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.

____________________

[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.

____________________

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.

____________________

[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.

____________________

[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.

____________________

[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.

____________________

[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 occurs, whichever is earlier, if the security interest is not perfected in some other way; see Pozzebon v Australian Gaming and Entertainment Ltd (in liq) [2014] FCA 1034; BC201407897. While there is no general prescribed time limit for perfection under the PPSA, there are prescribed timing requirements for properly perfecting a PMSI (see s 62, PPSA). Section 293(1)(a) contemplates an extension of time for the perfection by registration of a PMSI in relation to personal property that is not inventory (s 62(3)(b), PPSA) but it does not contemplate an extension of time for the perfection by registration of a PMSI in inventory (s 62(2)(b), PPSA). When considering an application for an extension of time under s 293(1) (particularly paras (a) and (b)) courts will need to consider the effect of any order on the priority of security interests perfected by prior registrations — contrast the observations of Black J in Cardinia Nominees with respect to extensions under s 588FM of the Corporations Act which should not affect the priority of security interests perfected by prior registrations.

____________________

Commentary References For further discussion please refer to commentary at [3.1200].

____________________

[PPSA.294] Timing — references to time in this Act 294 (1) In this Act, a reference to a particular time is a reference to that time by legal time in the Australian Capital Territory. (2) To avoid doubt, a reference to a particular time includes a reference to a particular time by reference to the end of a period. [subs (2) am Act 5 of 2015 s 3 and Sch 1 item 34, opn 25 Mar 2015]

[page 360]

PART 8.6 — ONUS OF PROOF AND KNOWLEDGE [ss 295–300] [PPSA.295] Guide to this Part 295 This Part provides that the onus of proving certain facts lies with the person asserting those facts. The Part also defines constructive knowledge and provides specific rules about knowledge requirements relating to bodies corporate and other entities and transfers between persons who have close associations with each other.

[PPSA.296] Onus of proof 296 In a proceeding in Australia under this Act, the onus of proving the following facts lies with the person asserting those facts: (a) the fact that a security interest attaches to personal property; (b) the fact that a security interest is perfected by registration; (c) the fact that a person takes personal property free of a security interest, except in relation to sections 43 and 47; (d) the fact that a person takes personal property free of a security interest under subsection 47(1); (e) the fact that a person does not take personal property free of a security interest under subsection 47(2);

(f)

the fact that a person who purchases collateral pays at least the market value of the collateral at the time of the purchase;

Note: See paragraph 129(3)(b).

(g) the fact that a person acquires personal property without actual or constructive knowledge as mentioned in paragraph 267(3)(b); (h) the fact that a fee referred to in subsection 279(1) does not exceed the reasonable marginal costs of providing information; Note: See subsection 279(2).

(i)

the fact that information has been provided to a grantor or the grantor’s authorised representative under section 275 or 276 in response to a request made within the previous 6 months;

Note: See subsection 279(3).

(j)

the fact that there has not been a material change in information provided to a grantor or the grantor’s authorised representative since the information was last provided to the grantor or the authorised representative;

Note: See subsection 279(4).

(k) the fact that the fee imposed under subsection 279(1) exceeds the reasonable marginal costs of providing information; Note: See subsection 281(2).

(l)

the fact that: (i) information has not been provided to the a grantor or a grantor’s authorised representative in response to a request made under section 275 within the previous 6 months; or [page 361] (ii) there has been a material change in information since the information was last provided to a grantor or a grantor’s authorised representative.

Note: See subsection 281(3).

[PPSA.297] Meaning of constructive knowledge 297 For the purposes of this Act, a person (the first person) has constructive knowledge of a circumstance if the first person would have had actual

knowledge of the circumstance if the first person had: (a) made the inquiries that would ordinarily have been made by an honest and prudent person in the first person’s situation; or (b) made the inquiries that would be made by an honest and prudent person with the first person’s actual knowledge in the first person’s situation. ____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 19 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 2(2) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [2.3050], [2.3150].

____________________

[PPSA.298] Actual or constructive knowledge by bodies corporate and other entities 298 (1) If it is necessary to establish that a body corporate has actual or constructive knowledge of a particular circumstance, it is sufficient to show: (a) that a director, employee or agent of the body corporate, being a director, employee or agent who is responsible for acting on behalf of the body corporate in relation to such a circumstance, had that knowledge; or (b) that both of the following apply: (i) the circumstance is communicated to a director, employee or agent of the body corporate; (ii) if the director, employee or agent had exercised reasonable care, the circumstance would have been brought to the attention of a director, employee or agent of the body corporate who is responsible for acting on behalf of the body corporate in relation to such a circumstance. (2) If it is necessary to establish that a person other than a body corporate has actual or constructive knowledge of a particular circumstance, it is sufficient to show: (a) that an employee or agent of the person, being an employee or agent who is responsible for acting on behalf of the person in relation to such a circumstance, had that knowledge; or

(b) that both of the following apply: (i) the circumstance is communicated to an employee or agent of the person; (ii) if the employee or agent had exercised reasonable care, the circumstance would have been brought to the attention of an employee or agent of the person who is responsible for acting on behalf of the person in relation to such a circumstance. [page 362] (3) Paragraphs (1)(b) and (2)(b) do not require a person to bring information to the attention of another person unless: (a) doing so is part of the person’s regular duties; or (b) the person has reason to know both of the following: (i) the transaction to which the circumstance relates; (ii) that the transaction would be materially affected by the information. ____________________ Comparative Legislation Comparable sections of New Zealand legislation: s 19(1)(b) of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 2(2)(b), (c) and (d) of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [1.3050], [2.3250].

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[PPSA.299] Actual or constructive knowledge in relation to certain property transfers 299 (1) This section applies if: (a) a person (the transferee) acquires personal property from another person (the transferor); and (b) any of the following applies: (i) the transferee is a member of the same household as the transferor; (ii) the transferee is an associated entity (within the meaning of the

Corporations Act 2001) of the transferor, or the transferor is such an associated entity of the transferee; (iii) the transferee is a director or officer (within the meaning of the Corporations Act 2001) of the transferor, or the transferor is such a director or officer of the transferee. (2) For the purposes of this Act, the following is to be presumed, unless the contrary is shown beyond reasonable doubt: (a) the transferee had actual or constructive knowledge that the acquisition constituted a breach of the security agreement that provides for a security interest in the personal property; (b) the transferee had actual or constructive knowledge of a security interest in the personal property; (c) value was not given by the transferee for the interest acquired. ____________________ Commentary References For further discussion please refer to commentary at [1.3050], [2.3300].

____________________

[PPSA.300] Registration of data does not constitute constructive notice 300 A person does not have notice, or actual or constructive knowledge, about the existence or contents of a registration merely because data in the registration is available for search in the register. ____________________ [page 363] Comparative Legislation Comparable sections of New Zealand legislation: s 20 of the New Zealand Personal Property Securities Act 1999. Comparable sections of Canadian legislation: s 47 of the Saskatchewan (Canada) Personal Property Security Act 1993. Commentary References For further discussion please refer to commentary at [1.3050], [2.3350].

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PART 8.7 — FORMS AND REGULATIONS [ss 301–

303] [PPSA.301] Guide to this Part 301 This Part enables the Registrar to approve forms for the purposes of this Act. Broad parameters are set out for what may be required by an approved form, including the way in which the form must be given to another person. This Part also empowers the Governor-General to make regulations for this Act.

[PPSA.302] Approved forms 302 (1) This section applies if this Act requires or authorises something to be in the approved form. (2) To be in the approved form, the thing must: (a) be in writing in a form approved by the Registrar; and (b) include the information, statements, explanations or other matters required by the form approved for the purposes of paragraph (a); and (c) include any other material (including documents) required by that form; and (d) be given in accordance with any requirements specified by the Registrar for the purpose. 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). Example: Examples of forms that could be approved (see paragraph (2)(a)) are as follows: (a) an interactive form provided on the internet; (b) a communication exchange provided by an interactive voice recognition telephone system; (c) a digital communication enabling computer to computer interaction.

(3) The Registrar may, by written instrument, approve a form for the purposes of paragraph (2)(a). (4) Without limiting subsection (2), a form approved under subsection (3) may specify a requirement that the applicant comply with registered data conditions (see section 176B) or third party data conditions (see section 176C), or both, for applications under any of the following sections: (a) section 150 (registration); (b) section 170 (search);

section 175 (copies of financing statements and verification (c) statements). [subs (4) insrt Act 35 of 2011 s 3 and Sch 2 item 56, opn 26 May 2011]

[page 364] (5) A form approved under subsection (3) may provide for a matter by applying, adopting or incorporating, with or without modification, any matter contained in an instrument or other writing as in force or existing from time to time, despite section 46AA of the Acts Interpretation Act 1901. [subs (5) insrt Act 35 of 2011 s 3 and Sch 2 item 56, opn 26 May 2011]

[PPSA.303] Regulations 303 The Governor-General may make regulations prescribing matters: (a) required or permitted by this Act to be prescribed; or (b) necessary or convenient to be prescribed for carrying out or giving effect to this Act.

[page 365]

CHAPTER 9 — TRANSITIONAL PROVISIONS [ss 304–343] PART 9.1 — GUIDE TO THIS CHAPTER [s 304] [PPSA.304] Guide to this Chapter 304 This Chapter deals with the way this Act will apply when the positive rules established by this Act begin to operate. It also provides for some other matters that will have less relevance over time (fixed and floating charges, in Part 9.5), or a once-only application (the review in Part 9.6). Part 9.2 defines key concepts for the Chapter. Part 9.3 deals with the initial application of this Act. Generally speaking, the Act starts to apply 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. Part 9.4 contains provisions that relate to transitional security interests. These are interests in existence at the registration commencement time or arising afterwards under security agreements made before the registration commencement time. This includes rules about the attachment, perfection and priority of transitional security interests. Part 9.4 also deals with the migration of data from existing Commonwealth, State and Territory registers onto the Personal Property Securities Register. Part 9.5 contains specific rules relating to fixed and floating charges. Part 9.6 provides for an independent review of the operation of the Act 3 years after it starts to apply. [s 304 am Act 96 of 2010 s 3 and Sch 2 items 116 and 117, opn 6 July 2010; Act 138 of 2011 Sch 1 items 1 and 2, opn 29 Nov 2011]

PART 9.2 — KEY CONCEPTS [ss 305–308] [PPSA.305] Guide to this Part 305 This Part contains definitions of the following terms used in this Chapter (and elsewhere in this Act): (a) migration time; (b) registration commencement time;

(c) transitional security agreement; (d) transitional security interest.

[page 366]

[PPSA.306] Meaning of migration time and registration commencement time 306 (1) Migration time For the purposes of this Act, the migration time is: (a) the start of the first day of the month that is 25 months after the month in which this Act is given the Royal Assent; or (b) another time determined by the Minister. Example: If this Act were given the Royal Assent on 10 December 2009, the migration time under paragraph (a) would be the start of 1 January 2012. [subs (1) am Act 138 of 2011 Sch 1 item 3, opn 29 Nov 2011]

(2) Registration commencement time For the purposes of this Act, the registration commencement time is at: (a) the start of the first day of the month that is 26 months after the month in which this Act is given the Royal Assent; or (b) another time determined by the Minister. Example: If this Act were given the Royal Assent on 10 December 2009, the registration commencement time under paragraph (a) would be the start of 1 February 2012. [subs (2) am Act 138 of 2011 Sch 1 item 3, opn 29 Nov 2011]

(3) The Minister may only determine a time for the purposes of paragraph (2) (b) that is on a day that is at least 28 days after the day on which the migration time occurs. (4) If the Minister determines other times for both the migration time and the registration commencement time, the Minister may, after the migration time, make a further determination for the purposes of paragraph (2)(b) that has the effect of providing for a later registration commencement time. Note: The registration commencement time determined by the further determination must be at least 28 days after the day on which the migration time occurs. [subs (4) am Act 138 of 2011 Sch 1 items 4 and 5, opn 29 Nov 2011]

(5) The Minister may, by written instrument, determine a time for the

purposes of paragraph (1)(b) or (2)(b) (including a determination mentioned in subsection (4)). (6) A determination made under subsection (5) is a legislative instrument, but section 42 (disallowance) of the Legislative Instruments Act 2003 does not apply to the determination. ____________________ [PPSA.306.A] Annotations to s 306 The registration commencement time was 30 January 2012 (see Personal Property Securities (Migration Time and Registration Commencement Time) Determination).

____________________ Commentary References For further discussion please refer to commentary at [6.50], [6.850].

____________________ [page 367]

[PPSA.307] Meaning of transitional security agreement 307 In this Act: transitional security agreement means a security agreement that is in force immediately before the registration commencement time, and that continues in force at and after that time. [def subst Act 96 of 2010 s 3 and Sch 2 item 118, opn 6 July 2010]

____________________ [PPSA.307.A] Annotations to s 307 Industrial Progress Corporation Pty Ltd v Wilson [2013] WASC 225; BC201303059 — although not finally determined, the court held that it was seriously arguable that retention of title terms included in a credit application signed by the customer in October 1998 and which terms were expressed to apply to the sale of all goods to the customer from time to time, constituted a transitional security agreement for the purposes of s 307 on the basis the agreement was in force, and continuing, as at 1 February 2012 (although 1 February 2012 was referred to in the judgement, it should be noted that the registration commencement time for the PPSA was actually 30 January 2012). The decision in Industrial Progress Corporation Pty Ltd v Wilson was distinguished in Central Cleaning Supplies (Aust) Pty Ltd v Elkerton (2014) 98 ACSR 52; [2014] VSC 61; BC201401227 where the court held a credit application agreement did not include a retention of title term and therefore it was not a transitional security agreement. A retention of title term which appeared on individual invoices issued subsequent to the credit application agreement was not incorporated as a term of the original credit application agreement between the parties. Interestingly, Ferguson J also made the following observations: had I been persuaded that the Credit Application agreement had as one of its terms the ROT Clause, it would not have mattered that steps were taken in connection with the supply of the Equipment after 30

January 2012 (for instance, the issuing of purchase orders and invoices). For instance, if the Credit Application agreement had provided that title in all goods whenever supplied was retained by Central Cleaning until payment in full was made, it would not matter that some purchase orders were not placed until after 30 January 2012. As Central Cleaning submitted (correctly, in my view) s 308(b) of the PPSA expressly recognizes that security interests can arise after 30 January 2012 if a transitional security agreement provides for the granting of the security interest. In this regard, I accept Central Cleaning’s submission that the phrase “provides for” should be given a different and more expansive meaning than “created” and “arises” (being the other limbs of section (a) of the definition of “security agreement” but not used in s 308(b)). [at 39].

____________________ Commentary References For further discussion please refer to commentary at [6.350].

____________________

[PPSA.308] Meaning of transitional security interest 308 In this Act: transitional security interest means a security interest provided for by a transitional security agreement, if: (a) in the case of a security interest arising before the registration commencement time — this Act would have applied in relation to the security interest immediately before the registration commencement time, but for section 310; or (b) in the case of a security interest arising at or after the registration commencement time: [page 368] (i)

the transitional security agreement as in force immediately before the registration commencement time provides for the granting of the security interest; and (ii) this Act applies in relation to the security interest. Note: Section 310 provides that this Act only starts to apply to security interests at the registration commencement time.

____________________ [PPSA.308.A] Annotations to s 308 Refer to the commentary at [PPSA.307.A].

____________________ Commentary References For further discussion please refer to commentary at [6.400], [6.450].

____________________

PART 9.3 — INITIAL APPLICATION OF THIS ACT [ss 309–318] [PPSA.309] Guide to this Part 309 This Act starts to apply to the following at the registration commencement time (26 months after the Act is given the Royal Assent, or another time determined by the Minister): (a) new security agreements; (b) security interests arising after commencement; (c) transitional security agreements and interests; (d) new interests in personal property; (e) prescribed personal property; (f) migrated personal property data from Commonwealth, State and Territory registers. Special provision is made for the following: (a) the enforceability of transitional security interests; (b) certain declared statutory interests; (c) intellectual property licences; (d) the enforcement generally of security agreements; (e) the starting time for registrations; (f) governing laws (under Part 7.2); (g) constitutional and non-constitutional interests; (h) charges, and fixed and floating charges. [s 309 am Act 138 of 2011 Sch 1 item 6, opn 29 Nov 2011]

[PPSA.310] When this Act starts to apply, and in relation to which matters 310 Subject to this Part and Part 9.4, this Act starts to apply at the registration commencement time in relation to the following matters: (a) a security agreement made at or after the registration commencement time; (b) a security interest (other than a transitional security interest) arising at or after the registration commencement time; [page 369]

(c) a transitional security agreement; (d) a transitional security interest (whether arising before, at or after the registration commencement time); (e) an interest in personal property (other than a security interest) arising at or after the registration commencement time; (f) personal property of a kind prescribed by regulations made for the purposes of paragraph 148(c); (g) personal property, if data in relation to the property is given to the Registrar as mentioned in section 330 or 331 (data in transitional registers). ____________________ Commentary References For further discussion please refer to commentary at [6.100].

____________________

[PPSA.311] Enforceability of transitional security interests against third parties 311 Despite section 20, a transitional security interest is enforceable against a third party in respect of particular personal property if it would have been so enforceable under the law that applied to the enforceability of security interests immediately before the registration commencement time, and as if this Act had not been enacted (whether the security interest arises before, at or after the registration commencement time). [s 311 subst Act 96 of 2010 s 3 and Sch 2 item 119, opn 6 July 2010]

____________________ [PPSA.311.A] Annotations to s 311 Re Maiden Civil (P & E) Pty Ltd; Albarran v Queensland Excavation Services Pty Ltd (2013) 277 FLR 337; [2013] NSWSC 852; BC201310524 — where it was accepted by the parties that the interest of QES under an undocumented lease was a transitional security interest. The lease/security agreement did not satisfy the writing requirements of s 20.

____________________

[PPSA.312] Declared statutory security interests 312 Section 73 (priority between security interests and declared statutory interests) applies in relation to an interest in collateral only if the interest is created, arises or is provided for under one of the following at or after the registration commencement time:

(a) a law of the Commonwealth, a State or a Territory; (b) the general law.

[PPSA.313] Enforcement of security interests in intellectual property licences 313 Section 106 applies in relation to security interests in intellectual property licences only if the security interests are provided for by security agreements made at or after the registration commencement time. [s 313 subst Act 96 of 2010 s 3 and Sch 2 item 120, opn 6 July 2010]

[page 370]

[PPSA.314] Enforcement of security interests provided for by security agreements 314 Chapter 4 (enforcement of security interests) applies only in relation to security interests provided for by security agreements made at or after the registration commencement time. ____________________ Commentary References For further discussion please refer to commentary at [2.14000].

____________________

[PPSA.315] Starting time for registrations 315 (1) A person may only apply to the Registrar for the registration of a financing statement or a financing change statement at or after the registration commencement time. (2) The Registrar may only register a financing statement or a financing change statement (whether on application by a person or at the Registrar’s initiative) at or after the registration commencement time. Note: However, the Registrar may, before the registration commencement time, register a financing statement or a financing change statement under Division 6 (migrated security interests) or Division 7 (preparatory registration) of Part 9.4.

[PPSA.316] Governing laws

316 Part 7.2 (Australian laws and those of other jurisdictions) applies only in relation to security interests in collateral (other than transitional security interests) that arise at or after the registration commencement time.

[PPSA.317] Constitutional and non-constitutional interests 317 (1) Section 251 (personal property taken free of security interest when Act starts to operate) applies only in relation to security interests in collateral (other than transitional security interests) that arise at or after the registration commencement time. (2) Section 252 (priority between non-constitutional security interests and constitutional security interests) applies only in relation to security interests in collateral, in relation to which this Act does not operate, that arise at or after the registration commencement time.

[PPSA.318] References to charges and fixed and floating charges 318 Part 9.5 (charges and fixed and floating charges) applies only: (a) in the case of a reference to a charge, a fixed charge or a floating charge in a law of the Commonwealth (whether the law is made before, at or after the registration commencement time) — in relation to a security interest (other than a transitional security interest) arising at or after the registration commencement time; or (b) in the case of a reference to a charge, a fixed charge or a floating charge in a security agreement — in relation to a security agreement made at or after the registration commencement time. ____________________ Commentary References For further discussion please refer to commentary at [1.2450], [4.6.600], [4.6.2450], [6.2750].

____________________ [page 371]

PART 9.4 — TRANSITIONAL APPLICATION OF THIS ACT [ss 319–337A] DIVISION 1 — INTRODUCTION [s 319] [Div 1 subst Act 96 of 2010 s 3 and Sch 2 item 121, opn 6 July 2010]

[PPSA.319] Guide to this Part 319 This Part deals with the transitional application of this Act. This Part applies to transitional security interests, which are security interests provided for by security agreements (transitional security agreements) in force immediately before the registration commencement time. A transitional security interest may arise before, at or after the registration commencement time. The registration commencement time 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. Division 2 is about the attachment, perfection and priority of transitional security interests. Transitional security interests are declared to be perfected until the end of the month that is 24 months after the registration commencement time, or until they are earlier perfected by other means (for example, by registration). Division 6 is about the migration of data about personal property from Commonwealth, State and Territory registers onto the Personal Property Securities Register. The Registrar may register migrated data about transitional security interests with effect from the registration commencement time. Such transitional security interests are known as migrated security interests. Migrated security interests are perfected under Division 2 from immediately before the registration commencement time. Division 7 provides for preparatory registration with respect to transitional security interests in anticipation of the commencement of the Personal Property Securities Register. Other data may also be registered under this Division before the registration commencement time. Transitional security interests that are registered in this way are perfected under Division 2 from immediately before the registration commencement time. Division 8 provides rules for dealing with defective registrations with respect to transitional security interests. For example, omissions arising from the migration of data onto the Personal Property Securities Register will not automatically render the registration of the data ineffective. [s 319 am Act 138 of 2011 Sch 1 item 6, opn 29 Nov 2011]

DIVISION 2 — ATTACHMENT, PERFECTION AND PRIORITY OF TRANSITIONAL SECURITY INTERESTS [ss 320–324] [Div 2 subst Act 96 of 2010 s 3 and Sch 2 item 121, opn 6 July 2010]

[PPSA.320] Guide to priority rules for transitional

security interests 320 (1) The following table is a guide to how this Act applies to the determination of priorities involving transitional security interests: [page 372] Priorities involving transitional security interests Item The following security has priority over … interest: 1 a perfected transitional security an unperfected security interest interest (whether transitional or not) 2 a perfected transitional security a perfected security interest interest that is not a transitional security interest 3 an unperfected transitional an unperfected security interest security interest that is not a transitional security interest 4 a perfected security interest an unperfected transitional (whether transitional or not) security interest

because of … subsection 55(3). subsection 55(5) and sections 322 and 322A. subsection 55(2) and section 321. subsection 55(3).

[subs (1) am Act 35 of 2011 s 3 and Sch 2 item 57, opn 26 May 2011]

(2) Other priorities involving transitional security interests are dealt with under this Division as follows: (a) for the priority between 2 perfected transitional security interests, see section 323; (b) for the priority between 2 unperfected transitional security interests, see section 323; (c) for the priority between 2 security interests, one or both of which is a transitional security interest, if the priority comes to be determined after the end of the month that is 24 months after the registration commencement time in circumstances involving insolvency or bankruptcy, see section 324. (3) In this section, a reference to a perfected transitional security interest is taken to be a reference to a transitional security interest that has been continuously perfected, at the time the priority comes to be determined, since immediately before the registration commencement time. ____________________ Commentary References For further discussion please refer to commentary at [6.1800]–[6.1950].

____________________

[PPSA.321] Attachment rule 321 For the purposes of subparagraph 21(1)(b)(i) and section 55, a transitional security interest in collateral is taken to have attached to the collateral immediately before the registration commencement time, whether the security interest arises before, at or after the registration commencement time. Note 1: Subparagraph 21(1)(b)(i) provides that unless a security interest in collateral is perfected by force of this Act, the security interest must have attached to the collateral in order to be perfected. Note 2: Section 55 provides for the default rules for determining priority between security interests in the same collateral. In some cases, these rules depend on when a security interest attaches. For example, the priority between 2 unperfected security interests is generally determined by their order of attachment (see subsection 55(2)).

[page 373] However, 2 unperfected transitional security interests have the priority they would have had between themselves if this Act had not been enacted (see section 323). Note 3: See section 320 for a general summary of priority rules as they affect transitional security interests.

____________________ Commentary References For further discussion please refer to commentary at [6.1550], [6.1700], [6.1900].

____________________

[PPSA.322] Perfection rule 322 (1) Main rule A transitional security interest in collateral is perfected from immediately before the registration commencement time, whether the security interest arises before, at or after the registration commencement time (including a transitional security interest that arises after the end of the month that is 24 months after the registration commencement time). Note 1: As a result of this subsection, the priority time for a transitional security interest under subsection 55(4) will be immediately before the registration commencement time, as long as the security interest remains continuously perfected. Note 2: See section 320 for a general summary of priority rules as they affect transitional security interests.

(2) However, the transitional security interest stops being perfected under subsection (1) at the earliest of the following times: (a) when the security interest is perfected by registration under Division 6

(b) (c) (d) (e) (f)

(migration of personal property interests); when the security interest is perfected by preparatory registration under Division 7; when a registration under Division 6 or 7 is amended so that the registration perfects the security interest; when the security interest is otherwise perfected by registration, or is perfected by possession or control; when the security interest is otherwise perfected (but not temporarily perfected) by this Act, other than under this section; the end of the month that is 24 months after the registration commencement time.

Note: In the case of a transitional security interest in collateral that does not arise until after the end of the month that is 24 months after the registration commencement time, this section has the same effect as for other transitional security interests. In particular: (a) if a financing statement describing the collateral is registered before the end of that month, by the operation of sections 21, 55, 321 and this section, the security interest is continuously perfected from the registration time for the collateral until the registration stops being effective; and (b) if the security interest is not perfected (otherwise than under this section) at the end of the month that is 24 months after the registration commencement time, the security interest will become unperfected at that time.

(3) Exception Subsections (1) and (2) do not apply to a transitional security interest in collateral if the interest is of a class prescribed by regulations made for the purposes of this subsection. ____________________ [page 374] [PPSA.322.A] Annotations to s 322 Transitional provisions Excepted prescribed interest (s 322(3)) See reg 9.2 at [PPSR9.2]. Note that this regulation will cease to have effect at the end of the month that is 24 months after the registration commencement time. Re Maiden Civil (P & E) Pty Ltd; Albarran v Queensland Excavation Services Pty Ltd [2013] NSWSC 852; BC201310524 — interests of the lessor under leases of motor vehicles (excavation equipment) that were registrable under pre PPSA law in the Northern Territory (the Registration of Interests in Motor Vehicles and Other Goods Act 2008) were not registered under that pre PPSA law. Section 322(3) and reg 9.2 applied and accordingly the security interests were not temporarily perfected. White v Spiers Earthworks Pty Ltd [2014] WASC 139; BC201402620 — the security interest of an owner under a hire purchase agreement that was registrable under pre PPSA law in Western Australia (the Chattel Securities Act 1987) was not registered under that pre PPSA law. Section 322(3) and reg 9.2 applied and

accordingly the security interest was not temporarily perfected.

____________________ Commentary References For further discussion please refer to commentary at [4.3.1000], [6.800], [6.1350], [6.1600], [6.1650], [6.1800], [6.1900], [6.1950].

____________________

[PPSA.322A] Priority rule — priority between transitional security interest and security interest perfected by control 322A Despite subsection 57(1), a transitional security interest in collateral that has been continuously perfected since the registration commencement time has priority over a security interest in the same collateral (other than a transitional security interest) that is currently perfected by control. Note 1: Only security interests in certain kinds of property can be perfected by control (see paragraph 21(2) (c) and Part 2.3). Note 2: Subsection 57(1) provides generally for security interests currently perfected by control to have priority over other security interests. [s 322A insrt Act 35 of 2011 s 3 and Sch 2 item 58, opn 26 May 2011]

[PPSA.323] Priority rule — priority otherwise undetermined 323 If the priority between 2 transitional security interests is not otherwise able to be determined under this Act, they have the priority between themselves that they would have had under the law that applied to such priority immediately before the registration commencement time, and as if this Act had not been enacted. Note: The priority between the following transitional security interests is not otherwise able to be determined under this Act:

(a) 2 unperfected transitional security interests (because of section 321, the order of attachment between these interests cannot be determined for the purposes of subsection 55(2)); (b) 2 transitional security interests that have been continuously perfected since immediately before the registration commencement time (because of sections 321 and 322, the order of the priority times for these interests cannot be determined for the purposes of subsection 55(4)).

____________________ [page 375] [PPSA.323A] Annotations to s 323 NCO Finance Australia Pty Ltd v Australian Pacific Airports (Melbourne) Pty Ltd [2013] FCCA 2274; BC201316226 — involved a priority contest between two transitional security interests in a motor vehicle prior to the end of the transition period. The first security interest, initially in favour of a financier and subsequently assigned to NCO, had been registered under the pre-PPSA motor vehicle securities legislation in Queensland. The second security interest arose in favour of APA, a car park operator, pursuant to the terms and conditions for parking. The court held that APA’s interest was a “repairer’s lien” for the purposes of the Chattel Securities Act 1987 (Vic) and it had been perfected by possession after NCO’s security interest has been perfected by registration under the pre-PPSA Queensland motor vehicles securities legislation. Pursuant to the Chattel Securities Act 1987 (Vic) and s 323 of the PPSA, the repairer’s lien had priority over the security interest of NCO.

____________________ Commentary References For further discussion please refer to commentary at [6.1900].

____________________

[PPSA.324] Priority rule — certain security interests upon insolvency or bankruptcy 324 (1) The priority between 2 security interests in the same collateral is to be determined under this Act, as if section 322 had not been enacted, if: (a) the priority between the security interests comes to be determined after the end of the month that is 24 months after the registration commencement time; and (b) either (or each) of the interests is a transitional security interest that has not been perfected, apart from under section 322; and (c) the grantor or secured party in relation to either (or each) of the security interests is insolvent or bankrupt. (2) Subsection (1) is in addition to, and does not derogate from, any other provision of this Division. ____________________ Commentary References For further discussion please refer to commentary at [1.3200], [6.1800], [6.1950].

____________________

DIVISION 3 — NON-PROTECTED PRIORITY FOR OTHER TRANSITIONAL SECURITY INTERESTS [Repealed] [Div 3 rep Act 96 of 2010 s 3 and Sch 2 item 121, opn 6 July 2010]

DIVISION 4 — TAKING FREE AND VESTING OF TRANSITIONAL SECURITY INTERESTS IN CERTAIN SITUATIONS [Repealed] [Div 4 rep Act 96 of 2010 s 3 and Sch 2 item 121, opn 6 July 2010]

DIVISION 5 — TAKING FREE AND VESTING OF TRANSITIONAL SECURITY INTERESTS IN OTHER SITUATIONS [Repealed] [Div 5 rep Act 96 of 2010 s 3 and Sch 2 item 121, opn 6 July 2010]

[page 376]

DIVISION 6 — MIGRATION OF PERSONAL PROPERTY INTERESTS [ss 330–335]

[PPSA.330] Scope of Division 330 This Division applies if, at or after the migration time, and before the registration commencement time: (a) an officer or agency of the Commonwealth, a State or a Territory gives the Registrar data, in relation to personal property, that is held by the officer or agency in a register (a transitional register) maintained under a law of the Commonwealth, a State or a Territory; and (b) the data is given in the approved form; and (c) the Registrar accepts the data. ____________________

Commentary References For further discussion please refer to commentary at [6.650]–[6.750], [6.950].

____________________

[PPSA.331] Requirement for Commonwealth officers etc to provide data 331 Upon a written request by the Registrar at or after the migration time, and before the registration commencement time, an officer of the Commonwealth, or the person in charge of an agency of the Commonwealth, must give the Registrar, in the approved form, data held by the officer or the agency in a transitional register. ____________________ Commentary References For further discussion please refer to commentary at [6.700], [6.850], [6.900], [6.950].

____________________

[PPSA.332] Meaning of migrated security interest 332 An interest in personal property is a migrated security interest in the personal property if all the following conditions are met in relation to the interest: (a) it is a transitional security interest in the personal property; Note: Transitional security interests are security interests that arise under security agreements made before the registration commencement time, to which this Act will apply at the registration commencement time (see sections 307, 308 and 310).

(b) data in a transitional register in relation to the property is: (i) given to the Registrar as mentioned in section 330 or 331; and (ii) accepted by the Registrar; (c) a registration in that transitional register in relation to the property was effective immediately before the time the data was given to the Registrar; (d) the registration in a transitional register was duly authorised by the law under which the register was maintained. ____________________ Commentary References For further discussion please refer to commentary at [6.800].

____________________

[PPSA.333] Registration with respect to migrated data 333 (1) Determination of registrable personal property At or after the migration time, and before the registration commencement time, the Registrar may, by legislative instrument, determine a class of personal property to be registrable if: [page 377] (a) data in a transitional register in relation to personal property of that class is given to the Registrar as mentioned in section 330 or 331; and (b) registrations in that transitional register with respect to personal property of that class were effective immediately before the time the data was given to the Registrar. (2) Registration of determined personal property If, in the opinion of the Registrar, personal property is in a determined class, the Registrar may register a financing statement with respect to the property at or after the migration time, and before the registration commencement time. Note: The Registrar must give a verification statement to each secured party after the registration of a financing statement (see section 156).

(3) Matters to be included in registered data If, in the opinion of the Registrar, a financing statement under subsection (2) describes personal property that is the subject of a transitional security agreement, without limiting any other matters that may be included, the Registrar must, in the statement: (a) either: (i) if subsection (4) applies — state the transitional registration end time as the end time for the effective registration in respect of the personal property; or (ii) if subsection (4) does not apply — not state an end time for the effective registration in respect of the personal property; and (b) disclose that: (i) the personal property is covered by a transitional security agreement; and (ii) the transitional security agreement provides for a security interest that is a migrated security interest.

[subs (3) am Act 96 of 2010 s 3 and Sch 2 item 122, opn 6 July 2010]

(4) This subsection applies if, in the Registrar’s opinion, the registration of the interest in the personal property in the transitional register would have ended at a particular time (the transitional registration end time) in accordance with the law under which the transitional register was maintained (as in force immediately before the migration time). [subs (4) subst Act 96 of 2010 s 3 and Sch 2 item 123, opn 6 July 2010]

(5) Registration time The registration time for the personal property is the registration commencement time. Note: However, the migrated security interest in the personal property is perfected from immediately before the registration commencement time (see section 322). [subs (5) insrt Act 96 of 2010 s 3 and Sch 2 item 123, opn 6 July 2010]

____________________ Commentary References For further discussion please refer to commentary at [6.950]–[6.1100], [6.1350].

____________________

[PPSA.334] Incorrectly registered migrated data 334 (1) Incorrectly registered data taken never to have been registered If data is registered with respect to personal property in a financing statement under subsection 333(2) on the basis that the property is in a class determined under subsection 333(1), but the personal property is not, in fact, in the determined class, this Act applies as if the data is not, and never has been, included in the register. [page 378] (2) Removal of data Before a time determined under subsection (3), the Registrar may (at his or her initiative) register a financing change statement to remove data from the register, if the Registrar becomes satisfied that subsection (1) applies to the data. (3) The Registrar may, by legislative instrument, determine a time for the purposes of subsection (2). Note 1: Incorrectly removed data may be restored under section 186. Note 2: Application may be made to the Administrative Appeals Tribunal for review of the Registrar’s decision under subsection (2) (see section 191).

____________________

Commentary References For further discussion please refer to commentary at [6.950], [6.1100].

____________________

[PPSA.335] No requirement for notice of verification statement 335 Section 157 does not apply in relation to a verification statement that relates to a registration event consisting of the registration of a financing statement under section 333 or a financing change statement under section 334. Note: Section 157 requires the holder of a verification statement to ensure that notice of the verification statement is given to certain persons.

____________________ Commentary References For further discussion please refer to commentary at [6.1150].

____________________

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

[PPSA.336] Preparatory registration — transitional security interests 336 (1) Application for preparatory registration At or after the migration time, and before the registration commencement time, a person may apply to the Registrar, in the approved form, for the registration of any of the following: (a) a financing statement that describes collateral with respect to a transitional security interest; (b) a financing statement with respect to personal property prescribed by regulations made for the purposes of paragraph 148(c); (c) a financing change statement to amend a financing statement mentioned in paragraph (a) or (b) that is registered under this section. (2) The Registrar may accept an application made under subsection (1), but only if: (a) in the case of a financing statement, or a financing change statement, with respect to a transitional security interest — the Registrar is satisfied on reasonable grounds that a transitional security interest will (whether before, at or after the registration commencement time) be:

(i) attached to the collateral; and (ii) held by the applicant; and (b) in any case — in the Registrar’s opinion, it is operationally practicable for the Registrar to register the financing statement, or financing change statement, before the registration commencement time. [page 379] (3) Registration If the Registrar accepts the application for registration, the Registrar may register the financing statement (or financing change statement), in accordance with the application, before the registration commencement time. Note: The Registrar must give a verification statement to a secured party affected by the registration.

(4) A registration under this section with respect to a transitional security interest must disclose that the collateral is covered by a transitional security agreement. (5) In the case of a registration with respect to a transitional security interest, the registration time for the collateral is the registration commencement time. Note: However, a transitional security interest in the personal property arising under the agreement is perfected from immediately before the registration commencement time, no matter whether the security interest arises before, at or after that time (see section 322).

(6) Chapter 5 (registration) applies in relation to an application for registration under this section, and to such a registration, subject to this section. [s 336 subst Act 96 of 2010 s 3 and Sch 2 item 124, opn 6 July 2010]

____________________ Commentary References For further discussion please refer to commentary at [6.2300].

____________________

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

[PPSA.337] Registration effective despite certain defects 337 (1) Scope This section applies if: (a) a registration describes collateral covered by a transitional security

(b) (c)

(d) (e)

agreement; and the transitional security agreement has given rise to a transitional security interest; and the registration would not, apart from this section, be effective in respect of the collateral because of a defect in the registered data (including the omission of data); and the Registrar has made a determination under subsection (2) in relation to defects of that type; and the determination applies to the registration.

Note: Sections 164 and 165 provide that serious or misleading defects in a registration, and certain particular types of defect, make a registration ineffective.

(2) For the purposes of paragraph (1)(d), the Registrar may, by legislative instrument, determine that registrations in a stated class are effective despite stated types of defect. (3) A determination under subsection (2) may provide that the determination does not apply in relation to a stated type of defect unless the registration includes particular data in relation to the defect (or in substitution for omitted data). (4) Registration temporarily unaffected by the defect Despite sections 164 and 165, the defect does not make the registration ineffective for the period starting at the registration time for the collateral and ending at the following time: (a) if the financing statement, as initially registered, states an end time — that end time (or an earlier end time, if the registration is amended to state an earlier end time); [page 380] (b) if the financing statement, as initially registered, does not state an end time — the end of the month that is 60 months after the registration commencement time (or an earlier end time, if the registration is amended to state an end time). (5) Registration becomes ineffective However, the registration becomes ineffective under section 164 because of the defect immediately after the end of the period mentioned in subsection (4), unless, at or before that time, the registration is amended to correct the defect.

[s 337 subst Act 96 of 2010 s 3 and Sch 2 item 125, opn 6 July 2010]

____________________ Commentary References For further discussion please refer to commentary at [6.1200], [6.2350].

____________________

[PPSA.337A] Registration defective if collateral is not covered by transitional security agreement 337A Without limiting section 164 (defects in registration), a registration that discloses that collateral is covered by a transitional security agreement is ineffective to the extent that it describes collateral that is not covered by a transitional security agreement. [s 337A insrt Act 96 of 2010 s 3 and Sch 2 item 125, opn 6 July 2010]

PART 9.5 — CHARGES AND FIXED AND FLOATING CHARGES [ss 338–341A] [PPSA.338] Guide to this Part 338 This Part contains special rules dealing with references to charges and fixed and floating charges in laws of the Commonwealth and in security agreements. These rules are expected to have less relevance over time, as the scheme provided for by this Act provides an alternative to reliance on those techniques for security interest transactions.

____________________ Commentary References For further discussion please refer to commentary at [4.6.500]–[4.6.950].

____________________

[PPSA.339] References to charges and fixed and floating charges 339 (1) This section applies in relation to a reference to a charge, a fixed charge, or a floating charge, over property in a law of the Commonwealth, or in a security agreement, but only to the extent that: (a) the charge referred to has attached to personal property; and

title to the personal property to which the charge has attached is in the (b) grantor; and (c) the charge is a security interest to which this Act applies. (2) This section does not apply in relation to: (a) paragraphs 12(2)(a) and (b), or subsection 19(4); or (b) a reference to a charge, a fixed charge, or a floating charge, if the charge referred to is a perfected security interest that is provided for by a transfer of an account or chattel paper. [page 381] (3) A reference to a charge over property is taken to be a reference to a security interest that has attached to: (a) a circulating asset; or (b) personal property that is not a circulating asset. (4) A reference to a fixed charge over property is taken to be a reference to a security interest that has attached to personal property that is not a circulating asset. (5) A reference to a floating charge over property is taken to be a reference to a security interest that has attached to a circulating asset. ____________________ Commentary References For further discussion please refer to commentary at [1.2450], [4.1.1550], [4.2.1450], [4.2.1850], [4.6.150]–[4.6.300], [4.6.500], [4.6.600], [4.6.900], [4.6.1150], [6.2550], [6.2750].

____________________

[PPSA.340] Meaning of circulating asset 340 (1) General definition For the purposes of this Act, if a grantor grants a security interest in personal property to a secured party, the personal property is a circulating asset if: (a) the personal property is covered by subsection (5) (unless subsection (2) or (3) applies); or (b) in any other case — the secured party has given the grantor express or implied authority for any transfer of the personal property to be made, in the ordinary course of the grantor’s business, free of the security

interest. (2) Exceptions Despite paragraph (1)(a), personal property covered by subsection (5) is not a circulating asset if: (a) an effective registration with respect to the property, in relation to the grantor, discloses, in accordance with the regulations, that the secured party has control of the personal property; and (b) the secured party has control of the personal property. Note: For the meaning of control in this subsection, see section 341. [subs (2) am Act 96 of 2010 s 3 and Sch 2 item 126, opn 6 July 2010]

(3) Despite subsection (1), personal property covered by subsection (5) is not a circulating asset if: (a) the personal property is goods; and (b) the security interest is perfected by possession. (4) For the purposes of paragraph (1)(b), personal property is not a circulating asset merely because the secured party has given express authority to transfer specific personal property, or a specific class of personal property, free of a security interest. (4A) Despite subsection (1), if a grantor grants a security interest provided for by a transfer of an account or chattel paper, the account or chattel paper is not a circulating asset in relation to the security interest. [subs (4A) insrt Act 35 of 2011 s 3 and Sch 2 item 59, opn 26 May 2011]

(5) Current assets This subsection covers the following personal property: (a) an account that arises from 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); [page 382] (b) (c) (d) (e) (f)

an account that is the proceeds of inventory; an ADI account (other than a term deposit); currency; inventory; a negotiable instrument.

Example: An example of an account mentioned in paragraph (a) is an account that is a credit card receivable. Note: For the meaning of inventory in this subsection, see section 341. [subs (5) am Act 96 of 2010 s 3 and Sch 2 item 127, opn 6 July 2010]

____________________ Commentary References For further discussion please refer to commentary at [3.700], [4.2.1450], [4.2.1850], [4.2.1900], [4.6.500], [4.6.1400], [4.6.2400], [4.6.2500]–[4.6.2600], [4.8.1900], [4.8.3700], [6.2600]–[6.2700], [6.2850].

____________________

[PPSA.341] Meaning of control and inventory 341 (1A) General rules For the purposes of subsection 340(2), a secured party has control of personal property if: (a) the secured party has control of the property within the ordinary meaning of the term “control”; or (b) the secured party has control of the property within the meaning of Part 2.3 (possession and control of personal property); or (c) in a case in which the personal property is inventory or an account — the secured party has control of the inventory or account because of: (i) paragraph (a) or (b); or (ii) subsection (1), (2), (3) or (4); or (d) in a case in which the personal property is an ADI account — the secured party has control of the account because of paragraph (a) of this subsection or section 341A. [subs (1A) insrt Act 96 of 2010 s 3 and Sch 2 item 128, opn 6 July 2010; am Act 35 of 2011 s 3 and Sch 2 item 60, opn 26 May 2011]

(1B) For the purposes of subsection 340(5) and this section: (a) inventory has its ordinary meaning; and (b) the definition of inventory in section 10 does not apply. [subs (1B) insrt Act 96 of 2010 s 3 and Sch 2 item 128, opn 6 July 2010]

(1) Control of inventory For the purposes of subsection 340(2), a secured party has control of inventory if: (a) the secured party and the grantor have agreed in writing that the grantor: (i) will specifically appropriate the inventory to the security interest; and

will not remove any specifically appropriated inventory without (ii) previously obtaining the specific and express authority of the secured party to do so; and (b) the grantor’s usual practice is to comply with the agreement. [subs (1) am Act 96 of 2010 s 3 and Sch 2 item 129, opn 6 July 2010]

(2) Control of accounts For the purposes of subsection 340(2), a secured party has control of the following kinds of accounts (the relevant account) in the circumstances set out in subsections (3) and (4) of this section: [page 383] (a) an account mentioned in paragraph 340(5)(a); (b) an account that is the proceeds of inventory. [subs (2) am Act 96 of 2010 s 3 and Sch 2 items 130 and 131, opn 6 July 2010]

(3) The secured party has control of the relevant account if: (a) the secured party, and the person to whom the relevant account is owed, have agreed in writing that amounts paid in discharge of the relevant account must be deposited into a specified ADI account; and (b) the usual practice is for such amounts to be so deposited; and (c) the secured party controls the ADI account within the meaning of paragraph (1A)(d); and (d) depositing any such amounts into the specified ADI account does not result in any person coming under a present liability to pay: (i) the person to whom the relevant account is owed; or (ii) if the person to whom the relevant account is owed is a body corporate — a related body corporate (within the meaning of the Corporations Act 2001). [subs (3) am Act 35 of 2011 s 3 and Sch 2 item 61, opn 26 May 2011]

(4) If the secured party is a transferee of the relevant account, the secured party has control of the relevant account if payment by the account debtor to the secured party would discharge the obligation of the account debtor under subsection 80(8) to the extent of the payment. (5) [subs (5) rep Act 96 of 2010 s 3 and Sch 2 item 132, opn 6 July 2010] [heading subst Act 96 of 2010 s 3 and Sch 2 item 128, opn 6 July 2010]

____________________

Commentary References For further discussion please refer to commentary at [4.1.1300], [4.2.1450], [4.2.1900], [4.6.500], [4.6.2400], [4.6.2650]–[4.6.2850], [4.8.1900], [4.10.1600], [6.2650], [6.2700].

____________________

[PPSA.341A] Control of an ADI account 341A (1) For the purposes of subsection 340(2), a secured party has control of an ADI account if: (a) one or more of the following applies: (i) the secured party is the ADI; (ii) the secured party is able to direct disposition of the funds from the account without further consent by the grantor; (iii) the secured party becomes the ADI’s customer with respect to the account; and (b) if the secured party is not the ADI — depositing an amount in the ADI account does not result in any person coming under a present liability to pay: (i) the debtor; or (ii) if the debtor is a body corporate — a related body corporate (within the meaning of the Corporations Act 2001). Note: However, a security interest in an ADI account is only perfected by control if the secured party is the ADI (see sections 21 and 25).

(2) A secured party has control under subsection (1) even if the grantor retains the right to direct the disposition of funds from the account. [s 341A insrt Act 35 of 2011 s 3 and Sch 2 item 62, opn 26 May 2011]

[page 384]

PART 9.6 — REVIEW OF OPERATION OF ACT [ss 342, 343] [PPSA.342] Guide to this Part 342 This Part provides for the review of the operation of the Act within 3 years after it starts to apply. The Act starts to apply under Part 9.3 at the registration commencement time (26 months after the Act is

given the Royal Assent, or another time determined by the Minister). [s 342 am Act 138 of 2011 Sch 1 item 6, opn 29 Nov 2011]

[PPSA.343] Review of operation of Act 343 (1) The Minister must cause a review of the operation of this Act to be undertaken and completed within 3 years after the registration commencement time. Note: For registration commencement time, see section 306.

(2) The persons who undertake the review under subsection (1) must give the Minister a written report of the review. (3) The Minister must cause a copy of the report of the review under subsection (1) to be tabled in each House of the Parliament within 15 sitting days of the day on which the report is given to the Minister. ____________________ Commentary References For further discussion please refer to commentary at [6.2950].

____________________

[page 385]

Personal Property Securities Regulations 2010 TABLE OF PROVISIONS Regulation

Title

Paragraph

PART 1 — PRELIMINARY DIVISION 1 — PRELIMINARY 1.1 1.2

Name of Regulations …. Commencement ….

[PPSR1.1] [PPSR1.2]

DIVISION 2 — GENERAL APPLICATION OF THE ACT 1.3 1.4 1.5

Application of the Act to external Territories …. Interests to which the Act does not apply …. Interests to which the Act applies ….

[PPSR1.3] [PPSR1.4] [PPSR1.5]

DIVISION 3 — DEFINITIONS 1.6 1.7 1.8 1.9 1.10

Definitions …. Meaning of motor vehicle …. Meaning of security interest …. Meaning of PPS lease …. Meaning of investment instrument ….

[PPSR1.6] [PPSR1.7] [PPSR1.8] [PPSR1.9] [PPSR1.10]

PART 2 — GENERAL RULES FOR SECURITY INTERESTS 2.1

Taking motor vehicles free of security interests …. Taking motor vehicles from prescribed persons ….

2.2

[PPSR2.1] [PPSR2.2]

PART 3 — SPECIFIC RULES FOR CERTAIN SECURITY INTERESTS PART 4 — ENFORCEMENT OF SECURITY INTERESTS 4.1

Relationship with consumer credit legislation ….

[PPSR4.1]

PART 5 — PERSONAL PROPERTY SECURITIES REGISTER 5.1 5.2 5.3 5.4 5.5

Access to register …. Notification of suspension of access to register …. What the register contains …. Prohibited registration …. Financing statements ….

[PPSR5.1] [PPSR5.2] [PPSR5.3] [PPSR5.4] [PPSR5.5] [page 386]

Regulation

5.6 5.7 5.8 5.8A 5.9 5.10

Title

Verification statements — publication as alternative …. Access to the register prohibited …. Search — criteria …. Access to third party data — third party …. Administrative process — statements in relation to amendment demand …. Removal of data …. PART 6 — JUDICIAL PROCEEDINGS

Paragraph

[PPSR5.6] [PPSR5.7] [PPSR5.8] [PPSR5.8A] [PPSR5.9] [PPSR5.10]

PART 7 — OPERATION OF LAWS 7.1

Concurrent operation of provisions of Corporations Act 2001 — resolution of inconsistency ….

[PPSR7.1]

PART 8 — MISCELLANEOUS PART 9 — TRANSITIONAL PROVISIONS 9.1 9.2 9.3



Transitional meaning of watercraft …. Temporary perfection rule — exception …. Sunset of Part 9 …. SCHEDULE 1 — FINANCING STATEMENT MATTERS FOR ITEMS OF TABLE IN SUBSECTION 153(1) OF ACT SCHEDULE 2 — FINANCING STATEMENT MATTERS FOR TABLE IN SECTION 154 OF ACT

[PPSR9.1] [PPSR9.2] [PPSR9.3]

[page 387]

Personal Property Securities Regulations 2010 TABLE OF AMENDMENTS The Personal Property Securities Regulations 2010 SLI 291 of 2010 were registered on 26 November 2010 (F2010L03071) and commenced on 27 November 2010. The Regulations have since been amended by: Amending Legislation

Date of Date of Commencement Registration 5 October 2011 6 October 2011 (F2011L02030)

Personal Property Securities Amendment Regulations 2011 (No 1) SLI 176 of 2011 Personal Property Securities 9 December 2011 10 December 2011 Amendment Regulations (F2011L02612) 2011 (No 2) SLI 235 of 2011 Personal Property Securities 28 June 2012 1 July 2012 Amendment Regulation (F2012L01404) 2012 (No 1) SLI 121 of 2012 Personal Property Securities 1 April 2014 1 July 2014 Amendment (Motor (F2014L00375) Vehicles) Regulation 2014 SLI 37 of 2014

[page 389]

Personal Property Securities Regulations 2010 PART 1 — PRELIMINARY DIVISION 1 — PRELIMINARY

[PPSR1.1] Name of Regulations 1.1 These Regulations are the Personal Property Securities Regulations 2010.

[PPSR1.2] Commencement 1.2 These Regulations commence on the day after they are registered.

DIVISION 2 — GENERAL APPLICATION OF THE ACT

[PPSR1.3] Application of the Act to external Territories 1.3 For subsection 7(3) of the Act, the following are external Territories: (a) the Territory of Christmas Island; (b) the Territory of Cocos (Keeling) Islands.

[PPSR1.4] Interests to which the Act does not apply 1.4 (1) For paragraph 8(1)(l) of the Act, the Act does not apply to a right or interest in personal property mentioned in section 260-5 of Schedule 1 to the Taxation Administration Act 1953. (2) For paragraph 8(1)(l) of the Act, the Act 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. [subreg (1A) insrt SLI 176 of 2011 reg 3 and Sch 1[1], opn 6 Oct 2011; renum as subreg (2) SLI 121 of 2012 reg 3 and Sch 1[1], opn 1 July 2012]

(3) However, subregulation (1A) does not apply to an interest to which paragraph 8(1)(k) of the Act applies. [subreg (1B) insrt SLI 176 of 2011 reg 3 and Sch 1[1], opn 6 Oct 2011; renum as subreg (3) SLI 121 of 2012 reg 3 and Sch 1[2], opn 1 July 2012]

(4) For paragraph 8(1)(l) of the Act, the Act does not apply to an interest if the grantor of the interest is a company that is: (a) incorporated under the Companies Act 1985 of the Territory of Norfolk Island; and (b) not registered under Part 5B.2 of the Corporations Act 2001. Note For the definition of grantor, see section 10 of the Act. [subreg (1C) insrt SLI 235 of 2011 reg 3 and Sch 1[1], opn 10 Dec 2011; am and renum as subreg (4) SLI 121 of 2012 reg 3 and Sch 1[3]–[5], opn 1 July 2012]

(5) For item 6 of the table in subsection 8(2) of the Act, section 74 of the Act applies to an interest in personal property mentioned in the following provisions of the Act: [page 390] (a) (b) (c) (d)

paragraph 8(1)(b) ; paragraph 8(1)(c) ; subparagraph 8(1)(f)(ii) ; subparagraph 8(1)(f)(iv) .

[subreg (2) renum as subreg (5) SLI 121 of 2012 reg 3 and Sch 1[6], opn 1 July 2012]

[PPSR1.5] Interests to which the Act applies 1.5 (1) For subsection 8(3) of the Act, the Act applies to: (a) a mortgage-backed security; and (b) if transferred to a person in connection with the issue by the person of a mortgage-backed security — a real property mortgage loan. (2) In this regulation: mortgage-backed security has the meaning given by section 286 of the Duties Act 2001 (Qld).

DIVISION 3 — DEFINITIONS

[PPSR1.6] Definitions 1.6 In these Regulations: ACN (short for “Australian Company Number”) is the number given by ASIC to a company on registration under the Corporations Act 2001. Act means the Personal Property Securities Act 2009. agriculture means personal property that is crops or livestock. aircraft means: (a) a machine or craft that: (i) can derive support in the atmosphere from the reactions of the air, other than the reactions of the air against the earth’s surface; and (ii) has nationality and registration marks assigned to it under the Chicago Convention; or (b) an aircraft engine; or (c) an airframe; or (d) a helicopter. aircraft engine has the meaning given by the definition of “aircraft engines” in the Aircraft Protocol. Note The Aircraft Protocol contains the following definition of “aircraft engines”: “aircraft engines” means aircraft engines (other than those used in military, customs or police services) powered by jet propulsion or turbine or piston technology and: (i) in the case of jet propulsion aircraft engines, have at least 1750 lb of thrust or its equivalent; and (ii) in the case of turbine-powered or piston-powered 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 data, manuals and records relating thereto.

Aircraft Protocol means the Protocol on Matters Specific to Aircraft Equipment, done at Cape Town on 16 November 2001. Note The Aircraft Protocol is a Protocol to the Convention on International Interests in Mobile Equipment, done at Cape Town on 16 November 2001.

[page 391]

airframe has the meaning given by the definition of “airframes” in the Aircraft Protocol. Note The Aircraft Protocol contains the following definition of “airframes”: “airframes” means airframes (other than those used in military, customs or police services) that, when appropriate aircraft engines are installed thereon, are type certified by the competent aviation authority to transport: (i) at least eight (8) persons including crew; or (ii) goods in excess of 2750 kilograms, together with all installed, incorporated or attached accessories, parts and equipment (other than aircraft engines), and all data, manuals and records relating thereto.

all present and after-acquired property means: (a) personal property over which the grantor has an interest at the registration time for the financing statement for a security interest or prescribed property; and (b) personal property acquired after the registration time for the financing statement for the security interest or prescribed property. all present and after-acquired property, except means all present and afteracquired property, except for an item or class of personal property stated in the financing statement for the interest. AML-CTF Act means the Anti-Money Laundering and Counter-Terrorist Financing Act 2006. ARBN (short for “Australian Registered Body Number”) is the number given by ASIC to a registrable body on registration under Part 5B.2 of the Corporations Act 2001. ARSN (short for “Australian Registered Scheme Number”) is the number given by ASIC to a registered scheme on registration under section 601EB of the Corporations Act 2001. [def am SLI 176 of 2011 reg 3 and Sch 1[2], opn 6 Oct 2011]

ASIC means the Australian Securities and Investments Commission. Australian Business Register means the register established under section 24 of the A New Tax System (Australian Business Number) Act 1999. Note The Australian Business Register can be viewed at http://www.abr.business.gov.au.

chassis number, for a motor vehicle, means the numbers or letters, or both, that: (a) are attached to or stamped on the vehicle’s chassis by the vehicle’s manufacturer; and (b) appears to uniquely identify the vehicle. Chicago Convention means the Convention on International Civil Aviation

done at Chicago on 7 December 1944, as amended by the Protocols mentioned in subsection 3A(2) of the Air Navigation Act 1920. helicopter has the meaning given by the definition of “helicopters” in the Aircraft Protocol. Note The Aircraft Protocol contains the following definition of “helicopters”: “helicopters” means heavier-than-air machines (other than those used in military, customs or police services) supported in flight chiefly by the reactions of the air on one or more power-driven rotors on substantially vertical axes and which are type certified by the competent aviation authority to transport:

[page 392] (i) at least five (5) persons including crew; or (ii) goods in excess of 450 kilograms, together with all installed, incorporated or attached accessories, parts and equipment (including rotors), and all data, manuals and records relating thereto.

hull identification number, for a watercraft, means a number that: (a) is in a form and of a size, specified in one of the following Standards, published by the International Organization for Standardization: (i) International Standard No ISO 10087:1995 (E), titled ‘Small craft — Hull identification — Coding system’; (ii) International Standard No ISO 10087:2006, titled ‘Small craft — Craft identification — Coding system’; and (b) is permanently attached to, and located in the positions on, the hull of a vessel specified by a Standard mentioned in paragraph (a); and (c) is allocated to the watercraft by: (i) a registration authority of a State or Territory; or (ii) a person authorised by a registration authority of a State or Territory; or (iii) the watercraft’s manufacturer; and (d) appears to uniquely identify the watercraft. manufacturer’s number, for an aircraft or motor vehicle, or an outboard motor to which regulation 9.1 applies, means the numbers or letters, or both, that: (a) are permanently attached to or stamped on a permanent part of the aircraft, motor vehicle or outboard motor by its manufacturer; and

appears to uniquely identify the aircraft, motor vehicle or outboard (b) motor. migrated security interest has the meaning given by section 332 of the Act. National Names Index means the index of that title created by ASIC. original registration time, for migrated data registered under section 333 of the Act, means the time at which the security interest or prescribed property was first registered on the transitional register. outboard motor means an internal combustion engine that: (a) has a propeller and a manufacturer’s number; and (b) is designed to be attached to a boat or vessel; and (c) is intended for use to propel a boat or vessel. prescribed property means personal property mentioned in subregulation 5.3(1) . registered scheme has the meaning given by section 9 of the Corporations Act 2001. registration time has the meaning given by subsection 160(1) of the Act. responsible entity has the meaning given by section 9 of the Corporations Act 2001. small aircraft means an aircraft other than an airframe, aircraft engine or helicopter. vehicle identification number, for a motor vehicle, means a number allocated to the vehicle in accordance with national standards, as in force from time to time, made under the Motor Vehicle Standards Act 1989. [page 393] watercraft means a boat or vessel, other than a seaplane, that: (a) is used, or intended to be used, in navigation by water or for any other purpose on water; and (b) that has: (i) a hull identification number; or (ii) an official number, within the meaning of the Shipping Registration Regulations 1981, issued by the Registrar of Ships (within the meaning of the Shipping Registration Act 1981).

Note 1

For the meaning of watercraft, see also regulation 9.1 .

Note 2 Several other words and expressions used in these Regulations have the meaning given by the Act, for example:

ABN account after-acquired property chattel paper crops financial property goods intangible property intermediated security investment instrument livestock National Credit Code negotiable instrument transitional register.

[PPSR1.7] Meaning of motor vehicle 1.7 (1) For the definition of motor vehicle in section 10 of the Act, personal property described in subregulation (2) or (3) is a motor vehicle. (2) The personal property: (a) is built to be propelled, wholly on land, by a motor that forms part of the property; and (b) is capable of a speed of at least 10 km/h; and (ba) has one or more motors that have a total power greater than 200 W; and (c) has any of the following: (i) a vehicle identification number; (ii) a chassis number; (iii) the manufacturer’s number; and (d) does not run on rails, tram lines or other fixed path. [s 1.7 am SLI 37 of 2014 s 4 and Sch 1 item 1, opn 1 July 2014]

(3) The personal property: (a) is capable, when being towed by, or attached to, a motor vehicle, of

travelling at a speed greater than 10 km/h; and (b) is a piece of machinery or equipment that is equipped with wheels and designed to be attached to, or towed by, a motor vehicle; and (c) has any of the following: (i) a vehicle identification number; [page 394] (ii) a chassis number; (iii) the manufacturer’s number. [subreg (3) am SLI 176 of 2011 reg 3 and Sch 1[3], opn 6 Oct 2011]

[PPSR1.8] Meaning of security interest 1.8 For paragraph 12(5)(b) of the Act, the extinguishment of a beneficial interest in an account or chattel paper is not a security interest.

[PPSR1.9] Meaning of PPS lease 1.9 (1) For paragraph 13(2)(d) of the Act, a lease or bailment is not a PPS lease if it is part of a pooling arrangement. (2) In subregulation (1) : pooling arrangement means an arrangement that includes one or more hire, lease or bailment arrangements, under which: (a) goods are pooled for the collective use, from time to time, of the parties to one or more hire, lease or bailment arrangements; and (b) none of the hire, lease or bailment arrangements, in substance, secures payment or performance of an obligation; and (c) possession of the goods can be passed between multiple users, without the prior approval of the owner, whether or not the goods are passed subject to conditions; and (d) like goods that are, by nature or usage of trade, the equivalent of the goods hired, leased or bailed under one of the hire, lease or bailment arrangements can be returned, in place of the goods originally hired, leased or bailed. [reg 1.9 insrt SLI 176 of 2011 reg 3 and Sch 1[4], opn 6 Oct 2011]

[PPSR1.10] Meaning of investment instrument 1.10 For paragraph (i) of the definition of investment instrument in section 10 of the Act, the following financial products are prescribed: (a) an Australian carbon credit unit, within the meaning of section 5 of the Carbon Credits (Carbon Farming Initiative) Act 2011; (b) a carbon unit, within the meaning of section 5 of the Clean Energy Act 2011; (c) each eligible international emissions unit mentioned in paragraphs (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. [reg 1.10 insrt SLI 121 of 2012 reg 3 and Sch 1[7], opn 1 July 2012]

[page 395]

PART 2 — GENERAL RULES FOR SECURITY INTERESTS [PPSR2.1] Taking motor vehicles free of security interests 2.1 (1) Incorrect or missing serial number For subsection 45(1) of the Act, a motor vehicle described in regulation 1.7 is prescribed. (2) However, in the period that ends at the end of the month that is 24 months after the registration commencement time, a motor vehicle described in regulation 1.7 is taken not to be prescribed for subsection 45(1) of the Act if: (a) it is subject to a transitional security interest; and (b) before the registration commencement time, it was not possible to register the transitional security interest by serial number on a transitional register of a State or Territory that registered security interests in motor vehicles. (3) Taking from prescribed persons For subsection 45(3) of the Act, a motor vehicle described in regulation 1.7 is prescribed. [reg 2.1 subst SLI 176 of 2011 reg 3 and Sch 1[5], opn 6 Oct 2011]

[PPSR2.2] Taking motor vehicles from prescribed persons 2.2 For paragraph 45(3)(b) of the Act, the seller or lessor of a motor vehicle is in a prescribed class if the seller or lessor: (a) holds a licence (however described) to deal or trade in that kind of motor vehicle; and (b) the licence is issued by a licensing authority in the State or Territory where the sale or lease of the motor vehicle happens.

[page 396]

PART 3 — SPECIFIC RULES FOR CERTAIN SECURITY INTERESTS Note This Part heading is reserved for future use.

