) or (2), or performing any related function under Division 2, 3 or 4, the secured party may enter the land on which, or the water source in which, the crops are, or were, growing. (4) However, the secured party may exercise the power to enter land or a water source under subsection (3) for a purpose mentioned in subsection (1) or (2) only to the same extent as the grantor would be entitled to enter the land or water source for the same purpose.

[PPSA.138C] Seizure and disposal or retention of livestock 138C (1) Without limiting section 123 (secured party may seize collateral), for the purposes of seizing collateral under that section that is livestock, or the

proceeds of livestock, the secured party may: (a) take possession of the livestock or proceeds wherever it is located; or (b) slaughter the livestock wherever it is located; or (c) take livestock that is fish; or (d) extract products from livestock (for example, by shearing sheep to extract wool). Note: A security interest may attach to a livestock product (for example, the wool of a sheep) as original collateral as mentioned in subsection 84A(2), or as proceeds.

(2) The secured party may dispose of, or retain, collateral that is livestock, or the proceeds of livestock, after it has been taken, slaughtered or extracted, subject to Divisions 2, 3, 4 and 5 (seizure, disposal or retention of collateral and objections). (3) For the purposes of exercising a power under subsection (1) or (2), or performing any related function under Division 2, 3 or 4, the secured party may enter the land on which, or the water source in which, the livestock or proceeds is located. ____________________ Commentary References For further discussion please refer to commentary at [4.7.1850], [4.7.1900].

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PART 4.4 — RULES APPLYING AFTER ENFORCEMENT [ss 139–144] [PPSA.139] Guide to this Part 139 This Part contains rules about steps to be taken after a security interest in collateral has been enforced. [page 263] These rules deal with the following: (a) the order of distribution of personal property or its proceeds; (b) the transfer of title to collateral; (c) redemption of collateral, or the reinstatement of security agreements, before disposal; (d) when certain enforcement notices are not required. A person exercising or discharging rights, duties and obligations arising under this Part must act honestly

and in a commercially reasonable manner (see section 111). [s 139 am Act 96 of 2010 s 3 and Sch 2 item 79, opn 6 July 2010]

[PPSA.140] Distribution of proceeds received by secured party 140 (1) Scope This section applies if any amount, personal property or proceeds (within the ordinary meaning of that term) of collateral is received by or on behalf of a secured party as a result of enforcing a security interest in collateral (whether or not under section 120 or 128). (1A) This section does not prevent the operation of another law of the Commonwealth, or a law of a State or Territory, to the extent that the law requires the amount, personal property or proceeds to be applied towards one or more obligations to persons that do not hold security interests (or any other interests) in the collateral before being applied towards any (or all) of the obligations mentioned in subsection (2). Example: This section does not prevent the operation of section 561 of the Corporations Act 2001, which gives priority to the satisfaction of certain unsecured obligations over the claims of a secured party holding a circulating security interest in a debtor’s property. [subs (1A) insrt Act 96 of 2010 s 3 and Sch 2 item 80, opn 6 July 2010]

(2) Order of application The amount, personal property or proceeds must be applied in the following order: (a) obligations to persons holding interests (other than security interests) in the collateral that have a higher priority (whether under this Act or otherwise) than the interest of the secured party; Note: The interests referred to in this paragraph might be interests to which this Act would otherwise not apply (see subsection 8(2)).

(b) reasonable expenses incurred in relation to the enforcement of security interests against the collateral, to the extent that the expenses are secured by the security interests; Note: Reasonable expenses in relation to the enforcement of a security interest are taken to be secured by the security interest unless the parties agree otherwise (see subsection 18(5)).

(c) obligations to persons holding security interests in the collateral that have a higher priority (whether under this Act or otherwise) than the interest of the secured party; (d) obligations to the secured party that are secured by the security interest in the collateral;

(e) obligations to persons holding interests or security interests in the collateral that have a lower priority (whether under this Act or otherwise) than the interest of the secured party; (f) to the grantor. [page 264] Note: Sections 102 and 103 affect the operation of this section in relation to commingled property.

(3) An amount, personal property or proceeds must be applied against interests to which paragraph (2)(a), (c) or (e) applies in the order of their priority (whether under this Act or otherwise). (4) This section applies in relation to a security interest in collateral even if a person takes the collateral free of the security interest under section 133. (5) An amount paid, or personal property or proceeds applied, in accordance with subsection (2) discharges an obligation secured by an interest in the collateral to the extent of the amount paid or the value of the proceeds or property applied. (6) To avoid doubt, any amount paid by the higher priority party to an enforcing party in accordance with section 127 is, for the purposes of this section, an expense incurred by the higher priority party in relation to the enforcement of the security interest in the collateral. (7) A secured party is not liable to an action, suit or proceeding in relation to an application of proceeds in accordance with this section if: (a) the secured party applied the proceeds honestly; and (b) the secured party applied the proceeds in a commercially reasonable manner. ____________________ Comparative Legislation Comparable sections of New Zealand legislation: ss 116A and 117 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 60(2) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.15150], [2.15200], [4.3.350].

____________________

[PPSA.141] Secured party may take steps to reflect

transfer of title 141 A secured party who is entitled to dispose of, or retain, collateral under section 128 or 134 may take any steps necessary to reflect the transfer of title resulting from the disposal or retention that the person whose title to the collateral is extinguished because of the disposal or retention could take to reflect a transfer of title to the collateral. [s 141 am Act 96 of 2010 s 3 and Sch 2 item 81, opn 6 July 2010]

[PPSA.142] Entitled persons may redeem collateral 142 (1) At any time before a secured party disposes of collateral under section 128, any other person with a security interest in the collateral, or the grantor, may redeem the collateral: (a) by paying the amounts required to discharge the obligations, or by performing the obligations, secured by security interests in the collateral; and (b) by paying the amount of any expenses in relation to the enforcement of the security interest, the payment of which is secured by the security interest. Note: Reasonable expenses in relation to the enforcement of a security interest are taken to be secured by a security interest unless the parties agree otherwise (see subsection 18(5)).

(2) However, a person must not redeem collateral under subsection (1) if the person agrees in writing after the default not to do so. [page 265] (3) The grantor’s right to redeem the collateral has priority over any other person’s right to redeem the collateral. ____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 132 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 62(1)(a) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.15300].

____________________

[PPSA.143] Entitled persons may reinstate security agreement 143 (1) At any time before a secured party disposes of or retains collateral (whether or not under this Chapter), a person may reinstate the security agreement by: (a) paying the following amounts: (i) amounts in arrears (disregarding amounts in arrears as a result of an acceleration clause in the security agreement); (ii) the amount of any expenses, in relation to the enforcement of the security interest, the payment of which is secured by the security interest; and Note: Reasonable expenses in relation to the enforcement of a security interest are taken to be secured by a security interest unless the parties agree otherwise (see subsection 18(5)).

(b) remedying any other default as a result of which the secured party proposes to dispose of, or retain, the collateral. (2) A security agreement may be reinstated only once during the period in which the security agreement is in force. ____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 133 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 62(1)(b) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.15350].

____________________

[PPSA.144] When certain enforcement notices are not required 144 A secured party is not required to give a notice to a person under section 95, 118, 121, 130, 132 or 135, if: (a) after having made reasonable attempts, the secured party has failed to locate the person; or (b) for the grantor — after the debtor defaults, the grantor waives in writing the grantor’s right to receive the notice; or (c) for a person other than the grantor — the person (at any time) waives in writing the person’s right to receive the notice; or

in any case — on an ex parte application in relation to the person, a (d) court is satisfied that a notice is not required for any other reason. Note: For which courts have jurisdiction, and for transfers between courts, see Part 6.2.

____________________ Commentary References For further discussion please refer to commentary at [2.14750], [2.15400], [4.13.3750].

____________________

[page 266]

CHAPTER 5 — PERSONAL PROPERTY SECURITIES REGISTER [ss 145–203] PART 5.1 — GUIDE TO THIS CHAPTER [s 145] [PPSA.145] Guide to this Chapter 145 This Chapter provides for the establishment and maintenance of a register with respect to personal property securities and certain prescribed personal property. Part 5.2 deals with the establishment of the register and what it contains. Registrations consist of financing statements, and are amended by the registration of financing change statements. Part 5.3 deals with the registration of these statements, including the data to be included and the issue of verification statements confirming their registration. Part 5.4 contains rules about the timing of registrations and when a registration becomes ineffective, including the defects that make a registration ineffective. Part 5.5 is about accessing the register to search for registered data and third party data. Part 5.5A is about conditions on access to data through the register. In addition, the Part enables the provision, through the register (as a portal), of non-registered data about personal property from third parties. Part 5.6 deals with the amendment of registrations after a demand for amendment is made. Part 5.7 deals with removal of data from the register and the correction of registration errors. Part 5.8 provides for fees for registration and searching the register, the review of registration decisions and annual reports. Part 5.9 establishes the offices of the Registrar of Personal Property Securities and the Deputy Registrar. [s 145 am Act 35 of 2011 s 3 and Sch 2 item 24, opn 26 May 2011]

PART 5.2 — ESTABLISHMENT OF THE REGISTER [ss 146–148] [PPSA.146] Guide to this Part 146

This Part sets up the Personal Property Securities Register. The Registrar of Personal Property Securities is required to establish and maintain the register, and ensure that it is kept operational. However, the Registrar can refuse access to the register, and suspend its operation, in certain circumstances. The register contains the following data: (a) data with respect to security interests, and related data; (b) data with respect to personal property prescribed by the regulations. [s 146 am Act 35 of 2011 s 3 and Sch 2 item 25, opn 26 May 2011]

____________________ [page 267] Commentary References For further discussion please refer to commentary at [3.50].

____________________

[PPSA.147] Personal Property Securities Register 147 (1) The Registrar must establish and maintain a register to be known as the Personal Property Securities Register. (2) Data in the register is the property of the Commonwealth. (3) The Registrar may keep the register in any form that he or she considers appropriate. (4) The Registrar must ensure that the register is operational at all times, except: (a) while access is refused, or its operation is suspended, under subsection (5); or (b) in other circumstances prescribed by the regulations. (5) If the Registrar considers that it is not practical to provide access to the register, the Registrar may: (a) refuse access to the register; or (b) otherwise suspend the operation of the register, in whole or in part. (6) If the Registrar refuses access to the register, or otherwise suspends the operation of the register in whole or in part, under subsection (5), the Registrar must publish a notice giving details of the refusal or other suspension of operation (including the period of refusal or suspension): (a) in a way prescribed by the regulations; or

(b) if regulations are not made for the purposes of paragraph (a) — in the Gazette. Note: The office of the Registrar of Personal Property Securities is established under Part 5.9.

____________________ [PPSA.147.A] Annotations to s 147 Prescribed circumstances (s 147(4)(b)) The registrar may suspend the operation of the register for up to 4 hours, after giving notice of the suspension in accordance with s 147(6) at least 7 days before the suspension: see reg 5.1 at [PPSR5.1]. Prescribed way (s 147(6)(a) The registrar must publish the notice on a website maintained by the registrar on the internet: see reg 5.2 at [PPSR5.2].

__________________________ Comparative Legislation Comparable sections of New Zealand legislation: s 139 and see s 138 (regarding registrar’s refusal to grant access to the register) of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 42 of the Saskatchewan (Canada) Personal Property Security Act 1993. See also Personal Property Securities Regulations. Commentary References For further discussion please refer to commentary at [3.100].

__________________________

[PPSA.148] What the register contains 148 The register is to contain the following data: (a) data in registered financing statements (as amended by any registered financing change statements) with respect to security interests; (b) data (if any) prescribed by regulations made for the purposes of this paragraph in relation to registrations, or possible registrations; [page 268] (c) data in registered financing statements (as amended by any registered financing change statements) with respect to personal property, being personal property that is prescribed by regulations made for the purposes of this paragraph. Note 1: If personal property is prescribed by regulations for the purposes of paragraph (c), this Act might not otherwise apply to interests in that property (see subsection 8(2)). Note 2: Access to non-registered data held by third parties may be provided to persons accessing the register (see Part 5.5A).

[s 148 am Act 35 of 2011 s 3 and Sch 2 items 26–29, opn 26 May 2011]

____________________ [PPSA.148.A] Annotations to s 148 Prescribed types of personal property (s 148(c)) See reg 5.3 at [PPSR5.3].

____________________ Comparative Legislation Comparable sections of New Zealand legislation: see s 140 of the New Zealand Personal Property Securities Act 1999. Commentary References For further discussion please refer to commentary at [3.50], [3.100], [3.150].

____________________

PART 5.3 — REGISTRATION [ss 149–158] [PPSA.149] Guide to this Part 149 A person may apply to the Registrar to register a financing statement, or a financing change statement, with respect to a security interest or certain personal property. A registration may perfect a security interest, which may give the secured party an advantage under this Act in enforcing the interest. A person must not make an application with respect to a security interest unless the person believes on reasonable grounds that the security interest is, or will be, held by a person stated in the application to be a secured party. This Part also deals with verification statements, which verify the registration of financing statements and financing change statements. The Registrar is responsible for giving verification statements to secured parties, who must give notice of the statements to grantors. Publication may be used as an alternative to giving verification statements.

____________________ Commentary References For further discussion please refer to commentary at [4.6.1700].

____________________

[PPSA.150] Registration — on application 150 (1) A person may apply to the Registrar to register a financing statement with respect to: (a) a security interest; or

personal property prescribed by regulations made for the purposes of (b) paragraph 148(c). [page 269] (2) A person may apply to the Registrar to register a financing change statement to amend a registered financing statement. (3) The Registrar must register the financing statement or financing change statement in accordance with the application, but only if: (a) the application is in the approved form; and (b) the fee (if any) determined under section 190 has been paid; and (c) the Registrar is not satisfied that the application is: (i) frivolous, vexatious or offensive, or contrary to the public interest; or (ii) made in contravention of section 151 (belief about security interest); and (d) the registration would not be prohibited by the regulations. Note 1: Section 161 authorises the description of collateral by a registration before or after a security agreement is made covering the collateral, or a security interest has attached to the collateral. Note 2: The Registrar must give a verification statement to each secured party after the registration of a financing statement or a financing change statement (see section 156). Note 3: Application may be made to the Administrative Appeals Tribunal for review of certain decisions of the Registrar about registration (see section 191). Note 4: The requirement to pay a fee is satisfied if an arrangement for its payment has been approved under subsection 190(4). [subs (3) am Act 35 of 2011 s 3 and Sch 2 item 30, opn 26 May 2011]

____________________ [PPSA.150.A] Annotations to s 150 Prohibited registrations (s 150(d)) See reg 5.4 at [PPSR5.4].

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 141 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 43(1) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [3.50], [3.150]–[3.250].

____________________

[PPSA.151] Registration — belief about security interest 151 (1) Requirements for collateral to secure obligation etc A person must not apply to register a financing statement, or a financing change statement, that describes collateral, unless the person believes on reasonable grounds that the person described in the statement as the secured party is, or will become, a secured party in relation to the collateral (otherwise than by virtue of the registration itself). Civil penalty: (a) for an individual — 50 penalty units; (b) for a body corporate — 250 penalty units. Note: See Part 6.3 (Civil penalty proceedings). Example 1: A person applies to register a financing statement that describes collateral as “all present and afteracquired property” of the grantor described in the statement. It is sufficient to comply with this subsection if the applicant believes on reasonable grounds that the secured party described in the statement will take a security interest in a particular class of items of personal property held (or later acquired) by the grantor (see paragraph (b) of the definition of description in section 10).

[page 270] Example 2: A person applies to register a financing statement that describes collateral as “fruit”. It is sufficient to comply with this subsection if the applicant believes on reasonable grounds that the secured party described in the statement will take a security interest in apples (see paragraph (b) of the definition of description in section 10). [subs (1) am Act 96 of 2010 s 3 and Sch 2 item 82, opn 6 July 2010]

(2) If a financing statement, or a financing change statement, that describes collateral has been registered on the application of a person, the person must, within the period covered by subsection (3), apply to register a financing change statement to amend the registration to end its effect with respect to the collateral, if: (a) the person described in the statement as the secured party has never, since the statement was registered, been a secured party in relation to the collateral (other than by virtue of the registration itself); and (b) there are no reasonable grounds (or there are no longer any reasonable grounds) for the belief mentioned in subsection (1).

Civil penalty: (a) for an individual — 50 penalty units; (b) for a body corporate — 250 penalty units. Note: See Part 6.3 (Civil penalty proceedings). [subs (2) am Act 35 of 2011 s 3 and Sch 2 item 31, opn 26 May 2011]

(3) The period covered by this subsection is as soon as practicable, or 5 business days, whichever is earlier, after: (a) if there never have been, since the statement was registered, reasonable grounds for the belief mentioned in subsection (1) — the day of the registration time, or the amendment time, for the financing statement or financing change statement; or (b) if there are no longer any reasonable grounds for that belief — the day when there stopped being reasonable grounds for the belief. Note: The period of 5 business days may be extended by a court under section 293. [subs (3) am Act 35 of 2011 s 3 and Sch 2 item 32, opn 26 May 2011]

(4) A person who wishes to establish that there were reasonable grounds for the belief mentioned in subsection (1) (at any particular time) bears an evidential burden in relation to the matter. Note: For evidential burden, see section 10. [subs (4) am Act 35 of 2011 s 3 and Sch 2 item 33, opn 26 May 2011]

(5) Damages for contravention of requirements For the purposes of section 271 (but without limiting that section): (a) compliance with subsection (1) or (2) is taken to be an obligation imposed on a person who applies, or is required to apply, for the registration of a financing statement or a financing change statement; and (b) any person with an interest in personal property described in the financing statement or financing change statement is taken to be a person to whom that obligation is owed; and (c) a contravention of subsection (1) or (2) is taken to be a failure to discharge that obligation. Note: Section 271 gives a right to recover damages for any loss or damage in relation to such a failure.

[page 271] (6) Registration unaffected by contravention However, if a person applies

for a registration of a financing statement or a financing change statement in contravention of subsection (1), and the statement is registered accordingly, the contravention does not affect the validity or effectiveness of the registration. (7) Registrations with respect to security interests only This section only applies in relation to a registration with respect to a security interest. ____________________ [PPSA.151.A] Annotations to s 151 Refer to [PPSA.164.A] and [PPSA.178.A].

____________________ Comparative Legislation Comparable sections of New Zealand legislation: see s 146 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: see s 43(4) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [1.2600], [3.200], [3.250], [4.6.1750], [4.13.1650].

____________________

[PPSA.152] Registration — location of personal property and interested persons outside Australia 152 A financing statement, or a financing change statement, may be registered whether or not: (a) the personal property to which the statement relates is located in Australia; or (b) any person who owns or has rights in that property is located in Australia. Note 1: For when personal property is located in Australia, see section 235. For when bodies corporate, bodies politic or individuals are located in Australia, see section 235. Note 2: For security interests in personal property outside Australia, see section 6.

____________________ Commentary References For further discussion please refer to commentary at [3.300], [4.9.1400], [4.12.2250].

____________________

[PPSA.153] Financing statements with respect to security interests 153 (1) A financing statement with respect to a security interest (including

such a financing statement as amended by the registration of a financing change statement) consists of data that complies with the following table: Financing statements with respect to security interests Item Data about: Details of data 1 The secured party The details prescribed by the regulations, in relation to each secured party, of: (a) the secured party; or (b) a person nominated by the secured party who has authority to act on behalf of the secured party. 2 The grantor Whichever of the following is applicable: (a) if the collateral is consumer property, and is required by the regulations to be described by serial number — no grantor’s details;

[page 272] Financing statements with respect to security interests Item Data about: Details of data (b) if the collateral is consumer property, and is not required by the regulations to be described by serial number — the grantor’s name and date of birth, as evidenced in accordance with the regulations, and no other details; (c) in any other case — the grantor’s details as prescribed by the regulations. 3 Giving of notices The following: (a) an address (including an email address or fax number) for the giving of notices to the secured party (or secured parties) relating to the registration; (b) details of any identifier provided for the giving of notices to the secured party (or secured parties). 4

The collateral and proceeds

Note: For identifiers, see section 289. A collateral description in accordance with all of the following rules: (a) the collateral must be described as one of the following: (i) consumer property; (ii) commercial property; (b) the collateral may or must be described by serial number, if allowed or required by the regulations; (c) the collateral must belong to a single class of collateral prescribed by the regulations; (d) any description of proceeds must comply with the regulations. Note: 2 or more types of collateral that belong to different classes prescribed by the regulations must be described in separate registrations. However, 2 or more registrations can be effected through a single application.

5

The end time for registration

For all the collateral described in the statement, the following data: (a) for collateral other than consumer property or property described by a serial number: (i) no stated end time; or (ii) an end time for the registration no later than the time (the default time) that is the end of the day 25 years after the registration time; or

[page 273] Financing statements with respect to security interests Item Data about: Details of data (iii) if the registration is amended to include or change (but not omit) an end time — an amended end time for the registration no later than the time (the default time) that is the end of the day 25 years after the amendment time for that amendment; (b) for consumer property, or property described by a serial number: (i) an end time for the registration no later than the time (the default time) that is the end of the day 7 years after the registration time; or (ii) if the registration is amended to change the end time — an amended end time for the registration no later than the time (the default time) that is the end of the day 7 years after the amendment time for that amendment. 6 Subordination An indication of whether the security interest is (or is to be) subordinated to any other security interest. However, this indication need not be included. 7 Security interest An indication of whether the security interest is, or is to be, a purchase money security interest (to any extent) if the security interest is in respect of a class of collateral prescribed by the regulations for the purposes of this item. 8 Any matter prescribed by the Details of the matter prescribed by the regulations, whether or regulations not the matter also comes under any of the other items in this table.

(2) If a person applies to register a financing statement (or a financing change statement) that would otherwise result in the statement of an end time in a financing statement not complying with item 5 of the table in subsection (1), the financing statement is taken to provide for the relevant default time mentioned in that item as the stated end time. (3) A statement of end time does not comply with item 5 of the table in subsection (1) if it states an end time earlier than the registration time or

amendment time in relation to the financing statement or financing change statement that provided for that end time. ____________________ [PPSA.153.A] Annotations to s 153 Prescribed details (s 153(1), table item 8) See reg 5.5 at [PPSR5.5] and Sch 1 that starts at [PPSRSCH1.1.1]. Including an indication of subordination in a financing statement Gibbston Downs Wines Ltd v Perpetual Trust Ltd [2013] BCL 361; [2013] NZCA 506 — an indication of subordination

[page 274] in a financing statement did not restrict the terms of a subordination agreement entered into between the relevant secured parties under s 70, NZ PPSA (being the equivalent of s 61, PPSA). Defects in registrations Refer to [PPSA.164.A].

____________________ Comparative Legislation Comparable sections of New Zealand legislation: see s 142 of the New Zealand Personal Property Securities Act 1999. Commentary References For further discussion please refer to commentary at [2.11350], [3.350]–[3.650], [3.750]–[3.900], [4.1.2200], [4.6.1800], [4.6.1850], [6.1200].

____________________

[PPSA.154] Financing statements with respect to prescribed property 154 A financing statement with respect to personal property prescribed by regulations made for the purposes of paragraph 148(c) (including such a financing statement as amended by the registration of a financing change statement) consists of data that complies with the following table: Financing statements with respect to prescribed property Item Data about: Details of data 1 The person who owns or has Details of the person, as prescribed by the regulations. an interest in the property 2 The property Details relating to the property in accordance with the following rules: (a) the property must be of a single class, described in the registration; (b) a statement must be included of the reason why the property

3

Any matter prescribed by the regulations

is registered. Details of the matter prescribed by the regulations, whether or not the matter also comes under any of the other items in this table.

____________________ [PPSA.154.A] Annotations to s 154 Prescribed details (s 154) See reg 5.5 at [PPSR5.5] and Sch 2 that starts at [PPSRSCH2.1.1].

____________________ Commentary References For further discussion please refer to commentary at [3.950].

____________________

[PPSA.155] Meanings of verification statement and registration event 155 In this Act: verification statement means a written statement in the approved form: (a) verifying the registration of a financing statement or a financing change statement (each of which is a registration event) with respect to a security interest, other than a financing change statement registered under section 185 (removal of old data) or 186 (incorrectly removed data); and [page 275] (b) including other data (if any), including third party data (see section 176C), approved by the Registrar for that form in relation to the registration event, a secured party, a grantor, or collateral. [def am Act 35 of 2011 s 3 and Sch 2 item 34, opn 26 May 2011]

____________________ Comparative Legislation Comparable sections of New Zealand legislation: see s 135 of the New Zealand Personal Property Securities Act 1999.