[page 397]

PART 4 — ENFORCEMENT OF SECURITY INTERESTS [PPSR4.1] Relationship with consumer credit legislation 4.1 For subsection 119(2) of the Act, a provision in Chapter 4 of the Act mentioned in an item of the table is taken to have been complied with, in the circumstances for the Act mentioned in the item if a provision of the National Credit Code (the NCC) mentioned in the item has been complied with, in the circumstances for the NCC mentioned in the item. Item

Provision of Act Section 130

Circumstances for Act

2

Sections 128 and 131

After seizing collateral, a secured party disposes of the collateral by sale, lease or licence, having first obtained the market value or, if the collateral does not have a market value, the best price reasonably available

Section 104

3

Section 132

Subsection 104(3)









After the sale of mortgaged goods, a secured party, on request by the grantor, higher secured parties and the debtor, gives a notice that contains the following information: (a) the total amount received from the sale; (b) the enforcement expenses,

1

At least 10 business days before collateral is to be disposed of, the secured party gives notice to the grantor and to any secured party with a higher priority

Provision of NCC Section 102

Circumstances for NCC Within 14 days after taking possession of collateral under a mortgage, the secured party provides a notice to the debtor, and does not sell the goods within 21 days after providing the notice An outstanding obligation has not been paid within 21 days after receiving a notice under section 102 of the National Credit Code and the secured party sells the goods, in accordance with section 103, for at least the estimated value, to a nominated person or to another person for the best price reasonably available After the sale of mortgaged goods, a secured party gives the mortgagor a notice that contains the following information:



(a) the gross amount realised;



(b) the net proceeds of the





amounts paid to other secured parties; (c) amounts paid to other secured parties;

sale;

(c) the amount required to pay out the credit contract;

[page 398] Item

Circumstances for Act



Provision of Act







4

Section 140









A secured party distributes Section 105 funds received in the following order: (a) interests with a higher priority; (b) enforcement costs;





(c) higher ranking security interests;







(d) the secured interests of the enforcing party;













(e) lower priority security interests; (f) the grantor

(d) any further recovery action that the secured party intends to take against the grantor; (e) any other information prescribed by these Regulations A secured party deducts the following amounts from any money received from a sale: (a) the secured amount that is outstanding; (b) the amount payable to discharge any prior mortgage; (c) the amounts payable to discharge any subsequent mortgages of which the secured party has notice; (d) the secured party’s reasonable enforcement expenses





(d) the balance owing to the grantor or by the debtor to the secured party

Provision of NCC



Circumstances for NCC

[page 399]

PART 5 — PERSONAL PROPERTY SECURITIES REGISTER [PPSR5.1] Access to register 5.1 For paragraph 147(4)(b) of the Act, the Registrar may suspend the operation of the register for up to 4 hours, after giving notice of the suspension in accordance with subsection 147(6) of the Act at least 7 days before the suspension.

[PPSR5.2] Notification of suspension of access to register 5.2 For paragraph 147(6)(a) of the Act, the Registrar must publish the notice on a website maintained by the Registrar on the Internet.

[PPSR5.3] What the register contains 5.3 (1) For paragraph 148(c) of the Act, the following types of personal property are prescribed: (a) a motor vehicle that has been impounded, immobilised or forfeited, or is subject to an impoundment, immobilisation or forfeiture application, under a law that provides for impoundment, immobilisation or forfeiture of a motor vehicle because it is being used, or has been used, in the commission of certain offences; (b) personal property that is subject to a notice or an order, or is confiscated or forfeited, under a provision of a proceeds of crime law; (c) personal property that is subject to an order of a court or tribunal (however described) that: (i) prevents or restricts a person dealing with the property; or (ii) enforces another court order (however described); or (iii) orders the sale or other disposal of all or part of the property; (d) personal property that:

(i) is not mentioned in paragraph (a), (b) or (c) ; and (ii) immediately before the registration commencement time, could have been registered on a transitional register maintained under a law of the Commonwealth, a State or a Territory. Note For subparagraph (d)(ii), transitional register has the meaning given by section 330 of the Act.

(2) In this regulation: court order does not include an order made under a proceeds of crime law. proceeds of crime law means: (a) the Mutual Assistance in Criminal Matters Act 1987; or (b) the Proceeds of Crime Act 1987; or (c) the Proceeds of Crime Act 2002; or (d) a law of a State or Territory that is a corresponding law within the meaning given by section 338 of the Proceeds of Crime Act 2002.

[PPSR5.4] Prohibited registration 5.4 (1) For paragraph 150(3)(d) of the Act, the following registrations are prohibited: [page 400] (a) a registration of a financing statement or a financing change statement for a motor vehicle mentioned in paragraph 5.3(1)(a), if the application for registration is made by a person other than: (i) a police commissioner; or (ii) a person authorised to register personal property on a transitional register; or (iii) a person authorised by a relevant agency to register data in relation to prescribed property; (b) a registration of a financing statement or a financing change statement for personal property mentioned in paragraph 5.3(1)(b), if the application for registration is made by a person other than: (i) a proceeds of crime authorised person; or (ii) a person authorised to register personal property on a transitional register; or

(iii) a person authorised by a relevant agency to register data in relation to prescribed property; (c) a registration of a financing statement or a financing change statement for personal property that is subject to an order of a court or tribunal (however described) mentioned in paragraph 5.3(1)(c), if the application for registration is made by a person other than: (i) the person who applied for the order; or (ii) if the order was made on the court’s own initiative — the person in whose favour the order is made; (d) a registration of a financing statement or a financing change statement for personal property that is mentioned in paragraph 5.3(1)(d), if the application for registration is made by a person other than: (i) a person authorised to register personal property on a transitional register; or (ii) a person authorised by a relevant agency to register data in relation to prescribed property; (e) a registration of a financing statement or a financing change statement for property prescribed under paragraph 148(c) of the Act, if the registration is in relation to a security interest in the property. (2) In this regulation: court order does not include an order made under a proceeds of crime law. police commissioner means: (a) the Commissioner of the Australian Federal Police; or (b) the head (however described) of the police force or service of a State or Territory. proceeds of crime authorised person means: (a) an appropriate officer under the Proceeds of Crime Act 1987; or (b) an authorised officer under the Proceeds of Crime Act 2002; or (c) an authorised person (however described) under a law of a State or Territory that is a corresponding law within the meaning of the Proceeds of Crime Act 2002, whose duties correspond to the duties of an authorised officer under that Act. [page 401]

proceeds of crime law means: (a) the Mutual Assistance in Criminal Matters Act 1987; or (b) the Proceeds of Crime Act 1987; or (c) the Proceeds of Crime Act 2002; or (d) a law of a State or Territory that is a corresponding law within the meaning of the Proceeds of Crime Act 2002. relevant agency means an agency that administers: (a) a law of the Commonwealth, a State or a Territory that establishes a transitional register; or (b) any other law of the Commonwealth, a State or a Territory that provides for registration of personal property on a transitional register.

[PPSR5.5] Financing statements 5.5 (1) Schedule 1 sets out matters prescribed for items of the table in subsection 153(1) of the Act. (2) Schedule 2 sets out matters prescribed for items of the table in section 154 of the Act.

[PPSR5.6] Verification statements — publication as alternative 5.6 (1) For subsection 158(1) of the Act, the Registrar may publish a verification statement by publishing the statement on a website maintained by the Registrar on the Internet. (2) A statement published under subregulation (1) must not include the date of birth of a grantor.

[PPSR5.7] Access to the register prohibited 5.7 (1) For paragraph 170(3)(d) of the Act, access to data on the register is prohibited if: (a) a court has ordered that access to the data is not permitted; or (b) the Registrar considers that it is in the public interest that access to the data should not be permitted. (2) For paragraph (1)(b), the Registrar must take into account the following

matters: (a) whether it is necessary to prevent or lessen a serious and imminent threat to the life or health of the individual whose personal details are recorded in the financing statement or of another person; (b) the interests of a person undertaking a search authorised by section 171 or 172 of the Act; (c) the interests of the secured party in ensuring that notice of the security interest is accessible by authorised searchers; (d) whether, in all the circumstances, the public interest in protecting the privacy of the individual grantor’s information outweighs the public interest in providing access to data.

[PPSR5.8] Search — criteria 5.8 For subsection 171(2) of the Act, the method by which the results of a search are to be worked out must allow for case-insensitive searching. [page 402]

[PPSR5.8A] Access to third party data — third party 5.8A For subsection 176C(1) of the Act, Austroads Ltd (ABN 16 245 787 323) is a prescribed person. Note Under subsection 176C(1) of the Act, a prescribed person becomes a ‘third party’. The Registrar may make an arrangement with a third party so that actions mentioned in the subsection, relating to data held by the third party, may be taken. [reg 5.8A insrt SLI 176 of 2011 reg 3 and Sch 1[6], opn 6 Oct 2011]

[PPSR5.9] Administrative process — statements in relation to amendment demand 5.9 For paragraph 180(3)(b) of the Act, the following statements must be made on the form: (a) that the person has given an amendment demand to the secured party, as required by section 178 of the Act; (b) that the amendment demand was given at least 5 business days before the day that the statement was given to the Registrar;

(c) that: (i) no collateral described in the registration secures any obligation (including a payment) owed by a debtor to the secured party; or (ii) the collateral in which the person has an interest does not secure any obligation (including a payment) owed by a debtor to the secured party; (d) that: (i) the approved form is accompanied by any written response to the amendment demand received from the secured party; or (ii) no written response was received from the secured party; (e) that there are no proceedings currently before a court (including a court of appeal) that relate to the amendment demanded; (f) that the person will notify the Registrar if proceedings that relate to the amendment demanded come before a court (including a court of appeal); (g) that the security agreement providing for the security interest is not an instrument or other document: (i) by which a person issues or guarantees, or provides for the issue or guarantee of, an obligation secured by a security interest; or (ii) in which another person is appointed as trustee for the person to whom the obligation secured by the security interest is owed; (h) that the information contained in the form is correct. [reg 5.9 am SLI 176 of 2011 reg 3 and Sch 1[7], opn 6 Oct 2011]

[PPSR5.10] Removal of data 5.10 (1) For paragraph 184(1)(c) of the Act, the Registrar may remove data from the register if the removal of the data is required by a court order. (2) For subparagraph 184(1)(e)(ii) of the Act, removal of data is required urgently if a court order requires the data to be removed urgently.

[page 403]

PART 6 — JUDICIAL PROCEEDINGS Note This Part heading is reserved for future use.

[page 404]

PART 7 — OPERATION OF LAWS [PPSR7.1] Concurrent operation of provisions of Corporations Act 2001 — resolution of inconsistency 7.1 For subsection 255(1) of the Act, paragraph 32(1)(a) of the Act does not apply to a matter set out in the table. Item 1 2

3

Matter A compromise or arrangement, under Part 5.1 of the Corporations Act 2001, that provides for the transfer or cancellation of securities A resolution, under section 601GC of the Corporations Act 2001, that provides for transfer or cancellation of interests in a registered managed investment scheme A compulsory acquisition of securities under Part 6A.1 or 6A.2 of the Corporations Act 2001

[reg 7.1 subst SLI 176 of 2011 reg 3 and Sch 1[8], opn 6 Oct 2011]

[page 405]

PART 8 — MISCELLANEOUS Note This Part heading is reserved for future use.

[page 406]

PART 9 — TRANSITIONAL PROVISIONS [PPSR9.1] Transitional meaning of watercraft 9.1 The definition of watercraft in regulation 1.6 includes an outboard motor that has a manufacturer’s number if: (a) the outboard motor is subject to a transitional security interest; and (b) before the registration commencement time, the outboard motor was registered on a transitional register, under legislation that conferred priority on security interests that are registered.

[PPSR9.2] Temporary perfection rule — exception 9.2 (1) For subsection 322(3) of the Act, a transitional security interest is prescribed if, before the registration commencement time it was: (a) registrable on a transitional register, under legislation that conferred priority on security interests that are registered; and (b) not registered. (2) Subregulation (1) does not apply to a transitional security interest if: (a) it is a charge that, under section 262 of the Corporations Act 2001, is required to be registered; and (b) for subsection 265(9) of Corporations Act 2001, it is taken not to have been registered.

[PPSR9.3] Sunset of Part 9 9.3 This Part ceases to have effect after the end of the month that is 24 months after the registration commencement time.

[page 407]

SCHEDULE 1 — FINANCING STATEMENT MATTERS FOR ITEMS OF TABLE IN SUBSECTION 153(1) OF ACT (subregulation 5.5(1) )

PART 1 — MATTERS FOR ITEMS 1 AND 2

[PPSRSCH1.1.1] Definitions for Part 1 1.1 In this Part: 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.

[PPSRSCH1.1.2] Individual secured party or grantor 1.2 (1) For items 1 and 2 of the table in subsection 153(1) of the Act, this clause applies if the secured party or grantor is an individual. (2) The details mentioned in each item of the table, from the source mentioned for the item, are prescribed for the individual mentioned in the item. (3) For subclause (2), the prescribed details are the details mentioned in the item of the table that: (a) applies to the individual; and (b) has the lowest item number. (4) For a grantor, in addition to the details mentioned in each item of the table, the grantor’s date of birth is prescribed. (5) The source for a grantor’s date of birth is the source in an item of the table that: (a) includes details of dates of birth; and (b) applies to the grantor; and (c) has the lowest item number. (6) Item 1 of the table applies only to a registration by the Registrar under subsection 333(2) of the Act. [subcl (6) insrt SLI 176 of 2011 reg 3 Sch 1[9], opn 6 Oct 2011]

Item Individual 1 Individual whose details are recorded in a transitional register,

Details Individual’s surname and given names, as recorded on the

Source Transitional register

2

for a migrated security interest Individual grantor who is known to the secured party, because of the operation of the AMLCTF Act

transitional register Individual’s surname and given names, as known to the secured party, because of the operation of the AMLCTF Act

Current data known by the secured party, because of the operation of the AML-CTF Act

[page 408] Item Individual Details 3 Individual who holds a Individual’s surname current driver’s licence and given names, as recorded on the individual’s driver’s licence 4 Individual who holds a Individual’s surname current proof of and given names, as identity or current recorded on a proof of proof of age card identity or proof of age card issued by a State or Territory body 5 Individual who holds a Individual’s surname current Australian and given names, as passport recorded on the individual’s current Australian passport 6 Individual who holds a Individual’s surname current visa, issued by and given names, as the Australian recorded on the Government individual’s current Australian visa 7 Individual who holds a Individual’s surname current passport other and given names, as than an Australian recorded on the

Source Current driver’s licence issued by a State or Territory licensing authority to the individual Current proof of identity or current proof of age card issued by a State or Territory body to the individual Current Australian passport issued to the individual

Current Australian visa issued for the individual

Current passport issued by the jurisdiction in which the individual

passport

8

Any other individual

individual’s current ordinarily resides passport issued by the jurisdiction in which the individual ordinarily resides Individual’s surname Birth certificate issued and given names, as for the individual recorded on the individual’s birth certificate

[PPSRSCH1.1.3] Body corporate secured party or grantor 1.3 (1) For items 1 and 2 of the table in subsection 153(1) of the Act, this clause applies if the secured party or grantor is a body corporate that: (a) is a trustee and has an ARSN; or (b) is not a trustee of a trust that has an ABN. [subcl (1) am SLI 176 of 2011 reg 3 and Sch 1[10], opn 6 Oct 2011]

(2) The details mentioned in each item of the following table, from the source mentioned for the item, are prescribed for the body corporate mentioned in the item. (3) For subclause (2), the prescribed details are the details mentioned in the item of the table that: (a) applies to the body corporate; and (b) has the lowest item number. (4) Item 1 of the table applies only to a registration by the Registrar under subsection 333(2) of the Act. [subcl (4) insrt SLI 176 of 2011 reg 3 and Sch 1[11], opn 6 Oct 2011]

[page 409] Item Body corporate 1 Body corporate for which details have been included on the

Details Body corporate number or name of body corporate, as

Source Transitional register

2

3 4 5

transitional register, for a migrated security interest Body corporate that is the responsible entity of a registered scheme, if the scheme has an ARSN Body corporate that has an ACN Body corporate that has an ARBN Any other body corporate

recorded on the transitional register Registered scheme’s ARSN

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

[PPSRSCH1.1.4] Secured party or grantor is a partner 1.4 (1) For items 1 and 2 of the table in subsection 153(1) of the Act, this clause applies if the secured party or grantor is a partner in a partnership. (2) The details mentioned in each item of the table, from the source mentioned for the item, are prescribed for the partner mentioned in the item. (3) For subclause (2), the prescribed details are the details mentioned in the item of the table that: (a) applies to the partner; and (b) has the lowest item number. (4) Item 1 of the table applies only to a registration by the Registrar under subsection 333(2) of the Act. [subcl (4) insrt SLI 176 of 2011 reg 3 and Sch 1[12], opn 6 Oct 2011]

(5) Despite subclause (2), if an individual partner grants a security interest over the partner’s net interest in a partnership, the prescribed details are the details mentioned in the item of the table in clause 1.2 that: (a) applies to the partner; and (b) has the lowest item number.

[subcl (5) insrt SLI 176 of 2011 reg 3 and Sch 1[12], opn 6 Oct 2011]

(6) Despite item 3 of the table, if a body corporate is a partner in a partnership that does not have an ABN, the prescribed details are the details mentioned in the item of the table in clause 1.3 that: (a) applies to the body corporate; and (b) has the lowest item number. [subcl (6) insrt SLI 176 of 2011 reg 3 and Sch 1[12], opn 6 Oct 2011]

[page 410] Item Partner 1 Partner of a partnership for which details of the partnership have been included on the transitional register, for a migrated security interest 2 Partner of a partnership that holds or has an interest in collateral in the course of, or for, an enterprise that has been allocated an ABN 3 Partner in any other partnership

Details Source ABN, name of partner Transitional register or name that identifies partnership, as recorded on the transitional register

ABN

Australian Business Register

Details mentioned in the item in the table in clause 1.2 that applies to the partner

Source of the details mentioned in the item in the table in clause 1.2 that applies to the partner

[PPSRSCH1.1.5] Secured party or grantor is a trustee 1.5 (1) For items 1 and 2 of the table in subsection 153(1) of the Act, this clause applies if the secured party or grantor is: (a) a body corporate that is a trustee of a trust that:

(i) has an ABN; and (ii) does not have an ARSN; or (b) any other trustee of a trust. (2) The details mentioned in each item of the table, from the source mentioned for the item, are prescribed for the trustee mentioned in the item. (3) For subclause (2), the prescribed details are: (a) for a trustee that is an individual — the details mentioned in the item of the table in clause 1.2 that: (i) applies to the trustee; and (ii) has the lowest item number; and (b) in any other case — the details mentioned in the item of the table that: (i) applies to the trustee; and (ii) has the lowest item number. (4) In this clause: trustee details means: (a) the ABN allocated to the enterprise carried on by the trust; or (b) the ACN or ARBN allocated to the trustee; or (c) the name of the trust or trustee. (5) Item 1 of the table applies only to a registration by the Registrar under subsection 333(2) of the Act. [subcl (5) insrt SLI 176 of 2011 reg 3 and Sch 1[13], opn 6 Oct 2011]

Item Trustee 1 Trustee of a trust for which details have been included on the transitional register, for a migrated security interest

Details Trustee details, as recorded on the transitional register

Source Transitional register

[page 411] Item Trustee Details 2 Trustee of a trust that ABN holds or has an interest

Source Australian Business Register

3

in collateral in the course of, or for, an enterprise that has been allocated an ABN Trustee of any other Trustee details trust mentioned in paragraph (3)(a)

Source mentioned in paragraph (3)(a)

[cl 1.5 am SLI 176 of 2011 reg 3 and Sch 1[14], opn 6 Oct 2011]

[PPSRSCH1.1.6] Body politic secured party or grantor 1.6 (1) For items 1 and 2 of the table in subsection 153(1) of the Act, this clause applies if the secured party or grantor is a body politic. (2) The details mentioned in each item of the table, from the source mentioned for the item, are prescribed for the body politic mentioned in the item. (3) For subclause (2), the prescribed details are the details mentioned in the item of the table that: (a) applies to the body politic; and (b) has the lowest item number. (4) Item 1 of the table applies only to a registration by the Registrar under subsection 333(2) of the Act. [subcl (4) insrt SLI 176 of 2011 reg 3 and Sch 1[15], opn 6 Oct 2011]

Item Body politic 1 Body politic for which details have been included on the transitional register, for a migrated security interest 2 Body politic that holds or has an interest in collateral in course of, or for, an enterprise that has been allocated an ABN 3 Body politic or has an

Details Source Body politic details, as Transitional register recorded on the transitional register

ABN

Australian Business Register

Name of body politic,

Constitution of body

interest in collateral, in accordance with other than in the course constitution of body of, or for, an enterprise politic that has been allocated an ABN

politic

[page 412]

PART 2 — MATTERS FOR ITEM 4

[PPSRSCH1.2.1] Application of Part 2 — personal property that is intermediated security 2.1 For this Part, personal property that is intermediated security is to be treated as financial property.

[PPSRSCH1.2.2] Description by serial number 2.2 (1) For paragraph (b) of item 4 of the table in subsection 153(1) of the Act: (a) the following classes of collateral, when described as consumer property, must be described by serial number: (i) aircraft; (ii) intangible property that is: (A) a design; or (B) a patent; or (C) a plant breeder’s right; or (D) a trade mark; or (E) a licence over any intangible property mentioned in subsubparagraphs (A) to (D). (iii) motor vehicles; (iv) watercraft; and (b) aircraft that is an aircraft engine, airframe, helicopter or small aircraft, when described as commercial property, must be described by serial number; and (c) the following classes of collateral, when described as commercial property, may be described by serial number: (i) motor vehicles; (ii) watercraft; (iii) intangible property that is: (A) a design; or (B) a patent; or (C) a plant breeder’s right; or (D) a trade mark; or

a licence over any intangible property mentioned in sub(E) subparagraphs (A) to (D). (2) If sub-subparagraph (1)(a)(ii)(E) or (1)(c)(iii)(E) applies, the licence must be described by the serial number of the right for which the licence is given. [subcl (2) am SLI 121 of 2012 reg 3 and Sch 1[8], opn 1 July 2012]

(3) For paragraph (b) of item 4 of the table in subsection 153(1) of the Act, a description of collateral by serial number must include the following information: (a) for an aircraft that is an aircraft engine, airframe or helicopter: (i) the manufacturer’s number; 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: [page 413] (i) the vehicle identification number; or (ii) if it has no vehicle identification number but has a chassis number — the chassis number; or (iii) if it has no vehicle identification number or chassis number — the manufacturer’s number; (d) for watercraft: (i) the official number; or (ii) if it does not have an official number — the hull identification number; or (iii) if it is an outboard motor for regulation 1.6 — the manufacturer’s number; (e) 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; (f) 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; (iii) if it does not have a patent number or a patent application number — a PCT number; (g) 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; (h) 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. (4) In this clause: PCT number means: (a) an international application number, issued under paragraph 30(2) (b) of the Patent Cooperation Treaty done at Washington 19 June 1970, amended on 2 October 1979 and modified on 3 February 1984 and 3 October 2001; or (b) if there is no international application number — an international publication number issued by the World Intellectual Property Organization.

[PPSRSCH1.2.3] Classes of collateral 2.3 (1) For paragraph (c) of item 4 of the table in subsection 153(1) of the Act, the following classes of collateral are prescribed: (a) agriculture; (b) aircraft; (c) all present and after-acquired property; (d) all present and after-acquired property, except; (e) financial property; (f) intangible property; [page 414]

(g) motor vehicles; (h) other goods; (i) watercraft. (2) In paragraph (1)(h) : other goods means personal property that is goods, other than agriculture, aircraft, motor vehicles and watercraft.

[PPSRSCH1.2.4] Description of proceeds 2.4 For paragraph (d) of item 4 of the table in subsection 153(1) of the Act, a description of proceeds must describe proceeds: (a) as all present and after-acquired property; or (b) for a particular item of personal property — in a way that identifies the item, including identifying a class to which the item belongs; or (c) for a class of personal property — in a way that identifies the class, including identifying the class by identifying a larger class of personal property that wholly includes the class.

PART 3 — MATTERS FOR ITEM 7 [PPSRSCH1.3.1] Purchase money security interest 3.1 For item 7 of the table in subsection 153(1) of the Act, property is in a prescribed class of collateral if the collateral can be subject to a purchase money security interest under section 14 of the Act.

PART 4 — MATTERS FOR ITEM 8 [PPSRSCH1.4.1] Prescribed matters — financing statement 4.1 For item 8 of the table in subsection 153(1) of the Act, for collateral, the details mentioned in each item of the table, about the subject mentioned for the item, for the purpose mentioned in the item: Item 1

Subject Inventory

Purpose Details Determining whether collateral For collateral that is commercial may include inventory, for Part property — whether or not the

2

Control

3

Transitional security interest

9.5 of the Act Determining whether collateral may be subject to control, for Part 9.5 of the Act Indicating whether a security interest is a transitional security interest

collateral may include inventory For collateral that is commercial property — whether or not the collateral may be subject to control If a security interest is a transitional security interest for section 308 of the Act — a statement that the security interest is a transitional security interest

[page 415] Item 4

Subject Migrated security interest

Purpose Indicating whether a registration is a migrated registration

5

Data from Australian Business Recording details from Register or National Names Australian Business Register Index or National Names Index

Note For the application of item 4, section 333 of the Act.

Details If collateral is subject to a migrated security interest: (a) a statement that the security interest is a migrated security interest; and (b) the name of the transitional register in which the data about the transitional security interest was held; and (c) when the migrated data was registered in the transitional register If an ABN, ACN, ARSN or ARBN is entered in a financing statement and a verification of these numbers is undertaken with the Australian Business Register or the National Names Index — the entity name or other data attached to those identifier numbers obtained from the Australian Business Register or the National Names Index

[page 416]

SCHEDULE 2 — FINANCING STATEMENT MATTERS FOR TABLE IN SECTION 154 OF ACT (subregulation 5.5(2) )

PART 1 — PRELIMINARY [PPSRSCH2.1.1] Definitions for Schedule 2 1.1 In this Schedule: individual: (a) includes a sole trader who has an ABN for the enterprise that holds or has an interest in the prescribed property; 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 that holds or has an interest in the prescribed property.

PART 2 — MATTERS FOR ITEM 1 [PPSRSCH2.2.1] Individuals 2.1 (1) For item 1 of the table in section 154 of the Act, this clause applies if an individual holds or has an interest in prescribed property. (2) The details mentioned in each item of the table, from the source mentioned for the item, are prescribed for the individual mentioned in the item. (3) For subclause (2), the prescribed details are the details mentioned in the item of the table that: (a) applies to the individual; and (b) has the lowest item number. (4) For an individual who is the owner of prescribed property, in addition to the details mentioned in each item of the table, the individual’s date of birth is prescribed. (5) The source for the individual’s date of birth is the source in an item of the table that: (a) includes details of dates of birth; and

(b) applies to the individual; and (c) has the lowest item number. Item Individual 1 Individual whose details are recorded in a transitional register, for migrated data 2 Individual whose property is subject to a court order

Details Individual’s surname and given names, as recorded on the transitional register Individual’s surname and given names, as recorded on the court order Individual who holds a Individual’s surname current driver’s licence and given names, as recorded on the individual’s current driver’s licence

Source Transitional register

3

Current driver’s licence issued by a State or Territory licensing authority to the individual

Court order

[page 417] Item Individual 4 Individual who holds a current proof of identity or current proof of age card

Source Current proof of identity or current proof or age card issued by a State or Territory body to the individual

5

Current Australian passport issued to the individual

6

Details Individual’s surname and given names, as recorded on a proof of identity or proof or age card issued by a State or Territory body Individual who holds a Individual’s surname current Australian and given names, as passport recorded on the individual’s current Australian passport Individual who holds a Individual’s surname current visa issued by and given names, as the Australian recorded on the Government individual’s current Australian visa

Current Australian visa issued for the individual

7

Individual who holds a current passport other than an Australian passport

8

Any other individual

Individual’s surname and given names, as recorded on the individual’s current passport issued by the jurisdiction in which the individual ordinarily resides Individual’s surname and given names, as recorded on the individual’s birth certificate

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

Birth certificate issued for the individual

[PPSRSCH2.2.2] Bodies corporate 2.2 (1) For item 1 of the table in section 154 of the Act, this clause applies if the secured party or grantor is a body corporate that: (a) is a trustee and has an ARSN; or (b) is not a trustee. (2) The details mentioned in each item of the table, from the source mentioned for the item, are prescribed for the body corporate mentioned in the item. (3) For subclause (2), the prescribed details are the details mentioned in the item of the table that: (a) applies to the body corporate; and (b) has the lowest item number. Item Body corporate 1 Body corporate for which details have been included on the transitional register, for migrated data 2 Body corporate that is the responsible entity of a registered scheme, if the scheme has an ARSN

Details Body corporate number or name of body corporate, as recorded on the transitional register Registered scheme’s ARSN

Source Transitional register

National Names Index

3

Body corporate that has an ACN

ACN

National Names Index

[page 418] Item Body corporate 4 Body corporate that has an ARBN 5 Any other body corporate

Details ARBN

Source National Names Index

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

[PPSRSCH2.2.3] Partners 2.3 (1) For item 1 of the table in section 154 of the Act, this clause applies if a partner in a partnership holds or has an interest in prescribed property for the partnership. (2) The details mentioned in each item of the table, from the source mentioned for the item, are prescribed for the partner mentioned in the item. (3) For subclause (2), the prescribed details are the details mentioned in the item of the table that: (a) applies to the partner; and (b) has the lowest item number. Item Partner 1 Partner of a partnership for which details of the partnership have been included on the transitional register, for migrated data 2 Partner of a partnership that holds or has an interest in the prescribed property in the course of, or for, an

Details Source ABN, name of partner Transitional register or name that identifies partnership, as recorded on the transitional register ABN

Australian Business Register

3

enterprise that has been allocated an ABN Partner in any other Details mentioned in partnership the item in the table in clause 2.1 that applies to the partner

Source of the details mentioned in the item in the table in clause 2.1 that applies to the partner

[PPSRSCH2.2.4] Trustees 2.4 (1) For item 1 of the table in section 154 of the Act, this clause applies if the secured party or grantor is: (a) a body corporate that is a trustee of a trust that: (i) has an ABN; and (ii) does not have an ARSN; or (b) any other trustee of a trust. (2) The details mentioned in each item of the table, from the source mentioned for the item, are prescribed for the trustee mentioned in the item. [page 419] (3) For subclause (2), the prescribed details are: (a) for a trustee that is an individual — the details mentioned in the item of the table in clause 2.1 that: (i) applies to the trustee; and (ii) has the lowest item number; and (b) in any other case — the details mentioned in the item of the table that: (i) applies to the trustee; and (ii) has the lowest item number. [subcl (3) am SLI 176 of 2011 reg 3 and Sch 1[15], opn 6 Oct 2011]

(4) In this clause: trustee details means: (a) the ABN allocated to the enterprise carried on by the trust; or (b) the ACN or ARBN allocated to the trustee; or (c) the name of the trust or trustee.

Item Trustee 1 Trustee of a trust for which details of the trust have been included on the transitional register, for migrated data 2 Trustee of a trust that holds or has an interest in the prescribed property in the course of, or for, an enterprise that has been allocated an ABN Trustee of any other trust

Details Trustee details, as recorded on the transitional register

Source Transitional register

ABN

Australian Business Register

Trustee details mentioned in paragraph (3)(a)

Source mentioned in paragraph (3)(a)

[PPSRSCH2.2.5] Bodies politic 2.5 (1) For item 1 of the table in section 154 of the Act, this clause applies if a body politic holds or has an interest in prescribed property. (2) The details mentioned in each item of the table, from the source mentioned for the item, are prescribed for the body politic mentioned in the item. (3) For subclause (2), the prescribed details are the details mentioned in the item of the table that: (a) applies to the body politic; and (b) has the lowest item number. Item Body politic 1 Body politic for which details have been included on the transitional register, for migrated data

Details Source Body politic details, as Transitional register recorded on the transitional register

[page 420]

Item Body politic 2 Body politic that holds prescribed property in course of, or for, an enterprise for which an ABN has been given 3 Body politic that holds prescribed property other than in course of, or for, an enterprise for which an ABN has been given

Details ABN

Source Australian Business Register

Name of body politic, Constitution of body as provided for in politic constitution of body politic

[page 421]

Summary of PPSA consequential amendments state legislation [Current to October 2012]

Compiled by Craig Wappett CONTENTS Introduction …. Table summarising nature of amendments in state legislation ….

Paragraph [C.1] [C.2]

[C.1] Introduction The following table sets out the amending legislation and summarises the nature of the amendments made. The table will be updated on an ongoing basis as state and territory consequential amendment legislation is released. Although the information is included in this table, there is a discrete table in [4.11.750] identifying state and territory licences that are excluded from the application of the PPSA. Each of the states and territories have 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; (d) declare certain interests to be statutory interests to which s 73(2) of the PPSA applies; and

in some cases, to exclude certain property or interests from the (e) application of the PPSA.

[C.2] Table summarising nature of amendments in state legislation In this table the term “statutory licence” refers to the relevant statutory interest, right or authority specified in the applicable amending legislation (this may include a licence, permit, lease, authorisation, authority etc). Jurisdiction New South Wales

Amending legislation Personal Property Securities (Commonwealth Powers) Act 2009

Nature of amendments Provides for the implementation of PPSA reforms including transitional arrangements.

[page 422] Jurisdiction

Amending legislation









Nature of amendments Declares that from the registration commencement time the following legislation ceases to have effect in relation to certain property: Registration of Interests in Goods Act 1986, in relation to prescribed goods; and Security Interests in Goods Act 1986, in relation to goods. Declares that on and from the PPSA registration commencement time a reference under state law to a charge will be taken to be a reference to: with respect to a charge, a security interest that is attached to a circulating asset or personal property that is not a circulating asset; with respect to a fixed charge, a security interest that is attached to personal property that is not a circulating asset; and with respect to a floating charge, a security interest that is attached to a circulating asset. Declares from the registration commencement time certain restrictions will apply to the enforcement of security interests in personal property to which the following legislation applies, where the enforcement of the interest under the PPSA would be

[page 423] Jurisdiction

Amending legislation

Nature of amendments inconsistent with the provisions of the legislation or would prevent, impede or defeat the making of an application to a court or tribunal: Commercial Agents and Private Enquiry Agents



Act 2004 Confiscation of Proceeds of Crime Act 1989 Criminal Assets Recovery Act 1990 Holiday Parks (Long-term Casual Occupation) Act 2002 Impounding Act 1993 Law Enforcement (Powers and Responsibilities) Act 2002 Pawnbrokers and Second-hand Dealers Act 1996 Property (Relationships) Act 1984 Residential Parks Act 1998 Residential Tenancies Act 1987 Residential Tenancies Act 2010 Retirement Villages Act 1999 Terrorism (Police Powers) Act 2002 Uncollected Goods Act 1995 Victims Support and Rehabilitation Act 1996 Warehousemen’s Liens Act 1935



[page 424] Jurisdiction

Amending legislation Personal Property Securities Legislation Amendment Act 2010





Victoria

Personal Property Securities (Commonwealth Powers) Act 2009 Personal Property Securities (Statute Law Revision and Implementation) Act 2010



Nature of amendments Amends the following legislation to declare certain statutory licences granted under them not to be personal property for the purposes of the PPSA: Fisheries Management Act 1994 Local Government Act 1993 Mining Act 1992 Petroleum (Onshore) Act 1991 Workers Compensation Act 1987 Amends the following legislation to declare certain interests to be statutory interests of a kind to which s 73(2) of the PPS applies: Building and Construction Industry Security of Payment Act 1999 Confiscation of Proceeds of Crime Act 1989 Criminal Assets Recovery Act 1990 Warehousemen’s Liens Act 1935 Effects various other consequential amendments to a range of New South Wales legislation. Provides for the implementation of PPSA reforms. Provides that specified provisions in certain legislation will be amended prior to the PPSA

[page 425] Jurisdiction

Amending legislation

Nature of amendments registration time and that such legislation (or parts thereof) will be repealed from the date specified or to be set by proclamation. This legislation includes: Chattel Securities Act 1987 (Pts 1, 2, 3 and 4)



Co-operatives Act 1996 (Pt 10, Div 2 and Sch 3) Instruments Act 1958 (Pts VII and VIII and Schs 6, 7 and 8) Amends the following legislation to declare certain statutory licences granted under them not to be personal property for the purposes of the PPSA: Casino Control Act 1991 Electricity Industry Act 2000 Fisheries Act 1995 Gambling Regulation Act 2003 Gas Industry Act 2001 Geothermal Energy Resources Act 2005 Mineral Resources (Sustainable Development) Act 1990 National Electricity (Victoria) Act 2005 Petroleum Act 1998 Petroleum (Submerged Lands) Act 1982 Racing Act 1958 Amends the following legislation to declare certain interests to be statutory interests of a kind to which s 73(2) of the PPSA applies:



[page 426] Jurisdiction

Amending legislation

Nature of amendments Infringements Act 2006 Marine Act 1988 Port Services Act 1995 Road Safety Act 1986 Effects various other consequential amendments to a range of Victorian legislation. Provides for the implementation of PPSA reforms.





Queensland

Personal Property Securities (Commonwealth Powers) Act 2009 Personal Property Securities (Ancillary Provides that specified provisions in certain Provisions) Act 2010 legislation will be amended prior to the PPSA registration commencement time and that such legislation (or parts thereof) will be repealed from a date specified or to be set by proclamation. This legislation includes: Bills of Sale and Other Instruments Act 1955 Cooperatives Act 1997 (Sch 3) Liens on Crops of Sugar Cane Act 1931 Motor Vehicles and Boats Securities Act 1986. Amends the following legislation to declare that certain statutory licences granted under them not to be personal property for the purposes of the PPSA: Alcan Queensland Pty Limited Agreement Act 1965 Casino Control Act 1982 Central Queensland Coal Associates Agreement Act 1968



[page 427]

Jurisdiction

Amending legislation









Nature of amendments Commonwealth Aluminium Corporation Pty Limited Agreement Act 1957 Electricity Act 1994 Gaming Machine Act 1991 Gas Supply Act 2003 Geothermal Exploration Act 2004 Gladstone Power Station Agreement Act 1993 Greenhouse Gas Storage Act 2009 Liquor Act 1992 Mineral Resources Act 1989 Mount Isa Mines Limited Agreement Act 1985 Offshore Minerals Act 1998 Petroleum Act 1923 Petroleum and Gas (Production and Safety) Act 2004 Petroleum (Submerged Lands) Act 1982 Queensland Nickel Agreement Act 1970 Thiess Peabody Coal Pty Ltd Agreement Act 1962 Wine Industry Act 1994 Amends the following legislation to declare certain interests to be statutory interests of a kind to which s 73(2) of the PPSA applies: Disposal of Uncollected Goods Act 1967

[page 428] Jurisdiction

Amending legislation









Nature of amendments Second-hand Dealers and Pawnbrokers Act 2003 Storage Liens Act 1973 Forestry Act 1959 Burials Assistance Act 1965 Criminal Proceeds Confiscation Act 2002 Legal Aid Queensland Act 1997 Declares that on and from the PPSA registration commencement time a reference under state law to a charge will be taken to be a reference to: with respect to a charge, a security interest as attached to a circulating asset or personal property that is not a circulating asset; with respect to a fixed charge, a security interest that has attached to personal property that is not a circulating asset; and with respect to a floating charge, a security interest that has attached to a circulating asset. Amends certain legislation to: displace priority rules set out in the PPSA in favour of rules set out in the state law in relation to the determination of priorities between certain state statutory interests and security interests to which the PPSA applies;

[page 429]

Jurisdiction

Amending legislation











Natural Resources and Other Legislation Amendment Act 2010

South Australia

Personal Property Securities (Commonwealth Powers) Act 2009 Statutes Amendment (Personal Property Securities) Act 2010



Nature of amendments set out the priority regimes for the proceeds of sale or disposal of personal property in certain circumstances; set out a statutory priority regime in relation to the application of the proceeds of sale of abandoned personal property. Effects various other consequential amendments to a range of Queensland legislation. Amends the Forestry Act 1959 to declare licences and authorities granted under the Act not to be personal property for the purposes of the PPSA. Provides for the implementation of PPSA reforms. Provides that specified provisions in certain legislation will be amended and only apply to relevant security interests prior to the PPSA registration commencement time and that such legislation will be repealed from the date specified or to be set by proclamation. This legislation includes: Bills of Sale Act 1886 Co-operatives Act 1997 (Pt 10, Div 2 and Sch 3) Goods Securities Act 1986 Liens on Fruit Act 1923

[page 430] Jurisdiction

Amending legislation









Nature of amendments Stock Mortgages and Wool Liens Act 1924 Amends the following legislation to declare certain statutory licences granted under them not to be personal property for the purposes of the PPSA: Aquaculture Act 2001 Electricity Act 1996 Fisheries Management Act 2007 Gas Act 1997 Mining Act 1971 Offshore Minerals Act 2000 Petroleum and Geothermal Energy Act 2000 Petroleum (Submerged Lands) Act 1982 Roxby Downs (Indenture Ratification) Act 1982 Amends the following legislation to declare certain statutory licences granted under them to either not be transferable (and therefore not licences for the purposes of the PPSA) or to place restrictions on the transferability of such licences (which restrictions can operate concurrently with the PPSA): Coastal Protection Act 1972 Historic Shipwrecks Act 1981 Marine Parks Act 2007 National Parks and Wildlife Act 1972 Wilderness Protection Act 1992

[page 431]

Jurisdiction

Amending legislation





Western Australia

Personal Property Securities (Commonwealth Laws) Act 2011

Nature of amendments Amends the following legislation to declare certain interests to be statutory interests of a kind to which s 73(2) of the PPSA applies: Criminal Assets Confiscation Act 2005 Worker’s Liens Act 1893 Effects various other consequential amendments to a range of South Australian legislation. Provides for the implementation of PPSA reforms including transitional arrangements. Grants the state the power to declare any statutory right, entitlement or authority is not personal property to which the PPSA applies. Declares that on and from the PPSA registration commencement time a reference under state law to a charge will be taken to be a reference to: with respect to a charge, a security interest that has attached to a circulating asset or personal property that is not a circulating asset; with respect to a fixed charge, a security interest that has attached to personal property that is not a circulating asset; and

[page 432] Jurisdiction

Amending legislation









Nature of amendments with respect to a floating charge, a security interest that has attached to a circulating asset. Declares from the registration commencement time certain restrictions will apply to the enforcement of security interests in personal property to which the following legislation applies where the enforcement of the interest under the PPSA would be inconsistent with the provisions of the legislation or would prevent, impede or defeat the making of an application to a court or tribunal: Criminal Property Confiscation Act 2000 Land Administration Act 1997 Local Government Act 1995 Rail Safety Act 2010 Residential Parks (Long-stay Tenants) Act 2006 Residential Tenancies Act 1987 Shipping and Pilotage Act 1967 Warehousemen’s Liens Act 1952 Western Australian Marine Act 1982 Effects various other consequential amendments to a range of Western Australian legislation.

[page 433] Jurisdiction

Amending legislation Personal Property Securities (Consequential Repeals and

Nature of amendments Provides that specified provisions in certain legislation will be amended prior to the PPSA

Amendments) Act 2011





registration commencement time and that such legislation (or parts thereof) will be repealed from a date specified or to be set by proclamation. This legislation includes: Bills of Sale Act 1899 (including the Bills of Sale (Fees) Regulations 1983 and the Bills of Sale Regulations 2001) Chattel Securities Act 1987 (other than ss 3A, 22, 23, 24, 25, 26, 29, 30A, 30B, 30C, 30D and 31) Co-Operatives Act 2009 (Sch 3) Amends the following legislation to declare certain statutory licences granted under them not to be personal property for the purposes of the PPSA: Fish Resources Management Act 1994 Pearling Act 1990 Mining Act 1978 Offshore Minerals Act 2003 Petroleum and Geothermal Energy Resources Act 1967 Petroleum Pipelines Act 1969 Petroleum (Submerged Lands) Act 1982 Taxi Act 1994 Transport Coordination Act 1966

[page 434] Jurisdiction

Amending legislation









Nature of amendments Water Services Licensing Act 1995 Amends the following legislation to declare certain statutory licences granted under them not to be personal property for the purposes of the PPSA if they are transferable: Electricity Industry Act 2004 Energy Coordination Act 1994 Conservation and Land Management Act 1984 Land Administration Act 1997 Liquor Control Act 1988 Perth Parking Management Act 1999 Swan and Canning Rivers Management Act 2006 Transport Coordination Act 1966 Wildlife Conservation Act 1950. Amends the following legislation to declare certain interests to be statutory interests of a kind to which s 73(2) of the PPSA applies: Bulk Handling Act 1967 Criminal Property Confiscation Act 2000 Public Trustee Act 1941 Warehousemen’s Liens Act 1952 Growers Charge Act 1940 Jetties Act 1926

[page 435] Jurisdiction

Amending legislation

Nature of amendments





Tasmania

Personal Property Securities (Commonwealth Powers) Act 2010 Personal Property Securities (National Provides that specified pre-PPSA legislation will Uniform Legislation) Implementation only apply to relevant security interests prior to the Act 2010 PPSA registration commencement time and that such legislation (or parts thereof) will be repealed from a date specified or to be set by proclamation. This legislation includes: Bills of Sale Act 1900 Cooperatives Act 1990 (Sch 4) Motor Vehicle Securities Act 1984 Stock, Wool, and Crop Mortgages Act 1930 Amends the following legislation to declare certain statutory licences granted under them not to be personal property for the purposes of the PPSA: Mineral Resources Development Act 1995



Western Australian Marine Act 1982 Western Australian Marine (Sea Dumping) Act 1981 Country Areas Water Supply Act 1974 Country Towns Sewerage Act 1948 Metropolitan Water Supply, Sewerage, and Drainage Act 1909 Effects various other consequential amendments to a range of Western Australian legislation. Provides for the implementation of PPSA reforms.

[page 436] Jurisdiction

Australian Capital Territory



Amending legislation

Nature of amendments Petroleum (Submerged Lands) Act 1982 Effects various other consequential amendments to a range of Tasmanian legislation. Personal Property Securities Act 2010 Provides for the implementation of PPSA reforms including transitional arrangements. Provides that specified pre-PPSA legislation will only apply to relevant security interests prior to the PPSA registration commencement time and that such legislation (or parts thereof) will cease to have effect and/or be repealed from a date specified or to be set by proclamation. This legislation includes: Instruments Act 1933 (including all associated legislative instruments) Sale of Motor Vehicles Act 1997 (Pt 4A other than s 32F) Amends the following legislation to declare certain statutory licences granted under them not to be personal property for the purposes of the PPSA: Liquor Act 1975 Planning and Development Act 2007 Amends the following legislation to declare certain interests to be statutory interests of a kind to which s 73(2) of the PPSA applies: Confiscation of Criminal Assets Act 2003

[page 437]

Jurisdiction

Amending legislation

Nature of amendments Criminal Code 2002 Hemp Fibre Industry Facilitation Act 2004 Public Trustee Act 1985 Road Transport (Safety and Traffic Management) Regulation 2000 Effects various other consequential amendments to a range of Australian Capital Territory legislation. Personal Property Securities (National Provides for the implementation of PPSA reforms Uniform Legislation) Implementation including transitional arrangements. Act 2010 Provides that specified pre-PPSA legislation will only apply to relevant security interests prior to the PPSA registration commencement time and that such legislation (or parts thereof) will be repealed from a date specified or to be set by proclamation. This legislation includes: Co-operatives Act 1997 (Pt 10, Div 2 and Sch 3) Instruments Act 1935 Registration of Interests in Motor Vehicles and Other Goods Act 1989 Repeals the following legislation: Instruments Ordinance 1935 Instruments Ordinance 1965 Instruments Amendment Act 1983 Instruments Amendment Act 1989

Northern Territory

[page 438] Jurisdiction

Amending legislation









Nature of amendments Instruments Amendment Act 1998 Motor Vehicles (Hire Car) Loan Security Regulations 1988. Amends the following legislation to declare certain statutory licences granted under them not to be personal property for the purposes of the PPSA: Electricity Reform Act 2000 Energy Pipelines Act 1982 Fisheries Act 1988 Gaming Control Act 1993 Geothermal Energy Act 2009 Liquor Act 1979 Mining Act 1982 Petroleum Act 1984 Petroleum (Submerged Lands) Act 1982 Tobacco Control Act 2002 Totalisator Licensing and Regulation Act 2000 Water Supply and Sewerage Services Act 2000 Amends the following legislation to declare certain statutory licences granted under them not to be transferable: Agents Licensing Act 1979 Agricultural and Veterinary Chemical (Control of Use) Act 2004

[page 439]

Jurisdiction

Amending legislation









Nature of amendments Animal Welfare Act 1999 Auctioneers Act 1935 Biological Resources Act 2006 Commercial Passenger (Road) Transport Act 1991 Consumer Affairs and Fair Trading Act 1990 Electrical Workers and Contractors Act 1978 Marine Act 1981 Plumbers and Drainers Licensing Act 1983 Poisons and Dangerous Drugs Act 1983 Private Security Act 1995 Prostitution Regulation Act 1992 Racing and Betting Act 1983 Soccer Football Pools Act 1978 Therapeutic Goods and Cosmetics Act 1986 Effects various other consequential amendments to a range of Northern Territory legislation.

[page 441]

Part D Explanatory Memoranda

[page 443]

Personal Property Securities Bill 2009 Explanatory Memorandum 2008–2009 THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA SENATE PERSONAL PROPERTY SECURITIES BILL 2009 REPLACEMENT EXPLANATORY MEMORANDUM (Circulated by the authority of the Attorney-General, the Honourable Robert McClelland MP) THIS MEMORANDUM REPLACES THE EXPLANATORY MEMORANDUM PRESENTED TO THE HOUSE OF REPRESENTATIVES ON 24 JUNE 2009

[page 444]

TABLE OF CONTENTS TABLE OF CONTENTS GLOSSARY OUTLINE FINANCIAL IMPACT STATEMENT CHAPTER 1 — INTRODUCTION PRELIMINARY GENERAL APPLICATION OF THIS ACT CHAPTER 2 — GENERAL RULES RELATING TO SECURITY INTERESTS SECURITY AGREEMENTS Security interests Enforceability against debtors Enforceability against third parties Perfection POSSESSION AND CONTROL OF PERSONAL PROPERTY Possession Control ATTACHMENT AND PERFECTION: SPECIFIC RULES Proceeds and transfer Attachment of security interest to proceeds Perfection of security interest in proceeds Transfers of property COLLATERAL RETURNED TO GRANTOR OR DEBTOR Collateral returned from bailee Negotiable instruments and investment instruments Following sale or lease Accounts and chattel paper RELOCATION OF COLLATERAL OR GRANTOR TO AUSTRALIA ETC Main rule



Intangible and financial property TAKING PERSONAL PROPERTY FREE OF SECURITY INTERESTS Unperfected security interests Serially numbered personal property SPECIAL RULES RELATING TO MOTOR VEHICLE PURCHASES Incorrect or missing serial number Taking from prescribed persons Transactions in the ordinary course of business Low value consumer property Security interests in currency Security interests in investment instrument or entitlement in the ordinary course of trading Security interests in investment instruments Security interests in investment entitlements Temporarily perfected security interests [page 445]



Rights of secured party and transferee PRIORITY BETWEEN SECURITY INTERESTS Priority of security interests generally Default priority rules Priority of security interests perfected by control Advances PURCHASE MONEY SECURITY INTERESTS Non-purchase money security interests in accounts Priority of security interests in transferred collateral Priority of creditors and purchasers of negotiable instruments, chattel paper and negotiable documents of title PRIORITY OF OTHER INTERESTS Priority between security interests and declared statutory interests Priority of execution creditors Returned goods

Priority where no foreign register TRANSFER AND ASSIGNMENT OF INTERESTS IN COLLATERAL Transfer of collateral Rights on transfer of account or chattel paper Modification or substitution of contract Rights on transfer of account or chattel paper CHAPTER 3 — SPECIFIC RULES FOR CERTAIN SECURITY INTERESTS AGRICULTURAL INTERESTS Relationship between security interest in crops and interest in land ACCESSIONS Priority rules Enforcement of security interests in accessions PROCESSED OR COMMINGLED GOODS INTELLECTUAL PROPERTY Implied references to intellectual property Security interests in intellectual property licences CHAPTER 4 — ENFORCEMENT OF SECURITY INTERESTS GENERAL RULES Exclusions Exercise of rights Collateral used for consumer purposes Contracting out Relationship with other laws Consumer Credit Code Enforcement rights where there are multiple secured parties Notice Enforcement of liquid assets SEIZURE AND DISPOSAL OR RETENTION OF COLLATERAL Seizing collateral

[page 446]

Seizure by parties with a higher priority Disposing of collateral (including by purchasing collateral) Disposal by sale Disposal by lease Purchase of collateral by the secured party Duties owed by a secured party when disposing of collateral Statements of account Retaining collateral Objection to purchase or retention RULES APPLYING AFTER ENFORCEMENT Redemption Reinstatement of the security agreement CHAPTER 5 — PERSONAL PROPERTY SECURITIES REGISTER ESTABLISHMENT OF THE REGISTER Registration REGISTRATION WITH RESPECT TO SECURITY INTERESTS Grantors, secured parties and giving of notices Collateral descriptions Serial numbered goods — motor vehicles and other goods Allocation of a single class and other descriptors prescribed by regulation Proceeds End times, default end times and renewal of registrations Subordination, purchase money security interests and matters prescribed by the regulations Verification statements and registration events Effective registration Defects in registrations Registration continues despite certain defects Requirement to end the registration of certain property Failure to pay maintenance fee SEARCHING THE REGISTER Search criteria Authorised search purposes Interference with privacy Written search results and evidence



Copies of financing statements AMENDMENT DEMANDS Administrative process to demand amendment of a registration Judicial process to obtain amendment of a registration REMOVAL OF DATA AND CORRECTION OF REGISTRATION ERRORS FEES, ADMINISTRATIVE REVIEW AND ANNUAL REPORTS Registration and search fees Review of decisions [page 447]

REGISTRAR OF PERSONAL PROPERTY SECURITIES CHAPTER 6 — JUDICIAL PROCEEDINGS JUDICIAL PROCEEDINGS GENERALLY Conferral of jurisdiction Transfers between courts Registrar’s role in judicial proceedings CIVIL PENALTY PROCEEDINGS Application Obtaining an order for a civil penalty Civil penalty proceedings and criminal proceedings Enforceable undertakings relating to contraventions of civil penalty provisions CHAPTER 7 — OPERATION OF AUSTRALIAN AND OTHER LAWS AUSTRALIAN LAWS AND THOSE OF OTHER JURISDICTIONS Contractual obligations Location Agreement to apply Australian law Goods Goods that are moved between jurisdictions Goods that are normally moved between jurisdictions Intangible property Intellectual property

ADI accounts Financial property Non-negotiable documents of title Negotiable instruments Proceeds CONSTITUTIONAL OPERATION RELATIONSHIP BETWEEN AUSTRALIAN LAWS Concurrent Operation When other laws prevail When other laws do not prevail CHAPTER 8 — MISCELLANEOUS VESTING OF CERTAIN UNPERFECTED SECURITY INTERESTS EXERCISE AND DISCHARGE OF RIGHTS, DUTIES AND OBLIGATIONS Entitlement to damage for breach of duties or obligations PROVISION OF INFORMATION BY SECURED PARTIES NOTICES AND TIMING Timing requirements ONUS OF PROOF AND KNOWLEDGE Onus of Proof … Knowledge FORMS AND REGULATIONS [page 448] CHAPTER 9 — TRANSITIONAL PROVISIONS CONSTITUTIONAL FRAMEWORK KEY CONCEPTS INITIAL APPLICATION OF THIS ACT Exclusions from initial application TRANSITIONAL PROVISIONS Migrated security interests and deemed registration Non-migrated security interests and temporary perfection Priority protection for certain transitional security interests Interests prescribed in the regulations excluded from temporary

perfection Priority after temporary perfection period Priority between transitional security interests, including migrated security interests Priority not on insolvency/bankruptcy or registration Taking free and vesting of transitional security interests Migration provisions Preparatory registration for collateral secured by transitional security interests Registration defects CHARGES AND FIXED AND FLOATING CHARGES REVIEW OF OPERATION OF ACT TABLE OF CLAUSE REFERENCES

[page 449]

GLOSSARY Accession A good is an accession to other goods when it is installed in, or affixed to, other property (unless both the accession and the other goods are required or permitted by the regulations to be described by serial number). Account A monetary obligation which arises from: disposing of property (whether by sale, transfer, assignment, lease, licence or in any other way); or 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 excludes an ADI account, chattel paper, investment entitlement, investment instrument or negotiable instrument. It does not matter whether or not the monetary obligation is earned by performance, and, if payable in Australia, whether or not the person who owes the money is located in Australia. Credit card receivables are a type of ‘account’, as they are monetary obligations which arise from the provision of services by the credit card provider in the ordinary course of their business in providing services of that kind. Credit card receivables include amounts due and payable by a credit card holder to the credit card provider in the ordinary course of the creditor card provider’s business of providing credit for purchases or advances made by the credit card holder. Credit card receivables also include amounts due and payable by a credit card provider in the ordinary course of the credit card provider’s business of providing services to merchants in respect of purchases paid for by credit card. Accounts are able to be transferred and the interests of transferees under a transfer of an account due from either the credit card holder to a credit card provider or from the credit card provider to a merchant would be security interests.

ADI account An account held with an authorised deposit-taking institution (ADI), such as a bank. Advance The payment of currency, provision of credit or giving of value. This would include the 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 Personal property acquired by the grantor after the security agreement is made. Attachment The creation of a security interest in personal property which could be enforced against that property. [page 450] Bailment The delivery of tangible personal property to another party who acquires possession of it. A bailment does not transfer ownership rights and the bailor has the right to take possession at any time or in accordance with the terms of the bailment. Chattel paper A writing which evidences both a monetary obligation and a security interest in, or lease of specific goods, for example, a hire-purchase agreement. It would not include a negotiable instrument, an investment instrument, an investment entitlement or a document of title. Circulating assets Assets that could be used or transferred in the ordinary course of the grantor’s business, even if they are subject to a security interest, including currency, negotiable instruments, inventory and certain accounts (except where the secured party has possession or control).

Collateral Personal property to which a security interest is attached. Commingled property Goods that are mixed with goods of the same kind to become part of a product or mass so as to have lost their original identity in the product or mass. Consumer property Personal property that is held by an individual and not used to any extent in the course of an enterprise to which an ABN has been allocated. Control One way of perfecting a security interest in controllable property. Currency Any currency authorised as a medium of exchange by the laws of Australia or any other country. Debtor A person (or their transferee or successor) who owes payment or the performance of an obligation that is secured by a security interest. A debtor would usually be the grantor of the security interest. Financial property Chattel paper, currency, documents of title, investment instruments and negotiable instruments (excludes investment entitlements). Financing statement The data registered on the Personal Property Securities Register. [page 451] Future advance An advance secured by a security interest which is made after the security agreement has been concluded. In most cases, because advances are only made after a security agreement has been entered into, future advances and advances are the same.

Goods Tangible personal property including crops, livestock, wool, extracted minerals, satellites and other space objects, but excluding chattel paper, documents of title, investment instruments, negotiable instruments, currency or investment entitlements. Grantor A person (or their transferee or successor) who owns or has an interest in the property to which a security interest has attached. A grantor would include a person who receives goods under a commercial consignment, a lessee under a PPS lease and a transferor of an account of chattel paper. Intangible property Personal property other than financial property, goods or an investment entitlement. Intellectual property Rights in a design, patent, trade mark, copyright, circuit layout or plant breeder right. Inventory Personal property used in the ordinary course of business by a business with an ABN, including property held for sale or lease, property held to be provided under a contract for services, property held as raw materials or as work in progress or property used or consumed as materials. Investment entitlement The rights held by an investment entitlement account holder arising from the crediting of a financial product to the account (clause 15). Investment instrument A financial product such as a share, stock, debenture, bond, derivative, interest in a managed investment scheme, traded financial product, assignable option (but an assignable option of an assignable option is not an investment instrument) or a foreign exchange contract that is not a derivative, but excludes a negotiable instrument, investment entitlement, document of title and the creation or transfer of a right to payment in connection with interests in land (if the

evidencing writing does not specifically identify that land). Migration time The time when agencies in charge of existing Commonwealth, State and Territory registers would start to transfer data to the PPS Register. The migration time would be the start of the first day of the month that is 25 months after the month in which the Bill is given Royal Assent, or an earlier time determined by the Minister. [page 452] New value Consideration sufficient to support a contract, other than value provided to discharge a prior debt or liability. Perfection A security interest could be perfected by registration, possession, control or temporary perfection and perfection would always confer priority over unperfected security interests in the collateral. Personal property Any form of property, other than land or a right or entitlement under a Commonwealth, State or Territory law that declares that the right or entitlement is not personal property for the purposes of the Bill. PPS lease A lease or bailment of goods, for an indefinite term or a term of more than one year. Where goods would be described by serial number, a PPS lease would only need to be a term of 90 days. Proceeds The identifiable or traceable personal property derived directly, or indirectly, from dealing with collateral or the proceeds of collateral. Purchase money security interest (PMSI) A security interest in collateral created by a seller who secures the obligation to pay the purchase price or a person who provides the value to purchase the

collateral. A PMSI could also be the interest of a lessor or bailor under a PPS lease or the interest of a consignor who delivers property under a commercial consignment. Registration commencement time The start of the first day of the month that is 26 months after the month in which the Bill is given the Royal Assent, or an earlier time determined by the Minister. Secured party The person who holds a security interest in collateral. The secured party would not always be the creditor of the debtor because a security interest could secure the performance of an obligation without the secured party being a creditor, for example, a security trustee could hold the security for the benefit of creditors but not itself be a creditor. Security agreement An agreement or other act, such as a deed of execution or a declaration of trust, or writing evidencing the agreement or act, that creates a security interest. Security interest An interest in relation to personal property created by a transaction that in substance secures the payment or performance of an obligation, without regard to the form of the transaction. [page 453] Value Consideration sufficient to support a contract including the discharge of an earlier debt or liability.

OUTLINE Personal property is any form of property other than land and certain licences. It includes motor vehicles, contractual rights and uncertificated shares. There are other rights or interests that fall outside the concepts of real and personal property. Native title rights and interests are one example of this and, as a result,

the PPS Bill would not apply to such rights and interests. A security interest in personal property arises from a transaction that in substance secures the payment or performance of an obligation. The interest in the personal property, taken as security for a loan or other obligation, is a security interest. The Bill would apply to transactions which have the effect of securing a payment or other obligation, regardless of the form of the transaction, the nature of the debtor or the jurisdiction in which the personal property or parties are located (subject to specified exceptions). This is known as a functional approach. The Bill would establish a single national law governing security interests in personal property. This would result in more certain, consistent, simpler and cheaper arrangements for personal property securities for the benefit of all parties. Personal Property Security Reform would address the complexity of over 70 Commonwealth, State and Territory laws, common law rules and rules of equity governing personal property securities. It would provide a modern and efficient personal property securities regulatory system which is essential for any modern financial system. The Bill is modelled on the New Zealand, Canadian and US legislation. It also draws on work by the United Nations Commission on International Trade Law (UNCITRAL) and the International Institute for the Unification of Private Law (UNIDROIT). The Bill relies on the Commonwealth’s own constitutional power and power referred to it by the States under section 51(xxxvii) of the Constitution. The Bill would also address the relationship between potentially conflicting Commonwealth and State and Territory laws. The Bill specifies where other laws prevail, for example, the Bill would not apply to rights granted under the general law or statutory law in relation to the control, use or flow of water, goods affixed to land or to non-consensual interests such as liens. Furthermore, a State or Territory would be able to expressly exclude a right, entitlement or authority granted by a law of the State or Territory from application by the Bill. Generally, a security interest would attach to personal property when the grantor has rights in the collateral and value is given or the grantor does an act which creates the security interest (such as by declaring a trust or executing a deed). The Bill would do away with the equitable concept of the crystallisation of floating charges and interests in after-acquired property would attach on the acquisition of the property by the grantor.

Perfection would occur when a security interest attaches to personal property and the secured party takes possession and/or control of the property or registers it on the PPS Register. The Bill would also provide short term ‘temporary perfection’ following certain events involving the collateral. The Bill specifies the circumstances when personal property would be able to be acquired free of a security interest. [page 454] The Bill includes default rules for determining priority between competing security interests in the same property. There are also special priority rules for specific transactions including ‘purchase money security interests’, accounts, ADI accounts, crops, livestock, accessions and commingled goods. The Bill also provides rules for determining priority between security interests and other interests, such as repairers’ liens and the interests of an execution creditor. The Bill provides a process for enforcing security agreements following default by debtors. These rules would operate together with the enforcement provisions in the Consumer Credit Codes and the parties’ own security agreements. The Bill would establish a public Register of Personal Property Securities to be maintained by a Registrar of Personal Property Securities. The Register would contain details of registered security interests in personal property (financing statements) and include details of the grantor and the secured party; an address for service of notice on the secured party; a description of the collateral and proceeds and the period of registration. The transitional provisions would provide for the migration of data from existing registers to the newly created PPS Register and priority rules for security interests existing prior to the Bill coming into force.

FINANCIAL IMPACT STATEMENT The new national Personal Property Securities Register to be established by the Bill would operate on a cost recovery basis. Use of the Register would incur nominal charges, which would be used to cover the costs of operating the Register. Fees are expected to be around thirty million dollars in the first full

financial year of operation but revenue estimates cannot be finalised until the design of the Register is complete and a commencement date has been determined.

CHAPTER 1 — INTRODUCTION Preliminary 1.1 Clause 1 contains the short title of the Bill. 1.2 The Bill would commence on the day after it receives Royal Assent (clause 2). 1.3 The Guide to the Bill would provide an overview of the entire Bill (clause 3). Each Part of the Bill would also have a guide with an overview of that specific part. 1.4 Subject to Part 9.3 and 9.4 of the Bill, the Bill would start to apply at the registration commencement time in relation to the following interests: a security agreement made at or after the registration commencement time; a security interest (other than a transitional security interest) arising at or after the registration commencement time; a transitional security agreement; a transitional security interest (whether arising before, at or after the registration commencement time); an interest in personal property (other than a security interest) arising at or after the registration commencement time; [page 455] personal property of a kind prescribed by the regulations (clause 148(c)); personal property, if data in relation to the property is given to the Registrar (clause 330–331). (Clause 310). 1.5 The registration commencement time, established in the transitional provisions, would be the day the PPS Register commences operation.

The registration commencement time would be the start of the first day of the month that is 26 months after the month in which the Bill is given Royal Assent, or an earlier time determined by the Minister (clause 306(2)). If the Minister determines an earlier time to be the registration commencement time, that time must be at least 28 days after the migration time (clause 306(3)). 1.6 Despite the Bill commencing on the day after it receives Royal Assent, the transitional provisions provide that a person would only be able to apply to register a financing statement or a financing change statement and the Registrar would only be able to register a financing statement, or a financing change statement, at or after the registration commencement time. The Registrar would also only able to register a financing statement or a financing change statement at his or her own initiative at or after the registration commencement time (clause 315). 1.7 Part 9.4 of the Bill would set out the rules to support the migration process and early registrations of transitional security interests. The migration time in the Bill would be the start of the first day of the month that is 25 months after the month in which the Bill is given Royal Assent or an earlier time determined by the Minister (clause 306(1)). If the Minister determines an earlier time to be the migration time, as is expected, the Minister would also determine an earlier time for the registration commencement time. The migration time would be determined having regard to the readiness of the PPS Register and users of the Bill.

General application of this Act 1.8 The Bill would apply to security interests in goods or financial property located in Australia or located outside Australia if the grantor is an Australian entity (clause 6(1)). 1.9 For this purpose, an Australian entity would be: an individual who is located in Australia; (clause 235) a company or registrable Australian body (within the meaning of the Corporations Act 2001); a corporation sole formed under a law of Australia; a public authority established under a law of Australia; or an instrumentality or agency of the Crown in right of the Commonwealth, a State or a Territory (clause 10).

1.10 The Bill would also apply to security interests in intangible property where: the grantor is an Australian entity; the account is payable in Australia; the assignor of an account or chattel paper is an Australian entity; an assigned account or chattel paper is payable in Australia; the intangible property is in an ADI account; or [page 456] the intangible property is created for by a Commonwealth, State or Territory law, for example, licences created by a law of a State or Territory and intellectual property created by a law of the Commonwealth (clause 6(2)). 1.11 The Bill would apply to Norfolk Island, but the application of the Bill to other external Territories would be prescribed by the regulations and could be limited to certain provisions or only be applicable in certain circumstances (clause 7(2)). 1.12 A reference anywhere in the provisions of the Bill to ‘Australia’ should be read to include the prescribed external Territory (despite s 17 of the Acts Interpretation Act 1901), unless the contrary intention appears. 1.13 Significant interests to which the Bill would not apply include: a right under the general law or Commonwealth or State and Territory laws which apply to the control, use or flow of water (including irrigation rights); an interest created by the transfer of land or rights to payment in connection with the transfer of land but only where the writing evidencing the creation or transfer identifies the land (mortgagebacked securities are therefore included in the Bill); an interest in goods that are affixed to land; and an interest in a right or licence, granted under a law of a Commonwealth, State or Territory, if the right or licence is declared not to be personal property under the Bill. 1.14 Other important exclusions would include: the interest of a seller shipping goods under a negotiable bill of

lading; non-consensual charges and liens created under a law of the Commonwealth, State or Territory; approved netting, close-out netting and market netting arrangements under the Payments Systems and Netting Act 1998; combination of account and set-off arrangements; the transfer of future remuneration and unearned rights to payments; the transfer of an insurance claim; certain interests arising under the Bankruptcy Act 1966; the assignment of an account where the sole purpose is for collection of the account (this does not include the assignment of an account to a factor); the assignment of an account or negotiable instrument to satisfy a pre-existing indebtedness (clause 8). 1.15 The Bill would operate in complex and dynamic financial markets which develop over time. It would need to adapt to these changes and where appropriate, include or exclude certain market transactions which arise and which either need to be subject to the Bill or excluded from the application of the Bill. Therefore the regulation-making powers in clauses 8(1)(l) and 8(3) are required to exclude or include interests from application of the Bill. The regulation making power could also be used to clarify whether particular kinds of security interests are covered by the exclusion in clause 8(1). [page 457]

CHAPTER 2 — GENERAL RULES RELATING TO SECURITY INTERESTS Security Agreements 2.1 Under the Bill, the parties to a security agreement would be free to draft their security agreement however they wish (clause 18(1)), subject only to the laws of the Commonwealth, State or Territory laws and the general law (common law and equity) (clause 257(1)). However, the Commonwealth, State, Territory or general laws would

not apply to the extent that they: require the registration of a security agreement, require the registration of the assignment of a security interest, require compliance with other formal requirements; or restrict the attachment and perfection provisions of the Bill (clause 257(3)). 2.2 A security agreement would be able to provide for security interests in after-acquired property (clause 18(2)) and security interests in property acquired after the security agreement has been entered into (afteracquired property) would attach without the need for specific appropriation of that property (clause 18(1)). The Bill therefore does away with the common law requirement that there must be specific appropriation by the debtor for a security interest to attach afteracquired property. However, for the security agreement to be enforceable against the debtor’s after-acquired property, the security agreement would have to include a description of the collateral, such as ‘all after-acquired property’ (clause 20(2)). 2.3 A description of particular collateral in a written security agreement would be sufficient where the collateral that is described as ‘consumer property’, ‘commercial property’ or ‘equipment’ in the writing evidencing a security agreement, is also described by reference to item or class (clause 20(4)). This means that the collateral in question would be readily identifiable in a particular situation. Example The following examples would be valid descriptions: “All equipment located at 17 Jersey Road” where the equipment is marked, listed or readily identifiable as equipment. “All coal produced at the Lil Abner Mine” where all Lil Abner Mine coal is stored and recorded as produce of the little Abner Mine. “All accounts referred to in [a specified computer print-out]” where the print-out has enough information to identify the account, for example, the account name, account number and where the account is held. Examples of which would not be sufficient include: “All equipment located at 17 Jersey Road” when there are many goods at 17 Jersey Road which may be equipment but are not identifiable as such. “All coal produced at the Lil Abner Mine” when there no records kept of what coal was produced at the Lil Abner Mine or where the coal is, or where coal from a neighbouring mine is stored at the mine but its origin is not identifiable.

[page 458]

“All accounts referred to in a specified computer print-out” where there are insufficient details on the print-out to identify the account or the account holder.

Security interests 2.4 A security interest is an interest in personal property provided for by a transaction that secures the payment or performance of an obligation (clause 12(1)). In determining whether or not an interest is a security interest, the Bill takes a functional approach and focuses on the substance of the transaction. 2.5 Certain transactions would create security interests provided that they secure the payment or performance of obligations, for example: fixed and floating charges; chattel mortgages; conditional sale agreements; hire-purchase agreements; pledges; trust receipts; consignments; leases of tangible property (including PPS leases); assignments, transfers of title and flawed asset arrangements (clause 12(2)). 2.6 A security interest would be created by a transaction that is a flawed asset arrangements that in substance secures payment or performance of an obligation. However, a security interest would not be created by an arrangement under which whether one person owes another person an obligation is conditional on the occurrence of certain events: because there is no interest in property that can be the object of the security interest. Example Person A buys its inventory from Person B on terms requiring it to pay within 90 days. However, if Person B fails to meet its supply obligations, then Person A is entitled to deduct an amount from the account owed to Person B in accordance with a formula specified in the contract. In substance, the account owed by Person A secures performance of Person B’s obligation to supply inventory to Person A. Person B’s account is a flawed asset: because Person B’s entitlement to be paid the account is conditional on it continuing to supply inventory to Person A. Example An arrangement between Person B and Person A obliges Person A to pay Person B an amount on the occurrence of certain events. Person B does not have an interest in personal property that could be the object of a security interest.

2.7 While a license itself would not be a security interest, (clause 12(5)) a licensee would be able to grant a security interest in a licence which is personal property, that is if: it is transferable (whether or not the right is exclusive and whether or not a transfer is restricted); and it is not granted under legislation which declares that the licence

is not personal property under the Bill (clause 8(1)). 2.8 The following interests are deemed to be security interests whether or not the transaction secures the payment or the performance of an obligation: the interests of a transferee of accounts or chattel paper; the interests of a lessor or bailor under a PPS lease; and the interests of a consignor under a commercial consignment. 2.9 However, the enforcement provisions in the Bill would not apply to these transactions (clause 109(1)). [page 459] Enforceability against debtors 2.10 A security interest would attach to property when: the grantor has rights in the property or the power to transfer rights in the property to the secured party (clause 19(1)), even if this power is subject to limitations, such as the requirement of the another party’s consent; and the secured party provides value or the grantor confers a security interest through their actions (clause 19(2)) (this alternative to the provision of value is required because a security interest could secure an obligation without value being given). 2.11 Under the Bill, attachment of a security interest is important because once the security interest attaches to the collateral, the grantor’s rights in the collateral are limited by the rights of the secured party and the secured party acquires enforceable rights against the collateral (clause 19(1)). Enforceability against third parties 2.12 Attachment would also be required for a security interest to be enforceable against third parties claiming competing interests in the collateral (clause 20(1)). But attachment on its own would be insufficient for a security interest to be enforceable against third parties, and in addition, the secured party would have to have either control or possession of the collateral or there would have to be a written security agreement between the parties (clause 20(1)).

2.13 Attachment of the security interest could be at any time, including after the other requirements have been complied with (clause 21(3)). Example A security interest in the collateral is registered on 1 February but the security agreement is executed later on 1 March. The security interest only becomes enforceable against third parties on 1 March because prior to then the security interest had not attached to the collateral.

2.14 For a written security agreement to be enforceable against third parties: it would have to be signed or intentionally adopted by the grantor, in the way which is specified in the agreement (clause 20(2)); it would have to describe the specific collateral or describe it as ‘the grantor’s all present and after-acquired property’ or ‘the grantor’s all present and after-acquired property’ with specified exceptions (clause 20(2)); if collateral were to be described as ‘consumer property’, ‘commercial property or ‘equipment’, it would also need to be described by reference to the item or class (clause 20(4)); if collateral were to be described as ‘inventory’, it would only be enforceable while that property is held as inventory (clause 20(5)); a description of the proceeds would not be required for the agreement to be enforceable in respect of the proceeds (clause 63(7)). 2.15 A security interest could be enforceable against a third party in respect of particular personal property even though the security interest is not enforceable in respect of other personal property to which the security interest has attached. 2.16 Unless the parties specify otherwise in a security agreement, a security interest would attach when the requirements for attachment are satisfied (clause 19(3)). [page 460] The parties could agree to postpone the time for attachment, but merely referring to the security interest as a ‘floating charge’, would

not by itself postpone attachment (clause 19(4)). 2.17 For the purposes of deemed security interests (that is, security interests in: accounts and chattel paper transferred to a transferee; goods which are leased to a lessee under a PPS lease; goods consigned under a commercial consignment to a consignor or sold to a purchaser under a conditional sale or retention of title agreement) the grantor (transferee, lessee, consignee or purchaser) would be deemed to have rights in the goods, for the purpose of attachment, when the grantor obtains possession of the collateral (clause 19(5)). Perfection 2.18 Under the Bill, perfection of security interests would be important to obtain priority over competing security interests in the same collateral. 2.19 A security interest would be perfected once the security interest attaches to the collateral (clause 21(1)) and the secured party provides public notice of its security interest by either: registering an interest in any collateral; taking possession of goods; temporarily perfecting a security interest in the collateral; or taking control of an investment instrument; an ADI account; a right evidenced by letters of credit; an investment entitlement or a negotiable instrument (clause 20(2)). 2.20 Some security interests could, therefore, be perfected without registration on the PPS Register. Where the collateral is goods (tangible personal property), possession by the secured party would be sufficient to perfect the security interest and control would be sufficient to perfect a security interest in the case of investment instruments, ADI accounts, certain rights evidenced by letters of credit, investment entitlements and negotiable instruments (clause 20(2)). 2.21 Where goods are held by a bailee and a security interest has attached to the collateral, the security interest would be able to be perfected by: the secured party registering the collateral; the bailee taking possession of the collateral on behalf of the bailor; the bailee issuing a document of title to the goods in the name of the secured party; or

the secured party obtaining a perfected security interest, for example by possession, in the negotiable document of title (clause 22(1)). Example Bank A finances Debt A’s purchase of portable steel toilets manufactured in Melbourne. Debt A is located in Sydney, so Debt A arranges for the toilets to be freighted to Sydney. The carrier issues a negotiable document of title and forwards this to Bank A. Once Bank A receives possession of the negotiable document of title, it has a perfected security interest in the toilets. Where the secured party is able to take possession of the document of title within 5 business days of its issue, the security interest would be deemed to be perfected from the moment the document of title was issued.

2.22 A security interest in any of the following collateral could also be temporarily perfected for the period of time specified in the Bill: collateral moved to Australia (clause 39–40); [page 461] proceeds not included in the registered description of collateral or arising from collateral perfected in another way (clause 33(2)–(3)); transferred collateral (clause 34); goods or documents of title, perfected by the bailee’s possession and returned to the grantor or debtor for dealing (clause 35); negotiable and investment instruments, perfected by the bailee’s control or possession, and returned to the grantor or debtor for dealing (clause 36). 2.23 This period of temporary perfection period would give the secured party an opportunity to perfect their interest by registration, possession or control. 2.24 A single registration of collateral would be able to perfect more than one security interest (clause 21(4)).

Possession and control of personal property 2.25 Possession and control of personal property would be important as two of the four ways of perfecting a security interest. Possession

2.26 A secured party would be able to perfect a security interests in collateral by possession (other than possession as a result of seizure or repossession) (clause 21(2)(a)). 2.27 It would not be possible to perfect a security interest in an intangible by possession. However, as investment instruments, chattel paper or negotiable instruments are the physical embodiment of intangible rights, possession of these documents would perfect a security interests in the associated intangible property. 2.28 A person would have possession of a negotiable instrument not evidenced by an electronic record when physical possession of the instrument is held by the person, or another person on their behalf (clause 24(4)). 2.29 A secured party would have possession of chattel paper evidenced by an electronic record only if there is a single authoritative copy of the record that identifies the secured party as the assignee of the record, which is maintained by the secured party (copies would need to be made with the secured party’s agreement and be identifiable as authorised copies) (clause 24(5)). 2.30 A person would have possession of an investment instrument evidenced by a certificate only if the certificate specifies the person entitled to the investment instrument, it is transferable by registration of the transfer by the issuer of the investment instrument and the person or someone on their behalf (not the grantor or debtor) has possession of the instrument (or, if another person is the registered owner, they have acknowledged in writing, possession on behalf of that person) (clause 24(6)). 2.31 Possession of a document of title would constitute possession of the collateral (clause 24(3)(b)). 2.32 Possession under the Bill would not equate to the common law meaning of possession. Possession would include both apparent and actual control of the property (clause 24(2)). Even if a secured party has actual possession of collateral, if it appears to be in the possession of the grantor (or another person on behalf of the grantor), the secured party would not have possession of the collateral (clause 24(1)). It follows that when goods in the secured party’s [page 462]

possession are transferred to the grantor’s possession, the security interest becomes unperfected (unless perfected by another means, such as by registration or through temporary perfection of returned collateral (clause 36). Example Finance A has a security interest in a painting owned by Grantor A. Finance A perfects the security interest by taking possession of the painting on 1 April 2009. Finance A returns the painting to Grantor A on 28 April 2009 for a dinner party held by Grantor A. Finance A resumes possession on 1 May. Finance A’s security interest ceased to be perfected on 28 April. Perfection of the security interest commenced from 1 May 2009.

Control 2.33 Perfection by control would occur when a creditor takes all steps necessary to be in a position to sell the collateral without further action by the grantor. 2.34 It would be impractical to require perfection by registration or possession of ADI accounts; investment entitlements; investment instruments; uncertificated negotiable instruments; rights evidenced by certain letters of credit and satellites. Therefore these kinds of collateral could be perfected by control (clause 21(2)(c)). 2.35 A secured party would have control of an ADI account where: the secured party is the ADI; the secured party could direct dispositions from the ADI without the grantor’s agreement (even if the grantor also retains the right to direct dispositions from the account) (clause 25(2)); or the secured party is the ADI’s customer for the account, that is, the secured party would have the right (not necessarily exclusive), to direct dispositions from the account. (Clause 25(1)). Example Bank A gives a loan to its customer Debtor A who already has a deposit account with Bank A. Bank A does not perfect a security interest in the account. Debtor A then grant’s Grantor A the right to instruct Bank A to make dispositions from the account subject to Debtor A’s consent. Debtor A defaults on its loans to both Bank A and Grantor A and both attempt to enforce a security interest in Debtor A’s account. Because Bank A is the ADI it did not need to take any specific action to obtain a perfected security interest in Debtor A’s account. Grantor A did not obtain control (and therefore a perfected security interest) in the account, because it’s right to instruct Bank A to make dispositions required Debtor A’s consent.

2.36 A secured party would have control of an investment entitlement while there is an agreement between the secured party, the grantor and the

intermediary to the effect that any instructions issued by the grantor are subject to approval by the secured party and permitting the secured party to deal in the entitlement without the consent of the grantor (clause 26(1)). The secured party would have control of an investment entitlement even if the person in whose name the intermediary maintains the account retains the right to make substitutions for the instrument, to originate instructions to the issuer or to otherwise deal with the instrument (clause 26(2)). 2.37 A person would have control of a certificated or uncertificated investment instrument while they are registered by the issuer as the registered owner of the investment instrument (clause 27(2)). [page 463] 2.38 A person would have control of a certificated investment instrument while they have possession of the instrument and the power to transfer or otherwise deal with the instrument (clause 27(3)). 2.39 A person would have control of an uncertificated investment instrument: where they have agreed with the registered owner of the instrument that they may deal in the instrument (clause 27(4)); where another person is the registered owner of the instrument on behalf of that person but that person can deal in the instrument (clause 27(5)); if the registered owner acknowledges in writing, that they hold the instrument on behalf of that person and that person is able to deal in the instrument (clause 27(6)). 2.40 A secured party would have control even if the registered owner (including the grantor) retains the right to make substitutions for the instrument, to originate instructions to the issuer or to otherwise deal with the instrument (clause 27(6)). 2.41 A secured party would have control of the rights evidenced by a letter of credit only to the extent that the issuer consents to assigning the proceeds of the letter of credit to the secured party (clause 28). 2.42 A secured party would have control of an uncertificated negotiable instrument while the instrument can be transferred according to the

rules of the clearing and settlement facility and the secured party is able to deal in the instrument (clause 29(1)). A secured party would have control even if the registered owner (including the grantor) retains the right to make substitutions for the instrument, to originate instructions to the issuer or to otherwise deal with the instrument (clause 29(2)).

Attachment and perfection: specific rules Proceeds and transfer Attachment of security interest to proceeds 2.43 When collateral gives rise to proceeds, the security interest would: automatically attach to any proceeds arising from a dealing in the collateral unless the security agreement provides otherwise; and continue in the collateral unless the secured party expressly or impliedly authorised the dealing giving rise to the proceeds. (Clause 32(1)). 2.44 Personal property would only be proceeds if the grantor had an interest in the proceeds (not an interest arising from the enforcement of the security interest) or the power to transfer rights in the collateral to the secured party (clause 31(3)). This reflects the attachment principle that the grantor must have an interest in the collateral or the power to transfer the collateral to another person (clause 19(2)(a)). Example Grantor A grants Bank A a security interest in its sapphires. Grantor A then transfers the sapphires to Person A in exchange for rubies without Bank A’s authorisation. Bank A would have a security interest in the rubies as proceeds of the sapphires.

2.45 The Bill would not require that there be a fiduciary relationship between the secured party and the person who deals in the collateral, for the proceeds to be identifiable or traceable (clause 31(2)). [page 464] 2.46 The security interest in the proceeds would have the same priority time as the security interest in the original collateral (clause 32(5)).

Collateral would give rise to proceeds when the proceeds are 2.47 identifiable or traceable personal property derived directly or indirectly from: a dealing with the collateral (or proceeds of the collateral); the right to an insurance payment or other payment as indemnity or compensation for loss or damage to the collateral; a payment made to discharge or redeem the collateral when the collateral was chattel paper, intangible property, an investment instrument, an investment entitlement or a negotiable instrument; the right of a licensor to receive payments under any intellectual property agreement; rights arising out of or property collected or distributed from an investment instrument or investment entitlement (clause 31(1)). Example Grantor A is the owner of a patent and has granted a security interest in the patent to Bank A. Grantor A has also granted a licence of the patent to Manufacturer A, under which Manufacturer A is obliged to make payments to Grantor A. Bank A has a security interest in the patent as original collateral, and in the licence payments as proceeds.

2.48 Proceeds would include proceeds of proceeds (clause 31(1)(a)). 2.49 When the security interest continues in the collateral, a secured party would be able to enforce their security interest against either or both of the collateral or the proceeds (clause 32(2)). 2.50 Where a secured party proceeds against both the collateral and the proceeds, the amount recoverable would be limited to the market value of the collateral immediately before the collateral gave rise to the proceeds, unless the collateral is an investment instrument or, at the time of the transfer, the transferee knew that the transfer was in breach of the security agreement (clause 32(2)–(3)). 2.51 Where the secured party proceeds against the collateral alone, an innocent purchaser of the collateral would have rights against the transferor to recover the consideration they provided. Where the secured party proceeds against the proceeds alone, an innocent third party would retain the collateral. Perfection of security interest in proceeds 2.52 At the time of entering into a security agreement, a secured party cannot always anticipate that proceeds that may arise from the collateral and therefore a security interest in proceeds would be

perfected by a registration of the collateral if: the description of the collateral includes a description of the proceeds which would be sufficient for a separate perfected security interest in the proceeds; the description of the collateral includes a description of the proceeds because they are of the same kind; the proceeds consist of currency, cheques, an ADI account, a right to an insurance payment or another payment as indemnity or compensation for loss to the collateral. (Clause 33(1)). [page 465] 2.53 A registration which describes the collateral as all the grantor’s present and after acquired property would perfect a security interest in proceeds held by the grantor. Example Grantor A grants a security interest in her funicular car to Bank A. Grantor A then exchanges her funicular car for her neighbour’s boat. The security interest would automatically attach to the boat. The security interest in the boat would only be perfected if Bank A included in the financing statement a description of any proceeds from the funicular car that included the boat.

2.54 A security interest in proceeds that is not perfected, but that arises from a perfected security interest in the collateral, would be temporarily perfected for 5 business days after the collateral gave rise to the proceeds (clause 33(2)). During this period of temporary perfection, the secured party could ensure the continuous perfection of the security interest in the proceeds after the end of the end of the 5 business days, by perfecting the interest in one of the usual ways (registration, possession or control) (clause 33(3)). Transfers of property 2.55 A security interest would not continue in transferred collateral where the Bill provides that a transferee would acquire collateral free of the security interest (clauses 41–55) or where the secured party has given express or implied authority for the transfer to be made free of the security interest (clause 32(1)). 2.56 In other cases, where collateral which is subject to a perfected security

interest is transferred, the security interest would be temporarily perfected for a period starting from the time of transfer and ending at the earliest of: the end of the month 24 months after transfer; if the security interest was perfected by registration — the end time for registration; if another perfected security interest attaches to the collateral and the original secured party consented to the transfer — 5 business days after transfer; if another perfected security interest attaches to the collateral and the original secured party did not consent to the transfer of the collateral — 5 business days after the original secured party acquires the knowledge required to perfect their security interest by registration (clause 34(1)). 2.57 The period of temporary perfection would give the secured party time to perfect their security interest in the property. Example Grantor A grants Bank A a security interest in its orchids. Bank A perfects the security interest by registration. Grantor A sells the orchids to Person B without Bank A’s authorisation. Grantor A does not take the orchids free of Bank A’s security interest. The security interest continues in the orchids and is temporarily perfected until the earlier of 24 months, the end of the registration or 5 business days after Bank A becomes aware of the transfer.

Collateral returned to grantor or debtor Collateral returned from bailee 2.58 When a security interest in goods is perfected by the bailee’s possession of the goods, or the secured party’s possession of the document of title, and the [page 466] property or document of title is returned to the grantor for sale, exchange or other action in preparation for sale or exchange, the security interest would be temporarily perfected for 5 business days (clause 35).

Negotiable instruments and investment instruments 2.59 When a security interest in a negotiable instrument or in an investment instrument is perfected by possession or control, and possession or control of the document is given to the grantor for sale, exchange, presentation, collection, renewal or registration for transfer, the security interest would be temporarily perfected for a period of 5 business days (clause 36). Following sale or lease 2.60 When a person acquires goods free of a security interest because of a sale or lease of the goods, the security interest would reattach to the goods when the grantor or a transferee of chattel paper regains possession of the goods as a result of: the original contract of sale or lease being rescinded or expiring; the transferee having seized the goods to enforce the security agreement; the grantor having repossessed the goods to enforce the contract of sale or lease (clause 37(1)). 2.61 If the security interest was perfected by registration prior to acquisition, and the registration is effective at re-possession, then the perfection would be deemed to be continuous (clause 37(2)). Accounts and chattel paper 2.62 When an account or chattel paper, arising from the sale or lease of goods, is transferred to another person, the transferee would be taken to have a security interest in the goods, if the goods come back into the possession of the transferor or transferee as a result of: the original contract of sale or lease being rescinded or expiring; the transferee having seized the goods to enforce the security agreement; the grantor having repossessed the goods to enforce the contract of sale or lease; any other circumstances prescribed by the regulations. (Clause 38(1)). Example Dealer A sells flaring and beading machines on credit to Purchaser A. Dealer A sells the proceeds of these transactions (an account) to Discount A. The flaring and beading machines turn out to be defective and Purchaser A rescinds the contract and returns the

machines to Dealer A. Discount A acquires a security interest in the machines to secure payment of the balance of the account.

2.63 The deemed goods security interest would be deemed to attach at the time of return or repossession (clause 38(2)). If the transferor or transferee has a perfected security interest in the account or chattel paper when the goods are returned or re-possessed, then the security interest would be temporarily perfected from the time of possession until 5 days after the time of return or re-possession (clause 38(3)–(4)). [page 467]

Relocation of collateral or grantor to Australia etc Main rule 2.64 When collateral continues to be subject to an enforceable security interest after being moved to Australia, the security interest would be taken to be continuously perfected from when the security interest was registered or became enforceable against third parties under the foreign law until the collateral is located in Australia (clause 39(1)–(2)). 2.65 If the security interest is continuously perfected as above, it would also be temporarily perfected from the time of relocation until 56 days thereafter or 5 days after the secured party acquires actual knowledge that the property is relocated in Australia (clause 39(3)). Intangible and financial property 2.66 If the grantor of a security interest in intangible property or chattel paper, investment instruments, currency, documents of title (but not intellectual property, intellectual property licences or ADI accounts) relocates to Australia or transfers the collateral to a person located in Australia and the security interest becomes governed by Australian law, then the security interest would be taken to be continuously perfected from the time when it was registered under the foreign jurisdiction, or became enforceable against third parties, until relocation (clause 40(2)). 2.67 If the security interest is continuously perfected (as above), then it

would be temporarily perfected starting from the time of relocation and ending at the earliest of 56 days thereafter or 5 business days after the secured party acquires actual knowledge of the relocation (clause 40(3)).

Taking personal property free of security interests 2.68 A security agreement would be effective according to its terms (clause 18) and would continue in collateral dealt with by the grantor, unless the secured party expressly or impliedly authorised a dealing giving rise to proceeds (clause 32). 2.69 However, a person would acquire an interest in personal property free of a security interest in the circumstances set out in Part 2.5 of the Bill. 2.70 The concurrent application of more than one of these rule to the same situation, or the application of only one of the rules to the same situation, would not affect the right of a transferee to take the property free of a security interest. 2.71 The provisions on taking free of security interests would not apply where the transferee’s interest is also a security interest, except where the property is an investment instrument or investment entitlement (clause 42). 2.72 The provisions refer to ‘taking free of a security interest’ and not ‘extinguishment’ because there may be circumstances where the security interest is attached to more than one item of collateral and the transferee is acquiring only one of those items. Only the acquired item would be taken free of the security interest, which would remain attached to the remaining items. 2.73 In some circumstances, a person would have to provide either value or new value in order to acquire an interest in personal property free of a security interest. A person provides ‘value’ when they provide consideration that is sufficient to support a simple contract. A person could also provide ‘value’ through a reduction or discharge of an existing liability. However, in order to [page 468] provide ‘new value’, the satisfaction of an antecedent debt or liability

would be insufficient, and something more would have to be given. (Clause 10). The requirement for new value ensures that the grantor obtains something that the secured party could proceed against if their property is transferred free of the security interest. Unperfected security interests 2.74 A person who acquires personal property that is subject to an unperfected security interest would acquire it free of the security interest if they provide new value and are not a party to the transaction that provides for the security interest (clause 43). Example Grant A obtains secured finance from Bank A to purchase a forklift. Bank A does not register the forklift on the PPS Register or perfect it using the other perfection methods. Grant A sells the forklift to Buy A. Buy A would acquire her interest in the forklift free of Bank A’s security interest.

2.75 These arrangements provide an incentive for secured parties to perfect their security interests. Serially numbered personal property 2.76 The Regulations would specify the kinds of personal property that may or must be described by serial number on the PPS Register and could include the following: motor vehicles; watercraft; aircraft; registered trade marks, patents, designs and plant breeder’s rights. 2.77 In order to guarantee the ability of a prospective buyer or lessee to rely on a search of the PPS Register, and to protect a security interest against an innocent acquisition, the Bill would provide that a person would take property free of a security interest when: the buyer or lessee provides new value; the property is required under the regulations to be described in a registration by reference to a serial number; a search of the register immediately before the time of the sale or lease, by reference only to the serial number of the property, would not have disclosed the registration on the PPS Register (clause 44(1)).

Example Person A owns a number of collectable motor vehicles in the course of running a business of hiring out vehicles for special events. Person A secures a loan from Bank A against the motor vehicles. Bank A perfects its security interest in the vehicles by registering against all of Person A’s motor vehicles, but does not register each motor vehicle individually by their serial numbers. Person B buys one of the motor vehicles from Person A. A search of the PPS Register by reference to the motor vehicle’s serial number would not disclose that Bank A has a security interest. Person B would take her interest in the motor vehicle free of Bank A’s security interest in the motor vehicle.

[page 469] Example Person A owns a number of collectable motor vehicles in the course a business of hiring out vehicles for special events. Person A secures a loan from Bank A against the motor vehicles. Bank A perfects its security interest in the vehicles by registering against all of Person A’s motor vehicles generally, but does not register each motor vehicle individually by its serial number. Person B buys one of the motor vehicles from Person A. A search of the PPS Register by reference to the motor vehicle’s serial number would not disclose that Bank A has a security interest. Person B searches the register against Person A and discovers the Bank’s registration against Person A in relation to motor vehicles generally. Person B is not aware that her purchase of the motor vehicle constitutes a breach of the Person A’s security agreement with Bank A. Person B would take her interest in the motor vehicle free of Bank A’s security interest in the motor vehicle. Example Buyer A buys a motor vehicle from Person A. Finance A has registered against the motor vehicle on the PPS Register by reference to its serial number. Buyer A would not take the car free of Finance A’s security interest, as a search of the PPS Register would have disclosed Finance A’s registration against the motor vehicle. Had Buyer A searched the PPS Register, she would have found Finance A’s registration and been aware that she would not be able to buy the motor vehicle free of Finance A’s security interest.

2.78 A buyer or lessee would not take their interest in the property free of the security interest if: the transferee holds the property, or holds the property on behalf of another, as inventory for a period after the sale or lease; or the transferee has actual knowledge that the sale or lease constitutes a breach of the relevant security agreement (unless the property is of a kind prescribed by the regulations). (Clause 44(2)). 2.79 When personal property is bought or leased with the intention of using it predominantly for personal, domestic or household purposes, the intention of the buyer or lessee is to be determined when the new value is first given for the sale or lease. This might be when the buyer or

lessee provides a deposit (which could be in advance of the parties making a binding agreement to buy or lease the property) (clause 44(3)). 2.80 This exception against taking inventory free of security interests means that a purchase or lease of serial numbered property (such as a motor vehicle) by a dealer in the property from a person who held the property as commercial property would not be free of the security interest merely because the financier of the seller or lessor had elected to register against the seller’s property generally and not in relation to individual serial numbered items. Example Finance A finances motor vehicles held by Person A as commercial property. Motor vehicles have been prescribed as serial numbered property. Finance A registers its security interest in Person A’s motor vehicles generally, and not by reference to their individual serial numbers. Dealer A buys a motor vehicle from Person A and holds the vehicle as inventory in the course of its business of buying and selling motor vehicles. Dealer A takes the motor vehicle subject to Finance A’s security interest.

[page 470]

Special rules relating to motor vehicle purchases Incorrect or missing serial number 2.81 A person who buys or leases a motor vehicle (of a kind prescribed in the regulations) would take their interest in the vehicle free of a security interest if: the person acquires the motor vehicle for new value; the regulations provide that the motor vehicle is of a kind that may or must, be described by serial number; a search of the register immediately before the time of the sale or lease, or on the previous day, by reference only to the serial number of the vehicle, would not have disclosed a registration on the PPS Register; and either: the seller or lessor is the person who granted the security interest; or the seller or lessor is another person who is in possession

of the motor vehicle, provided 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 vehicle) (clause 45(1)). 2.82 However, the buyer or lessor would not take the motor vehicle free of the security interest if: the secured party is in possession of the motor vehicle immediately before the time of the sale or lease; the motor vehicle is bought at a sale held by or on behalf of an execution creditor; the buyer or lessee holds, or holds on behalf of another person, the motor vehicle as inventory; or the person has actual or constructive knowledge of the security interest (clause 45(2)). 2.83 Therefore, if the person acquiring the property did not have knowledge of the security interest and a search of the PPS Register at any time on the day that the interest was acquired, or on the previous day, by reference to the serial number would not have disclosed a registered security interest, then that person would acquire the motor vehicle free of the security interest (clause 45). 2.84 This provision is based on s 7(1A) of the Chattel Securities Act 1987 (Vic) (the ‘day and a half rule’) and s 8(3)(b) of the Registration of Interests in Goods Act 1986 (NSW), but unlike the existing State provisions, these provisions would not compel a transferee to undertake the search prior to purchase or lease (clause 45(1)). 2.85 This provision would have effect only in limited circumstances because in most cases, where personal property is required to be registered by serial number and the serial number is incorrectly recorded or missing, the registration would be ineffective, and the transferee would take their interest free of the security interest. Taking from prescribed persons 2.86 A buyer or lessee of an interest in a motor vehicle would ordinarily acquire it free of a security interest, if the regulations provide that motor vehicles of that kind may or must be described by serial number, and the seller or lessor is in a class of persons prescribed by the regulations (clause 45(3)).

[page 471] 2.87 The purpose of this provision is to allow a person to buy or lease a motor vehicle from a motor vehicle dealer, free of a security interest, without the need to search the PPS Register prior to acquiring their interest. Example Grant A is a motor vehicle dealer. Grant A has cars in stock financed under a floor plan arrangement with bailment company Finance A. Under the floor plan arrangement Finance A purchases the vehicles from Manufacturer A and allows Grant A to retain them on its premises for sale. Finance A registers its security interest in each vehicle. Buy A wants to purchase a car from Grant A with finance provided by Bank B. Neither Buy A nor Bank B need to search the PPS Register as the transferor (Grant A) is a motor vehicle dealer. Buy A acquires its interest in the car free of Finance A’s security interest.

2.88 However, the person would not take the vehicle free of the security interest if: the secured party was in possession of the vehicle immediately before the buyer or lessee acquired their interest; when the vehicle is being sold (not leased) — the person buys the vehicle at a sale held by or on behalf of an execution creditor; the buyer or lessee holds the vehicle as inventory, or holds the vehicle as inventory on behalf of another person; or the transferee has actual or constructive knowledge that the sale or lease constitutes a breach of the security agreement (clause 45(4)). 2.89 Many buyers or lessees of motor vehicles from motor vehicle dealers would be aware that motor vehicles held by dealers as inventory are subject to a security interest but this knowledge alone would not disqualify buyers and lessees. Example Grant A is a motor vehicle dealer. Bank A has perfected a security interest in all of the vehicles at Grant A’s showroom, by registering each vehicle against its serial number. The security agreement obliges Grant A to sell the vehicles for an amount determined in accordance with a formula agreed to by Grant A and Bank A, with a minimum price of $X for any vehicle. Buy A is an associate of Grant A, though not a motor vehicle dealer, and is aware that Grant A is obliged to sell the vehicles for at least $X. Grant A sells a motor vehicle to Buy A for an amount significantly less than $X. Buy A would not acquire the motor vehicle free of Bank A’s security interest.

Transactions in the ordinary course of business

2.90 Generally, a person who acquires an interest in personal property in the ordinary course of the vendor’s business of dealing with property of that kind would acquire the interest free of any security interest granted by the vendor, whether perfected or unperfected (clause 46(1)). This would not give the transferee protection from all security interests, only those security interests that have been granted by the transferor. 2.91 However, this provision would not apply if: in the case of personal property that may or must be described by serial number, the transferee holds the property, or holds the property on behalf of another, as inventory; or the transferee has actual or constructive knowledge of the security agreement (clause 46(2)). [page 472] 2.92 Purchasers are only protected when they acquire their interest in the property ‘in the ordinary course of the seller’s or lessor’s business of selling or leasing personal property of that kind’ (clause 46(1)). Generally, this would be a question of fact in each case but 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 financial stress. Example Grant A is primarily in the business of leasing, repairing and rebuilding cranes. Grant A’s practice is to sell a crane if it becomes obsolete, deteriorated beyond its useful life, or difficult to lease. Grant A sells one of its cranes to Buy A. The sale is the only sale that occurs that year. While the sale of the crane to Buy A would be in the ordinary course of Grant A’s business, the sale would not be in the ordinary course of Grant A’s business of dealing with property of that kind. Example Grant A is primarily in the business of raising and selling livestock. Grant A and Buy A regularly exchange livestock for feed. The exchange of the livestock for feed would be in the ordinary course of business despite it being secondary to Grant A’s primary business of dealing in livestock.

Low value consumer property 2.93 A person who buys or leases personal property that they intend to use

predominantly for personal, domestic or household purposes would take the goods free of any security interests provided that: their intention to use the personal property predominantly for personal, domestic or household purposes existed at the time of the purchase of lease; the person acquires their interest for new value; and the market value of the consideration provided by the purchaser or lessee (at the time of payment) is not more than $5,000 (or a greater amount prescribed in the regulations) (clause 47(1)). 2.94 However, the buyer or lessee would not take the property free of the security interest if: the property is required under the regulations to be described in a registration by serial number; the person has actual or constructive knowledge that the sale or lease is a breach of the security agreement; or at the time the contract for sale or lease was entered into: the market value of the personal property is more than $5,000; and the person believed the market value of the personal property to be not more than $5,000 (clause 47(2)). 2.95 This provision would enable consumer to purchase low-value consumer goods without the need to search the PPS Register. Example Ms X buys a chainsaw at a garage sale for $2,000 with the intention to use it in her hobby workshop. Ms X is not aware of any security interest in the chainsaw. The market value of the chainsaw is less than $5,000. Ms X would take the chainsaw free of the security interest.

[page 473] Example Mr Y buys an antique chair at a garage sale for $4,000. Mr Y does not believe the market value of the chair to be more than $5,000 and while similar chairs are selling for $6,000 at the local antique shop, Mr Y does not know this. Mr Y would take the chair free of the security interest. Example Mr Y buys an antique chair at a garage sale for $4,000. Mr Y knows that similar chairs are selling for $6,000 at the local antique shop. Mr Y would not take the chair free of the

security.

Security interests in currency 2.96 A transferee of currency would acquire their interest in the currency free of any security interests in that currency if, at the time of acquiring the currency, the transferee had no actual or constructive knowledge of the security interest (clause 48). 2.97 This rule recognises the importance of the negotiability of currency in ordinary commerce. Security interests in investment instrument or entitlement in the ordinary course of trading 2.98 A person who buys an investment instrument or entitlement in the ordinary course of trading on a prescribed financial market (within the meaning of the Corporations Act 2001) takes an instrument or entitlement free of any security interests (clause 49). This provision protects the integrity of transactions in prescribed markets such as the Australian Stock Exchange. Security interests in investment instruments 2.99 A person would acquire an interest, including a security interest, (clause 42) in an investment instrument free of other security interests if: the person acquired their interest by a consensual transaction for value; the person took possession or control of the investment instrument; and the person had no actual or constructive knowledge that the acquisition constituted a breach of the security agreement that provided for the security interest (clause 50). Security interests in investment entitlements 2.100 A person would acquire an interest in an investment entitlement free of a security interest if: the person gave value for the interest (unless the interest acquired is a security interest); the person acquired their interest in a consensual transaction; and the person had no actual or constructive knowledge that the

acquisition of the interest was a breach of a security agreement that provides for a security interest in any investment entitlement or financial product (clause 51). [page 474] Temporarily perfected security interests 2.101 A security interest would be temporarily perfected in a number of circumstances, despite the secured party not having perfected it by registering a financing statement or by taking possession or control of the collateral, where: a bailee takes possession of goods and issues a negotiable instrument of title (clause 22(2)); proceeds arise from collateral (clause 33(2)); collateral is transferred (clause 34(1)); goods are returned to a grantor for dealing (clause 35(1)); negotiable instruments or investment instruments are given to the grantor for sale (clause 36(1)); goods, which are the subject of transferred account or chattel paper, are returned (clause 38(3)); collateral is relocated to Australia (clause 39(1)); or the grantor moves to Australia (clause 40(2)). 2.102 Transferees that buy or lease collateral in which the security interest is temporarily perfected (other than under clause 322) would acquire their interests free of the security interest where they provide new value and do not have actual knowledge that the purchase or lease constitutes a breach of the security interest (clause 52). 2.103 This protects innocent transferees who acquire collateral subject to a temporarily perfected security interest, as searching the PPS Register would not have revealed a registration. Example Bank A has perfected its security interest in goods by arranging for a bailee to possess the goods on its behalf. The property is returned to Grant A for sale. The security interest would be temporarily perfected for five business days. If Grant A becomes insolvent during those five days, Bank A’s security interest would not be void because of the temporary perfection. However, if Grant A sells the property to a third party during the five days, in circumstances that constitute a breach of the security agreement, the transferee would take

the collateral free of Bank A’s security interest, despite the secured party’s interest being temporarily perfected.

Rights of secured party and transferee 2.104 The ability of transferees to take security interests free of security interests would have consequences for secured parties and transferees as follows: the rights of the secured party to the relevant property, or an accession to the property, are subrogated to the rights (if any) of the transferor and any predecessor of the transferor (clause 53(2)); and a transferee who makes a part payment before receiving notice of the secured party’s rights (clause 53(2)) would have their obligation discharged to the extent of the payment (clause 53(3)).

Priority between Security Interests Priority of security interests generally 2.105 An item of personal property could secure payments or obligations owed to more than one secured party. When more than one secured party becomes [page 475] entitled to the collateral under their security agreement, the priority rules determine (for example): the order in which proceeds of the collateral realised as part of an enforcement process are to be distributed (clause 140); whether a secured party would be entitled to notice that another secured party has commenced enforcement process in relation to the collateral (clause 130); whether a secured party would be entitled to take over an enforcement process initiated by another secured party (clause 123). 2.106 The priority rules would apply only if two or more security interests are attached to the same collateral.

The priority rules would not apply where the collateral has been 2.107 acquired free of any competing security interests or where only one security interest is attached to the collateral. Example Grant A is a dealer in antiquarian books. Grant A grants a security interest in its antiquarian books to Bank A. Grant A later grants a security interest in the same antiquarian books to Bank B. Neither Bank A nor Bank B perfect their security interest in the books. Grant A sells one of the antiquarian books to Buy A. Buy A takes the book free of the security interests previously held by Bank A and Bank B (clause 43). There is no priority contest between Bank A and Bank B. Example Grant A is a dealer in antiquarian books. Grant A grants a security interest in its antiquarian books to Bank A. Grant A later grants a security interest in the same antiquarian books to Bank B. Both Bank A and Bank B perfect their security interest. Grant A sells a book to Buy A in the ordinary course of Grant A’s business. Buy A knew that the transfer would be a breach of the security agreement with Bank A. Therefore, Buy A acquired the books subject to Bank A’s security interest, but not Bank B’s security interest. It is not necessary to apply the priority rules because Buy A took the books free of Bank B’s security interest (clause 48).

2.108 The Bill includes general priority rules (clause 55–61) and specific priority rules for: purchase money security interests (clause 62–65); security interests in transferred collateral (clause 66–68); creditors and purchasers of negotiable instruments, chattel paper and negotiable documents of title (clause 69–72); competing security interests and declared statutory interests (clause 73); and execution creditors, ADI accounts and returned tangible property (clause 74–77). Default priority rules 2.109 The order in which the security interests attach to the collateral is relevant only if both interests are unperfected, in which case priority would be determined by the order of attachment (clause 55(2)). 2.110 When two unperfected security interests attach at the same time, they would have the same priority under the Bill. However, one of the secured parties will be able to achieve priority over the other by registering their security interest.

[page 476] 2.111 A perfected security interest would have priority over an unperfected security interest in the same collateral (clause 55(3)). Example Grant A grants a security interest in its oil paintings to Bank A, and later grants a security interest in the same oil paintings to Bank B. Bank B registers the security interest, while Bank A does not. The security interest held by Bank B would have a higher priority than the security interest granted by Bank A, despite Grant A having granted the first security interest to Bank A.

2.112 Where two or more security interests are both perfected, priority would be determined by the priority time for each security interest (clause 55(4)). 2.113 The priority time for a security interest would be the initial perfection time only if it the security interest remained continuously perfected after that time (clause 55(6)). A security interest would be continuously perfected only if it is has been perfected at all times since the initial perfection time (clause 56(1)). A security interest could be continuously perfected by separate contiguous or overlapping perfections (clause 56(2)). Example Grant A purchases a Bentley with finance provided by Finance A. Finance A registers the security interest in May and provides the finance to Grant A in June. Grant A later obtains further finance from Finance B, which is also secured against the Bentley. Finance B registers this security interest in June. The security interest held by Finance A would have priority over that held by Finance B, because the priority time for Finance A’s security interest preceded that of Finance B’s. Example Grant A is a dealer in stamps. Grant A purchases a rare stamp with finance provided by Bank A. In July, Bank A perfects its security interest in the stamp by taking possession of the stamp. In September, Grant A grants security interest in the stamp to Bank B. Bank B perfects its security interest in the stamp with a registration on the PPS Register. In November, Bank A agrees to give Grant A possession of the stamp for 48 hours to allow Grant A to exhibit the stamp at a festival. Before giving Grant A possession of the stamp, Bank A registers its security interest in the stamp on the PPS Register. The security interest held by Bank A would have priority over that held by Bank B, because the priority time for Bank A’s security interest would be July (when Bank A initially perfected its security interest by taking possession of the stamp).

Priority of security interests perfected by control 2.114 A security interest that is perfected by control would have priority over

a security interest perfected by any other means (clause 57(1)). 2.115 Only the following kinds of property could be perfected by control: an ADI account; an investment entitlement; an investment instrument; a negotiable instrument that is not evidenced by a certificate; 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; and satellites and other space objects. [page 477] 2.116 A security interest would be perfected by control when the secured party, or another person on behalf of the secured party, has control of the collateral (clause 21(2)). However, controllable property could be perfected otherwise than by control. Example Grant A borrows $10,000 from Bank A and grants Bank A a security interest in its shares. Bank A perfects its security interest by registering a financing statement on the PPS Register. Grant A later borrows $15,000 from Bank B and grants Bank B a security interest in the same shares. Bank B perfects its security interest by taking control of the shares. Bank B’s security interest would have priority over Bank A’s security interest because Bank B has perfected its security interest through control while Bank A has perfected its security interest through registration.

2.117 A security interest perfected by control would have priority over a security interest that is not perfected by control even when the secured party knows that the grant of the security interest was made in breach of a pre-existing security interest. This makes it unnecessary to consider whether a person with control had knowledge of another security interest or the terms of the other security interest. 2.118 Secured parties should therefore protect their security interests by perfecting their interests appropriately. As perfection by registration alone would be insufficient to guarantee priority against a competing security interest perfected by control, a secured party with a security interest in controllable property, who is concerned that the grantor might transfer the collateral to another person, should consider taking

2.119

2.120

2.121

2.122

control of the property. Where all the competing security interests are perfected by control, the first in time principle would apply and priority would be determined by the order in which the secured parties took control of the collateral (provided that perfection by control has been continuous) (clause 57(2)). This rule would be subject to an exception where an ADI perfects its security interest in an ADI account held with the ADI (always by control) (clause 25(1)). The security interest held by the ADI would be subordinate to a security interest held by another secured party who has control (clause 75). An ADI which is concerned about this could choose to specify that only an account holder can direct the disposition of funds. Priority between perfected security interests not perfected by control would be determined by their priority time. The security interest with the earliest priority time would have the highest priority (clause 55(4)). Over a period of time, a secured party might perfect a security interest by more than one method. For example, the security interest might initially be perfected by possession and then perfected later by registration. Provided that the security interest has been continuously perfected, the priority time would be the earliest priority time (clause 55(5)–(6)). Example On 1 July, Grant A grants Finance A a security interest in a lathe. Finance A takes possession of the lathe from 1 July until 30 August. On 1 August, Finance A registers against Grant A in relation to the lathe with an end date of 31 October. On 1 October, Finance A again takes possession of the lathe until 31 December. At 31 December, Finance A’s security interest in the lathe will have been continuously perfected since

[page 478] 1 July, initially by possession, then by registration and later by possession. The priority time for the security interest will be 1 July.

2.123 The priority time for a security interest first perfected by control would be the time when the collateral is first perfected by control. A secured party who has control of the collateral and who wishes to surrender control while retaining a perfected security interest, should satisfy

themselves beforehand that the security interest will remain perfected despite the loss of control (clause 55(7)). 2.124 If a security interest has priority over a second security interest and that second security interest has priority over a third security interest, then the first security interest would have priority over the third security interest (clause 59). It would not matter whether the second security interest exists. 2.125 The priority of a constitutional security interest over a nonconstitutional security interest is relevant where a State does not refer the power to enact the Bill to the Commonwealth. Some security interests would be within the constitutional power of the Commonwealth (clauses 243(2) and clauses 246–249) but others would not be. For example, the Bill would operate in relation to a security interest when the secured party is a constitutional corporation and the grantor is an individual (clause 248(1)). However, the Bill would not operate when both the secured party and the grantor are individuals and the constitution does not apply to the collateral. 2.126 A security interest that is within the constitutional power of the Commonwealth would have priority over a security interest that is not within the constitutional power of the Commonwealth (clause 252). Accordingly, a security interest granted by an individual over nonconstitutional property to a constitutional corporation would have priority over a security interest in the same property granted to an individual. Example State A is a State that has not referred the power to enact the Bill to the Commonwealth. Grant A is an individual, and has granted a security interest in his or her personal property to Person A, another individual. The security agreement is entered into in State A. Grant A later grants a security interest in the same personal property to Bank A. The security interest held by Bank A, as a security interest arising from the Commonwealth’s banking power, would have priority over the security interest held by Person A.

2.127 Where a security interest is transferred to another party, the transferred part of the security interest would have the same priority after the transfer that it had immediately before the transfer (clause 60). 2.128 A secured party could subordinate their security interest to any other interest (whether or not a security interest) in the same collateral (clause 61(1)). This would sometimes be necessary because a prior perfected security interest could limit further finance available to the debtor.

2.129 A subordination agreement would be effective according to its terms. Any third party who is intended to benefit from the subordination agreement would be able to enforce the subordination agreement without being a party to the agreement. (Clause 61(2)). Example On 1 July, Finance A registers a security agreement against Grant A over its inventory in anticipation of future deliveries of inventory to Grant A. On 1 August,

[page 479] Grant A attempts to obtain further finance from Finance B but Finance B is aware of Finance A’s registered security interest and concerned that Finance A would have priority in the event of Grant A’s default. Finance B therefore makes the provision of finance conditional on a subordination agreement between Grant A and Finance A to ensure that once their security agreement is signed, Finance B’s security interest would not be subordinate to that of Finance A.

2.130 A security interest would not be created by an agreement or undertaking to subordinate the right of a person to the performance of an obligation to the right of another person to the performance of an obligation of the same debtor. Advances 2.131 An advance is the payment of currency, the provision of credit or the giving of value, and would include the liability of a debtor to pay interest, credit costs and other charges or costs connected to the advance or the enforcement of a security interest securing the advance (clause 10, advance). A future advance would be an advance secured by a security interest (if the advance is made after the security agreement) and would include expenses in relation to the enforcement of the security agreement, secured by the security interest (clause 10, future advance). 2.132 A security agreement could contain a provision securing a future advance (clause 18(4)) and the Bill would confer the same priority on all advances (including future advances) and obligations secured by the security agreement (clause 58). Accordingly, a security agreement can contain a provision which secures future advances. 2.133 Expenses, in relation to the enforcement of a security interest in collateral, would include advances, costs and taxes for obtaining

possession of, protecting (including insuring), maintaining, preserving or repairing the collateral (clause 10). A security agreement would be taken to secure reasonable expenses in relation to the enforcement of the security interest, unless the parties agree otherwise (clause 18(5)).

Purchase money security interests 2.134 A security interest would be a purchase money security interest: to the extent that it attaches to collateral and secures all or part of the purchase price; where the secured party provides the value required by the grantor to acquire the collateral, to the extent that the collateral secures the value; where a lessor or bailor acquires an interest under a PPS lease, that is, a lease or bailment of tangible property for an effective period of more than one year, or 90 days in the case of serial numbered goods) (clause 13); or where a consignor acquires an interest under a commercial consignment (clause 14(1)). Example Grant A leases a jetspa from Finance A for a term of more than one year. Finance A has a purchase money security interest. Example Grant A is a wholesaler of car radios. Grant A purchases car radios from Manufacturer A, financed by Bank B. Bank B has a security interest in Grant A’s all present and after acquired property but does not have a purchase money security

[page 480] interest. Grant A decides to take up Manufacturer A’s offer to supply the car radios on a deferred payment basis. Manufacturer A would have a purchase money security interest in the car radios supplied after this time.

2.135 A secured party who has a purchase money security interest would have priority over a perfected security interest in the same collateral, granted by the same grantor, provided the purchase money security interest is perfected by a registration that states that the security interest is a purchase money security interest. 2.136 When the collateral is inventory that is goods, the purchase money

2.137

2.138

2.139

2.140

security interest would have to be perfected by a registration before the grantor obtains possession of the goods (clause 62(2)). A single registration could confer purchase money priority on several later supplies of goods. When goods are shipped to the grantor by a common carrier, the grantor would not obtain possession of the goods until the grantor acquires actual possession of the goods (clause 65). When the collateral is inventory that is not goods, the security interest would have to be perfected by a registration before the security interest could attach to the inventory (clause 62(2)). When the collateral is goods, but not inventory, the purchase money security interest would have to be perfected by registration before the end of 10 days after the grantor obtains possession of the goods. When collateral is neither inventory nor goods, the purchase money security interest would have to be perfected by registration before the end of 10 days after the security interest attaches to the collateral. (Clause 62(3)). A purchase money security interest held by a seller, lessor or consignor of the collateral would have priority over another purchase money security interest in the same collateral held by a person who is not the seller, lessor or consignor, provided the priority interest is perfected within the period required to obtain priority over a security interest that is not a purchase money security interest (clause 64). A PMSI would not include: an interest acquired under a sale and lease-back arrangement; an interest in collateral (as original collateral) that is a monetary obligation, chattel paper, investment instrument, investment entitlement or a negotiable instrument; a security interest in collateral that the grantor intends to use predominantly for personal, domestic or household purposes (clause 14(2)). If a security interest secures purchase money security obligations and other obligations, it would be a purchase money security interest only to the extent that it secures purchase money obligations and not to the extent that it does not secure purchase security obligations (clause 14(3)). Example Grant A borrows $100,000 from Dealer A to purchase a front-end loader from Dealer A. Grant A is able to purchase the front-end loader for $75,000 and Grant A uses the balance of the money advanced ($25,000) to purchase a round-the-world cruise. While the frontend

loader would secure the entire $100,000 advanced, the security interest would only be a purchase money security interest priority to the

[page 481] extent that it secured $75,000. Dealer A would have a security interest in the front-end loader securing the other $25,000 (but this security interest would not have purchase money security status).

2.141 If a security interest is granted in purchase money security collateral and collateral that is not purchase money security collateral, the security interest would be a purchase money security interest only to the extent that it secures the purchase money collateral (clause 14(4)). Example Grant A owes $5,000 to Bank A, but the loan is unsecured. Grant A borrows a further $10,000 from Bank A to purchase a computer. All of the $10,000 is used to purchase the computer. Bank A secures both the $10,000 loan and the earlier $5,000 loan against the computer. The security interest in the computer would be a purchase money security interest only to the extent that it secures the $10,000 advanced by Bank A for the purchase of the computer.

2.142 A purchase money security interest would continue to be a purchase money security interest despite the secured obligation being renewed, refinanced, consolidated or restructured (clause 14(5)). Example Bank A gives Grant A a $5,000 unsecured loan in addition to an existing $10,000 purchase money security interest secured against Grant A’s wine collection. Grant A and Bank A agree to consolidate the loans, to extend the period over which Bank A must be repaid and to secure the loans against the wine collection and against some antique prints owned by Grant A. The consolidated loan would be a purchase money security interest, but only to the extent of $10,000 of the $15,000 consolidated loan and only to the extent that it is secured against the wine collection.

2.143 When an obligation secures both purchase money security interests and other security interests, the parties could agree on a method of apportioning payments. If the parties don’t agree, the payments would be apportioned as intended by the grantor alternatively in the following order: to unsecured obligations; to secured obligations; to obligations secured by purchase money security interests. (Clause 14(6)).

Non-purchase money security interests in accounts 2.144 The priority held by an inventory financier in a purchase money security interest could extend to proceeds arising from a dealing by the grantor in the collateral (clause 32(5)) but when the proceeds are in the form of an account, other than an ADI account, the grantor could assign the account to another person for new value. 2.145 The accounts financier would have priority provided it registers its security interest against the grantor, before the earlier of: the perfection of the purchase money security interest; or the registration time of the purchase money security interest (Clause 64(1)). 2.146 Alternatively, the accounts financier would have priority, if it gives notice to each secured party holding a registered purchase money security interest in the inventory at least five business days before the earlier of the day: it registers its security interest against the grantor; or the priority interest attaches to the account. (Clause 64(1)). [page 482] 2.147 The requirement that five business days notice be given to the inventory financier would give the inventory financier time to protect its security interest by altering the terms of trade for future inventory finance that would become subordinate to the priority interest. 2.148 If the purchase money security interest is subordinate to a priority interest, the purchase money security interest would continue in either the proceeds of the inventory or the new value received by the grantor. This security interest in the new value would be taken to be perfected by the registration that perfected the purchase money security interest in the proceeds. (Clause 64(3)). Example Manufacturer A supplies inventory to Grant A on a purchase money security interest basis. Manufacturer A has registered against Grant A in relation to the inventory. Grant A would like to begin transferring the proceeds of its inventory, in the form of accounts, to Discount A for new value. Discount A gives 5 business days notice to Manufacturer A of its intention to begin buying accounts from Grant A. Discount A registers its security interest in the transferred accounts. At the end of the 5 business days, Discount A begins buying the

accounts from Grant A. Discount A has priority over Manufacturer A in relation to the accounts, but Manufacturer A would have a purchase money priority over the new value Grant A has received on the transfer of the accounts to Discount A.

2.149 More than one purchase money security interest could attach to the same collateral, for example where a grantor acquires collateral that is financed partly by the seller of the collateral and partly by another financier. 2.150 A purchase money security interest held by a seller, lessor or consignor would have priority over any other purchase money security interest granted by the same grantor, if the purchase money security interest is perfected: for collateral that is inventory and tangible property — at the time the grantor obtains possession; for collateral that is inventory and intangible property — at the time the priority interest attaches to the collateral; and in any other case, before the end of 10 business days after the grantor obtains possession of the collateral (clause 63). Example Grant A acquires a lathe from Manufacturer A on a retention of title basis, under which Grant A is obliged to pay 25% on possession and the balance in regular instalments over six months. Manufacturer A has a purchase money security interest in the lathe that secures the 75% balance owing on the lathe. Grant A finances the initial 25% of the purchase price of the lathe through a loan from Bank B secured against the lathe also on a purchase money security interest basis. Manufacturer A’s purchase money security interest will have priority over Bank B’s purchase money security interest.

2.151 When neither of the purchase money security interests is held by a seller, lessor or consignor, priority would be determined in accordance with the default priority rules, that is, on the basis of the earliest priority time or earliest attachment if neither is perfected. Example Bank A grants Grant A a loan to purchase equipment for its business. Bank A takes a security interest in all Grant A’s present and after acquired property, including

[page 483] proceeds, to secure the loan. Grant A then acquires a boat from Manufacturer A, on a retention of title basis, and Manufacturer A registers its purchase money security interest in the boat. Grant A finances the initial down payment on the boat through a loan from Bank B, also secured against the boat, and any proceeds, on a purchase money security interest

basis. Grant A sells the boat and acquires proceeds in the form of an account. Grant A sells the account to Discount A and keeps the new value provided by Discount A. Discount A gives notice to Manufacturer A one day before it registers its security interest in the transferred account. Discount A has priority over Manufacturer A in the proceeds that were transferred to Grant A. As the seller of the boat, Manufacturer A would have priority over Bank B’s purchase money security interest in the proceeds but Bank B would have priority over Bank A which does not have a purchase money security interest in the proceeds.

Priority of security interests in transferred collateral 2.152 A grantor could transfer collateral to another person where the transferee does not take the property free of the security interest and the transferee, in turn, grants a security interest in the collateral to another secured party. In these circumstances, it would become necessary to determine which security interest has priority (clause 66). 2.153 The law would need to balance the competing interests of two innocent parties: the secured creditor who provided finance to the transferor and who did not consent to and is unaware of the transfer (the transferor’s secured party); and the secured creditor who provided finance to the transferee and who was not aware of the earlier security interest (the transferee’s secured party). 2.154 Where the transferor-granted security interest or the transferee-granted security interest is a purchase money security interest, neither interest would have purchase money priority over the other, because purchase money priority applies only when the competing security interests have been granted by the same grantor (clause 62(1)). 2.155 The transferor-granted interest would have priority where it was perfected immediately prior to transfer and was continuously perfected since transfer (clause 67). Example Bank A has a registered security interest in Grant A’s worm farm, securing $100 owed by Grant A to Bank A. Grant A transfers the worm farm to Grant B, in circumstances where Grant B takes the worm farm subject to the security interest. Bank A has the benefit of temporary perfection (clause 34). Within 24 months of the transfer, Grant B grants Bank B a security interest in the worm farm, securing $150 owed by Grant B to Bank B. Grant A is not aware of the transfer. Bank A’s security interest would have priority over Bank B’s security interest (clause 67). Example

Bank A has a registered security interest in Grant A’s worm farm, securing $100 owed by Grant A to Bank A. Grant A transfers the worm farm to Grant B, in circumstances where Grant B takes the worm farm subject to the security interest. Bank A has the benefit of temporary perfection (clause 34). Bank A becomes aware of the transfer, but does not register against Grant B within 5 business days. The temporary perfection ends (clause 34(1)(c)(ii)). Bank A registers against Grant B. There are no other registrations against Grant B. Grant B later grants a security

[page 484] interest in the worm farm to Bank B (who later still perfects its security interest by registration). Bank A would have priority on an ordinary first in time basis because its second registration was made before Bank B’s registration.

2.156 On ordinary first in time priority principles, once the transferorgranted interest becomes unperfected, a perfected transferee-granted interest would have priority over a transferorgranted interest. 2.157 However, the Bill would allow the transferor-granted interest to have priority over the transferee-granted interest, subject to the transferor’s secured party resuming perfection of the security interest and giving notice to the transferee’s secured party. The transfereegranted interest would have priority to the extent of any advances made or obligations secured while the transferor-granted interest was not perfected (clause 68). The transferee’s secured party would have priority only if it acquired the security interest without actual or constructive notice that the acquisition constitutes a breach of the transferor’s security interest (clause 68(2)(c)). Example Bank A has a registered security interest in Grant A’s worm farm, securing $100 owed by Grant A to Bank A. Grant A transfers the lathe to Grant B, in circumstances where Grant B takes the worm farm subject to the security interest. Bank A has the benefit of temporary perfection (clause 34). Bank A becomes aware of the transfer, but does not register against Grant B within 5 business days. The temporary perfection ends (clause 34(1)(c)(ii)). Grant B is negotiating a loan from Bank B. Bank B registers against Grant B. Bank A becomes aware of the transfer to Grant B and registers against Grant B but before Bank B makes an advance to Grant B or comes under an obligation to Grant B that is secured against the worm farm. Bank A gives a notice to Bank B. Bank A’s security interest has priority over Bank B’s security interest (clause 68(1)).

2.158 The transferee-granted interest has priority where the transferorgranted security interest: is not registered with a serial number; was perfected by registration before the transfer, became

unperfected and was later reperfected; notice in the approved form was given to other secured parties; the transferee-granted security interest was perfected immediately before the transferorgranted interest was re-perfected; the transferee acquired their interest without knowledge that it was a breach of a prior security agreement; and the transferee-granted interest secured performance of an advance made before the transferor-granted interest is re-perfected (this would apply despite the rule that all advances have the same priority)(clause 58). (Clause 68(2)). Example Bank A has a registered security interest in Grant A’s worm farm. Grant A transfers the worm farm, in the ordinary course of his business, to Grant B who acquires the worm farm free of Bank A’s security interest. Grant B grants a security interest in the worm farm to Bank B. Bank B immediately perfects its interest in the worm farm without any knowledge that this is in breach of Bank A’s prior security agreement and makes a number of advances to Grant B under their security agreement. Bank A later becomes aware of the transfer and

[page 485] re-registers its security interest and provides notice to Bank B in the approved form. Bank A would have priority over Bank B’s security interest in the worm farm (clause 68(1)). However, Bank B would have priority over the Bank A’s security interest to the extent of the advances made or obligations incurred before Bank A re-perfected its security interest and gave the notice to Bank B (clause 68(2)).

Priority of creditors and purchasers of negotiable instruments, chattel paper and negotiable documents of title 2.159 The interest of a creditor who is paid by a debtor would have priority over any security interest in: the funds paid; the intangible that was the source of the payment (for example, a bank account); or a negotiable instrument used to effect the payment (clause 69(1)). 2.160 However, the creditor would not have priority if they had actual knowledge that the payment was a breach of the security agreement that provided for the security interest (clause 69(2)). 2.161 A person who acquires an interest in a negotiable instrument, in a

consensual transaction, would have priority over security interests in the negotiable instrument provided: the person provided value and took possession or control of the instrument; if the acquisition was in the ordinary course of the person’s business of acquiring instruments of that kind — the person acquired the interest without actual or constructive knowledge that the transaction involved a breach of the security interest; and if the acquisition was not in the ordinary course of the person’s business of acquiring instruments of that kind — the person lacks actual or constructive knowledge of the security interest (clause 70). Example Finance A perfects its security interest in Dealer A’s cars by registering a financing statement. Dealer A sells a car to a person who pays for the car with a cheque. Dealer A deposits the cheque with Bank A. Bank A is unaware of Finance A’s security interest in the cheques (as proceeds of the car). Bank A’s interest in the cheque takes priority Finance A’s security interest in the cheque.