____________________

[PPSA.156] Verification statements — Registrar to

give to secured parties 156 (1) The Registrar must ensure that a verification statement in relation to a registration event is given to the following persons: (a) a person registered as a secured party in the registration immediately before the time of the registration event; (b) a person registered as a secured party in the registration immediately after the time of the registration event. Note: This section does not apply in relation to a registration event if the Registrar publishes a verification statement in relation to the event under section 158.

(2) If a registration event involves the amendment of a registration to change an address (including an email address or a fax number) for the giving of notices to a secured party, the Registrar must ensure that the verification statement is given to the secured party at both the previously registered address and the address as changed. (3) If a registration event involves the amendment of a registration to omit a secured party, the Registrar must ensure that the verification statement in relation to the event is given to the secured party at the previously registered address for the secured party. ____________________ Comparative Legislation Comparable sections of New Zealand legislation: see s 145 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: see s 20 of the Personal Property Securities Regulations. Commentary References For further discussion please refer to commentary at [3.900], [3.1000], [6.1150].

____________________

[PPSA.157] Verification statements — secured parties to give notice to grantors 157 (1) Requirement to provide verification statement A person (the statement holder) who is, under section 156, given a verification statement in relation to a registration event concerning a registration, must ensure that a notice of the statement, in the approved form, is given to the following persons as soon as reasonably practicable after the time of the registration event: (a) a person registered as a grantor in the registration immediately before the time of the registration event; (b) a person registered as a grantor in the registration immediately after

the time of the registration event. Note: This section does not apply in relation to a registration event if the Registrar publishes a verification statement in relation to the event under section 158.

[page 276] (2) Without limiting subsection (1), the approved form for notice of a verification statement: (a) may authorise specified data in the verification statement not to be included in the notice; but (b) must otherwise require the data in the verification statement to be included in the notice. (3) Exception — waiver by interested person of right to receive notice However, this section does not apply in relation to a person mentioned in paragraph (1)(a) or (b) if: (a) the collateral to which the registration event relates is (immediately before or after the event) described in the registration as commercial property; and (b) the person has, in writing, waived the right under this section to receive a notice in relation to registration events to which paragraph (a) applies. (4) Contravention of requirement If the statement holder contravenes a requirement under subsection (1) to ensure that a notice is given to an individual, the contravention constitutes an act or practice involving interference with the privacy of the individual for the purposes of section 13 of the Privacy Act 1988. Note 1: These acts or practices may be the subject of complaints under section 36 of that Act. Note 2: If a statement holder fails to discharge an obligation under this section, an action for damages may be available under section 271.

____________________ Comparative Legislation Comparable sections of New Zealand legislation: see s 148 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: see s 43(12) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [3.1000], [4.13.1650].

____________________

[PPSA.158] Verification statements — publication as alternative 158 (1) The Registrar may publish, in a way prescribed by the regulations, a single verification statement in relation to a number of registration events if: (b) the events affect a number of persons registered as secured parties (whether before or after the events); and (b) the Registrar considers that it would be inconvenient for verification statements to be given to each registered (or formerly registered) secured party. (2) Sections 156 and 157 do not apply in relation to a registration event if the Registrar publishes a verification statement in relation to the event under this section. ____________________ [PPSA.158.A] Annotations to s 158 Prescribed way of publishing (s 158(1)) See reg 5.6 at [PPSR5.6].

____________________ Commentary References For further discussion please refer to commentary at [3.1000], [6.1150].

____________________ [page 277]

PART 5.4 — WHEN A REGISTRATION IS EFFECTIVE [ss 159–168] [PPSA.159] Guide to this Part 159 This Part provides for the time at which a description of collateral is registered. The precise timing of a registration may be significant in determining the priority to be given to a security interest in the collateral (see section 55). This Part also deals with when a registration is effective and registration defects that may cause it to become ineffective. A registration is effective from the registration time until the earliest of:

(a) the registered end time; or (b) an amendment time; or (c) the time when the registration stops being available for search in the register. A registration is only ineffective because of a defect if there is a seriously misleading defect in data relating to the registration, or one of a number of particular defects set out in section 165 exists. If a security interest in certain property becomes unperfected, the secured party may be obliged to take steps to end the effect of the registration.

[PPSA.160] Registration time — general 160 (1) A description of collateral starts to be registered in a registration with respect to a security interest, in relation to a particular secured party, at the moment (the registration time) when the description becomes available for search in the register in relation to that secured party. Note 1: A written search result is evidence of a registration and of the registration time (see section 174). Note 2: A registration may stop being effective even if it is available for search in the register (for example, because of a defect — see section 164). Note 3: If 2 or more registrations describe the same collateral in relation to the same secured party, there may be different registration times for the collateral in relation to each of the registrations.

(2) The amendment time for an amendment to a registration is the moment when the amended registration becomes available for search in the register. ____________________ Comparative Legislation Comparable sections of Canadian legislation: s 43(2) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [3.1050].

____________________

[PPSA.161] Registration time — security agreements and interests 161 Personal property may be described in a registration with respect to a security interest before or after: (a) a security agreement is made covering the property; or (b) a security interest attaches to the property. ____________________ [page 278]

Comparative Legislation Comparable sections of New Zealand legislation: see s 146 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 43(4) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [3.1050].

____________________

[PPSA.162] Registration time — transfers 162 A financing statement, or a financing change statement, may be registered to reflect the transfer of a security interest, or of collateral, before or after the transfer. ____________________ [PPSA.162.A] Annotations to s 162 Section 162 does not specify timing requirements. Section 34 stipulates timing requirements for continued perfection by registration where collateral is transferred. Section 276 suggests that a delay or failure by a transferee of a security interest in registering a financing statement or financing change statement recording the transferee as the secured party may not of itself result in a loss of perfection for the security interest so long as an otherwise effective registration remains in place in respect of the security interest. A transferee not registering a financing change statement or a financing statement in connection with a transfer of a security interest should not prevent a person searching the register discovering the security interest even though the secured party details may still be those of the transferor (note the search criteria in s 171 do not include the secured party’s details). The ability to discover relevant registrations based on the correctness of the grantor details and, in certain circumstances, the serial number of the collateral are the key factors in s 165 that make a registration defective. On the other hand, ss 160 and 163 refer to the registration time and effectiveness of a registration “in relation to a secured party”.

____________________ Comparative Legislation Comparable sections of New Zealand legislation: see ss 146 and 155 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 43(4) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [3.1050].

____________________

[PPSA.163] Effective registration 163 (1) A registration with respect to a security interest that describes particular collateral, in relation to a secured party, is effective with respect to that collateral from the registration time for the description of the collateral until the earliest of the following times: (a) the end time (if any) registered for the collateral; (b) if the registration is amended to omit the collateral description — the amendment time;

(c) the time when the description of the collateral in the registration stops being available for search in the register (by reference to that time) in respect of the secured party. Note: For the registration time for collateral, see section 160.

(2) This section is subject to sections 164, 165 and 166 (defects in registration). ____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 153 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 44(1) of the Saskatchewan (Canada) Personal Property Security Act 1993. See also s 4 of the Personal Property Securities Regulations.

[page 279] Commentary References For further discussion please refer to commentary at [3.1050].

____________________

[PPSA.164] Defects in registration — general rule 164 (1) A registration with respect to a security interest that describes particular collateral is ineffective because of a defect in the register if, and only if, there exists: (a) a seriously misleading defect in any data relating to the registration, other than a defect of a kind prescribed by the regulations; or (b) a defect mentioned in section 165. [subs (1) am Act 35 of 2011 s 3 and Sch 2 item 35, opn 26 May 2011]

(2) In order to establish that a defect is seriously misleading, it is not necessary to prove that any person was actually misled by it. (3) A registration that describes particular collateral is not ineffective only because the registration is ineffective with respect to other collateral described in the registration. ____________________ [PPSA.164.A] Annotations to s 164 Although there is considerable case law on defective or seriously misleading registrations in Canada, these cases should be approached cautiously due to some of the unique registration requirements in Australia. These registration requirements are set out in s 153 PPSA and in the PPS Regulations. Sections 164, 165, 166 and 337A of the PPSA are the key provisions relating to when a registration will be defective. Like New Zealand and Ontario, Australia’s PPSR operates using the “exact

match” search system. The Canadian registers (other than Ontario) have a “close match” system. Some key differences between the registration requirements under the PPSA and the registration requirements in Canada and New Zealand are: the use of identifying numbers such as ACN, ARBN, ARSN, and ABN rather than the organisation’s name when entering the grantor’s details in a registration; the need to effect separate registrations for every collateral class rather than being able to describe multiple collateral classes in one registration; the requirement to indicate in the registration if a purchase money security interest is being claimed to any extent; the ability to nominate if collateral the subject of the registration may include “inventory” or may be subject to “control” for the purposes of Pt 9.5 of the PPSA. Grantor description Rabobank New Zealand Ltd v Stockco Ltd [2010] NZCCLR 25 — this case involved an application for summary judgment and it was relevant whether the applicant’s registration was “seriously misleading” and therefore invalid because it did not include the grantor’s partnership name. The court found there was sufficient doubt and refused the application for summary judgment. See also Polymers International Ltd v Toon [2013] NZHC 1897; BC201364696 — where the financing statement failed to comply with the requirements of the NZ PPSA and regulations in three respects: it did not include the company’s unique incorporation number; it did not classify the debtor company as a “company”; and it misspelled the debtor name by omitting a space gap between “N” and “Z”. The court indicated that only the first of these failures would be seriously misleading. This outcome was influenced by the search functionality of the NZ register. It is worth noting that under Australia’s PPSA (s 165(b)) a registration will be defective if no search by reference to the grantor’s details (as required under s 153 and the PPS Regulations) is capable of disclosing the registration. It is not necessary to determine if a registration is “seriously misleading” (as per s 164(1) (a)) if the defect is one of those set out in s 165. This is a significant departure from the comparable provisions in New Zealand and Canada.

[page 280] The searcher’s perspective If a person using the correct search information, whether it be the grantor’s details or a serial number, is unable to find a registration due to any errors in that registration, then the registration is likely to contain a seriously misleading defect, see Fairbanx Corp v Royal Bank of Canada [2010] OJ No 2226; 2010 ONCA 385; 319 DLR (4th) 618; 262 OAC 251; 68 CBR (5th) 102; 16 PPSAC (3d) 96. What is required for a registration to be seriously misleading turns on the effectiveness or otherwise of information provided in the financing statement, which allows an effective search using the PPSA’s search criteria, see Polymers International Ltd v Toon [2013] NZHC 1897; BC201364696. Future Revelation Ltd v Medica Radiology & Nuclear Medicine Pty Ltd [2013] NSWSC 1741; BC201319052 — an order was made declaring that registrations were not ineffective because the secured party was identified on the register by its ABN and not by its ACN as required by s 153 of the PPSA and the PPS Regulations. Brereton J noted that: this was not a defect of a kind mentioned in s 165 of the PPSA and so the issue was whether it was “seriously misleading” for the purposes of s 164; Canadian case law suggests that the test for whether a defect is “seriously misleading” is whether it will result in the registration not being disclosed on a search; a person searching the PPSR is likely to be concerned with the identity of the grantor and/or the collateral and although the PPSR can be searched by reference to the identity of the grantor and the

collateral, there is no facility to search by reference to the identity of the secured party; in this case, a search by reference to the identity of the collateral or the grantor would have disclosed the relevant security interest. Such a search would have identified clearly enough the secured party even though its ABN and not ACN was stated; in his view it was very clear that this defect was not seriously misleading or indeed for that matter misleading at all and therefore the registration was not ineffective by reason of that defect. Stevenson v GMAC Leaseco Ltd (2003) NBCA 26; 227 DLR (4th) 154; 4 PPSAC (3d) 211 (GMAC Leaseco) provides very useful commentary on the corresponding provisions in the New Brunswick PPSA (these provisions are substantially the same in all other Canadian PPSA legislation with the exception of the Ontario PPSA). Despite the differences between the registration requirements of Australia’s PPSA and the Canadian PPSAs, some key principles identified in GMAC Leaseco will be equally relevant in Australia when considering if a registration has a “seriously misleading” defect: The court’s focus should be on whether the creditor has perfected its security by registering a financing statement in accordance with the provisions of the legislation. Concepts of fairness and equity must be guided by this consideration. The PPSA is primarily concerned with promoting certainty and preserving the integrity of the registration system, not subjective notions of fairness. The risk of loss should fall on registrants who are responsible for errors or omissions in the registration. General law and equitable principles should only be relevant to the extent they are not inconsistent with the PPSA (or in the Australian context, to the extent they are capable of operating concurrently with the PPSA s 254). In GMAC Leaseco, the registered financing statement identified both the serial number of the collateral (in circumstances where the use of the serial number was optional rather than mandatory) and the grantor’s name. The serial number was correct but the grantor’s name was incorrect. The New Brunswick Court of Appeal held the error with the grantor’s name invalidated the registration. However, the court also observed that if it is optional rather than mandatory to register using a serial number for serial numbered property and the serial number recorded is incorrect, but the grantor’s details are correct, the error with the serial number does not render the registration invalid provided that the registration contains a general description of the collateral that itself is not “seriously misleading”. It is unclear whether this would be the case under Australia’s PPSA. Although s 165(a) would not apply where it is optional rather than mandatory to register by serial number and s 165(b) would not apply if the grantor’s details are correct, the

[page 281] secured party would need to argue that a registration recording the correct collateral class and grantor’s details but using an incorrect serial number was not “seriously misleading” under s 164. In Australia there will be no “general collateral description” (in particular, no free text collateral description) where a registration is made using a serial number (whether use of the serial number is mandatory or not). If an error in a serial number is minor, say one incorrect number or letter or a transposition error, it is possible that this would not be “seriously misleading” for the purposes of s 164. This may mean that the registration could be effective for priority purposes but not for the purposes of the taking free rules in ss 44 and 45 PPSA, but it is more likely that any error in a serial number, no matter how minor, would be “seriously misleading” for the purposes of s 164. Whether a collateral description is seriously misleading Financing statement collateral descriptions that “overreach” could be regarded as misleading to individuals searching the PPSR. However, courts should consider whether the notice function of the PPSR

is being compromised by such overreaching. Simpson v New Zealand Associated Refrigerated Food Distributors Ltd (2006) 3 NZCCLR 706; [2007] 2 NZLR 130; (2007) 10 NZCLC 264,263 — in October 2003 SFM executed a general security agreement in favour of Westpac. Westpac registered describing the collateral as “all present and after-acquired property”. In November 2004, SFM executed a trading account document with NZARFD giving a security interest in the goods supplied by NZARFD as well as the proceeds of such goods. In December 2004, NZARFD registered describing the collateral as “all present and after-acquired property”. SFM went into receivership in June 2005 holding a large quantity of NZARFD goods that had not been paid for. Both the NZ High Court and the Court of Appeal held that an overstatement of the collateral description in a registration (eg by nominating the collateral in a registration as “all present and future acquired property” when the actual security agreement covers only specific goods) will not affect the validity of the registration unless it is otherwise seriously misleading. Unlike the PPSA, the NZ PPSA does not require a registration to specify whether a purchase money security interest is being claimed and there is no equivalent to s 165(c) PPSA in the NZ PPSA. If a categorisation is too broad it will be open to challenge from the debtor/grantor and subject to the specific procedures contemplated in the NZ PPSA (and the PPSA) for rectifying an overly broad collateral description. Example 1 in ss 151 and 164(3) PPSA tends to suggest that an overreaching collateral description should not be “seriously misleading” under s 164, PPSA. Unfortunately, collateral classes cannot be amended using a financing charge statement and s 178 PPSA does not seem to contemplate the replacement of a financing statement with a new financing statement. A registration will be ineffective to the extent the collateral class specified in the registration does not cover a collateral class covered by the security agreement. A secured party can and should register against all relevant collateral classes unless it is registering against “all present and after acquired property”. If the collateral class “all present and after acquired property, except” is used, the exception described in the financing statement needs to refer to the items or classes of personal property that are not covered by the financing statement: PPS Regulations 1.6. A financing statement that uses this class without describing the items or classes that are “excepted” or excluded may be ineffective or “seriously misleading” on the basis that it does not include an adequate description of the collateral; see Re Noriega [2003] AJ No 367; 2003 ABQB 265; [2003] 7 WWR 566; 5 PPSAC (3d) 223. Inappropriate use of free text to supplement a collateral description in a registration could also result in the registration being seriously misleading. If free text suggests limitations on the coverage of a security interest, it is likely to be seriously misleading if a person might have been misled by that text had they been aware of it. It is not necessary to prove that any person was actually misled: s 164(2) PPSA. For example, free text added to a non serial number registration against “motor vehicles” might say the secured party has a security interest in “all Toyota motor vehicles owned by the grantor”. This would probably restrict the effectiveness of the registration to Toyota vehicles (and not vehicles of any other make) and only those owned by the grantor — it would not extend to Toyota vehicles leased by the grantor as lessee.

[page 282] Collateral may include “inventory” or may be subject to “control” Part 9.5 As noted above, certain aspects of the registration process under the PPSR are not found in Canada or New Zealand. One of these matters is the ability to indicate if collateral may include “inventory” or may be subject to “control” for the purposes of Pt 9.5 of the PPSA. These nominations are only relevant to whether the secured party has a “circulating security interest” and should probably be construed in this limited context rather than rendering an otherwise valid registration ineffective.

____________________ Comparative Legislation Comparable sections of New Zealand legislation: ss 149, 150, 151 and 152 of the

New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 43(6), (7), (8) and (9) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [3.1100], [4.8.3250], [6.2350].

____________________

[PPSA.165] Defects in registration — particular defects 165 For the purposes of paragraph 164(1)(b), a defect in a registration that describes particular collateral exists at a particular time if any of the following circumstances exist: (a) in a case in which the collateral is required by the regulations to be described by serial number in the register — no search of the register by reference to that time, and by reference only to the serial number of the collateral, is capable of disclosing the registration; (b) in a case in which the collateral is not required by the regulations to be described by serial number in the register — no search of the register by reference to that time, and by reference only to the grantor’s details (required to be included in the registered financing statement under section 153), is capable of disclosing the registration; (c) if the registered financing statement (as amended, if at all) indicates that a security interest in the collateral is a purchase money security interest (to any extent) — the security interest is not a purchase money security interest (to any extent) in the collateral; (d) in any case — circumstances in relation to the data related to the registration that are prescribed by the regulations. [s 165 am Act 35 of 2011 s 3 and Sch 2 items 36 and 37, opn 26 May 2011]

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 150 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 43(7) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [3.1100], [4.8.3250], [6.2350].

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[PPSA.166] Defects in registration — temporary

effectiveness 166 (1) Scope This section applies if: (a) one of the following defects in a registration that describes particular collateral arises at a particular time (the defect time): (i) a defect mentioned in paragraph 165(a) or (d); (ii) a defect mentioned in paragraph 165(b), other than a defect resulting from a change of the grantor in relation to the collateral; and (b) the defect does not arise only because of an irregularity, omission or error in a financing statement or a financing change statement. [page 283] Example: A defect mentioned in paragraph 165(a) may occur if there is a change in the serial number under which collateral is required to be described in the register. For example, a patent may be required to be described by serial number (a Patent Application Number or a Patent Number). The Patent Application Number may be changed to a Patent Number when the patent is registered on the patents register. Note: A change of the grantor may occur if the collateral described in the registration is transferred. In this case, the secured party’s security interest may be temporarily perfected for a certain period (see section 34).

(2) Registration is temporarily unaffected by the defect Despite sections 164 and 165, the defect does not make the registration ineffective for the period starting at the defect time and ending at the earliest of the following times: (a) the end time for the registration (as registered immediately before the defect time); (b) the end of the month that is 60 months after the defect time; (c) the end of 5 business days after the day the secured party acquires actual or constructive knowledge of the defect. Note: The period mentioned in paragraph (c) may be extended by a court under section 293.

(3) Registration becomes ineffective However, the registration becomes ineffective with respect to the collateral under sections 164 and 165 because of the defect immediately after the earliest time mentioned in subsection (2), unless, at or before that time, the registration is amended to correct the defect. ____________________ Commentary References For further discussion please refer to commentary at [3.1150], [4.8.3250].

____________________

[PPSA.167] Security interest in certain property becomes unperfected 167 (1) Scope This section applies in relation to a registration with respect to a security interest if: (a) collateral described in the registration is: (i) used, or intended to be used, predominantly for personal, domestic or household purposes; or (ii) registered with a serial number (see subsection (3)); and (b) a security interest in the collateral that was perfected by the registration becomes unperfected at a particular time (the unperfection time); and (c) the end time for the registration is a time more than 5 business days after the day the unperfection time occurs. (2) Requirement to end effective registration The secured party must, before the end of 5 business days after the day the unperfection time occurs, apply to register a financing change statement under section 150 amending the registration to end its effect. Note 1: The period may be extended by a court under section 293. Note 2: If the secured party fails to discharge the obligation under this section, an action for damages may be available under section 271.

[page 284] (3) When collateral is registered with a serial number For the purposes of this section, collateral is registered with a serial number at a particular time only if a search of the register by reference to that time and by reference only to the serial number of the collateral is capable of disclosing the registration. ____________________ Commentary References For further discussion please refer to commentary at [3.1200], [4.13.2050].

____________________

[PPSA.168] Maintenance fees

168 (1) The Registrar may give a secured party in respect of a registration with respect to a security interest a written notice requiring the secured party to pay the fee (determined under section 190) stated in the notice within 28 days after the notice is given in order to maintain the effectiveness of the registration. (2) If the fee is not paid within 28 days after the notice is given, the Registrar may register a financing change statement amending the registration to end its effect. Note 1: The Registrar must give a verification statement to each secured party after the registration of a financing change statement (see section 156). Note 2: Application may be made to the Administrative Appeals Tribunal for review of certain decisions of the Registrar about registration (see section 191). Note 3: The requirement to pay a fee is satisfied if an arrangement for its payment has been approved under subsection 190(4).

PART 5.5 — ACCESSING THE REGISTER TO SEARCH FOR DATA [ss 169–176] [Heading subst Act 35 of 2011 s 3 and Sch 2 item 38, opn 26 May 2011]

[PPSA.169] Guide to this Part 169 This Part is about accessing the register to search for data about personal property. Anyone may access the register to search the register for data with respect to a security interest or personal property. Searches can only be undertaken by reference to certain criteria, for example the details of a grantor, or a serial number. A search by reference to an individual grantor’s details, and the use of data obtained by a search, is only authorised if the search is undertaken for a purpose stated in this Part. A civil penalty applies in respect of unauthorised searches, and damages may be available (under section 271). In addition, an unauthorised search may be investigated under the Privacy Act 1988. The written search results may be used as evidence in a court or tribunal. A person may apply to obtain: (a) copies of registered financing statements and verification statements; and (b) reports of certain matters relating to registered data in relation to the person. [s 169 am Act 35 of 2011 s 3 and Sch 2 items 39 and 40, opn 26 May 2011]

[page 285]

[PPSA.170] Search — general 170 (1) A person may apply to the Registrar for access to the register to search for data in relation to a security interest or personal property (or both). [subs (1) subst Act 35 of 2011 s 3 and Sch 2 item 41, opn 26 May 2011]

(2) The Registrar must: (a) give the person access to the register to search for the data, in accordance with the application; and (b) if, in the application, the person requests a written search result in relation to the data — ensure that the person is able to obtain a written search result in relation to the data, in the appropriate form under section 174. (3) However, the Registrar may give the person access to the register to search for the data only if: (a) the search is authorised under sections 171 and 172; and (b) the application is in the approved form; and (c) the person pays the fee determined under section 190; and (d) access to the data is not prohibited by the regulations. Note 1: Application may be made to the Administrative Appeals Tribunal for review of the Registrar’s decision under this section to refuse to give a person access to the register to search for data (see section 191). Note 2: The requirement to pay a fee is satisfied if an arrangement for its payment has been approved under subsection 190(4).

____________________ [PPSA.170.A] Annotations to s 170 Prohibited access to data (s 170(3)(d)) See reg 5.7 at [PPSR5.7].

____________________ Comparative Legislation Comparable sections of New Zealand legislation: see s 171 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 48 of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [3.1250].