2.162 The interest of a person who acquires chattel paper for new value, in a consensual transaction, in the ordinary course of their business of acquiring chattel paper of that kind would have priority over: a perfected security interest if they lack actual or constructive knowledge of the security interest; and a security interest that has attached to proceeds of inventory as original collateral (clause 71(2)). Example Dealer A leases paintings in the course of a business. Dealer A leases a painting to Person A. The lease agreement is chattel paper. The lease payments are proceeds of Dealer A’s inventory. Dealer A assigns the lease payments to Finance A. The assignment is deemed to be a security interest and attaches to the payments (which are proceeds of inventory) as original collateral. Dealer A also

[page 486] sells the chattel paper to Finance B. Both Finance B and Finance A claim the lease payments made to Dealer A. Finance B’s interest in the chattel paper would have priority over Finance A’s security interest in the lease payments.

2.163 The interest of a holder of a negotiable document of title would have

priority over a perfected security interest in the document if the holder gives value for the document and: where the holder acquires the document in the ordinary course of their business of dealing in documents of that kind — it is acquired without actual or constructive knowledge that the acquisition was a breach of the security interest; or where the holder does not acquire the document in the ordinary course of their business of dealing in documents of that kind — it is acquired without actual or constructive knowledge of the security interest (clause 72).

Priority of other interests Priority between security interests and declared statutory interests 2.164 An interest in personal property would have priority over a security interest where: it arises under a law of the Commonwealth, a State or Territory (unless the collateral owner agrees to the interest) or the general law; and it arises in relation to providing goods or services in the ordinary course of business; no other law provides for priority between the priority interest and the security interest; and the holder of the priority interest has no knowledge that the transaction is a breach of the security agreement (clause 73(1)). 2.165 Other interests in personal property would have priority over a security interest if, and only if, the Commonwealth, State or Territory conferred priority on the other interests over security interests (clause 73(2)). 2.166 The priority between an interest arising under a law of the Commonwealth, State or Territory and a security interest would be determined according to that law, if: that law declares these provisions to be applicable to the statutory interest; and the statutory interest arises after the declaration come into effect (clause 73(2)). 2.167 These rules do not apply to interests arising before the registration commencement time. Any other interest that currently has priority

over a security interest would continue to have priority over a security interest (clause 312). Priority of execution creditors 2.168 A security interest would be subordinate to the interest of an execution creditor provided the security interest is not perfected at the time of execution (clause 74). [page 487] Returned goods 2.169 A perfected security interest that re-attaches to returned property (clause 37(1)) would have priority over a goods security interest that is granted to the transferee of an account under clause 38(1). (Clause 76(1)). 2.170 A security interest in goods granted to the transferee of chattel paper (clause 38(1)) has priority over: a perfected security interest granted to the transferee of an account (clause 38(2)); a perfected security interest that re-attaches to returned goods or after-acquired property (if the transferee takes possession of the chattel paper in the ordinary course of business and for new value). Example Finance A grants a loan to Dealer A and secures a security interest in all Dealer A’s motor vehicles. Lessor A leases a motor vehicle from Dealer A. The lease creates chattel paper which Dealer A transfers to Finance B. Lessor A makes the required payments under the lease to Finance B. Lessor A then terminates the lease and returns the motor vehicle to Dealer A. Finance A’s pre existing security interest re-attaches to the motor vehicle but this security interest would be subordinate to Finance B’s security interest as the transferee of the chattel paper.

2.171 A security interest in goods that is granted by a person who acquires an interest in the property would have priority over a security interest that re-attaches or is granted when the goods are returned, if: the attachment occurred while the person possesses the property; and immediately before the possession time, the priority interest was

perfected (clause 76(3)). Priority where no foreign register 2.172 Where a foreign jurisdiction does not provide for the registration of security interests, a security interest in an account or financial property (chattel paper; currency; documents of title; investment instruments and negotiable instruments) would have priority over another interest, in proceedings in an Australian court: 2.173 in respect of accounts — if the priority interest was perfected prior to the attachment of the other interest (clause 77(2)); 2.174 in respect of financial property — if the priority interest was perfected by registration prior to the attachment of the other interest and the secured party lacks possession or control of the property (clause 77(3)).

Transfer and assignment of interests in collateral Transfer of collateral 2.175 A provision in a security agreement or other agreement prohibiting the transfer of the collateral by the grantor would not affect any right the grantor has to transfer the collateral either by agreement with the transferee or by operation of law (clause 79(1)). 2.176 However, the fact that the transfer of the collateral is effective would not affect the right of a secured party to treat the transfer as a default under the security agreement (clause 79(2)). [page 488] Rights on transfer of account or chattel paper 2.177 In order to ensure that an account debtor is not in a worse position following the transfer of an account or chattel paper, the rights of a transferee of an account or chattel paper (including a secured party or receiver) would, subject to the account debtor not having agreed not to assert any contractual defences (clause 80(2)), be subject to: the contractual terms between the account debtor and the transferor, and any equity, defence or claim arising under their

contract; any other equity, defence or claim that the account debtor may have against the transferor, including set-off, that arises before transfer, (clause 80(1)). Modification or substitution of contract 2.178 An account debtor and the transferor of an account may agree to modify the contract giving rise to the account. The modification would be effective against the transferee provided that: the account debtor and the transferor acted honestly in modifying the contract; the modification is made in a commercially reasonable way; and the modification does not have a materially adverse effect on the transferee’s rights or the transferor’s ability to perform under the contract (clause 80(6)). 2.179 This rule would apply only to the extent that a transferred right to payment has not been fully earned by performance (or is outstanding) (clause 80(4)). 2.180 If a transferor initially agrees with the transferee not to modify or substitute a contract but then later agrees with the account debtor to modify or substitute the contract, contrary to the agreement with the transferee, the transferor would be acting dishonestly. 2.181 If collateral is intangible or chattel paper, the account debtor would be able to make payments under the contract to the transferor until the receipt of a notice including the following information: the contract under which payment has become due; the amount payable that has been transferred; and that payment needs to be made to the transferee. 2.182 An account debtor would be unaffected by the assignment of a debt until notice of the assignment is given directing the account debtor to pay the transferee. After receiving notice, other than a notice from the transferor, if the account debtor requests proof from the transferee and the transferee fails to provide proof within 5 days of the transfer, payment to the transferee discharges the obligation (clause 80(7)). Example Buyer A has an agreement with Dealer A to purchase equipment and pay on an instalment basis. Dealer A agrees that it will not assign any of its rights under the sale agreement.

Nevertheless, Dealer A grants Finance A a security interest in the accounts. The antiassignment agreement would be ineffective. However, if Finance A notifies Buyer A to make all future payments directly to Finance A, Buyer A would be obliged to do so in order to discharge its obligations.

[page 489] Rights on transfer of account or chattel paper 2.183 A term in a contract which prohibits the transfer of: an account arising from the proceeds of inventory; an account which arises from granting rights (other than under construction contracts) or providing services (other than financial services) in the ordinary course of a business of that kind; or an account that is proceeds of an account arising from providing rights or services in the ordinary course of business; would be binding on the transferor only to the extent of making the transferor liable in damages for breach of contract and is unenforceable against third parties (clause 81(2)). Example Buyer A has an agreement with Dealer A to purchase equipment and pay on an instalment basis. Dealer A agrees that it will not assign any of its rights under the sale agreement. Nevertheless Dealer A grants to Finance A a security interest in its accounts. The antiassignment agreement would be ineffective.

2.184 This provision acknowledges that it is impractical for transferees of accounts and chattel paper to examine each contract for prohibitions on assignment.

CHAPTER 3 — SPECIFIC RULES FOR CERTAIN SECURITY INTERESTS Agricultural interests 3.1 The Bill deals with the relationship between a security interest in crops and an interest in the land on which the crops are growing (clause 84). 3.2 It establishes what could be described as an ‘agricultural PMSI’ (purchase money security interest) that would enable farmers to obtain additional finance on a PMSI-like basis, using crops and livestock as

collateral. While an ‘agricultural PMSI’ shares many characteristics with PMSIs, they would have a lower priority than a PMSI in the same property. Relationship between security interest in crops and interest in land 3.3 The Bill would protect the interests of a lessor or mortgagee of land and they would not be adversely affected if: a security interest is granted in crops on the land after the creation of the lessor’s or mortgagee’s interest in the land; and the lessor or mortgagee has not consented to the creation of the security interest in the crops (clause 84(1)). Example Farmer B borrows money from Bank A and provides Bank A with a mortgage over his land. Farmer B then borrows money from Bank B and grants a security interest to Bank B in his crops. Bank A does not give written consent to the creation of the security interest in the crops. Bank A’s mortgage is not prejudicially affected by Bank B’s security interest in the crops.

3.4 A perfected security interest in crops would be protected if the land is subsequently sold, leased or encumbered (clause 84(2)). This provision reflects similar protection in State and Territory legislation. [page 490] Example Farmer J borrows money from Bank A and grants Bank A a perfected security interest in her crops. Farmer J then grants Bank B a mortgage over the land on which the crops are growing. Bank A’s security interest in the crops is not prejudicially affected by Bank B’s mortgage.

3.5 Perfected security interests in crops which secure loans or other value used to produce the crops (a ‘crop PMSI’) would have priority over other security interests in the same crops (clause 85) 3.6 A security interest in crops would be a crop PMSI where: the security interest is granted for value; the security interest is granted to enable the crops to be produced (for example, seed, fertiliser or chemicals used in crop production); and the security agreement providing for the security interest is made six months before the crops are planted or while they are growing

(to ensure that the growing of the crops is contemplated at the time the security interest is granted) (clause 85). Example Farmer B borrows money from Bank A and provides Bank A a perfected security interest in his crops. The money is used for general farming purposes not specifically related to producing the crops. Farmer B then purchases fertiliser from AgricSupplies on terms that grant AgricSupplies a security interest in the fertiliser and the crops securing the unpaid purchase price of the fertiliser. The crops PMSI of AgricSupplies would have priority over Bank A’s security interest in the crops.

3.7 A similar rule would be established for livestock, but whereas the crop PMSIs would have priority over other PMSIs, the priority interests in livestock would not have priority over PMSIs (clause 86).

Accessions 3.8 Goods are sometimes made up of separate components that may require replacement as they wear out or become obsolete (for example, a sail on a yacht) and the value or utility of these goods may be improved with additional components (for example, a roof rack or trailer hitch to a car). 3.9 These substituted or added goods are accessions, which are defined as goods that are installed in, or affixed to, other goods, unless both the accessions and the other goods are required or permitted by the regulations to be described by unique serial numbers (clause 10, accession). For example, an engine installed in a motor vehicle is an accession because the engine is physically attached to the motor vehicle and only the car is described by a unique serial number. This exception for goods permitted or required to be described by a serial number would avoid the application of the accessions provisions where it would be inappropriate to do so and in particular, to the attachment of aircraft engines to airframes. 3.10 Accessions raise particular priority issues and therefore the Bill would provide special priority issues for accessions. They would also raise particular enforcement issues (as they become attached to other property). The rules on accessions are closely modelled on those in the New Zealand and Saskatchewan personal property securities legislation. [page 491]

Priority rules 3.11 A security interest in a good would continue in the good after it becomes an accession, despite being affixed or installed to another good (clause 88). 3.12 A security interest in an accession would have priority over an interest in the whole unless the interest in the whole falls within an exception (clause 89). For example, a security interest in an engine that is later affixed to a car would have priority over a security interest attached to the car. If the car (including the engine) were dealt with in a way that extinguished the security interest, then the security interest in the engine would be extinguished, for example, if the car were sold by a motor vehicle dealer. 3.13 These provisions would protect secured parties with security interests in goods that have the potential to become an accession (because when the security agreement is made the secured party would have an expectation that the good would later be affixed or installed to another good and that this would not affect their security interest). 3.14 Exceptions to the default priority rule would apply when: a person acquires an interest in the whole for value after the accession is affixed, but before the security interest in the accession is perfected; a person who buys the whole for value before the security interest in the accession is perfected; a person with a perfected security interest in the whole who makes an advance after the accession is affixed and before the security interest in the accession is perfected, but only to the extent of the advance; or a person has a perfected security interest in the whole obtained after the goods become an accession, and acquires the right to retain the goods under the security agreement before the security interest in the accession became perfected. (Clause 90). 3.15 All of these exceptions would apply only when the secured party to the accession has not perfected its security interest in the accession after it became affixed and it is therefore necessary to balance the interests of the secured party to the accession (who has not perfected the security interest) and another person who acquired rights in the whole (including the accession) without the benefit of notice that would have

been provided by perfecting the security interest. Example Grant A borrows money from Finance B to buy a new motor for its pump, which is placed into the pump. Before Finance B registers its security interest in the motor on the PPS Register, Grant A offers the pump as security for a loan from Bank A, which advances the money and perfects its security interest in the pump through registration. Bank A has priority over Finance B to the motor because Bank A acquired for value an interest in the whole (the pump) before the security interest in the accession (the motor) was perfected. Bank A’s search of the register would not have disclosed Finance B’s security interest, and Bank A was entitled to assume that its perfected security interest would have the highest priority of any security interests attached to the pump.

3.16 Exceptions to the default priority rules would also apply where a security interest in the accession attaches after the goods becomes an accession. (Clause 91). [page 492] 3.17 A security interest in the accession would be subordinate to a security interest attached to the whole before the accession was affixed, unless the person with the security interest in the whole: consents to the security interest in the accession; disclaims any interest in the accession; agrees that a person may remove the accession; or has no right to prevent the grantor from removing the accession. Example Grant A owns a large telescope at its observatory. Bank A has a registered security interest in Grant A’s telescope. Grant A orders a replacement mirror from Supplier S. Supplier S supplies and installs the mirror in the telescope before the terms of payment are agreed. Grant A and Supplier S later agree that payment for the mirror is to be made within 30 days of the installation and Supplier S a security interest in the mirror. Bank A does not consent to the terms of payment between Grant A and Supplier S. Grant A defaults on its obligations to Bank A. Bank A seeks to enforce its interest in the telescope (including the recently installed mirror). Bank A’s security interest would have priority over Supplier S’ interest in the mirror.

3.18 A security interest in an accession that attaches after the goods become an accession would also be subordinate to the interest of 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. Enforcement of security interests in accessions

3.19 A secured party seizing an accession would have a duty to minimise any damage caused to the other good and any inconvenience to the person in possession of the other goods (clause 123). Only damage and inconvenience that is necessarily incidental to the removal of the accession would be permitted and the degree of damage and inconvenience that is necessarily incidental to the removal would be a question of fact in each case (clause 92). 3.20 Any party other than the grantor with an interest in the goods which are damaged would have a right to be reimbursed for the damage (but not inconvenience) caused by the removal of the accession, even if the damage is necessarily incidental to the removal of the accession (clause 93(1)). The value of the damage would not include the diminished value of the good resulting from the removal of the accession (otherwise the reimbursed party would be unjustly enriched) (clause 93(2)). A person entitled to be reimbursed may refuse to give permission for removal until the secured party has given adequate security for the removal (clause 94). 3.21 The secured party who is removing the accession would have to notify the grantor and any parties with a higher priority security interest in the accession that they intend to remove the accession (clause 95(1). Notice would give the grantor and any parties with a higher priority security interest in the accession an opportunity to approach the Court to seek a postponement of the removal (clause 97). 3.22 A person with an interest in the whole would be entitled to retain the accession if the obligation secured by the security interest in the accession is performed or the removing party is paid the market value of the accession (clause 96). The removing party would be able to obtain a Court order determining the amount payable for the retention of the accession (clause 97). [page 493]

Processed or commingled goods 3.23 Special provisions would apply to goods which are manufactured, processed, assembled or comingled so that they become part of a product of mass and their separate identity is lost.

3.24 A security interest in goods would continue in a product or mass even though the identity of the good is lost in the manufacturing, processing, assembly or commingling process (clause 99(1)). 3.25 The identity of the good would be lost if it is not commercially practical to restore the good to its original state. This would be a question of fact to be determined by the commercial and practical facts of each case. (For example, grain that becomes commingled with other grain in a silo would normally lose its identity in the mass of grain and a piece of wood that is manufactured into a fruit bowl would lose its identity in the fruit bowl) (clause 99(2)). 3.26 Perfection of a security interest in goods that become part of a product or mass is treated as perfection of a security interest in the product or mass (clause 100). The Bill would therefore provide protection for a secured party who perfects their security interest in a good which is then subsequently transformed into another good. 3.27 Any priority continuing in the commingled goods would be limited to the value of the goods on the day on which they became part of the combined product or mass (this would prevent the unjust enrichment of a secured party) (clause 101). Example Grant A is a furniture-maker. Finance A has a perfected security interest of $1 000 in glue owned by Grant A. Finance B has a perfected security interest of $10 000 in timber owned by Grant A. Grant A uses the glue and timber to make a table. The value of the glue that Grant A uses to make the table on the day that Grant A makes the table is $50. The value of the timber that Grant A uses to make the table on the day that Grant A makes the table is $200. Finance A and Finance B are the only persons with security interests in the table. Because the market for tables collapses, the table is worth $100. Finance A and Finance B have equal priority in the table. On enforcement of their security interests, Finance A is entitled to recover $20 (or 50/250th of $250). Finance B is entitled to recover $80 (or 200/250th of $250).

3.28 The priority between security interests continuing in commingled goods would be determined according to three rules: a continuing perfected security interest would have priority over a continuing unperfected security interest (clause 102(1)); continuing perfected security interests would have equal priority, but only to the extent that the amount secured by the interests would be proportionate to the amount secured by the sum of all perfected interests(clause 102(2)); and continuing unperfected security interests would have equal priority but only to the extent that the amount secured by the

interest would be proportionate to the amount secured by the sum of all perfected interests (clause 102(3)). 3.29 The priority of security interests continuing in the product or mass would be limited to the value of the goods on the day on which they become part of the [page 494] product or mass (clause 102(4)). But a perfected PMSI in goods that continues in the product or mass has priority over a non-PMSI security interest in the product or mass (clause 103). Example Grant A is a furniture-maker. Finance A has a registered security interest of $1 000 in glue owned by Grant A. The value of the glue that Grant A uses to make a table on the day that Grant A makes the table is $50. The table is valued at $1 000, being for the timber, glue, labour and skill of the furniture maker. On enforcement of its security interest, Finance A could recover no more than $50.

Intellectual Property Implied references to intellectual property 3.30 If a security interest in goods were perfected by registration, and the exercise of the secured party’s rights would necessarily involve the exercise of the intellectual property rights, including those under licence, and the security interest had attached to the intellectual property, then the description of the goods in the security agreement would be taken to include a description of those intellectual property rights. This would be subject to the parties indicating a contrary intention in their agreement (clause 105). Example Grant A owns a factory that produces car parts using robots whose only function is to manufacture those particular car parts. The process used to manufacture the car parts was patented by Grant A. Grant A obtains a loan from Bank A and received value for a security interest. The security agreement refers to ‘the robots’. Bank A registers the security interest. Grant A defaults under the security agreement. Bank A enforces the security agreement. The security agreement only refers to a security interest in robots, but the court determines that the security interest extends to the patent to the extent required to permit the robots to operate. The exercise of Bank A’s rights to the robots under the security agreement necessarily involves the use of the patent rights exploited in the robots. Bank A’s security

interest will therefore be enforceable against both the robots and the patent.

Security interests in intellectual property licences 3.31 Where intellectual property is transferred and the licensee or sublicensee continues to hold the licence or sub-licence after transfer, a security interest in the licence or sub-licence would continue in the licence or sub-licence and bind every successor-in-title to the licensor to the same extent as the security agreement was binding on the licensor (clause 106). Example Licensor A is the owner of copyright, and has licensed Grant A to exercise the copyright. Grant A has granted a security interest in the licensed rights to Bank A. Licensor A transfers the copyright to Licensor B. Licensor B will be bound by the security interest granted by Grant A to Bank A to the same extent that Licensor A was bound by the security interest.

[page 495]

CHAPTER 4 — ENFORCEMENT OF SECURITY INTERESTS General rules 4.1 The Bill would not codify the rights, duties and obligations of the parties to a security agreement as the parties should be able to negotiate their own contractual terms, subject to the provisions of the Consumer Credit Code (the Code), to the extent that it is able to operate concurrently (clause 254(1)). 4.2 Any secured party would, regardless of its priority ranking, be able to commence enforcement action under the Bill. This would enable secured parties to negotiate between themselves and reach agreement about enforcement. Higher ranked secured parties would, however, be able to protect their interests by obtaining possession of collateral from a lower ranked enforcing party. 4.3 Enforcement under the Bill would not require secured parties to obtain judgment against a debtor before being entitled to exercise rights against the secured assets. Likewise, the enforcement provisions would

not prevent persons with an interest in the secured property, other than a security interest, from enforcing their interest, through court proceedings. Exclusions 4.4 The enforcement provisions would only apply to secured goods within Australia. However, it is important to note that the enforcement provisions would not apply to all secured personal property. 4.5 Specifically, the enforcement provisions would not apply where: the transaction is deemed to be a security interest. A transaction that does not secure the payment or performance of an obligation does not create a security interest and therefore should not be subject to the security interest enforcement remedies; or a party has perfected its security interest in an investment instrument or investment entitlement by taking possession or control. When the secured party has perfected their security interest in an investment instrument or investment entitlement by possession or control they would be able to sell, transfer, use or otherwise deal with the collateral in the manner and to the extent provided in the security agreement. This would allow a secured party to trade in the market without having to comply with the procedures and time limits of the Bill (clause 109(3)). Exercise of rights 4.6 The enforcement provisions would not diminish the rights and remedies available to parties, whether those remedies are provided for by the security agreement, any Commonwealth, State and/or Territory law and/or any rule of law or equity (clause 110). Accordingly, the rights and remedies available to parties may be a combination of right and remedies provided in the Bill, contractual provisions and other legislation (clause 114). [page 496] 4.7 However, enforcement action under the Bill would require all parties to exercise their rights, duties and obligations arising under the enforcement provisions honestly and in a commercially reasonable

manner (clause 111). The duty would apply in conjunction with the specific duties imposed in the enforcement provisions, and under the general law and other legislation. 4.8 In exercising rights, a secured party is generally only able to deal with the personal property to the same extent that the grantor would be able to deal with the property. However, a secured party would not be so limited if the secured party had title to the collateral prior to enforcing (for example, a lease arrangement, or where the grantor is contractually prohibited from transferring the collateral to a contract) (clause 112). 4.9 If a secured party has obtained judgment or initiated execution proceedings against a grantor these would continue in the collateral and would not prevent the secured party from taking enforcement action under the Bill (clause 113). Collateral used for consumer purposes 4.10 The Bill distinguishes between transactions securing inventory and equipment and those securing consumer goods, particularly in relation to the extent to which parties may contract out of the enforcement clauses. 4.11 In describing consumer transactions, the enforcement provisions refer to ‘goods used predominantly for personal, domestic or household purposes’ rather than ‘consumer property’, used elsewhere in the Bill and defined as property used exclusively for a non-ABN activity (clause 10). 4.12 Consumer property is defined in the Bill as property used predominantly for personal, domestic or household purposes or intended to be used mostly for those purposes and is not acquired as an investment. The use of the wider definition is consistent with the Code and would ensure that the consumer protections in the Code and the Bill would apply in broadly the same set of circumstances. Certain remedies would not be available where the collateral is used predominantly for personal, domestic or household purposes. The remedies that fall into this category are: remedies available under applied provisions of the State and Territory land law (clause 117–118); the collection and application of liquid collateral (clause 120); the disposal of collateral by lease or licence (clause 128(2));

the disposal by sale where the collateral is acquired by the enforcing secured party (clause 129); and the retention of collateral by the enforcing secured party (clause 134). Contracting out 4.13 The parties would have freedom of contract over their respective rights and responsibilities in enforcement. 4.14 Parties would also be able to contract out of specific enforcement provisions. The rights of parties to contract out would not impact on the rights and remedies affecting third parties who are not parties to the contract. 4.15 The extent to which parties would be able to contract out would depend on whether the collateral secured is used predominantly for personal use; and if so, [page 497] parties would only be able to contract out of the secured party’s right to apparent possession (where property cannot be seized or storage facilities are unavailable) (clause 115(4)). 4.16 This would ensure that consumers have the full protection of the enforcement provisions and, in particular, the notice provisions. In any event, contracting out of the provisions in respect of personal, domestic and household goods would be of limited use as parties would still have to meet the requirements in the Code. Example Grant A obtains a loan from Bank B to finance the purchase of business assets secured against her car. Grant A uses the car 90% of the time for personal use. For 10% of the time Grant A uses the car for business purposes. Grant A defaults on the loan and Bank B initiates enforcement action. As a result of Grant A’s use of the car predominantly for personal, household or domestic purposes, Bank B is unable to vary or contract out of most of the enforcement provisions, regardless of the fact that the loan was obtained to meet business needs.

4.17 Where collateral is not used predominantly for personal, domestic or household purposes, parties would be able to contract out of most of the enforcement provisions (clause 115).

Relationship with other laws 4.18 The Bill would not apply to property of a business that is subject to a receiver or a controller appointed under Part 5.2 of the Corporations Act 2001 (clause 116). These provisions provide comprehensive rules for receivers and other controllers when exercising functions in relation to property. 4.19 Security agreements in relation to commercial transactions often use both personal property and land to secure the same obligation. Currently, a secured party must initiate separate enforcement proceedings against the land and the personal property to meet any outstanding debt secured by both. This is costly and can lead to prolonged enforcement proceedings. 4.20 In order to reduce costs and to ensure expeditious resolution of enforcement, the Bill would allow a secured party who has a security interest securing the same obligation in relation to both kinds of collateral to apply the land law to the personal property as if the personal property were land (clause 117–118). This is done by reading in the provisions of the relevant land law as if it were a provision of the Bill. 4.21 The incorporation of the land laws would not oblige a secured party having an interest in both land and personal property to initiate enforcement action under the applied land laws. A secured party could take separate proceedings against the land under the land law and against the personal property in accordance with their other rights under the Bill, general law and the security agreement (clause 118(2)). 4.22 A secured party could make a decision to proceed as if the personal property were land or to proceed under the Bill; but could only make a decision where they have the highest priority or have received written agreement from all the other secured parties (clause 117(1)). 4.23 Where a secured party decides to proceed under land law, the land law of the State or Territory in which the land is situated would apply. A secured party who elected to proceed under the land provisions would not have to comply [page 498]

with the enforcement provisions of the Bill other than the distribution rules (clause 140). The rights of the other secured parties would not be affected by the proceedings under land law. They would have standing in any enforcement proceedings and would be entitled to apply to Court for a judicially supervised sale (clause 118(6)). 4.24 Because the land law of the State or Territory might not be consistent with the enforcement of security interests against personal property, clause 118(5) would provide a regulation-making power to enable State or Territory land laws to be modified for the enforcement of security interests in personal property. The Bill has been developed in consultation with the States and Territories and they endorse this option of using the State and Territory land laws to enforce security interests in both personal property and land. The States and Territories have also approved the text of this Bill. Consumer Credit Code 4.25 Where collateral is used for consumer purposes, the Bill and the Code would operate concurrently and, in these circumstances, a secured party would have to comply with both the requirements in the Bill and in the Code. 4.26 Whether the Code would apply, would depend on the purpose of the credit. The Code establishes the rights and obligations of parties where credit has been provided, or is intended to be provided, wholly or predominantly for personal, domestic, or household purposes. 4.27 There would be overlap between the Bill and the Code when the credit is provided, or is intended to be provided, wholly or predominantly for personal, domestic, or household purposes, and the collateral is used wholly or predominantly for personal, domestic, or household purposes. The Code may not apply where the credit was intended for business purposes, even if the credit is secured against personal property that is used wholly or predominantly for personal, domestic or household purposes. 4.28 The Code and the Bill contain similar requirements for enforcement, but they also contain requirements on which the other is silent, as well as a number of corresponding requirements. 4.29 Where both the Code and the Bill contain similar obligations, regulations under the Bill would provide that a secured party who has complied with the relevant provision of the Code would be deemed to

have complied with corresponding obligations in the Bill (clause 119(2)). 4.30 The regulations are likely to deem compliance, where the provisions in the Bill and the Code are similar and there would be no significant impact on the rights of parties if there is deemed to be compliance. 4.31 The concurrent operation of the Bill means that: where there are requirements or rights in the Code on which the Bill is silent the secured party must comply with the requirements in the Code; where there are requirements or rights in the Bill on which the Code is silent the secured party must comply with the requirements in the Bill; and where there are corresponding requirements in relation to the same party/s in both the Code and the Bill, the requirements in the Bill may be deemed to be satisfied by a secured party undertaking the requirements in the Code. [page 499] Example Bank A has a security interest in Grant A’s stereo set. Vikram uses the stereo at home. When Grant A defaults on her loan with Bank A, Bank A decides to take enforcement action against Grant A’s stereo. As Grant A uses the stereo predominantly for personal use, Bank A must comply with all the obligations in the Code as well as the requirements in the Bill. As required by the Code, Bank A provides a pre-possession notice to Grant A and gives her 30 days to remedy the default. Pursuant to the Consumer Credit Code, Bank A obtains a court order allowing it to enter Grant A’s residence and take possession of the stereo. As required by both the Code and the Bill, after gaining possession, Bank A provides a notice advising Grant A that it intends to dispose of the stereo. The Code prevents Bank A from selling the stereo until 21 days have elapsed after giving notice. The Bill requires only a period of 10days to have elapsed before Bank A could dispose of the stereo. The regulations could provide, however, that if Bank A complies with the requirements in the Code, Bank A would be deemed to have complied with the Bill. Accordingly, Bank A gives Grant A the pre-disposal notice and waits until 21 days have elapsed before it sells the stereo. Bank A would have complied with the Code and would be deemed to have complied with the Bill.

4.32 The following Table lists the respective rights, duties and obligations contained in the Code and the Bill and details how the Bill and Code would operate when there are concurrent or conflicting duties.

[page 500] Table 9: Interaction between the Code and the Bill The Code After default, the credit provider would have to provide notice to the debtor specifying the action required to remedy the default. The credit provider would have to wait at least 30 days before taking enforcement action (s 80).

The Bill The Bill doesn’t specify the formal requirements for after default and before seizure of the collateral. Therefore the Bill would not prevent the operation of the Code (a secured party enforcing against collateral used as a consumer good would therefore have to send a notice prior to seizure as required in the Code). A secured party cannot enforce a The Bill does not provide any presecurity interest against a guarantor (a seizure conditions where the grantor is person who executed the security not the debtor. Accordingly, the agreement but is not the debtor) unless: requirements in s 82 of the Code would • judgment has been obtained against have to be satisfied before a secured the debtor and remains unsatisfied; or party could enforce against a guarantor. • the court has relieved the credit provider from obtaining judgment against the debtor; or • the debtor cannot be located (s 82). A secured party must seek the consent The Bill does not contain any minimum of a court to seize goods where the amount that would have to be amount outstanding is less than 25% of outstanding before enforcement action the credit provided or $10,000 could take place. The restrictions in s whichever is the lesser amount (s 83) 83 of the Code would apply. An acceleration clause in a contract or mortgage may only be applied in certain circumstances (s 84–85). Postponement of enforcement action The Bill is silent on the issue of could be negotiated between the parties postponement of enforcement action or ordered by a court (s 86–89). and where a debtor, mortgagor or grantor sought a postponement, the provisions in the Code relating to postponement would apply.

A secured party may seek details of the Nothing would prevent a secured party whereabouts of collateral from a debtor from seeking information under s 90 of (s 90). the Code. The concurrent application of the Code • A secured party could seize collateral and the Bill means that a secured party if the debtor is in default (clause 123). may, under the Bill seize collateral used • A secured party with possession or predominantly for personal, domestic control could seize the collateral by or household purposes if any applicable serving a notice on the grantor, or preconditions in the Code have been where the collateral is a licence, the complied with. licensor (clause 124). • A secured party with a higher ranking could seize the collateral from the possession of a lower ranking party (clause 127A). [page 501] The Code A secured party cannot enter residential premises to take possession of collateral without the permission of the occupier or an order from court (s 91–93). The Code is silent on apparent possession and accordingly parties could seize by apparent possession under clause 164 of the Bill unless the parties have contracted out of this provision.

The Bill The Bill provides that a secured party could seize the collateral by any method permitted by law. As a result, a secured party would have to comply with the Code’s regulation of seizure. If collateral cannot be readily moved from a grantor’s premises or adequate storage facilities are not available a secured party may seize the collateral by taking apparent possession of the collateral (clause 123 and clause 126).

Within 14 days of taking possession under a mortgage a secured party must provide notice to the mortgagor with all relevant details and must not sell the goods within 21 days of providing the notice (s 94).

A secured party would have to give notice to the grantor and to any secured party with a higher priority at least 10 business days before the collateral is to be disposed of (clause 130).

Example of Possible Regulation: The regulations could provide that the requirement in clause 130 would be taken to have been complied with, if a notice to the mortgagor is provided as required by section 94 of the Code. A debtor may nominate a person who is The Bill would not prevent the prepared to purchase the goods (s 95). application of s 95 of the Code. If the outstanding obligation has not been paid within 21 days after receiving the notice under section 94 the secured party must sell the goods, either for the estimated value or a higher price to a nominated buyer or to another person for the best price reasonably obtainable (s 96).

After seizing collateral, a secured party would have to dispose of the collateral by sale and must obtain the market value or, if the collateral does not have a market value, the best price reasonably obtainable (Clause 128).

Example of Possible Regulation: The regulations could provide that the requirement in clause 128 and clause 130 of the Bill would be taken to have been complied with if the secured party complied with s 96 of the Code. After the sale of mortgaged goods a secured party must give the mortgagor a notice stating the gross amount realised, the net proceeds of the sale, the amount required to pay out the credit contract and any further action the secured party intends on taking (s 96(3)).

A secured party would have to give the grantor, higher secured parties and the debtor a notice with the total amount received from the sale, the enforcement expenses, amounts paid to other secured parties and the balance owing to the grantor or by the debtor to the secured party (Clause 132).

Example of Possible Regulation: The regulations could provide that clause 132 of the Bill would be taken to have been complied with if a notice is given to the mortgagor (grantor) in terms of s 96(3) of the Code A secured party is entitled to deduct the A secured party would have to following amounts from the money distribute funds received in the received from the sale: following order: [page 502]

The Code • the secured amount outstanding; • the amount payable to discharge any prior mortgage; • the amounts payable to discharge subsequent mortgages of which the secured party had notice (s 97).

The Bill • interests with a higher priority; • enforcement costs; • higher ranking security interests;

• lower priority interests and security interest; • grantor (Clause 140). Example of Possible Regulation: While it is arguable that s 97 does not provide an order for distribution, it limits the amounts that may be deducted to secured amounts. The regulations could provide that clause 140 of the Bill would be taken to have been complied with s 97 of the Code has been complied with. [page 503] Enforcement rights where there are multiple secured parties 4.33 Any secured party, regardless of its priority ranking, would be able to commence enforcement action under the Bill. To ensure that this does not prejudice higher ranking secured parties, a higher ranking party would be able to ‘take-over’ enforcement proceedings and obtain possession of the collateral from a lower ranking enforcing secured party (clause 121(3)). This would apply to all collateral. Notice 4.34 The notice provisions would require an enforcing secured party to give notice of its intended action at different stages of the enforcement process: before a secured party removes an accession (clause 95); before a secured party initiates enforcement action under the incorporated land laws of a State or Territory (clause 118); before a secured party takes enforcement action against liquid collateral (clause 121); before a secured party disposes of collateral (clause 130); after a secured party has seized and disposed of the collateral or

keeps the collateral for disposal at a later date it would have to provide a statement of account (clause 132); before a secured party can retain the property (clause 135). 4.35 Where the collateral is used predominantly for personal, domestic or household purposes, additional notice requirements in the Code would also apply. 4.36 Enforcement notices would generally only be required to be given to the grantor, who stands to lose their rights in the collateral and higher ranking secured parties (who have a right to seize the collateral and commence their own enforcement action). Secured parties would not be required to give notice to lower ranking secured parties, as this would increase the cost burden on the enforcing secured parties, thereby reducing the money available for distribution. Lower ranking secured parties would, however, be able to negotiate additional notice provisions or to extend the provision of notices to themselves. 4.37 There are, however, two circumstances which would require notice to be given to a wider group of persons: where a secured party intends to use the incorporated provisions of a State or Territory land law, they need to give notice to the grantor, any person with a perfected security interest and any person who has notified the secured party of their interest in the property (clause 118(2)). This notice is required because the procedures and remedies under the incorporated land law might differ from those in the Bill and lower-ranking secured parties may wish to engage in the proceedings (clause 118(6)); Where a secured party intends to retain the collateral, they would need to provide notice to the grantor or to a secured party with an interest perfected by registration. This notice is required because where a secured party retains the collateral it does so, without having to pay other secured parties any obligations still owed to them and notice would enable them to object to retention or negotiate for compensation. [page 504] 4.38 Despite the general requirement for providing notice when undertaking

a step in the enforcement action, enforcing secured parties are not required to give notice when: the secured party has failed to locate the person to whom the notice must be sent; a person (including the grantor) has waived their right to receive the notice; or a court has ordered that a notice is not required for any other reason. Enforcement of liquid assets 4.39 The Bill would provide for enforcement against collateral consisting of debts due to the grantor from a third party, including accounts, chattel paper, investment instruments in the form of debt obligations or negotiable instruments. Because this collateral is the equivalent of cash, a separate enforcement process would be provided to ensure that the secured party would not have to go through a two-step process and could realise the collateral by collection directly from the third party (clause 120-121). 4.40 When liquid assets are collected, the enforcing secured party would have to apply the assets to discharge the obligation secured by the security interest and distribute any amounts received in accordance with the Bill (clause 140). Example Grant A owes Finance A $30,000. To secure the loan, Finance A has taken a security interest in Grant A’s bank account held with Bank A. Finance A is the highest ranking secured party. On 1 January 2028, Grant A defaults on his loan repayments to Finance A. On 6 January 2028, Finance A gives written notice to Bank A requiring it to pay $30,000 from Grant A’s bank account. On 8 January 2008, Bank A pays Finance A $30,000 from Grant A’s bank account, that is, within 5 days of receiving the notice. Finance A applies the money received from Bank A ($30,000) towards discharging the obligation that Grant A owes it.

4.41 The secured party would have to give a written notice to higher ranking secured parties within 10 business days before the day on which third party notice is given or control of the asset is taken (whichever applies) (clause 121). This would allow the higher ranking secured party to take enforcement action in its own right (clause 121(3)). The enforcing secured party would also have to notify the grantor within 5 business days after the day on which action is taken (clause 121(4)).

When liquid assets are collected, the enforcing secured party would 4.42 have to apply the assets to discharge the obligation secured by the security interest and distribute the balance as required by the Bill (clause 120(5)).

Seizure and disposal or retention of collateral Seizing collateral 4.43 On default by a grantor, when the secured party wishes to initiate an enforcement action, it would need to seize the collateral. The Bill would provide for this right to seize the collateral, in the event that a contract failed to do so. A secured party would be able to seize the collateral by any method permitted by law where the debtor is in default under the security agreement (clause 123(1)). This would enable secured parties to determine the method of seizure that is most appropriate for the collateral and their circumstances. [page 505] 4.44 Where the collateral is an intangible, the secured party cannot physically possess the collateral but the Bill would deem seizure to have occurred if a secured party takes steps to gain control. If the collateral is a licence, the secured party could effect seizure by giving notice of possession to the licensor and either the grantor or the grantor’s successor. If the collateral is any other type of intangible (for example, an investment instrument) a secured party could seize the collateral after giving notice to the grantor (clause 123(2)). 4.45 A secured party who has perfected the security interest by possession or control is taken to have seized the collateral (clause 124). 4.46 Taking possession of the collateral implies removing it from the grantor’s premises to the secured party’s premises or control. Physical removal would not always be possible and therefore a secured party could take ‘apparent possession’ of collateral where it cannot be readily moved from a grantor’s or the grantor’s agent’s premises or where adequate storage facilities are not available (clause 126). 4.47 Apparent possession would enable a secured party to enforce their

interest where they cannot seize the property or where they have no storage facilities. It provides notice of the transfer of the collateral from the grantor to the secured party. Once a secured party has gained apparent possession, any interference with this possession would be an interference with the secured party’s rights. 4.48 A secured party who takes apparent possession may dispose of the collateral on the grantor’s property. To ensure that this provision does not work unfairly against grantors, the Bill would provide that secured parties would not be able to cause to the grantors, any greater cost or inconvenience than is necessarily incidental to the disposal (clause 126(2)). Example Bank A has decided to enforce its security interest in Person A’s grain which is located in a silo on her property. Bank A is unable to find adequate storage facilities in the vicinity of her property and, after meeting the notice requirements under the Bill, advertises Person A’s grain for public sale by auction, despite not having actual possession of the grain. Bank A decides to conduct the auction on Olga’s property, and to run a small market at the auction on Person A’s property. The market stalls are not ‘necessarily incidental’ to the sale. Bank A does not have the right to operate the market stalls. As the stalls will be on Person A’s property, she can prevent Bank A from conducting the market stalls.

Seizure by parties with a higher priority 4.49 At any time when a secured party has taken possession of collateral, a higher ranking secured party could require that the secured party give it possession of the collateral (clause 127(2)). To seize collateral from a lower ranking party, a higher ranking party would have to provide it with a written notice requiring possession. A lower ranked enforcing secured party would have to comply with the notice within 5 business days of receiving it or within a reasonable period given the circumstances. 4.50 A higher ranked party that has gained possession of the collateral would have to pay the enforcement costs of the lower ranked party within 20 business days after the later of either: disposing of the collateral; or receiving evidence that the lower ranking party has incurred those costs. [page 506]

4.51 If not paid, the outstanding enforcement costs would become a debt due by the higher party and the lower ranked party could initiate court action to recover these costs. 4.52 A higher party who has seized the collateral from a lower ranked party would be required to dispose of or retain the collateral. Example Finance A decided to commence enforcement action against Person A who was in default of a security agreement over a small aircraft. Finance A’s security interest was second in priority to that of Bank A. Finance A took possession of the aircraft and gave notice to Bank A. Bank A gave written notice to Finance A to give possession of the aircraft to Bank A. Finance A must comply. Bank A takes over enforcement action.

4.53 By enabling any secured party to seize and enforce against the collateral, the rights of junior secured parties would be protected, in that they would not be reliant on higher ranking parties to take action. Conversely, the right of a higher ranking party to seize would enable a higher ranked party to protect its own interests. Disposing of collateral (including by purchasing collateral) 4.54 Secured parties who seize collateral under the Bill are required to dispose of collateral or retain the collateral themselves (clause 125). Disposal relates to three different types of remedies: sale to a third party; sale where the collateral is purchased by the enforcing secured party; and lease or licence to a third party. 4.55 The disposal provisions would apply to all collateral including intangibles such as licences. A secured party would be able to dispose of collateral by sale or lease to a third party (clause 128(2)) and any proceeds arising from the disposal would need to be distributed in accordance with the Bill (clause 140). 4.56 The Bill would not require immediate disposal after seizure and recognises that disposal might need to be delayed, in whole or in part, to obtain a higher price or for other reasons. The secured party would only be able to delay the disposal where it would be reasonable in the circumstances or in accordance with the security agreement (clause 125(3)). The parties would be able to contract out of this provision. Disposal by sale

The Bill would provide that a secured party could choose the method 4.57 of sale, including private or public sale, auction or closed tender (clause 128(2)). 4.58 The secured party would be able to be dispose of the collateral as a whole or in parts, where it would be difficult to dispose of the collateral in its entirety (clause 128(5)). This could result in different components being sold at different times. 4.59 Disposal of licences would have to be in accordance with the terms and conditions of the licence (clause 128(6)). Disposal by lease 4.60 A disposal by lease could only occur if expressly provided for by the security agreement (clause 128(2)). The disposal would be at the time the lease is [page 507] entered into (clause 128(3)) and the terms of a lease would be determined by the security agreement. Example Manufacturer A sells new office furniture and leases new and used office furniture. Almost all of its business is aimed at providing office furniture for small to medium sized businesses. Grant A has entered into a conditional sale agreement to buy office furniture from Manufacturer A. Under the agreement, Grant A will pay the purchase price of the office furniture over a period of 9 months. The sale agreement provides that the office furniture will continue to be owned by Manufacturer A until the last instalment has been paid. The sale agreement also provides that if Grant A defaults on the sale agreement, Manufacturer A is able to dispose of the office furniture either through sale or through a lease arrangement. If the office furniture is leased it must be leased for a minimum of 3 months. Grant A defaults on its sale agreement. Manufacturer A seizes the desks and chairs under the Bill and leases them according to the terms in the sale agreement.

Purchase of collateral by the secured party 4.61 A secured party who seizes commercial collateral would be able to dispose of the collateral by purchasing it (clause 129). 4.62 A significant concern of interested parties would be that a secured party could purchase the collateral for less than its market value. Therefore a secured party would need to provide notice of its intention

to purchase to the grantor and other interested parties, who could then object to the purchase. A secured party would only be able to purchase the collateral if there is no objection to the purchase (clause 130). 4.63 A secured party would only be able to purchase collateral by public sale (including auction or closed tender) for an amount which is equal to or more than the market value of the collateral (clause 129(3)). 4.64 Regardless of how it intends to dispose of the collateral, a secured party who has seized the collateral would be required to provide notice of its intention to dispose of the collateral (clause 130). Interested parties would have the opportunity to seek to redeem or reinstate the collateral or to monitor disposal to ensure it is conducted in a commercially reasonable manner. 4.65 A secured party would be required to notify the grantor and higher ranking secured parties at least 10 business days before the day on which the collateral is to be disposed of (clause 130(3)). 4.66 The secured party would not be required to give notice in certain circumstances (clause 130(5)) including where: the secured party believes on reasonable grounds that the secured party was induced to enter the security agreement as a result of a fraud by the grantor or debtor; the secured party, after making reasonable attempts to locate the person, has failed to do so; financial damage may be suffered if collateral is not immediately disposed of; the collateral is perishable and may perish within 10 days after the collateral is seized;

[page 508] the secured party reasonably believes that the value of the collateral will materially decline if not disposed of immediately; and the collateral is foreign currency. 4.67 The first exemption would enable a secured party who was induced into a security agreement by fraud to dispose of the property without intervention from the grantor or debtor which could delay the disposal process. Other exemptions would ensure that the notice provisions would not prejudice the interests of all parties in obtaining the maximum value to be gained from the collateral. Duties owed by a secured party when disposing of collateral 4.68 When disposing of collateral to third parties, the secured party would owe a duty to exercise reasonable care to: obtain at least the market value for the collateral; or if there is no market value, to obtain the best price that is reasonably obtainable, having regard to the circumstances that exist at the time (clause 131). This is the same duty required of a controller of disposing of corporation property under s 420A of the Corporations Act. 4.69 Breach of this provision would not depend on an actual failure to achieve either the market price or the best price reasonably obtainable but would depend on whether all reasonable care was taken to sell the property for its market value, or alternatively for the best price reasonably obtainable. 4.70 The provision requires that the collateral be marketed in a manner appropriate for sale of collateral of that type and compliance in each case would depend on the particular circumstances. The secured party exercising a sale would be expected to, where appropriate, obtain proper valuations, advertise appropriately, maintain the collateral in good condition pending sale and choose an appropriate venue for the sale. 4.71 This provision would ensure that the enforcing secured party obtains

the best possible price rather than merely satisfying its own interests. This duty operates in conjunction with the requirement for secured parties to exercise their rights honestly and in accordance with ordinary commercial practice (clause 111). This would be in the interests of the debtor (who would need to make good any shortfall in the sale price and outstanding obligations) and other secured parties who would have to take separate legal proceedings to obtain any outstanding debts from the debtor. 4.72 A failure by the enforcing party to attempt to obtain the best possible price could result in a statutory breach which would enable other interested parties to take legal action to either ensure that the best possible price were obtained or to claim damages suffered as a result of the statutory breach. Statements of account 4.73 The statement of account would be the means by which enforcing secured parties would account to interested parties on the disposal of the collateral and distribution of the proceeds. 4.74 Where a secured party has disposed of collateral or exercised its collection rights, interested parties would be entitled to all relevant financial information, such as the amount received, the enforcement costs, and the debts outstanding. [page 509] The enforcing secured party would only be obliged to provide this statement on request from a grantor, debtor or a higher ranking secured party (clause 132(1)). 4.75 Where the secured party has not disposed of the collateral within 6 months of seizing the collateral, they would have to provide a written statement of account showing the total amount received for the collateral and the expenses incurred in maintaining the collateral (clause 132(7)). A new statement would need to be given for each 6 month period after seizure if the collateral is not disposed of within this period (clause 132(4)). The secured party would have to give this statement to the grantor, debtor and higher ranking secured parties when requested to do so.

4.76 Statements of account would need to be provided within 20 business days following the request or such further period as would be reasonable in the circumstances (clause 132(2) and clause 132(6)). 4.77 Collateral acquired after disposal would be acquired free of the interests of the grantor of the security interest, the security interest of the enforcing secured party and all security interests lower in priority to the interest of the enforcing secured party (clause 133), but subject to the security interests of higher ranked parties. The higher ranking security interests would be able to be discharged in accordance with the security agreement if sufficient funds were available. 4.78 The rules relating to an acquirer taking free of security interests would need to be read in conjunction with the distribution rules (clause 186), which require payment to the higher secured party ahead of amounts owed to the enforcing secured party. Where the obligation owed to a higher ranking secured party has been discharged, the person acquiring the collateral would not be subject to that security interest. Retaining collateral 4.79 The Bill would also allow a secured party to enforce their security interest by retaining collateral they have seized (clause 134). However, the collateral could not be retained if it is used predominantly for personal domestic or household purposes (clause 109(5)). 4.80 There would be cases where it is commercially advantageous for a secured party to retain collateral rather than sell it and the Bill would allow them to do so. This right to retain collateral corresponds to a creditor’s existing right to seize and retain collateral on default under a retention of title arrangement. However, retention is not an absolute right and the Bill would provide a process to ensure that the interests of all interested parties are taken into account. This is particularly important given that the remedy of retention would not require a secured party to compensate other interested parties for the loss of their interests in the collateral. Objection to purchase or retention 4.81 Before a secured party could retain property, it would be required to provide notice of its intention to the grantor and other registered secured parties (clauses 135–138). 4.82 Persons receiving notice would be able to object to the secured party’s

proposal of retention by providing notice to the secured party at least 10 business days or a shorter period (agreed to by the objector) before the enforcing secured party takes steps to retain the collateral (clause 137(2)). [page 510] 4.83 On receiving an objection, a secured party would be entitled to seek proof of the objector’s interest in the collateral. If such proof is not provided within 10 business days of the request, the notice of objection would be taken not to have been given (clause 138). 4.84 If the secured party receives a notice of objection, it could sell or lease the collateral rather than retain or purchase it (clause 135(3)). 4.85 If a secured party receives no objections by the end of 10 business days after the day the last notice is given, they would be taken to have irrevocably elected to acquire the collateral (clause 136(1)). Thereafter, the secured party would become the unencumbered owner of the property and would have no rights against the grantor in respect of any outstanding obligation. A secured party would need to ensure that legal title to the property passes to them as this would not occur by operation of law. 4.86 Secured parties subordinate to the retaining secured party and the grantor(s) would also be able to object to the retention of the collateral. This is especially important as the retention provision does not provide for subordinate parties or the grantor to receive anything if the value of the retained collateral is greater than the amount owed to the retaining secured party. It is likely that before they agree to retention of collateral by the enforcing secured party, other secured parties would negotiate acceptable terms of compensation. 4.87 The Bill would provide that a secured party who acquires title to the collateral acquires the collateral free of their own security interests as well as the security interests of the grantor and subordinate security interests (clause 136(2)).

Rules applying after enforcement 4.88 Any proceeds received from the collateral either through enforcement

against liquid collateral (clause 120) or by disposal (clause 128) would have to be applied according to the distribution rules in the Bill (clause 140). 4.89 This distribution would mean that, where there are insufficient funds, parties lower in the order would not recover the amount due to them. Where a secured party does not receive funds from the distribution or there is a shortfall in the amount received, they would be able to take legal action against the debtor personally for the outstanding obligation. Redemption 4.90 The right of redemption is the right to cure the default and redeem the collateral at any time before the collateral is irrevocably disposed of by sale or foreclosure. 4.91 The Bill would provide the debtor, the grantor and higher ranking secured parties with a right to redeem the collateral (clause 142(1)). 4.92 A debtor’s right to redeem the collateral would have priority over the right of any other party, including that of a higher ranking secured party, to redeem the collateral (clause 142(3)). 4.93 Redemption would be given effect when the redeemer pays the amount required to discharge the obligation secured by the collateral and the amount of any enforcement expenses incurred by the secured party, secured by the security interest. 4.94 Parties to a non-consumer transaction would be able to contract out of the right of redemption (clause 115). A person entitled to redeem would also be [page 511] prohibited from accessing the redemption provisions if, after the default occurred they had agreed with the secured party not to redeem the property (clause 142(2)). Reinstatement of the security agreement 4.95 The Bill would provide a right of reinstatement of the security agreement prior to the exercise of enforcement action.

4.96 The right to reinstatement would enable a person to reinstate the security agreement by paying the amount of arrears and the amount of any expenses incurred as a result of the enforcement action. The right of reinstatement would protect grantors and debtors where their default is minor, temporary and atypical. 4.97 The Bill would establish safeguards against possible abuse of the right of reinstatement. A security agreement could only be reinstated once and the person seeking reinstatement would have to pay not only the amount in actual arrears but also cure any other default and reimburse the secured party for their enforcement expenses (clause 143(1)).

CHAPTER 5 — PERSONAL PROPERTY SECURITIES REGISTER 5.1 The Bill would establish a single national online Personal Property Securities Register (the PPS Register) under which personal property that is or may be subject to a security interest can be registered. The main object of the PPS Register would be to provide a real-time online noticeboard of personal property over which a security interest has been, or may be, taken. The PPS Register would replace the existing array of electronic and paper-based registers. It would be a voluntary registration scheme, allowing secured parties to weigh up the costs and benefits of registering a financing statement for a security interest. 5.2 In most cases, the registrations contained on the PPS Register would relate to security interests. All security interests in personal property would be registrable regardless of the form of the security interest, the legal personality of the grantor of the interest, the nature of the collateral or the jurisdiction in which the property or the parties are located. Registration of security interests would be voluntary. However, parties should be aware that failure to register a security interest on the PPS Register could result in a loss of priority to a third person or unenforceability against a liquidator, administrator, trustee in bankruptcy or the Official Receiver. 5.3 A person would also be able to search the PPS Register to determine whether a prior registered interest exists prior to purchasing personal property or lending money in relation to the property. 5.4 A simple targeted electronic ‘registration’ would provide notice to the

world of any actual or prospective security interests without the need to sift through complex documentary material as is currently the case with many of the [page 512] existing schemes. This would make the advance registration of security interests possible; that is, property would be able to be registered on the PPS Register before a security agreement is made or the security interest attaches to it. 5.5 The PPS Register could also contain information about other interests over personal property prescribed by the regulations, for example, interests that arise in vehicles impounded by State and Territory police or property subject to confiscation orders under proceeds of crime laws. 5.6 While the PPS Register would be accessible using a web browser, it would also be supported by a business to government interface, a physical document lodgement service, a contact centre and SMS message connectivity. PPS Register information would be transmitted using secure, encrypted methods of communication. Example Grant A applied for a loan with Finance A using its business assets to secure the loan. Finance A registered the business assets on the PPS Register before approving the loan.

5.7 During development of the Bill, concerns were expressed about possible scope creep of the PPS Register. These concerns related to two particular functions of the Register. The first concern was a possible increase in the authorised purposes for which a search could be made by reference to the name and date of birth of an individual (clause 172). Consequently, the authorised purposes for searches by reference to the name and date of birth of an individual could only be altered by the Parliament and it would not be lawful to alter the authorised purposes without Parliamentary scrutiny. 5.8 The second concern was the type of interest that could be included on the Register. The definition of security interest (clause 12) would only be able to be amended by legislation. However, the Bill would also allow for the registration of other interests in classes of personal

property to be determined under the regulations (clause 148). Therefore any Regulations made under this provision would have to take account of privacy concerns, and include a Privacy Impact Assessment where appropriate.

Establishment of the Register 5.9 The PPS Register would be established and maintained by a Registrar of Personal Property Securities (clause 147(1)). Data that is recorded in the PPS Register would be the property of the Commonwealth (clause 147(2)). Clause 147(3) would allow the Registrar to keep the Personal Property Securities Register in any form that he or she considers appropriate. This provision is based on s 1274(1) of the Corporations Act, which allows ASIC to ‘keep such registers as it considers necessary in such form as it thinks fit’. This would ensure that the focus is on the outcomes to be delivered rather than the manner in which the obligations are discharged. The Bill would also be ‘technology neutral’ so that the Registrar would not be constrained in the discharge of his or her obligations under the Bill. For example, the Bill would allow the Registrar to accept documents in hard copy form, over the internet through a web browser, or over the internet using XML messaging technology. [page 513] 5.10 While the Registrar would be able to keep the Register in any form that he or she considers appropriate (clause 147(3)), the Government proposes to implement a fully electronic register. 5.11 The PPS Register would be maintained and operated at all times (clause 147(4)). This means that it would be available day and night, as well as on weekends and public holidays, when large numbers of secured transactions would take place. However, the Registrar would be able to refuse access to, or suspend the operation of the PPS Register, in whole or in part, where it would not be practical to provide access (clauses 147(4)–(5)). If this occurs, the Registrar must publish notice of the suspension or refusal in a way prescribed by the regulations and, if not prescribed, by Gazette (clause 147(6)).

Example The Registrar may consider that it is not practical to maintain the PPS Register when upgrading the IT system or during an IT failure that closed down part of the PPS Register.

5.12 The PPS Register could contain a range of information about personal property that is, or will become, subject to a security interest (clause 148). This would allow buyers and financiers to readily identify property that is subject to an actual or potential security interest. 5.13 There would also be scope to register property subject to other kinds of interests, such as those which arise in vehicles impounded because of their use in unlawful activities and confiscation orders made under proceeds of crime laws (clause 148). Any such interests could be included on the PPS Register by regulation, with the provisions in Chapter 5 being applied with appropriate modifications. This is designed to help prospective purchasers and lenders to obtain up-todate information about the status of personal property. Example Person W wants to buy a car from an acquaintance. The acquaintance agrees but advises that he will not be able to deliver the car straight away. Person W searches the PPS Register. The search result discloses that there are no security interests over the car but that it has recently been impounded by the police.

Registration 5.14 A person would be able to apply to the Registrar to register on the PPS Register under a financing statement (or a financing change statement to amend a registered financing statement) with respect to a security interest or other kinds of interest prescribed in the regulations (clause 150). 5.15 The term ‘financing statement’ refers to the data that is, or is to be, registered on the PPS Register (clause 10, financing statement). The term ‘financing change statement’ in turn means data that amends a financing statement that is registered on the PPS Register (clause 10, financing change statement). These terms have been adopted because they are also used in other jurisdictions that have a PPS regime, such as New Zealand and Canada. 5.16 The Registrar would have to register the financing statement or financing change statement if: the application is in a form approved by the Registrar; the registration fee (if any) has been paid or an arrangement for payment has been made;

[page 514] the Registrar is not satisfied that the application is frivolous, vexatious or offensive, contrary to the public interest or made in circumstances in which the registrant does not believe on reasonable grounds that it holds or will hold a security interest in the property stated in the application; and the registration is not prohibited by the regulations (clause 150(3)). 5.17 If the financing statement or financing change statement does not satisfy any of the above, the Registrar would not be required to make the registration. The Registrar’s decision not to make the registration would be reviewable by the Administrative Appeals Tribunal (clause 191). 5.18 A person would not be able to apply to register a financing statement, or a financing change statement, in relation to a security interest unless the person believes on reasonable grounds that a security interest in the property is, or would be held by a person stated in the application as a secured party (clause 151(1) and (7)). Where a person registers without such a belief they would be taken to have contravened an obligation owed to any person with an interest in the personal property (clause 151(5)). 5.19 A person who applies for a financing statement or financing change statement, would be required to end the registration where: the collateral has never (since the statement was registered) secured an obligation owed by a debtor to the person stated in the registration to the secured party; and there are no reasonable grounds for believing that the collateral secures, or would secure, such an obligation 5.20 In cases where there have never been reasonable grounds for believing that the collateral secures or would secure the obligation, the registration would have to end as soon as practical or within 5 business days of the day of registration or if there are any no longer any reasonable grounds for that belief, as soon as practical or within 5 business days of the reasonable grounds for the belief ceasing. (Clause 151(2)–(3)). 5.21 The failure to discharge the obligation to only register a financing

statement, where the person believes on reasonable grounds that the collateral secures or would secure a security interest, would not affect the validity or effectiveness of the registration (clause 151(6)). However, the failure to discharge the obligation would attract a civil penalty (clause 151(1)) and give rise to a claim for damages (clause 271). The onus of proving a breach of clauses 151(1)–(2) would rest on the person making the claim (clause 151(4)). 5.22 Civil penalties could apply to breaches of these provisions. The maximum penalty for each breach would be 50 penalty units for an individual, and 250 penalty units for a body corporate (clause 151(1)–(2)). The ‘corporate multiplier’ (that is, maximum fine applicable to individuals would be multiplied by a factor of five for a body corporate) reflects the corporate multiplier in s 4B(3) of the Crimes Act 1914. The maximum penalty level is considered to be sufficient in light of the potential impact unauthorised registrations could have on those relying on the registrations as well as the ability of persons with an interest in the property to recover for any loss or damage resulting from these breaches. [page 515] 5.23 The Registrar could register a financing statement, or a financing change statement, even if the personal property, or the person who owns or has rights in that property, is located outside Australia (clause 152). This is subject to the necessary connection with Australia being satisfied (clause 6). 5.24 While applications for registration would have to be in writing, they would largely be lodged electronically through a web browser or through a business to government interface. The Electronic Transactions Act 1999 would have the effect that any applications made in accordance with the Bill could be made by electronic transmission of words or data or the display or representation of words or data by any form of communication.

Registration with respect to security interests 5.25 When a secured party or its agent registers a financing statement or

financing change statement in order to make or amend a registration on the PPS Register, they would be required or authorised to enter the following information: details about the secured party and related information such as an address and identifier for giving notices to the secured party (clause 153(1) table items 1 and 3); details about the grantor (clause 153(1) table item 2) but this is not required for consumer property required by the regulations to be described by a serial number, because the serial number would be sufficient to allow a search of the register to disclose a registration over the collateral without grantor details; a description of the collateral and proceeds (including as prescribed by the regulations (clause 153(1) table item 4), including: a description as either ‘consumer property’ or ‘commercial property’; a serial number where required by the regulations; allocation to a single class as prescribed by the regulations; and where proceeds are claimed, a description of proceeds in accordance with the regulations; the end time of the registration (or end time ‘not stated’ for commercial registrations where the collateral is not described by serial number)(clause 153(1) table item 5); details of any subordination agreements (optional)(clause 153(1) table item 6); whether the security interest is (or is to be) a purchase money security interest (optional) (clause 153(1) table item 7), and any other matter prescribed by the Bill or regulations (clause 153(1) table item 8). Grantors, secured parties and giving of notices 5.26 The details to be included on the PPS Register about a secured party or grantor would be prescribed by regulations. 5.27 The Bill would require that consumer grantors be identified by their name and date of birth (or not at all when the collateral is required by

the regulations to be described by serial number) (clause 153, table item 2). 5.28 When the secured party or grantor is not an individual, the regulations could require them to identify themselves by their Australian Company Number [page 516] (ACN) issued under the Corporations Act 2001 at registration; their Australian Registered Body Number (ARBN) issued to a ‘registrable body’ under that Act; or their Australian Registered Scheme Number (ARSN). The regulations could also prescribe that certain trading arrangements, for example partnerships, could be identified by their Australian Business Number (ABN). For those that are not required to be identified by their ACN, ARBN, ARSN or ABN, the required details could be the organisation’s name as it appears on the organisation’s constitution. 5.29 The incorrect entry of the identifier of the grantor would be a registration error that would result in a registration being ineffective (and therefore invalid) (clause 164(1)). This could occur through inadvertence (for example entering one incorrect number when entering the ACN). In relation to grantors who are individuals, the error could occur because people are known by more than one name. To promote certainty, the regulations could specify the sources from which names and dates of birth would have to be drawn. 5.30 Secured parties would be wholly responsible for the accuracy of all details contained in their registrations. However, to assist users to maintain the accuracy of registrations, the PPS Register could check the validity of data against other databases (such as the National Names Index or the Australian Business Register administered, respectively, by the Australian Securities and Investment Commission and the Australian Taxation Office). This application of IT technology would help to promote the integrity of information recorded on the PPS Register. 5.31 In order to reflect commercial reality, the PPS Register could enable an application for the registration of a financing statement or financing

change statement to be made by a secured party group (consisting of one or more secured parties) and/or multiple grantors (clauses 153– 154). This would be important where people hold or propose to hold property jointly, or as tenants in common when jointly accessing credit. There might also be occasions where credit is offered by multiple secured parties, such as on a joint venture basis. 5.32 Secured parties would also be able to record a unique identifier devised by themselves, when giving notice in relation to particular registrations (clause 153(1) table item 3(b)). This identifier could be used by secured parties to direct communications to their agents (clause 289). Collateral descriptions 5.33 A focal part of each registration would be the ‘collateral description’ which would describe key attributes of the property that is the subject of the registration (clause 153(1) table item 4). 5.34 Personal property registrations over consumer property would have to be described on the PPS Register as either ‘consumer property’ or ‘commercial property’ (clause 153(1) table item 4(a)). This distinction is important because the Bill contains safeguards to ensure that consumers are not subject to the same rules as commercial transactions. 5.35 The other collateral descriptions required under clause 153(1) table item 4, are discussed below. [page 517] Serial numbered goods — motor vehicles and other goods 5.36 It is proposed that the PPS Register would take the place of existing State and Territory schemes for registering encumbrances over motor vehicles (such REVS in New South Wales and VSR in Victoria) and would extend to certain other property assigned a serial number (particularly ships and aircraft). 5.37 In circumstances prescribed by the regulations, such as when the collateral is consumer property, it would be mandatory to describe property registered on the PPS Register by its serial number: such as

the vehicle identification number (VIN) or chassis number applied to motor vehicles (clause 153(1) table item 4(b)). This would assist PPS Register users to readily identify property. It would also promote privacy protection as such property would be identifiable on the Register by the serial number, rather than by the grantor’s name. 5.38 Where serial numbered goods are registered as ‘commercial property’, it would be optional for the secured party to record serial numbers (clause 153(1)). This approach would avoid the inconvenience of requiring secured parties to continually update the PPS Register in relation to car-lot inventory and the like. 5.39 The use of serial numbers to describe collateral would enable the PPS Register to link with other databases such as the National Exchange of Vehicle and Driver Information System (NEVDIS), which uses serial numbers. NEVDIS would return information about whether the vehicle has been reported as written off or stolen. Including this information in the search result would give consumers greater confidence that they are buying property that is not subject to a security interest or other restriction. Example When Grant A decided to buy a car, he searched the PPS Register for possible registrations. Grant A found that the vehicle was clear of any registrations and had not been reported as written off or stolen.

Allocation of a single class and other descriptors prescribed by regulation 5.40 All of the collateral described in a particular registration would have to be allocated a single class as prescribed by the regulations (clause 153(1) table item 4(c)). The types of collateral classes could be agriculture, aircraft, financial property, goods, intangibles, motor vehicle and watercraft. In order to reflect current practice in relation to general company charges, the prescribed classes could include ‘present and after-acquired property’ and ‘present and after acquired property except specified property’ (with a capacity to describe the exception in a free text field or attachment). 5.41 The PPS Register could be designed so that a user could only ever choose a single collateral class for each registration. This would ensure that registrations are allocated to a single class. 5.42 For some collateral classes or registration types, the regulations could allow secured parties to enter free text into a separate data field in the

registration in order to provide further particulars of the property. This would make it easier for third parties searching the PPS Register to accurately identify the property. Example Finance A made a registration against Grant A’s wheat crop. It described the collateral as ‘crops’, and entered the description of ‘wheat’ in the free text field.

[page 518] Example Finance A made a registration against Grant A’s present and after acquired property apart from scuba equipment. It allocated the class of ‘all present and after acquired property except’, and placed ‘scuba equipment’ in the free text field.

5.43 In addition, for some collateral class or registration types, the regulations could allow the parties to attach documents to their collateral descriptions. Example Purchaser A wants to buy accounts from Grant A. Purchaser A searches the PPS Register and discovers that the accounts have already been registered by Finance A. Purchaser A is able to identify the accounts on the PPS Register by the list of accounts that Finance A had attached to its registration.

Proceeds 5.44 A secured party would be able to describe the collateral as including any proceeds arising from the sale of the property (clause 153(1) table items 4(d)). This would be important because a security interest in the proceeds could be perfected and enforced against third parties. Where proceeds are to be specifically claimed, the secured party would have to indicate this in the registration in order to obtain perfection. The regulations will prescribe the way in which proceeds would need to be described. End times, default end times and renewal of registrations 5.45 Registrations would have a period of registration that commences from the ‘registration time’ and ends at the moment that the registration ceases to be available for a real-time search on the PPS Register (the ‘end time’)(clauses 153(1) table item 5, (clause 160), (clause 163) and (clause 166)). Secured parties could renew a registration by amending

the registered ‘end time’. 5.46 When making a registration, a secured party would have the option of specifying an ‘end time’ for the registration. Where an end time is not specified or does not comply with the rules for default registration periods, the PPS Register would assign a ‘default end time’ according to the type of property and ‘default registration period’ (clause 153(1) table item 5 and clause 153(2)). 5.47 For consumer property and other property described in a registration by a serial number, the default registration period would be no later than the end of the day seven years after the registration became available for search on PPS Register (noting that the registration would be extendable by increments of up to seven years) (clause 153(1) table item 5(b)). 5.48 Commercial property, such as inventory or equipment, would be registrable for a period of up to 25 years after the end of the day the collateral becomes available for search (clause 153(1) table item 5(a)). Alternatively, the secured party could choose not to state an end time for the registration. Registrations over commercial property could be extended for increments of up to 25 years or by amending the registration to record that there is no stated end time. Example Finance F registers Grant A’s motor vehicle on 1 January 2020. Finance F does not enter an end time for the registration so that the PPS Register assigns a default end time of 1 January 2027 in accordance with the rules for the ‘default registration

[page 519] period’ for consumer goods. On 1 January 2027, Grant A has not paid out the loan secured against the motor vehicle, and tries to extend the registration by entering an end date of 2 January 2035. Under the ‘default registration period’ rules, the PPS Register assigns a default end time of 1 January 2034.

Subordination, purchase money security interests and matters prescribed by the regulations 5.49 A secured party would be able to indicate whether the security interest is (or is to be) subject to subordination agreements that postpone the secured party’s interest to that of another person on the relevant registration or registrations (clause 153(1) table items 6). The

indication of subordination would be optional because the subordination would only affect the priority position of those people bound by it. 5.50 A secured party would be able to indicate whether the security interest is (or is to be) subject to be a purchase money security interest (clause 153(1) table items 7). 5.51 The regulations would allow for matters relating to the contents of a registration to be prescribed (clause 153(1) table item 8). It is envisaged that most matters that would be prescribed by regulation would concern, but would not be limited to, grantor and secured party details and collateral descriptions. 5.52 Apart from registrations relating to security interests, the Bill would also allow for the registration of other interests over property, such as those that arise in vehicles impounded by State and Territory police because of their use in unlawful activities, or property subject to confiscation orders made under proceeds of crime laws (clause 154). For such registrations, the required data that needs to be recorded on the PPS Register would include: details of the person who owns or has an interest in the property (details of the person recorded as prescribed by the regulations); and details relating to the property including the allocation to a single class as prescribed by the regulations and a statement must be included of the reason why the property is registered (clause 154). Verification statements and registration events 5.53 To help parties manage their registrations, the Bill would establish a system for verifying registration events. 5.54 ‘Registration event’ refers to the registration of a financing statement or a financing change statement (except where the financing change statement relates to the removal of old data under clause 216 or the restoration of incorrectly removed data under clause 217) (clause 155). 5.55 Where a registration event occurs, the Registrar would be required to give a verification statement to each person who is or was registered as a secured party immediately after or before the time of the registration event (clause 156(1)). Where a registration event involves an

amendment to the secured party address for service, the Registrar must ensure that the verification statement is sent to the secured party at the old and amended addresses (clause 156(2)). Similarly, if the amendment is to omit a secured party, the Registrar would be required to send a copy of the verification statement to the secured party at the previously registered address (clause 156(3)). [page 520] Example Credit A registers a financing statement on the PPS Register on 1 August 2010. Soon after, Credit A registers a financing change statement to add another grantor to the registration. The Registrar would issue a verification statement to Credit A soon after the registration of the financing change statement.

5.56 A verification statement would give secured parties a documentary basis on which they could check the accuracy of any data added, altered or removed from the PPS Register by them, their agent or the Registrar. The statement must be given as soon as practicable after the time of the verifiable event or the latest verifiable event where more than one event is notified. 5.57 The Electronic Transactions Act 1999 would operate alongside the Bill to allow the Registrar to provide verification statements and other notices given under the Bill by electronic means. In such cases, that Act would require that the person consented to the information being given by electronic communication. However, consent would be able to be inferred from the person’s conduct. For example, the Registrar would be able to infer consent where a secured party has nominated an email address as the address for giving notices in relation to the registration. 5.58 Recipients of a verification statement would have to ensure that notices of the statement are given to each person registered as a grantor immediately before and/or immediately after the registration event (clause 157(1)). The approved form would authorise that specified data in the verification statement would not have to be included in the notice, in case it contains confidential information such as passwords, but otherwise should contain the same data as that on the verification statement (clause 157(2)). The notice of a verification statement would have to be given as soon as practicable after the

relevant registration event (clause 157(3)). Example Finance A registers a financing change statement to change the grantor from Grantor A to Grantor B. Soon after registration, Finance A receives the verification statement from the Registrar. Finance A must send a copy of the verification statement in the approved form and containing the required information as soon as practical to both Grantor A and Grantor B.

5.59 Where the collateral is described as commercial property, the grantor could waive in writing the right to receive a copy of a verification statement in relation to certain verifiable events (clause 157(3)). For consumer protection purposes, consumer grantors would not be able to waive this requirement. 5.60 If a verifiable event occurs which affects a number of persons registered as secured parties (whether before or after the events) and the Registrar considers that it would be inconvenient for verification statements to be sent to each interested person, the Registrar could publish a single verification statement in relation to all verifiable events (clause 158(1)). Where this occurs, the requirement for individual verification statements would no longer apply. This process could be used, for example, in relation to data migration from existing registers to the new PPS Register during the transition to the new system. 5.61 A failure to send a notice of a verification statement to the grantor as soon as reasonably practical would not alter the effectiveness of a registration. However, it would constitute an interference with the privacy of a grantor who [page 521] is an individual for the purposes of s 13 of the Privacy Act 1988 (clause 157(5)) and could give rise to a claim for damages against the secured party (clause 271). This ‘interference with privacy’ provision would cover any entity or individual whether or not they were otherwise subject to the Privacy Act. 5.62 The PPS Register would be based on notice filing rather than document filing. The general rule would be that a registration commences from the moment that the collateral description becomes

available for search on the PPS Register in relation to a particular secured party (clause 160(1)). Example At noon on 1 January 2020, Finance A applied to register Grant A’s wheat crop on the PPS Register in anticipation of entering a loan agreement. The collateral was registered from when it became available for search on the PPS Register at 1 second after noon on 1 January 2020.

5.63 When a financing change statement is registered to amend data in a registration, the amended data (for example, added property and any proceeds as described)) would only be registered from the moment that the data becomes available for search on the PPS Register (amendment time) (clause 160(2)). The amended registration would not be taken to have commenced at the initial registration time, but at the amendment time. Example Finance A has a registration against Farmer B in relation to crops: wheat that commenced on 1 January 2020. On 1 July 2022, Finance A amended its registration against Farmer B to describe the collateral as crops: wheat and barley. The crop: wheat registration commenced on 1 January 2020, while the crop: barley registration commenced on 1 July 2022.

5.64 Personal property would be registrable before or after a security agreement is made describing the property (clause 161). In addition, the PPS Register would allow a registration to reflect the transfer of a security interest or of the collateral before or after the transfer (clause 162). 5.65 Advance registration would inform secured parties of the order of registration (and potentially the order of priority) while still negotiating the transaction. This would improve certainty in commercial negotiations as parties could ascertain their rights to priority over other security interests in personal property. 5.66 Where a security interest in property is transferred to another secured party by registering a financing changes statement, the ‘registration time’ for the property would not be affected. Alternatively, the prospective secured party could apply to register a new financing statement. Here, the registration time would, by operation of law, be the registration time for the original collateral, provided that the property is continuously perfected since the initial registration time (that is, there is no gap in time between the effective registration of the initial financing statement and the new financing statement).

Example Finance F sold its security interest in Grant A’s crops to Bank A. The transfer could be reflected in the PPS Register in one of two ways. Finance F could transfer the registration to Bank A, thereby effecting a change of the secured party. Alternatively, Bank A could register Grant A’s crops in a new registration. Finance F would have

[page 522] to end its effective registration against Grant A’s crops. Bank A could take a subordination agreement from Finance F in case Finance F did not end its registration.

Effective registration 5.67 The Bill would apply the concept of ‘effective registration’, which would describe the situation where a person has a financing statement validly recorded on the PPS Register. This would be important for the purposes of establishing, in the context of a priority dispute or a grantor’s insolvency, that the person is a secured party with a security interest in personal property that is perfected by registration. 5.68 In the absence of any disqualifying defects, a registration of a financing statement would be effective from the ‘registration time’ of the relevant financing statement until the earliest of the following times: the registration reaches the end time for the registration; the collateral is omitted from the registration or the description of the collateral otherwise ceases to be available for search (for example, where the Registrar has removed the data because it is frivolous or vexatious) (clause 163). An effective registration could also be brought to an end by the Registrar (clause 168) for failure to pay a maintenance fee. Defects in registrations 5.69 It is the secured party’s responsibility to ensure that the information registered on the PPS Register is accurate and complete. A registration would be ineffective in certain circumstances (clause 164), for example where a registration contains a seriously misleading defect in any data relating to the registration or another defect that is specified in the Bill as rendering a registration ineffective. A defect would include an irregularity, omission or error in the registration (clause 10, defect).

5.70 This policy approach has been adopted to promote the reliability of PPS Register data. This rule would not necessarily make a registration defective on the basis of a simple mistake, such as a typographical error in a free text field. Nor would it be likely to capture errors of a more substantive kind that do not seriously mislead a person. For example, the omission of the name of one secured party in a consortium would not be seriously misleading whereas an incomplete or inaccurate collateral description would be likely to be misleading. 5.71 In order to establish that a defect is seriously misleading, it would not be necessary to prove that a person was actually misled by the registration (clause 164(2)). This means that parties would need to objectively consider whether certain errors are seriously misleading. This would promote the integrity and reliability of the PPS Register system and minimise litigation. 5.72 For the same reasons, the Bill would establish specific circumstances in which a registration would be ineffective (clause 165): where the collateral is required under the regulations to be described by a serial number in the PPS Register and no search of the PPS Register by reference only to the serial number would disclose the registration (this rule would apply to registrations covering either consumer property or commercial property) (clause 165(a)); [page 523] where the collateral is not required under the regulations to be described by a serial number in the PPS Register and the regulations require the grantor’s details to be provided and no search of the PPS Register by reference only to the grantor’s details would disclose the registration (this rule would apply to commercial property and consumer property not required by the regulations to be described by serial number (clause 153(1), table item 2). (Clause 165(b)); where the registered financing statement states that the security interest is a purchase money security interest and the security interest is not a purchase money interest in relation to the collateral; (clause 165(c)) and

a defect in the data prescribed by the regulations (clause 165(d). Example Finance A made a number of errors when entering data into the PPS Register. For example, it registered: Grant A’s motor vehicle (consumer property) using an incorrect serial number (12344 instead of 12345); and Grant B’s details using the incorrect ACN. Either of these errors is sufficient to render the registration ineffective.

5.73 One exception to the general rule regarding registration defects arises in relation to the description of particular collateral that forms only part of the property subject to the registration. Specifically, the registration of certain collateral would not be ineffective for the sole reason that the registration of other collateral in the same registration is ineffective (clause 164(3)). This means that a registration may be partly effective and partly ineffective. Example After Finance F registered Grant A’s crop:wheat, it intended to add Grant A’s barley crop. In the free text description, Finance F mistakenly entered the phrase ‘and canola’ (rather than ‘and barley’). The misdescription of the barley crop did not affect the registration of the wheat crop, which continued to be effective. The registration would have been effective in relation to any of Grant A’s canola.

Registration continues despite certain defects 5.74 Registrations would continue to be effective despite certain defects arising over time (clause 166). This might occur, for example, where the grantor’s name becomes seriously misleading because of a name change following marriage. In such cases, the registration would remain effective until the earliest of: the end time for the registration as registered immediately before the change; the end of the month that is 60 months after the change; the end of 5 business days after the day that the secured party acquires the knowledge of the defect (clause 166(2)). 5.75 A secured party would have the knowledge required to correct a defect if the secured party has actual knowledge of the defect, or would have had such knowledge had they made the enquiries that an honest and prudent person would have made (clause 297). Finance providers should not be subject to unduly onerous requirements to update the PPS Register, but could be expected to undertake periodic reviews of their customer loans. Where such reviews reveal a change of circumstances, registrations made by the secured party should be

amended to include updated information. This would ensure continuing priority in the property and would assist other PPS Register users. [page 524] 5.76 This rule is not intended to give secured parties the opportunity to correct defects of their own creation, but to provide a grace period for secured parties to correct registrations where events beyond their control have led to a previously effective registration becoming defective. 5.77 It is important to note that the ineffectiveness of a registration does not affect the validity of the underlying security agreement, but may result in a loss of priority where a competing interest is registered on the PPS Register. Example When Gina James changed her name to Gina O’Grady, she forgot to tell Bank A. When Bank A reviewed Gina’s loans some eighteen months later, it discovered Gina’s name change and amended its registration to correct the defect within 5 business days. Bank A’s registrations remained effective throughout the whole period.

Requirement to end the registration of certain property 5.78 To ensure that individuals are not prejudiced by outdated registrations, a secured party would be under a statutory obligation to omit collateral or end the effective registration of collateral that is a consumer good or serial numbered property and the security interest that is perfected by registration would become unperfected. The secured party would have to end the registration within 5 business days of the ‘unperfection time’ (clause 167) or extended time as approved by a court (clause 293). Non-compliance would expose the secured party to liability for statutory damages (clause 271) and would entitle the grantor to seek to end the registration through administrative or judicial processes. This would be important because secured consumer credit transactions tend to be one-off dealings between the parties where there is no reason for the secured party to obtain the benefit of continuing priority status at the expense of the consumer. 5.79 In all other cases, there would be no statutory obligation on the

secured party to end a registration. This is because commercial financing is typically a medium to long term arrangement, often involving a fluctuating line of credit rather than a lump sum loan, and a series of security agreements rather than a one-time loan or credit transaction. In many commercial arrangements, it would be contrary to the interests and intentions of both parties to require the secured party to end a registration every time there was a short break in their financing relationship. 5.80 However, most financing arrangements would come to an end at some point and negotiations could end after a registration is made and when no security agreement is executed. Many consumers might also not want to pursue damages claims or would have suffered no loss or insufficient loss to warrant court action but would still want old registrations ended. Therefore, the Bill would include an amendment demand process aimed at ensuring that all parties can obtain rectification of the PPS Register in certain circumstances (Part 5.6). Failure to pay maintenance fee 5.81 An effective registration could be brought to an end by the Registrar for the failure to pay a maintenance fee (clause 168(2)). This would only apply where: the Minister has determined that a fee is payable to maintain the effectiveness of the registration (clause 190(1)); [page 525] the Registrar has issued a written notice requiring the secured party to pay the stated fee within 28 days after the notice is given; and the secured party has failed to pay the fee stated in the notice, or has failed to make arrangements (clause 190(3)) for the payment of the fee within 28 days after the notice is given (clause 168(1)). 5.82 Where the maintenance fee has not been paid, or arrangements have not been made for its payment, the Registrar would be able to bring the registration to an end by registering a financing change statement amending the registration to end it (clause 168(2)).

5.83 As the registration of the financing change statement is a registration event (clause 155), the Registrar would have to give a verification statement to each secured party (clause 156) and the secured party would have to in turn give notice of this registration event to grantor(s) (clause 157).

Searching the register 5.84 The availability of reliable, low-cost, fast and accessible search facilities would be a central feature of the PPS Register. This would be important because prospective lenders might wish to know whether particular property is subject to a current or prospective security interest, while prospective purchasers may want to learn whether property they are about to buy is subject to an encumbrance or other restriction. In addition, secured parties may want to search the PPS Register to verify the validity and history of their own registrations, while grantors might like to monitor registrations made against them. 5.85 As with all registrations and amendments, the PPS Register could be accessible for search purposes by direct online access 24 hours a day, 7 days per week or by making a written application lodged with the Registrar. This could be done through a web browser, through a business to government interface, written application, SMS message, or by Interactive Voice Response (IVR) (search by SMS and IVR would only be available for searches for collateral described by a serial number). A search result could provide real-time and historic point-intime information. A person could enlist the services of an agent to perform the searches on her or his behalf. This would mean that all people would be able to access the PPS Register for search and other purposes even if they are located in remote areas. 5.86 For this purpose, the Bill would provide that a person could apply to search the PPS Register for data and obtain a written search result in relation to that data (clause 170(1)–(2)). Users would not have to be registered to undertake a PPS Register search. However, the Registrar would only be required to give a person access if: the search is authorised both in terms the correct search criteria (clause 171) and a search reference to an individual grantor (clause 172); the search application is in the approved form;

a search fee is paid or an arrangement is made for the payment of fees in accordance with a determination made by the Minister; and the search is not prohibited by the regulations (clause 170(3)). [page 526] Search criteria 5.87 The Bill would provide that a person may search the PPS Register by reference to the following specified criteria: a grantor’s details; a serial number by which collateral may (or must) be described; the time of the search; an earlier nominated time (point-in-time search), but only with the consent of the Registrar; and any other criteria prescribed by the regulations. (Clause 171(1)). Example Bank A searches the PPS Register for dairy cattle registered against Grant A, a company that is recorded as the grantor in several PPS Register registrations. Bank A enters the Grant A’s ACN and indicates in the search request that he is searching for livestock registrations. The search returns two registrations against that ACN — one for dairy cattle against Finance A and another for goats against Bank B.

5.88 To improve business efficiency and to minimise inconvenience, the PPS Register search function would allow users to refine their searches according to their needs. Therefore, while a user may search against a particular grantor’s name, they could refine their search to a particular class of collateral or other descriptor. It is anticipated that these descriptors might include information that identifies, for example, whether the property is a purchase money security interest, subject to a subordination agreement or is a current asset subject to control. 5.89 For serial numbered goods (such as motor vehicles used for consumer purposes), users would be able to search the PPS Register by the serial number only. This is in line with the current practice on the REVS and VRS registers which do not record grantor details. 5.90 The regulations would prescribe a number of search criteria. For example, it would be possible to establish the PPS Register so that a

person would be able to search the PPS Register by reference to the unique identifier of a registration. This would make searching more efficient as searchers would not have to examine irrelevant registrations. Example Bank B makes a registration and is given the unique identification number for the registration. Bank A (and other authorised searchers) will be able to enter this unique identification number on the PPS Register to view the registration.

5.91 The Registrar would have to ensure that search results are provided in response to a search application in accordance with any regulations made for such purposes (clause 171(2)). This provision would enable the regulations to determine rules for applying technological solutions for working out search results. In particular, this would allow the PPS Register to apply an exact match search method with a correction table for frequently used substitutes (such as Ltd and Limited). Authorised search purposes 5.92 Given the public nature of the PPS Register, it is of primary concern to protect the privacy of individuals’ details recorded on the PPS Register. To deter people [page 527] from interfering with individual grantors’ privacy, the Bill would provide that the PPS Register could only be searched by reference to an individual grantor’s details for an authorised purpose. These purposes are varied and would include a broad spectrum of searches without compromising an individual’s privacy (clause 172(2)). Example Vendor A is selling a large commercial shopping complex to Buyer A. Vendor A made it a condition of its leases that tenants — some of whom are sole traders — not enter into any general security interests. Buyer A would like to search the PPS Register to establish whether the tenants have complied with the lease terms. Buyer A will not be able to search the PPS Register for this purpose. As Vendor A made it a condition of the lease agreement that it could search the PPS Register for this purpose, Vendor A will be able to undertake the searches and warrant compliance to Buyer A.

5.93 In addition, a person who undertakes an authorised search could not then use the data obtained as a result of searching the PPS Register,

unless the searcher has also obtained the data lawfully from another source (clause 172(3)). This would therefore limit the extent to which PPS Register search data could be used, including by information brokers. 5.94 Each unauthorised search of the PPS Register or use of PPS Register would attract a civil penalty. The maximum penalty would be 50 penalty units for an individual, and 250 penalty units for a body corporate (clause 172(3)). The maximum penalty level is considered to be sufficient in light of the potential impact unauthorised searches and use of PPS Register data could have on persons whose information is disclosed in a registration, the limited information about individual persons contained on the PPS Register, and the ability of grantors to recover for loss or damage in relation to such breaches. 5.95 A person claiming that there has been an unauthorised search or use of PPS Register data bears the evidential burden of proof (clause 172(4)). The Registrar would be empowered to investigate, decline to investigate, or further investigate, a suspected unauthorised search or use of data (clause 172(5)). The Registrar would also be able to use technological evidence to detect transactions on the PPS Register indicating that unauthorised searches or use of data is occurring. 5.96 The duty not to conduct unauthorised searches would be an obligation due to the grantor and the failure to observe that duty and resulting in loss or damage would give rise to a claim for damages. (Clause 172(3) and (6)). Interference with privacy 5.97 To supplement the civil penalties which could apply to unauthorised searches and unauthorised use of an individual’s personal information, the Bill would also provide that an unauthorised search or use of the personal information (including unauthorised use by a third party) would constitute an act or practice interfering with the privacy of an individual for the purposes of s 13 of the Privacy Act (clause 173(2)). This ‘interference with privacy’ provision would cover any entity or individual whether or not they were otherwise subject to the Privacy Act. [page 528]

5.98 An individual would be able to complain to the Privacy Commissioner under section 36 of the Privacy Act if she or he believes that a search of the PPS Register or use of the personal information constitutes an interference with their privacy. Example Person A received a phone call from Finance F offering her cheap finance because she had no registrations on the PPS Register. Person A complained to Finance F that this was an unauthorised search of the PPS Register and an interference with her privacy but they could not resolve the matter. Person A complained to the Privacy Commissioner. The Privacy Commissioner encouraged the parties to conciliate the complaint and, as happens in the majority of these matters, the parties reached an agreement, including that Finance F would provide a public apology to Person A. Because there was no formal determination by the Commissioner, no decision could be published on the website but, as this particular matter was considered to be of general interest to the public, the Privacy Commissioner published some short case notes about the complaint and its outcome without identifying any of the parties.

5.99 In addition the Registrar would be able to inform the Privacy Commissioner of a suspected interference with privacy and the Privacy Commissioner would be able to investigate the matter under its own motion investigative powers (s 40(2) of the Privacy Act). Written search results and evidence 5.100 An important part of entering into secured transactions would be to obtain accurate and reliable written search results. While a clear PPS Register search result would provide prospective purchasers and lenders with some certainty that the transaction they are about to enter would not be undermined by other registered interests, it would be another matter to prove the status of a registration at a later time, particularly if a priority dispute were litigated. 5.101 To this end, a person who conducts an electronic search of the PPS Register could elect to obtain a written search result documenting the search (clause 170(2)). The written search result would be admissible as evidence in a court or tribunal and, in the absence of evidence to the contrary, proof of matters stated in the search result (clause 174(1)). Where competing interests are in dispute, a party would need a written search result covering two or more competing registrations and provision would be made for this (clause 174(2)(c)). Example Finance F and Bank B both registered Grant A’s present and after acquired property on the same day. However, Finance F’s registration was the first to become available for search on the PPS Register. A later written search result issued by the Registrar provided prima facie

written evidence that Finance F was the first to register. This occurred because it was Bank B s practice to make all of its registrations at the end each business day, while Finance F made its registrations as they occurred throughout the day.

5.102 A written search result would be provided in the appropriate form if issued by the Registrar in the approved form or by Commonwealth, State or Territory officers authorised by the Registrar or other prescribed persons (clause 174(3)). 5.103 The Registrar could by legislative instrument determine data relating to the secured party, grantor, or collateral, to be included on the search result [page 529] (clause 174(4) and (7)). In order to protect personal information, it is envisaged that only necessary information would be shown on the search result about grantors and secured parties. 5.104 For secured parties, this would be the identifier (ACN, ARSN etc) or name recorded on the PPS Register in accordance with the regulations, and the address for service nominated by the secured party group. The address for service would need to be shown on the search result as this would be used by interested parties to send notices to the secured party. Copies of financing statements 5.105 The Bill would also allow for secured parties to request, in the approved form, a copy of their financing statement or verification statement from the Registrar (clause 175). A request for a copy of the financing statement or verification statement could incur a fee (clause 190). 5.106 The Registrar would have a discretion to issue or refuse to issue a copy of the financing statement or verification statement. This would assist the Registrar to manage his/her resources and to impose limits on how many requests a secured party could make in relation to a registration for a given period. If the Registrar refuses the request, and the secured party disagrees with the refusal, the secured party could apply to the Administrative Appeals Tribunal to review the Registrar’s decision. 5.107 A person could also request, in the approved form, a report of matters

relating to registered data relating to that person (clause 176(1)). The Registrar would be able to determine the different matters that the report would cover. A request for a report could incur a fee (clause 190). These reports would be intended to assist secured parties to manage their registrations. Example To assist secured parties renewing registrations nearing their end date, the Registrar could determine, by written instrument, that a report showing the number of registrations with an end date within the next three months would be provided (clause 176(2)).

5.108 The Registrar would also have the discretionary power to provide a report of matters related to registered data (clause 176(2)).

Amendment demands 5.109 Ideally secured parties and others with interests in the registered personal property would be able to resolve any difficulties with the registration between themselves. However, if a secured party is unwilling or neglects to omit property from, or end, a registration, a person with an interest in the collateral (other than a security interest) could demand, in writing, that the registration be amended (clause 178). This statutory demand would be known as an ‘amendment demand’. An interested person could demand: that the secured party omit the collateral from the registration (clause 178(1), item 1); or end the effective registration of the collateral (clause 178(1), item 2). 5.110 This process would be important as a mere registration could limit the person’s ability to deal with the registered property. [page 530] 5.111 A secured party would not be able to require payment for compliance with a demand for amendment (clause 178(3)). Consumers would be protected against the imposition of hidden loan fees relating to amendment demands. 5.112 Where a dispute remains unresolved, the person seeking amendment

could obtain a rectification of the registration through either an administrative or judicial process. 5.113 A person with an interest in property described in a registration would initially have to give a written demand to the secured party to amend the registration (clause 178). The Electronic Transactions Act 1999 authorises the giving of a demand by electronic means. Example Person A became aware that Finance A had registered against all of its present and afteracquired paintings rather than the particular painting offered as security for the loan. Person A sends an email to Finance A demanding that it amend the registration to apply only to the particular painting.

5.114 Where the secured party fails to amend the PPS Register in line with the demand by the end of 5 business days after the day of the demand (or such later period as approved by the court (clause 293), the person would generally have a choice of pursuing an administrative or a judicial action to obtain an amendment of the PPS Register. However, if the security agreement that provides for the security interest in the collateral is a security trust instrument, only judicial processes would be available (clause 179(1)–(3)). Administrative process to demand amendment of a registration 5.115 The Bill would only allow secured parties, their agents and the Registrar (including subject to court order) to amend a registration. Secured parties could therefore expect that registrations could not be amended inadvertently or with ill-intentions. 5.116 The administrative process would be available where a person gives a written demand to a secured party to amend the registration and the secured party fails to apply for the amendment before the end of 5 business days or a period as extended by the court (clause 179(1)). However, the process would not be available where: the security agreement (if any) creating the security interest in respect of the collateral is a security trust instrument; or proceedings are before a court in relation to an application concerning the demand (clause 179(2)). 5.117 The exception in relation to security trust instruments would minimise the scope for inadvertent, fraudulent or negligent changes to a registration through a trustee’s actions or omissions. In cases involving security trust instruments, the beneficiaries of the trust rather than the

trustee would suffer the direct loss where a security interest loses priority due to negligent or fraudulent action that brings a registration to an end. 5.118 The administrative process would cease to be available where the financing statement is subsequently amended in accordance with a demand or court proceedings (clause 179(2)). 5.119 To commence the administrative process, a person would have to give a written statement to the Registrar setting out the nature of their demand and anything else prescribed by the regulations (clause 180(3)). As soon as practical after the [page 531] statement is given to the Registrar, the Registrar would have to give an amendment notice to the secured party unless the Registrar has already done so (clause 180(4)). In this regard, the Registrar could give an amendment notice to a secured party where the Registrar suspects on reasonable grounds that the underlying obligation has ceased (clause 180(2)). 5.120 An amendment notice would have to be in the approved form. If the amendment notice is not in the approved form, the amendment notice would have to: state the amendment demanded; invite the secured party to submit a response before the end of 5 business days after the day of the Registrar’s notice or an extended period approved by the Registrar; describe the ‘show cause’ procedure in the amendment notice (clause 181); and include a copy of the written statement of the person who demanded the amendment (clause 180(5)). 5.121 The ‘show cause’ process would require the Registrar to amend a registration in accordance with the demand described in the amendment notice unless the Registrar suspects on reasonable grounds that the amendment is not authorised under the Bill (clause 181(1) and (2)). In deciding whether to amend or refuse to amend the registration, the Registrar would have to consider the response (if any) of the

secured party as well as any other relevant information (clause 181(4)). Example Finance A failed to comply with Grant A’s request to amend the registration over Grant A’s painting. Grant A applied to the Registrar setting out the terms of his demand and other required information. The Registrar gave Finance A written notice of Grant A s statement and invited Finance A to show cause why the registration should not be amended.

5.122 The provision of false or misleading information in any response to the Registrar’s invitation could be an offence against Part 7.4 of the Criminal Code. Similarly, providing false or misleading information in an application to the Registrar to initiate the amendment demand process could be an offence against Part 7.4 of the Criminal Code. 5.123 A secured party would have to be notified of the Registrar’s decision by verification statement under clause 156)(assuming the Registrar decides to amend the registration). The Registrar s decision would be reviewable by the AAT. Judicial process to obtain amendment of a registration 5.124 The Bill would provide a judicial process for interested persons affected by a PPS Register registration to obtain an amendment to a registration that concerns their interests. These parties would not be required to undergo the administrative process prior to applying to a court. 5.125 The judicial process would be available where a written demand for amendment is made and the secured party does not comply with the demand within 5 business days after being given notice of the demand or a period extended by a court under clause 293. The judicial process would be available in all cases, including where a security trust instrument is involved. [page 532] 5.126 The secured party or the person who gave the demand (usually the grantor) would be able to apply to court for an order relating to the registration (clause 182(1)). Any person with an interest (including a security interest) in the collateral would have the right to appear before the court (clause 182(3)). The Registrar would also have the right to

appear in proceedings (clause 218), which would be especially important if other relevant administrative processes relevant were underway. 5.127 Where a party brings an application to court in relation to an amendment demand, the court could make orders to amend the registration (clause 182(4)). If the court did not consider the demand was authorised, the court could make orders to: restrain the Registrar from amending the registration; restrain the person who gave the amendment demand from making such further amendment demands as specified by the court; restrain the Registrar from giving the secured party amendment notices in relation to such further amendment demands as specified by the court; any other orders that the court thinks fit (clause 182(4)). 5.128 The Registrar would have to comply with a court order as soon as practicable after receiving it (clause 182(5)). The Register could also determine that data removed from the PPS Register would not be made available for searching by reference to a time prior to the removal or after the removal (clause 182(6)).

Removal of data and correction of registration errors 5.129 Consistent with the Registrar’s role of establishing and maintaining the PPS Register, the Registrar would be empowered to: amend registrations; correct errors and omissions made by the Registrar and registry staff; remove, restore and archive data and implement court orders as authorised. 5.130 The Registrar would be empowered to remove data (including an entire registration) from the PPS Register where: the application to register the data is frivolous or vexatious, the data is offensive, or the retention of the data in the PPS register is contrary to the public interest; the registration of the data is prohibited by the regulations; the application to register the data was not made in the approved form; the removal is required urgently in the public interest or for reasons prescribed by the regulations (clause 184).

Example Credit A applied for a registration against Person B in which the collateral was described as ‘Bartholomew’. As Credit A could not take a security interest in a person, the registration would be frivolous or vexatious and the Registrar could remove it.

5.131 The Registrar’s power to remove data which is contrary to the public interest would extend to a broad range of data, for example, data that if retained on the PPS Register, would otherwise be unlawful. The Registrar would also have the power to urgently remove data in the public interest. 5.132 The Registrar would also be empowered to remove data if the data is prohibited by the regulations for being defamatory or otherwise unlawful. [page 533] 5.133 Where data is removed, the Registrar would have to give a verification statement to each secured party (clause 156). The verification statement would serve as notice of the removal of the data. If the secured party believes that the Registrar’s decision is wrong, they could apply to the AAT to review the Registrar’s decision (clause 191). 5.134 In most cases, where a financing change statement is registered, the historical data about the registration prior to the amendment would be available for search if a user undertakes a point-in-time search or a current search after the removal of the data. Where data has been removed by the Registrar, the Registrar could decide that the data would not be included in any point-in-time search result. If the data has been removed urgently in the public interest or for reasons prescribed by the regulations (clause 184(1)(e)(ii)), the Registrar would be required not to make such data available for search. Data removed in this way would be treated as if it had never been included in the PPS Register. 5.135 The Registrar would also have the capacity to register a financing change statement to remove old data from the PPS Register or data that has been ineffective for 7 years or more after its registered end date (clause 185). 5.136 The Registrar would also have the discretionary power to restore data (including an entire registration) to the PPS Register where that data

was incorrectly removed (clause 186(1)). The Registrar would need to exercise his discretionary power to protect the rights of third parties. If data is restored to the PPS Register, it would be taken to have never been removed from the PPS Register (clause 186(2)). 5.137 To ensure that removed data is not lost, the Registrar would be able to keep a record of any removed data (clause 187). This would allow for old and removed records to be archived and prevent the PPS Register from becoming cluttered with old and ineffective registrations. Parties would be able to gain access to archived records under the Freedom of Information Act. 5.138 The Registrar would be empowered to amend registrations to correct any errors or omissions made by the Registrar (clause 188).

Fees, administrative review and annual reports Registration and search fees 5.139 The Minister would be able, by legislative instrument, to determine fees for the purposes of the Bill (clause 190(1)–(2)). Fees could be payable on a ‘pay as you go’ basis (through credit card or direct debit arrangements) or by arrangement with the Registrar (in accordance with arrangements determined by the Minister under clause 190(3)–(4). Example Finance A projected that it would undertake about 1,000 transactions on the PPS Register each month. To overcome the inefficiency of multiple small ‘as you go’ transactions, Finance A enters an arrangement with the Registrar of Personal Property Securities for the invoicing and payment of fees on a monthly basis.

5.140 Any fees imposed by the Bill would be set on a cost recovery basis (clause 190(5)) and could not amount to a taxation (section 55 of the Commonwealth Constitution). 5.141 The amount of any fee, other than a fee to maintain a registration, would be a debt due to the Commonwealth, and could be recovered by the Commonwealth [page 534] by application to a court (clause 190(6)). The fee to maintain a

registration would not be a debt to the Commonwealth because the sanction imposed for non-payment would be the ending of the effective registration of the property. Review of decisions 5.142 A person could apply to the AAT for review of any of the following decisions by the Registrar: refusing to register a financing statement (clause 150(1); refusing to register a financing change statement (clause 150(2)); amending the PPS Register to end the effect of a registration (clause 150(2)); refusing to give a person access to the PPS Register to search for data, (clause 170); refusing to give a person a copy of a registered financing statement or a verification statement (clause 175); refusing to give a person a report (clause 176(1)); registering, or refusing to register, an amendment demand (clause 181(1)); removing data from the PPS Register (clause 184(1)(a)–(c)); not making data removed from the PPS Register available for searching on the PPS Register (clause 178(2), clause 181(5)) or clause 184(2)(a)); restoring incorrectly removed data to the PPS Register (clause 186); correcting an error or omission made by the Registrar (clause 188); and removing migrated data from the PPS Register (clause 334(2)). 5.143 Under the Administrative Appeals Tribunal Act 1975, a party to Administrative Appeals Tribunal (AAT) proceedings may appeal a decision by the tribunal to the Federal Court of Australia on a question of law. 5.144 The Registrar would have to prepare an annual report at the end of each financial year for tabling by the Minister in the Parliament. The report would have to address the operation of the Bill and provide details of each occasion on which access to the Register was refused or otherwise suspended during the relevant year (clause 147(5)). (Clause 192(2)).

Registrar of Personal Property Securities 5.145 The offices of the Registrar of Personal Property Securities and the Deputy Registrar are established under Part 5.9. 5.146 The clauses in this Part provide for: an office of the Registrar and Deputy Registrar and for the appointment of the Registrar and the Deputy Registrar (clause 194 and clause 200); the functions and powers of the Registrar and Deputy Registrar (clause 195 and clause 201); acting Registrar appointments to be made in certain circumstances (clause 196); the resignation of the Registrar and Deputy Registrar (clause 198 and clause 202); and the termination of the appointment of the Registrar and Deputy Registrar (clause 199 and clause 203). 5.147 The Registrar would be able to delegate his or her powers to persons who may, or may not, be engaged under the Public Service Act 1999 (clause 197). The [page 535] ability to delegate to non-public servants would be necessary to outsource functions under the Bill to private employees, such as those engaged in a contact centre. A delegate could be required to exercise their powers under the direction or supervision of the Registrar, Deputy Registrar or a person engaged under the Public Service Act. The powers conferred on the Registrar under the Bill fall into three broad classes: the powers required to operate the PPS Register. It is expected that the Registrar would ordinarily exercise these powers through automated systems without delegation to any person but the Registrar would need this power of delegation for situations requiring manual processes. The volume of transactions processed by the PPS Register would make it impractical for the Registrar to exercise all of his or her powers personally;

the power to undertake investigations or commence or intervene in legal proceedings (clauses 173(5), 218 and 219). It is expected that the Registrar would ordinarily exercise these powers personally but if the powers were delegated, it is expected that the delegation would be in relation to a particular matter and under the supervision of the Registrar. This power of delegation would give the Registrar flexibility in the administration of the PPS Register and the ability to retain powers over significant matters and to delegate powers over less significant matters; the power to make a range of routine decisions, such as in relation to applications to the Registrar for reports (clause 176), the amendment demand process (clause 180(2)) and the approval of arrangements for the payment of fees (clause 190(4)). It is expected that these matters would ordinarily be exercised by junior officers working at a telephone contact centre, under the direct supervision of more senior officers. The volume and nature of these functions would make it inappropriate for them to be exercised by SES officers.

CHAPTER 6 — JUDICIAL PROCEEDINGS Judicial proceedings generally 6.1 The Bill would confer jurisdiction on various Australian courts over ‘PPS matters’, that is matters arising under the Bill or otherwise arising in relation to security agreements or security interests (clause 206(1)). The conferred jurisdiction would not include matters over which the Federal Court or the Federal Magistrates Court has jurisdiction under the Administrative Decisions (Judicial Review) Act 1977. (Clause 206(1)). 6.2 Chapter 6 would establish specific requirements and procedures for transferring PPS matters between courts, including cross-jurisdictional transfers. The Bill would therefore exclude the operation of the Jurisdiction of Courts (Cross-vesting) Act 1987 and section 39B of the Judiciary Act 1903 (clause 206(2)) but not other provisions of the Judiciary Act (clause 206(3)).

[page 536] Conferral of jurisdiction 6.3 The Bill would confer jurisdiction over PPS matters on the following courts, subject to any limits on a particular court’s jurisdiction (clause 207): the Federal Court; the Family Court of Australia; the Federal Magistrates Court; a superior court of a State or Territory; and a lower court of a State or Territory. 6.4 A lower court of a State or Territory is a court of that State or Territory that is not a superior court (ie, a Supreme Court) (clause 211(3)). Jurisdiction would be conferred on such courts to facilitate access to court for parties wishing to enforce their rights regardless of the value of the security interests. 6.5 The Bill would not permit cross-jurisdictional appeals (eg from a state court to a federal court) unless expressly provided for by law (clause 208). 6.6 The Bill would require that courts and court officers with jurisdiction over PPS matters assist each other (clause 209). Transfers between courts 6.7 PPS matters would be able to be transferred between courts where appropriate or in the interests of justice (clause 212(1)). For a matter to be transferred: a PPS matter would need to be pending or before a court; jurisdiction would need to be conferred on the receiving court for either the whole proceeding or an application in the proceeding; and the remedies sought would need to be within the power of the receiving court. (Clause 210). 6.8 The Bill would not provide for the transfer of PPS matters between the Federal or Family Court and the Federal Magistrates Court (clause 210). Transfers between these courts are already provided for under existing legislation.

6.9 The Bill would enable cross-jurisdictional transfers from lower courts through the superior courts (clause 211). For example, a Local Court could transfer a matter to its Supreme Court with a recommendation that the matter be transferred to the Supreme Court of another jurisdiction. On receipt of the transfer, the Supreme Court of the other jurisdiction could transfer the matter to a lower court in its jurisdiction. 6.10 A court could transfer a PPS matter on the application of a party or on its own initiative (clause 213) In deciding whether to make a transfer, the court would need to take into account a number of considerations, including but not limited to the following: the location or place of business of the parties; where the relevant events took place; the desirability that related hearings be heard in the same State or Territory; any recommendation from a lower court that the matter be transferred; and the suitability of having the matter determined by the receiving court (clause 212(2)). 6.11 The receiving court would proceed with a transferred matter as if the matter had been instituted in that court (clause 214). When dealing with a transferred PPS matter, a court would be required to apply the rules of evidence and procedures [page 537] applied in any superior court, which the court considers appropriate in the circumstances (clause 215). Where a PPS matter is transferred, barristers or solicitors entitled to practise in the transferring court would have the same entitlements to practice in the receiving court (clause 216). In addition, appeals would not be allowed in relation to the transfer of proceedings (clause 211) and the rules of evidence and procedure (clause 215). (Clause 217). Registrar’s role in judicial proceedings 6.12 The PPS Registrar would be able to intervene in a proceeding on behalf of the Commonwealth (clause 218). If the PPS Registrar

considered it to be in the public interest for a person to seek to recover damages resulting from a PPS matter, the Registrar would be able to commence and pursue proceedings in the person’s name (clause 219). Where the person is not a constitutional corporation, this would require the person’s written consent (clause 219(3)).

Civil Penalty Proceedings 6.13 The Bill would include a civil penalty regime for the contravention of certain provisions (‘civil penalty provisions’). These provisions are aimed at protecting the privacy of individuals. A wrongdoer who contravened a civil penalty provision could be ordered to pay the Commonwealth a monetary penalty. A civil penalty is imposed through the courts and the standard is a civil, rather than a criminal, standard. Part 6.3 of the Bill would set out the framework for civil penalty proceedings. Application 6.14 A civil penalty provision would be identified as such by the relevant provision or by another provision (clause 221). Obtaining an order for a civil penalty 6.15 The PPS Registrar would initiate civil penalty proceedings on behalf of the Commonwealth. The Registrar would need to apply for an order from the Federal Court within six years of the alleged contravention (clause 222(1)). If two or more civil penalty provisions were contravened by the same conduct, proceedings could be instituted under any one or more of the provisions but a person would be liable for only one penalty in respect of the same conduct (clause 222(4)). 6.16 In making its decision, the court would need to be satisfied that the wrongdoer had contravened a civil penalty provision and that the contravention was serious (clause 222(2)). When determining the monetary penalty, the court would have regard to the nature and extent of the contravention and of the resultant loss or damage. The court would also consider the circumstances of the contravention and whether the person had previously been found to engage in similar conduct. (Clause 222(3)). 6.17 For each contravention, the court could order the wrongdoer to pay the

pecuniary penalty that the court considers appropriate. However, the amount payable could not be more than the amount set for contravening the relevant provision (clause 222(2)). 6.18 Civil penalties could be applied to persons involved in the acts of others who contravened the civil penalty provisions. For example, a person who aids, [page 538] abets, counsels or procures a contravention of a civil penalty provision would be liable to incur a civil penalty (clause 224). 6.19 If the Federal Court orders a person to pay a monetary penalty, this would have the same effect as a court judgment and would be enforceable by the Commonwealth as such (clause 225). 6.20 The contravention of a civil penalty provision would not constitute an offence (clause 223). Civil penalty proceedings and criminal proceedings 6.21 Where conduct could attract both civil penalty and criminal proceedings, the Bill provides priority for criminal proceedings. 6.22 If the relevant conduct results in a criminal conviction, the Federal Court could not make an order for contravening a civil penalty provision (clause 226). Where criminal proceedings are commenced against a person for conduct which is the subject of civil penalty proceedings, the civil penalty proceedings would be stayed (clause 227(1)). In the event the person was not convicted of the offence, the civil proceedings would be resumed, but otherwise they would be dismissed (clause 227(2)). 6.23 Criminal proceedings would be able to be instituted against a person despite that person having been found to have contravened a civil penalty provision in respect of substantially the same conduct (clause 228)). 6.24 Other than in cases raising allegations of giving false evidence in civil penalty proceedings, the evidence produced in civil proceedings would be inadmissible in criminal proceedings if the conduct alleged to constitute the offence is substantially similar (clause 229).

Enforceable undertakings relating to contraventions of civil penalty provisions 6.25 If the PPS Registrar considers a person to have contravened a civil penalty provision, the Registrar could accept a written undertaking to pay an amount to the Commonwealth within a certain period (clause 230). The breach of such an undertaking would enable the Registrar to apply to the Federal Court for an order that the person comply with the undertaking (clause 231).

CHAPTER 7 — OPERATION OF AUSTRALIAN AND OTHER LAWS Australian laws and those of other jurisdictions 7.1 The parties to a security agreement would need to know whether the security interest will be governed by the law of a place in Australia or another place. They would require certainty and predictability as to the law applicable to the validity, perfection, effects of perfection and nonperfection and enforcement of the security interest. The conflict-oflaws rules would meet the reasonable expectations of all interested parties to a security agreement. 7.2 The rules in Part 7.2 would apply to proceedings in an Australian court (clause 234). [page 539] 7.3 As there are connecting factors which must be met before Australian law is able to determine which law governs a security agreement, this Part should be read together with clause 6 (Connection with Australia). 7.4 This Part is based on international conflict-of-laws rules, and in particular on similar provisions in the New Zealand and Saskatchewan PPS Acts and the UNCITRAL [Legislative Guide on Secured Transactions]. 7.5 Clause 234 (Scope of this Part) would use the term ‘validity’ instead of ‘attachment’. This concept of validity relates to whether a security interest is effective and enforceable between the parties, and not whether the security agreement itself is valid as a contract between the

parties. 7.6 The provisions would include general rules (clause 234-237) and specific rules about security interests in goods (clause 238), intangible property (clause 239), financial property (clause 240) and proceeds (clause 241). 7.7 The starting principle is that a security interest in goods would be governed by the law of the location in which the goods are located, that security interests in an intangible would be governed by the law of the location in which the grantor is located and that a security interest in financial property would be governed by the law of the location in which the grantor is located. These principles would be modified in particular situations. Contractual obligations 7.8 Nothing in this Part of the Bill would affect the law that governs contractual obligations in a security agreement (clause 234). The contractual rights and obligations of the parties to a security agreement would be subject to the law chosen by the parties and as evidenced by the terms of the contract. The Bill would deal only with the law governing property rights created by a security agreement in proceedings before an Australian court (clause 234). 7.9 The choice of law available to parties to a security agreement would be consistent with the Convention on the Law Applicable to Contractual Obligations (Rome Convention)(Articles 3 and 4). Article 3 of the Rome Convention provides that parties have freedom of choice as to what law should govern contractual obligations and Article 4 provides that where a law has not been chosen, contractual obligations would be governed by the law of the country to which the contract is most closely connected. Under the Bill, the parties to a security agreement would be able to determine the appropriate law applicable to their personal obligations under the agreement. Location 7.10 The location of personal property, whether in Australia or another jurisdiction, would generally be the location where the personal property is situated (clause 235). 7.11 Australia would mean the Commonwealth of Australia and include Norfolk Island and any other external Territories prescribed by the

Regulations (clause 7). 7.12 There would be exceptions for some specific kinds of personal property, for example, investment instruments not evidenced by certificates would be located in the jurisdiction which governs the transfer of the investment instrument, while the location of negotiable instruments evidenced by electronic records [page 540] would be the jurisdiction which governs the negotiable instrument. The location of chattel paper would also be the jurisdiction which governs the chattel paper (clause 235). 7.13 A person’s location would be determined either by a body corporate’s place of incorporation, the jurisdiction of the body politic or an individual’s principal place of residence. Agreement to apply Australian law 7.14 The law of the Commonwealth would be the substantive law governing property rights created by a security agreement when the agreement between the parties expressly states the law of a place in Australia is to apply, and the grantor is an Australian entity (clause 237). The parties would be able to agree that Australian law governs a security interest only when the grantor is an Australian entity at the time the security interest attaches to the collateral (clause 237(1)(a)). For practical purposes, when the grantor is an Australia entity, this clause would apply only when the collateral is goods or a securities entitlement (because the security interest would generally be governed by Australian law when the collateral is an intangible) (clause 239) or financial property (clause 240). 7.15 An Australian company with foreign investments would be able to enter into security agreements which expressly apply Australian law to the company’s security interests, no matter where the goods, intangible property or financial property is located, when the security interest attaches. 7.16 The Bill would not apply when the grantor is not an Australian entity and the collateral is goods located outside Australia, as there would not

be a sufficient connection with Australia (clause 6(1)). For this reason, the Bill does not include provisions about the law that governs these security interests — including parties being able to agree that Australian law applies to the security agreement. Whether a nonAustralian entity would be able to agree that Australian law governs a security interest granted by it in goods located outside Australia would be a matter for the law of the location of the grantor or the goods. 7.17 There would be some exceptions to the express agreement provision in relation to specific intangible property. A security agreement would be unable to specify that Australian law would apply over security interests in an account, an assignment of an account or chattel paper, intellectual property or an intellectual property licence. Security interests in this type of intangible property would be governed by the law of the location of the grantor. Example Company B incorporated in Country Z exports goods to Australia and a number of other countries and has receivables owed to it from customers in these countries. Company A incorporated in Australia takes a security interest in an accounts receivable of Company B for receivables owed by Australian customers and payable in Australia. As the collateral is an account the governing law is that of the jurisdiction of the grantor at the time the security interest attaches. In this instance the law of Country Z would apply to the security interest.

7.18 This approach would be consistent with the United Nations Convention on the Assignment of Receivables in International Trade (UN Assignment Convention). Articles 22 and 30 of the UN Assignment Convention establish [page 541] the general rule that it is the law of the jurisdiction where the grantor is located which determines the governing law for the assignment of receivables. This rule would be required so that the law applicable to receivables is fixed to one location and secured parties would not have to ascertain which of a potential multitude of laws applies in a particular case. 7.19 This Part would cover the attachment, perfection and effect of perfection or non-perfection of security interests but other Commonwealth laws could provide governing laws for security

interests (clause 236). Goods 7.20 The main rule applying to goods would be that of the jurisdiction where the property is located when the security interest attaches to the goods, under that law. Example Person A, located in Australia, takes a security interest in a painting owned by Person F, located in Country F. The painting is located in Country F. As the painting is a good located in Country F, the validity, perfection and effect of perfection or non-perfection of the security interest will be governed by the law of Country F, However, the parties could expressly agree that the law of Australia would apply to the security interest in the painting despite the painting beings located outside Australia (clause 237).

7.21 The rule applying to goods would not distinguish between possessory and non-possessory security interests. Goods that are moved between jurisdictions 7.22 Secured parties could have security interests in personal property which is capable of being moved from jurisdiction to jurisdiction. If the main rule were to apply, it would be incumbent on secured parties to monitor the secured goods throughout transit and to enforce the security interests according to the law of the jurisdiction in which the goods were located when the security interest attached (this could be difficult to determine when the security agreement is enforced at a later time). 7.23 The Bill would therefore include an exception to the main rule for goods that are about to be moved. The law of the jurisdiction to which the goods are moved would apply when the secured party has a reasonable belief that the goods will be moved to the jurisdiction (clause 238(2)). Example Person A, located in Australia, takes a security interest in a painting owned by Person F, located in Country F. The painting is located in Country F. When the security interest attached to the painting, Person A held a reasonable belief that the painting would be moved from Country F to Australia. The governing law for goods that are moved is that of the jurisdiction to which they are moved, provided the secured party has a reasonable belief that the goods will be moved to that jurisdiction. Therefore, the law of Australia would govern the security interest in the painting. Also, because Person A is located in Australia, the parties could have expressly agreed that the law of Australia would apply to the security interest from the outset, regardless of the

location of the painting at any particular time (clause 237).

[page 542] Example Person F, located in Country F, takes a security interest in a painting owned by Person A, located in Australia. The painting is located in Australia. When the security interest attached to the painting, Person F held a reasonable belief that the painting would be moved from Australia to Country F. In proceedings in an Australian court, the law of Country F would govern the security interest in the painting (so long as the painting is located in Australia) (clause 6(1)(a) and clause 238(3).

Goods that are normally moved between jurisdictions 7.24 Strict adherence to the main rule would create a similar problem for secured parties who take security interests in goods which are normally moved between jurisdictions. Shipping containers are an example of this type of property. 7.25 Therefore, the Bill would provide an exception to the main rule for commercial goods that are normally moved between jurisdictions. The exception would apply the law of the jurisdiction (including the conflict of law rules) in which the grantor is located when the security interests attaches to the goods under the law of that jurisdiction (clause 238(3)). This means that secured parties would not have to know the exact location of the goods at any particular point in time. Example Person A, located in Australia, grants a security interest in shipping containers to Bank A, located in Australia. At any given time the shipping containers are located in various countries, or at sea. As Person A is located in Australia, the law of Australia would govern security interests in the container, unless otherwise expressly agreed by the parties (clause 238(3) and clause 237). Example Person F, located in Country F, grants a security interest in shipping containers to Foreign bank, located in Country F. At any given time, the shipping containers are located in various countries, or at sea. In proceedings in an Australian court, as Person F is located in Country F, the law of Country F would govern security interests in the container, unless otherwise expressly agreed by the parties (clause 238(3) and clause 237).

7.26 This exception to the main rule would take into consideration the requirement of sufficient connection to the governing law and the reasonable expectation of the parties, that for mobile commercial property, the location of the goods at any particular time should not

dictate what law would apply to the security interests. 7.27 A notable difference in this provision would be that the law of the debtor’s jurisdiction includes a reference to their conflict of laws rule. Similar inclusions are contained in both the New Zealand and Saskatchewan PPS Acts. The inclusion of conflict of laws invokes the doctrine of renvoi, which essentially means ‘reference back’. Put simply, the law of the forum is required to look not only at the domestic law of the debtor’s location, but also the choice of law provisions in the grantor’s location. Example Person F, located in Country F, grants a security interest in shipping containers to Bank A, located in Australia. Bank A commences enforcement action in an Australian court against Person F in relation to shipping containers located in Australia. The Australian court is required to apply the choice of laws rules in

[page 543] Country F. The Australian court is able to resolve the dispute in accordance with Australian law, provided the conflict of law rules in Country F apply the law of Australia to the shipping containers (clause 238(3)). Example Person F, located in Country F, grants a security interest in shipping containers to Bank A, located in Australia. Bank A commences enforcement action in an Australian court against Person F in relation to shipping containers located in Australia. The choice of laws in Country F includes the doctrine of renvoi, which creates a circular situation where the laws of each jurisdiction keep referring back to one another. In this instance, the Australian court would apply the law of Country F and resolve the issue as if a court of Country F had exercised its jurisdiction (clause 238(3)).

Intangible property 7.28 The main governing law rule for security interests in intangible property would be that the governing law would be the law of the jurisdiction where the grantor is located when the security interest attaches under that law (clause 239(1)). 7.29 This provision would provide certainty for the parties because: it would not always be clear where an intangible is located; and there would be a single law applicable to the intangible property. 7.30 The Bill would take into consideration a change in the location of the grantor over the life of the security interest and provide that perfection

and the effect of perfection or nonperfection of a security interest in intangible property would be governed by the law in which the grantor is located at a particular time (clause 239(2)). Example Exporter A, located in Australia, grants a security interest over a chose in action it has against persons located in Country D and Country E. The security interests would be governed by the law of Australia, unless the parties agree otherwise (clause 239(2)). Example Person A, located in Australia, grants a security interest over accounts due to it by persons located in Country D and Country E. The security interests would be governed by the law of Australia (clause 239(2)). Person A would not be able to contract that the security interest be governed by the law of another country (clause 237(2)(a)).

Intellectual property 7.31 The governing law for security interests in intellectual property or an intellectual property licence would be the law of the jurisdiction under which the intellectual property or licence was granted (clause 239(3)). Example Grant A, who is located in Australia, is the author and owner of the intellectual property in a best-selling book. In order to finance her next book, Grant A borrows money from Publisher F, which is located in Country F. Grant A grants Publisher F a security interest in the copyright in Grant A’s next book, whether located in Australia or Country F. The security interest would not extend to the copyright in other places. The security interest would be governed by the law of Australia to the

[page 544] extent that the collateral is Australian copyright and the law of Country F to the extent that the collateral is Country F copyright.

7.32 A different rule would apply to intellectual property and intellectual property licences because the same law would need to govern both the intellectual property and the associated security interest. This would be particularly important when title to the intellectual property is based on registration in an intellectual property register, such as for patents and trade marks. ADI accounts 7.33 A security interest in an ADI account would ordinarily be governed by the law of the jurisdiction that governs the ADI account (clause

239(4)). The parties to the security interest and the ADI could agree to the law of another jurisdiction applying to the security interest in the ADI account, provided the choice of law is not manifestly contrary to public policy (clause 239(5)). Financial property 7.34 The governing law for the validity of a security interest in financial property would ordinarily be that of the jurisdiction where the grantor is located when the security interest attaches, under that law, to the property (clause 240(1)). The location of the grantor would ordinarily also apply for determining perfection and the effect of perfection or nonperfection of a security interest in financial property (clause 240(4)). Example Company F, located in Country F, grants a security interest to Bank B, located in Country B, in financial property located in Australia. Bank B does not have possession or control of the financial property. In proceedings in an Australian court, the validity, perfection and the effect of perfection or non-perfection of a security interest in the financial property would be governed by the law of Country F (ie the law of the location of the grantor).

7.35 However, the law of Australia would govern the validity of a security interest in certain kinds of financial property when the security interest attaches under the law of a place in Australia and at the time the security interest attaches, the property is both located in Australia and the secured party has possession or control of the property. This rule would apply to investment instruments, negotiable instruments not evidenced by certificates and rights evidenced by letters of credit that state that the letters of credit must be presented on claiming payment or requiring the performance of an obligation (clause 240(3)). Example Company F, located in Country F, grants a security interest to Bank B, located in Country B, in an investment instrument located in Australia. The security interest has attached under the law of New South Wales. Bank B has possession or control of the investment instrument. The validity of Bank B’s security interest in the shares would be governed by the law of Australia.

7.36 Australian law would also apply to the perfection of a security interest in financial property in certain situations. Perfection and the effect of perfection or non-perfection would be governed by the law of Australia if at that time the financial property is located in Australia and the secured party has possession or control of the property (clause 240(5)).

[page 545] Example Company F, located in Country F, grants a security interest to Bank B, located in Country B, in an investment instrument located in Australia. The security interest has attached under the law of New South Wales. At the time of attachment, Bank B did not have possession or control of the investment instrument, however, Bank B later obtained possession or control of the investment instrument. The validity of Bank B’s security interest in the shares would be governed by the law of Country F (the location of the grantor, as there was no possession or control at attachment). But the perfection and the effect of perfection or nonperfection would be governed by the law of Australia (as the secured party has possession or control of the investment instrument that is located in Australia).

Non-negotiable documents of title 7.37 A security interest in a non-negotiable document of title would be governed by the law of the jurisdiction in which the goods covered by the document of title are located when the security interest attaches under that law (clause 240(6)). Negotiable instruments 7.38 A security interest in an uncertificated negotiable instrument would be governed by the law of the jurisdiction that governs the negotiable instrument. Proceeds 7.39 The governing law in relation to a security interest in proceeds would be the law of the location of the security interest in the original collateral. 7.40 There would be an exception where the proceeds are an account (to facilitate transfers of accounts) (clause 241).

Constitutional Operation 7.41 Pursuant to section 51(xxxvii) of the Constitution, the Commonwealth Parliament may legislate with respect to matters referred to it by the State parliaments. The Bill would be supported by suitable references of State legislative powers. Such references would remove any need to ‘read down’ the Act by reference to existing Commonwealth constitutional powers and would ensure that the new legislative

framework is comprehensive in its national coverage. 7.42 The Commonwealth and the States and Territories have agreed to the terms of an inter-governmental agreement underpinning the referral of legislative power from the States to the Commonwealth to enable the Commonwealth to enact the Bill. The Council of Australian Governments signed the inter-governmental agreement on 2 October 2008. 7.43 The Bill would operate in a referring State to the extent permitted by the constitutional powers of the Commonwealth and the reference of State legislative powers. 7.44 The Bill would still operate in a State regardless of whether that State has referred the powers necessary to enable the Commonwealth Parliament to enact the Bill. However, the Bill would operate in a nonreferring State only to the extent that the Bill’s operation could be supported by the Commonwealth Parliament’s legislative powers under section 51 of the Constitution (other than section 51 (xxxvii)). [page 546] 7.45 In a non-referring State, the Bill would govern security interests in personal property where: the grantor of the security interest is a person with respect to whom the Commonwealth can legislate, for example a bankrupt or an insolvent (clause 247); the security interest arose in the course of activities with respect to which the Commonwealth can legislate: for example, activities undertaken by a constitutional corporation (clause 248); or the security interest is in collateral over which the Commonwealth has legislative powers, for example, a bill of exchange or promissory note (clause 249). 7.46 The Bill would also provide that the PPS Register would operate in a non-referring State (clause 250). 7.47 The Bill would operate in a Territory as a law of the Commonwealth, to the extent that it can in accordance with the Commonwealth Parliament’s legislative powers under sections 122 and 51 of the Constitution (other than section 51(xxxvii)) (clause 243).

7.48 The Bill would operate outside Australia to the extent that it can under section 51(xxix) of the Constitution (the external affairs power) or any of the other legislative powers that the Commonwealth Parliament has under section 51 of the Constitution (other than section 51(xxxvii)) (clause 243(7)). 7.49 A State would not be a referring State unless the State refers the necessary legislative power before the registration commencement time. If a State were to refer the legislative power after the registration commencement time, a further Bill would be required to include that State as a referring State (clause 244). 7.50 The Bill would reflect the matters referred by state parliaments (clause 245). Initially, the Commonwealth would rely on the referral of legislative power from the states in order to make the Bill. The reference of power would also extend to the making of express amendments to the Bill. An express amendment would include direct amendments of the Bill but would exclude the enactment of a provision in a different Act that would have a significant affect on the Bill. 7.51 A referring State would stop being a referring State if that State were to terminate the provisions of the referral legislation that conferred the power to make the Bill initially and the provisions that permitted subsequent amendments (clause 244).

Relationship between Australian Laws Concurrent Operation 7.52 The Bill would establish the relationship between the Bill and other laws. If the Bill were to operate in relation to a security interest, other laws would not affect the validity of the interest, except where the Bill provides otherwise. The Bill would otherwise operate not to exclude or limit the concurrent operation of other applicable laws of the Commonwealth, a State or Territory or a rule of law or equity. The Bill would prevail to the extent of any direct inconsistency over a law of a State or a Territory or a rule of law or equity. However, the Bill would recognise that some laws of a State or a Territory and rules of law or equity could operate concurrently with the Bill (clause 254).