____________________

[PPSA.171] Search — criteria 171 (1) A person may access the register to search for data by reference to the following criteria:

(a) a grantor’s details (as required to be included, if at all, in a registered financing statement under section 153); (b) a serial number by which collateral may (or must) be described in the register; (c) the time of the search; (d) an earlier nominated time, but only with the consent of the Registrar; (da) a unique identifier allocated by the Registrar to a registered financing statement; (e) any other criteria prescribed by the regulations. Note: If a registration is no longer effective, details of the registration can still be found by searching the register by reference to an earlier time when the registration was still effective (see paragraph (d)). However, data removed from the register may not be available for search by reference to an earlier time (see Part 5.7). [subs (1) am Act 35 of 2011 s 3 and Sch 2 items 42 and 43, opn 26 May 2011]

[page 286] (2) The Registrar must ensure that the way in which the results of a search are worked out in response to an application for the search is determined in accordance with any regulations made for the purposes of this subsection. ____________________ [PPSA.171.A] Annotations to s 171 Criteria prescribed by the regulations (s 171(1)(e)) See reg 5.8 at [PPSR5.8]. Cases If a person using the correct search information, whether it be the grantor’s details or a serial number, is unable to find a registration due to any errors in that registration, then the registration is likely to contain a seriously misleading defect, see Fairbanx Corp v Royal Bank of Canada [2010] OJ No 2226; 2010 ONCA 385; 319 DLR (4th) 618; 16 PPSAC (3d) 96. What is required for a registration to be seriously misleading turns on the effectiveness or otherwise of information provided in the financing statement, which allows an effective search using the PPSA’s search criteria, see Polymers International Ltd v Toon [2013] NZHC 1897; BC201364696.

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 172 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 48(1) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [3.1300].

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[PPSA.172] Search — by reference to details of grantor who is an individual 172 (1) Scope This section applies if a person proposes to access the register to search for data by reference to the details of a grantor (other than that person) who is an individual. [subs (1) am Act 35 of 2011 s 3 and Sch 2 item 44, opn 26 May 2011]

(2) Individual grantor details — permitted searches The following table sets out which persons (searchers) may access the register to search for data, and for what purpose: Individual grantor details — permitted searches Item Searchers 1 A person (the first person), or another person with the first person’s consent 2 A secured party in relation to a registration 3 A grantor in relation to a registration 4

A person

5

A person

Purpose To disclose any registration in which the first person is registered as a grantor or a secured party. A purpose that relates to a security interest attached to collateral described in the registration. A purpose that relates to a security interest attached to the collateral described in the registration. To disclose any registration in which the person is registered as a secured party. To disclose whether collateral to which a security interest is attached is described in a registration.

[page 287] Individual grantor details — permitted searches Item Searchers 6 A person

7

A person

8

A person

Purpose To disclose whether or not personal property is described in a registration, if: (a) the property is to be purchased or dealt with by the person; or (b) the person has an interest in the property. To establish whether to provide credit to, or obtain a guarantee or an indemnity from, a person named in the search application or a person with an interest in the personal property described in the application. To establish whether to provide credit to, or obtain a personal guarantee or an indemnity from an associate (within the meaning of section 11 or subsection 12(2) of the Corporations Act 2001) of a

9 10

11 12

13

14

15

body corporate named in the search application or of a body corporate with an interest in the personal property described in the application. A person To establish whether to invest in, with, or through, a person named in the search application. A person To establish whether to invest in, with, or through, an associate (within the meaning of section 11 or subsection 12(2) of the Corporations Act 2001) of a body corporate named in the search application or of a body corporate with an interest in the personal property described in the application. The Registrar A purpose that relates to the administration of this Act. A person who has taken control of the A purpose that relates to the searcher’s control of the property of an individual who is insolvent property. under administration, within the meaning of the Corporations Act 2001 An Official Receiver in Bankruptcy A purpose that relates to the exercise of a power, or within the meaning of the Bankruptcy Act the performance of a function, of that Official 1966 Receiver in Bankruptcy. The legal personal representative of an A purpose that relates to the exercise of a power, or individual (including a deceased the performance of a function, as legal personal individual) representative. A government entity within the meaning A purpose that relates to the exercise of a power, or of the A New Tax System (Australian the performance of a function, of that entity, unless Business Number) Act 1999 the purpose is covered by another purpose listed in this table.

[page 288] Individual grantor details — permitted searches Item Searchers 16 A government entity within the meaning of the A New Tax System (Australian Business Number) Act 1999 17

The holder of a lien or charge, or a creditor

18

A bailiff, or sheriff, of a court of the Commonwealth, a State or a Territory A person

19

Purpose A purpose that relates to the maintenance of the law, including the prevention, detection, investigation or prosecution of contraventions of laws (whether the penalty for contravention is criminal or civil). A purpose that relates to the enforcement of the lien or charge, or the creditor’s rights, as the case may be. A purpose that relates to the enforcement of a court order or warrant. To advise another person in connection with any of the purposes referred to in this table.

[subs (2) am Act 35 of 2011 s 3 and Sch 2 items 45 and 46, opn 26 May 2011]

(3) Search otherwise than for authorised purpose A searcher mentioned in an item in the table in subsection (2) must not, otherwise than for the purpose

specified in the item: (a) access the register to search for data; or (b) use data obtained as a result of accessing the register, unless the searcher has also obtained the data lawfully from another source. Civil penalty: (a) for an individual — 50 penalty units; (b) for a body corporate — 250 penalty units. Note: See Part 6.3 (Civil penalty proceedings). [subs (3) am Act 35 of 2011 s 3 and Sch 2 items 47 and 48, opn 26 May 2011]

(4) A person who wishes to establish that a searcher mentioned in an item in the table in subsection (2) did an action mentioned in paragraph (3)(a) or (b) for the purpose specified in the item bears an evidential burden in relation to the matter. Note: For evidential burden, see section 10.

(5) For the purposes of section 195A (Registrar — investigations), the Registrar may do either or both of the following: (a) investigate a suspected contravention of subsection (3); (b) decline to investigate, or to investigate further, a suspected contravention of subsection (3). [subs (5) am Act 35 of 2011 s 3 and Sch 2 item 49, opn 26 May 2011]

(6) Recovery of damages for contravention For the purposes of section 271: (a) compliance with subsection (3) is taken to be an obligation imposed on a person who accesses the register to search for data, or uses data obtained as a result of accessing the register to search for data; and (b) the obligation is taken to be owed to the grantor by reference to whose details the search is undertaken; and (c) a contravention of subsection (3) is taken to be a failure to discharge that obligation. [page 289] Note: Section 271 gives a right to recover damages for any loss or damage in relation to such a failure. [subs (6) am Act 35 of 2011 s 3 and Sch 2 item 50, opn 26 May 2011]

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Comparative Legislation Comparable sections of New Zealand legislation: s 173 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 48(1) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [3.1350].

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[PPSA.173] Search — interference with privacy 173 (1) Scope This section applies if: (a) a person obtains access to the register and searches the register for data (whether or not the access is obtained as a result of an application under section 170); and (b) as a result of the search, the person obtains personal information about an individual within the meaning of that Act. (2) Unauthorised search or use of personal information is an interference with privacy If the search, or the use of the personal information, is unauthorised under subsection (3) or (4), the search or use constitutes an act or practice involving interference with the privacy of the individual for the purposes of section 13 of the Privacy Act 1988. Note: These acts or practices may be the subject of complaints under section 36 of that Act.

(3) The search is unauthorised if: (a) the search is not authorised under section 171; or (b) the search is prohibited under subsection 172(3); or (c) access to the data for a search of that kind is prohibited by regulations made for the purposes of paragraph 170(3)(d). (4) The use of the personal information is unauthorised (unless the data has been obtained lawfully from another source) if: (a) the search is not authorised under section 171; or (b) the use of the personal information is prohibited under subsection 172(3); or (c) access to the data for a search of that kind is prohibited by regulations made for the purposes of paragraph 170(3)(d). ____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 174 of the New Zealand Personal Property Securities Act 1999. Commentary References For further discussion please refer to commentary at [3.1350].

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[PPSA.174] Search — written search results and evidence etc 174 (1) Search result as evidence A written search result in the appropriate form (see subsection (3)) is admissible as evidence in a court or tribunal and is, in the absence of evidence to the contrary, proof of the matters stated in the search result. (2) Without limiting subsection (1), the matters that may be stated in a search result include the following: (a) the registered description of collateral at a particular time; [page 290] (b) the time of the registration of a financing statement, any financing change statement and the end time for a registration; (c) the chronological order of any of the events mentioned in paragraph (b), in relation to one or more registrations. [subs (2) am Act 96 of 2010 s 3 and Sch 2 item 83, opn 6 July 2010]

(3) Appropriate form of search result A search result is in the appropriate form if: (a) it purports to be issued by the Registrar in the approved form; or (b) it purports to be issued by one of the following: (i) an officer or agency of the Commonwealth authorised by the Registrar; (ii) an officer or agency of a State or Territory authorised by the Registrar; or (c) it purports to be: (i) issued by a person prescribed by the regulations; and (ii) if the Registrar approves a form for the purposes of this subparagraph — in the approved form. (4) The Registrar may include, or may authorise to be included, in a search result, any data, including third party data (see section 176C), determined by the Registrar in relation to a secured party, a grantor or personal property.

[subs (4) am Act 35 of 2011 s 3 and Sch 2 item 51, opn 26 May 2011]

(5) Evidence of transient electronic communications etc If a search result is covered by paragraph (b) of the definition of writing in section 10, evidence of the search result may be given by the production of a recording of the search result mentioned in that paragraph. (6) Instruments of approval The Registrar may, by written instrument, authorise an officer or agency for the purposes of subparagraph (3)(b)(i) or (ii). (7) The Registrar may, by legislative instrument, determine data for the purposes of subsection (4). ____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 175 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 48(2) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [3.1400].

____________________

[PPSA.175] Copies of financing statements and verification statements 175 On application by a person in the approved form, accompanied by the fee (if any) determined under section 190, the Registrar may give the person: (a) a copy of any registered financing statement (as amended by any registered financing change statement) in relation to which the person is registered as a secured party; or (b) a copy of a verification statement that relates to such a registered financing statement. Note 1: Application may be made to the Administrative Appeals Tribunal for review of the Registrar’s decision under this section to refuse to give a person a copy of a registered financing statement or verification statement (see section 191).

[page 291] Note 2: The requirement to pay a fee is satisfied if an arrangement for its payment has been approved under subsection 190(4).

[PPSA.176] Reports by Registrar

176 (1) Reports about particular persons On application by a person in the approved form, accompanied by the fee (if any) determined under section 190, the Registrar may give the person a report of matters determined under subsection (3) relating to registered data in relation to the person. Note 1: Application may be made to the Administrative Appeals Tribunal for review of the Registrar’s decision under this section to refuse to give a person a report (see section 191). Note 2: The requirement to pay a fee is satisfied if an arrangement for its payment has been approved under subsection 190(4).

(2) The Registrar may, at the Registrar’s initiative, give a person a report of matters relating to registered data in relation to the person (whether or not the matters are determined under subsection (3)). (3) The Registrar may, by legislative instrument, determine matters that may be the subject of reports under this section. (4) Reports for the purposes of the administration of this Act For the purposes of the administration of this Act, the Registrar may prepare a report of any matter relating to registered data.

PART 5.5A — CONDITIONS ON DATA ACCESS [ss 176A–176C] [Pt 5.5A insrt Act 35 of 2011 s 3 and Sch 2 item 52, opn 26 May 2011]

[PPSA.176A] Guide to this Part 176A Access to registered data and third party data through the register may be provided subject to conditions, including conditions about the subsequent use of the data. Damages may be available (under section 271) in respect of a contravention of conditions of access. The Registrar may arrange with a third party (prescribed by the regulations) under this Part for the provision of access to non-registered data, held by the third party, through the register (as a portal). For example, the Registrar may arrange with a prescribed third party to provide users of the register with data held by the third party that relates to motor vehicles. As a result, third party data concerning a motor vehicle may be provided on a verification statement or search result that relates to that vehicle, whether or not the data is specifically requested.

[PPSA.176B] Access to registered data — conditions 176B (1) Scope This section applies if a person applies for:

(a) the registration of a financing statement or a financing change statement (under section 150); or (b) access to the register to search for data (under section 170); or (c) a copy of a registered financing statement or verification statement (under section 175). [page 292] (2) Registered data conditions The person may be required to comply with conditions (registered data conditions) in relation to registered data received as a result of the application, as part of the approved form for the application. Note: For approved forms, see section 302.

(3) Registered data conditions includes, but is not limited to, conditions relating to the use of registered data. (4) The person’s compliance with the registered data conditions may be required whether or not: (a) the application relates to personal property that is the subject of registered data; or (b) in the case of an application for access to the register to search for data — the person is applying for access to the register to search for registered data; or (c) in the case of an application for a copy of a registered financing statement — the applicant also applies for a copy of a verification statement in relation to the financing statement. (5) Recovery of damages for contravention For the purposes of section 271: (a) compliance with the registered data conditions as required under subsection (2) of this section is taken to be an obligation imposed on the person by this Act; and (b) the obligation is taken to be owed to the Commonwealth; and (c) a contravention of a registered data condition is taken to be a failure to discharge that obligation. Note: Section 271 gives a right to recover damages for any loss or damage relating to such a failure.

(6) If the person (the applicant) applies on behalf of another person (the principal): (a) both the applicant and the principal may be required, by the approved

form for the application, to comply with the registered data conditions; and (b) an obligation is taken to be imposed under subsection (5) on both the applicant and the principal, in each of their personal capacities, to comply with the registered data conditions.

[PPSA.176C] Access to third party data 176C (1) Agreement with third parties The Registrar may make an arrangement with a person (the third party) prescribed by regulations made for the purposes of this section to enable: (a) data (third party data) held by the third party with respect to personal property to be included in verification statements; and (b) access to the register to be given to applicants under section 170 (search — general) to search for third party data; and (c) third party data to be included in search results under section 174; and (d) applications for registration under section 150, for access to the register under section 170 or for copies of registered financing statements or verification statements under section 175 to be subject to conditions (third party data conditions) relating to third party data obtained as a result of such applications. Example: An arrangement between the Registrar and a third party to enable third party data relating to motor vehicles to be included in verification statements and search results.

[page 293] (2) Third party data does not include personal information, within the meaning of the Privacy Act 1988, about an individual. (3) Third party data conditions includes, but is not limited to, conditions relating to the use of the third party data. (4) Use of third party data A person may be required to comply with third party data conditions, as part of the approved form for application, if the person applies: (a) for the registration of a financing statement or a financing change statement (under section 150); or

(b) for access to the register to search for data (under section 170); or (c) for a copy of a registered financing statement or verification statement (under section 175). Note: For approved forms, see section 302.

(5) A person’s compliance with third party data conditions may be required whether or not: (a) the application relates to personal property that is the subject of the third party data; or (b) in the case of an application for access to the register to search for data — the person is applying for access to the register to search for the third party data; or (c) in the case of an application for a copy of a registered financing statement — the applicant also applies for a copy of a verification statement in relation to the financing statement. (6) Recovery of damages for contravention For the purposes of section 271: (a) compliance with the third party data conditions as required under subsection (4) of this section is taken to be an obligation imposed on the person by this Act; and (b) the obligation is taken to be owed to the third party; and (c) a contravention of one of the third party data conditions is taken to be a failure to discharge that obligation. Note: Section 271 gives a right to recover damages for any loss or damage relating to such a failure.

(7) If a person (the applicant) makes an application mentioned in subsection (4) on behalf of another person (the principal): (a) both the applicant and the principal may be required, by the approved form for the application, to comply with the third party data conditions; and (b) an obligation is taken to be imposed under subsection (6) on both the applicant and the principal, in each of their personal capacities, to comply with the third party data conditions. ____________________ [PPSA.176C.A] Annotations to s 176 Prescribed person (s 176C(1)) Austroads Ltd (ABN 16 245 787 232) is a prescribed person: see reg 5.8A at [PPSR5.8A].

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[page 294]

PART 5.6 — AMENDMENT DEMANDS [ss 177–182] DIVISION 1 — INTRODUCTION [ss 177,178]

[PPSA.177] Guide to this Part 177 A person with an interest in collateral may require changes to the registration, by way of an amendment demand given to the secured party. An amendment demand may be made if: (a) the obligation owed by a debtor to the secured party is not secured by collateral described in the registration; or (b) the particular collateral in which the person has an interest does not secure any obligation owed by a debtor to the secured party. An amendment demand, if not voluntarily complied with, may be pursued by an administrative process activated by the Registrar, or by an application to a court. The secured party may also apply to a court to oppose an amendment demand.

[PPSA.178] How amendment demands are given 178 (1) A person with an interest (including a security interest) in collateral described in a registration with respect to a security interest may give a demand (an amendment demand), in writing, to the secured party for a financing change statement to be registered to amend the registration as authorised by the following table: Note: If the secured party does not comply with the amendment demand, the demand may be enforced under Subdivision A (administrative process) or Subdivision B (judicial process) of Division 2. Authorised amendments Item When amendment is authorised 1 No collateral described in the registration secures any obligation (including a payment) owed by a debtor to the secured party. 2 The particular collateral in which the person has an interest does not secure any obligation (including a payment) owed by a debtor to the secured party.

What amendment is authorised Amendment to end effective registration (including an amendment to remove the registration). Amendment to omit the collateral.

[subs (1) am Act 103 of 2013 s 3 and Sch 1 item 55, opn 29 June 2013]

(2) Data removed from the register because of an amendment in compliance

with the amendment demand must not be made available for search in the register by reference to any time before (or after) the time of removal, if the Registrar so decides for the purposes of this subsection. Note 1: Application may be made to the Administrative Appeals Tribunal for review of the Registrar’s decision that the removed data is not to be made available for search in the register (see section 191). Note 2: Incorrectly removed data may be restored under section 186.

[page 295] (3) A secured party must not require payment for compliance with an amendment demand in relation to collateral that: (a) at the time the security interest attached to the collateral, the grantor intended to use predominantly for personal, domestic or household purposes; or (b) the grantor is using predominantly for personal, domestic or household purposes. [subs (3) am Act 96 of 2010 s 3 and Sch 2 item 84, opn 6 July 2010]

____________________ [PPSA.178.A] Annotations to s 178 As the PPSR does not permit the amendment of a collateral class using a financing change statement there are practical difficulties with compelling a secured party to replace a registration against “all present and after acquired property” with a specific collateral class registration. Refer to the commentary at [PPSA.164.A].

____________________ Comparative Legislation Comparable sections of New Zealand legislation: ss 162 and 163 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 50(3) and (4) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [3.1450].

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DIVISION 2 — AMENDMENT DEMANDS: ADMINISTRATIVE AND JUDICIAL PROCESS [ss 179–182] Subdivision A — Administrative Process [ss 179–181]

[PPSA.179] Scope of Subdivision

179 (1) This Subdivision applies if: (a) a secured party is given an amendment demand; and (b) an application has not been made to register a financing change statement in compliance with the demand before the end of 5 business days after the day the demand is given to the secured party; and (c) there are no proceedings currently before a court (including a court of appeal), in relation to an application under section 182, that relate to the amendment demanded. (2) This Subdivision stops applying if: (a) a financing change statement is registered in accordance with the amendment demand; or (b) proceedings come before a court (including a court of appeal), in relation to an application under section 182, that relate to the amendment demanded. (3) No application to security trust instruments This Division does not apply in relation to a security interest if the security agreement providing for the interest is an instrument or other document: (a) by which a person issues or guarantees, or provides for the issue or guarantee of, an obligation secured by a security interest; and (b) in which another person is appointed as trustee for the person to whom the obligation secured by the security interest is owed. ____________________ [page 296] Comparative Legislation Comparable sections of New Zealand legislation: s 164 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 50(8) of the Saskatchewan (Canada) Personal Property Security Act 1993.

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[PPSA.180] Administrative process — amendment notices 180 (1) Amendment notice given by Registrar The Registrar may give the secured party a notice (an amendment notice), in accordance with subsection (5), of the amendment demanded.

(2) At the initiative of the Registrar An amendment notice may be given at the initiative of the Registrar, if the Registrar suspects on reasonable grounds that the amendment demanded is authorised under section 178. (3) In response to a statement by the person who gave the amendment demand The person who gave the amendment demand to the secured party may give a statement in the approved form to the Registrar: (a) stating the amendment demanded; and (b) including anything else prescribed by the regulations. Note: The provision of false or misleading information in the statement may be an offence against Part 7.4 of the Criminal Code.

(4) An amendment notice must be given in response to a statement under subsection (3) as soon as practicable after the statement is given (unless an amendment notice has already been given at the initiative of the Registrar). (5) Amendment notices An amendment notice is given in accordance with this subsection if: (a) the notice is in the approved form; or (b) the notice: (i) states the amendment demanded; and (ii) invites the secured party to submit a response to the amendment demand in writing to the Registrar before the end of 5 business days after the day the notice is given (or an extended period approved by the Registrar); and (iii) sets out the effect of section 181 (amendment of registration); and (iv) if a statement is given under subsection (3) — includes a copy of the statement. Note: The provision of false or misleading information in any response to the invitation may be an offence against Part 7.4 of the Criminal Code.

____________________ [PPSA.180.A] Annotations to s 180 Prescribed details (s 180(3)(b)) See reg 5.9 at [PPSR5.9].

____________________ Commentary References For further discussion please refer to commentary at [3.1450].

____________________

[PPSA.181] Administrative process — registration

amendments 181 (1) If an amendment notice is given to a secured party under section 180, after the end of the period covered by subsection (3), the Registrar must (at his or her initiative) register a financing change statement amending the registration (including an

[page 297] amendment to remove the registration) in accordance with the amendment demand, unless the Registrar suspects on reasonable grounds that the amendment is not authorised under section 178. (2) However, the Registrar may register such a financing change statement before the end of the period covered by subsection (3) if: (a) the secured party has responded to the invitation in the amendment notice; and (b) the Registrar has no reason to believe that the secured party intends to give a further response. (3) The period covered by this subsection is: (a) 5 business days after the day the amendment notice is given to the secured party; or (b) a longer period approved by the Registrar (in relation to the particular amendment demand, or to a class of amendment demands) after the amendment notice is given to the secured party. (4) In making a decision about whether to register a financing change statement amending the registration in accordance with the amendment demand, the Registrar must consider: (a) the response (if any) of the secured party to the invitation in the amendment notice; and (b) any other relevant information. (5) Data removed from the register because of an amendment under this section must not be made available for search in the register by reference to any time before (or after) the time of removal, if the Registrar so decides for the purposes of this subsection. Note 1: The provision of false or misleading information in any response to the invitation may be an offence against Part 7.4 of the Criminal Code. Note 2: The Registrar must give a verification statement to each secured party after the registration of a financing change statement (see section 156). Note 3: Application may be made to the Administrative Appeals Tribunal for review of certain decisions of the Registrar about registration (see section 191). Note 4: This section stops applying if proceedings come before a court under section 182 in relation to the amendment demanded (see subsection 179(2)).

Note 5: Incorrectly removed data may be restored under section 186.

____________________ [PPSA.181.A] Annotations to s 181 Cirillo v Registrar of Personal Property Securities [2013] AATA 733; BC201313909 — the Administrative Appeals Tribunal held there were reasonable grounds for the Registrar to suspect that an amendment sought by a grantor was not authorised under s 178.

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 165 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 50(5) of the Saskatchewan (Canada) Personal Property Security Act 1993.

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Subdivision B — Judicial Process [s 182]

[PPSA.182] Judicial process for considering amendment demand 182 (1) The following persons may apply to a court for an order in relation to an amendment demand: [page 298] (a) the secured party; (b) the person who gave the amendment demand. (2) The person who gave the amendment demand cannot make an application under this section before the end of 5 business days after the day the demand is given to the secured party. Note: The period may be extended by a court under section 293.

(3) A person with an interest (including a security interest) in the collateral described in the registration has the right to appear before the court on an application under this section. Note 1: The Registrar also has the power to intervene in the proceeding (see section 218). Note 2: For which courts have jurisdiction, and for transfers between courts, see Part 6.2.

(4) On an application under this section, a court may make the following orders: (a) if the court considers the amendment demanded to be authorised under

section 178 — an order requiring the Registrar to register a financing change statement amending the registration (including an amendment to remove the registration); (b) if the court does not consider the amendment demanded to be so authorised — one or more of the following orders: (i) an order restraining the Registrar from registering a financing change statement amending the registration at the Registrar’s initiative (under section 181); (ii) an order restraining the person who gave the amendment demand from making such further amendment demands as the court specifies; (iii) an order restraining the Registrar from giving the secured party amendment notices under section 180 in relation to such further amendment demands as the court specifies; (c) any other order that the court thinks fit. (5) The Registrar must comply with a court order to register a financing change statement as soon as reasonably practicable after receiving the order. Note: The Registrar must give a verification statement to each secured party after the registration of a financing change statement (see section 156).

(6) Data removed from the register because of an amendment under this section must not be made available for search in the register by reference to any time before (or after) the time of removal, if the Registrar so decides. Note: Incorrectly removed data may be restored under section 186.

____________________ [PPSA.182.A] Annotations to s 182 Sandhurst Golf Estates Pty Ltd v Coppersmith Pty Ltd [2014] VSC 217; BC201403647 held the court had jurisdiction to restrain persons from seeking to register a financing statement claiming a security interest in circumstances where those persons had been found not to have a security interest but nevertheless threatened to seek to register a financing statement that would inconvenience and damage the parties against whom the registration would be made. See also Macquarie Leasing Pty Ltd v DEQMO Pty Ltd [2014] NSWSC 1466; BC201408958 and Macquarie Leasing Pty Ltd v Registrar of Personal Property Securities Register [2014] NSWSC 1677; BC201410003. Macquire Leasing v Registrar of Personal Property Securities Register [2015] NSWSC 94; BC201500888 — in the face of repeated registrations by various persons seeking to prevent the completion of a sale of a prime mover by a secured party, the court ordered the removal of a

[page 299] registration against the grantor in favour of a non-existent entity and an ambulatory order directing the

Registrar of the PPSR to remove any subsequent interest that might be registered against the grantor until noon the following day. This was to ensure the secured party would receive the money from the sale of the prime mover to which it was entitled and the purchaser would receive clear title to the prime mover.

____________________ Comparative Legislation Comparable sections of New Zealand legislation: ss 166, 167 and 168 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 50(7) and (9) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [3.1450].

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PART 5.7 — REMOVAL OF DATA AND CORRECTION OF REGISTRATION ERRORS [ss 183– 188] [PPSA.183] Guide to this Part 183 The Registrar may remove data in certain situations, for example if its retention is contrary to the public interest. The Registrar may also remove old data, restore removed data and correct errors or omissions made by the Registrar.

[PPSA.184] Removal of data — general grounds 184 (1) The Registrar may (at his or her initiative) register a financing change statement to remove data (including an entire registration) from the register if the Registrar is satisfied that: (a) the application to register the data was frivolous or vexatious, the data is offensive, or the retention of the data in the register is contrary to the public interest; or (b) the registration of the data is prohibited by regulations made for the purposes of paragraph 150(3)(d); or (c) the removal of the data is required or permitted by the regulations made for the purposes of this paragraph; or (d) the application to register the data was not made in the approved form; or

(e) the removal is required urgently: (i) in the public interest; or (ii) for reasons prescribed by regulations made for the purposes of this subparagraph. Note 1: The Registrar must give a verification statement to each secured party after the data is removed (see section 156). Note 2: Application may be made to the Administrative Appeals Tribunal for review of the Registrar’s decision to remove data from the register under paragraph (a), (b) or (c) (see section 191).

(2) Data removed from the register under this section must not be made available for search in the register by reference to any time before (or after) the time of removal: [page 300] (a) in relation to data removed under paragraph (1)(a), (b) or (c) — if the Registrar so decides for the purposes of this paragraph; and (b) in relation to data removed under paragraph (1)(d) — if the Registrar so decides for the purposes of this paragraph; (c) in relation to data removed under paragraph (1)(e) — in all cases. Note: Application may be made to the Administrative Appeals Tribunal for review of the Registrar’s decision under paragraph (a) (see section 191).

(3) If subsection (2) applies in relation to data removed from the register, this Act otherwise applies as if the data is not, and never has been, included in the register. Note: Incorrectly removed data may be restored under section 186.

____________________ [PPSA.184.A] Annotations to s 184 Removal of data (s 184(1)(c)) See reg 5.10 at [PPSR5.10]. Prescribed reasons (s 184(1)(e)(ii)) See reg 5.10 at [PPSR5.10]. Re Manormay Investments Pty Ltd [2013] VSC 260; BC201302816 — the court held certain security interests were void and of no effect and ordered that they be set aside. The court ordered the Registrar of the PPS Register to remove the registrations relating to these security interests pursuant to s 184(1)(e)(ii) of the PPSA and PPSR 5.10(2).

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 170(1) of the New Zealand

Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 46(2) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [3.1450].

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[PPSA.185] Removal of data — registration ineffective for 7 years or more 185 The Registrar may (at his or her initiative) register a financing change statement to remove data (including an entire registration) with respect to a security interest from the register to reflect the fact that the registration has been ineffective under section 163 for 7 years or more. ____________________ Commentary References For further discussion please refer to commentary at [3.1450].

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[PPSA.186] Incorrectly removed data — restoration 186 (1) The Registrar may (at his or her initiative) register a financing change statement to restore data to the register (including an entire registration) if it appears to the Registrar that the data was incorrectly removed from the register under this Act. (2) If data is restored to the register under subsection (1), for the purposes of this Act the data is taken never to have been removed from the register. ____________________ [PPSA.186A] Annotations to s 186 In SFS Projects Australia Pty Ltd v Registrar of Personal Property Securities [2014] FCA 846; BC201406315 the court held:

[page 301] the Registrar has power to register a financing change statement to restore data comprising the original end times to the PPS Register if it appears to the Registrar that the data was incorrectly removed from the PPS Register; data may be incorrectly removed from the PPS Register if it is removed in accordance with a financing change statement containing an error made by the person submitting the application to register the financing change statement.

In this case the assignor of certain security interests ended the registrations rather than transferring them to the assignee. The Registrar had not made any error and argued that s 186 did not apply in these circumstances. However, Gleeson J found: … the mere fact that the data has been removed in conformity with a financing change statement will not necessarily mean that the data has been correctly removed. If the application to register a financing change statement is found to have been submitted in error or found to have contained data different from that which was intended to be included by the person making the application, then the Registrar may be satisfied that relevant data has been incorrectly removed from the register. The court placed some reliance on the difference in the wording of ss 186 and 188. The latter specifically refers to “an error or omission made by the Registrar.” See also SFS Projects Australia Pty Ltd v Registrar of Personal Property Securities (No 2) [2014] FCA 987; BC201407525. These decisions do not consider the consequences of restoring data in this manner for other persons who might rely on the register while the relevant data is missing from the register.

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 169A of the New Zealand Personal Property Securities Act 1999. Commentary References For further discussion please refer to commentary at [3.1450].

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[PPSA.187] Records of removed data 187 The removal of data from the register under this Act does not prevent the Registrar from keeping a record of the removed data in whatever form the Registrar considers appropriate. ____________________ Commentary References For further discussion please refer to commentary at [3.1450].

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[PPSA.188] Correction of registration errors 188 (1) The Registrar may (at his or her initiative) register a financing change statement to amend a registration to correct an error or omission made by the Registrar. (2) If a registration is corrected under subsection (1), this Act applies as if the error or omission had never been made. Note 1: The Registrar must give a verification statement to each secured party after the registration of a financing change statement (see section 156). Note 2: Application may be made to the Administrative Appeals Tribunal for review of the Registrar’s decision to register a financing change statement (see section 191).

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 170A of the New Zealand Personal Property Securities Act 1999.

[page 302] Commentary References For further discussion please refer to commentary at [3.1450].

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PART 5.8 — FEES, ADMINISTRATIVE REVIEW AND ANNUAL REPORTS [ss 189–192] [PPSA.189] Guide to this Part 189 This Part provides for fees for registration and searching the register, the review of registration decisions and the obligation of the Registrar to prepare annual reports on the operation of this Act.

[PPSA.190] Registration and search fees 190 (1) Determination of fees and arrangements The Minister may, by legislative instrument, determine fees for the purposes of this Act. (2) The Minister may, by a legislative instrument made under subsection (1), determine the kinds of arrangements for the payment of fees under the instrument that may be approved under subsection (4). (3) If this Act requires the payment of a determined fee for a particular purpose, without limiting subsection (6), that requirement is satisfied if an arrangement for its payment has been approved under subsection (4). (4) Approval of arrangements The Registrar may approve an arrangement (of a kind determined under subsection (2)) in relation to the payment of fees by a person for the purposes of this section on application by the person in the approved form, accompanied by the fee (if any) determined under subsection (1). (5) Miscellaneous The fees determined under subsection (1) must not be such as to amount to taxation.

(6) The amount of a fee, except a fee to maintain a registration (determined for the purposes of section 168), is a debt due to the Commonwealth, and may be recovered by the Commonwealth by application to a court. Note 1: If a fee to maintain a registration is not paid within 28 days, the Registrar may end the effective registration of the collateral (see section 168). Note 2: For which courts have jurisdiction, and for transfers between courts, see Part 6.2.

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 190 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 2.1(2) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [3.1550].

____________________

[PPSA.191] Review of decisions 191 An application may be made to the Administrative Appeals Tribunal for review of the following decisions made by the Registrar: (a) a decision to refuse to register a financing statement, under subsection 150(1); [page 303] (b) a decision to refuse to register a financing change statement, under subsection 150(2); (c) a decision to register a financing change statement to amend the register to end the effect of a registration, under subsection 150(2); (d) a decision to refuse to give a person access to the register to search for data, under section 170; (e) a decision to refuse to give a person a copy of a registered financing statement in relation to which the person is registered as a secured party, or of a verification statement, under section 175; (f) a decision to refuse to give a person a report relating to registered data in relation to the person, under subsection 176(1); (g) a decision to register a financing change statement in accordance with an amendment demand, under subsection 181(1); (h) a decision to refuse to register a financing change statement in

accordance with an amendment demand, under subsection 181(1); (i) a decision to register a financing change statement to remove data from the register, under paragraph 184(1)(a), (b) or (c); (j) a decision that data removed from the register is not to be made available for search in the register, under subsection 178(2) or 181(5) or paragraph 184(2)(a); (k) a decision to register a financing change statement to restore incorrectly removed data to the register, under section 186; (l) a decision to register a financing change statement to amend a registration to correct an error or omission made by the Registrar, under section 188; (m) a decision to register a financing change statement to remove migrated data from the register, under subsection 334(2). ____________________ [PPSA.191.A] Annotations to s 191 Cirillo v Registrar of Personal Property Securities [2013] AATA 733; BC201313909 — the Administrative Appeals Tribunal affirmed a decision by the Registrar to refuse to register a financing change statement in accordance with an amendment demand under s 181(1).

____________________

[PPSA.192] Annual reports 192 (1) The Registrar must, as soon as practicable after the end of each financial year, prepare and give to the Minister, for presentation to the Parliament, a report on the operation of this Act during that financial year. Note: See also section 34C of the Acts Interpretation Act 1901, which contains extra rules about annual reports.

(2) The Registrar must include in the report: (a) details of each occasion on which access to the register was refused, or the operation of the register was otherwise suspended, during the financial year under subsection 147(5); and (b) any information necessary to demonstrate that fees determined under subsection 190(1) do not amount to taxation. [page 304]

PART 5.9 — REGISTRAR OF PERSONAL PROPERTY SECURITIES [ss 193–203] [PPSA.193] Guide to this Part 193 This Part establishes the offices of the Registrar of Personal Property Securities and the Deputy Registrar. Both are appointed by the Minister and engaged under the Public Service Act 1999. The Part also includes provision for the delegation of the Registrar’s powers.

[PPSA.194] Registrar — establishment of office 194 (1) There is to be a Registrar of Personal Property Securities. (2) The Registrar is to be: (a) engaged under the Public Service Act 1999; and (b) appointed as Registrar of Personal Property Securities by the Minister by written instrument. (3) The office of the Registrar of Personal Property Securities is not a public office for the purposes of the Remuneration Tribunal Act 1973.

[PPSA.195] Registrar — functions and powers 195 (1) The Registrar has the functions given under this Act or any other Act. (2) The Registrar has power to do all things necessary or convenient to be done for or in connection with the performance of his or her functions. ____________________ Commentary References For further discussion please refer to commentary at [3.1500].

____________________

[PPSA.195A] Registrar — investigations 195A (1) The Registrar may conduct an investigation into any matter for the purpose of performing his or her functions. (2) If the Registrar believes on reasonable grounds that a person has information that is relevant to an investigation under subsection (1), the

Registrar may, by written notice given to the person, require the person to give any such information to the Registrar, within the period and in the way specified in the notice. (3) The period specified in a notice under subsection (2) must be at least 14 days after the notice is given. (4) A person contravenes this subsection if: (a) the person has been given a notice under subsection (2); and (b) the person fails to comply with the notice. Civil penalty: (a) for an individual — 50 penalty units; (b) for a body corporate — 250 penalty units. Note: See Part 6.3 (Civil penalty proceedings).

[page 305] (5) A notice under subsection (2) of this section must set out the effect of the following provisions: (a) subsection (4) of this section; (b) section 137.1 of the Criminal Code (giving false or misleading information). (6) Despite subsection (2), the Registrar cannot give a notice under that subsection to: (a) the Commonwealth, a State or a Territory; or (b) an officer or agency of the Commonwealth, a State or a Territory. [s 195A insrt Act 35 of 2011 s 3 and Sch 2 item 53, opn 26 May 2011]

[PPSA.196] Registrar — acting appointments 196 (1) The Minister may, by written instrument, appoint a person engaged under the Public Service Act 1999 to act as the Registrar: (a) during a vacancy in the office of Registrar (whether or not an appointment has previously been made to the office); or (b) during any period, or during all periods, when the Registrar: (i) is absent from duty or from Australia; or (ii) is, for any reason, unable to perform the duties of the office.

(2) Anything done by, or in relation to, a person purporting to act under an appointment is not invalid merely because: (a) the occasion for the appointment had not arisen; or (b) there was a defect or irregularity in connection with the appointment; or (c) the appointment had ceased to have effect; or (d) the occasion to act had not arisen or had ceased. Note: For general provisions about appointments, see also sections 20 and 33A of the Acts Interpretation Act 1901.

[PPSA.197] Registrar — delegation 197 (1) The Registrar may, by written instrument, delegate all or any of his or her functions or powers to: (a) a person engaged under the Public Service Act 1999; or (b) another person determined by the Registrar, by written instrument, for the purposes of this section. Note: The Registrar may determine a particular person or a class of persons under paragraph (b), and may apply the determination in relation to particular matters or classes of matters (see subsection 33(3A) of the Acts Interpretation Act 1901).

(2) A delegate must, if required by the instrument of delegation, perform a delegated function, or exercise a delegated power, under the direction or supervision of: (a) the Registrar; or (b) a Deputy Registrar; or (c) a person engaged under the Public Service Act 1999. Note: For further provisions relating to delegations, see sections 34AA and 34AB of the Acts Interpretation Act 1901.

____________________ Commentary References For further discussion please refer to commentary at [3.1500].

____________________ [page 306]

[PPSA.198] Registrar — resignation

198 (1) The Registrar may resign by writing signed by him or her and given to the Minister. (2) The resignation takes effect on the day it is received by the Minister or, if a later day is specified in the resignation, on that later day.

[PPSA.199] Registrar — termination 199 (1) The Minister may terminate the appointment of the Registrar by written instrument. (2) The appointment of the Registrar is terminated if the Registrar stops being engaged under the Public Service Act 1999 for any reason.

[PPSA.200] Deputy Registrar — establishment of office 200 (1) There is to be at least one Deputy Registrar of Personal Property Securities (a Deputy Registrar). (2) A Deputy Registrar is to be: (a) engaged under the Public Service Act 1999; and (b) appointed as a Deputy Registrar of Personal Property Securities by the Minister by written instrument. (3) The office of Deputy Registrar of Personal Property Securities is not a public office for the purposes of the Remuneration Tribunal Act 1973.

[PPSA.201] Deputy Registrar — functions and powers 201 (1) Subject to any direction by the Registrar, a Deputy Registrar has all the functions and powers of the Registrar, except the powers of delegation under section 197. (2) A function or power of the Registrar, when performed or exercised by a Deputy Registrar, is taken to have been performed or exercised by the Registrar. (3) The performance of a function, or the exercise of a power, of the Registrar by a Deputy Registrar does not prevent the performance of the function, or the exercise of the power, by the Registrar. (4) If the performance (or exercise) of a function or power by the Registrar is dependent on the opinion, belief or state of mind of the Registrar in relation to a

matter, that function or power may be performed (or exercised) by a Deputy Registrar on his or her opinion, belief or state of mind in relation to that matter. (5) If the operation of a provision of this Act or another Act is dependent on the opinion, belief or state of mind of the Registrar in relation to a matter, that provision may operate on the opinion, belief or state of mind of a Deputy Registrar in relation to that matter.

[PPSA.202] Deputy Registrar — resignation 202 (1) A Deputy Registrar may resign by writing signed by him or her and given to the Minister. (2) The resignation takes effect on the day it is received by the Minister or, if a later day is specified in the resignation, on that later day. [page 307]

[PPSA.203] Deputy Registrar — termination 203 (1) The Minister may terminate the appointment of a Deputy Registrar by written instrument. (2) The appointment of a Deputy Registrar is terminated if the Deputy Registrar stops being engaged under the Public Service Act 1999 for any reason.

[page 308]

CHAPTER 6 — JUDICIAL PROCEEDINGS [ss 204– 231] PART 6.1 — GUIDE TO THIS CHAPTER [s 204] [PPSA.204] Guide to this Chapter 204 This Chapter deals with the role of the courts in proceedings that relate to security interests in personal property. Part 6.2 is about judicial proceedings generally. Part 6.3 deals with proceedings for contravention of a civil penalty provision.

PART 6.2 — JUDICIAL PROCEEDINGS GENERALLY [ss 205–219] DIVISION 1 — INTRODUCTION [ss 205, 206]

[PPSA.205] Guide to this Part 205 This Part is about judicial proceedings in a court with respect to matters arising under this Act or in relation to a security agreement or a security interest. Jurisdiction is conferred on the Federal Court, the Federal Circuit Court, courts of States and Territories and the Family Court. PPS matters can be transferred between courts in accordance with procedures set out in this Part. The Registrar may intervene in judicial proceedings. [s 205 am Act 13 of 2013 s 3 and Sch 2 item 1, opn 12 Apr 2013]

[PPSA.206] Scope of this Part 206 (1) This Part deals with the jurisdiction of a court with respect to a matter

(a PPS matter): (a) arising under a provision of this Act authorising an application to be made to a court; or (b) otherwise arising in relation to this Act, other than a matter in respect of which the Federal Court or the Federal Circuit Court has jurisdiction under the Administrative Decisions (Judicial Review) Act 1977; or (c) otherwise arising in relation to a security agreement or a security interest. [subs (1) am Act 13 of 2013 s 3 and Sch 2 item 1, opn 12 Apr 2013]

(2) This Part operates to the exclusion of: (a) the Jurisdiction of Courts (Cross-vesting) Act 1987; and (b) section 39B of the Judiciary Act 1903. (3) This Part does not limit the operation of the provisions of the Judiciary Act 1903 other than section 39B. [page 309] (4) Without limiting subsection (3), this Part does not limit the operation of subsection 39(2) of the Judiciary Act 1903 in relation to matters arising under this Act. (5) Nothing in this Part affects any other jurisdiction of any court. (6) This Part does not apply to matters arising under Part 6.3 (civil penalty proceedings). ____________________ [PPSA.206A] Annotations to s 206 SFS Projects Australia Pty Ltd v Registrar of Personal Property Securities [2014] FCA 846; BC201406315.

____________________ Commentary References For further discussion please refer to commentary at [4.4.1200].

____________________

DIVISION 2 — CONFERRAL OF JURISDICTION [ss 207–209]

[PPSA.207] Jurisdiction of courts

207 Jurisdiction is conferred on a court mentioned in an item in the following table with respect to a PPS matter, subject to the limits on the court’s jurisdiction (if any) specified in the item: Jurisdiction of courts Item Court on which jurisdiction is conferred 1 The Federal Court 2 The Federal Circuit Court

Limits of jurisdiction No specified limits. The court does not have jurisdiction to award an amount for loss or damage that exceeds: (a) $750,000; or (b)

3

4

if another amount is prescribed by the regulations — that other amount. A superior court, or lower court, of a The court’s general jurisdictional limits, including (but State or Territory not limited to) limits as to locality and subject matter, to the extent that the Constitution permits. The Family Court No specified limits.

[s 207 am Act 13 of 2013 s 3 and Sch 2 item 1, opn 12 Apr 2013]

[PPSA.208] Cross-jurisdictional appeals 208 The following table has effect: Cross-jurisdictional appeals Item Unless expressly provided by a to any of the following courts: law of the Commonwealth, a State or a Territory, an appeal with respect to a PPS matter does not lie from a decision of … 1 the Federal Court (a) the Federal Circuit Court; (b)

a court of a State;

(c)

a court of a Territory;

[page 310] Cross-jurisdictional appeals Item Unless expressly provided by a to any of the following courts: law of the Commonwealth, a State or a Territory, an appeal with respect to a PPS matter does not lie from a decision of … (d) the Family Court. 2 the Federal Circuit Court (a) a court of a State; (b)

a court of a Territory.

3

4

5

6

7

8

a court of a State (other than a State (a) Family Court) (b)

a court of the Australian Capital Territory

a court of the Northern Territory

a court of an external Territory

the Family Court

a State Family Court

the Federal Court; the Federal Circuit Court;

(c)

a court of another State;

(d)

a court of a Territory;

(e)

the Family Court;

(f) (a)

a State Family Court of the same State. the Federal Court;

(b)

the Federal Circuit Court;

(c)

a court of a State;

(d)

a court of another Territory;

(e) (a)

the Family Court. the Federal Court;

(b)

the Federal Circuit Court;

(c)

a court of a State;

(d)

a court of another Territory;

(e) (a)

the Family Court. the Federal Circuit Court;

(b)

a court of a State;

(c)

a court of another Territory (whether internal or external);

(d) (a)

the Family Court. the Federal Court;

(b)

the Federal Circuit Court;

(c)

a court of a State;

(d) (a)

a court of a Territory. the Federal Court;

(b)

the Federal Circuit Court;

(c)

the Supreme Court of the same State;

(d)

a court of another State;

(e)

a court of a Territory.

[s 208 am Act 13 of 2013 s 3 and Sch 2 item 1, opn 12 Apr 2013]

[page 311]

[PPSA.209] Courts to act in aid of each other 209 In PPS matters, all of the following must severally act in aid of, and be

auxiliary to, each other: (a) courts on which jurisdiction is conferred under this Part; (b) officers of, or under the control of, those courts.

DIVISION 3 — TRANSFERS BETWEEN COURTS [ss 210–217]

[PPSA.210] Application of this Division 210 (1) Scope This Division applies if all the following conditions are satisfied: (a) a proceeding with respect to a PPS matter is pending, or has come, before a court (the transferring court) on which jurisdiction is conferred under this Part in relation to the matter; (b) jurisdiction is also conferred on another court (the receiving court) under this Part with respect to either of the following (the transfer matter): (i) the entire proceeding; (ii) an application in the proceeding; (c) the receiving court has the power to grant the remedies sought before the transferring court in relation to the transfer matter. (2) Transfers to which other legislation applies This Division does not apply to a transfer between the courts mentioned in an item in the following table, except as provided by paragraph 211(2)(b): Transfers to which other legislation applies Item Transferring court 1 The Federal Court 2 The Family Court 3 The Federal Circuit Court

Receiving court The Federal Circuit Court. The Federal Circuit Court. The Federal Court or the Family Court.

Note 1: Paragraph 211(2)(b) gives the Federal Circuit Court the power to transfer a matter to the Federal Court with a recommendation that the Federal Court transfer the matter to a superior court other than the Federal Court. Note 2: Transfers mentioned in the table are covered by other legislation as follows: (a) for a transfer mentioned in item 1 — section 32AB of the Federal Court of Australia Act 1976; (b) for a transfer mentioned in item 2 — sections 33A to 33C of the Family Law Act 1975; (c) for a transfer mentioned in item 3 — section 39 of the Federal Circuit Court of Australia Act 1999. [subs (2) am Act 13 of 2013 s 3 and Sch 1 item 467, Sch 2 item 1, opn 12 Apr 2013]

[PPSA.211] Exercise of transfer power 211 (1) General rule If section 212 (which deals with the criteria for transfers) is satisfied, the transferring court may transfer to the receiving court: (a) the transfer matter; and (b) if the transferring court considers it necessary or convenient — any related application (or all related applications) in the proceeding. [page 312] (2) Cross-jurisdictional transfers between lower courts and superior courts However, if the transferring court is a lower court, and the transferring court considers that section 212 is satisfied in relation to the transfer of a matter mentioned in subsection (1) of this section to a receiving court that is a superior court other than the relevant superior court: (a) the transferring court does not have the power to transfer the matter to that receiving court; but (b) the transferring court may: (i) transfer the matter to the relevant superior court; and (ii) give the relevant superior court a recommendation that the matter be transferred to that receiving court by the relevant superior court. (3) In this Act: lower court means: (a) the Federal Circuit Court; or (b) a court of a State or Territory that is not a superior court. relevant superior court, in relation to a lower court, means: (a) if the lower court is the Federal Circuit Court — the Federal Court; or (b) if the lower court is a court of a State or Territory — the Supreme Court of the State or Territory. superior court means: (a) the Federal Court; or (b) a Supreme Court of a State or Territory; or (c) the Family Court; or

(d) a State Family Court. [subs (3) am Act 13 of 2013 s 3 and Sch 2 item 1, opn 12 Apr 2013]

[PPSA.212] Criteria for transfers between courts 212 (1) General The transferring court may make a transfer under section 211 only if it appears to the transferring court, taking into account the considerations covered by subsection (2), that: (a) the transfer matter arises out of, or is related to, another proceeding pending, or that has come, before a receiving court; or (b) it is otherwise in the interests of justice that the transfer matter be determined by a receiving court. (2) Relevant considerations The considerations covered by this subsection include, but are not limited to, the following: (a) the principal location, or place of business, of the parties in relation to the transfer matter; (b) where the event (or events) that are the subject of the transfer matter took place; (c) the desirability of related proceedings being heard in the same State or Territory; (d) any relevant recommendation received under subsection 211(2); (e) the suitability (taking into account the considerations mentioned in paragraphs (a) to (d) and any other consideration) of having the transfer matter determined by the receiving court. [page 313]

[PPSA.213] Initiating transfers between courts 213 A court may make a transfer under section 211: (a) on the application of a party made at any stage; or (b) at the court’s own initiative.