[page 547] 7.53 The Bill would provide certainty about the concurrent operation of the Bill with other Commonwealth, State and Territory laws (clause 255) and this would be consistent with the intergovernmental agreement on PPS reform, which provides (clause 3.2.4) that, where there is direct inconsistency between State or Territory legislation and the PPS Act, or subordinate legislation made under the Act, that State or Territory legislation would prevail over the Act or subordinate legislation where: subordinate legislation made under the Act provides that the State or Territory legislation prevails; or the State or Territory legislation expressly derogates from the Act or subordinate legislation. 7.54 Inconsistencies between the Bill and other Commonwealth, State or Territory legislation would be able to be resolved by a regulation replacing a provision of the Bill or modifying its operation (clause 255). This would provide a mechanism to resolve inconsistencies that would otherwise affect the regulatory responsibilities of participants in the national PPS scheme. A similar mechanism is included in the Corporations Act and the Corporations Agreement 2002. 7.55 This regulation making power could not be used to modify the definitions of ‘personal property’ (clause 26) or ‘licence’ (clause 255(3) so far as those definitions exclude certain rights, entitlements and authorities granted under Commonwealth, State or Territory law and which are declared under that law not to be personal property under the PPS Act. This restriction would be in accordance with the terms of the PPS inter-governmental agreement between the Commonwealth and the States and Territories. 7.56 The Bill would ensure that the Commonwealth, by enacting the Bill, could not give preference to one State (or part thereof) over another State (or part thereof) in relation to trade, commerce or revenue (as this would contravene section 99 of the Commonwealth Constitution) (clause 260)). This would be achieved by allowing a court to ‘readdown’ any provision in the Bill that would give such a preference, so that it would not operate to the extent that it gives the preference.

When other laws prevail 7.57 The Bill would allow for the Payment Systems and Netting Act 1998, the Cheques Act 1986, and the Bill of Exchange Act 1997 to prevail over the PPS Act to the extent of any inconsistency (clause 256). 7.58 The Bill would set out restrictions on the extent to which a security agreement would be effective according to its terms under clause 18(1) (clause 18). A security agreement would be subject to any rule of law or equity or any law of the Commonwealth, a State or a Territory. An Act that prevented the granting of security interests in certain kinds of personal property would continue to be effective, for example, the prohibition in the Gaming Machines Act 2001 (NSW) on granting certain kinds of security interests in approved gaming machines (section 74) or the prohibition in the Consumer Credit Code on mortgages that charges all the property of a mortgagor (section 40(1)). 7.59 The contractual relationship between the parties would continue to be regulated by the general contract rules dealing with matters such as the formation, validity, interpretation and enforceability of contracts. [page 548] 7.60 The Bill would allow a law of the Commonwealth, a State or a Territory or a rule of law or equity to prevail over the Bill to the extent of an inconsistency, where that law prohibits or limits a person creating, acquiring or dealing with collateral or a security interest in collateral (clause 254). This would include where the relevant law restricts the right of a person to hold, transfer or assign a security interest or where the law would impose further limitations or obligations in relation to the enforcement of a security interest in personal property. The regulation-making power in clause 258(4) could disapply the subordination so that the Bill would prevail. This could be necessary, for example, where a State or Territory law purporting to limit the ability of a person to deal with a security interest in personal property would unintentionally undermine the operation of the national scheme. 7.61 This rule would be subject to the provisions in the Bill which determine when other laws do not prevail (clause 258(5).

7.62 The Bill would allow a referring State or a Territory to declare that a matter be excluded from the application of the whole or part of the Bill (clause 259). The declaration could also specify the extent to which the matter is excluded. Regulations made under the Bill could override any such declaration. These provisions would be in accordance with the terms of the PPS inter-governmental agreement between the Commonwealth and the States and Territories. 7.63 While the Bill would allow State and Territory laws consistent with the Bill to operate concurrently with the Bill, the Bill would ensure that such laws would not prevail over the Bill in certain circumstances. When other laws do not prevail 7.64 A security agreement or an assignment of a security agreement would not be ineffective under the Bill merely because of a failure to comply with certain laws of a State or a Territory. Specifically, where a State or Territory law: require or enable a person to register a security interest or an assignment - a failure to comply with the registration requirements under the relevant State or Territory law would not affect the validity, priority or enforcement or otherwise limit the effect of the security agreement, security interest (clause 261) or the assignment (clause 262); relates to a security agreement or an assignment of a security interest and requires the security agreement to be in a particular form or be executed in a particular way — a failure to comply with the formal requirements under the relevant State or Territory law would not affect the validity, priority or enforcement or otherwise limit the effect of the security agreement, the security interest or the assignment (clause 263). This would only apply to State and Territory laws prescribed by the regulations. It would be possible to prescribe State and Territory laws that impose different formal requirements in different States and Territories, to facilitate consistent national formal requirements; affects the operation of the rules under the Bill that determine when a security interest attaches to personal property (clause 264) and how a security interest is perfected — the operation of the relevant State or Territory law would be excluded to the extent that it affects the specified provisions of the Bill.

[page 549] 7.65 These provisions would ensure national consistency in relation to registration, assignment, the formal requirements for security agreements and the rules relating to attachment and perfection.

CHAPTER 8 — MISCELLANEOUS Vesting of certain unperfected security interests 8.1 The Bill would specify the circumstances in which an unperfected security interest in property would vest in the grantor (clauses 267–269). 8.2 These provisions would operate in conjunction with other provisions in the Corporations Act and the Bankruptcy Act 1966 which specify the circumstances in which a security interest is void as against a trustee, liquidator or administrator. For example, the Corporations Act provides that certain unregistered charges are void as against the liquidator (s 266–267). 8.3 Unlike the provisions in the Bankruptcy Act and Corporations Act, the provisions in the Bill would also apply to transactions where the secured party owns the collateral, for example, under a lease or hire purchase arrangement. 8.4 The Bill would provide that a security interest would vest in the grantor if the security interest were unperfected when: a company or body corporate is wound up; an administrator is appointed under the Corporations Act (or that Act as applied by a State or Territory law); a company or a body corporate executes a deed of company arrangement; a sequestration order is made under the Bankruptcy Act; the person becomes a bankrupt under the Bankruptcy Act (clause 267). 8.5 This outcome would not be new to Australian law. The High Court in Associated Alloys v ACN 001 452 106 (Pty) Ltd (in liquidation) [2000] HCA 25 and in General Motors Acceptance Corporation Australia v

8.6

8.7 8.8

8.9

Southbank Traders (Pty) Ltd [2007] HCA 19, held that a supplier could lose their security interest as a result of failing to register the interest. The following kinds of security interests would be exempt from this rule: the interest of a senior creditor under a turnover trust (clause 268(2)); a short term PPS lease (a lease of goods described by serial number for a term of 90 days and less than one year (clause 268(1). While these transactions would survive the grantor’s insolvency, they would remain subject to the relevant priority rules in the Bill. Turnover trusts are a feature of a large number of commercial documents and are commonly included in guarantees provided in commercial financing. It would therefore be onerous to require financiers to register turnover trusts. The Bill would strike a balance by allowing unregistered turnover trusts to survive the grantor’s insolvency but would make the senior creditor’s unregistered interest under the trust subordinate to the interest of another registered security interest. Similarly, it would be onerous to require the registration of short term PPS leases to protect them from a grantor’s insolvency. As with turnover trusts, the Bill would strike a balance by allowing unperfected short term PPS leases to survive the grantor’s insolvency but to remain subject to the priority rules of the Bill. [page 550]

8.10 The Bill would also provide that a person who acquired the personal property from the secured party or the receiver would acquire good title provided they gave new value and had no knowledge that the winding up of the company, administration or the execution of a deed of company arrangement had commenced (clause 267(3)). 8.11 A secured party whose security interest vests in the grantor would be entitled to compensation which would entitle them to prove in the grantor’s insolvency (clause 269).

Exercise and discharge of rights, duties and obligations Entitlement to damage for breach of duties or obligations 8.12 The Bill would provide a right to recover damages to any person to whom a duty or obligation is owed under the Bill or who reasonably relies on the performance of a duty or obligation and who suffers loss or damage as a result of a failure to satisfy the duty or obligation (clause 271(1)). This right to recover damages would not affect any other liability arising under a law of the Commonwealth, State or Territory or the general law (clause 271(2)). 8.13 The right to recover damages could arise in the following situations: a breach of the duty to obtain market value when enforcing a security agreement (clause 131); a breach of the duty not to damage property when removing an accession in enforcing a security agreement (clause 92); or a failure to amend a registration (clause 180). 8.14 Damages would not be recoverable from the following persons provided that they had acted honestly under a power conferred on them by the Bill: the Commonwealth; the Registrar, Deputy Registrar, a delegate, member of staff or person acting as a member of staff or authorised to perform any of the Registrar’s functions; a Commonwealth Minister; or a State or Territory Minister performing functions under an agreement to proceed as if personal property is land (clause 118). (Clause 272). 8.15 A person who is affected by an error made by any of these people would have recourse under the Commonwealth’s Compensation for Detriment caused by Defective Administration Scheme. 8.16 The operation of the Bill in relation to rights, obligations, duties and remedies would remain unaffected where the secured party has title to the collateral, rather than the grantor (clause 273).

Provision of information by secured parties 8.17 The Bill would allow:

a grantor of a security interest; a person with another security interest in the collateral; an execution creditor with an interest in the collateral; an authorised representative of any of the above (clause 275(9); to request the following information from a secured party: a copy of the security agreement; the amount of the obligation and the terms of payment; [page 551] an approval or correction of an itemised list of secured property at a day not more than 20 days after the request; an approval or confirmation of the amount of the obligation and terms of payment at a day not more than 20 days after the request. (Clause 275). 8.18 The person providing the information could later be estopped from denying the authenticity of the copy of the agreement they provide or the accuracy of the information they provide (clause 283). 8.19 The secured party would be required to provide the information within ten days of receiving the request (clause 277(1)) unless: the secured party obtains a court exemption from providing the information (clause 278); the secured party obtains an extension of time for providing the information (clause 278); the secured party has already provided the information under another legal obligation (clause 275(5)); the secured party has a prior confidentiality agreement with the debtor, the debtor is not in default and the information has not been requested by the grantor or its auditor (clause 275(7)); the response would contravene a law of the Commonwealth, State or Territory or the general law (clause 275(6)); the response would breach a duty of confidence (clause 275(6)); or the fees requested for responding to the request have not been paid (clause 279(5)).

8.20 Where the secured party fails to respond to a request for information within the specified time or provides an incomplete or incorrect response, the person requesting the information would be able to apply to court for an order ordering the secured party to respond to the request within a specified period (clause 280). 8.21 A grantor would be entitled to receive this information free of charge once every six months or otherwise if there has been a material change in the information (clause 281(3)). In other circumstances, secured parties would be able to recover the reasonable marginal costs of responding to requests for information (clause 279). Where a person believes that the requested fee exceeds the reasonable marginal costs of providing the information or that the information has not already been provided in the previous six months or that there has been a material change in the information, the person would be able to apply to court for an order imposing a fee and stating a time within which it is to be paid (clause 281). 8.22 When a person fails to comply with a court order made in respect of a failure to provide the information or in relation to the reasonable fees of providing the information, the court would have the power to make an order extinguishing the security interest and directing the Registrar to register a financing statement reflecting this. The court could make any other orders it thinks necessary to obtain compliance (clause 282). 8.23 If a person who is no longer a secured party receives a request for information, they would be required to provide the requesting party with the name and address of their successor (if known) (clause 276). [page 552]

Notices and Timing 8.24 The provisions on notices and timing would not apply to proceedings before a court or tribunal or to procedures specified in the parties’ security agreement (clause 285). 8.25 A notice or other document required to be given under the Bill would need to be given: in writing (clause 286); and at the address specified in the registration by pre-paid post, fax or

email (a registration would specify only one address for service even where there is more than one secured party) (clause 153). 8.26 A registration could include an identifier so notices could be directed to the appropriate person within large organisations (clause 153). The Registrar would be able to specify the manner in which these identifiers would need to be included in notices and a notice which fails to include the identifier in the specified manner would be ineffective (clause 289). 8.27 A notice to be served on a deceased person could be served on the deceased’s legal representative or another person specified by the court (clause 290). The court would also have the power to make an order directing a notice or document to be given in a particular way or dispensing with any of the notice requirements (clause 291). Timing requirements 8.28 Provided a Court is satisfied that it would be just and equitable and that there would be no prejudice to third parties, it could extend the number of business days within which a person would be required to comply with the following obligations: perfection of purchase money security interests in collateral other than inventory (clauses 62(3)) and 63); the perfection of non-purchase money security interests in accounts (clause 64(1)); the enforcement of security interests in liquid assets: the payment of amounts owing to secured parties (clause 120(3)); the provision of notice to higher priority parties (clause 121(2)) and the grantor (clause 121(5)); compliance with notice from higher priority parties (clause 127(9)); the provision of notice of disposal of collateral (clause 130(2)); the provision of statements of account (clause 132(2)); the provision of notice of retention of collateral (clause 135(2)); the provision of proof of interests (clause 138(2)); the registration of financing statements:

the amendment of a registration after acquiring knowledge of defect (clause 166(2)); an application to end an effective registration in consumer property or serial numbered goods (clause 167(2)); an application for amendment of an registration after change demand (clause 182(2)); or the provision of information relating to security interests (clause 275(1)). [page 553] 8.29 A notice given under the Act would not be invalid as a result of a formal defect or an irregularity (clause 292)).

Onus of Proof and knowledge Onus of Proof 8.30 In any proceedings in an Australian court, the onus of proving that a security interest has attached to personal property, is perfected or has been taken free of a security interest, would lie with the person making those assertions. 8.31 Furthermore, because knowledge would generally lie with the person making the assertion, the onus would lie with the person making the following assertions to prove them: (clause 296): a security interest is attached; a security interest is perfected; personal property is acquired free of security interests (except in relation to taking domestic or household property free of security interests (clause 44(2)); a person acquires property but had no knowledge that a security interest had also been granted by a body corporate and the winding up, administration or execution of a deed of company arrangement of the company or body corporate had commenced (clause 267(3)); the fee requested to provide information regarding a security interest does or does not exceed the reasonable marginal costs of

providing the information (clause 279(2)); information regarding a security interest has been or has not been provided to a grantor within the previous 6 months (clause 281(3)); there has been or has not been a material change in the information regarding the security interest provided to a grantor since the information was last provided (clause 281(3)); or the secured party paid the market value when it purchased the collateral (clause 129(3)). 8.32 A number of the provisions in the Bill (particularly those in Part 2.5) would allow a person to acquire property free of a security interest provided certain conditions are satisfied. The Bill provides that the person would not take the property free of the security interest if: the purchaser had actual or constructive knowledge that the acquisition constituted a breach of the security agreement that provides for a security interest in the personal property; the purchaser had actual or constructive knowledge of a security interest in the personal property; or value was not given by the transferee for the interest acquired. 8.33 The onus of proving that the security interest is extinguished, would be on the person claiming that they have taken the property free of the security interest (clause 296). Knowledge 8.34 The Bill would refer to ‘actual knowledge’ and ‘constructive knowledge’. 8.35 The expression ‘constructive knowledge’ would be used where a person might gain an advantage by deliberately not making inquiries when a reasonable [page 554] person would make inquiries. Constructive knowledge would therefore include the knowledge that a person would have if they had made the inquiries that would have been made by an honest and prudent person in their situation or by an honest and prudent person with their actual

knowledge and in their situation (clause 297). 8.36 Where it is necessary to prove that a body corporate, or person other than a body corporate, has actual or constructive knowledge of a specific circumstance, it would be sufficient to prove that: a director, employee or agent, of the body corporate or person, who has responsibility for the circumstance had that knowledge; or the circumstance was communicated to a director, employee or agent, of the body corporate or person and reasonable care required them to bring the circumstances to the attention of the person responsible for the circumstance (clause 298). 8.37 The Bill would contain presumptions that where personal property is transferred between members of the same household, related companies or a company and a company director or officer of that company (clause 299(1)), that they: had actual or constructive knowledge of the security interest in the collateral; had actual or constructive knowledge that the transaction was a breach of the security agreement; and did not provide value for the interest. 8.38 These presumptions could be disproved if the parties involved could prove otherwise beyond a reasonable doubt (clause 299(2)). 8.39 This standard of proof is used in the Security Interests in Goods Act 2005 (NSW)(s 7(6)) and the Chattel Securities Act 1987 (Vic)(s 8). These Acts deal with security interests and would be replaced by the PPS Bill. 8.40 The Commonwealth, the States and Territories have all agreed that the higher standard be retained to provide finance companies with their existing level of protection against fraudulent transactions. Because the civil standard of proof would make it harder to set aside fraudulent transactions, it would not give lenders sufficient incentive to finance ordinary consumers without additional checks. The higher criminal standard of proof would better protect financiers holding security interests in personal property and deter fraudulent transactions which are a clear risk where related entities trade with one another.

Forms and Regulations

8.41 The Registrar would be able to approve forms required for the Bill (clause 302). 8.42 The Governor-General would be able to make regulations for the purposes of the Bill (clause 303).

CHAPTER 9 — TRANSITIONAL PROVISIONS 9.1 The Bill would provide for the transition from current law governing the creation, enforcement and priorities of security interests in personal property. [page 555] Part of this transition would require the migration of data from existing State, Territory and Commonwealth registers recording security interests in personal property to the PPS Register. 9.2 The Bill would apply to security interests existing before the Bill comes into force subject to the transitional provisions. The transitional provisions would generally allow security holders to maintain their existing priority and preserve their rights for 24 months from the time the PPS Register commences operation. 9.3 In order to preserve existing rights and priorities while ensuring a smooth transition to PPS law, certain parts of the Bill, for example, the provisions relating to enforcement would only apply to new security interests created once the Bill comes into force and not to existing security interests.

Constitutional framework 9.4 Under clause 51(xxxi) of the Constitution, the Commonwealth can only make laws acquiring property on just terms, including the provision of just terms compensation. Therefore the Bill cannot confer a higher priority on a security interest relative to another security interest in the same property, than it had prior to the Bill. 9.5 It is only where priority is to be determined following a bankruptcy or insolvency, or where an existing secured party has assented to the Bill

by voluntarily registering their interest on the PPS Register, that the Commonwealth can alter the existing priorities between competing interests without invoking the just terms requirement. The transitional provisions therefore contain special rules for determining priority in these situations. Apart from insolvency and consent, the Bill would ensure that pre-existing interests maintain the priority they would have had prior to the Bill. 9.6 The transitional provisions would preserve for 24 months (the temporary perfection period) existing rights in cases of bankruptcy or insolvency, or assent by a security interest holder whose interest is not migrated to the PPS Register (non-migrated security interest). 9.7 However, the transitional provisions would also encourage nonmigrated security interest holders to register their interests under the new regime. The Bill would provide that should the grantor become insolvent or bankrupt after the expiry of the temporary perfection period, unless that security interest has been otherwise perfected, it would become an unperfected security interest under the Bill and would have a lower priority than security interests in the same property that had been perfected. 9.8 The transitional provisions would apply to existing security interests that had been migrated to the PPS Register without requiring the secured party to indicate their assent to the Bill by voluntarily reregistering or amending the registration. However, in circumstances where this would change the priority of a migrated security interest, resulting in an acquisition of property otherwise than on just terms, the transitional provisions would protect the migrated security interest by ensuring that the secured party retains the priority they would have had if the PPS Act had not been enacted (clause 325). [page 556]

Key concepts 9.9 The migration time would be the start of the month that is 25 months after Royal Assent to the Bill or an earlier time determined by the Minister (clause 306(1)) although it is likely that the Minister would determine an earlier migration time.

9.10 The registration commencement time would also be determined by the Minister and would need to be at least 28 days after the day determined as the migration time. If the Minister does not make a determination for the migration time, the registration commencement time would be the start of the first day of the month that is 26 months after the month in which the Bill is given Royal Assent (clause 306)) Example If the Bill were given Royal Assent on 10 December 2020, the migration time would be the start of 1 January 2023 and the registration commencement time would be the start of 1 February 2023. If the Minister determined that the migration time would instead be 1 March 2021, the Minister may also determine an earlier time for the registration commencement time to occur but that time must be after 28 March 2021.

9.11 A security agreement would be a transitional security agreement if the agreement was in force immediately before the registration commencement time and the Bill would have applied to the security interest had the Bill been in force before the registration commencement time (clause 307). 9.12 A security interest would be a transitional security interest even if the interest arises after the registration commencement time, where the security agreement is entered into prior to the registration commencement time and allows for the creation of the security interest and the Bill would have applied to the security interest had the Bill been in force before the registration commencement time (clause 308). 9.13 Whether the relevant State is a referring State would affect whether the Bill would apply to a particular security interest arising after the registration commencement time and the extent to which it would have applied before the registration commencement time. In general terms, if a State does not refer its constitutional powers to the Commonwealth, the Bill would apply only to the extent of the Commonwealth’s constitutional power (that is, generally to all secured lending over personal property except as between solvent individuals where the Commonwealth lacks constitutional power). 9.14 A security agreement would be able to expressly provide for ongoing supplies and therefore result in a series of security interests. Provided the security agreement is in force prior to the registration commencement time and allows for future security interests to be granted, each security interest granted under that security agreement, regardless of whether it is granted before or after the registration commencement time, would be a transitional security interest. The

secured party to such an ongoing transaction would only need to register one financing statement to cover the ongoing transitional security interests. 9.15 Where there is no formal agreement providing for ongoing supplies, generally each supply would be considered to be a separate contract or security agreement. Supplies made after the registration commencement time in this type of situation would each be made under a new security agreement. Security [page 557] interests made after the registration commencement time would not benefit from the protection provided in the transitional provisions. The secured party to this kind of arrangement would need to register two financing statements; one to secure transitional security interests and a further registration to secure security interests arising after the registration commencement time. Example Each Friday, Supplier A supplies Vendor A, a newsagent, with greeting cards. Supplier A and Vendor A signed a contract on 1 February 2007, prior to the first supply, which noted that Mary does not own the cards until she pays for them. The contract provided for the ongoing supply of cards. Three weeks after the Bill commences, a liquidator is appointed to Vendor A’s business. Supplier A has not registered the collateral on the PPS Register. The contract between Supplier A and Vendor A is a security agreement that provides for future security interests in the cards supplied. The supply each week represents a new security interest under the security agreement. Supplier A will have priority over the liquidator’s interest for all supplies made to Mary as the ongoing supplies are transitional security interests provided for by the original transitional security agreement. The transitional security interests therefore receive temporary perfection for 24 months following the registration commencement time. Example Facts as above except that the weekly parcels have always come with a prominent notice on the invoice to the effect that Mary does not own the cards until she pays for them. Vendor A has never signed a contract with Supplier A. Three weeks after the Bill commences, a liquidator is appointed to Mary’s Vendor A. Supplier A has not yet registered against Vendor A. The informal nature of the business relationship between Supplier A and Vendor A means that a security agreement, and a security interest under that agreement, arises with each supply. There is no security agreement that covers the ongoing supplies. As a result, any supplies made after the registration commencement time will also be new security agreements and Supplier A would not be able to access the protection provided under the

transitional provisions for the security interests arising under those agreements. Supplier A would have priority over the liquidator only in relation to supplies made before the registration commencement time. Fred will lose priority in relation to goods supplied after the registration commencement time as his interest in these goods has not been perfected. Example Facts as above except that prior to the commencement of the Bill, Supplier A decides that, in order to protect supplies made after the commencement of the Bill, he will require Vendor A to enter into a written contract providing for the ongoing supply of cards. The parties enter into the agreement two weeks before the registration commencement time. Three weeks after the Bill commences, a liquidator is appointed to Vendor A’s business. Supplier A has not yet registered against Vendor A. Supplier A has protected his security interests by having Vendor A enter into a written agreement that provides for the ongoing supplies. The agreement would ensure that supplies made after the registration commencement time are protected by the 24 month temporary perfection period. Supplier A would have priority over the liquidator’s interest for all supplies made to Vendor A.

[page 558]

Initial Application of this Act 9.16 The application provisions would establish the security interests and security agreements to which the Bill would apply as follows: security agreements made at or after the registration commencement time; security interests arising at or after the registration commencement time; transitional security agreements and transitional security interests; interests in personal property (other than security interests) arising after the registration commencement time; personal property, if data in relation to the property is given to the Registrar as part of the migration process; and prescribed personal property. (Clause 310). Exclusions from initial application 9.17 Several parts of the Bill would apply only in relation to interests that arise after the registration commencement time and would, therefore, not apply as follows: transitional security interests would only be enforceable against

third parties if they would have been enforceable before the registration commencement time (clause 311); priority between security interests and declared statutory interests would not be determined by the priority provisions of the Bill unless the interests were created under a law of the Commonwealth, State or Territory after the registration commencement time (clause 312); security interests in intellectual property licences that are created before the registration commencement time would not be binding on successors-in-title (clause 313); the enforcement provisions would not apply to security agreements made before the registration commencement time (clause 314); application for the registration of a financing statement would not be able to be made, nor the registration made, before the registration commencement time (clause 315); the governing laws provisions of the Bill would not apply to security interests that arise before the registration commencement time (clause 316); a non-constitutional security interest that becomes a constitutional security interest would not be covered by the Bill unless the security interest arose at or after the registration commencement time (clause 317(1)); charges, fixed charges and floating charges created by security agreements made prior to the registration commencement time, would not be covered by the Bill (clause 318).

Transitional provisions 9.18 In order to encourage secured parties to register their interests, the Bill would limit the period for which holders of transitional security interests (including both migrated security interests and non-migrated security interests) could maintain their priority over newly registered interests. [page 559]

Migrated security interests and deemed registration 9.19 Migrated security interests would be interests that are currently registered on ‘transitional registers’ and the registered data in relation to the interests would be migrated to the PPS Register (clause 332). These interests would be deemed to be registered on the PPS Register from immediately before the registration commencement time until the earlier of: the time when the interest stops being continuously perfected under the Bill; the end-time of the registration (clause 323). 9.20 By being deemed to be registered from immediately before the registration commencement time, migrated security interests would have priority over new security interests registered at or after the registration commencement time. Example Bank B has a security interest in a car owned by Grant A. This security interest was registered on the NSW Register of Encumbered Vehicles and is migrated across to the PPS Register as a migrated security interest. Bank B’s security interest is taken to be perfected from immediately before the registration commencement time until the time the registration would have ended in accordance with the law under which the Register of Encumbered Vehicles was maintained. Example Facts as above except, after the security interest is migrated to the PPS Register, Bank B amends the registration to extend the end time. On 6 August 2011, which is before the end date of both the REVS registration and the amended PPS registration, Grant A gives Bank B an amendment demand stating that the car does not secure the loan to Grant A. Bank B does not respond. On 12 August 2011, the Registrar removes Bank B’s registration from the PPS Register. On 20 August 2011, a liquidator is appointed to Grant A’s company. By amending its registration, Bank B assented to the terms of the PPS Bill. Bank B’s security interest stopped being continuously perfected on 12 August — its unregistered security interest would be void against the liquidator.

9.21 The process of migrating security interests from transitional registers would not require security interest-holders to re-register their existing registered security interests. However, if the application of the transitional priority scheme would result in an acquisition of property other than on just terms, then the priority would be determined as if the Bill had not been enacted (clause 325). Non-migrated security interests and temporary perfection

9.22 A non-migrated security interest would be any transitional security interest which is not a migrated security interest. Apart from certain interests excluded by the regulations, nonmigrated security interests would be temporarily perfected by the Bill for a period starting immediately before the registration commencement time and ending at the end of the earlier of the following times: the time when the security interest ceased to be continuously perfected otherwise than by temporary perfection; or the end of the month that is 24 months after the registration commencement time (clause 322). 9.23 Temporary perfection is a form of perfection (clause 21) the purpose of which is to protect the holder of the non-migrated security interest and give them the opportunity to perfect their security interest. Temporary perfection would give [page 560] secured parties holding non-migrated security interests priority over parties who register their security interest at or after the registration commencement time. Example Grant A is a fruit packer. On 30 August 2009 Finance A lends Grant A $5 000 and takes a security interest in Grant A’s truck. There is no register on which Finance A can register its interest in the truck. On 1 May 2010 the new PPS Register commences. On 14 May 2010 Finance B lends Grant A $10000 and takes a security interest in the same truck. Finance B registers its interest on the PPS Register on the same day. On 15 July 2010 Grant A becomes insolvent. The priority between Finance A and Finance B comes to be determined. Finance A’s interest is a transitional security interest and would therefore be temporarily perfected by the Bill, for a period starting immediately before 1 May 2010, up until 31 May 2012. Finance A’s interest in Grant A’s truck would therefore have priority over Finance B’s interest, even though Finance A’s interest is unregistered. Example Facts as above, except on 24 May 2010 Finance A registers its interest on the PPS Register and as a result agrees to be subject to the terms of the Bill. On 1 June 2010 Finance A inadvertently removes Finance A’s registration from the PPS Register. On 15 July 2010 Grant A becomes insolvent. Finance A’s continuous perfection ended, and the security interest became unperfected, on the date the registration became ineffective. Finance A would not have the benefit of temporary perfection until the end of the 24 month period. Finance B would have priority as a registered security interest over Finance A’s now unregistered security interest.

Priority protection for certain transitional security interests 9.24 The transitional provisions would set up a transitional priority scheme which would apply: in bankruptcy or insolvency; or in a priority dispute between migrated security interests; or where holders of non-migrated security interests have assented to the Bill by registering their interests (clause 320). 9.25 A transitional security interest would be taken to have attached to the collateral immediately before the registration commencement time (clause 321). Interests prescribed in the regulations excluded from temporary perfection 9.26 The 24 month temporary perfection period applying to non-migrated security interests would not apply to interests prescribed in the regulations (clause 320(5)). The regulations could provide that the temporary perfection period would only be available for transitional security interests that were: not registrable on any register prior to the registration commencement time; or registrable on a register but registration did not confer priority under the legislation. 9.27 Therefore, security interests that were registrable on a transitional register that determined priority but were not registered, would not be temporarily perfected and the priority of these interests would be determined as if the Bill had not been enacted (in the absence of rules establishing priority, priority would be determined by the common law rule that an earlier security interest would have priority over a later security interest). [page 561] Example On 3 March 2009, Finance F lends Grant A $20,000 and takes a security interest in Grant A’s boat as collateral. The parties and the boat are located in Queensland. The boat is old and does not have a valid Hull Identification Number (HIN). The security interest is registrable on the Queensland Bills of Sale Register but Finance F registers its interest on the Queensland Register of Encumbered Vehicles (REVS) despite the State legislation requiring that all registrations of interests in boats include the HIN. The registration is

therefore not legally valid under the legislation. Finance F’ registration is not migrated to the PPS Register. The security interest would also not be temporarily perfected as it was registrable on the Queensland Bills of Sale Register. If Finance F registers on the PPS Register after the registration commencement time, it would have a transitional security interest perfected only from the date of registration. The invalid registration on the Queensland Register would not provide any protection for the security interest. Example Facts as above, except that on 19 September 2009, Grant A grants a further security interest in his boat to Finance S in the sum of $10,000. Finance S registers its interest in Grant A’s boat on the Queensland Bills of Sale Register. The registration is migrated to the PPS Register and is deemed to be registered on the PPS Register from immediately before the registration commencement time. Two months after the registration commencement time, Grant A becomes insolvent. These provisions of the Bill would not apply to Finance F’s interest because it was registrable on a register that determines priority by registration. Priority would be determined as if the Bill had not been enacted, under the Bills of Sale and Other Instruments Act 1955 (Qld), which determines that a registered interest has priority over an unregistered interest. Finance S’s registered interest would have priority over Finance F’s unregistered interest despite the fact that Finance F’s interest was created first.

9.28 The regulations could also provide that if the legislation governing the transitional register provides a time in which secured parties must register their interest, any interests created within that time period before the registration commencement time would obtain temporary perfection. However, if the time in which the interest had to be registered under the governing legislation has lapsed at the registration commencement time, the interest would not obtain temporary perfection and would only obtain perfection from the time of registration on the PPS Register. 9.29 If the legislation governing the transitional register does not determine a time by which an interest should be registered, the interest would have perfection from the time it is registered on the PPS Register. Example The Corporations Act requires that where a company creates a charge, the company must ensure that it lodges a notice in the prescribed form setting out particulars of the charge within 45 days of the charge being created. Thirty days before the registration commencement time, Company A establishes a charge over Company B’s assets in relation to a debt owed by Company B. Five days after the registration commencement time, Company B becomes insolvent. Company A’s security interest would have temporary perfection from immediately before the registration commencement time and would have priority over the liquidator.

[page 562]

Example In January 2008, Bank D lends Grant A $4,000 and takes a security interest in Grant A’s car as collateral for the loan. Bank D registers its security interest on the NSW Register of Encumbered Vehicles. Five days before the registration commencement time, Finance F lends Grant A $5,000 and takes a security interest in Grant A’s car as collateral for the loan. Despite being registrable on the NSW Register of Encumbered Vehicles, Finance F fails to register its interest. Two months after the registration commencement time, Grant A becomes insolvent. Bank D’s registration was migrated to the PPS Register and is deemed to be registered from immediately before the registration commencement time. Finance F has not registered its interest on the PPS Register. The priority would be determined as if the Bill had not been enacted and Bank D would have priority over the liquidator and Finance F as an unregistered security interest.

Priority after temporary perfection period 9.30 The effect of limiting the temporary perfection period would be that secured parties are encouraged to register their non-migrated security interests during the 24 month temporary perfection period. Disputes about the priority between security interests most commonly arise in cases of bankruptcy or insolvency, and in these circumstances the Bill would not confer priority on eligible non-migrated security interests for longer than 24 months. After the temporary perfection period, in an insolvency, the priorities would be determined under the substantive provisions of the Bill. However, if secured parties register during the temporary perfection period and maintain that perfection, their interests would have been continuously perfected from immediately before the registration commencement time. Example Grant A is a fruit packer. On 5 February 2010, Finance B lends Grant A $5,000 and takes a security interest in Grant A’s truck. The PPS Register commences on 1 May 2010. On 6 August 2010, Finance A lends Grant A $10,000 and takes a security interest in the same truck, which it registers on the PPS Register. Grant A becomes insolvent on 1 October 2012. Finance B has not registered its interest on the NSW Register of Encumbered Vehicles. Finance A’s registered interest in Grant A’s truck would have priority over Finance B’s unregistered interest, because the priority provisions of the Bill would give priority to a perfected interest. The two year temporary perfection period ended on 31 May 2012 without Finance B registering its interest and Finance A’s interest is perfected by registration. Example Facts as above, except Finance B registers its security interest on 24 June 2012 after the end of the temporary perfection period. Grant A becomes insolvent on 1 October 2012. The first in time rule in the Bill would apply and Finance A’s registered interest in Grant A’s painting would have priority over Finance B’s registered interest. Finance B would not benefit from the temporary perfection period in the Bill because there would be a gap between the temporary perfection period and the registration of the interest.

Priority between transitional security interests, including migrated security interests 9.31 The Bill would also provide rules for determining priority between different transitional security interests. The interests would have the same priority they [page 563] would have had if the Bill had not been enacted. The period for which this rule applies (the priority period) would be limited by the Bill depending on the particular interests involved (clause 324). 9.32 After the end of the priority period, the security interests would have priority between themselves that is determined under the Bill (clause 324(3)). 9.33 Where two non-migrated security interests compete for priority, the priority period would generally be the 24 month temporary perfection period. However, if one of the security interests had been perfected by registration and the registration had expired during that period, the priority period would end when that registration expired (clause 322(2)). Where both security interests had been registered and both of the registrations expire within the 24 months temporary perfection period, the priority period would finish on the earlier of the dates on which the registrations expire. Example On 13 June 2008, Finance F lends Grant A $5,000 and takes a security interest in his racing bicycle. On 16 September 2009, Finance B lends Grant A $6,000 and also takes a security interest in the same bicycle. On 1 May 2010, the PPS Register commences operation. Prior to the PPS Register there was no register on which interests in bicycles could be registered. On 27 September 2010, within the temporary perfection period, Grant A becomes insolvent. The two interests would have priority determined as if the Bill were not in operation, so Finance F’s earlier interest would have priority. Example Facts as above, except on 11 June 2010 Finance B registers its interest on the PPS Register, and on 27 September 2012 Grant A becomes insolvent. The date of insolvency is no longer within the two year temporary perfection period. Finance B’s interest is now perfected by registration, and Finance F’s is unperfected. The Bill would give Finance B’s registered interest priority. Example

Facts as above, except on 30 July 2011 Finance B’s registration ends, and on 20 August 2011, Grant A becomes insolvent. The date of insolvency is within the two year temporary perfection period. Finance F continues to have temporary perfection, and Finance B’s continuous perfection has stopped and its interest will no longer have temporary perfection. The priorities would be determined under the Bill. Finance B’s interest would be unperfected under the Bill and Finance F’s interest would therefore have priority as it is perfected by temporary perfection.

9.34 Where a migrated security interest and a non-migrated transitional security interest compete for priority, the priority period would end at the earliest of the expiry of the 24 month temporary perfection period or the time when one of the security interest stops being continuously perfected. Example On 1 April 2010, Company A establishes a charge over Company B’s assets in the sum of $100,000. Company A does not register its charge prior to the PPS registration commencement time on 1 May 2010. Under the Corporations Act, Company A has 45 days to register the charge. As a result, Company A would be eligible for temporary perfection under the Bill. On 5 April 2010, Company L also establishes a charge over Company B’s assets, in the sum of $25,000. Company L creates the charge despite being aware of Company A’s charge over Company B’s

[page 564] property. On 16 April 2010, Company L registers the charge on the Australian Securities and Investment Commission Register in accordance with the Corporations Act. Company A’s registered charge is migrated to the PPS Register. On 27 September 2010 Company B becomes insolvent. As a migrated security interest, Company L’s security interest would have effective registration from immediately prior to the registration commencement time. As a non-migrated security interest, Company A’s security interest would have temporary perfection from immediately before the registration commencement time. The priority has come to be determined during the priority period and would therefore be determined as if the Bill had not been enacted. At this time Company A’s charge would have priority, because the Corporations Act gives priority to an unregistered charge over a registered charge where the registered chargee has notice of the unregistered charge when registering. Example Facts as above except, Company A does not register during the temporary perfection period and Company B becomes insolvent on 2 October 2012. Because the temporary perfection period for Company A’s transitional interest has ended, the priority between the two interests will be determined by the provisions that apply after the priority period. The priority will therefore be determined by the Bill. Because Company B’s interest is taken to be perfected by registration until the registration end date and Company L’s interest is no longer temporarily perfected, Company L’s security interest would have priority, as the Bill would give priority to a perfected interest.

9.35

Where two migrated security interests compete for priority, the priority period would finish at the earliest date on which one of the registrations expires. Example On 5 March 2008, Finance A lends Grant A $60,000 to buy a car and takes a security interest in the car. Finance A registers its interest on 10 March 2008 on the Queensland Register of Encumbered Vehicles, with an end date of 10 March 2015. On 16 June 2009, Finance B lends Grant A $5,000 and also takes a security interest in the car. Faith Finance registers its interest on the Queensland Register of Encumbered Vehicles, with an end date of 16 June 2016. The start of the day on 1 May 2010 is the registration commencement time, and both Finance A’s and Finance B’s interests appear on the new PPS Register. Grant A becomes insolvent on 1 March 2015. Because the priority has come to be determined during the priority period, the priority will be determined as if the Bill had not been enacted. Finance A’s interest has priority because the Motor Vehicles and Boats Securities Act 1986 (Qld) would have given Finance A’s earlier registered interest priority. Example Facts as above, except Grant A becomes insolvent on 11 May 2015, after the end date of Finance A’s registration. Because the priority has come to be determined after the priority period, the priority will be determined by the Bill. Finance A’s interest is now unregistered, so the Bill would give priority to Finance B’s perfected migrated security interest.

9.36 In some cases, the Bill would give both interests exactly the same priority. This is because the temporary perfection provisions give exactly the same start time for temporary perfection for all transitional security interests. For example, if two non-migrated interest holders have registered during the temporary [page 565] perfection period, their interests would have been perfected from exactly the same time, and the Bill would give them equal priority. 9.37 In any case, where the Bill would apply and would not result in either security interest having priority over the other, the Bill would give the interests the same priority between themselves they would have had if the Bill had not been enacted (clause 324(3)). Priority not on insolvency/bankruptcy or registration 9.38 The priority rules would be different where priority is to be determined between a transitional security interest and a competing interest but: The issue of priority does not arise because of an insolvency or

bankruptcy; and priority is to be determined where the secured party holds a nonmigrated security interest but they have not registered it (clause 326). 9.39 This alternative priority rule would apply to a competing security interest whether or not the competing interest is a transitional security interest and whether or not the competing interest is an interest to which these provisions would apply. The competing security interest could be any kind of security interest, including a registered security interest. 9.40 Because a determination of the priority in these cases could involve the acquisition of property on just terms, the transitional security interest and the competing security interest in the collateral would have the priority between themselves that they would have had if the Bill had not been enacted (clause 326(3)). Taking free and vesting of transitional security interests 9.41 The provisions in the Bill relating to acquiring collateral free of security interests and vesting of unperfected security interests in the grantor would apply to transitional and migrated security interests only in cases of bankruptcy or insolvency or where a secured party has assented to the Bill by registering their transitional security interest or re-registering or amending the registration of their migrated security interest (clauses 327 and 328). As a result, collateral might be transferred free of a security interest under the Bill where, under the law prior to the Bill, the same collateral would have transferred subject to the security interest. In cases where this would not apply, the pre registration commencement time law would apply (clause 329). Migration provisions 9.42 Registered interests on transitional registers would generally be migrated to the new PPS Register. Migration would be done by an officer or agency of the Commonwealth, a State or a Territory giving data in the approved form to the PPS Registrar and the Registrar accepting that data (clause 330). The Registrar would be able to compel an officer or agency of the Commonwealth to provide data in the approved form to the Registrar (clause 331). 9.43 A security interest would be a migrated security interest if:

it is a transitional security interest in personal property; data is given to and accepted by the Registrar; the registration was effective on the transitional register immediately before the registration was given to the Registrar; and [page 566] the registration on the transitional register was authorised by the law under which the transitional register was maintained (clause 332). 9.44 The migration provisions would provide that the Registrar may determine, by legislative instrument, that a class of personal property about which data had been given to the Registrar is registrable, and allow the Registrar to register items in that class before the registration commencement time (clause 333). 9.45 This would involve the Registrar determining that, for example, ‘valid registrations on the Queensland Vehicle Securities Register perfecting security interests at the registration commencement time’ is a class of registrable property. A register may be unsuitable for migration because: the information in the register is not clearly set out; it is a register of interests to which the Bill does not apply; or it does not contain sufficient identifying information. 9.46 If a particular interest is not migrated across from an existing register because the Registrar has not determined the information on that register to be a registrable class of property, the interest would be a non-migrated security interest. If the interest is a type of interest governed by the Bill, the transitional provisions would protect the rights of the secured party. 9.47 These provisions would not apply to certain transitional security interests prescribed in the regulations and as a result those interests would not obtain temporary perfection (clause 320(5)). 9.48 If a particular interest is migrated to the PPS Register despite falling outside the classes of personal property determined by the Registrar to be registrable, the data would be taken not to be, and never to have

been, included in the PPS Register (clause 334(1)). The Registrar would be able to determine a time before which the Registrar would be able to register a financing change statement to remove data incorrectly registered in the migration process (clause 334(2)) Where data needs to be removed after the determined time, the data would need to be removed under another provision of the Bill. 9.49 The Registrar would have to give a verification statement to the secured party of the registration that is removed but there would be no obligation on the secured party to provide a notice of the verification statement to the grantor (clause 335). 9.50 Each migrated registration would need to have an end time. This would be the end time in the transitional register, according to the law under which the transitional register was maintained (clause 333(4)). Typically, this end time would be listed on the register from which the information is being migrated. If a particular registration fails to list this information, the Registrar would assign an appropriate end time, for example, the latest end date allowed by the legislation governing the particular register (clause 153). Preparatory registration for collateral secured by transitional security interests 9.51 The migration provisions would allow a non-migrated transitional security interest to be registered between the migration time and the registration commencement time (clause 336). A secured party that registers their security interest in this time would receive the same protection under the Bill as a secured party who registers their security interest within the 24 month temporary perfection period. The registration time for registrations of this nature would be immediately before the registration commencement time. [page 567] 9.52 The holder of a non-migrated security interest that is excluded from temporary perfection would be able to apply for preparatory registration in order to secure perfection from immediately before the registration commencement time. Registration defects

9.53 The Registrar would be able to determine that certain registrations are effective despite defects that would render them ineffective under the Bill (clause 337). This provision is necessary because some transitional registers do not include information that would be required on the PPS register. In the case of other transitional security interests, the Registrar could decide that secured parties should be given an opportunity to correct certain details of the registration where they have perfected their interest. Example State vehicle registers do not include information about the grantor of the interest. The Bill would enable the Registrar to determine that a migrated State vehicle registration, for a vehicle that is commercial property, is not ineffective merely because a search of the PPS Register, by reference only to the individual or corporate details of the grantor in respect of the collateral, is not capable of returning the relevant registration.

9.54 A registration on the PPS Register would be ineffective because of a defect if, and only if, there is a seriously misleading defect in the data or there is a specified defect (clauses 164) and 165). If a registration falls within the scope of the Registrar’s determination, the registration would not be ineffective because of the defect until: in relation to a non-migrated security interest, the end of the month that is 36 months after the security interest becomes unperfected; or in relation to a migrated security interest, the end time included when the security interest is migrated (clause 337). 9.55 Once these times have lapsed, the registration would become ineffective unless the registration is amended to correct the defect before the relevant time lapses.

Charges and fixed and floating charges 9.56 The Bill would implement a functional approach to security interests, and apply to all security transactions that in effect secure payment or the performance of an obligation — including fixed and floating charges. As a result, transactions that are currently structured as fixed charges or floating charges would become security interests under the Bill. 9.57 Some statutes currently refer to fixed charges, floating charges or charges and the Bill would maintain the effect of the existing provisions so that parties would not be able to avoid existing

provisions governing fixed and floating charges. Similarly, some security agreements may refer to fixed or floating charges. 9.58 The Bill would provide that in any Commonwealth law or security agreement, a reference to a charge would be taken to be a reference to a security interest that has attached to a circulating asset or personal property that is not a circulating asset (clause 339(3)). 9.59 The reference to a charge would apply to a charge only to the extent that the charge has attached to personal property owned by the grantor (clause 339(1)). [page 568] As a result, a reference to a charge would not apply to property owned by the secured party-such as the collateral in a retention of title arrangement, lease or consignment. 9.60 A reference to a floating charge over property would be taken to be a reference to a security interest that attaches to a circulating asset (clause 339(5)). 9.61 There would be two classes of circulating assets: where a secured party has given the grantor express or implied authority for any transfer of the personal property to be made, in the ordinary course of the grantor’s business, free of the security interest (clause 340(1)) (the personal property would not be a circulating asset merely because the secured party has given express authority to transfer specific personal property or a specific class of personal property free of a security interest (clause 340(4)) and current assets as follows: accounts that arise from 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); accounts that are the proceeds of inventory; ADI accounts (other than term deposits); currency;

inventory; and negotiable instruments. (Clause 340(5)). 9.62 However, personal property would not be a circulating asset if: the personal property consists of goods and the security interest in the goods is perfected by possession (clause 340(3); the secured party has registered a collateral description in a current asset that discloses that the secured party has control of the personal property and the secured party does have control of the current asset (clause 340(2)). 9.63 A person would have control of inventory if the secured party and the grantor have agreed in writing that the grantor would specifically appropriate the inventory to the security interest and would not remove any specifically appropriated inventory without previously obtaining express authority from the secured party to do so (and it is the grantor’s usual practice to comply) (clause 341(1)). 9.64 A person would have control of an account if: the secured party and the person to whom the relevant account is owed have agreed in writing that amounts paid to discharge the account must be deposited into a specified ADI account and it is usual practice for those amounts to be deposited in that manner; the secured party controls the ADI account and any deposits into the ADI account do not result in any person becoming liable to pay the person to whom the relevant account is owed or, if that person is a body corporate, to pay a related body corporate (clause 341(3)). 9.65 This applies to: an account that arises from granting a right, or providing services, in the ordinary course of a business of granting rights or providing services of [page 569] that kind (whether or not the account debtor is the person to whom the right is granted or the services are provided); and an account that is the proceeds of inventory. (Clause 341(2)).

9.66 These provisions would not be exhaustive of when a person might have control of a current asset. 9.67 The definition of circulating asset would confirm the existing case law on floating charges, which provides that in determining whether a floating charge exists over personal property, consideration must be given to both the express terms of the agreement between the parties as well as to the actual level of control exerted by the secured party. The provision takes into account current case law on the nature of floating charges so that, in determining whether a charge is a floating charge, consideration would be given to the intention of the parties as demonstrated by both their contract and their practice.

Review of operation of Act 9.68 The Minister would have to arrange for a review of the operation of the Bill to be undertaken and completed within 3 years after the registration commencement time (clause 343). The persons who undertake the review would have to provide a report to the Minister which would be tabled in both Houses of Parliament within 15 sitting days after the report is given to the Minister. [page 570] TABLE OF CLAUSE REFERENCES clause 1 clause 2 clause 3 clause 6 clause 7 clause 8 clause 10 clause 12 clause 13 clause 14 clause 15

14 14 14 15, 79, 105, 106, 108 15, 106 16, 18 15, 29, 41, 54, 60, 78, 87 18, 77 42 42, 43 8

clause 18 clause 19 clause 20 clause 21 clause 22 clause 24 clause 25 clause 26 clause 27 clause 28 clause 29 clause 31 clause 32 clause 33 clause 34 clause 35 clause 36 clause 37 clause 38 clause 39 clause 40 clause 42 clause 43 clause 44 clause 45 clause 46 clause 47 clause 48 clause 49 clause 74 clause 75 clause 76 clause 77

17, 28, 41, 113 19, 20, 24 17, 19, 20 19, 20, 21, 22, 39, 128 21, 35 22 23, 39 23, 113 23, 24 24 24 24, 25 24, 25, 26, 28, 44 21, 25, 26, 35 21, 26, 35, 46 21, 27, 36 21, 22, 27, 36 27, 49 27, 28, 36, 49 21, 28, 36 21, 28, 36 28, 35 29, 37 30, 121 31, 32 33 34 35, 37 35 49 40 49, 50 50

clause 79 clause 80

50 50, 51

clause 81

51

clause 84 clause 85 clause 86 clause 88 clause 89 clause 90 clause 91 clause 92

53 53, 54 54 54 54 55 55 56, 117

clause 93 clause 94 clause 95 clause 96 clause 97 clause 99 clause 100 clause 101 clause 102 clause 103 clause 105 clause 106 clause 109 clause 110 clause 111 clause 112 clause 113 clause 114 clause 115 clause 116 clause 117 clause 118 clause 119 clause 120 clause 121

56 56 56, 67 56 56 56, 57 57 57 57 57 58 58 19, 59, 73 59 60, 72 60 60 59 61, 75 61 60, 61, 62 60, 61, 62, 67, 117 62 60, 68, 74, 120 67, 68, 120

[page 571] clause 50 clause 51 clause 52 clause 53 clause 55 clause 56 clause 57 clause 58 clause 59 clause 60 clause 61 clause 62 clause 63 clause 64 clause 65 clause 66 clause 67

35 35 36 36 38, 40 38 39 41, 47 40 41 41 42, 46, 120 20, 45 42, 44, 120 42 45 46

clause 68 clause 69 clause 70 clause 71 clause 72 clause 73

46, 47 47 48 48 48 37, 49

clause 152 clause 153 clause 154 clause 155 clause 156 clause 157 clause 158 clause 160

79 79, 80, 81, 82, 83, 119, 135 81, 84 84, 89 84, 89, 96, 97 85, 89 85 83, 85

clause 161 clause 162 clause 163 clause 164 clause 165 clause 166 clause 167 clause 168 clause 170 clause 171

86 86 83, 86 65, 80, 87, 136 87, 136 83, 88, 120 88, 120 86, 89 90, 93, 99 90, 91

clause 123 clause 124 clause 125 clause 126 clause 127 clause 128 clause 129 clause 130 clause 131 clause 132 clause 133 clause 134 clause 135 clause 136 clause 137 clause 138 clause 140 clause 142 clause 143 clause 147 clause 148 clause 150 clause 151

37, 56, 64, 65, 69 64, 69 70 65, 69 64, 69, 120 60, 65, 70, 71, 74 60, 71, 121 37, 65, 67, 71, 120 72, 117 65, 67, 73, 120 73 60, 73 67, 74, 120 74 74 74, 120 36, 62, 65, 66, 68, 70, 74 75 75 77, 99 14, 77 78, 98, 99 78, 79

clause 228

104

clause 229

104

clause 230 clause 231 clause 234 clause 235 clause 236 clause 237 clause 238 clause 239 clause 240 clause 241 clause 243 clause 244 clause 245 clause 247 clause 248 clause 249

104 104 105 15, 106 107 106, 107, 108, 109 105, 107, 108, 109 105, 106, 109, 110 105, 106, 110, 111 105, 111 40, 112 112 112 112 40, 112 40, 112 [page 572]

clause 172 clause 173 clause 174 clause 175 clause 176 clause 178 clause 179 clause 180 clause 181 clause 182 clause 184 clause 185 clause 186 clause 187

76, 90, 91, 92 92, 100 93 93, 99 94, 99, 100 94, 99 95 95, 100, 117 95, 96, 99 96, 97, 120 97, 99 98 73, 98, 99 98

clause 188 clause 190 clause 191 clause 192 clause 194 clause 195 clause 196 clause 197 clause 198 clause 199 clause 200 clause 201 clause 202 clause 203 clause 206 clause 207 clause 208 clause 209 clause 210 clause 211 clause 212 clause 213 clause 214 clause 215 clause 216 clause 217 clause 218 clause 219 clause 221 clause 222

98, 99 89, 93, 94, 98, 100 78, 97 99 99 99 99 100 99 100 99 99 99 100 101 101 101 101 102 101, 102 101, 102 102 102 102 102 102 96, 100, 102 100, 102 103 103

clause 250 clause 252 clause 254 clause 255 clause 256

112 40 59, 113 113 113

clause 257 clause 258 clause 259 clause 260 clause 261 clause 262 clause 263 clause 264 clause 267 clause 268 clause 269 clause 271 clause 272 clause 273 clause 275 clause 276 clause 277 clause 278 clause 279 clause 280 clause 281 clause 282 clause 283 clause 285 clause 286 clause 289 clause 290 clause 291 clause 292 clause 293 clause 296 clause 297 clause 298 clause 299 clause 302 clause 303

17 114 114 113 114 114 114 115 116, 117, 121 116 117 79, 85, 89, 117 117 118 118, 119, 120 119 118 118 119, 121 119 119, 121 119 118 119 119 81, 119 119 120 120 89, 94, 96 121 88, 122 122 122 123 123

clause 306

14, 15, 125

clause 307 clause 308

125 125 [page 573]

clause 223 clause 224 clause 225 clause 226 clause 227

103 103 103 103 103

clause 315 clause 316 clause 317 clause 318 clause 320 clause 321 clause 322 clause 323 clause 324 clause 325 clause 326 clause 327 clause 328

14, 127 127 127 127 129, 135 129 36, 128, 131 128 131, 133 124, 128 133, 134 134 134

clause 310 clause 311 clause 312 clause 313 clause 314

14, 127 127 49, 127 127 127

clause 329 clause 330 clause 331

134 14, 134 14, 134

clause 332 clause 333 clause 334 clause 335 clause 336 clause 337 clause 339 clause 340 clause 341 clause 343

128, 134 134, 135 99, 135 135 135 135, 136 136 136, 137 137, 138 138

[page 575]

Personal Property Securities (Consequential Amendments) Bill 2009 Explanatory Memorandum 2008–2009

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

HOUSE OF REPRESENTATIVES

PERSONAL PROPERTY SECURITIES (CONSEQUENTIAL AMENDMENTS) BILL 2009

EXPLANATORY MEMORANDUM

(Circulated by the authority of the Attorney-General, the Honourable Robert McClelland MP)

[page 576]

TABLE OF CONTENTS TABLE OF CONTENTS OUTLINE FINANCIAL IMPACT STATEMENT ABBREVIATIONS FORMAL CLAUSES EXPLANATION OF ITEMS Schedule 1 — Fisheries legislation Amendment of the Fisheries Management Act 1991 Amendment of the Torres Strait Fisheries Act 1984 Schedule 2 — Intellectual property legislation Amendment of the Designs Act 2003 Amendment of the Patents Act 1990 Amendment of the Plant Breeder’s Rights Act 1994 Amendment of the Trade Marks Act 1995 Schedule 3 — Maritime legislation Amendment of the Admiralty Act 1988 Amendment of the Marine Navigation Levy Collection Act 1989 Amendment of the Marine Navigation (Regulatory Functions) Levy Collection Act 1991 Amendment of the Navigation Act 1912 Amendment of the Protection of the Sea (Civil Liability) Act 1981 Amendment of the Protection of the Sea (Harmful Anti-fouling Systems) Act 2006 Amendment of the Protection of the Sea (Prevention of Pollution from Ships) Act 1983 Amendment of the Protection of the Sea (Shipping Levy Collection) Act 1981 Amendment of the Shipping Registration Act 1981



Schedule 4 — Personal Property Securities Act 2009 Schedule 5 — Other legislation Amendment of the Air Services Act 1995 Amendment of the Bankruptcy Act 1966 Amendment of the Commonwealth Inscribed Stock Act 1911 Amendment of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 Amendment of the Health Insurance Act 1973 Amendment of the Insurance Act 1973 Amendment of the Privacy Act 1988 Amendment of the Quarantine Act 1908 Amendment of the Wool International Act 1993

[page 577]

1.

Outline

1.1 Personal Property Securities (PPS) reform aims to address the complexity of over 70 Commonwealth, State and Territory laws, common law rules and rules of equity currently governing security interests in personal property. PPS reform would provide a modern and efficient personal property securities framework, which is essential for any modern financial system. 1.2 The Personal Property Securities Bill 2009 was introduced into Parliament on 24 June 2009. By harmonising existing laws, the Bill will reduce the complexity of the existing arrangements for secured lending using personal property as collateral. The Bill will also increase consistency in the arrangements for creating, dealing with and enforcing security interests in personal property. 1.3 The PPS (Consequential Amendments) Bill 2009 (the Consequential Bill) represents the next stage in the Government’s harmonisation of Australia’s law on secured financing using personal property. 1.4 Personal property is any form of property other than land or buildings. The PPS Bill will apply to transactions which have the effect of securing a payment or other obligation by taking an interest in personal property, regardless of the form of the transaction, the nature of the debtor or the jurisdiction in which the personal property or parties are located. This is known as the functional approach. 1.5 The Consequential Bill will amend 25 Commonwealth Acts that deal with the creation, registration, priority, extinguishment or enforcement of interests in personal property. The amendments proposed by this Bill will also clarify the operation of legislation that will operate concurrently with the PPS Bill. This will facilitate the establishment of a single national regime for personal property securities. 1.6 The Consequential Bill contains measures designed to: harmonise language and concepts with the PPS Bill where appropriate; support a seamless transition to the PPS Register to be established by the PPS Bill, including removing provisions providing for the registration of security interests on a separate Commonwealth register; resolve conflicts between the PPS Bill and other Commonwealth

legislation that provides for security interests or other interests in personal property; determine the priority between Commonwealth statutory interests in personal property, other than security interests, and security interests in the same property; clarify the rights of secured parties and other parties in particular situations including statutory detention of personal property that may be subject to a security interest; and ensure that current rights are preserved on implementation of the amendments. 1.7 The Consequential Bill will not amend the Corporations Act 2001, which will be amended by a separate Bill following a public consultation process.

2.

Financial impact statement

2.1 The Consequential Bill will not have a financial impact on the operations of Government.

3.

Abbreviations

The following abbreviations are used in this explanatory memorandum. [page 578] AFMA AMSA ARS ASIC Consequential Bill IP PPSA or PPS Act PPS

— — — — —

Australian Fisheries Management Authority Australian Maritime Safety Authority Australian Register of Ships Australian Securities and Investments Commission Personal Property Securities (Consequential Amendments) Bill 2009 — Intellectual Property — the proposed Personal Property Securities Act 2009 — Personal Property Securities

4. Formal Clauses Clause 1 — Short title 4.1 The Short Title of the Consequential Bill is defined here. Clause 2 — Commencement 4.2 This clause provides for the commencement of the various proposed amendments. More details are provided in the notes on items relating to the respective Schedules. The provisions of the Consequential Bill will not commence at all if the Personal Property Securities Act 2009 does not commence. Clause 3 — Schedule(s) 4.3 The amendments made to legislation by the Consequential Bill are set out in five schedules.

Explanation of items 5. Schedule 1 — Fisheries legislation Schedule 1 amends the Fisheries Management Act 1991 and the Torres Strait Fisheries Act 1984 to ensure that enforcement action taken under that legislation against goods would not be frustrated by a secured party enforcing against the same goods under the PPS Act. This will ensure that the PPS Act does not circumvent the seizure, detention or forfeiture of property by the Commonwealth as a result of contravention of the Fisheries Management Act or Torres Strait Fisheries Act. The amendments also set out the priority between statutory interests and PPS Act security interests. Interests currently registered under the Fisheries Management Act that are PPS Act security interests will be migrated to the PPS Register.

Commencement 5.1 Schedule 1 will commence on the registration commencement time (the PPS Act registration commencement time) within the meaning of the PPS Act. The PPS Act registration commencement time is the first day of the month that is 26 months after the month in which the PPS Bill is given Royal Assent, or an earlier time determined by the Minister. The Government expects the registration commencement time will be in May 2011. [page 579]

Amendment of the Fisheries Management Act Definition of PPSA security interest Item 1 5.2 This item inserts a definition of a ‘PPSA security interest’ into the interpretation section (subsection 4(1)) of the Fisheries Management Act. A PPSA security interest is a security interest to which the PPS Act applies or a transitional security interest to which Division 4 of Part 9.4 of the PPS Act applies (being an interest subject to the PPS Act as a result of a bankruptcy or insolvency, or where an existing secured party has assented to the PPS Act by voluntarily registering their interest on the PPS Register). 5.3 The definition has been included to clarify references to ‘PPSA security interests’ in the amendments to the Fisheries Management Act. Definition of statutory fishing rights option Items 2–4 5.4 These items provide for technical amendments to the Fisheries Management Act to include a reference in the interpretation section (subsection 4(1)) to the definition of ‘statutory fishing rights option’ in section 31A. Registration of PPSA security interests Items 5, 10 and 17 5.5 These items recognise that from the PPS Act registration commencement time, PPSA security interests will be registered on the PPS Register. 5.6 The amendments will end the requirement for dealings giving rise to a PPSA security interest in a ‘statutory fishing rights option’ or a ‘fishing right’, to be registered on the Register of Statutory Fishing Rights, and will consequently mean that such dealings are effective despite not being registered on that register. 5.7 From the PPS Act registration commencement time, interests that are PPSA security interests can be registered on the PPS Register. The requirements to register under section 31F and section 46 of the Fisheries Management Act will cease to apply to PPSA security interests at the PPS Act registration commencement time. Repeal of subsection 31F(9) and subsection 46(6) Items 6 and 11

5.8 These items repeal subsection 31F(9) and subsection 46(6) of the Fisheries Management Act. These provisions allow a party to a dealing to lodge with AFMA the document relating to a charge over corporate property required to be lodged with ASIC under section 263 of the Corporations Act 2001, instead of the documents required under the Fisheries Management Act. 5.9 From the PPS Act registration commencement time, a charge over corporate property will be a PPSA security interest and these types of interests will no longer be required to be registered with ASIC. Priority between statutory fishing rights options or fishing rights and PPSA security interests Items 7 and 12 5.10 These items set out the priority between (i) section 31F interests in statutory fishing rights options or section 46 interests in fishing rights and (ii) PPSA security interests. [page 580] 5.11 Interests under section 31F or section 46 will have priority over unperfected PPSA security interests in the same property. 5.12 Where an interest under section 31F or section 46 is registered on the Register of Statutory Fishing Rights before a PPSA security interest in the same property is perfected under the PPS Act, the interest under section 31F or section 46 will have priority over the PPSA security interest. 5.13 Where a PPSA security interest is perfected under the PPS Act before an interest under section 31F or section 46 is registered on the Register of Statutory Fishing Rights, the PPSA security interest will have priority over the interest under section 31F or section 46. 5.14 These items also apply subsection 73(2) of the PPS Act to interests under section 31F and section 46 of the Fisheries Management Act. Applying subsection 73(2) ensures the priority between a section 31F interest or section 46 interest and a security interest in the same property is determined in accordance with the Fisheries Management Act after the PPS Act registration commencement time (under the rules set out in these items). Dealing with a statutory fishing rights option

Items 8–9 5.15 These items maintain current rights by ensuring that the holder of a statutory fishing rights option may deal with the option subject to any rights or interests in that option that are PPSA security interests or that appear on the Register of Statutory Fishing Rights. Dealing with a fishing right Items 13–14 5.16 These items maintain current rights by ensuring that, except where a condition of a fishing right provides otherwise, the holder of a fishing right may deal with the fishing right subject to any rights or interests in the fishing right that are PPSA security interests or that appear on the Register of Statutory Fishing Rights. Repeal of subsection 50(3) Items 15 and 18 5.17 These items remove the requirement that AFMA must notify parties with an interest in a fishing right under section 46 of the Fisheries Management Act when a notation is made on the Register of Statutory Fishing Rights in relation to the cancellation, suspension, revocation or rectification of a registration of a fishing right. This reflects the fact there is no similar requirement under the PPS Act. 5.18 The amendment will have a transitional effect to ensure that where the AFMA makes the notation giving rise to the requirement to notify parties before the PPS Act registration commencement time, AFMA must comply with the requirement to notify the relevant parties. Enforcement Item 16 5.19 This item ensures that the seizure, detention or forfeiture of a boat or any other property under the Fisheries Management Act has effect despite any enforcement action [page 581] taken against the property under the PPS Act. Enforcement under the Fisheries

Management Act will have effect regardless of whether the seizure, detention or forfeiture under that Act occurred before or after a secured party commences enforcement action under the PPS Act. Amendment of the Torres Strait Fisheries Act Definition of PPSA security interest Item 19 5.20 This item inserts a definition of a ‘PPSA security interest’ into the interpretation section (subsection 3(1)) of the Torres Strait Fisheries Act. A PPSA security interest is a security interest to which the PPS Act applies or a transitional security interest to which Division 4 of Part 9.4 of the PPS Act applies (being an interest subject to the PPS Act as a result of a bankruptcy or insolvency, or where an existing secured party has assented to the PPS Act by voluntarily registering their interest on the PPS Register). 5.21 The definition has been included to clarify references to ‘PPSA security interests’ in the amendments to the Torres Strait Fisheries Act. Enforcement Item 20 5.22 This item ensures that the seizure, detention or forfeiture of a boat or any other property under the Torres Strait Fisheries Act has effect despite any enforcement action taken against the property under the PPS Act. Enforcement under the Torres Strait Fisheries Act will have effect regardless of whether the seizure, detention or forfeiture under that Act occurred before or after a secured party commences enforcement action under the PPS Act.