[PPSA.214] Documents and procedure 214 If a transferring court transfers a proceeding or application to another

court under section 211: (a) the Registrar (or other proper officer) of the transferring court must give the Registrar (or other proper officer) of the other court all documents filed in the transferring court in respect of the proceeding or application, as the case may be; and (b) the other court must proceed as if: (i) the proceeding or application had been originally instituted or made in the other court; and (ii) the same proceedings had been taken in the other court as were taken in the transferring court.

[PPSA.215] Conduct of transferred proceedings 215 (1) Subject to any applicable rules of court, a court must, in dealing with a PPS matter transferred to the court under section 211, apply rules of evidence and procedure that: (a) are applied in any superior court; and (b) the court considers appropriate to be applied in the circumstances. (2) If a proceeding with respect to a PPS matter is transferred under section 211 from a transferring court to another court, the other court must deal with the proceeding as if, subject to any order of the transferring court, the steps that had been taken for the purposes of the proceeding in the transferring court (including the making of an order), or similar steps, had been taken in the other court.

[PPSA.216] Entitlement to practise as barrister or solicitor 216 (1) Scope This section applies if a proceeding with respect to a PPS matter in a transferring court is transferred to another court under section 211. (2) Right to appear A person who is entitled to practise as a legal practitioner (however described) in the transferring court has the same entitlements to practise in relation to the matters covered by subsection (3) in the other court that the person would have if the other court were a federal court exercising federal jurisdiction. (3) This subsection covers the following matters: (a) the PPS matter; (b) any other proceeding out of which the PPS matter arises or to which

the PPS matter is related, if the other proceeding is to be determined together with the PPS matter.

[PPSA.217] Limitation on appeals 217 An appeal does not lie from a decision of a court: (a) in relation to the transfer of a proceeding under section 211; or (b) as to which rules of evidence and procedure are to be applied under subsection 215(1). [page 314]

DIVISION 4 — REGISTRAR’S ROLE IN JUDICIAL PROCEEDINGS [ss 218, 219]

[PPSA.218] Intervention in judicial proceedings 218 (1) The Registrar may, on behalf of the Commonwealth, intervene in a proceeding in a court with respect to a PPS matter. (2) If the Registrar intervenes in the proceeding: (a) the Registrar is taken to be a party to the proceeding; and (b) subject to this Act, the Registrar has all the rights, duties and liabilities of such a party; and (c) without limiting paragraph (b), the Registrar may appear and be represented by a legal practitioner (however described).

[PPSA.219] Initiation of judicial proceedings 219 (1) Scope This section applies if the Registrar considers it to be in the public interest for a person to bring and carry on a proceeding in a court for the recovery of damages with respect to a PPS matter. (2) Initiation of proceedings by Registrar The Registrar may, on behalf of the Commonwealth, cause the proceeding to be begun and carried on in the person’s name. (3) If the person is not a constitutional corporation, the Registrar must obtain the person’s written consent to the exercise of the Registrar’s power under

subsection (2).

PART 6.3 — CIVIL PENALTY PROCEEDINGS [ss 220–231] DIVISION 1 — INTRODUCTION [ss 220, 221]

[PPSA.220] Guide to this Part 220 This Part sets up a framework for determining liability under a civil penalty provision. On application by the Registrar, the Federal Court of Australia can order the payment of a civil penalty for a serious breach of a civil penalty provision (Division 2). Division 3 deals with the interaction of civil penalty proceedings with criminal proceedings. Division 4 is about enforceable undertakings relating to contraventions of civil penalty provisions. The Registrar may accept a written undertaking for the payment of a specified amount to the Commonwealth within a specified period. The undertaking is given by a person who has taken action that contravenes a civil penalty provision.

[PPSA.221] What is a civil penalty provision? 221 A subsection of this Act (or a section of this Act that is not divided into subsections) is a civil penalty provision if: (a) the words “civil penalty” and one or more amounts in penalty units are set out at the foot of the subsection (or section); or (b) another provision of this Act specifies that the subsection (or section) is a civil penalty provision. [page 315]

DIVISION 2 — OBTAINING AN ORDER FOR A CIVIL PENALTY [ss 222–225]

[PPSA.222] Federal Court may order person to pay pecuniary penalty for contravening civil penalty

provision 222 (1) Application for order Within 6 years of a person (the wrongdoer) contravening a civil penalty provision, the Registrar may apply on behalf of the Commonwealth to the Federal Court for an order that the wrongdoer pay the Commonwealth a pecuniary penalty. (2) Court may order wrongdoer to pay pecuniary penalty If the Court is satisfied that the wrongdoer has contravened a civil penalty provision, and the Court is satisfied that the contravention is serious, the Court may order the wrongdoer to pay to the Commonwealth for each contravention the pecuniary penalty that the Court determines is appropriate (but not more than the relevant amount specified for the provision). (3) Determining amount of pecuniary penalty In determining the pecuniary penalty, the Court must have regard to all relevant matters, including: (a) the nature and extent of the contravention; and (b) the nature and extent of any loss or damage suffered as a result of the contravention; and (c) the circumstances in which the contravention took place; and (d) whether the person has previously been found by the Court in proceedings under this Act to have engaged in any similar conduct. (4) Conduct contravening more than one civil penalty provision If conduct constitutes a contravention of 2 or more civil penalty provisions, proceedings may be instituted under this Act against a person in relation to the contravention of any one or more of those provisions. However, the person is not liable to more than one pecuniary penalty under this section in respect of the same conduct.

[PPSA.223] Contravening a civil penalty provision is not an offence 223 A contravention of a civil penalty provision is not an offence.

[PPSA.224] Persons involved in contravening civil penalty provision 224 (1) A person must not: (a) aid, abet, counsel or procure a contravention of a civil penalty provision; or

(b) induce (by threats, promises or otherwise) a contravention of a civil penalty provision; or (c) be in any way directly or indirectly knowingly concerned in, or party to, a contravention of a civil penalty provision; or (d) conspire to contravene a civil penalty provision. (2) This Part applies to a person who contravenes subsection (1) in relation to a civil penalty provision as if the person had contravened the provision.

[PPSA.225] Recovery of a pecuniary penalty 225 If the Federal Court orders a person to pay a pecuniary penalty: (a) the penalty is payable to the Commonwealth; and (b) the Commonwealth may enforce the order as if it were a judgment of the Court. [page 316]

DIVISION 3 — CIVIL PENALTY PROCEEDINGS AND CRIMINAL PROCEEDINGS [ss 226–229]

[PPSA.226] Civil proceedings after criminal proceedings 226 The Federal Court must not make a pecuniary penalty order against a person for a contravention of a civil penalty provision if the person has been convicted of an offence constituted by conduct that is substantially the same as the conduct constituting the contravention.

[PPSA.227] Criminal proceedings during civil proceedings 227 (1) Proceedings for a pecuniary penalty order against a person for a contravention of a civil penalty provision are stayed if: (a) criminal proceedings are started or have already been started against the person for an offence; and (b) the offence is constituted by conduct that is substantially the same as

the conduct alleged to constitute the contravention. (2) The proceedings for the order may be resumed if the person is not convicted of the offence. Otherwise, the proceedings for the order are dismissed.

[PPSA.228] Criminal proceedings after civil proceedings 228 Criminal proceedings may be started against a person for conduct that is substantially the same as conduct constituting a contravention of a civil penalty provision regardless of whether a pecuniary penalty order has been made against the person.

[PPSA.229] Evidence given in proceedings for penalty not admissible in criminal proceedings 229 Evidence of information given or evidence of production of documents by an individual is not admissible in criminal proceedings against the individual if: (a) the individual previously gave the evidence or produced the documents in proceedings for a pecuniary penalty order against the individual for a contravention of a civil penalty provision (whether or not the order was made); and (b) the conduct alleged to constitute the offence is substantially the same as the conduct that was claimed to constitute the contravention. However, this does not apply to a criminal proceeding in respect of the falsity of the evidence given by the individual in the proceedings for the pecuniary penalty order.

DIVISION 4 — ENFORCEABLE UNDERTAKINGS RELATING TO CONTRAVENTIONS OF CIVIL PENALTY PROVISIONS [ss 230, 231]

[PPSA.230] Acceptance of undertakings relating to contraventions of civil penalty provisions 230 (1) This section applies if the Registrar considers that an action taken by a person contravenes a civil penalty provision.

[page 317] (2) The Registrar may accept a written undertaking given by the person in relation to the action, in which the person undertakes to pay a specified amount to the Commonwealth within a specified period. (3) The person may withdraw or vary the undertaking at any time, but only with the consent of the Registrar.

[PPSA.231] Enforcement of undertakings 231 (1) If the Registrar considers that a person who gave an undertaking under section 230 has breached any of its terms, the Registrar may apply to the Federal Court for an order under subsection (2). (2) If the Federal Court is satisfied that the person has breached a term of the undertaking, the Court may make either or both of the following orders: (a) an order directing the person to comply with that term of the undertaking; (b) any other order that the Court considers appropriate.

[page 318]

CHAPTER 7 — OPERATION OF LAWS [ss 232–264] PART 7.1 — GUIDE TO THIS CHAPTER [s 232] [PPSA.232] Guide to this Chapter 232 This Chapter deals with how this Act interacts with other laws. Part 7.2 deals with the interaction of Australian and foreign laws relating to security interests. Part 7.3 deals with the constitutional operation of this Act. Part 7.4 deals with the interaction of this Act with other Commonwealth laws and with State and Territory laws.

PART 7.2 — AUSTRALIAN LAWS AND THOSE OF OTHER JURISDICTIONS [ss 233–241] [PPSA.233] Guide to this Part 233 This Part is about how Australian laws interact with foreign laws. In court proceedings, this Part describes which law will govern the validity, perfection and effect of perfection or non-perfection of a security interest. The Commonwealth may provide that a particular law governs a security interest and parties can agree that the law of the Commonwealth governs a security interest. The rules for determining the governing law in relation to a security interest differ depending on the type of interests. For example, for a security interest in goods, the question of the governing law may be dependent on the location of the goods. However, for certain intangible property and financial property this will generally be determined by the location of the grantor.

____________________ Commentary References For further discussion please refer to commentary at [5.50].

____________________

[PPSA.234] Scope of this Part 234 (1) General rule In proceedings in an Australian court, the law of the jurisdiction specified by this Part in relation to a security interest governs the validity, perfection and effect of perfection or non-perfection of the security interest. (2) Preservation of contractual obligations However, this Part does not affect the law that governs contractual obligations (including any obligations arising under a security agreement). ____________________ Commentary References For further discussion please refer to commentary at [4.12.1500], [5.550]– [5.800], [5.1100].

____________________ [page 319]

[PPSA.235] Meaning of located 235 (1) Location of personal property For the purposes of this Act, personal property (including chattel paper, an investment instrument and a negotiable instrument) is located in the particular jurisdiction in which the personal property is situated. (2) However: (a) an investment instrument that is not evidenced by a certificate is located in the jurisdiction the law of which governs the transfer of the investment instrument; and (b) a negotiable instrument that is evidenced by an electronic record is located in the jurisdiction the law of which governs the negotiable instrument; and (c) chattel paper that is evidenced by an electronic record is located in the jurisdiction the law of which governs the chattel paper. (3) Location of a person A body corporate is located in the jurisdiction in which the body corporate is incorporated. (4) A body politic is located in the jurisdiction of the body politic. (5) An individual is located at the individual’s principal place of residence. (6) Location within Australia For the purposes of this Act, in the application

of this section in relation to Australia: (a) the jurisdiction in which personal property is located under subsection (1), or in which an individual is located under subsection (5), is the jurisdiction of the State or Territory in which the property, or the individual’s principal place of residence, is situated (as the case may be); and (b) a reference to the law of that jurisdiction is a reference to the law of that State or Territory, and to the law of the Commonwealth as it applies in that State or Territory. (7) Location within a foreign country that has a federal character For the purposes of this Act, in the application of this section in relation to a foreign country that is divided into territorial units that have their own rules of law about security interests (distinct from those that apply to the foreign country generally): (a) the jurisdiction in which personal property is located under subsection (1), or in which an individual is located under subsection (5), is the jurisdiction of the territorial unit in which the property, or the individual’s principal place of residence, is situated; and (b) a reference to the law of that jurisdiction is a reference to the law of that territorial unit, and to the law of the foreign country as it applies in that territorial unit. ____________________ Commentary References For further discussion please refer to commentary at [4.5.300], [4.12.1100], [5.650], [5.1300], [5.1450].

____________________

[PPSA.236] Commonwealth laws may provide for governing law 236 Despite any other provision of this Part, a law of the Commonwealth may provide that that law, or any other law of the Commonwealth, governs a security interest. ____________________ Commentary References For further discussion please refer to commentary at [1.3800].

____________________

[page 320]

[PPSA.237] Express agreement 237 (1) Despite sections 238, subsections 239(1) and (2) and section 240, the law of the Commonwealth (other than the law relating to conflict of laws) governs a security interest if: (a) the grantor is an Australian entity at the time the security interest attaches to the collateral; and (b) the security agreement that provides for the security interest expressly provides that the law of the Commonwealth, or that law as it applies in a particular State or Territory, governs the security interest. (2) However, a security agreement may not provide for the law of the Commonwealth, or that law as it applies in a particular State or Territory, to govern a security interest in the following intangible property: (a) an account; (b) a transfer of: (i) an account; or (ii) chattel paper; (c) intellectual property or an intellectual property licence. Note 1: For the law that governs security interests in such kinds of intangible property, see section 239. Note 2: The parties to a security agreement may provide that the law of the Commonwealth governs a security interest in an ADI account if it would not be manifestly contrary to public policy (see subsection 239(5)). [subs (2) am Act 96 of 2010 s 3 and Sch 2 item 85, opn 6 July 2010]

____________________ Commentary References For further discussion please refer to commentary at [4.5.700], [4.12.1050], [4.12.1150], [4.12.1300], [4.12.1500], [4.12.1600], [4.12.1750], [5.650]–[5.750], [5.1350].

____________________

[PPSA.238] Governing laws — goods 238 (1) Main rules The validity of a security interest in goods is governed by the law of the jurisdiction (other than the law relating to conflict of laws) in which the goods are located when the security interest attaches, under that law, to the goods. Note 1: Under section 237, the parties to a security agreement may expressly provide for the law of the

Commonwealth to apply instead. Note 2: For when personal property is located in a jurisdiction, see section 235.

(1A) At a particular time, the perfection, and the effect of perfection or nonperfection, of a security interest in goods is governed by the law of the jurisdiction (other than the law relating to the conflict of laws) in which the goods are located at that time. (2) Goods that are moved Despite subsections (1) and (1A), the validity, perfection, and the effect of perfection or non-perfection, of a security interest in goods is governed by the law of a particular jurisdiction (the destination jurisdiction), other than the law relating to the conflict of laws, if: (a) at the time (the attachment time) the security interest attaches, under that law, to the goods, it was reasonable to believe that the goods would be moved to the destination jurisdiction; and (b) the goods are currently located in the destination jurisdiction. (2A) Subsection (2) applies from the attachment time. [page 321] (3) Goods that are normally moved between jurisdictions Despite subsections (1) to (2A), the validity, perfection, and the effect of perfection or non-perfection, of a security interest in goods is governed by the law of a jurisdiction (including the law relating to conflict of laws) if: (a) the grantor is located in that jurisdiction when the security interest attaches, under that law, to the goods; and (b) the goods are of a kind that is normally used in more than one jurisdiction; and (c) the goods are not used predominantly for personal, domestic or household purposes. Note: For the location of bodies corporate, bodies politic and individuals, see section 235.

(4) Goods entered on registers of ships Despite subsections (1A) to (3), at a particular time, the perfection, and the effect of perfection or non-perfection, of a security interest in goods is governed by the law of a country if: (a) the goods are entered in a register of ships maintained by the country containing the names and particulars of ships; and (b) in proceedings in the country, the law of that country governs title to

the goods. ____________________ [PPSA.238.A] Annotations to s 238 Re Maiden Civil (P&E) Pty Ltd; Albarran v Queensland Excavation Services Pty Ltd (2013) 277 FLR 337; [2013] NSWSC 852; BC201310524 — Justice Brereton confirmed that Pt 7.2 of the PPSA is about how Australian laws interact with foreign laws and not interstate issues between jurisdictions within Australia. Justice Brereton also held that even if Pt 7.2 had applied, the items of excavation equipment concerned were not goods normally used in more than one jurisdiction for the purposes of s 238(3).

____________________ Commentary References For further discussion please refer to commentary at [4.4.900], [4.4.1200], [4.5.300], [4.5.700], [4.12.1200]–[4.12.1300], [4.12.1700], [5.450], [5.600], [5.650], [5.1250], [5.1350]– [5.1450].

____________________

[PPSA.239] Governing laws — intangible property 239 (1) Main rules The validity of a security interest in intangible property is governed by the law of the jurisdiction (other than the law relating to conflict of laws) in which the grantor is located when the security interest attaches, under that law, to the property. (2) At a particular time, the perfection, and the effect of perfection or nonperfection, of a security interest in intangible property is governed by the law of the jurisdiction (other than the law relating to conflict of laws) in which the grantor is located at that time. (3) Intellectual property In relation to a security interest in intellectual property or an intellectual property licence: (a) subject to paragraph (c), the validity of the security interest is governed by the law of the jurisdiction (other than the law relating to conflict of laws) in which the grantor is located when the security interest attaches, under that law, to the property or licence; and [page 322] (b) subject to paragraph (c), at a particular time, the perfection, and the effect of perfection or non-perfection, of the security interest is governed by the law of the jurisdiction (other than the law relating to conflict of laws) in which the grantor is located at that time; and

(c) the following matters are governed by the law of the jurisdiction (other than the law relating to conflict of laws) by or under which the property or licence is granted, if that law provides for the public registration or recording of the security interest, or of a notice relating to the security interest: (i) whether a successor in title to the grantor’s interest in the property or licence takes it free of a security interest; (ii) the validity of the security interest against a transferee of the property or licence. [subs (3) subst Act 96 of 2010 s 3 and Sch 2 item 86, opn 6 July 2010]

(4) ADI accounts Despite subsections (1) and (2), a security interest in an ADI account is governed by the law of the jurisdiction (other than the law relating to conflict of laws) that governs the ADI account. (5) However, the parties to a security agreement may agree in writing that the law of another jurisdiction governs the security interest in the ADI account if: (a) the ADI consents in writing; and (b) applying the law of that other jurisdiction would not be manifestly contrary to public policy. (6) Rights evidenced by letters of credit not covered This section does not apply to a right evidenced by a letter of credit that states that the letter of credit must be presented on claiming payment or requiring the performance of an obligation. Note 1: For the priority of a security interest in an account if there is no foreign register, see section 77. Note 2: For the location of bodies corporate, bodies politic and individuals, see section 235. Note 3: Under section 237, the parties to a security agreement may expressly provide for the law of the Commonwealth to apply instead. Note 4: Rights mentioned in subsection (6) are dealt with in the same way as financial property by section 240.

____________________ Commentary References For further discussion please refer to commentary at [4.5.750], [4.9.1400], [4.12.1250], [4.12.1500], [4.12.1550], [5.400], [5.500], [5.600], [5.700], [5.1350].

____________________

[PPSA.240] Governing laws — financial property and rights evidenced by letters of credit 240 (1) Validity rules The validity of a security interest in financial property,

or property covered by subsection (2), is governed by the law of the jurisdiction (other than the law relating to conflict of laws) in which the grantor is located when the security interest attaches, under that law, to the property. (2) This subsection covers property that is a right evidenced by a letter of credit that states that the letter of credit must be presented on claiming payment or requiring the performance of an obligation. (3) However, the validity of a security interest to which subsection (1) applies is governed by the law of Australia if: [page 323] (a) the security interest has attached under the law of a place in Australia; and (b) at the time of attachment: (i) the property is located in Australia; and (ii) the secured party has possession or control of the property sufficient to perfect the security interest under this Act. (4) Perfection rules At a particular time, the perfection, and the effect of perfection or non-perfection, of a security interest in financial property, or property covered by subsection (2), is governed by the law of the jurisdiction (other than the law relating to conflict of laws) in which the grantor is located at that time. (5) However, at a particular time, the perfection, and the effect of perfection or non-perfection, of a security interest mentioned in subsection (4) is governed by the law of Australia if, at that time: (a) the property is located in Australia; and (b) the secured party has possession or control of the property sufficient to perfect the security interest under this Act. (6) Non-negotiable documents of title Despite subsections (1) to (5), a security interest in a non-negotiable document of title is governed by the law of the jurisdiction (other than the law relating to conflict of laws) in which the goods to which the document of title relates are located when the security interest attaches, under that law, to the document of title. (7) Negotiable instruments not evidenced by a certificate Despite subsections (1) to (5), a security interest in a negotiable instrument that is not

evidenced by a certificate is governed by the law of the jurisdiction (other than the law relating to conflict of laws) that governs the negotiable instrument. Note 1: For the priority of a security interests in financial property if there is no foreign register, see section 77. Note 2: For the location of bodies corporate, bodies politic and individuals, see section 235.

____________________ Commentary References For further discussion please refer to commentary at [4.5.750], [4.12.1550], [4.12.1650], [4.12.1700], [5.600], [5.750].

____________________

[PPSA.241] Governing laws — proceeds 241 (1) The validity of a security interest in proceeds is governed by the law of the jurisdiction (other than the law relating to conflict of laws) that governed the validity of the security interest in the collateral that gave rise to the proceeds. [subs (1) am Act 96 of 2010 s 3 and Sch 2 item 87, opn 6 July 2010]

(2) The perfection, and the effect of perfection or non-perfection, of a security interest in proceeds is governed by the law of the jurisdiction (other than the law relating to conflict of laws) that governed the perfection, and the effect of perfection or non-perfection, of the security interest in the collateral that gave rise to the proceeds. [subs (2) am Act 96 of 2010 s 3 and Sch 2 item 87, opn 6 July 2010]

(3) This section applies despite any other provision of this Part. [page 324] (4) However, this section does not apply in relation to proceeds that are an account unless the account arises from the dealing that gave rise to the proceeds. Note: If this section does not apply in relation to proceeds that are an account, the law governing the validity and the perfection of a security interest consisting of a transfer of the account is determined by the law of the jurisdiction in which the grantor is located (see section 239 (governing laws — intangible property)). [subs (4) insrt Act 96 of 2010 s 3 and Sch 2 item 88, opn 6 July 2010]

____________________ Commentary References For further discussion please refer to commentary at [5.600], [5.800].

____________________

PART 7.3 — CONSTITUTIONAL OPERATION [ss 242–252B] DIVISION 1 — INTRODUCTION [s 242] [Div 1 heading insrt Act 96 of 2010 s 3 and Sch 2 item 89, opn 6 July 2010]

[PPSA.242] Guide to this Part 242 This Part is about the constitutional operation of this Act in the States and Territories, and outside Australia, as follows: (a) this Act operates in any State that has given the Commonwealth power to legislate accordingly for the purposes of paragraph 51(xxxvii) of the Constitution; (b) this Act operates in any State to the extent that other constitutional powers permit its operation; (c) this Act operates in a Territory, and outside Australia, to the extent that it can under the Constitution. A security interest in collateral in relation to which this Act operates under this Part has priority over a security interest in the same collateral in relation to which this Act does not operate under this Part. [s 242 am Act 96 of 2010 s 3 and Sch 2 item 90, opn 6 July 2010]

DIVISION 2 — CONSTITUTIONAL BASIS [ss 243–252] [Div 2 heading insrt Act 96 of 2010 s 3 and Sch 2 item 91, opn 6 July 2010]

[PPSA.243] Constitutional basis for this Act 243 (1) Operation in a referring State It is the Commonwealth Parliament’s intention that this Act should operate in a referring State to the extent that it can in accordance with: (a) the legislative powers that the Commonwealth Parliament has under section 51 of the Constitution (other than paragraph 51(xxxvii)); and (b) the legislative powers that the Commonwealth Parliament has because of a reference or adoption by the Parliament of the referring State under paragraph 51(xxxvii) of the Constitution. Note: For the meaning of referring State, see section 244. [subs (1) am Act 96 of 2010 s 3 and Sch 2 items 92–94, opn 6 July 2010]

[page 325]

(2) Operation in a non-referring State It is the Commonwealth Parliament’s intention that this Act should operate in a non-referring State to the extent that it can in accordance with the Commonwealth Parliament’s legislative powers under section 51 of the Constitution (other than paragraph 51(xxxvii)), including (but not limited to) the powers relating to the matters mentioned in sections 246 to 250. (3) Operation in a Territory It is the Commonwealth Parliament’s intention that this Act should operate in a Territory to the extent that it can in accordance with the Commonwealth Parliament’s legislative powers under: (a) section 122 of the Constitution; and (b) section 51 of the Constitution (other than paragraph 51(xxxvii)). Note: This Act extends to Norfolk Island, but only extends to other external Territories if regulations are made to provide for that extension (see section 7).

(4) Despite subsection 22(3) of the Acts Interpretation Act 1901, this Act as applying in a Territory is a law of the Commonwealth. (5) Operation outside Australia It is the Commonwealth Parliament’s intention that this Act should operate outside Australia to the extent that it can in accordance with the Commonwealth Parliament’s legislative powers under: (a) paragraph 51(xxix) of the Constitution; and (b) the other legislative powers that the Commonwealth Parliament has under section 51 of the Constitution (other than paragraph 51(xxxvii)). Note 1: For the application of Australian and foreign law in relation to a security interest, see section 6 and Part 7.2. Note 2: For the relationship between this Act and other Australian laws, see Part 7.4.

____________________ Commentary References For further discussion please refer to commentary at [1.4350].

____________________

[PPSA.244] Meaning of referring State 244 (1) General meaning A State is a referring State if, for the purposes of paragraph 51(xxxvii) of the Constitution, the Parliament of the State has, before the registration commencement time: (a) referred the matters covered by subsections (3) and (4) to the Commonwealth Parliament; or (b) both: (i) adopted the relevant version of this Act; and

(ii) referred the matters covered by subsection (4) to the Commonwealth Parliament. Note 1: For registration commencement time, see section 306. Note 2: Subsections (5), (6) and (7) deal with when a State stops being a referring State. [subs (1) subst Act 96 of 2010 s 3 and Sch 2 item 95, opn 6 July 2010]

(2) A State is a referring State even if the State’s referral law provides that: (a) the reference to the Commonwealth of a matter covered by subsection (3) or (4) is to terminate in particular circumstances; or (b) the adoption of the relevant version of this Act is to terminate in particular circumstances; or (c) any or all of the State’s amendment references have not commenced in relation to a particular kind (or kinds) of personal property (or so commence at or after the registration commencement time); or [page 326] (d) the reference to the Commonwealth Parliament of a matter covered by subsection (3) or (4) has effect only: (i) if, and to the extent that, the matter is not otherwise included in the legislative powers of the Commonwealth Parliament (otherwise than by a reference under paragraph 51(xxxvii) of the Constitution); or (ii) if and to the extent that the matter is included in the legislative powers of the Parliament of the State. [subs (2) subst Act 96 of 2010 s 3 and Sch 2 item 95, opn 6 July 2010]

(3) Reference covering the relevant version of this Act This subsection covers the matters to which the referred provisions relate, to the extent of making laws with respect to those matters by including the referred provisions in the relevant version of this Act. [subs (3) am Act 96 of 2010 s 3 and Sch 2 item 96, opn 6 July 2010]

(4) Amendment references This subsection covers the referred PPS matters (as defined by section 245), to the extent of making laws with respect to those matters by making express amendments of this Act in relation to each of the following kinds of personal property: (a) personal property (other than fixtures and water rights); (b) fixtures;

(c) transferable water rights. (5) When a State stops being a referring State A State stops being a referring State if: (a) in the case where the Parliament of the State has referred to the Commonwealth Parliament the matters covered by subsection (3) — that reference terminates; or (b) in the case where the Parliament of the State has adopted the relevant version of this Act — the adoption terminates. [subs (5) subst Act 96 of 2010 s 3 and Sch 2 item 97, opn 6 July 2010]

(6) A State also stops being a referring State if the State’s amendment reference in relation to personal property (other than fixtures or water rights): (a) terminates; or (b) is qualified or restricted to any degree. [subs (6) am Act 96 of 2010 s 3 and Sch 2 item 98, opn 6 July 2010]

(7) However, a State does not stop being a referring State only because the State’s amendment reference in relation to fixtures or transferable water rights (or each of them): (a) terminates; or (b) is qualified or restricted to any degree. [subs (7) am Act 96 of 2010 s 3 and Sch 2 item 98, opn 6 July 2010]

(8) Definitions In this section: amendment includes the insertion, omission, repeal, substitution or relocation of words or matter. amendment reference of a State means a reference by the Parliament of the State to the Parliament of the Commonwealth of the referred PPS matters in relation to personal property covered by paragraph (4)(a), (b) or (c). [page 327] express amendment means the direct amendment of this Act, but does not include the enactment by a Commonwealth Act of a provision that has, or will have, substantive effect otherwise than as part of the text of this Act. initial reference [def rep Act 96 of 2010 s 3 and Sch 2 item 99, opn 6 July 2010]

referral law, of a State, means the law of the State that refers the matters covered by subsection (4) to the Parliament of the Commonwealth. [def am Act 96 of 2010 s 3 and Sch 2 item 100, opn 6 July 2010]

referral version of this Act [def rep Act 96 of 2010 s 3 and Sch 2 item 101, opn 6 July 2010]

referred provisions means the provisions of the relevant version of this Act, to the extent to which they deal with matters that are included in the legislative powers of the Parliaments of the States. [def am Act 96 of 2010 s 3 and Sch 2 item 102, opn 6 July 2010]

relevant version of this Act means: (a) if, at the time the State’s referral law was enacted, this Act had not been enacted — this Act as originally enacted; or (b) otherwise — this Act as originally enacted, and as amended: (i) by the Personal Property Securities (Consequential Amendments) Act 2009 and the Personal Property Securities (Corporations and Other Amendments) Act 2010; or (ii) by the Personal Property Securities (Consequential Amendments) Act 2009, the Personal Property Securities (Corporations and Other Amendments) Act 2010 and the Personal Property Securities (Corporations and Other Amendments) Act 2011; or (iii) from time to time, until the earliest time that any provision of the State’s referral law commences. [def insrt Act 96 of 2010 s 3 and Sch 2 item 103, opn 6 July 2010; am Act 35 of 2011 s 3 and Sch 2 item 54, opn 26 May 2011]

transferable water rights, in relation to a State, means any water rights that are transferable under the general law or a law of the State by the holder of the right (whether or not the right is exclusive, and whether or not a transfer is restricted or requires consent). water rights, in relation to a State, means any rights, entitlements or authorities, whether or not exclusive, that are granted by or under the general law or a law of the State in relation to the control, use or flow of water, but does not include any right, entitlement or authority that is: (a) granted by or under a law of the State; and (b) declared by that law not to be personal property for the purposes of this Act. ____________________

Commentary References For further discussion please refer to commentary at [1.4450].

____________________

[PPSA.245] Meaning of referred PPS matters 245 (1) In this Act, referred PPS matters, in relation to personal property covered by paragraph 244(4)(a), (b) or (c), means: [page 328] (a) the matter of security interests in the personal property; and (b) without limiting the generality of paragraph (a), each of the following matters: (i) the recording of security interests, or information with respect to security interests, in the personal property in a register; (ii) the recording in such a register of any other information with respect to the personal property (whether or not there are any security interests in the personal property); (iii) the enforcement of security interests in the personal property (including priorities to be given as between security interests, and as between security interests and other interests, in the personal property). (2) However, referred PPS matters does not include the matter of making provision with respect to personal property or interests in personal property in a manner that excludes or limits the operation of a law of a State to the extent that the law makes provision with respect to: (a) the creation, holding, transfer, assignment, disposal or forfeiture of a right, entitlement or authority that is granted by or under a law of the State; or (b) limitations, restrictions or prohibitions concerning the kinds of interests that may be created or held in, or the kinds of persons or bodies that may create or hold interests in, a right, entitlement or authority that is granted by or under a law of the State; or (c) without limiting the generality of paragraph (a) or (b) — any of the following matters: (i) the forfeiture of property or interests in property (or the disposal

of forfeited property or interests) in connection with the enforcement of the general law or any law of the State; (ii) the transfer, by operation of that law of the State, of property or interests in property from any specified person or body to any other specified person or body (whether or not for valuable consideration or a fee or other reward). (3) In this section: forfeiture means confiscation, seizure, extinguishment, cancellation, suspension or any other forfeiture. register means any system for recording interests or information (whether in written or electronic form).

[PPSA.246] Non-referring State operation — overview 246 (1) Operation This Act operates in a non-referring State in relation to a security interest, or another interest, in personal property: (a) while the interest in the personal property is covered by any of the following: (i) section 247 (which deals with persons); (ii) section 248 (which deals with activities); (iii) section 249 (which deals with interests); and (b) without limiting paragraph (a), to the extent that Chapter 5 (Personal Property Securities Register) applies in relation to the personal property under section 250. [page 329] (2) To avoid doubt, subsection (1) applies to a non-referring State at a particular time even if no State is a referring State at that time. (3) Constitutional meaning of terms Unless the contrary intention appears, a word or phrase used in sections 247 to 250 that is used in the Constitution has the same meaning as it has in the Constitution.

[PPSA.247] Non-referring State operation —

persons 247 (1) This Act operates in a non-referring State, in relation to a security interest in personal property, while: (a) the obligation secured by the security interest is owed by or to a person covered by subsection (3); or (b) the grantor of the security interest is a person covered by subsection (3). (2) This Act operates in a non-referring State, in relation to an interest (other than a security interest) in personal property, while the interest is held by a person covered by subsection (3). (3) This subsection covers the following persons: (a) a bankrupt or an insolvent; (b) an Official Receiver of the estate of a bankrupt, or a registered trustee of a bankrupt, within the meaning of the Bankruptcy Act 1966; (c) a constitutional corporation; (d) the Commonwealth, or an agency of the Commonwealth.

[PPSA.248] Non-referring State operation — activities 248 (1) This Act operates in a non-referring State in relation to a security interest, or another interest, in personal property, if the interest arises in the course of any of the following activities: (a) trade or commerce with other countries, or among the States; (b) activities undertaken by a constitutional corporation; (c) banking, other than State banking; (d) State banking extending beyond the limits of the State concerned; (e) insurance, other than State insurance; (f) State insurance extending beyond the limits of the State concerned; (g) using postal, telegraphic, telephonic, or other like services; (h) supplying goods or services to the Commonwealth, or an agency of the Commonwealth; (i) conduct by the Commonwealth, or an agency of the Commonwealth; (j) an activity related to a fishery in Australian waters beyond territorial limits.

(2) However, this Act stops operating under subsection (1) in a non-referring State in relation to a security interest, or another interest, in personal property, if, after the interest arises: (a) the interest is dealt with; and (b) that dealing is not in the course of an activity to which subsection (1) applies. (3) Subsection (2) does not limit the operation of this Act in a non-referring State otherwise than under this section. [page 330]

[PPSA.249] Non-referring State operation — interests 249 (1) General rule This Act operates in a non-referring State in relation to a security interest, or another interest, in personal property, if the interest includes an interest in any of the following: (a) a constitutional corporation; (b) money borrowed on the public credit of the Commonwealth; (c) an ADI account, other than an ADI account relating to State banking; (d) an ADI account that relates to State banking extending beyond the limits of the State concerned; (e) a policy of insurance, other than State insurance; (f) a policy of State insurance extending beyond the limits of the State concerned; (g) a bill of exchange or a promissory note; (h) copyright, a patent of an invention or design, or a trade mark; (i) a facility that provides postal, telegraphic, telephonic or other like services; (j) a fishery in Australian waters beyond territorial limits; (k) a lighthouse, lightship, beacon or buoy. (2) Constitutional interests exclusively — severable operation Without limiting subsection (1), this Act also has the effect it would have if this Act operated in a non-referring State in relation to a security interest, or another

interest, in personal property, to the extent only that the interest were in any of the things mentioned in that subsection.

[PPSA.250] Non-referring State operation — inclusion of data in register 250 Chapter 5 of this Act (Personal Property Securities Register) operates in a non-referring State in relation to personal property.

[PPSA.251] Personal property taken free of security interest when Act begins to operate 251 A person to whom personal property is transferred takes the property free of a security interest in the property at a particular time (the relevant time) if: (a) this Act did not operate under this Part in relation to the security interest at a previous time; and (b) if this Act had so operated, the person would have taken the property free of the security interest under this Act (other than this section); and (c) at the relevant time, this Act begins to operate under this Part in relation to the security interest.

[PPSA.252] Priority between constitutional and non-constitutional security interests 252 A security interest in collateral in relation to which this Act operates under this Part has priority over a security interest in the same collateral in relation to which this Act does not operate under this Part. ____________________ Commentary References For further discussion please refer to commentary at [6.2250].

____________________ [page 331]

DIVISION 3 — CONSTITUTIONAL GUARANTEES [ss 252A, 252B]

[Div 3 insrt Act 96 of 2010 s 3 and Sch 2 item 104, opn 6 July 2010]

[PPSA.252A] No constitutional preference to one State over another 252A A provision of this Act does not apply to the extent that the operation of the provision would give, or result in the giving of, preference (within the meaning of section 99 of the Constitution) to one State or part of a State over another State or part of a State.

[PPSA.252B] No unjust acquisition of property 252B (1) A provision of this Act does not apply to the extent that the operation of the provision would result in an acquisition of property from a person otherwise than on just terms. (2) In subsection (1): acquisition of property has the same meaning as in paragraph 51(xxxi) of the Constitution. just terms has the same meaning as in paragraph 51(xxxi) of the Constitution. ____________________ [PPSA.252B.A] Annotations to s 252B The vesting rule in s 267(2) of the PPSA does not effect an “acquisition of property” within the meaning of s 51(xxxi) of the Constitution and therefore s 252B does not apply to a vesting of an interest in property pursuant to s 267(2); see White v Spiers Earthworks Pty Ltd [2014] WASC 139; BC201402620.

____________________

PART 7.4 — RELATIONSHIP BETWEEN AUSTRALIAN LAWS [ss 253–264] DIVISION 1 — INTRODUCTION [s 253]

[PPSA.253] Guide to this Part 253 This Part deals with the interaction of this Act with other Australian laws. This Act is not intended to exclude or limit the operation of any other law if that other law is capable of

operating concurrently with this Act. If there is an inconsistency between this Act and another law, regulations may be made to resolve the inconsistency. Other laws prevail over this Act in certain situations, as follows: (a) certain specified Commonwealth laws prevail; (b) other laws may govern security agreements; (c) other laws may include restrictions on acquiring or dealing with personal property or a security interest; (d) State or Territory laws may exclude certain matters from coverage under this Act. However this Act prevails over other laws in relation to certain requirements relating to the registration and form of security interests, and their assignment, attachment and perfection.

[page 332]

DIVISION 2 — CONCURRENT OPERATION [ss 254, 255]

[PPSA.254] Concurrent operation — general rule 254 (1) This Act is not intended to exclude or limit the operation of any of the following laws (a concurrent law), to the extent that the law is capable of operating concurrently with this Act: (a) a law of the Commonwealth (other than this Act); (b) a law of a State or Territory; (c) the general law. (2) Without limiting subsection (1), this Act is not intended to exclude or limit the concurrent operation of a concurrent law, to the extent that the law has the effect of: (a) providing for whether a matter or other thing that is created, arises or is provided for under the concurrent law constitutes personal property; or (b) subject to section 258, prohibiting or limiting a person creating, acquiring or dealing with personal property or a security interest in personal property; or (c) without limiting paragraph (b): (i) prohibiting or limiting the right of a person to hold, transfer or assign a security interest in personal property; or (ii) imposing limitations or additional obligations or requirements in

relation to the enforcement of a security interest in personal property; or (d) subject to sections 261 and 264, requiring or enabling a person to register a security interest (within the meaning of section 261); or Note 1: Section 261 provides that a failure to register the security interest under the law does not limit the effect of the security interest or a security agreement for the security interest. Note 2: Section 264 provides that, to the extent that the law would restrict or otherwise affect the operation of section 19 (attachment) or 21 (perfection) of this Act, the operation of the law is excluded.

(e) subject to section 262, requiring or enabling a person to register the assignment of a security interest (within the meaning of that section); or Note: Section 262 provides that a failure to register the assignment under the law does not limit the effect of the assignment, the security interest or a security agreement for the security interest.

(f)

subject to section 263, requiring a security agreement for a security interest, or for an assignment of a security interest (within the meaning of that section) to be in a particular form, or to be witnessed or executed in a particular way; or

Note: Section 263 provides that a failure to comply with such a requirement does not limit the effect of the security agreement, the security interest or the assignment.

(g) operating to extinguish (however described) a security interest in circumstances other than those provided under this Act; or (h) providing for, or in relation to, a matter in a way that is expressly allowed by or under this Act. Note: The following provisions of this Act expressly allow for the operation (or the limited operation) of State and Territory laws: (a) (b) (c) (ca)

section 73 (interests arising under laws of the Commonwealth, States and Territories); section 110 (rights and remedies of debtors and secured parties); section 119 (relationship with credit legislation); section 140 (distribution of proceeds received by secured party);

[page 333] (d) section 208 (cross-jurisdictional appeals); (e) section 271 (entitlement to damages for breach of duties or obligations); (f) subsections 275(5) and (6) (secured party to provide certain information relating to security interest); (g) section 285 (service or giving of notices). [subs (2) am Act 96 of 2010 s 3 and Sch 2 item 105, opn 6 July 2010]

(3) To avoid doubt, this section does not apply to a law of a State or Territory, or the general law, to the extent that there is a direct inconsistency between this Act and that law. ____________________ [PPSA.254.A] Annotations to s 254 Cases i Trade Finance Inc v Bank of Montreal [2011] SCJ No 26; [2011] ACS no 26; [2011] SCC 26; 17 PPSAC (3d) 250 — the Supreme Court of Canada held that the secured party under a PPSA security interest was a purchaser for value without notice and, as such, defeated an equitable interest (in the nature of a constructive trust or equitable lien) that resulted from a court order (this was a non-consensual interest outside the scope of the Ontario PPSA). Refer to the case annotation at [PPSA.19.A]. Also note the application of s 73, PPSA to some non consensual interests. Interaction between the general law and PPSA priority rules for competing security interests In considering the application of s 68 of the British Columbia PPSA (being the equivalent provision to s 254(1)(c)) the British Columbia Court of Appeal in KBA Canada, Inc v 3S Printers Inc [2014] BCJ No 544; 2014 BCCA 117 determined that the PPSA does not allow a court to exercise equitable jurisdiction to override the statutory priority rules in the Act as between competing security interests to which the PPSA applies. Justice Groberman delivering the reasons for judgment for the court, commented as follows: [20] It was well-established that the overriding goal of the PPSA is to provide commercial certainty and predictability to personal property financing. The statute includes clear rules for registration of financing statements in respect of security interests and for priorities among secured creditors. Courts have been very reluctant to circumvent or modify the explicit statutory provisions through the use of extra-statutory principles of common law or equity… [22] The statute includes several provisions dealing with priorities, and provides, in s 35 [the equivalent of s 55 in Australia’s PPSA], a residual rule that applies where the “Act does not provide another method for determining priority between security interests.” The section does not, on its face, leave room for priorities to be determined on the basis of common law or equitable principles, except to the extent that those principles are expressly incorporated into the statutory scheme. [24] … If s 68 were interpreted as “providing another method for determining priority between security interests” it would mean that equitable and common law principles would dominate the determination of priorities. The statutory purpose of replacing those complex and convoluted principles with simple rules that provide certainty and predictability would be undermined. [26] As I read s 68, it allows principles of common law, equity, and the law merchant to be applied only to fill interstices in the statute, or to cover areas that are beyond the scope of the legislation. It does not allow the court to apply such principles instead of the clear statutory precepts.” The court also determined that the PPSA comprehensively governs priority among secured creditors and the doctrine of unjust enrichment could not be used to circumvent the clear statutory priority rules.

[page 334] Subrogation and marshalling Li v F Vitale & Sons Pty Ltd [2014] VSC 326; BC201405332 — on the facts

of this case it was not necessary to determine whether a retention of title security interest is a relevant security interest for the purpose of the doctrines of subrogation and marshalling. A number of Canadian cases suggest these doctrines can apply to PPSA security interests (see, for example, National Bank of Canada v Makin Metals Ltd [1994] 4 WWR 707).

____________________ Commentary References For further discussion please refer to commentary at [1.3800], [4.1.4900], [4.11.1250].

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[PPSA.255] Concurrent operation — regulations may resolve inconsistency 255 (1) The regulations may: (a) provide that a provision of this Act (or an instrument made under this Act) does not apply to a matter that is dealt with by a law (the specified law) of the Commonwealth, a State or a Territory specified by the regulations; or (b) modify the operation of this Act (or an instrument made under this Act) so that no inconsistency arises between the operation of a provision of this Act or the instrument and the operation of a law (the specified law) of the Commonwealth, a State, or a Territory specified by the regulations. (2) Without limiting subsection (1), regulations made for the purposes of that subsection may provide that a provision of this Act (or an instrument made under this Act): (a) does not apply to: (i) a specified person; or (ii) a specified body; or (iii) specified circumstances; or (iv) a specified person or body, in specified circumstances; or (b) does not prohibit an act to the extent to which the prohibition would otherwise give rise to an inconsistency with the specified law; or (c) does not require a person to do an act to the extent to which the requirement would otherwise give rise to an inconsistency with the specified law; or (d) does not authorise a person to do an act to the extent to which the conferral of that authority on the person would otherwise give rise to

an inconsistency with the specified law; or (e) does not impose an obligation on a person to the extent to which complying with that obligation would require the person to not comply with an obligation imposed on the person under the specified law; or (f) authorises a person to do something for the purposes of this Act (or an instrument made under this Act) that the person: (i) is authorised to do under the specified law; and (ii) would not otherwise be authorised to do under this Act (or the instrument); or (g) will be taken to be satisfied if the specified law is satisfied. [page 335] (3) This section does not apply in relation to the following provisions: (a) paragraphs (c) and (d) of the definition of licence in section 10; (b) paragraph (b) of the definition of personal property in section 10. Note: Certain rights, entitlements and authorities under Commonwealth, State and Territory law, as declared by the relevant law, are excluded from the definitions of personal property and licence (in section 10).

____________________ [PPSA.255.A] Annotations to s 255 Matters that the Act does not apply to (s 255(1)) See reg 7.1 at [PPSR7.1].

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DIVISION 3 — WHEN OTHER LAWS PREVAIL [ss 256–260]

[PPSA.256] When other laws prevail — certain other Commonwealth Acts 256 If there is any inconsistency between this Act and one of the following Acts (the other Act), the other Act prevails to the extent of the inconsistency: (a) the Payment Systems and Netting Act 1998; (b) the Cheques Act 1986; (c) the Bills of Exchange Act 1909.

(d) [repealed] ____________________ Commentary References For further discussion please refer to commentary at [1.3800], [4.10.3200], [4.10.3250].

____________________ [s 256 am Act 92 of 2013 s 3 and Sch 1 item 4, opn 28 June 2013]

[PPSA.257] When other laws prevail — security agreements 257 (1) Scope This section sets out restrictions on the extent to which a security agreement is effective according to its terms under subsection 18(1). (2) Operation of other laws dealing with security agreements Subsection 18(1) is subject to each of the following laws: (a) a law of the Commonwealth (other than this Act); (b) a law of a State or a Territory; (c) the general law. (3) However, a law mentioned in subsection (2) does not apply: (a) to the extent (if any) to which the operation of the law is affected by Division 4 (when this Act prevails); and (b) to the extent (if any) prescribed by the regulations. Note: Division 4 restricts the operation of State and Territory laws in certain respects, for example by preventing formal requirements under those laws from affecting the validity of security interests.