Explanation of items 5. Schedule 2 — Intellectual property legislation Schedule 2 amends the Designs Act 2003, Trade Marks Act 1995 and Patents Act 1990 to remove the effect of security interests registered on the registers established under those Acts. The amendments will continue to allow PPSA security interests to be registered under the relevant intellectual property legislation after the PPS Act registration commencement time, but will provide that such registration may have no effect on the rights of the registered owner. Schedule 2 also amends the Plant Breeder’s Rights Act 1994 to acknowledge that a security interest can be granted over a plant breeder’s right.

Commencement 6.1 Schedule 2 will commence on the PPS Act registration commencement time. The PPS Act registration commencement time is the first day of the month that is 26 months after the month in which the PPS Bill is given Royal Assent, or an earlier time determined by the Minister. The Government expect the registration commencement time will be in May 2011. [page 582] Amendment of the Designs Act 2003 Definition of a PPSA security interest Item 1 6.2 This item inserts a definition of a ‘PPSA security interest’ into the definitions section (section 5) of the Designs Act. The definition includes a security interest to which the PPS Act applies and a transitional security interest to which Division 4 of Part 9.4 of the PPS Act applies. 6.3 The definition has been included to clarify references to PPSA security interests in the amendments to the Designs Act. Amendment of section 12 Item 2 6.4 Subsection 12(1) of the Designs Act provides that the rights of a registered owner of a design are subject to any rights appearing in the Register of Designs. 6.5 PPSA security interests will continue to be recordable on the Register of Designs. This is to enable such registrants to receive notifications, given an opportunity to be heard, or given the opportunity to make submissions under subsections 50(2), 52(3) and (5), 67(2) and (3), 68(2) and 68(4) of the Designs Act. 6.6 However, item 2 will have the effect that interests that appear on the Register of Designs and meet the definition of a PPSA security interest, will not have any effect on the rights of the registered owner after the PPS Act registration commencement time (see item 7 for the application of this rule). This amendment will encourage registration of PPSA security interests on the PPS Register after the PPS Act registration commencement time and will assist in ensuring that priority issues between PPSA security interests registered on

either the Register of Designs or the PPS Register are avoided. Item 3 6.7 Subsection 12(3) of the Designs Act currently provides that equities, in relation to a registered design may be enforced against the registered owner, except to the prejudice of a purchaser in good faith for value. 6.8 Item 3 will have the effect that the rule in subsection 12(3) will not apply in relation to a PPSA security interest. This is because the PPS Act will govern dealings with PPSA security interests over registered designs, including enforcement and taking a registered design free of an existing PPSA security interest (taking-free). The note to be added further assists readers in identifying the relevant provisions in the PPS Act relating to enforcement and taking-free of an existing PPSA security interest. Amendment of section 118 Items 4 6.9 Section 118 of the Designs Act currently provides that the Register of Designs is prima facie evidence of any particulars entered in it. 6.10 This item amends section 118 of the Designs Act so that this section does not apply in relation to any particulars recorded in the Register of Designs in relation to a PPSA security interest. This amendment is required because whilst PPSA security interests are registrable on the Register of Designs, such interests will not have any [page 583] effect on the rights of the registered owner after the PPS Act registration commencement time (see item 2). Consequently, from the PPS Act registration commencement time onwards, the Register of Designs will not be prima facie evidence of PPSA security interests registered in it. Amendment of section 119 Items 5 and 6 6.11 Section 119 of the Designs Act currently provides that a document, in relation to which particulars have not been entered in the Register of Designs, is not admissible in any proceedings as proof of the title to a design or to an

interest in a design, unless circumstances outlined in paragraphs (a) or (b) of section 119 exist. 6.12 These items amend section 119 so that this section would not apply to PPSA security interests. This amendment will allow for the operation of section 174 of the PPS Act, which provides that certain particulars relating to registrations on the PPS Register are admissible as evidence. Application of amendments Item 7 6.13 This item clarifies that parties with a dealing, enforcement action, or court proceedings in relation to a registered design (or an interest in a registered design) which have already started (but not yet finished) as at the PPS Act registration commencement time, should be able to rely on the rules which apply prior to the PPS Act registration commencement time. 6.14 A practical application of this amendment may be in relation to an interest holder that has a registration on the Register of Designs prior to the PPS Act registration commencement time. That interest holder would consider that their interests recorded on the Register of Designs would constrain the registered owner’s rights and that such recordings would be admissible as evidence. Item 7 will ensure that this understanding remains valid. Amendments to the Patents Act Definition of a PPSA security interest Items 8 and 14 6.15 These items insert the term ‘PPSA security interest’ into the list of expressions in section 3 for the term to be defined in the Dictionary in Schedule 1 of the Patents Act. The definition includes a security interest to which the PPS Act applies and a transitional security interest to which Division 4 of Part 9.4 of the PPS Act applies. 6.16 The definition has been included to clarify references to ‘PPSA security interests’ in the amendments to the Patents Act. Amendment of section 189 Item 9 6.17 Subsection 189(1) of the Patents Act provides that the rights of a registered owner of a patent are subject to any rights appearing in the Register of Patents.

[page 584] 6.18 PPSA security interests will continue to be recordable on the Register of Patents. However, item 9 will have the effect that interests that appear on the Register of Patents, and meet the definition of a PPSA security interest, will not have any effect on the rights of the registered owner after the PPS Act registration commencement time (see item 15 for the application of this rule). This amendment will encourage registration of PPSA security interests on the PPS Register after the PPS Act registration commencement time, and will assist in ensuring that priority issues between PPSA security interest registered on either the Register of Patents and PPS Register are avoided. Item 10 6.19 Subsection 189(3) of the Patents Act currently provides that equities, in relation to a patent may be enforced against the registered owner, except to the prejudice of a purchaser in good faith for value. 6.20 Item 10 will have the effect that the rule in subsection 189(3) would not apply in relation to a PPSA security interest. This is because the PPS Act will govern dealings with PPSA security interests over patents, including enforcement and taking-free of an existing PPSA security interest. The note to be added further assists readers in identifying the relevant provisions in the PPS Act relating to enforcement and taking-free of an existing PPSA security interest. Amendment of section 195 Item 11 6.21 Section 195 of the Patents Act currently provides that the Register of Patents is prima facie evidence of any particulars entered in it. 6.22 This item amends section 195 of the Patents Act so that this section will no longer apply to PPSA security interests. This amendment is required because whilst PPSA security interests will continue to be recordable on the Register of Patents, such interests that appear on the Register of Patents will not have any effect on the rights of the registered owner after the PPS Act registration commencement time (see item 9). Consequently, from the PPS Act registration commencement time onwards, the Register of Patents will not provide prima facie evidence when it comes to PPSA security interests over patents.

Amendment of section 196 Items 12–13 6.23 Section 196 of the Patents Act currently provides that a document, of which particulars have not been entered in the Register of Patents, is not admissible to any proceedings as proof of title to a patent or to an interest in a patent, unless circumstances outlined in paragraphs (a) or (b) of section 196 exists. 6.24 These items amend section 196 so that this section would not apply to PPSA security interests. This amendment will allow for the operation of section 174 of the PPS Act, which provides that certain particulars relating to registrations on the PPS Register are admissible as evidence. Application of amendments Item 15 6.25 This item clarifies that parties with a dealing, enforcement action, or court proceedings in relation to a patent (or an interest in a patent) which have already started [page 585] (but not yet finished) as at the PPS Act registration commencement time, should be able to rely on the rules which apply prior to the PPS Act registration commencement time. 6.26 A practical application of this amendment may be in relation to an interest holder that has a registration on the Register of Patents prior to the PPS Act registration commencement time. That interest holder would consider that their interests recorded on the Register of Patents would constrain the registered owner’s rights and that such recordings would be admissible as evidence. Item 15 will ensure that this understanding remains valid. Amendment of the Plant Breeder’s Rights Act Application of the PPS Act Item 16 6.27 Section 20 of the Plant Breeder’s Rights Act provides that the plant breeder’s right is personal property. 6.28 This item inserts notes after section 20. Note 1 clarifies that the PPS

Act applies to the plant breeder’s right, and any licence in the plant breeder’s right, as intellectual property. Note 2 informs readers that section 106 of the PPS Act corresponds to subsection 20(3) of the Plant Breeder’s Rights Act. Item 17 6.29 Section 25 of the Plant Breeder’s Rights Act provides that the right to apply for the plant breeder’s right is personal property. 6.30 This item inserts a note after section 25 informing readers that the PPS Act deals with security interests in personal property, including a right to apply for the plant breeder’s right. 6.31 The PPS Act will apply of its own force over personal property. The inclusion of items 16 and 17 should not be used to support the argument that the PPS Act does not apply to personal property provided under certain legislation if similar notes are not inserted in those pieces of legislation. Amendment of the Trade Marks Act Definition of a PPSA security interest Item 18 6.32 This item inserts a definition of a ‘PPSA security interest’ into the definitions section (section 6) of the Trade Marks Act. The definition includes a security interest to which the PPS Act applies and a transitional security interest to which Division 4 of Part 9.4 of the PPS Act applies. 6.33 The definition has been included to clarify references to PPSA security interests in the amendments to the Trade Marks Act. Amendment of section 22 Item 19 6.34 Subsection 22(1) provides that the trade mark owner can deal with the trade mark as absolute owner and give good discharges subject only to any rights appearing on the Register of Trade Marks. [page 586] 6.35 PPSA security interests will continue to be recordable on the Register of Trade Marks. This is to enable such registrants to receive notifications, given an opportunity to be heard, or given the opportunity to make submissions under

sections 84(2), 84A(4), 84A(5) and 111 of the Trade Marks Act. 6.36 However, item 19 will have the effect that interests that appear on the Register of Trade Marks and meet the definition of a PPSA security interest, will not have any effect on the rights of the registered owner after the PPS Act registration commencement time (see item 24 for the application of this rule). This amendment will encourage registration of PPSA security interests on the PPS Register after the PPS Act registration commencement time, and will assist in ensuring that priority issues between PPSA security interests registered on either the Register of Trade Marks and the PPS Register are avoided. Item 20 6.37 Subsection 22(3) of the Trade Marks Act currently provides that equities, in relation to a registered trade mark may be enforced against the registered owner, except to the prejudice of a purchaser in good faith for value. 6.38 This item will have the effect that the rule in subsection 22(3) would not apply in relation to a PPSA security interest. This is because the PPS Act will govern dealings with PPSA security interests over registered trade marks, including enforcement and taking-free of an existing PPSA security interest. The note to be added further assists readers in identifying the relevant provisions in the PPS Act relating to enforcement and taking-free of an existing PPSA security interest. 6.39 It should be noted that although subsection 21(2) is somewhat similar to subsection 22(3) — in that both subsections are concerned with enforcement of equities — the former has not been amended whereas the latter has. The reason for this is that subsection 21(2) recognises that there are different types of equities and that these equities will have their own enforcement rules. This does not contradict the operation of the enforcement rules in the PPS Act. 6.40 If the equity is a PPSA security interest, then under subsection 21(2) the PPS Act enforcement rules will operate in relation to that equity. 6.41 Subsection 22(3) on the other hand authorises enforcement of an equity in a trade mark, subject to a restriction stated in terms of a general principle. The PPS Act adequately authorises the enforcement of PPS Act equities in trade marks, subject to particular rules (not the general principle) that do not necessarily apply in relation to equities that are PPSA security interests. Therefore, equities that are PPSA security interests are expressly excluded from the operation of subsection 22(3) to avoid any inconsistency between subsection 22(3) and the PPS Act.

Amendment of section 113 Item 21 6.42 Section 113 of the Trade Marks Act currently provides that if a person (other than the registered owner) claims to have an interest that is not recordable under Part 10 of the Trade Marks Act 1995 (ie not an assignment or transmission of title), the person and the registered owner may together apply to have the interest recorded on the Register of Trade Marks. [page 587] 6.43 This item amends section 113 so that any person can apply to the Registrar of Trade Marks to have the particulars of a claim to an interest that is not recordable under Part 10 to be recorded in the Register of Trade Marks. The application must contain evidence of the claim asserted. 6.44 This item will allow a security interest holder to apply to have their interest recorded on the Trade Marks Register without the joinder of the registered owner of the trade mark. Amendment of section 117 Item 22 6.45 Section 117 of the Trade Marks Act currently provides that if a person has applied for the registration of a trade mark, and another person claims to have an interest in, or a right in respect of, the trade mark, they may together apply to the Registrar of Trade Marks for a record to be kept of the other person’s claim. 6.46 This item amends section 117 so that any person can apply to the Registrar of Trade Marks to have the particulars of a claim to an interest recorded on the Register of Trade Marks without the joinder of the applicant for the trade mark. Consequently, a security interest holder can apply to have their interest recorded on the Trade Marks Register without the joinder of the person who has applied for the registration of the trade mark. Amendment of section 210 Item 23 6.47 Section 210 of the Trade Marks Act currently provides that the Register of Trade Marks is prima facie evidence of any particulars entered in it.

6.48 This item amends sections 210 so that this section would no longer apply to PPSA security interests. This amendment is required because whilst PPSA security interests are registrable on the Register of Trade Marks, such interests would not have any effect on the rights of the registered owner after the PPS Act registration commencement time (see item 19). Consequently, from the PPS Act registration commencement time onwards, the Register of Trade Marks will not be prima facie evidence of PPSA security interests registered on it. Application of amendments Item 24 6.49 This item clarifies that parties with a dealing, enforcement action, or court proceedings in relation to a registered trade mark (or an interest in a registered trade mark) which have already started (but not yet finished) as at the PPS Act registration commencement time, should be able to rely on the rules which apply prior to the PPS Act registration commencement time. 6.50 A practical application of this amendment may be in relation to an interest holder that has a registration on the Register of Trade Marks prior to the PPS Act registration commencement time. That interest holder would consider that their interests recorded on the Register of Trade Marks would constrain the registered owner’s rights and that such recordings would be admissible as evidence. Item 24 would ensure that this understanding remains valid. [page 588]

Explanation of items 7. Schedule 3 — Maritime legislation Schedule 3 amends the Shipping Registration Act 1981 to restrict the application of the Act so that it no longer applies to mortgages over ships. The amendments will prevent the registration on the Australian Register of Ships (ARS) of mortgages over ships and the lodgement of caveats in relation to PPSA security interests. Existing mortgages on the ARS will be migrated to the PPS Register. The result will be that the PPS Register will be the sole register for the registration of mortgages and other PPSA security interests in ships. The PPS Act will govern the creation, enforceability and priority of security interest in ships, including mortgages. The power of the Supreme Courts to rectify the ARS will be extended to the PPS Register to ensure the Court’s power is not restricted when PPSA security interests currently registered on the ARS are migrated to the PPS Register. Under the Admiralty Act 1988, the Federal Court is able to exercise the same power as the Supreme Courts under the Shipping Registration Act to rectify the ARS. Schedule 3 includes a minor amendment to the Admiralty Act 1988 to enable the

Federal Court to also rectify the PPS Register. This schedule also amends the Marine Navigation Levy Collection Act 1989, Marine Navigation (Regulatory Functions) Levy Collection Act 1991, Protection of the Sea (Civil Liability) Act 1981, Protection of the Sea (Civil Liability for Bunker Oil Pollution Damage) Act 2008, Protection of the Sea (Harmful Anti-fouling Systems) Act 2006, Protection of the Sea (Prevention of Pollution from Ships) Act 1983 and the Protection of the Sea (Shipping Levy Collection) Act 1981 to ensure that enforcement action taken under this legislation against goods will not be frustrated by a secured party enforcing against the same goods under the PPS Act. Schedule 3 amends the Navigation Act 1912 to ensure that a number of statutory liens and charges under that Act have priority over PPSA security interests while preserving the current priority as between nonPPSA security interests.

Commencement 7.1 Schedule 3 will commence on the PPS Act registration commencement time. The PPS Act registration commencement time is the first day of the month that is 26 months after the month in which the PPS Bill is given Royal Assent, or an earlier time determined by the Minister. The Government expect the registration commencement time will be in May 2011. Amendment of the Admiralty Act Amendment of section 32 Item 1 7.2 Section 32 of the Admiralty Act provides that in proceedings in the Federal Court on a proprietary maritime claim, the orders that the court may make include orders of the kind that a court may make under section 59 of the Shipping Registration Act. 7.3 This item inserts a reference to section 59A of the Shipping Registration Act into section 32 of the Admiralty Act. Section 59A will be inserted into the Shipping Registration Act by item 25 of schedule 3. Item 1 is intended to give the Federal Court the same powers with respect to rectification of the PPS Register as section 59A will grant to the State and Territory Supreme Courts. [page 589] Amendment of the Marine Navigation Levy Collection Act Enforcement Items 2–3 7.4 These items insert a new subsection into section 10 of the Marine

Navigation Levy Collection Act. Section 10 provides that an officer of Customs may detain a ship for an unpaid levy, until the levy is paid. 7.5 The amendment will ensure that a secured party does not have the power to enforce its PPSA security interest (by seizing the detained property under section 123 of the PPS Act) while a ship is detained pursuant to section 10 of the Marine Navigation Levy Collection Act. Amendment of the Marine Navigation (Regulatory Functions) Levy Collection Act Enforcement Items 4–5 7.6 These items insert a new subsection into section 9 of the Marine Navigation (Regulatory Functions) Levy Collection Act. Section 9 provides that an officer of Customs may detain a ship for an unpaid levy, until the levy is paid. 7.7 The amendment will ensure that a secured party does not have the power to enforce its PPSA security interest (by seizing the detained property under section 123 of the PPS Act) while a ship is detained pursuant to section 9 of the Marine Navigation (Regulatory Functions) Levy Collection Act. Amendment of the Navigation Act Definition of a PPSA security interest Item 6 7.8 This item inserts a definition of a ‘PPSA security interest’ into the interpretation section (subsection 6(1)) of the Navigation Act. A PPSA security interest is a security interest to which the PPS Act applies or a transitional security interest to which Division 4 of Part 9.4 of the PPS Act applies (being an interest subject to the PPS Act as a result of a bankruptcy or insolvency, or where an existing secured party has assented to the PPS Act by voluntarily registering their interest on the PPS Register). 7.9 The definition has been included to clarify references to PPSA security interests in the amendments to the Navigation Act. Amendment of section 83 Items 7–8 7.10 Section 83 recognises and gives statutory effect to the common law position that unpaid seamen have a lien over the ship for their wages. This lien is given priority over other liens by virtue of subsection 83(2).

7.11 These items amend subsection 83(2) of the Navigation Act to clarify the position of the seamen’s lien, by continuing its priority over all other liens and giving it priority over all PPSA security interests. 7.12 These items also apply subsection 73(2) of the PPS Act to a lien under section 83 of the Navigation Act. Applying subsection 73(2) ensures the priority [page 590] between a lien under section 83 and a security interest in the same property is determined in accordance with the Navigation Act after the PPS Act registration commencement time. Amendment of section 128 Item 9 7.13 Section 128 of the Navigation Act provides that amounts outstanding to an authority in relation to expenses incurred in attending to sick or injured seamen are a charge over the vessel. This item inserts new subsections 128(2A) and 128(2B) of the Act. 7.14 The amendment will clarify the position of the charge, by giving it priority over PPSA security interests. 7.15 These items also apply subsection 73(2) of the PPS Act to a charge under section 128 of the Navigation Act. Applying subsection 73(2) ensures the priority between a charge under section 128 and a security interest in the same property is determined in accordance with the Navigation Act after the PPS Act registration commencement time. Amendment of section 298 Item 10 7.16 Section 298 of the Navigation Act provides for a charge over a wreck for damage to land occasioned in attending to the wreck, which is recoverable as salvage. 7.17 The amendments will clarify the position of the charge, by giving it priority over PPSA security interests. 7.18 This item applies subsection 73(2) of the PPS Act to a charge under section 298. Applying subsection 73(2) ensures the priority between a charge under section 298 and a security interest in the same property is determined in

accordance with the Navigation Act after the PPS Act registration commencement time. Amendment of the Protection of the Sea (Civil Liability) Act Enforcement Item 11 7.19 This item inserts a new subsection into section 22 of the Protection of the Sea (Civil Liability) Act. Where AMSA incurs expenses under the Protection of the Sea (Powers of Intervention) Act 1981, the amount is a charge over the ship (sections 20 and 21 of the Protection of the Sea (Civil Liability) Act). Under section 22, this gives rise to a power to detain a ship until the amount is paid or security for payment of the amount is provided. 7.20 The amendment will ensure that a secured party does not have the power to enforce its security interest (by seizing the detained property under section 123 of the PPS Act) while a ship is detained pursuant to section 22 of the Protection of the Sea (Civil Liability) Act. [page 591] Amendment of the Protection of the Sea (Harmful Anti-fouling Systems) Act Enforcement Item 12 7.21 This item inserts a new subsection into section 18 of the Protection of the Sea (Harmful Anti-fouling Systems) Act. Section 18 gives AMSA the power to detain a ship if there are reasonable grounds for believing that an offence against this Act has been committed in respect of the ship. 7.22 The amendment will ensure that a secured party does not have the power to enforce its security interest (by seizing the detained property under section 123 of the PPS Act) while a ship is detained pursuant to section 18 of the Protection of the Sea (Harmful Anti-fouling Systems) Act. Amendment of the Protection of the Sea (Prevention of Pollution from Ships) Act Enforcement Item 13

7.23 This item inserts a new subsection into section 27A of the Protection of the Sea (Prevention of Pollution from Ships) Act. Section 27A gives AMSA power to detain a foreign vessel in connection with pollution breaches. 7.24 The amendment will ensure that a secured party does not have the power to enforce its security interest (by seizing the detained property under section 123 of the PPS Act) while a ship is detained pursuant to section 27A of the Protection of the Sea (Prevention of Pollution from Ships) Act. Amendment of the Protection of the Sea (Shipping Levy Collection) Act Enforcement Item 14 7.25 The item inserts a new subsection into section 12 of the Protection of the Sea (Shipping Levy Collection) Act. Section 12 provides that a Collector, within the meaning of the Customs Act 1901, or another authorised person, may detain a ship for an unpaid levy, until the levy is paid. 7.26 The amendment will ensure that a secured party does not have the power to enforce its security interests (by seizing the detained property under section 123 of the PPS Act) while a ship is detained pursuant to section 12 of the Protection of the Sea (Shipping Levy Collection) Act. Amendment of the Shipping Registration Act Amendment of subsection 3(1) and heading of Part III Items 15–17 7.27 These items repeal the definition of mortgage, insert a definition of PPSA security interest and substitute ‘mortgages’ with ‘security interests and other dealings’ in the heading of Part III of the Shipping Registration Act. 7.28 The definition of a PPSA security interest inserted by item 16 will include a security interest to which the PPS Act applies but exclude a transitional security interest under the PPS Act. In combination with the relevant operative rules, the exclusion of [page 592] transitional security interests from the definition will ensure that parties who enter into a security agreement before the PPS Act registration commencement time have the same rights after that time. For example, the right to lodge a caveat

under section 47A in respect of their interest. 7.29 The amendments support the repeal of the Shipping Registration Act’s comprehensive regime for ship mortgages and align the terminology used by the Act with the functional approach taken by the PPS Act. Repeal of sections 38 to 44A Item 18 7.30 Sections 38 to 44A of the Shipping Registration Act establish a comprehensive regime for creation, registration, priority, transfer, enforcement and discharge of ship mortgages. 7.31 Item 18 is intended to repeal the comprehensive ship mortgage regime established by sections 38 to 44A. Ship mortgages will be PPSA security interests, which could be registered on the PPS Register. Amendment of section 47A Item 20 7.32 Section 47A of the Shipping Registration Act permits a person who claims an interest in a ship or a share in a ship under an unregistered instrument to lodge a caveat with the Registrar of Ships. The lodging of a caveat forbids entry in the ARS of any instrument relating to any dealing with that ship or share of the ship until notice is given to the caveator. 7.33 This item will have the effect that a person claiming an interest in a ship or share in a ship which is a PPSA security interest may not lodge a caveat with the Registrar of Ships with respect to that interest. By virtue of the definition of PPSA security interest excluding transitional security interests, parties will be entitled to continue to lodge caveats in respect of security interests that arise out of a security agreement created before the PPS Act registration commencement time. 7.34 This item supports the functional approach taken by the PPS Act and the character of the PPS Register, which is intended to be the principal Australian register of security interests. It is intended that a person wishing to protect a PPSA security interest in a ship could protect that interest by perfecting it under the PPS Act. Amendment of paragraph 47B(1)(a) and (b) Item 21 7.35 Item 21 removes the requirement on the Registrar of Ships to notify

mortgagees in respect of caveats entered on the ARS. From the PPS Act registration commencement time, ship mortgages will be registered on the PPS Register instead of the ARS. Item 35 7.36 This item will ensure that the amendment under item 21 does not apply, and the obligation on the Registrar of Ships to notify mortgagees continues, where a caveat is lodged on the ARS before the PPS Act registration commencement time. [page 593] Amendment of subsection 47D(3) Item 22 7.37 Except to the extent that a caveat specifies otherwise, subsection 47D(3) of the Shipping Registration Act allows for the Registrar of Ships to enter into the ARS (1) the transmission of a ship, or a share in a ship, to a person if the person becomes entitled to the transmission by operation of law, and (2) a dealing by a mortgagee of a ship or share of a ship, under the mortgage, where the caveator has consented or the caveat has lapsed. 7.38 This item amends that subsection to remove the reference to the Registrar of Ships registering a dealing of a mortgagee. Amendment of subparagraph 58(1)(b)(i), paragraphs 58(3)(a) and 66(3)(a), subsections 66(4) to (9) and (11), and section 79 Items 23, 24, 26, 27 & 30 6.36 These items remove references to mortgages in the Shipping Registration Act which are redundant because of the repeal of the ship mortgage scheme in sections 38 to 44A. Insertion of s 59A Item 25 7.39 With one exception, section 59A is intended to grant substantially the same power to the Supreme Courts of the States and Territories with respect to rectification of the PPS Register as section 59 grants those courts with respect to rectification of the ARS. The amendment will preserve the power of the courts to

rectify ship mortgage registrations after those registrations are migrated from the ARS to the PPS Register, and extend their power to include the power to rectify PPS registrations of PPSA security interests in ships which are not ship mortgages. 7.40 Unlike section 59, section 59A is not intended to grant power to the courts to rectify omitted entries where the omitted entry relates to something that was required to be registered. Unlike the Shipping Registration Act, the PPS Act does not impose obligations to register. Item 36 7.41 This item provides that item 25 applies in relation to a registration under the PPS Act with respect to a security interest regardless of when the security interest arises. Amendments of section 47, subsections 74(1) and 74(2), section 81 and subsection 82(1) of the Act Items 19, 28, 29, 31 & 32 7.42 These items remove references to provisions which are repealed by this Schedule or which will not have a relevant affect after the PPS Act registration commencement time (the commencement time for items in this Schedule). Application of amendments Item 33 7.43 This item will clarify that items 15, 17 to 19 and 22 to 24 apply in relation to the interest of a mortgagor in a mortgage of a ship, or of a share in a ship, regardless of [page 594] when the interest arose. This ensures that at the PPS Act registration commencement time, the Shipping Registration Act no longer provides for mortgages over ships. 7.44 Any mortgages that are registered on the ARS before the PPS Act registration commencement time will continue to have the same priority they had between themselves before the PPS Act registration commencement time,

subject to Chapter 9 (transitional provisions) of the PPS Act. For example, a registered mortgage in a ship will continue to have priority over a later registered mortgage in the same ship where both mortgages were registered on the ARS before the PPS Act registration commencement time. 7.45 The transitional provisions of the PPS Act can only alter the existing priorities between competing interests where one of the parties becomes bankrupt or insolvent, or where an existing secured party has assented to the PPS Act by voluntarily registering their interests on the PPS Register. Item 34 7.46 This item will ensure that item 20 does not affect the validity or effectiveness of caveats lodged prior to the PPS Act registration commencement time. Item 37 7.47 This item provides that the requirement in subsection 66(4) of the Shipping Registration Act (as in force immediately before this Schedule commences at the PPS Act registration commencement time) to give notice to a mortgagee stops applying when this Schedule commences. Item 38 7.48 This item provides that items 28 and 29 do not apply to breaches of subsections 74(1) and 74(2) (as in force immediately before this Schedule commences at the PPS Act registration commencement time) that occurred before items 28 and 29 commence. The contravention of sections of the Shipping Registration Act listed in subsections 74(1) and 74(2) is an offence under that Act.

Explanation of items 8. Schedule 4 — Personal Property Securities Act 2009 Schedule 4 makes minor technical amendments in response to submissions made to the Senate Legal and Constitutional Affairs Committee’s inquiry into the provisions of PPS Bill and subsequently to the Attorney-General’s Department. The PPS Bill is being amended through the Consequential Bill, rather than by way of parliamentary amendments, to avoid the need for States who have given a referral of power to give a further referral of power in respect of the amendments.

Commencement 8.1 Items 1–7, 9–35 and 37–64 of Schedule 4 will commence on the later of (1) the start of the day the Consequential Bill receives Royal Assent, and (2) immediately after the commencement of the PPS Act. [page 595] 8.2 Items 8 and 36 of Schedule 4 will commence on the latest of (1) the start of the day the Consequential Bill receives Royal Assent, (2) immediately after the commencement of the PPS Act, and (3) the start of the day on which section 3 of the National Consumer Credit Protection Act 2009 commences. Amendment of section 6 Item 1 8.3 Section 6 of the PPS Act sets out the connection that a PPSA security interest (an interest in relation to personal property provided for by a transaction that, in substance, secures payment or performance of an obligation (section 12 of the PPS Act)) in goods (tangible property that is not financial property or investment entitlements (section 10 of the PPS Act)), financial property (chattel paper, currency, a document of title, an investment entitlement or a negotiable instrument (section 10 of the PPS Act)) or intangible property (personal property which is not financial property, goods or an investment entitlement (section 10 of the PPS Act) must have with Australia for the PPS Act to apply. 8.4 Section 6(1) of the PPS Act applies the Act to a security interest in goods or financial property if the location of the goods or property is in Australia or the grantor is an Australian entity. 8.5 Section 6(2) of the PPS Act applies the Act to security interests in intangible property if the grantor is an Australian entity. 8.6 This item inserts a new subsection 6(1A) extending the application of the PPS Act to a PPSA security interest in an ‘investment entitlement’ if the investment entitlement intermediary is located in Australia or the grantor of the security interest is an Australian entity. An ‘investment entitlement’ is the rights of a person in whose name an investment entitlement intermediary maintains an investment entitlement account (section 15(1) of the PPS Act). An investment entitlement account is an account to which interests in financial products (within the meaning of the Corporations Act 2001) may be credit or debited, or an

account maintained by a CS facility license holder (within the meaning of the Corporations Act) (section 15(7) of the PPS Act). 8.7 This item would align the application of investment entitlements with that of financial property under section 6(1). Item 2 8.8 Section 6(2)(e) of the PPS Act currently applies the Act to PPSA security interests in intangible property that are created, arise or are provided for by a law of the Commonwealth, a State or a Territory. A 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. For example, it applies the Act to licences created by a law of a State or Territory and intellectual property created by a law of the Commonwealth (section 6(2) of the PPS Act). 8.9 This item amends section 6(2)(e) of the PPS Act so that the Act also applies to a PPSA security interest in intangible property that is created, arises or is provided for under the general law of the Commonwealth, a State or a Territory. The general law of the Commonwealth, a State or a Territory means the principles and rules of the common law and equity (section 10 of the PPS Act). For example, it applies the Act to a right to damages in tort. [page 596] Amendment of section 8 Items 3 and 4 8.10 Section 8(1) of the PPS Act provides that the Act does not apply to a number of interests (including interests prescribed by regulations). 8.11 Section 8(1)(d) provides that the PPS Act does not apply to any right of set-off or right of combination of accounts. 8.12 Item 3 adds the words ‘(within the ordinary meaning of the term “accounts”)’ to the end of section 8(1)(d). The amendment is necessary because the term ‘account’ is defined in section 10, while the term ‘right of combination of accounts’ is a term of art in banking law. ‘Right of combination of accounts’ generally means the right of a banker to combine several accounts held by a person with a bank (which may have debit or credit balances) into a single account with a single net balance.

8.13 The table in section 8(2) lists a number of interests to which the PPS Act does apply to despite section 8(1). 8.14 Item 4 amends the table in section 8(2) by inserting an Item 6 at the end of the table. This amendment permits regulations to apply provisions of the PPS Act, specified in those regulations, to security interests that would otherwise be excluded from coverage because they are specified in section 8(1). 8.15 The effect will be to allow regulations to be made under section 8(2) providing that the Act does apply (to the extent provided for by the regulations) to interests excluded by section 8(1). In particular, regulations made under section 8(1)(l) of the Act may exclude certain matters from the application of the Act, while the regulations made under section 8(2) would provide limited exceptions to those regulations. Amendments to section 10 Item 5 8.16 Section 10 is the Dictionary or the interpretative section of the PPS Act. 8.17 This item amends the definition of an ADI Account to an account that is maintained with an approved deposit-taking institution (for example, a banks or credit union) that is payable on demand or at some time in the future. This amendment was required as the previous definition of an ADI Account was defined as a protected account within the meaning of the Banking Act 1959. While the Banking Act definition is apt for specialised prudential regulation purposes, it was criticised as being too complex for use in relation to the PPS Act that will be used by a broad cross-section of the community. Item 6 8.18 This item fixes a cross-referencing error in the definition of ‘Australia’ in section 10 of the PPS Act. It replaces the reference to ‘subsection 7(4)’ with a reference to ‘section 7’. This does not substantively alter the definition of Australia in the PPS Act. Item 7 8.19 This item inserts a definition of ‘jurisdiction’ into section 10 of the PPS Act. The operation of this definition of jurisdiction works in conjunction with subsection 235(6) of the PPS Act, which is discussed below. Item 8

8.20 This item inserts a definition for the National Credit Code in the PPS Act. Item 36 of this Schedule omits references the Consumer Credit Code and substitutes [page 597] references to the National Credit Code proposed under the National Consumer Protection Bill 2009. Items 8 and 36 of the Schedule will commence at the later of the commencement of balance of the Schedule and the commencement of section 3 of the National Consumer Credit Protection Act 2009. Item 9 8.21 This item amends a punctuation error in the definition of ‘registration’ in section 10 of the PPS Act. It changes the ‘;’ at the end of paragraph (b) of the definition to of registration to ‘.’ This amendment does not alter the definition of ‘registration’. Amendment to section 12 Item 10 8.22 Section 12 of the PPS Act defines the term ‘security interest’. 8.23 Section 75 of the PPS Act recognises that an ADI can take security interests in an ADI account held with the ADI. 8.24 For consistency with section 75, this item inserts a new section 12(4A) providing that an ADI may take a PPSA security interest in an ADI account that is kept with the ADI. Insertion of subsection 14(2A) Item 11 8.25 Section 14 of the PPS Act provides the definition of a ‘purchase money security interest’ (PMSI). A PMSI is a PPSA security interest in collateral created by a seller who secures the obligation to pay the purchase price or a person who provides the value to purchase the collateral. 8.26 Section 14(2)(c) excludes from the definition of PMSI a PPSA security interest in collateral that (at the time of the interest attaching to the collateral) the grantor intends to use predominantly for personal, domestic or household purposes. Section 14(2)(c) is intended to promote that availability of finance to

small business, by ensuring that general PPSA security interests are not eroded by later PMSIs granted to acquire personal use assets. 8.27 This item inserts a new subsection 14(2A) having the effect that a security interest in collateral that is required or permitted by the regulations to be described by serial numbered may be a PMSI (regardless of the purpose for which the serial numbered good was acquired). This provision maintains the priority that PPSA security interests in serial number numbered goods (such as motor vehicles) would otherwise have over earlier general PPSA security interests. Amendment of section 23 Item 12 8.28 Section 23 of the PPS Act provides the Guide Statement for Part 2.3 of the PPS Act (Possession and control of personal property). Possession generally meaning under the Act being possession by one party exclusive of possession by others (section 24 of the PPS Act) and control being variously defined under sections 25, 26, 27, 28 and 29 according to the collateral involved. [page 598] 8.29 This item corrects an error in the Guide Statement by omitting ‘goods in the possession of a common carrier’ and substituting it with the phrase ‘goods transported by a common carrier’. This correction ensures that the Guide Statement is consistent with section 24(3) of the PPS Act, which sets out when a grantor or debtor to whom goods are transported by a common carrier acquires possession of the goods. Amendments of section 26 Items 13–15 8.30 Section 26 of the PPS Act establishes when a secured party has control of an investment entitlement that is credited to an investment entitlement account. A secured party would have control of an investment entitlement while there is an agreement between the secured party, the grantor and the intermediary to the effect that any instructions issued by the grantor are subject to approval by the secured party and permitting the secured party to deal in the entitlement without the consent of the grantor (section 26(1) of the PPS Act). The secured party would have control of an investment entitlement even if the person in

whose name the intermediary maintains the account retains the right to make substitutions for the instrument, to originate instructions to the issuer or to otherwise deal with the instrument (section 26(2)). 8.31 An ‘investment entitlement’ is the rights of a person in whose name an investment entitlement intermediary maintains an investment entitlement account (section 15(1) of the PPS Act). 8.32 An investment entitlement intermediary is a person who maintains investment entitlement accounts on behalf of others, or a person who operates securities transfer and settlement facilities under an Australian CS facility licence (within the meaning of the Corporations Act) (section 15(2) of the PPS Act). 8.33 An investment entitlement account is either an account to which interests in financial products may be credited or debited or, in the case of an account maintained by a CS facility licence holder, writing that records holdings and transfers maintained by the CS facility license holder in the course of operating the facility (section 15(7) of the PPS Act). 8.34 These items amend section 26 such that the definition of control in section 26 now reflects a more simplified approach to defining control as provided in the definition of ‘control agreement’ in Article 1 of the draft ‘Convention on Substantive Rules regarding Intermediated Securities’. 8.35 The amended section 26 would define control with the effect that a secured party would have control of an investment entitlement where there is an agreement between the secured party, the grantor and the intermediary to the effect either: (i) that any instructions issued by the grantor to the intermediary are subject to approval by the secured party, or (ii) permitting the secured party to deal in the entitlement without the consent of the grantor in one or more specified circumstances. Amendment of subsection 32(2) Item 16 8.36 Section 32(2) of the PPS Act caps the amount available to a secured party enforcing against both collateral and proceeds to the market value of the collateral immediately before the collateral gave rise to the proceeds. This cap does not apply to collateral which is an investment instrument. [page 599]

8.37 This item amends section 32(2) to extend the exclusion of the cap to investment entitlements. Amendments of section 39 Items 17 and 18 8.38 Section 39 of the PPS Act deals with the continuous perfection of a PPSA security interest when the collateral is relocated from a foreign jurisdiction to Australia. It allows the period of continuous perfection to begin before the collateral is relocated to Australia. This is important because the priority of the PPSA security interest may depend upon when it began to be continuously perfected. 8.39 Section 39(2) provides the period from which the PPSA security interest in the intangible property or financial property will be taken to have been continuously perfected under section 39(1). 8.40 These items substitute a new subsection 39(2) which allows the period of continuous perfection of the PPSA security interest to start at the beginning of the period during which the PPSA security interest was continuously perfected, registered, recorded or otherwise became effective against third parties under the law of the foreign jurisdiction before the collateral was relocated to Australia. 8.41 These items also insert a new subsection 39(2A) preventing secured parties under subsection 39(2) from taking the benefit of continuous perfection under Australian law where the PPSA security interest was not perfected, registered, recorded or otherwise enforceable under the law of a foreign jurisdiction immediately before relocation to Australia. Amendment of section 40 Item 19 8.42 Section 40 of the PPS Act provides the rules for continuously perfecting a PPSA security interest in intangible property or financial property which was governed by the law of a foreign jurisdiction but begins to be governed by the law of Australia. 8.43 Subsection 40(2) provides the period from which the security interest in the intangible property or financial property will be taken to have been continuously perfected under subsection 40(1). 8.44 This item substitutes subsections 40(1) and (2) with the effect that the period of continuous perfection of the PPSA security interest in the collateral under subsection 40(1) starts at the beginning of the period during which the

PPSA security interest was continuously perfected, registered, recorded or otherwise became effective against third parties under the law of the foreign jurisdiction before the collateral was relocated to Australia. 8.45 This item also inserts a new subsection 40(2A) preventing secured parties from taking the benefit of continuous perfection under the Australian law when the PPSA security interest was not perfected, registered, recorded or otherwise enforceable under the law of a foreign jurisdiction immediately before relocation. Amendment of section 41 Item 20 8.46 Section 41 of the PPS Act provides the Guide Statement for Part 2.5 of the PPS Act (Taking personal property free of security interests). This Guide Statement provides the rules for when personal property may be bought or leased free of a PPSA security interest. [page 600] 8.47 Paragraphs (a) to (j) in the Guide Statement are a list of the circumstances and related rules further defined in Part 2.5 where personal property may be bought or leased free of a PPSA security interest. These paragraphs are: (a) (b) (c) (d) (e) (f) (g) (h) (i) (j)

unperfected security interests; personal, domestic or household property; serial number defects; certain motor vehicles; currency; taking in the ordinary course of business; taking investment interests or entitlements in the ordinary course of trading; investment instruments; investment entitlements. temporarily perfected security interests;

8.48 This item omits the reference to ‘certain motor vehicles’ and substitutes ‘motor vehicles’ in order to reflect section 45 of Part 2.5 of the PPS Act, which provides the rules for acquiring motor vehicles free of a PPSA security interest.

8.49 This item also changes the order of paragraphs (b) to (f) to reflect the order these rules are dealt with in Part 2.5. This new order is given as: (b) (c) (d) (e) (f)

serial number defects; motor vehicles; taking in the ordinary course of business; personal, domestic or household property; currency;

8.50 This item also rectifies punctuation errors in paragraphs (i) and (j). The ‘.’ at the end of paragraph (i) is substituted with a ‘;’ and the ‘;’ at the end of paragraph (j) is substituted with a ‘.’ Amendment of section 43 Item 21 8.51 Section 43 provides that a person who acquires personal property that is subject to an unperfected PPSA security interest acquires it free of the PPSA security interest if they provide ‘new value’ (meaning value other than value provided to reduce or discharge an earlier debt or liability (section 10 of the PPS Act) and are not a party to the transaction that provides for the PPSA security interest. 8.52 This item amends subsection 43(1) by omitting the words ‘new value’ and substituting ‘value’. This will make the PPS Act more consistent with the approach taken in both the Personal Properties Securities Act (New Zealand) (section 52) and Personal Properties Securities Act (Saskatchewan) (section 20(3)), which both refer to ‘value’ and not ‘new value’. Amendment of section 44 Item 22 8.53 Section 44 of the PPS Act provides that a buyer or lessee would take property free of a PPSA security interest where (i) the buyer/lessee provides ‘new value’, (ii) the [page 601] property is required to be registered by reference to a serial number, and (iii) a search by reference to the serial number immediately before the sale/lease would not have disclosed the PPSA security interest.

8.54 This item amends section 44(1) by removing the reference to new value, and substituting ‘value’. This will make the PPS Act more consistent with the approach taken in both the Personal Properties Securities Act (New Zealand) (section 55) and Personal Properties Securities Act (Saskatchewan) (sections 30(6) and (7)), which both refer to ‘value’ and not ‘new value’. Item 23 8.55 Subsection 44(2) establishes an exception to the taking free rule in subsection 44(1). This exception applies when the purchaser/lessee had actual knowledge that the sale or lease constitutes a breach of the relevant security agreement at the relevant time. Under paragraph 44(3)(a) the relevant time in respect of property bought or leased to be used for personal, domestic or household purposes is the time new value is first given for the sale or lease. 8.56 This item amends paragraph 44(3)(a) so that the timing rule in that provision applies when personal property is bought or leased for new value. 8.57 This item also rectifies a typographical error by amending the heading of section 49 of the PPS Act by omitting ‘investment interest’ and substituting it with ‘investment instrument’. Amendment of section 51 Item 24 8.58 This item corrects a typographical error by omitting a reference to ‘an investment intermediary’ and substituting a reference to ‘the investment intermediary’. Amendment of section 55 Item 25 8.59 Section 55 of the PPS Act sets out the default priority rules which apply when the PPS Act provides no other way of determining priority between competing PPSA security interest in the same collateral. 8.60 Subsection 55(4) provides that the priority between two or more PPSA security interests in collateral that are currently perfected is to be determined by the order in which the priority time (subsection 55(5) of the PPS Act) for each PPSA security interest occurs. 8.61 Subsection 55(5) sets out a number of events that can become the ‘priority time’, subject to the subsection 55(6) requirement that perfection must be continuous. Subsection 55(5) provides that an event listed in paragraphs 55(5)

(a) to (c) becomes the ‘priority time’ if that time occurs earlier than any other such event in relation to a competing PPSA security interest. 8.62 The event in paragraph 55(5)(b) occurs when a secured party, or another person on their behalf, takes possession of the collateral. 8.63 This item amends paragraph 55(5)(b) so that the priority time may also be when the secured party first perfects the security interest by taking control of the collateral. [page 602] Item 26 8.64 This item amends a cross-referencing error in the note to section 55 of the PPS Act by omitting the reference to ‘subsection 33(5)’ and substituting it with a reference to ‘subsection 32(5)’. Amendment of section 61 Item 27 8.65 Section 61 of the PPS Act provides that a secured party may voluntarily subordinate their PPSA security interests in collateral to any other interest in the collateral. This can sometimes be necessary as a prior perfected PPSA security interest can limit further finance being available to a debtor. 8.66 Subsection 61(2) determines how an agreement to subordinate a PPSA security interest may be effective and enforceable. 8.67 This item amends subsection 61(2) by omitting ‘An agreement to subordinate a security interest’ and replacing it with ‘The subordination’. This amendment improves the consistency between subsections 61(1) and 61(2) by acknowledging that a subordination need not be by agreement, but could be by deed or other instrument. The amendment makes the Act more consistent with the approach taken in the Personal Property Security Act 1993 (Saskatchewan) (section 40(1)). Item 28 8.68 This item amends paragraph 61(2)(b) by omitting ‘the agreement’ and substituting ‘the subordination’, consistently with the amendment to subsection 61(1) made by item 33.

Amendment of section 64 Item 29 8.69 Section 64 provides that a secured party with a non-PMSI in an account can claim priority over secured parties with a PMSI in the account as proceeds of inventory. There are two situations, outlined in paragrpahs 64(1)(a) and (b), where a non-PMSI in accounts can have priority over a PMSI. 8.70 Subparagraph 64(1)(b)(i) requires notice to be given under subsection 64(2) to each secured party in account of which a registration is effective at the time the priority interest (the interest to which subsection 64(1) applies) is perfected by registration. 8.71 This item amends the notice provision in subparagraph 64(1)(b)(i) so that the secured party seeking priority will only be required to provide notice to the PMSI holder over whom priority is sought (not to all other PMSI holders). Amendment of section 73 Item 30 8.72 Section 73 of the PPS Act determines the priority between PPSA security interests under the Act and interests (other than security interests) which may arise under a law of the Commonwealth, a State or a Territory or through operation of the general law. 8.73 This item inserts subsections 73(7), (8) and (9) to allow the Minister to alter the priority of a PPSA security interest relative to an interest in the collateral that has arisen through the operation of the general law (when the interest is not of a kind affected by subsection 73(1)). [page 603] Example A lien over a personal property arises by operation of the general law. The priority of the lien relative to PPSA security interests in the collateral is not determined by subsection 73(1). The priority between the lien and a PPSA security interest in a personal property will be determined in accordance with an instrument made under subsection 73(8), if, and only if, no law of the Commonwealth (other than the PPS Act and that instrument) provides for priority between the lien and the PPSA security interest, the instrument provides that subsection 73(7) applies to the lien, and the lien arises after the instrument comes into effect. If the priority between the lien and a PPSA security interest in the personal property is not determined in accordance with an instrument made under subsection 73(8), then paragraphs 8(1)(b) and (c), subsection 8(2), paragraph 140(2)(a) and subsection 254(1) will have the effect that priority between the lien and the PPSA security interest will be determined in accordance with the general law.

Amendment of section 77 Items 31–33 8.74 Section 77 of the PPS Act sets out priority rules for security interests in ‘accounts’ or ‘financial property’, where the law of the foreign jurisdiction that governs perfection, and the effects of perfection or non-perfection does not provide for the public registration or recording of interests, or a notice relating to the interest. 8.75 These items insert a reference to ‘investment entitlement’ into subsections 77(1), (2) and (3). 8.76 These amendments increase the scope of section 77 to apply its priority rules to PPSA security interests in investment entitlements. Amendment of section 79 Item 34 8.77 Section 79 has the effect that collateral may be transferred despite a provision in an agreement (whether or not a security agreement) prohibiting the transfer or declaring a transfer to be a default of the security agreement. 8.78 This item amends subsection 79(1) to confine its effect to prohibitions on the transfer of the collateral that a security agreement. The effect is that third party may take good title to collateral despite a provision in a security agreement prohibiting the transfer. Other provisions of the PPS Act, particularly those in Part 2.5, address whether the person will take the collateral free of the PPSA security interest. Amendment of section 80 Item 35 8.79 Section 80 of the PPS Act establishes that the rights of a transferee of an account or chattel paper are subject to certain other rights. 8.80 This item amends subsection 80(7) to remove the phrase ‘collateral that is’. This amendment would allow subsection 80(7) to apply when the account or chattel paper is not collateral before the transfer. Amendment of section 119 Item 36 8.81 Subsection 119(1) of the PPS Act sets out how Chapter 4 of the PPS Act (Enforcement of security interests) applies to collateral to which the Consumer Credit Code of a State or Territory applies.

[page 604] 8.82 Subsection 119(2) provides that the regulations made under the PPS Act can provide that when a specified provision of the Consumer Credit Code of a State or Territory has been complied with that a specified provision of the PPS Act it is considered under the PPS Act to have been complied with. 8.83 This item amends both subsections 119(1) and (2) so that instead of referring to the ‘Consumer Credit Code of a State or Territory’ it refers to the ‘National Credit Code’. This amendment ensures that the PPS Act is concordant with the National Credit Code introduced under the National Consumer Protection Bill 2009. Amendment of sections 128 and 129 Items 37 and 38 8.84 Paragraph 128(2)(b) and subsection 129(1) refer to the term ‘commercial property’, which is defined under section 10 to mean property other than ‘consumer property’ (property held by an individual other than property held in the course or furtherance (to any degree) of carrying on an enterprise to which an ABN has been allocated). 8.85 These items amend paragraph 128(2)(b) and subsection 129(1) so that they apply to collateral that is not used predominately for personal, domestic or household purposes (rather than to commercial property). The amendment is intended to align the PPS Act more closely with consumer credit laws. Amendment of subsection 151(1) Item 39 8.86 Subsection 151(1) of the PPS Act states that a person must not apply to register a ‘financing statement’, or a ‘financing change statement’, in relation to a PPSA security interest unless that the secured party named in the application believes on reasonable grounds that the collateral secures, or will secure, an obligation (including a payment) owed to the secured party named in the application. 8.87 A ‘financial statement’ means data registered (or that is to be registered) pursuant to an application for registration under subsection 150(1) (section 10 of the PPS Act). 8.88 A ‘financing change statement’ means data amending a registered financing statement (section 10 of the PPS Act).

8.89 This amendment extends the effect of subsection 151(1) to PPSA security interests of the kinds specified in subsection 12(3) of the PPS Act which do not secure an obligation owed to the secured party named in the application. The amended subsection 151(1) would allow a person to register a financing statement, or financial change statement if they believe on reasonable grounds that the secured party holds, or will hold, a PPSA security interest of the kind mentioned in subsection 12(3). Amendment of section 157 Item 40 8.90 Section 157 of the PPS Act sets out when a secured party is required to give a verification statement to a grantor. Verifications statement means a written statement in the approved form as defined in section 155 of the PPS Act. 8.91 Subsection 157(4) provides that a contravention of subsection 157(1) constitutes an act or practice involving interference with the privacy of the individual for the purposes of section 13 of the Privacy Act 1988. [page 605] 8.92 This item amends subsection 157(4) so that a contravention of the Privacy Act will only apply where notice was required to be given to an individual. This amendment is required as only individuals have a right to privacy under the Privacy Act. Insertion of subsection 171(1) Item 41 8.93 Section 171 of the PPS Act sets out the criteria by which a person may search the register. 8.94 This item inserts paragraph 171(1)(da) providing for a person to search the register by the unique identifier allocated by the PPS Registrar to a registered financing statement. Amendment of section 235 Items 42 and 43 8.95 Section 235 of the PPS Act sets out where personal property and persons are located for the purposes of the Act.

8.96 Subsection 235(1) provides that personal property is located in the particular jurisdiction (whether the jurisdiction of Australia or a foreign jurisdiction) in which the personal property is situated. 8.97 Item 42 amends subsection 235(1) by omitting ‘(whether the jurisdiction of Australia or a foreign jurisdiction)’ in order to allow the term ‘jurisdiction’, as it appears in subsection 235(1) to be affected by subsections 235(6) and (7) proposed to be inserted by item 43. 8.98 Item 43 amends section 235 to insert subsections 235(6) and (7). 8.99 This item introduces a definition of ‘jurisdiction’ for the purposes of the PPS Act. To avoid confusion between the geographical and legal meaning of the term, the new subsection refers separately to the ‘jurisdiction’ (the geographical sense) and ‘laws of the jurisdiction’. 8.100 In the case of personal property located in Australia, subsection 235(6) provides that the jurisdiction in which the personal property is located is the State or Territory in which it is situated. In the case of a person located in Australia, subsection 235(6) provides that the jurisdiction in which the person is located is the State or Territory in which the individual’s principal place of residence is situated. 8.101 In a foreign country with a federal character (that is, one which is divided into territorial units with separate rules of law), Item 43 provides that the jurisdiction in which an item of personal property is located is the territorial unit in which it is situated. In the case of a person located in a foreign country, this item provides that the jurisdiction is the territorial unit in which the individual’s principal place of residence is situated (subsection 235(7)). Example The State of California is a territorial unit of the United States of America that has its own rules of law as distinct from those that apply to the United States of America generally. If property were situated in a place in California, the effect of subsection 235(7) is that a reference to the laws of the jurisdiction would be a reference to Californian law, and US federal law as it applies in California.

[page 606] Amendment of section 238 Item 44 8.102 Section 238 provides the main rule for determining which jurisdiction’s laws apply to a PPSA security interest in goods. Section 238

currently has the effect that the perfection, and the effect of perfection or nonperfection, of a PPSA security interest in goods will be governed by the law of the place in which they are located when the PPSA security interest attaches to the goods, even if the goods are later moved to another jurisdiction. 8.103 This item amends subsection 238(1) so that only the validity of a PPSA security interest will be governed by the law of the place where the goods were located when the PPSA security interest attached to the goods. When goods are moved to another jurisdiction, the applicable law for validity will continue to be the jurisdiction where the goods were located when the PPSA security interest attached. Item 45 8.104 This item omits a reference to ‘property’ and substitutes ‘goods’, in order to make it clear that subsection 238(1) is concerned only with goods. Item 46 8.105 This item inserts a new subsection 238(1A) for determining the applicable law for the perfection, and effect of perfection or non-perfection of a PPSA security interest in goods. The applicable law would be the jurisdiction in which the goods are located at the time it becomes necessary to consider the perfection of the PPSA security interest. 8.106 This would mean that, in determining whether there is a perfected PPSA security interest in the goods, it would be necessary to apply the law of the place where the goods were located at the relevant time, and if necessary to search the PPS Register of that place, and not the place where the goods were located when the PPSA security interest attached to the goods. 8.107 This item retains an exception in subsection 238(2) for goods which are about to be moved between jurisdictions. The law of the jurisdiction to which the goods are moved will apply where it is reasonable to believe that the goods will be moved to the jurisdiction. 8.108 The amendment replaces the existing reference to the reasonable belief of a secured party with an objective test. The effect is that a person with knowledge of all the circumstances should be able to determine which law will apply to the PPSA security interest, and that this should not depend on the reasonableness of the secured party’s belief. Item 47 8.109 This item amends a cross-reference consequential upon the insertion

of subsection 238(2A). Items 48 and 49 8.110 Paragraph 238(3)(b) refers to the term ‘commercial property’, which is defined in section 10 to mean property other than ‘consumer property.’ Consumer property is property held by an individual other than property held in the course or [page 607] furtherance (to any degree) of carrying on an enterprise to which an ABN has been allocated. PPSA security interests in commercial property used in more than one jurisdiction is governed by the law of the jurisdiction in which the grantor is located. 8.111 These items amend subsection 238(3) so that instead of applying to ‘commercial property’, it applies to collateral that is not used predominately for personal, domestic or household purposes (rather than to commercial property). The result is that PPSA security interests in collateral that is used predominately for personal, domestic or household purposes will be governed by the conflict of law rules in subsections 238(1), (1A) and (2). Item 50 8.112 This item inserts a new subsection 238(4) that recognises the special circumstances of international shipping and shipping registration. Subsection 38(4) has the effect that the perfection and effect of perfection or non-perfection of a PPSA security interest in a ship is governed by the law of the country on whose register of ships the ship is registered (if the ship is registered). Where a ship is registered on a primary, or chartering-out, register and a secondary, or chartering-in, register, subsection 238(4) has the effect that the perfection and effect of perfection or non-perfection of a PPSA security interest in the ship is governed by the law of the primary register. This item is not intended to affect the rule in subsection 238(3) about the law that applies to determine the validity of a PPSA security interest in other goods that are normally moved between jurisdictions. Amendment of section 239 Item 51

8.113 Subsections 239(4) and (5) of the PPS Act provides the conflict of laws rule for PPSA security interests in an ADI account. 8.114 A PPSA security interest in an ADI account is governed by the law of the jurisdiction which governs the ADI account, except where the parties agree in writing to apply the law of another jurisdiction, providing this would not be manifestly contrary to public policy. 8.115 This item amends subsection 239(5) to require the consent of the relevant ADI before the law of another jurisdiction will govern a PPSA security interest in an ADI account. This amendment recognises that an ADI has an interest in which law applies to PPSA security interests in ADI accounts maintained with it, and accordingly should be given a say in any decision to apply the laws of another jurisdiction. Amendment of paragraph 265(e) Item 52 8.116 Section 265 of the PPS Act provides a Guide Statement for Chapter 8 of the Act (Miscellaneous). 8.117 This item amends paragraph 265(e) to insert the words ‘and what constitutes knowledge’. This corrects an omission in the Guide statement. Amendment of paragraph 267(1)(b) Item 53 8.118 Section 267 provides for the vesting of an unperfected PPSA security interest in the grantor on the grantor’s winding up or bankruptcy (subsection 267(2)). [page 608] 8.119 This item changes the timing references in paragraph 267(1)(b) to the particular time at which the relevant insolvency/bankruptcy event occurs — rather than to the beginning of the day on which it occurs. This ensures that a PPSA security interest does not vest in the grantor despite being perfected on the same day but before the insolvency or bankruptcy event. The effect of this change is that the common law ‘zero hour rule’ does not apply to the vesting rule in subsection 267(2). This ‘zero hour rule’ deems an insolvency to begin at the instant after midnight of the day on which the insolvency occurs.

Amendment of subsection 267(2) Items 54 and 55 8.120 Subsection 267(2) operates to vest certain unperfected PPSA security interests in the grantor, if the grantor becomes bankrupt or is wound up. 8.121 Item 54 amends subsection 267(2) to remove the words ‘unless the security interest is unaffected by this section because of section 268’. These words are unnecessary, as section 268 will operates on its own to establish exceptions to subsection 267(2). 8.122 Item 55 inserts a note after subsection 267(2) alerting the reader to the exceptions in section 268. Amendment of section 268 Items 56 and 57 8.123 Section 268 of the PPS Act sets out certain interests which are unaffected by the vesting rule in subsection 267(2). 8.124 Item 56 replaces the current subsection 268(1). The amendment expands the exclusion to a PPSA security interest of a transferee under a transfer of an account or chattel paper, if the transfer does not secure payment or performance of an obligation. It would not be appropriate to vest a PPSA security interest in the grantor if the secured party has provided full value to the grantor for the transfer of the account or chattel paper. To do so would give the insolvent or bankrupt grantor the benefit of both the value provided on the transfer and also the transferred account or chattel paper. 8.125 Item 57 omits subsection 268(3), which is incorporated into the amended subsection 268(1). Amendment of subsection 317(1) Item 58 8.126 This item omits the current words ‘(when a non-constitutional security interest becomes a constitutional security interest)’ and replaces it with ‘(personal property taken free of security interest when Act starts to operate)’. 8.127 This amendment corrects the incorrect reference to the heading of section 251. Amendment of subsection 327(1) Items 59 and 60 8.128 These items correct a drafting error clarifying the scope of the

following provisions of section 327. [page 609] Amendment of section 338 Item 61 8.129 Section 338 provides the Guide Statement for Part 9.5 of the PPS Act (Charges and fixed and floating charges). 8.130 This item corrects a drafting error clarifying that the intended operation of the provisions on charges and fixed and floating charges extends to all Commonwealth legislation. Amendment of subsection 339(1) Item 62 8.131 Section 339 of the PPS Act provides that transactions structured as fixed charges or floating charges would be treated as security interests under the PPS Act. 8.132 This item inserts a new paragraph 339(1)(c), which limits the application of the section by adding a requirement that ‘the charge is a security interest to which this Act applies.’ 8.133 This amendment ensures that section 339 applies to references to charges only to the extent that they are security interests. Amendment of subsection 340(5) Item 63 8.134 This item corrects a drafting error. Amendment of section 342 Item 64 8.135 Item 64 corrects a drafting error.

Explanation of items 9.

Schedule 5 — Other legislation

Schedule 5 amends nine pieces of Commonwealth legislation as follows: Amendments to the Air Services Act 1995 to protect the priority of statutory liens held by Air Services Australia over aircraft and ensure concepts under that Act and the PPS Bill are harmonised. Amendments to the Bankruptcy Act 1966 will ensure there are no inconsistencies with the PPS Bill. This will be done by aligning the definition of secured creditor in the Bankruptcy Act with the definition of secured party in the PPS Bill. This will mean that secured parties under the PPS Bill are also secured for the purposes of the Bankruptcy Act and that, provided they have perfected their PPSA security interests (interests to which the PPS Bill applies), their PPSA security interest would not vest in a bankrupt estate and they retain the right to enforce without having to prove in the bankruptcy with unsecured creditors.

[page 610]

The amendment to the Commonwealth Inscribed Stock Act 1911 will amend a regulation making power which provides for the establishment of a register of equitable interests in stock so that it does not apply to security interests. The amendment will support the transition to the PPS Register. The amendment to the Corporations (Aboriginal and Torres Strait Islander) Act 2006 will ensure that charges created under that Act continue to have the same priority following commencement of the PPS Act. The Health Insurance Act 1973 will be amended to prohibit the creation of a security interest in a right to payment that has been assigned to a medical practitioner. An amendment to the Insurance Act 1973 will preserve the Federal Court’s power to determine the priority of a charge in relation to other interests in the same property. Amendments to the Privacy Act 1988 will alert readers of that legislation to the fact that unauthorised uses of data under the PPS Bill are ‘interferences with privacy’ under the Privacy Act and subject to the Privacy Commissioner’s powers of investigation. Amendments to the Quarantine Act 1908 will give priority to statutory interests over PPSA security interests. The amendments will also ensure that enforcement action taken under the Quarantine Act against goods will not be frustrated by a secured party enforcing against the same goods under the PPS Bill. The Wool International Act 1993 will be amended to support the transition from the register established under that Act to the PPS Register. Charges would no longer be required to be registered on the register established under that Act.

Commencement 9.1 Items 1–18 and 21–50 of Schedule 5 will commence on the PPS Act registration commencement time. The PPS Act registration commencement time is the first day of the month that is 26 months after the month in which the PPS Bill is given Royal Assent, or an earlier time determined by the Minister. The Government expect the registration commencement time will be in May 2011.