____________________ Commentary References For further discussion please refer to commentary at [2.3550].

____________________ [page 336]

[PPSA.258] When other laws prevail — personal property, security interests and matters excluded from State amendment referrals

258 (1) Personal property and security interests This Act (apart from Division 4), or any instrument made under this Act, does not have an effect covered by subsection (2) to the extent to which that effect would give rise (apart from this subsection) to a direct inconsistency between this Act, or the instrument, and a law covered by subsection (3). Note: Division 4 restricts the operation of State and Territory laws in certain respects, for example by preventing formal requirements under those laws from affecting the validity of security interests.

(2) The following effects of a law are covered by this subsection: (a) prohibiting or limiting a person creating, acquiring or dealing with personal property or a security interest in personal property; (b) without limiting paragraph (a): (i) prohibiting or limiting the right of a person to hold, transfer or assign a security interest in personal property; or (ii) imposing limitations or additional obligations or requirements in relation to the enforcement of a security interest in personal property. (3) The following laws are covered by this subsection: (a) a law of the Commonwealth (other than this Act, or an instrument made under this Act); (b) a law of a referring State (while the State is a referring State); (c) a law of a Territory; (d) the general law. (4) Subsection (1) does not apply to an effect of a law to the extent (if any) prescribed by the regulations. (5) Matters excluded by State amendment referrals Any provisions of this Act, or an instrument made under this Act, that would (apart from this subsection) operate, or purport to operate, to exclude or limit the operation of a law of a referring State do not operate to exclude or limit the operation of the law to the extent to which the law makes provision for a matter mentioned in paragraph 245(2)(a), (b) or (c). Note: Subsection 245(2) provides exceptions to the scope of the matters (called PPS referred matters) in relation to which referring States have given an amendment reference to the Commonwealth (see subsection 244(4)).

(6) Subsection (5) only applies in relation to a law of a referring State while the State is a referring State. ____________________

Commentary References For further discussion please refer to commentary at [1.3800], [4.13.2950].

____________________

[PPSA.259] When other laws prevail — exclusion by referring State law or Territory law 259 (1) Scope This section applies if a law of a referring State, or of a Territory, declares a matter to be an excluded matter for the purposes of this section in relation to: (a) the whole of this Act (or an instrument made under this Act); or (b) a specified provision of this Act (or an instrument made under this Act); or [page 337] (c) this Act (or an instrument made under this Act), other than a specified provision; or (d) this Act (or an instrument made under this Act), otherwise than to a specified extent. (2) Matters excluded by declaration This Act (and any instrument made under this Act), apart from Division 4 (when this Act prevails), does not apply in relation to the excluded matter to the extent provided by the declaration. (3) Regulations under this Act may affect operation of declaration Subsection (2) does not apply to the declaration to the extent (if any) prescribed by the regulations. ____________________ Commentary References For further discussion please refer to commentary at [1.3800].

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[PPSA.260] When other laws prevail — no constitutional preference to one State over another 260 [s 260 rep Act 96 of 2010 s 3 and Sch 2 item 106, opn 6 July 2010]

DIVISION 4 — WHEN THIS ACT PREVAILS [ss 261–264]

[PPSA.261] When this Act prevails — registration requirements 261 (1) Scope This section applies if a law (the applicable law) of a State or Territory has the effect of requiring or enabling a person to register a security interest. Example: A law of a State or Territory may have this effect by requiring a person to register any interest acquired by the person in a motor vehicle including, but not limited to, a security interest.

(2) For the purposes of this section, a person registers a security interest under an applicable law if, under (or in accordance with) that law, the person registers, or otherwise discloses, any of the following: (a) the security interest; (b) a security agreement providing for the security interest; (c) collateral covered (or to be covered) by the security interest. (3) Failure to register under applicable law A failure to register the security interest under the applicable law does not: (a) affect the validity, priority or enforceability of the security interest, or of a security agreement providing for the security interest; or (b) otherwise limit the effect of the security interest, or a security agreement providing for the security interest. Note: In other respects this Act is not intended to exclude or limit the concurrent operation of the applicable law (see section 254).

____________________ [PPSA.261.A] Annotations to s 261 When the PPSA started to apply in relation to transitional security agreements and transitional security interests, the Chattel Securities Act 1987

[page 338] (WA) did not have the effect of requiring or enabling a secured party to register its security interest. As a result, s 261 of the PPSA did not apply; see White v Spiers Earthworks Pty Ltd [2014] WASC 139; BC201402620.

____________________ Commentary References For further discussion please refer to commentary at [1.3800], [4.11.1900].

____________________

[PPSA.262] When this Act prevails — assignment requirements 262 (1) Scope This section applies if a law (the applicable law) of a State or Territory has the effect of requiring or enabling a person to register the assignment of a security interest. (2) For the purposes of this section, a person registers the assignment of a security interest under an applicable law if, under (or in accordance with) that law, the person registers, or otherwise discloses, any of the following in relation to a security interest that is (or is to be) assigned, however the assignment is described in that law: (a) the assignment; (b) a security agreement providing for the assignment; (c) collateral covered (or to be covered) by the security interest. (3) An assignment of a security interest mentioned in this section includes (but is not limited to) the following, however described in the applicable law: (a) the transfer of the security interest; (b) the creation of the security interest; (c) the devolution of the security interest from a deceased person to another person upon the death of the deceased person. (4) Failure to register under applicable law A failure to register the assignment of the security interest under the applicable law does not: (a) affect the validity of the assignment; or (b) affect the validity, priority or enforceability of the security interest, or of a security agreement providing for the security interest; or (c) otherwise limit the effect of the assignment, the security interest or of a security agreement providing for the security interest. Note: In other respects this Act is not intended to exclude or limit the concurrent operation of the applicable law (see section 254).

____________________ Commentary References For further discussion please refer to commentary at [1.3800].

____________________

[PPSA.263] When this Act prevails — formal requirements relating to agreements

263 (1) Scope This section applies if a law (the applicable law) of a State or Territory: (a) relates (whether expressly or by implication) to a security agreement for a security interest in collateral, or for an assignment (however described) of a security interest in collateral; and (b) has the effect of requiring the security agreement: (i) to be in a particular form; or (ii) to be witnessed or executed in a particular way; and (c) is prescribed by regulations made for the purposes of this section. [page 339] Example: A law of a State or Territory requires a security agreement to be in a particular form if the law requires the instrument evidencing the agreement to use a particular form of words, or to be executed on paper of a particular sort.

(2) An assignment of a security interest mentioned in this section includes (but is not limited to) the following, however described in the applicable law: (a) the transfer of the security interest; (b) the giving of the security interest; (c) the devolution of the security interest from a deceased person to another person upon the death of the deceased. (3) Failure to comply with formal requirement under applicable law Without limiting section 261 or 262, a failure to comply with the requirement under the applicable law does not: (a) affect the validity or enforceability of the security agreement; or (b) affect the validity, priority or enforceability of the security interest; or (c) affect the validity of the assignment (if relevant); or (d) otherwise limit the effect of the security agreement, the security interest or the assignment (if relevant). Note: In other respects this Act is not intended to exclude or limit the concurrent operation of the applicable law (see section 254).

____________________ Commentary References For further discussion please refer to commentary at [1.3800], [4.7.550], [4.11.1000], [4.11.1900], [4.13.2950].

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[PPSA.264] When this Act prevails — attachment and perfection of security interests 264 To the extent that a law of a State or Territory would have the effect of restricting or otherwise affecting the operation of the following provisions, the operation of the law is excluded by force of this section: (a) section 19 (when a security interest attaches to personal property); (b) section 21 (how a security interest is perfected). Example: If a law of a State or Territory would have the effect of requiring a security interest to be registered under the law before it is taken to attach, or to be perfected, under this Act, the operation of the law is excluded by force of this section.

____________________ Commentary References For further discussion please refer to commentary at [4.11.1900].

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[page 340]

CHAPTER 8 — MISCELLANEOUS [ss 265–303] PART 8.1 — GUIDE TO THIS CHAPTER [s 265] [PPSA.265] Guide to this Chapter 265 This Chapter contains rules about the following: (a) the vesting of certain unperfected security interests (Part 8.2); (b) damages and compensation for contraventions of this Act (Part 8.3); (c) the provision of information relating to security interests (Part 8.4); (d) the giving of notices and rules about timing (Part 8.5); (e) the onus of proof in judicial proceedings, and what constitutes knowledge (Part 8.6); (f) approved forms and regulations (Part 8.7).

PART 8.2 — VESTING OF CERTAIN UNPERFECTED SECURITY INTERESTS [ss 266–269] [PPSA.266] Guide to this Part 266 This Part provides for the vesting of an unperfected security interest in the grantor in certain circumstances. In the event of the bankruptcy of an individual grantor, or the winding up or the entry into administration of a body corporate grantor, a secured party’s unperfected security interest vests in the grantor. However, some security interests are unaffected by this rule. Some secured parties are entitled to damages or compensation in relation to the vesting of unperfected interests under this Part.

[PPSA.267] Vesting of unperfected security interests in the grantor upon the grantor’s winding up

or bankruptcy etc 267 (1) Scope This section applies if: (a) any of the following events occurs: (i) an order is made, or a resolution is passed, for the winding up of a company or a body corporate; (ii) an administrator of a company or a body corporate is appointed (whether under section 436A, 436B or 436C of the Corporations Act 2001, under that section as it is applied by force of a law of a State or Territory, or otherwise); (iii) a company or a body corporate executes a deed of company arrangement (whether under Division 10 of Part 5.3A of the Corporations Act 2001, under that Division as it is applied by force of a law of a State or Territory, or otherwise); (iv) a sequestration order is made against a person (the bankrupt) under the Bankruptcy Act 1966; [page 341] (v) a person (the bankrupt) becomes a bankrupt by force of section 55, 56E or 57 of the Bankruptcy Act 1966; and (b) a security interest granted by the body corporate, company or bankrupt is unperfected at whichever of the following times applies: (i) in the case of a company or body corporate that is being wound up — when, on a day, the event occurs by virtue of which the winding up is taken to have begun or commenced on that day (whether under section 513A or 513B of the Corporations Act 2001, under either section as applied by force of a law of a State or Territory, or otherwise); (ii) in the case of any other company or body corporate — when, on a day, the event occurs by virtue of which the day is the section 513C day for the company or body, within the meaning of the Corporations Act 2001 (including that Act as it is applied by force of a law of a State or Territory, or otherwise); (iii) in the case of a bankrupt — when a sequestration order is made against the bankrupt under the Bankruptcy Act 1966, or when he

or she becomes a bankrupt by force of section 55, 56E or 57 of that Act. Note 1: For the meaning of company, see section 10. Note 2: See also Division 2A of Part 5.7B of the Corporations Act 2001. [subs (1) am Act 96 of 2010 s 3 and Sch 2 item 107, opn 6 July 2010; item 108, opn 30 Jan 2012]

(2) Security interest vested in grantor The security interest held by the secured party vests in the grantor immediately before the event mentioned in paragraph (1)(a) occurs. Note: This subsection does not apply to certain security interests (see section 268).

(3) Title of person acquired for new value without knowledge Subsection (2) does not affect the title of a person to personal property if: (a) the person acquires the personal property for new value from a secured party, from a person on behalf of a secured party, or from a receiver in the exercise of powers: (i) conferred by the security agreement that provides for the security interest; or (ii) implied by the general law; and (b) at the time the person acquires the property, the person has no actual or constructive knowledge of the following (as the case requires): (i) the filing of an application for an order to wind up the company; (ii) the passing of a resolution to wind up the company; (iii) the appointment of an administrator of the company under section 436A, 436B or 436C of the Corporations Act 2001; (iv) the execution of a deed of company arrangement by the company. Note: Section 296 deals with the onus of proving matters under this subsection. [subs (3) am Act 96 of 2010 s 3 and Sch 2 item 109, opn 6 July 2010]

____________________ [PPSA.267.A] Annotations to s 267 Vesting of property Re Maiden Civil (P & E) Pty Ltd; Albarran v Queensland Excavation Services Pty Ltd (2013) 277 FLR 337; [2013] NSWSC 852; BC201310524 — upon commencement of the administration

[page 342] and/or winding up of Maiden (a lessee of excavation equipment that was serial numbered property), QES’s

unperfected security interest (as lessor) vested in Maiden. The exception provided in s 268(1)(ii) for PPS leases of serial numbered goods did not apply because one or more of s 13(1)(a)–(d) applied. Maiden held the equipment subject to the perfected security interest of another secured party with security over all assets of Maiden. White v Spiers Earthworks Pty Ltd [2014] WASC 139; BC201402620 — a transitional security interest under a hire purchase agreement was unperfected when an administrator was appointed to the grantor and therefore the secured party’s security interest vested in the grantor immediately before the appointment. The NZ PPSA does not include an insolvency vesting rule. The Canadian PPSAs do not have a vesting rule per se but they do provide that a security interest is “not effective” against a trustee in bankrtupcy or liquidator if the security interest is unperfected as at the date of bankruptcy or the winding up order, as applicable. These provisions have consistently been interpreted as giving a trustee in bankruptcy or liquidator of a lessee, under a lease that is a security interest for the purposes of the legislation, priority over the unperfected security interest of the lessor; Re Giffen (1998) 155 DLR (4th) 332; [1998] 1 SCR 91; International Harvester Credit Corporation of Canada Ltd v Trustee of Bell’s Dairy Ltd (1986) 50 Sask R 177; 30 DLR (4th) 387; [1986] 6 WWR 161; (1986) 34 BLR 76; Donaghy v CNS Vehicle Leasing [1992] 6 WWR 70. Unperfected security interests granted by the insolvent grantor Only unperfected security interests granted by the insolvent grantor vest in the grantor; s 267(1)(b) and (2). Section 267 has no direct application to security interests granted by a party other than the insolvent grantor. Consider the following example: Grantor (G), as lessee, has entered into a PPS lease with a secured party (SP1) in the ordinary course of SP1’s business. SP1 does not perfect by registering against G; SP1 has previously granted security to another secured party (SP2) in relation to the leased asset. SP2 has perfected its security interest against SP1. When SP1 enters into the PPS lease with G, s 46 applies and s 34 does not; G has previously granted a security interest over all of its assets to another secured party (SP3) who has perfected its security interest against G.

[page 343] If G becomes insolvent it is not entirely clear whether s 267 results in SP1’s unperfected security interest vesting in G subject to SP2’s security interest or if s 267 effectively terminates SP2’s security interest because SP1 no longer has an interest in the leased asset to which SP2’s security can attach or reattach. The taking free rules in Pt 2.5 of the PPSA and s 37 (dealing with the reattachment of SP2’s security interest when the taking free rules apply and SP1 subsequently repossesses the collateral) are also relevant. The Act seems to indicate the following outcomes: SP2’s security interest should not be effective as against insolvent G’s liquidator, administrator or trustee in bankruptcy if SP1’s security interest vests in G pursuant to s 267. This should be the case even though SP1’s security interest is a PPS lease and, prior to G’s insolvency, SP2’s security would be attached to SP1’s reversionary interest under the PPS lease and SP2’s security interest would be expected to reattach to the leased goods pursuant to s 37 upon expiry or termination of the lease. In any priority contest between SP3 and SP2, SP3 should win if SP1’s security interest has vested under s 267 or if SP3 would defeat SP1 in a priority contest (irrespective of whether G is insolvent at the time of the priority contest). The general law principle of sheltering should mean that if G takes free of SP2’s security interest, SP3 does as well. Also note s 76(3). These outcomes appear to be consistent with the overall scheme of the legislation and they do not depend on whether SP1 or SP2 has a title based security interest or a non-title based security interest. However, there is some uncertainty about the interaction of the relevant PPSA provisions and also whether the nemo dat principle might be invoked (relying on the residual application of the general law pursuant to s 254) to elevate SP2 above a liquidator, administrator or trustee in bankruptcy of G or SP3. Refer to the commentary on s 254 at [PPSA.254.A]. There is some conflicting and inconclusive Canadian authority in relation to these issues; see Re Perimeter Transportation Ltd (2010) BCCA 509 and David Morris Fine Cars Ltd v North Sky Trading Inc (1994) 158 AR 117 (appeal dismissed by the Alberta Court of Appeal, 1996 ABCA 134). Non-consensual security interest Section 267(2) has no operation in relation to non consensual security interests that are not subject to the perfection requirements under the PPSA; Dura (Australia) Constructions Pty Ltd (in liq) (recs and mgrs apptd) v Hue Boutique Living Pty Ltd [2014] VSCA 326; BC201411364. Also refer to [PPSA.8.A] and [PPSA.12.A]. Administration and liquidation processes Even though a secured party has perfected its security interests, it is critically important to respond to notices received from administrators or liquidators and to be able to substantiate the security interest and identify relevant collateral upon the insolvency of the grantor: Carson, Re; Hastie Group Ltd (No 3) [2012] FCA 719; BC201205065 (Hastie Group (No 3)); Re John Pettit Pty Ltd (subject to a Deed of Company Arrangement) [2014] NSWSC 728; BC201404302. Hastie Group (No 3) involved an application brought by the administrators appointed to the companies that comprised the Hastie Group for directions under s 447D of the Corporations Act 2001 permitting them to dispose of certain plant and equipment. The companies had been engaged in the business of subcontracting on construction and engineering projects. The books and records of the companies inadequately described the nature and location of all the plant and equipment and some of the plant and equipment had been moved from time to time between companies and different building sites. This appeared to have occurred without records being kept of particular movements. There were 955 registrations noted against the companies in the PPSR. On 28 May 2012, the administrators wrote to all creditors who had an interest recorded against the companies in the PPSR. Enclosed with each letter was a pro forma security interest summary that each creditor was requested to complete in respect of each security interest the creditor held. Each creditor was requested to provide notification of its interest as a matter of urgency and, in any event, by no later than 31

May 2012. By 19 June 2012, approximately 80% of those secured creditors had failed to respond to that correspondence. Many of the responses received by the administrators were of little assistance to

[page 344] them in understanding the identity of the property in which a security interest might be claimed. This was because the responses did not adequately particularise the equipment or the security agreement under which the security interest arose. Given the generality of many of the registrations in the PPSR and the existence of many transitional security interests that were not registered, it was extremely difficult for the administrators to identify property subject to third party security interests. On 26 June 2012, the administrators wrote to 12 financiers who appeared from the books and records of the companies to have a secured claim in respect of plant and equipment. The financiers were asked to consent to the sale of the plant and equipment referable to their interests or give notice that they did not consent to such a sale before 2 July 2012. They were also asked to advise, on or before 2 July 2012, whether, to the best of their knowledge, any of the listed items of plant and equipment formed a key component of another piece of plant or equipment and whether that plant and equipment was recorded on the lists that had been provided to them. In each case, the letter stated that if no response was received on or before 2 July 2012, the administrators would assume that the rights of the relevant financier (with respect to the companies) did not include any interest in any of the items in the listed plant and equipment, or, alternatively, that the financier waived that interest. The administrators also placed an advertisement in major daily newspapers. The advertisement requested that creditors notify the administrators of claims concerning assets, plant and equipment, stock, inventory, leased assets or other items in the possession of the Hastie Group entities by 4 July 2012. The advertisement contained the following statement: If you do not contact the administrators within this timeframe, the administrators will assume that any rights you may have regarding the Hastie Entities do not include any interest or claims in any of the items currently in the possession of the Hastie Entities, or alternatively that you waive and do not pursue that interest which may result in their sale. On 4 July 2012, the administrators also sent an email to 3,000 creditors (whose current addresses were known to the administrators) requesting that they advise of any claims in relation to plant and equipment. That email contained a notification in substantially similar terms as that which appeared in the newspaper advertisements referred to above. As a result of these actions the administrators were able to identify approximately $2 million worth of assets belonging to third parties. However, approximately 3,684 items of plant and equipment were still “unclaimed”. The administrators formed the view that: the ongoing cost, including the significant storage costs; and the efforts undertaken by them to establish the existence of all claimants in relation to plant and equipment, meant it would be in the in the best interests of the companies and their creditors that all unclaimed plant and equipment be sold as soon as possible. However, the administrators were concerned that despite their inquiries and the notifications that they had given, some of the unclaimed plant and equipment could be subject to claims that might arise in the future. The administrators proposed to: place a further advertisement in newspapers advising the proposed auction of the unclaimed plant and equipment;

conduct the auction sales no earlier than 10 July 2012; then hold the net proceeds of sale in a separate escrow account for a period of three months following the completion of each sale; immediately upon completion of the sale process, write to all known creditors advising them of the realisation of the assets and the three-month time period during which the proceeds would be held in escrow; and after the three-month period, apply the proceeds of sale in the ordinary course of the administration of the companies. The effect of this would be that the proceeds of the auction sales (after sales costs and costs represented by direct work done by the

[page 345] administrators in realising or preserving the plant and equipment) would be paid to the security trustee representing the syndicate that comprised the Hastie Group’s major financiers. The court was satisfied that it was appropriate to make the directions sought by the administrators to enable these steps to occur. The issues that arose in Hastie Group (No 3) could have arisen under pre PPSA law. If anything, the PPSA should assist suppliers and lessors to claim equipment and stock upon a grantor’s insolvency. For example, appropriate use of secured party identifiers (see s 153(1), table item 3 and s 289, PPSA) in financing statements should assist with ensuring notices are brought to the attention of relevant persons within a secured party’s organisation so that they can be properly dealt with. This mechanism did not exist prior to the PPSA. Additional vesting rule for security interests granted by a company There is an additional vesting rule for security interests granted by a company in s 588FL of the Corporations Act. Where the grantor is a company, s 588FL of the Corporations Act provides that the security interest will vest in the company on insolvency if the security interest is perfected by registration only and it has been registered for less than 6 months, unless it was registered within 20 business days after the relevant security agreement came into force; see Carrafa, Goutzos & Lofthouse (as Liquidators of Relux Commercial Pty Ltd) (in liq) v Doka Formwork Pty Ltd [2014] VSC 570; BC201409592. Section 588FL will not apply in the circumstances referred to in s 588FN of the Corporations Act. As to the effect of s 588FL of the Corporations Act and its interaction with s 21 of the PPSA see Pozzebon v Australian Gaming and Entertainment Ltd (in liq) [2014] FCA 1034; BC201407897. Cancellation of security agreement before appointment of administrator Retention of title supply agreements were found to have been cancelled by the parties pursuant to the terms of the agreements on 26 September 2012 prior to the appointment of the administrator to the purchaser on 26 October 2012. It was held that in these circumstances s 267, PPSA did not apply. Property in the goods remained with the seller and it was entitled to possession and to sell them; Crossmark Asia v Retail Adventures Pty Ltd [2013] NSWSC 55; BC201300382.

____________________ Comparative Legislation Comparable sections of Canadian legislation: s 20(2) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [1.3200], [2.15650], [2.15700], [2.15950], [4.3.650], [4.3.700], [4.5.500], [4.6.2050], [4.8.3200], [4.8.3500], [4.8.4150],

[4.12.1050], [4.13.2500].

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[PPSA.267A] Vesting in grantor of security interest that attaches after winding up etc 267A (1) Vesting of security interest A security interest vests in the grantor when it attaches to the collateral if: (a) paragraph 267(1)(a) applies in relation to the grantor; and (b) before the time (the critical time) mentioned in paragraph 267(1)(b), the grantor enters into a security agreement with the secured party that provides for the secured party to take a security interest in collateral from the grantor; and (c) at the critical time: (i) the security interest has not attached to the collateral; and (ii) there is no registration that would perfect the security interest when it attaches to the collateral; and [page 346] (d) after the critical time, the security interest attaches to the collateral; and (e) at the time of attachment: (i) the security interest is unperfected; or (ii) if the security interest is perfected, it is perfected only by a registration for which the registration time is after the critical time. Note: This section does not apply to certain security interests (see section 268).

(2) Property acquired for new value without knowledge Subsection (1) does not affect the title of a person to personal property if: (a) the person acquires the personal property for new value from a secured party, from a person on behalf of a secured party, or from a receiver in the exercise of powers: (i) conferred by the security agreement providing for the security interest; or

(ii) implied by the general law; and (b) at the time the person acquires the property, the person has no actual or constructive knowledge of the following (as the case requires): (i) the filing of an application for an order to wind up the company; (ii) the passing of a resolution to wind up the company; (iii) the appointment of an administrator of the company under section 436A, 436B or 436C of the Corporations Act 2001; (iv) the execution of a deed of company arrangement by the company. Note: Section 296 deals with the onus of proving matters under this subsection. [s 267A insrt Act 96 of 2010 s 3 and Sch 2 item 110, opn 6 July 2010]

____________________ Comparative Legislation Comparable sections of Canadian legislation: see s 20(2) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.15700], [2.15950], [4.8.3200], [4.8.3500], [4.8.4150].

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[PPSA.268] Security interests unaffected by section 267 268 (1) Security interests to which vesting rule does not apply Subsection 267(2) and section 267A (security interests vested in grantor) do not apply to the following security interests: (a) a security interest provided for by any of the following transactions, if the interest does not secure the payment or performance of an obligation: (i) a transfer of an account or chattel paper; (ii) a PPS lease, if paragraph (e) (serial numbered goods) of the definition of PPS lease in subsection 13(1) applies to the lease, and none of paragraphs (a) to (d) of that definition applies to the lease; (iii) a commercial consignment; (aa) a security interest for which perfection, and the effect of perfection or non-perfection, is governed by the law of a foreign jurisdiction at the time mentioned in paragraph 267(1)(b); (b) a security interest covered by subsection (2) of this section. [page 347] Example: An example of a security interest mentioned in subparagraph (a)(ii) is a PPS lease of goods that does not secure the payment or performance of an obligation, if: (a) the goods leased may or must be described by serial number in accordance with the regulations; and (b) the lease is for a term of between 90 days and 1 year; and (c) paragraphs (c) and (d) of the definition of PPS lease in subsection 13(1) do not apply to the lease. [subs (1) am Act 96 of 2010 s 3 and Sch 2 items 111 and 112, opn 6 July 2010]

(2) Security interests and subordinated debts This subsection covers a security interest in an account if all of the following conditions are satisfied: (a) a person (the obligor) owes money to another person (the senior creditor); (b) the obligor also owes money to a third person (the junior creditor); (c) an agreement between the senior creditor and the junior creditor

provides (in substance): (i) for the postponement or subordination of the obligor’s debt to the junior creditor, to the obligor’s debt to the senior creditor; and (ii) in the event of the obligor’s debt to the junior creditor being discharged (whether wholly or partly) by the obligor transferring personal property to the junior creditor — for the junior creditor to transfer the property, or proceeds of the property, to the senior creditor to the value of the amount owed by the obligor to the senior creditor; and (iii) in the event that the property or proceeds are not transferred — for the junior creditor to hold the property or proceeds on trust for the senior creditor to that value; and (iv) in the event of such a trust arising — for a security interest to be granted by the junior creditor to the senior creditor over the personal property or proceeds securing payment of the obligor’s debt to the senior creditor; (d) the security interest is a security interest granted under the agreement, in the circumstances described in subparagraph (c)(iv). ____________________ Commentary References For further discussion please refer to commentary at [2.15800], [2.15900], [4.1.1550], [4.2.1350], [4.3.650], [4.8.4150], [4.13.2500].

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[PPSA.269] Certain lessors, bailors and consignors entitled to damages 269 (1) Scope This section applies if either of the following security interests is vested in the grantor under section 267 or 267A: (a) a security interest of a consignor under a commercial consignment (see paragraph 12(3)(b)); (b) a security interest of a lessor or bailor under a PPS lease (see paragraph 12(3)(c)). [subs (1) am Act 96 of 2010 s 3 and Sch 2 item 113, opn 6 July 2010]

(2) Entitlement to damages and compensation The consignor, or lessor or bailor: (a) is taken to have suffered damage immediately before the time the

security interest vests in the grantor under section 267 or 267A (as the case requires); and [page 348] (b) may recover an amount of compensation from the grantor equal to the greater of the following amounts: (i) the amount determined in accordance with the lease, bailment or consignment; (ii) the sum of the market value of the leased, bailed or consigned property immediately before the time mentioned in paragraph 267(1)(b), and the amount of any other damage or loss resulting from the termination of the lease, bailment or consignment. Note: The lessor, bailor or consignor may be able to prove the amount of compensation in proceedings related to the bankruptcy or winding-up of the grantor. [subs (2) am Act 96 of 2010 s 3 and Sch 2 items 114 and 115, opn 6 July 2010]

____________________ Comparative Legislation Comparable sections of Canadian legislation: s 21 of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.16000], [4.13.2500].

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PART 8.3 — EXERCISE AND DISCHARGE OF RIGHTS, DUTIES AND OBLIGATIONS [ss 270–273] [PPSA.270] Guide to this Part 270 This Part provides a right to recover damages for a failure to discharge a duty or obligation imposed by this Act.

[PPSA.271] Entitlement to damages for breach of duties or obligations

271 (1) If a person fails to discharge any duty or obligation imposed on the person by this Act: (a) the person to whom the duty or obligation is owed; and (b) any other person who can reasonably be expected to rely on performance of the duty or obligation; has a right to recover damages for any loss or damage that was reasonably foreseeable as likely to result from the failure. (2) Nothing in subsection (1) limits or affects any liability that a person may incur under any of the following: (a) a law of the Commonwealth, a State or a Territory; (b) the general law. ____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 176 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 65(2) and (5) of the Saskatchewan (Canada) Personal Property Security Act 1993.

____________________ [page 349]

[PPSA.272] Liability for damages 272 Despite section 271, none of the following persons is liable to an action, suit or proceeding for damages for, or in respect of, anything done honestly, or honestly omitted to be done, in the exercise, or purported exercise, of any power conferred by this Act or the regulations: (a) the Commonwealth; (b) the Registrar, or a delegate of the Registrar; (c) a Deputy Registrar; (d) the Minister; (e) a Minister of a State or Territory, or another authority of a State or Territory, in relation to the exercise or performance of a power, duty or function pursuant to an agreement made for the purposes of section 118 (proceeding as if personal property were land); (f) a member of the Registrar’s staff; (g) a person who is acting as a member of the Registrar’s staff;

(h) a person who is authorised to perform or exercise a function or power of, or on behalf of, the Registrar.

[PPSA.273] Application of Act not affected by secured party having title to collateral 273 The fact that title to collateral is in a secured party rather than a grantor does not affect the application of any provision of this Act relating to rights, duties, obligations and remedies. ____________________ [PPSA.273.A] Annotations to s 273 The priority scheme under the PPSA is not dependent on traditional questions of title. Care should be taken not to import pre PPSA language and concepts into the interpretation of the PPSA: see Commissioner of Inland Revenue v Stiassny [2013] 1 NZLR 140; [2012] NZCA 93. Refer to [PPSA.69.A].

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 24 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 3(1)(a) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [4.3.50].

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PART 8.4 — PROVISION OF INFORMATION BY SECURED PARTIES [ss 274–283] [PPSA.274] Guide to this Part 274 This Part enables an interested person to request a secured party who holds a security interest in collateral to provide information about the interest. This Part sets out procedural rules for making, and complying with, such requests.

[page 350]

[PPSA.275] Secured party to provide certain information relating to security interest 275 (1) Requests for information An interested person mentioned in subsection (9) may request a secured party who holds a security interest in collateral to send or make available to the interested person, or any other person, any of the following: (a) a copy of the security agreement that provides for the security interest; (b) a statement in writing setting out the amount or the obligation that is secured by the security interest and the terms of payment or performance of the obligation, as at the day specified in the request; (c) a written approval or correction of an itemised list of personal property attached to the request indicating in which items of property the security interest is granted, as at the day specified in the request; (d) a written approval or correction of the following attached to the request, as at the day specified in the request: (i) the amount or the obligation that is secured by the security interest; (ii) the terms of payment or performance of the obligation. (2) A request made under subsection (1) must specify an address to which the information requested under that subsection must be sent or at which the information must be made available. (3) A request made in accordance with paragraph (1)(b), (c) or (d) must not specify a day later than 20 business days after the day the request is made. Note: The period may be extended by a court under section 293.

(4) Compliance with request Subject to subsections (5) and (6), a person who receives a request made under subsection (1) must respond to the request. Note 1: A person who receives a request but who no longer has a security interest in collateral must respond to the request in accordance with section 276. Note 2: Section 277 deals with the time for responding to a request. Note 3: A person who responds to a request might be prevented from denying the accuracy etc of information provided (see section 283).

(5) A secured party is not required to respond to a request made under

subsection (1) if the information requested under that subsection must be, or has already been, made available to the person who made the request, under any of the following: (a) a law of the Commonwealth, a State or a Territory; (b) the general law. (6) A secured party is not required to respond to a request made under subsection (1) if: (a) subject to subsection (7), the secured party and the debtor have agreed (the confidentiality agreement) in writing that neither the secured party nor the debtor will disclose information of the kind mentioned in subsection (1); or (b) the response would contravene any of the following: (i) a law of the Commonwealth, a State or a Territory; (ii) the general law; or (c) the response would disclose information that is protected against disclosure by a duty of confidence. [page 351] (7) Paragraph (6)(a) does not apply if: (a) the confidentiality agreement is made after the security agreement that provides for the security interest is made; or (b) at the time the request is received, the debtor is in default under the security agreement; or (c) the debtor, in writing, authorises the disclosure of the information; or (d) the grantor requests the secured party to give the information to the grantor; or (e) the request is made by an auditor of the grantor, if the grantor is a body corporate. (8) If: (a) a request is made in accordance with paragraph (1)(c); and (b) the secured party claims a security interest provided for by a security agreement in any of the following: (i) all of the grantor’s present and after-acquired property;

(ii) all of the grantor’s present and after-acquired property except for an item or class of personal property described in the security agreement; (iii) all of a specified class of personal property of the grantor; the secured party may indicate this instead of approving or correcting the itemised list of property. (9) Interested persons For the purposes of this section, the following persons are interested persons: (a) the grantor in relation to the collateral in which the security interest is granted; (b) a person with another security interest in the collateral mentioned in paragraph (a); (c) an auditor of a grantor mentioned in paragraph (a), if the grantor is a body corporate; (d) an execution creditor with an interest in the collateral; (e) an authorised representative of any of the above. (10) A secured party who receives a request made under subsection (1) that purports to be made by an interested person may act as if the person is entitled to make the request, unless the secured party has actual knowledge that the person is not entitled to make it. ____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 177 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 18(1), (2), (3), (4) and (8) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [1.2400], [2.3900], [4.10.1100], [4.13.1150].

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[PPSA.276] Obligation to disclose successor in security interest when request made 276 (1) This section applies if: (a) a person makes a request under subsection 275(1); and (b) the person (the previously secured party) to whom the request was made no longer has a security interest in the collateral.

[page 352] (2) The previously secured party must respond to the request by sending, or making available, to the person making the request the name and address of: (a) the immediate successor in interest; and (b) the latest successor in interest (if known). Note: Section 277 deals with the time for responding to a request.

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 183 of the New Zealand Personal Property Securities Act 1999.

____________________

[PPSA.277] Time for responding to a request 277 (1) A person required to respond to a request under section 275 or 276 must respond before the end of 10 business days after the day the request is received. (2) Subsection (1) does not apply if the person has been exempted from responding to the request, or the time for responding to the request has been extended, under section 278. Note: The time for responding to a request may also be affected by subsection 279(5) or section 281.

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 178 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 18(6) and (7) of the Saskatchewan (Canada) Personal Property Security Act 1993.

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[PPSA.278] Application to court for exemption or extension of time to respond to requests 278 (1) A person required to respond to a request under section 275 or 276 may apply to a court for an order: (a) exempting the person (either wholly or partly) from responding to the request; or (b) extending the time for responding to the request. Note: For which courts have jurisdiction, and for transfers between courts, see Part 6.2.

(2) On application by the person for an order under paragraph (1)(a), the court may make the order if it is satisfied that, in the circumstances, it would be unreasonable for the person to respond to the request. (3) On application by the person for an order under paragraph (1)(b), the court may make the order if it is satisfied that, in the circumstances, it would be unreasonable for the person to respond to the request: (a) within the time allowed under section 277; or (b) within the time (if any) ordered by a court under section 281. ____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 179 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 18(13) of the Saskatchewan (Canada) Personal Property Security Act 1993.

____________________ [page 353]

[PPSA.279] Persons may recover costs arising from request 279 (1) A person required to respond to a request under section 275 or 276 may charge the person making the request a fee for providing information in response to the request. (2) A fee imposed under subsection (1) must not: (a) exceed the reasonable marginal costs of providing the information; or (b) be such as to amount to taxation. Note: Section 296 deals with the onus of proving matters under this subsection.

(3) Despite subsection (1), a grantor mentioned in paragraph 275(9)(a), or the grantor’s authorised representative, who has requested information under section 275, is entitled to be provided information free of charge unless: (a) that information has already been provided to the grantor or the authorised representative under section 275 or 276 in response to a request; and (b) that request was made within the previous 6 months. Note: Section 296 deals with the onus of proving matters under this subsection.

(4) The grantor or the authorised representative is also entitled to be provided

information free of charge, despite subsection (3), if there has been a material change in the information since the information was last provided to the grantor or the authorised representative. Note: Section 296 deals with the onus of proving matters under this subsection.

(5) A person is not required to respond to a request under section 275 or 276 if: (a) the person imposes a fee under subsection (1) for providing the information; and (b) the fee has not been paid; and (c) an order under section 281 that the person charge a nil amount, or provide the information free of charge, has not been made. ____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 180 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 18(17) of the Saskatchewan (Canada) Personal Property Security Act 1993.

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[PPSA.280] Application to court for response to request etc 280 (1) A person who makes a request under section 275 may apply to a court for an order under this section if the person required to respond to the request has: (a) not responded to the request: (i) within the time specified in section 277; or (ii) within the time ordered by the court under subsection 278(3) or section 281; or (b) provided an incomplete or incorrect response; or (c) refused to respond to the request because of subsection 275(5) or (6). Note: For which courts have jurisdiction, and for transfers between courts, see Part 6.2.

(2) On application, the court may make an order requiring the person who received the request to: [page 354]

(a) respond to the request within a specified period; or (b) provide a complete and correct response within a specified period. ____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 181 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 18(8), (10) and (11) of the Saskatchewan (Canada) Personal Property Security Act 1993.

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[PPSA.281] Application to court in relation to costs charged 281 (1) A person (the interested person) who has requested information under section 275 may apply to a court for an order if: (a) the person required to respond to the request imposes a fee under subsection 279(1) for providing the information; and (b) the interested person: (i) believes that the fee exceeds the reasonable marginal costs of providing the information; or (ii) if the interested person is a grantor or the grantor’s authorised representative — believes that the information has not already been provided to the grantor or the authorised representative in response to a request made under section 275 within the previous 6 months; or (iii) if the interested person is a grantor or the grantor’s authorised representative — believes that there has been a material change in the information since the information was last provided to the grantor or the authorised representative. Note: For which courts have jurisdiction, and for transfers between courts, see Part 6.1.

(2) If the court is satisfied that the fee imposed under subsection 279(1) exceeds the reasonable marginal costs of providing the information, the court may, on application by the interested person, make an order: (a) stating an amount (including a nil amount) that is to be imposed as a fee; and (b) stating a time within which the request must be responded to after the fee has been paid. Note: Section 296 deals with the onus of proving matters under this subsection.

(3) If the court is satisfied that: (a) the information has not already been provided to the grantor or the grantor’s authorised representative in response to a request made under section 275 within the previous 6 months; or (b) there has been a material change in the information since the information was last provided to the grantor or the authorised representative; the court may, on application by the interested person, make an order: (c) that the information be provided to the grantor, or the authorised representative, free of charge; and (d) stating a time within which the request must be responded to. Note: Section 296 deals with the onus of proving matters under this subsection.

(4) Consequential orders If the court makes an order under this section, it may also make any other consequential orders that it considers appropriate. [page 355]

[PPSA.282] Consequences of not complying with court order 282 If a person fails to comply with a court order made under section 280 or 281, the court may, on the application of the person who made the request under section 275: (a) make an order extinguishing the security interest to which the request relates, together with an order requiring the Registrar to register a financing change statement amending the registration accordingly; or (b) make such other orders as the court thinks necessary to ensure compliance with the request. ____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 182 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 18(12) of the Saskatchewan (Canada) Personal Property Security Act 1993.

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[PPSA.283] Estoppels against persons who respond

to a request 283 (1) For the purposes of this Act, a person who responds to a request made under section 275 is prevented from denying any of the things mentioned in subsection (2) of this section to any of the following persons to the extent that that person relies on the response: (a) the person who makes the request; (b) any other person who the person who responds to the request actually knows will rely on the response. (2) For the purposes of subsection (1), a person is prevented from denying the following things: (a) that a copy of a security agreement provided in response to a request made in accordance with paragraph 275(1)(a) is a true copy of the security agreement; (b) if the person corrected information in response to a request made in accordance with paragraph 275(1)(b), (c) or (d): (i) the accuracy of information provided in response to the request before the correction; or (ii) the accuracy of the information provided in response to the request. ____________________ Comparative Legislation Comparable sections of Canadian legislation: s 18(14), (15) and (16) of the Saskatchewan (Canada) Personal Property Security Act 1993.

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PART 8.5 — NOTICES AND TIMING [ss 284–294] [PPSA.284] Guide to this Part 284 This Part deals with notices that must be given under this Act, and how those notices must be given. The Part also empowers a court to make an order extending a period within which something under this Act must be done. A reference to time in this Act is a reference to time by legal time in the Australian Capital Territory.

[page 356]

[PPSA.285] Application of this Part — notices etc 285 This Part does not apply to notices or other documents served or given: (a) in, or for the purposes of, any proceedings in a court or a tribunal of the Commonwealth or a State or Territory; or (b) in accordance with a procedure specified in a security agreement for serving or giving notices or other documents. ____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 184 of the New Zealand Personal Property Securities Act 1999.

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[PPSA.286] Notices — writing 286 A notice or any other document required or permitted to be given to any person for the purposes of this Act must be in writing. Note: Writing may include the display or representation of words or data by any form of communication, if recorded in a certain way (see section 10).

____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 185 of the New Zealand Personal Property Securities Act 1999.

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[PPSA.287] Notices — registered secured parties 287 A notice or document required or permitted to be given, for the purposes of this Act, to a person registered as a secured party must be given to the person, by one of the following methods, at the address specified in the registration for the giving of notices to the person: (a) leaving it at the address; (b) sending it to the address by pre-paid post; (c) sending it to the address by fax or by email. Note: For the giving of verification statements by the Registrar, see section 156.

____________________ Comparative Legislation Comparable sections of New Zealand legislation: see s 187 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 68(1) of the

Saskatchewan (Canada) Personal Property Security Act 1993.

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[PPSA.288] Notices — more than one registered secured party 288 (1) This section applies if: (a) a registration includes 2 or more secured parties; and (b) a notice or document is required or permitted to be given to each of the secured parties. (2) The notice or document may be given to each of the secured parties by giving a single notice in accordance with section 287. [page 357]

[PPSA.289] Notices etc must be given to persons registered as secured parties using identifier 289 Despite anything in this Part, a notice or document is, for the purposes of this Act, taken not to have been given to a person registered as a secured party if: (a) the Registrar approves a manner of including an identifier in a notice or document; and (b) an identifier is specified in the registration for the giving of notices to the person; and (c) the notice or document does not include the identifier in the manner approved by the Registrar.

[PPSA.290] Notices — deceased persons 290 If a notice or document is required or permitted to be given to a person for the purposes of this Act and the person is deceased, a copy of the notice or document must be given to: (a) the legal personal representative of the deceased person; or (b) on application by the person giving the notice, such person as a court directs. Note: For which courts have jurisdiction, and for transfers between courts, see Part 6.2.

[PPSA.291] Notices — Court orders 291 (1) Despite anything in this Part, if a notice or other document is required or permitted by this Act to be given to a person, a court may, on application by a person who is required or permitted to give the notice or document, make an order: (a) directing that the notice or document be given in any manner specified by the court; or (b) dispensing with any requirement to give the notice or document, either unconditionally or subject to conditions. Note: For which courts have jurisdiction, and for transfers between courts, see Part 6.2.

(2) In considering whether to make an order under subsection (1), the court must have regard to the following matters: (a) the efficient administration of this Act; (b) any other matter that the court considers relevant. ____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 186 of the New Zealand Personal Property Securities Act 1999.

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[PPSA.292] Notices — formal defects 292 A notice purportedly given under this Act is not invalid as a result of a formal defect or an irregularity, unless: (a) a person applies to a court objecting on that ground; and (b) the court is satisfied that substantial injustice has been caused by the defect or irregularity; and (c) the court is satisfied that the injustice cannot be remedied by an order of the court. [page 358]

[PPSA.293] Timing — applications for extension of time 293 (1) On application, a court may make an order extending the number of

business days in a period specified in the following provisions if the court is satisfied that it is just and equitable to do so: (a) paragraphs 62(3)(b) (perfection of purchase money security interests); (b) paragraphs 63(c) and (d) (priority between competing purchase money security interests); (c) paragraph 64(1)(b) (priority between non-purchase money security interest and purchase money security interest); (d) subsection 120(3) (payment of amount owed to secured party in enforcing security interests in liquid assets); (e) paragraphs 121(2)(e) and (5)(a) (notice to higher priority parties and grantor of enforcement of liquid assets); (f) subsection 127(4) (compliance with notice from higher priority party); (g) subsection 127(9) (payment of amount by higher priority party); (h) paragraph 130(2)(c) (notice of disposal of collateral); (i) paragraphs 132(2)(a) and (6)(a) (giving statements of account); (j) paragraph 135(2)(a) (notice of retention of collateral); (k) subsection 138(2) (giving proof of interest); (l) subsection 151(3) (belief about security interest); (m) paragraph 166(2)(c) (when defect makes registration ineffective); (n) subsection 167(2) (application for amendment of registration); (o) subsection 182(2) (application for amendment after demand); (p) subsection 275(3) (information required by request). [subs (1) am Act 35 of 2011 s 3 and Sch 2 item 55, opn 26 May 2011]

(2) The court may make the order even if the period has ended. (3) In making an order to extend a period under subsection (1), the court must take into account the following: (a) whether the need to extend the period arises as a result of an accident, inadvertence or some other sufficient cause; (b) whether extending the period would prejudice the position of any other secured parties or other creditors; (c) whether any person has acted, or not acted, in reliance on the period having ended. ____________________ [PPSA.293.A] Annotations to s 293

Time to perfect The considerations the court must take into account in making an order under s 293 are similar to those in s 588FM of the Corporations Act. Section 588FM relates to an extension of time for the perfection by registration of security interests granted by a corporation under s 588FL of the Corporations Act. In relation to the making of an order under s 588FM see Re Barclays Bank plc [2012] NSWSC 1095; BC201208047; Re Cardinia Nominees Pty Ltd [2013] NSWSC 32; BC201300324 (Cardinia Nominees) and Re Apex Gold Pty Ltd [2013] NSWSC 881; BC201310637; Re Black Opal IP Pty Ltd (subject to Deed of Company Arrangement) [2013] NSWSC 1225; BC201313559; 123 Sweden AB v Appleyard Capital Pty Ltd [2014] NSWSC 782; BC201404636 and Re Transurban CCT Pty Ltd [2014] NSWSC 1909; BC201411634. In Re

[page 359] Enviro Pallets (NSW) Pty Ltd [2013] QSC 220 the court made an order under s 588FM even though the company was in liquidation. The application was heard on an ex parte basis and the liquidator neither consented to, nor opposed, the orders sought. In Cardinia Nominees Black J noted that orders made under s 588FM should not affect the priority between the secured party seeking the extension and another secured party that registers its security interest in the 20 business day period specified in s 588FL. The extension of time under s 588FM for the purposes of the vesting rule in s 588FL does not affect the date of registration of the financing statement for the security interest for which the extension is sought. A security interest that was previously perfected by registration on the PPSR would generally have priority over a later registered interest because of s 55, PPSA. Nevertheless, the court imposed a condition on its order expressly preserving the priority position of a secured creditor that had registered during the 20 day period. Due to insufficient evidence of the grantor company’s solvency and the likelihood of its continued solvency for the foreseeable future, the court also made its order conditional on reserving the ability of a liquidator, administrator, deed administrator or other unsecured creditor to apply to discharge the order within a 6 month period from the date of registration of the security interest. Section 588FM of the Corporations Act is not contingent on s 588FL being already engaged, that is, the grantor does not need to have been wound up, had an administrator appointed or to have executed a deed of company arrangement before an extension of time is sought; see Re Quality Blended Liquor Pty Ltd [2014] QSC 234; BC201408388. The PPSA does not prescribe a general time limit for perfection, however, the insolvency vesting rule in s 588FL of the Corporations Act (which is in addition to the insolvency vesting rule in Pt 8.2 of the PPSA) essentially requires the perfection by registration of a security interest granted by a corporation within 20 business days after the security agreement that gave rise to the security interest came into force or before a relevant insolvency event