9.2 Items 19 and 20 of Schedule 5 will commence on the later of (1) the start of the day the Consequential Bill receives Royal Assent, and (2) immediately after the commencement of the PPS Act. Amendment of the Air Services Act Amendment of subsection 60(3) Items 1 and 4 9.3 Item 1 removes the term ‘floating charge’ from paragraph 60(3)(a), as the concept has been superseded by the term ‘security interest that has attached to a circulating asset’ under the PPS Act. 9.4 Under item 4, this amendment will not apply in relation to a floating charge if the floating charge was created before the PPS Act registration commencement time. Item 2 9.5 This item adds a note specifying the relevant provision in the PPS Act which deals with security interests that attach to circulating assets. [page 611] Item 3 9.6 Section 60 sets out the effect of a statutory lien, including that it applies in spite of any encumbrance in respect of the aircraft, and sets out the priority between competing interests over the aircraft. 9.7 Section 60 provides that a statutory lien is subject to security interests created in the aircraft before the statutory lien is registered, where the security interest covers a debt incurred before that time. 9.8 This item applies subsection 73(2) of the PPS Act to a statutory lien imposed under section 60. Applying subsection 73(2) ensures the priority between the statutory lien and a security interest in the same property is determined in accordance with the Air Services Act after the PPSA registration commencement time. Amendment of the Bankruptcy Act Definition of PPSA grantor or debtor Item 5

9.9 This item inserts a definition of a ‘PPSA grantor or debtor’ into the interpretation section (subsection 5(1)) of the Bankruptcy Act. This item imports the definition of a PPS Act grantor or debtor from the PPS Act to apply in amended sections 301 and 302. Definition of PPSA secured party Item 6 9.10 This item inserts a definition of a ‘PPSA secured party’ into the interpretation section of the Bankruptcy Act. This item imports the definition of a PPS Act secured party from the PPS Act to apply in amended sections 301 and 302. Definition of PPSA security agreement Item 7 9.11 This item inserts a definition of a ‘PPSA security agreement’ into the interpretation section of the Bankruptcy Act. This item imports the definition of a PPS Act security agreement from the PPS Act to apply in amended sections 301 and 302. Definition of a PPSA security interest Item 8 9.12 This item inserts a definition of a ‘PPSA security interest’ into the interpretation section of the Bankruptcy Act. The definition of a PPSA security interest in this item will include a security interest to which the PPS Act applies but excludes a transitional security interest under the PPS Act. This item imports the definition of a PPS Act security interest from the PPS Act to apply in amended sections 301 and 302. Definition of a secured creditor Item 9 9.13 This item amends the definition of a ‘secured creditor’ in the interpretation section of the Bankruptcy Act. The definition of secured creditor is amended to include [page 612]

secured parties under the PPS Act who have perfected their security interests and also creditors who are not secured parties under the PPS Act (this will include future holders of charges in land). 9.14 The definition of a secured party under the PPS Act means the holder of an interest in personal property (excluding land) provided by any of the following transactions which in substance secure the payment or performance of an obligation: a fixed charge; a floating charge; a chattel mortgage; a conditional sale agreement; a hire purchase agreement; a pledge; a trust receipt; a consignment; a lease of goods; an assignment; a transfer of title; a flawed asset arrangement and the following transactions which may not secure payment or the performance of an obligation: transfers of accounts or chattel paper, commercial consignments and PPS leases. 9.15 Therefore, the inclusion of PPS Act secured parties within the definition of secured creditors will increase the category of secured creditors under the Bankruptcy Act in respect of security agreements entered into after the PPS Act registration commencement time. These secured creditors will be able to realise or deal with the secured property, which will not vest in the bankrupt estate, provided they have perfected their security interest. Example Lessor A leases a front loader washing machine to Person A for a term of two years (ie this is a PPS lease under section 13 of the PPS Act and a PPS lease is a security interest under section 12 of the PPS Act). Person A enters into a deed of arrangement under the Bankruptcy Act. Lessor A does not prove in bankruptcy and instead follows the enforcement procedures under the PPS Act. Lessor A is entitled to do this because, following the amendments to the Bankruptcy Act and the amended definition of secured creditor, Lessor A is now a secured creditor under the Bankruptcy Act.

Amendment of section 301 Items 10–13 9.16 These items amend section 301 of the Bankruptcy Act to include PPS Act security agreement provisions entitling the PPS Act secured party to terminate or modify the agreement or re-possess the property, when the PPS Act grantor or debtor becomes a bankrupt, commits an act of bankruptcy or enters into a deed of assignment or arrangement under the Bankruptcy Act, as void provisions. Amendment of section 302 Items 14–17 9.17 These items amend section 302 of the Bankruptcy Act to include PPS

Act security agreement provisions which entitle the PPS Act secured party to exercise any power or remedy or modify the agreement if the PPS Act grantor or debtor becomes a bankrupt, commits an act of bankruptcy or executes a deed of assignment or arrangement, as void provisions. Application of amendments Item 18 9.18 This item provides that item 9 amending the definition of ‘secured creditor’ in the Bankruptcy Act, in line with the PPS Act, will only apply to bankruptcies where the date of the bankruptcy arises after the PPS Act registration commencement time. [page 613] Amendment of the Commonwealth Inscribed Stock Act Amendment of section 24B Items 19–20 9.19 Section 24B of the Commonwealth Inscribed Stock Act allows for the making of regulations which would require the operator of a clearing and settlement facility, an incorporated company or other body corporate to keep a record of equitable interests in stock, and to comply with requirements in relation to the keeping of such a record. 9.20 These items have the effect of limiting the regulation making power so that it does not apply to security interests in stock within the meaning of the PPS Act and to which the PPS Act applies. This is consistent with the PPS Register being the principal register of security interests in personal property in Australia. 9.21 These items will commence on the later of (1) the start of the day the Consequential Amendments Bill receives Royal Assent, and (2) immediately after the commencement of the PPS Act. This will prevent regulations being made before the PPS Act registration commencement time to have effect after that time with the result that PPS Act security interests could be registered on two registers. Amendment of the Corporations (Aboriginal and Torres Strait Islander) Act Amendment of sections 453–10 and 511–1

Items 21–22 9.22 Paragraph 453–10(4)(b) of the Corporations (Aboriginal and Torres Strait Islander) Act provides that the Registrar of Aboriginal and Torres Strait Islander Corporations may charge some or all of the remuneration, charges or expenses of an authorised officer who examines the books of an Aboriginal and Torres Strait Islander corporation or related body corporate on the property of the corporation or related body corporate. It also provides that the Registrar may give the charge any priority in relation to existing charges on the charged property that the Registrar sees fit. 9.23 Paragraph 511–1(4)(b) provides that the Registrar may charge some or all of the remuneration, charges or expenses of a special administrator of an Aboriginal and Torres Strait Islander corporation on the property of the corporation or related body corporate. It also provides that the Registrar may give the charge any priority in relation to existing charges on the charged property that the Registrar sees fit. 9.24 These items apply subsection 73(2) of the PPS Act to charges created under paragraphs 453–10(4)(b) and 511–1(4)(b). Applying subsection 73(2) ensures the priority between a charge under one of these paragraphs and a security interest in the same property is determined in accordance with the Corporations (Aboriginal and Torres Strait Islander) Act after the PPS Act registration commencement time. 9.25 The amendments are intended to preserve the power of the Registrar to give any priority that the Registrar sees fit to charges created by the Registrar under these two provisions, after the PPS Act registration commencement time. Amendment of the Health Insurance Act Insertion of section 20AA Item 23 9.26 Section 20A of the Health Insurance Act provides that a person entitled to receive a medicare benefit may assign that benefit to their practitioner. This provision facilitates bulk billing. [page 614] 9.27 This item is intended to prevent a person from creating a valid PPS Act security interest in a medicare benefit that has been assigned to a practitioner

under section 20A. 9.28 The amendments made by this item also ensure that subsection 20A(5) will continue to have effect after the PPS Act registration commencement time. That provision requires an assignment of a medicare benefit to be made in accordance with section 30A. 9.29 This item includes a definition of a ‘PPSA security interest’ which includes a security interest to which the PPS Act applies but excludes a transitional security interest under the PPS Act. This ensures that security agreements entered into before the PPS Act registration commencement time are not retrospectively voided. Amendment of the Insurance Act Amendment of section 62S Item 24 9.30 Section 62S of the Insurance Act provides that the Federal Court may give directions about the remunerative and allowances for a judicial manager (a manager of a general insurer appointed by the Court) and determine who is liable to pay the remuneration and allowances. The judicial manager’s remuneration and allowances may be charged against the property of the relevant general insurer. That charge will take priority in relation to existing charges on that property as the Court thinks fit. 9.31 This item applies subsection 73(2) of the PPS Act to charges created under section 62S. Applying subsection 73(2) ensures the priority between a charge under section 62S and a security interest in the same property is determined in accordance with the Insurance Act after the PPS Act registration commencement time. 9.32 The amendments are intended to preserve the power of the Federal Court to give any priority that the Court sees fit to charges created under section 62S, after the PPS Act registration commencement time. Amendment of the Privacy Act Amendment of section 13 Items 25–26 9.33 The note added by these items to section 13 of the Privacy Act will flag that subsection 157(4) and subsection 173(2) of the PPS Act make the following interferences with privacy under section 13 of the Privacy Act: — the failure of secured parties to provide notice of verification

statements (written statements confirming the registration of their security interest financing statements) to the grantors; — the conduct of an unauthorised or prohibited search; — the use of personal information obtained through unauthorised or prohibited searches. Insertion of section 28B Items 27–29 9.34 These items expand the Privacy Commissioner’s existing powers to include the power to investigate acts or practices which may be interferences with privacy under the PPS Act. [page 615] Insertion of section 49A Item 30 9.35 Section 49A provides, as in the case of suspected tax file number and credit reporting offences, that where the Commissioner during the course of an investigation forms the opinion that subsection 172(3) of the PPS Act may have been contravened, the Commissioner must cease dealing with the complaint and inform the Registrar of PPS of his opinion. If the Registrar of PPS notifies the Commissioner that the Registrar has decided not to continue under section 222 of the PPS Act (obtaining an order for a civil penalty), the Commissioner may continue his investigation. Amendment of the Quarantine Act Definition of PPSA security interest Item 31 9.36 This item inserts a definition of a ‘PPSA security interest’ into the interpretation section (subsection 5(1)) of the Quarantine Act. The definition includes a security interest to which the PPS Act applies but excludes a transitional security interest under the PPS Act. 9.37 The definition has been included to clarify references to PPSA security interests in the amendments to the Quarantine Act. Amendment of section 65

Items 32–33 9.38 Sections 64 and 65 of the Quarantine Act provide the Commonwealth with the power to detain items of personal property for unpaid expenses incurred in connection with quarantining animals, plants and other goods. 9.39 The amendment will ensure that a secured party does not have the power to enforce its security interest (by seizing the detained property under section 123 of the PPS Act) while a vessel is detained pursuant to section 65 of the Quarantine Act. Insertion of subsection 69A(14) Items 34–36 9.40 Under section 69A of the Quarantine Act, the Minister may approve the payment of compensation for goods or premises that are destroyed under or in accordance with the Quarantine Act. Payment is to be made to the owner(s). Subsection 69A(14) provides that the owner means a person who had an interest in the goods or premises at the time of destruction but does not include a person who has an interest by reason that they are entitled to a benefit of a mortgage, charge or lien in respect of the goods or premises unless they were in possession of the goods or had control of the premises at the time of destruction. 9.41 These items amend section 69A to ensure that for the purposes of determining the owner of the goods or premises, a person who, or a partnerships which, had an interest in goods or premises at the time of their destruction does not include a person or partnership that holds a PPSA security interest in the goods or premises unless that person or partnership has possession or control of the goods or premises at the time of destruction. [page 616] 9.42 As subsection 69A(14) already excludes persons with an interest under a mortgage, charge or lien, it is not necessary to include transitional security interests in the definition of a ‘PPSA security interest’. Amendment of the Wool International Act Amendment of subsection 22J Items 37–40 9.43 Section 22J of the Wool International Act requires that particulars of a

charge in a unit of equity in WoolStock Australia Limited are registered in the register of equity holders in order for that charge to have effect. This is inconsistent with the policy in the PPS Act that the fact that a PPSA security interest is not registered does not affect the validity of the security interest. 9.44 These items amend section 22J of the Wool International Act to ensure that a charge on a unit of equity in WoolStock Australia Limited is solely registrable on the PPS Register. 9.45 Item 39 adds a note specifying that a charge over a unit of equity in WoolStock Australia Limited may be the subject of a registration on the PPS Register. In addition, a further note clarifies that the priority between charges over units of equity will be determined in accordance with the PPS Act. Repeal of section 22K Item 41 9.46 Section 22K of the Wool International Act sets out the priority of charges over units of equity. The priority provided is similar to the priority rules under the PPS Act, providing priority in the order of registration. 9.47 This item repeals section 22K of the Wool International Act. Charges under the Wool International Act are in the nature of a security interest over personal property to which the PPS Act applies. The priority between competing security interests in personal property will be determined under the PPS Act. Repeal of paragraph 22L(b) Items 42 and 50 9.48 Item 42 amends section 22L of the Wool International Act. Subsection 22L(b) provides for the beneficiary of a charge on a unit of equity to, upon request, have access to an entry in the register of equity holders. As charges will be registered on the PPS Register, the Wool International Act will no longer recognise beneficiaries of charges. The consequence of the amendment is that it will be necessary for the grantor to consent to a secured party having access to the register of equity holders under the Wool International Act. 9.49 Item 50 provides that where WoolStock Australia Limited has not complied with a request made by a person under paragraph 22L(b) of the Wool International Act, the requirement to comply with the request stops applying after the PPS Act registration commencement time. Amendment of section 22R

Item 43 9.50 This item makes a technical amendment. The note in subsection 22R(2) refers to subsection (5) which no longer exists. The amendment repeals the note. [page 617] Item 44–45 9.51 These items repeal subsection 22R(4) of the Wool International Act. Section 22R(4) allows for a registered equity holder to notify WoolStock Australia Limited to make payments to beneficiaries of charges on units of equity, in accordance with the priorities established under section 22K of the Wool International Act. Amendment of section 22S Items 46–49 9.52 These items amend section 22S of the Wool International Act to remove the requirement that WoolStock Australia Limited notify beneficiaries of charges in units in equity of amounts available for distribution. This is as a result of the particulars of the charges no longer being registered on the register of equity holders under the Act.

[page 619]

Personal Property Securities (Corporations and Other Amendments) Bill 2010 Explanatory Memorandum 2008–2009–2010 THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA HOUSE OF REPRESENTATIVES PERSONAL PROPERTY SECURITIES (CORPORATIONS AND OTHER AMENDMENTS) BILL 2010 EXPLANATORY MEMORANDUM (Circulated by the authority of the Attorney-General, the Honourable Robert McClelland MP)

[page 620]

TABLE OF CONTENTS TABLE OF CONTENTS 1. OUTLINE 2. FINANCIAL IMPACT STATEMENT 3. FORMAL CLAUSES SCHEDULE 1 4. AMENDING TERMINOLOGY TO INCORPORATE THE FUNCTIONAL APPROACH 5. EXTENDING THE CA CONCEPT OF PROPERTY TO INCLUDE PPSA RETENTION OF TITLE PROPERTY 6. REPEAL CHAPTER 2K (REGISTRATION OF COMPANY CHARGES) BUT RETAIN THE EFFECT OF SECTIONS 266 AND 267 7. APPROPRIATE TRANSITIONAL AND APPLICATION ARRANGEMENTS 8. MAINTAIN EXISTING RIGHTS SCHEDULE 2 9. PERSONAL PROPERTY SECURITIES ACT 2009 10. TRANSITIONAL PROVISIONS SCHEDULE 3 11. AMENDMENT OF OTHER ACTS

[page 621]

1. OUTLINE 1.1 The Personal Property Securities (Corporations and Other Amendments) Bill 2010 (the Bill) contains three schedules: a. Schedule 1: Corporations Act 2001; b. Schedule 2: Personal Property Securities Act 2009; and c. Schedule 3: Amendment of other Acts.

Schedule 1 1.2 Schedule 1 makes changes to Corporations Act 2001(Cth) to align it with the Personal Property Securities Act 2009 (‘PPS Act’). Schedule 1 would: a. amend terminology used in the Corporations Act to apply the functional approach of the PPS Act to those sections of the Corporations Act that deal with charges; Currently, only transactions which create charges or mortgages are security agreements under the Corporations Act. But the PPS Act uses a functional approach of treating alike transactions which have the same effect of securing the payment or performance of an obligation. These security interests would, therefore, also be included as PPSA security interests in the Corporations Act. b. extend the Corporations Act concept of property to include PPSA retention of title property; c. replace Chapter 2k (Registration of company charges) because the PPS Act provides for the registration of security interests in personal property but retain provisions equivalent to sections 266 and 267 in Chapter 2K (which provide that charges are void against an administrator or liquidator in certain circumstances); d. apply appropriate transitional and application provisions; and e. change references to floating and fixed charges to circulating and noncirculating charges respectively but with the intention of

maintaining existing rights, for example, employee preferences under CA, section 561.

Schedule 2 1.3 Schedule 2 would amend the PPS Act to simplify the transitional provisions. 1.4 Schedule 2 would also make the PPS Act consistent with existing State and Territory provisions on the enforcement of security interests in agricultural products (Chapter 6).

Schedule 3 1.5 Schedule 3 would make minor consequential amendments to other Commonwealth legislation (Chapter 7).

2.

FINANCIAL IMPACT STATEMENT

2.1 The Bill will not have a financial impact on the operations of Government. [page 622]

3.

FORMAL CLAUSES

Clause 1 — Short title 3.1 The Short title of the Bill is defined here.

Clause 2 — Commencement 3.2 This clause provides for the commencement of the various proposed amendments. More details are provided in the notes on items.

Clause 3 — Schedules 3.3 The amendments made to legislation by the Bill are set out in three Schedules.

SCHEDULE 1

4. AMENDING TERMINOLOGY TO INCORPORATE THE FUNCTIONAL APPROACH 4.1 Under existing Personal Property Securities and Corporations law, transactions creating security interests are treated differently depending on the legal form of the transaction concerned. However, under the functional approach of the PPS Act, they will all be treated as security transactions where they perform the same function of securing payment or performance of an obligation. 4.2 The existing terminology of the CA, including charges, mortgages, liens, pledges and floating charges and fixed charges is based on the form of the transaction which creates the security interest. Schedule 1 would therefore, where appropriate, replace this terminology with terminology based on the functional approach of the PPS Act. 4.3 To harmonise the CA and the PPS Act: a. all references to charge and chargee would be replaced with security interest and secured party (items 28–39 and 42–84); b. all references to mortgage and mortgagee would be replaced with security interest and secured party (items 116–124); c. all references to floating charges would be replaced with circulating security interests and fixed charges with noncirculating security interests (items 86–87 and 89–100); d. all references to security would be replaced with security interests (items 101–114); e. all references to chargee, lienee and pledgee (or holder of lien or pledge) would be replaced with secured party and all references to charge, lien and pledge with security interest (items 125–134, and 136–137); 4.4 Schedule 1 would also introduce the concepts described in paragraphs 4.5–4.9 below. 4.5 A new omnibus concept of security interest (items 9–10) would include the concept of PPSA security interests (items 4 and 10) in personal property [page 623]

together with the existing CA concepts of charges, mortgages, liens and pledges; (items 56; 85; 115 and 143–5 replace charge with security interest). Example: Under subsection 442CB(1), an administrator only has a duty to act reasonably in exercising a power of sale over property that is subject to a pledge or a lien. This obligation to act reasonably would be extended to all secured property (item 135). Example: Under subsection 443F(2), an administrator’s lien has priority over any charges in so far as the administrator’s indemnity has priority over the debts. This priority would be extended to all secured property (items 138–139).

4.6 A new omnibus concept of secured creditor (items 7 and 10) which would include PPSA secured creditors under the PPS Act and secured creditors under the Corporations Act; 4.7 A new omnibus concept of secured party (items 8 and 10) which would include PPSA secured parties and the existing concepts of chargees, mortgagees, lienees and pledgees in the Corporations Act as they apply to property to which the PPS Act does not apply (items 148–151 replace chargee with secured party); Example: The disqualification of mortgagees under section 448C, would apply to all secured parties and not only to mortgagees (item 117).

4.8 A new omnibus concept of circulating security interest (items 1 and 10) which would include the PPS Act concept of circulating security interest together with the existing CA concept of floating charge; Example: Under section 442B, administrators would continue to have the power to treat property, subject to a non-circulating security interest (previously a fixed charge), as subject to a circulating security interest (previously a floating charge) (item 88).

4.9 A new omnibus concept of possessory security interest (items 9–10) which would include PPSA security interests perfected by possession or control together with the existing concepts of liens and pledges in the Corporations Act. Example: Where the company is under administration and the administrator is entitled to dispose of the property, the pledgee, lienee or secured party in possession or control (possessory secured parties) would all have to allow potential purchasers to inspect the property (items 133–134). Example: Where the company is under administration and the pledgee, lienee or secured party in possession or control (possessory secured parties) have possession of the property, they would all be permitted to continue in possession of the property (item 156). Example: The rules for the distribution of proceeds would be the same for all possessory security interests where the original property was subject to a lien, a pledge or a security interest perfected by possession or control (items 136–137). Example: Section 441JA currently makes provision for the sale of property subject to a lien or pledge. Section 441JA would be replaced with proposed section 441EA which refers to the sale of property subject to possessory security interests (proposed section 441EA would also amend

the Corporations Act in line with the PPS Act to remove the requirement that the security interest can only be enforced if there is no higher-priority security interest in the same property) (items 40–41).

[page 624]

5. EXTENDING THE CA CONCEPT OF PROPERTY TO INCLUDE PPSA RETENTION OF TITLE PROPERTY 5.1 The PPS Act concept of security interests includes transactions where the secured party, not the grantor, retains title over the property. This includes: a. agreements to sell subject to retention of title; b. romalpa clause agreements; c. conditional sale agreements; d. hire-purchase agreements; and e. leases and consignments that secure the payment or performance of an obligation. 5.2 Some transactions which do not secure the payment or performance of an obligation, but which have that effect, are deemed to be security interest under the PPS Act. These include: a. commercial consignments; and b. leases and bailments of greater than one year (or ninety days in the case of serial numbered goods) (ie PPS leases). 5.3 In order to align the Corporations Act with the PPS Act, property subject to these new PPSA security interests would be included in the Corporations Act as PPSA retention of title property (items 3 and 10) (the existing definition of lease in the Corporations Act would, however, exclude PPSA security interests (item 2) except in subsection 419(1) (item 151). 5.4 The Corporations Act currently defines retention of title clause property. This definition would be retained to account for any existing retention of title property but qualified to exclude PPSA retention of title property (items 3 and 10).

5.5 Therefore, there would be two classes of retention of title property: a. PPSA retention of title property (which includes most personal property that is subject to a retention of title clause) (items 3 and 10); and b. Retention of title clause property as defined in the Corporations Act (to the extent that it is not PPSA retention of title property). This could include retention of title property: i) that is not personal property within the meaning of the PPS Act; ii) where the retention of title clause does not secure payment or performance of an obligation; or iii) where the relevant property interest is excluded by PPS Act, section 5.6 In those cases where it would not prejudice existing rights, property of the company for the purposes of the Corporations Act would include PPSA retention of title property so that PPSA retention of title secured parties could enforce their security interests as secured parties. 5.7 CA, Part 5.2 would not apply to PPSA retention of title property and therefore under subsection 419A(1), a controller would not be liable for PPSA retention of title property (item 152). [page 625] 5.8 A secured party with a security interest over substantially the whole of the property would be able to appoint an administrator to enforce their security interest (CA, section 436C) (item 142, definition of enforce, item 154, definition of property in Part 5.3). 5.9 CA, subsection 441A(3) enables a chargee or receiver with a charge in the whole or substantially the whole of the property to enforce the charge. Property in this context would include PPSA retention of title property and where a company is under administration, the chargee with a charge over the whole or substantially the whole of a company’s property could enforce the security interest before or after the decision period (items 140–141, definition of decision period, item 154, definition of property in Part 5.3). 5.10 Where an administrator incurs debts in the exercise of his or her

5.11

5.12

5.13

5.14

5.15

duties, the administrator is personally liable for the debts (CA, section 443A), and this would include for property hired, leased, used or occupied that gives rise to PPSA security interests (item 162). An administrator may only withdraw from security agreements, entered into prior to the administration, where the property is owned or leased from another person (CA, section 443B) but this would exclude property giving rise to PPSA retention of title security interests (items 164–165). An administrator would therefore only be able to withdraw from transactions involving true operational leases or real property. Currently, under the CA, sections 443D–E, an administrator is indemnified and has a lien over all property of the company for debts arising during the administration. The administrator’s lien would not have priority over PPSA retention of title because it is not company property (items 162–165). In future, an administrator would be indemnified out of, and have a lien over, all property of the company including unperfected PPSA retention of title property but excluding non-PPSA retention of title property (item 166). CA, subsection 444D(1) provides that a deed of company arrangement binds secured creditors but that this does not affect their rights to realise their collateral except to the extent that they voted for the deed and the deed stops them doing so. In future, PPSA retention of title property holders would be subject to CA, section 444D(2) and would therefore be able to deal in the PPSA retention of title property unless they voted in favour of a deed of company arrangement which prevents them from dealing in the property (items 167–8). However, there would be circumstances where it would be important to preserve existing rights by not including PPSA retention of title property within the definition of company property. Where a company is insolvent and the property of the company is insufficient to meet the payment of unsecured creditors, employee entitlements would have preference over floating charges (CA, section 561). If PPSA retention of title property were included as company property, it would be subordinate to employee preferences and PPSA retention of title property holders would lose their property. Therefore, property of the company would exclude PPSA retention of title property in this context. In the following situations, property of the company would only include PPSA retention of title property where those security interests

are vested in the company through either PPS Act, sections 267 or 267A or proposed section 588FL (items 171, 174, 182). [page 626] 5.16

5.17

5.18

5.19

5.20

5.21

5.22

5.23

Where a company is being wound up, a person cannot proceed against the company’s property (CA, section 471B). This would include PPSA retention of title property vested in the company (item 171). In determining the remuneration for a liquidator, the Court is required to take into account, among other things, the value and nature of the property which the liquidator was required to deal with (CA, section 473(10)). This would include PPSA retention of title property vested in the company (item 171). When a company is being wound up, the liquidator is required to take custody of the property to which the company is entitled (CA, section 474). This would include PPSA retention of title property vested in the company (item 172). The liquidator can commission a report on the affairs of the company (CA, section 53) and property of the company (CA, section 475(8)). This would include PPSA retention of title property vested in the company (item 171). The powers of the liquidator include selling or disposing of property and doing all things necessary for the winding up of the company and distributing its property (CA, section 477). This would include PPSA retention of title property (item 171). After the Court orders a company to be wound up, the liquidator must collect the company’s property (CA, section 478). The Court may also require a person to deliver property, (item 171), to which the company is prima facie entitled, to the liquidator (CA, section 483). This would include PPSA retention of title property vested in the company (item 171). Where the property is insufficient to satisfy all creditors, the Court may make an order on the priority of payments from the property (CA, section 485(3)). This would include PPSA retention of title property vested in the company (item 171). In reviewing the liquidator’s remuneration, the Court must take into

account, the value and nature of the property, dealt with by the liquidator (CA, section 504(2)). This would include PPSA retention of title property vested in the company (item 174).

6.

REPEAL CHAPTER 2K (REGISTRATION OF COMPANY CHARGES) BUT RETAIN THE EFFECT OF SECTIONS 266 AND 267 6.1 Most charges currently subject to the registration requirements of Chapter 2K would be covered by the PPS Act. These existing charges would be migrated to the PPS Register to be established by the PPS Act and in future such charges would be registered on the PPS Register. Chapter 2K would be repealed (item 18) and consequential amendments would be made throughout the Corporations Act (items 11–17 and 19–27) with effect from the time the PPS Act comes into effect (expected to be May 2011). 6.2 Although Chapter 2K would be repealed, section 266 would be retained to prevent security interests being granted fraudulently with knowledge of an [page 627] imminent administration, liquidation or deed of company arrangement and to avoid property falling into the trustee’s or administrator’s estate or being claimed by unsecured creditors. 6.3 For security interests entered into after the commencement time, the proposed section 588FL (item 183) would replace section 266. Section 588FL would provide that where a company is being wound up, an administrator appointed, or a deed of company arrangement executed: a. any PPSA security interest which was not continuously perfected for six months prior to that event; or b. any PPSA security interest not continuously perfected at 20 days (or a later day ordered by the Court) after the agreement was made until the day the winding up or the administration begins, would vest in the company and the secured party would be unable to enforce the security agreement (item 183). 6.4 Despite the operation of proposed new provisions replacing sections 266 and 267, a transferee of property which was subject to a security interest to which the new provisions apply, would take the property

free of the security interest provided that they had no knowledge of the security interest (item 54). However, the onus of proving this lack of knowledge would be with the transferee. This reversal of onus is required because the relevant matters requiring proof would usually be within the knowledge of the transferee and it would be unduly onerous to require the secured party to prove the transferee’s state of mind. This provision would protect bona fide purchasers for value and render ineffective fraudulent transactions designed to frustrate payments to creditors. 6.5 Proposed section 588FL would vary section 266, which requires that a security interest be registered within 45 days of being created or registered within 6 months of the administration, liquidation, or deed of company arrangement. Section 588FL(2) would instead provide that when a company is being wound up, an administrator appointed, or a deed of company arrangement executed (the critical time), any PPSA security interest which was perfected, registered or enforceable against a third party after the latest of: a. six months before the critical time; or b. 20 days after the security agreement came into force; c. a later time ordered by the Court under proposed section 588FM; would vest in the company (item 183, proposed section 588FL(4)). Proposed section 588FL(4) would only apply if a security interest is perfected at the specified times by registration and it would not apply if the security interest is perfected by possession, control or temporary perfection (even if the security interest is also perfected by registration). Example: CompanyA grants FinanceA a security interest in its all present and after acquired property. FinanceA registers its security interest 15 days after the creation of the security interest. CompanyA becomes insolvent 30 days after the security interest is granted. FinanceA would retain their security interest, because FinanceA registered the security interest within the required 20 day period.

[page 628] Example: CompanyA grants FinanceA a security interest in its all present and after acquired property.

FinanceA registers its security interest 25 days after the creation of the security interest. CompanyA becomes insolvent 30 days after the security interest is granted. The security interest would vest in CompanyA because FinanceA did not register the security interest within the required 20 day period or within the six month period prior to the critical time. Example: CompanyA grants FinanceA a security interest in its all present and after acquired property. FinanceA registers its security interest 25 days after the creation of the security interest. CompanyA becomes insolvent eight months after the security interest is granted. FinanceA would retain its security interest because it registered its security interests prior to the six month period before the critical time. Example: CompanyA grants FinanceA a security interest in its all present and after acquired property. FinanceA registers its security interest 15 days after the creation of the security interest. CompanyA becomes insolvent 5 months and 25 days after the security interest is granted. The security interest would not vest in CompanyA because FinanceA registered the security interest within the required 20 day period (despite the fact that the registration was also made within 6 months before the insolvency).

6.6 If the law of another jurisdiction governs the enforceability of the security interest, and also provides for its registration, proposed subsection 588FL(3) would provide that the PPS Act security interest would vest in the company where the perfection, registration or enforceability against third parties occurs after the latest of: a. six months before the critical time; or b. 20 days after the security agreement came into force; c. a later time ordered by the Court under proposed section 588FM. 6.7 As deemed security interests (transfers of accounts and chattel paper; PPS leases and commercial consignments) are not true security interests, it would operate unfairly to subject them to the rule in proposed subsection 588FL(4) and they are therefore excluded from this rule by proposed section 588FN) (item 183). Subordinated debts (turnover trusts) would also be excluded from this rule (proposed subsection 588FN(2)). 6.8 Proposed subsection 588FL(4) would also not apply if the secured party agreed to the transfer of the collateral and the PPSA security interest is perfected at the end of 5 business days after the transfer or where the secured party did not agree to the transfer, the PPSA security interest was continuously perfected until 5 business days after the day the secured party acquired the knowledge required to perfect their interest by registration (item 183, proposed subsection 588FN(3)). 6.9 Under PPS Act, section 266, an unperfected security interest will vest

in the grantor and as a result, property that is currently exempt from liquidation would, if subject to an unperfected security interest, vest in the company and be available for distribution to unsecured creditors. The property could, however, subsequently be transferred free of the PPSA security interest, provided that the transferee provides new value for the property and has no actual or constructive [page 629]

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6.11

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knowledge of the winding up, deed of company arrangement or administration (item 183, proposed subsection 588FL(5)). Existing section 267, which prevents the enforcement of a security interest granted by a company to a person associated with the company within six months after the granting of the interest, would be replaced by proposed section 588FP (item 183). The new provision would be designed to prevent a company granting security interests to persons associated with the company (which would enable those persons to appoint receivers and take control) and would apply to PPSA security interests and other charges to which section 267 currently applies. Proposed section 588FP retains CA, section 267. Where a security interest was granted to an officer of a company and associated persons and the secured party purports to take steps to enforce the security interest, within six months after the security interest is created, without the leave of the Court, then the security interest would be void. The six month period after the security agreement refers to six months after the time the security agreement is made and not to six months after the attachment of the security interest. This would not affect the title of a transferee who takes the personal property for value and without actual or constructive knowledge of the seller’s security interest. Proposed section 588FN provides that a transferee of property, which was subject to a security interest in proposed sections 588FL and FM, takes the property free of the security interest provided that they had no knowledge of the security interest. Proposed section 588FN would place the evidential burden on the defendant, who acquires property subject to a security interest under

proposed sections 588FL and 588FM, to prove that the defendant had no actual or constructive knowledge of the matters set out in proposed sections 588FL and 588FM. The reason for reversing the onus is that the matters requiring proof would usually be peculiarly within the knowledge of the defendant and it would be unduly onerous to require the plaintiff to prove the state of the defendant’s knowledge (item 183, proposed subsection 588FL(6)). This provision is intended to protect bona fide purchasers for value while ensuring that fraudulent transactions designed to frustrate the payment of funds to creditors are void.

7. APPROPRIATE TRANSITIONAL AND APPLICATION ARRANGEMENTS 7.1 Schedule 1 would commence when the PPS Register starts to operate (that is, when the PPS Act starts to apply). Because most amendments require the alignment of existing categories of security interests in the Corporations Act and related concepts to the PPS Act, they would only apply to PPSA security interests that arise under agreements made after the new PPS Act scheme starts to operate. 7.2 Transitional provisions would be enacted to retain certain aspects of the registration scheme for existing registrable charges. At the commencement time, the ASIC Register would be closed to further registrations. However, [page 630] ASIC would be required to retain existing records on its Register for seven years after the commencement time. This would enable chargees, lienees and pledgees of registrable charges to continue to obtain information relating to their charges, liens or pledges. 7.3 The repeal of CA, Chapter 2K (item 17) would not immediately apply to registrable charges under the CA (except to the extent necessary to close the CA register to new registrations, and to limit the effect of CA, section 266 (the voiding of registrable charges)). Despite the repeal of Chapter 2K, the following provisions would continue to apply after the commencement time for a period of seven years (item

7.4 7.5

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7.7

187, proposed section 1502): a. CA, subsection 265(1), in relation to registrable charges entered on the Register before the commencement time (item 186, definition of commencement time); b. CA, subsection 266(4), in relation to notices that are required to be lodged before the commencement time; c. CA, section 272, in relation to registrable charges entered on the Register before the commencement time; d. CA, section 274, in relation to registrable charges arising before the commencement time; e. the existing exemptions from CA, sections 266 and 267 would continue to apply. The priority rules for existing registrable charges would apply indefinitely (item 187, proposed section 1506). It is also proposed that registrable charges, notified before the commencement time (including provisional charges), would be migrated across to the PPS Register and (as transitional security interests) would retain the priority they had prior to migration. Registrable charges not notified before the commencement time, could be registered anytime on the PPS Register (but would have priority dating to that day), unless they obtain a Court order under CA, section 274 to retain their precommencement time priority (item 187, proposed section 1502). CA, subsection 266(4) would continue to apply to registrable charges which became void under CA, section 266 before the commencement time. This would maintain the existing rights of secured creditors to apply to a court for relief and a declaration that the registrable charge never was void (item 187, proposed section 1504).

8.

MAINTAIN EXISTING RIGHTS

8.1 Schedule 1 would maintain the status quo in a number of respects. 8.2 Firstly, Schedule 1 would amend CA, section 283BG and 283CD to exclude borrowers and guarantors respectively from the obligation to report to the Trustees on charges they create while under administration (items 146 and 147). 8.3 Schedule 1 would retain the restrictions on the exercise of third party

rights under administration (items 156; 158–159). 8.4 PPS Act, s 140 specifies the order for the distribution of proceeds when enforcing security interests. Several provisions of the Corporations Act require [page 631] certain payments to be made out of property that is subject to security interests. For example, CA, section 433 provides that a receiver who is appointed on behalf of the holders of debentures of a company that are secured by a floating charge, and who takes possession or control of property of the company that is secured by the floating charge, must pay certain debts in priority to any claim for debentures and CA, section 1311 makes it an offence for the receiver not to do so. Therefore, PPS Act, section 140 would not apply when a receiver has been appointed to property of the company (see PPS Act, section 116). 8.5 CA, section 443E provides that an administrator’s right of indemnity under CA, section 443D has priority over certain debts of the company secured by a floating charge on property of the company. CA, section 443F provides that the administrator’s indemnity is secured by a lien and that the lien has priority over a charge to the extent that the right of indemnity has priority over debts secured by the charge. It is proposed that the Minister would make a declaration under PPS Act, section 73(3) determining that the administrator’s lien has priority over a security interest to the extent that the right of indemnity has priority over debts secured by the security interest. 8.6 CA, section 561 provides that if the property of a company available to pay unsecured creditors is insufficient to make certain payments, then the payment of those amounts must be made in priority to floating charges. PPS Act, section 254 provides that laws which are capable of operating concurrently with the PPS Act may do so. While the PPS Act, section 140 sets out the order for distributing proceeds to those with interests in the property, persons entitled to payments under CA, section 561 do not have interests in the property. Therefore, CA, section 561 and PPS Act, section 140 are capable of operating concurrently, because CA section 561 requires certain payments to be made before the property is put towards those with interests in the

property.

SCHEDULE 2 9. PERSONAL PROPERTY SECURITIES ACT 2009 Amendment of section 3 Items 1–3 9.1 Items 1–3 are amendments to the Guide to the PPS Act. They describe changes made to the PPS Act by other items. In particular, item 1 describes a change made by item 38 (includes the additional requirement for perfection of enforceability against third parties); item 2 the change made by item 79 (removes the reference to assignment of interests for greater accuracy); and item 3 describes a change made by item 92 (specifies the registration commencement time which is now known because the PPS Act has received Royal Assent). 9.2 The rationale for these changes is discussed in the individual items below. [page 632]

Amendment of section 6(2)(c) Items 4 9.3 Section 6(2) of the PPS Act identifies when the PPS Act will apply to a security interest in intangible property. Subsection 6(2)(c) provides that the PPS Act applies to a security interest in intangible property if the intangible property is an assignment of an account or chattel paper. 9.4 Item 4 would clarify that the intangible property is the interest of a transferee under a transfer of an account or chattel paper, and not the assignment of the account or chattel paper.

Amendment of section 8(1)(f)(v) Items 5 9.5 The PPS Act does not apply to certain interests, one of which is a

transfer of an interest or claim in, or under, a contract of annuity or policy of insurance. This reflects exclusions found in both the New Zealand and Saskatchewan PPS Acts. 9.6 However, section 31(1)(b) provides that proceeds can include a right to an insurance payment or other payment as indemnity or compensation for loss of, or damage to, the collateral (or proceeds of collateral). 9.7 This amendment would maintain the general exclusion of insurance policies from the PPS Act but include insurance payments that are proceeds under the PPS Act. 9.8 Without this amendment, it would be possible for a secured party’s security interest to become worthless when the collateral is destroyed. If the security interest were not able to attach to the resulting insurance payment as proceeds, the secured party would be left without an interest in the insured property. Allowing the secured party’s security interest to attach to the insurance payout allows them to maintain a security interest in an asset that has a substantially similar value. This would be consistent with the policy behind the general exclusion on insurance policies because permitting the security interest to continue in the insurance payment as proceeds is not the same as permitting a security interest in the insurance proceeds as original collateral. Example: A bank takes a security interest in a car which has been insured by its owner. The car is written off after being involved in an accident. The owner receives the right to an insurance payment as a result. Because the right to the insurance payout is a right as compensation for the loss of the car, it would be included as proceeds under the PPS Act and the bank would have a security interest in the right to the insurance payment as proceeds of its security interest in the car. In effect, the bank’s security interest in the car is replaced by a security interest in the payment. As a result, the bank is placed in a substantially similar position to the one in which it was prior to the car being written off.

Amendment of section 237 Items 6, 7, 8 and 9 9.9 See the discussion under item 79. [page 633]

Amendment of subsection 8(1)(f)(x) Item 10

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Subsection 8(1)(f)(x) provides that the Act does not apply to an assignment of the beneficial interest in an account where, after the assignment, the assignee holds the account on trust for the assignor (‘trust-back’ exclusion). The Personal Property Securities Bill 2008 (Exposure Draft) defined an account to mean a monetary obligation. The definition of account in the PPS Act was narrowed without a corresponding change to subsection 8(1)(f)(x) to retain the broader exclusion from the Act. This amendment would reinstate the effect that subsection 8(1)(f)(x) had in the Exposure Draft.

Water Rights Items 11 and 14 9.13 Subsection 8(1)(i) provides that the PPS Act does not apply to 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. 9.14 Item 14 proposes to define a right in relation to the control, use or flow of water as including a right that a person has against another person to receive (or otherwise gain access to) water. 9.15 This amendment would ensure that the Act would not apply to rights held in water that are derived from contract. This commonly occurs where an intermediary such as an operator of irrigation infrastructure has the licence to the water and is responsible for distributing it to producers. 9.16 Item 11 includes a note which refers to the substantive amendment. 9.17 This amendment is intended to ensure that the PPS Act would not apply to any rights in water regardless of the source or basis of those rights.

Pawnbrokers, Superannuation and Commonwealth Debt Acts Items 12 and 14 9.18 Items 12 and 14 would insert subsections 8(1)(ja) and 8(6) to exclude certain security interests taken by pawnbrokers from the PPS Act. Pawnbrokers are extensively regulated by State and Territory legislation. The amendments would exclude security interests taken by regulated pawnbrokers from the PPS Act, provided a security interest

9.19

is taken in the ordinary course of the pawnbroker’s business as a pawnbroker, is taken in accordance with State and Territory legislation and the market value of the obligation secured and the market value of the collateral is less than the threshold established by section 47 of the PPS Act for low-value consumer transactions. The pawnbroker would have to believe that the market value of the collateral is less than this threshold. The property could also not be of a kind that the regulations require or allow to be described by serial number (for example, motor vehicles and watercraft). Item 12 would also insert subsection 8(1)(jb), which would exclude members’ interests in superannuation entities from the PPS Act: [page 634] a.

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as members of a superannuation fund (within the meaning of the Superannuation Industry (Supervision) Act 1993); or b. as members of an approved deposit fund (within the meaning of the Superannuation Industry (Supervision) Act 1993); or c. as holders of retirement savings accounts (within the meaning of the Retirement Savings Accounts Act 1997); or d. in accounts kept under the Small Superannuation Accounts Act 1995 in the name of the person; or e. as holders of superannuation annuities (within the meaning of the Income Tax Assessment Act 1997). The exclusion implements the Government’s retirement income policy, which prevents holders of interests in superannuation funds from using those interests as security for loans and other obligations not related to retirement income. Item 12 would also insert subsection 8(1)(jc), which would clarify that the PPS Act would not apply to charges created by section 6 of the Commonwealth Inscribed Stock Act 1911 or section 5 of the Loans Redemption and Conversion Act 1921. These provisions create charges over the Consolidated Revenue Fund which secure payment of Treasury bonds and other Commonwealth debt instruments.

Amendment of section 237

Item 13 9.22 See the discussion under item 79.

Amendment of section 10 — definition of description Items 15 and 76 9.23 Subsection 10(b) currently provides that a description which identifies a class of personal property is a description of that class for the purposes of the Act. 9.24 This amendment responds to stakeholder concerns that, for example, a description of fruit would not be sufficient to describe oranges. This amendment clarifies that a description may identify a class of personal property by identifying a larger class of personal property that includes the class. This would make it clear that a more general collateral description such as fruit would be sufficient to describe a more specific class of collateral such as oranges. 9.25 Item 76 adds a note to section 151 which explains how this definition of description would work in the context of section 151.

Definition of Financial Product Item 16 9.26 Section 10 currently provides that the term financial product has the same meaning as it has in the Corporations Act. This amendment would maintain that reference for the purposes of the definition of investment instrument. 9.27 However, the term financial product is also used in relation to intermediated securities. [page 635] 9.28

This amendment would have the effect that, for the purposes of the definition of intermediated security at section 15 of the PPS Act, a financial product is any of the following (or an interest in any of them): a. shares; b. bonds;

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c. any other financial instrument; or d. any other financial asset. This definition is based on the definitions used in the Geneva Securities Convention, which is also known as the UNIDROIT Convention on Substantive Rules for Intermediated Securities.

Definition of grantor Item 17 9.30 This item amends the definition of grantor by omitting the reference to ownership of personal property as distinct from an interest in the property. The reference to ownership is redundant and could cause confusion because an interest in the property also includes a full ownership interest. The amendment would also make the definition consistent with the definition of debtor at section 2(1) of the Personal Property Security Act 1993 (Saskatchewan).

Amendment of section 10 — Definition of Intellectual Property Item 18 9.31 Section 10 currently defines intellectual property by reference to Australian legislation. However, this definition does not allow for intellectual property that arises under similar legislation in other countries to fall within the definition. As a result, the PPS Act applies to intellectual property differently depending on whether it is granted by Australian or foreign legislation. 9.32 This amendment would clarify that a right under a law of a foreign country that corresponds to one mentioned in the definition is also to be defined as intellectual property. This change would mean that the PPS Act is consistent in its application to intellectual property, wherever it originates.

Intermediated Security Items 19 to 23 9.33 The amendments made by these items are consequential on the amendment to the definition of intermediated security proposed by item 34.

Definition of livestock Items 24 and 36 9.34 Item 24 amends the definition of livestock to make it clear that livestock includes the products of livestock. For example, a reference to livestock would also include a reference to wool while still on the sheep’s back. This means that livestock in the PPS Act would include a security interest in a product of the livestock even if the security interest was not held in the complete animal. [page 636] 9.35

Item 36 inserts a note to section 19 of the PPS Act that is consequential to this amendment.

Amendment of section 10 — Definition of Negotiable Instrument Item 25 9.36 Section 10 currently defines negotiable instrument to include a range of instruments, as follows: 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). 9.37 This item extends the definition with the effect that dematerialised negotiable instruments (that is, instruments that are evidenced by an electronic record) would fall within the definition. The proposed extended definition of negotiability is consistent with the approach taken by the UNCITRAL Legislative Guide on Secured Transactions.

Definition of new value Item 26 9.38 This item amends the definition of new value with the qualification owed to the person providing the value. The effect of this amendment is that new value would not include the refinancing of a loan from an existing lender. New value would continue to include any financing

provided by a lender to a borrower in order to refinance an existing loan from another lender.

Definition of registration time Item 28 9.39 Item 28 amends the definition of registration time as a result of the amendment to the transitional provisions at item 123.

Intermediated security Item 29 9.40 The amendment made by this item is a result of the amendment to the definition of intermediated security proposed by item 34.

Enforcement provisions — agricultural products Items 30 and 31 9.41 Items 30 and 31 are a result of the amendment to the provisions on enforcement over agricultural products at item 72.

Amendment of section 12 Item 32 9.42 Section 12 provides for the definition of security interest. In particular, subsection 12(4) currently provides that an account debtor, in relation to an [page 637]

9.43

account or chattel paper, may take a security interest in the account or chattel paper and subsection 12(4A) provides that an ADI may take a security interest in an ADI account that is kept with the ADI. The amendment proposed by item 32 would establish a general principle for which subsections 12(4) and 12(4A) are specific examples.

Definition of PPS lease Item 33

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Section 13 sets out the meaning of PPS lease, which includes certain bailments of goods. The current subsection 13(3) provides that section 13 only applies to a bailment if the bailor provides value for the bailment to the bailee. A bailment is the delivery of tangible personal property to another party who acquires possession of it. A bailment does not transfer ownership rights and the bailor has the right to take possession at any time or in accordance with the terms of the bailment. This item repeals the requirement that the bailor must provide value for the bailment to the bailee and includes the requirement that the bailee (not the bailor) must provide the value. This change reflects the typical bailment situation as one in which the person who obtains possession of the property (the bailee) provides the value. Under item 25, a bailment would only be a PPS lease under section 13 if the bailee provides value but it would not be necessary for the bailee to provide the value to the bailor (the bailee and bailor could agree that the bailee provide value to another person).

Intermediated securities Item 34 9.47 Section 15 currently deals with investment entitlements and a number of related terms. This terminology is, however, different from that used in other parts of the world to describe the same thing. In particular, work undertaken by the Hague Conference (to develop the Convention on the Law Applicable to Certain Rights in Respect of Securities Held with an Intermediary) and UNIDROIT (to develop the Convention on Substantive Rules regarding Intermediated Securities) relies on terminology such as intermediated securities and intermediary. 9.48 This item amends the PPS Act so that the language used in relation to intermediated securities is consistent with that used in other countries and in international law. 9.49 A number of consequential changes have been made to the PPS Act as a result of this change. These include items 19–23 and 29 (which add and repeal definitions in Section 10), item 55 (which alters the wording in section 77(3)) as well as the bulk amendments (items 101– 121). 9.50 This item amends the definition of intermediary to ensure that only

persons holding an Australian financial services license, an Australian clearing and settlement facility licence or a license issued by a foreign jurisdiction permitting them, in the course of business or other regular activities, to maintain securities on the behalf of themselves and/or others could be an [page 638] intermediary under the PPS Act. This clarifies and broadens the application of the PPS Act to intermediated securities to include foreign licensed intermediaries.

PPS leases Item 35 9.51 The PPS Act provides that a security interest that is a PPS lease (subsection 12(3)) may be a bailment (subsection 13(1)). Subsection 19(5) does not currently establish when a grantor has rights in goods that are bailed to the grantor. Item 35 would clarify that a grantor has rights in goods that are bailed to the grantor when the grantor obtains possession of the goods for the purposes of subsection 19(2)(a). This would extend the rule that currently applies to leases, to bailments.

Definition of livestock Item 36 9.52 The amendment made by this item is consequential on the amendment to the definition of livestock proposed by item 24.

Written security agreements Item 37 9.53 Section 20 of the PPS Act sets out when a security interest is enforceable against a third party in respect of particular collateral. Subsection 20(2)(a) provides that a written security agreement will be enforceable against a third party if it is adopted or accepted by the grantor by an act specified in the writing that is done with the intention of adopting or accepting the writing.

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9.55

The requirement for the writing to specify exactly what must be done can be an onerous one, especially for small and medium businesses. This item permits a grantor to accept a security agreement by performing an act (or omission) that, while not specified in the writing, reasonably appears to be done with the intention of adopting or accepting the writing. The amendment also makes it clear that whether the person intended to adopt or accept the writing is to be assessed objectively. The item also recognises that in certain circumstances, an omission could be taken to constitute adoption or acceptance of an agreement.

Requirements for perfection Item 38 9.56 Section 20 of the PPS Act sets out when a security interest is enforceable against third parties. Section 21 sets out when a security interest is perfected. The current requirements for perfection are that a security interest has both attached and that the secured party has control or possession of the collateral, or made a registration in relation to the security interest. However, section 21 currently does not require that the security interest be enforceable against third parties. [page 639] 9.57

Item 38 would add a new requirement that a security interest must be enforceable against third parties before it is perfected. This would provide greater certainty in the grantor’s insolvency, because a security agreement would generally need to be evidenced in writing signed or adopted by the grantor to survive the grantor’s insolvency.

Control of an ADI account Items 39 and 48 9.58 Subsection 21(2)(c)(i) currently allows any secured party to control an ADI account. Item 39 would have the effect that only an ADI with whom the account is held would be able to perfect a security interest in the ADI account by control. All other secured parties would have to register in order to perfect a security interest in an ADI account. The

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practical effect of this change is that a secured party that has a security interest in an ADI account would not need to incur the expense of perfecting by control in order to ensure they maintain their first priority as against other secured parties. Rather, the ordinary principal of first to register would apply (subject to the interest of the ADI with whom the ADI account is held). The ADI with whom the account is held would be able to perfect a security interest in an ADI account by control. The ADI would therefore have the highest priority (because perfection by control would also have a higher priority than perfection by registration). This means that the ADI would not be vulnerable to other secured parties claiming the ADI account, so that the ADI account would be available to the ADI for prudential regulation purposes. Allowing the ADI to perfect the security interest by control, and obtain the highest priority would also be consistent with the ADI’s right of set-off and combination of accounts in relation to the ADI account. Item 48 (the Guide to Part 2.6 — Priority between security interests) also includes a paragraph that explains the effect if this change.

Amendment of sections 24(5)(b) and (d) Item 40 9.61 The rationale for this change is discussed under item 79.

Amendment of section 26 — control of intermediated securities Item 41 9.62 Under subsection 21(2)(c), security interests over certain classes of property can be perfected by control. Section 26 sets out when a secured party has control of an intermediated security that is credited to an intermediated securities account. Item 41 would replace section 26 with a new section conferring control of an intermediated security on the secured party where there is an effective agreement between various parties or if the intermediated security account is maintained. 9.63 This item would allow a secured party to have control of an intermediated security where the secured party is also registered as the holder of the intermediated security. In such a situation, the secured party would not need an

[page 640]

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agreement with the grantor and the intermediary in order to exercise effective control of the instrument. This approach would be consistent with the treatment of investment instruments in section 27, whereby investment instruments could be controlled by the controller registered as the owner, by possession or by agreement. It would also be consistent with the approach to security interests in intermediated securities set out in the Geneva Securities Convention. The current section 26 provides that for an agreement to be effective, it must be between the secured party, the grantor and the intermediary. However, it is also possible for a secured party to exercise practical control of an intermediated security if there is an agreement between the grantor and the intermediary, or between the grantor and the secured party of which the intermediary has notice. The new section 26 would provide that such agreements will also be effective to give a secured party control of an intermediated security for the purposes of the PPS Act. This item also reflects the change in terminology from investment entitlements to intermediated securities. This change would be consistent with the amendment to the definitions in section 15 and with the bulk amendments made in items 101–121. This amendment would ensure that the reference to an intermediary in subsection 26(2)(a)(iii) includes a person prescribed under the subsection 26(3) regulations where that intermediary is an intermediary under subsection 15(2)(b). Consequently, a subsection 26(2)(a)(iii) notice could be provided to someone other than the subsection 15(2)(b) intermediary where the person is prescribed in accordance with the section 26(3) regulations. This item would also establish a regulation-making power for prescribing people and classes of people in accordance with subsection 15(2)(b).

Amendment of subsection 32(1)(a) Item 42 9.68 Subsection 32(1)(a) provides that a security interest will continue in collateral if the collateral gives rise to proceeds, unless the secured

9.69

9.70

party authorised a dealing giving rise to proceeds. This currently means that any authorised dealing in collateral, even a short-term lease, would extinguish a security interest. This limits the extent to which a secured party would allow a grantor to deal with the property. The item would provide that a dealing in collateral which gives rise to proceeds would only extinguish a security interest if the secured party has agreed that the dealing would extinguish the security interest. This change draws a distinction between a dealing with and a disposal of the collateral. This amendment would minimise the risk that a secured party would have their security interest extinguished simply because they authorised a grantor to deal with the collateral and would therefore allow grantors more freedom to deal with collateral. A disposal of collateral where there is express or implicit authorisation from the secured party would continue to be an exception to the rule that the security interest continues in the collateral. [page 641]

Amendment of section 44 Items 43 and 44 9.71 Section 44 allows a person to take an item of personal property free of any security interests where that collateral can be, but is not, registered by serial number. Currently, a person will not take this property free of a security interest where a person has actual knowledge that the sale or lease is a breach of the relevant security agreement. This test is a complicated and potentially uncertain one. 9.72 Item 43 would modify the test in section 44 to make it consistent with the test in subsection 43(2) for taking free of an unperfected security interest. The amended test would allow a person to take the property free of a security interest unless they were a party to the transaction that created or provided for the security interest. This would minimise the number of different tests in the PPS Act. The narrower exception is also appropriate given the relative ease with which security interests in serial-numbered goods can be registered. 9.73 Under the amended test, it would not be necessary to determine the

actual knowledge of the buyer or lessee as item 44 would repeal subsection 44(3).

Amendment of section 51 Item 45 9.74 Item 45 would clarify that the rule in subsection 51(1) would not apply when the transferee, but not any other party, has actual or constructive knowledge that crediting the interest in the financial product would constitute a breach of the security agreement.

Amendment of subsection 52(1) Items 46 and 47 9.75 Subsection 52(1) determines when a buyer or lessee takes personal property free of a temporarily perfected security interest and it currently exempts security interests perfected by section 322. The amendments made to the transitional provisions have included section 322 within section 321 and a corresponding change has been made to section 321.

Amendment of section 54 Item 48 9.76 This item makes an amendment to the Guide to Part 2.6 that is consequential to the amendment discussed at item 39.

Amendment of section 54 Item 49 9.77 Section 54 is the Guide to Part 2.6 (Priority between security interests). Section 54 currently only provides a general example of the kinds of priority interests governed by Division 6. [page 642] 9.78

The amendment to the Guide would set out in a clearer fashion what priorities the Division regulates. It would refer to all potential competing priorities and not just by way of example as is currently the

case.

Amendment of section 57 Item 50 9.79 Section 57 provides a super-priority for security interests that are currently perfected by control. Subsection 33(2) provides for the continuous perfection of proceeds of collateral subject to a security interest for 5 business days after the dealing giving rise to the proceeds. However, the security interest in the proceeds does not currently retain the super-priority conferred on the security interest perfected by control. 9.80 This item amends section 57 so that a security interest in proceeds of original collateral that was perfected by control when the collateral gave rise to proceeds, would have priority over any other security interest in the proceeds except a security interest in the proceeds as original collateral perfected by control.

Amendment of sections 62 and 63 Items 51 9.81 Sections 62 and 63 set out the rules that regulate the priority of competing purchase money security interests (PMSIs) and the priority of PMSIs against other security interests. 9.82 Section 62 of the PPS Act sets out the priority rules applicable to a perfected PMSI as against a perfected security interest in the same collateral. Subsection 62(3)(b) currently provides that a PMSI in personal property other than inventory will have priority if it is perfected by registration before the end of 10 business days after the grantor obtains possession of the goods or, for other property, the day the interest attaches to the property. This item would extend the deadline for registration to 15 days, allowing secured parties more time to register and still maintain priority. This amendment recognises that a secured party will not always know precisely when a grantor has obtained possession of goods, or when their security interest has attached to the property. 9.83 Section 63 sets out the priority rules applicable to competing PMSIs. Subsection 63(c) currently provides that a PMSI in collateral that are goods, and not inventory, has priority if the security interest is

9.84

perfected before the end of 10 business days after the day the grantor, or another person at the request of the grantor, obtains possession of the collateral. This item would extends the deadline for registration to 15 days, allowing secured parties more time to register and still maintain priority. This change is consistent with the amendment to subsection 62(3)(b). Subsection 63(d) provides that a PMSI in collateral that are not goods, and not inventory, has priority if the security interest is perfected before the end of 10 business days after the day the priority interest attaches to the collateral. This item extends the deadline for registration to 15 days, allowing secured parties more time to register and still maintain priority. This change is consistent with the amendments to subsections 62(3)(b) and 63(c). [page 643]

Amendment of section 64 Item 52 9.85 Section 64 sets out when a non-PMSI in an account as original collateral (the priority interest) has priority of over a PMSI in the account as proceeds of inventory. Subsection 64(1)(b) currently provides that priority interests have priority where the secured party holding the priority interest gives notice to each secured party holding a PMSI in the account and the notice is given at least 5 business days before the earlier of the registration day and the day the priority interest attaches to the account. 9.86 This item amends subsection 64(1)(b) by substituting 5 business days with 15 business days. This amendment would give other secured parties more time to protect their security interest by altering the terms of trade for future inventory finance that would become subordinate to the priority interest.

Amendment of subsection 64(3) Items 53 and 54 9.87 Section 64 deals with the priority competition between an inventory financier and an accounts financier and confers priority in an account

9.88

9.89

9.90

on the accounts financier. The amendment would confer the same priority on the inventory financier, over the new value provided by the accounts financier, as it had in the account as proceeds of inventory. This would compensate the inventory financier for their loss of priority over the security interest in the account. The amendment would also ensure that the transferee’s interest in the new value would not be a security interest unless it is a security interest apart from PPS Act, section 12. It would also ensure that section 64 does not operate to confer priority on the accounts financier over the new value which they provide. This section would also enable the inventory financier to use subsection 120(1)(a) (enforcement against an account) to enforce its security interest. Example: A manufacturer supplies inventory to a wholesaler on a purchase money security interest basis and registers this security interest. The wholesaler sells the inventory on terms to a retailer and as a result the inventory financier has a PMSI in the accounts that arise. The wholesaler then sells the accounts for new value to a factor (the accounts financier) who does all that is necessary to have priority in the accounts over the inventory financier. However, the inventory financier would have first priority over the new value that the accounts financier provided.

Priority of interests Items 55–56 9.91 Section 68 deals with the priority competition that arises when two different grantors grant security interests in the same collateral to different secured parties. This could arise where a grantor sells property to another person, despite the fact that it is subject to a security interest, who then grants a security interest in that property to a secured party of their own. Section 68(2) describes [page 644] when the buyer’s secured party would have priority and subsection 68(2)(c) provides an exception to that rule based on the buyer’s (transferee’s) knowledge. The section currently suggests that the buyer acquires the security interest which is illogical and does not achieve the intended policy outcome.

9.92

9.93

This amendment would clarify that the buyer (transferee) must acquire the collateral without actual or constructive knowledge that the acquisition constitutes a breach of the security agreement that provides for the transferor granted interest. Subsection 68(2)(d) sets out one of the conditions for when a transferee-granted pre-condition has priority. Item 56 would clarify that the qualification of but only to the extent of the advance or obligation should qualify the whole subsection 68(2) and not just subsection 68(2)(d).

Amendment of section 71 Item 57 9.94 The rationale for this change is discussed under item 79

Amendment of section 72 Item 58 9.95 Section 72 sets out when the interest of a holder of a negotiable document of title has priority over a perfected security interest in the same document of title. Subsection 72(b)(ii) provides that a holder who has actual or constructive knowledge of the security interest will not take priority under section 72. This item would amend subsection 72(b)(ii) by replacing negotiable instrument with document of title. This would rectify the inconsistency in the current section and clarify that section 72 applies to negotiable documents of title.

Amendment of section 77(3) Item 59 and 60 9.96 This item is an amendment that is consequential to the amendment made at item 34.

Amendment of subsection 77(4) Item 62 9.97 Subsection 77(4) deals with the relationship between sections 77, 239 and 240. However, the reference to 240(3) is not consistent with the reference to 239(2) and would be replaced with a reference to sections 240(4) and (5).

Amendment of Heading to Part 2.7 and section 78 Items 63 and 64 9.98 See the discussion under item 79. [page 645]

Amendment of section 83 Item 65 9.99 The changes to the Guide to this part are consequential to amendments made by items 66–68.

Amendment of sections 84A–86 Items 66–68 9.100 The Bill would clarify the ability of a security interest to be created in crops and livestock. 9.101 Item 66 would create section 84A which would provide that a security interest could attach to crops while the crops are still growing. Similarly it would provide that a security interest could attach to the products of livestock before they became proceeds (for example, wool derived from livestock or semen extracted for breeding purposes). 9.102 These provisions would clarify that a security interest could be held in the crops and livestock as distinct from the land or animal from which these products are derived. Accordingly a financer could take a security interest in the wool without taking a security interest in the livestock from which it is derived. 9.103 Items 67 and 68 would amend sections 85 and 86 respectively to extend the special priority rules relating to crops and livestock contained in those sections to also cover security interests held in the proceeds of crops and livestock.

Amendment of section 108 Item 69 9.104 Item 69 makes an amendment to the Guide to Part 4.2 to add that Part 4.2 contains provisions on the rules relating to enforcement of security interests in crops and livestock.

Amendment of subsection 109(5)(b) Item 70 9.105 Section 126 allows a secured party to seize collateral by taking apparent possession. Subsection 115(4) currently allows consumers to contract out of section 126 where the collateral is predominantly used for personal, domestic or household purposes. This option to contract out of the provision does not provide sufficient protection for consumers and therefore, items 70, 72 and 75 would amend the PPS Act to make it impossible to take apparent possession of consumer property. 9.106 Subsection 109(5) sets out which of the enforcement provisions do not apply in relation to collateral that is used by a grantor predominantly for personal, domestic or household purposes. Item 70 would include a new subsection 109(5)(ba), which would ensure that section 126 would not apply to collateral that is used by a grantor predominantly for personal, domestic or household purposes. [page 646] 9.107 Since section 126 would no longer apply to consumer property, subsection 115(4), which allows the parties to contract out of section 126, would be redundant. Item 66 repeals subsection 115(4). 9.108 As a result of the amendment made by item 70, section 126 would not apply to consumer property. Item 75 inserts a note that draws attention to this amendment and refers to subsection 109(5)(ba).

Amendment of subsection 115(1)(p) Item 71 9.109 Item 72 would amend section 115 of the PPS Act to provide that the parties to a security agreement in which a security interest was granted in crops or livestock could contract out the rights of seizure and disposal provided in the proposed Division 6 of Part 4.3.

Amendment of section 115(4) Item 72

9.110 This item makes an amendment to the PPS Act that is consequential to that discussed at item 70.

Amendment of section 116 Item 73 9.111 Section 116 provides that the enforcement provisions do not apply in relation to property in the hands of a receiver, a receiver and manager, or a controller. The effect of this provision is to disapply the enforcement provisions where the grantor is an individual. It would still be possible for a receiver or a receiver and manager to be appointed to the property of an individual, by order of the Court or in accordance with a security agreement. 9.112 This item would amend section 116 by adding subsection 3, which would apply the enforcement provisions where the grantor is an individual. The enforcement provisions would not apply to nonindividuals.

Amendment of section 122 Item 74 9.113 This amendment would clarify the Guide to Part 4.3 (Seizure and Disposal or Retention of Collateral) by including additional information as to what a secured party must or may do when retaining or disposing of collateral.

Amendment of section 126 Item 75 9.114 See Item 70.

Amendment of subsection 135(4) Item 76 9.115 Section 135 provides that where a secured party proposes to retain collateral, they must give notice to certain parties. This item would amend section 135 to [page 647]

provide that the notice must (not may) be given in the approved form. The retention of collateral by a secured party can be significant for the grantor and it is appropriate that any notice be set out in the approved form. 9.116 The operation of subsection 135(4) would be tempered by section 25C of the Acts Interpretation Act 1901, which provides that where an Act prescribes a form, then, unless the contrary intention appears, strict compliance with the form is not required and substantial compliance is sufficient. Accordingly, substantial compliance with the approved form would be sufficient compliance.

Amendment of section 136 Item 77 9.117 Section 136 sets out the effect of the retention of collateral by a secured party on their obligation, on other secured parties and on other security interests in the collateral. However, it does not presently provide that the obligation owed to the secured party will be extinguished as a result of the retention of the collateral. Further, while it does provide that the secured party takes the collateral free of the security interests of lower ranked secured creditors, it is silent on whether the obligations secured or payments owed to the lower ranked secured parties are extinguished. 9.118 This item would clarify that the obligations secured or payments owed to the lower ranked secured parties are not extinguished even if their security interests in the collateral are ineffective against the retaining secured party. It would also clarify that the debt or other obligation owed to the secured party, who retains the collateral, is extinguished as a result of the retention (even if that debt or obligation is secured against other collateral that is not retained by the secured party).

Amendment of sections 138A–138C Item 78 9.119 Under the PPS Act, a secured party is able to seize collateral and exercise various rights to recover the outstanding amount due if the debtor is in default under the security agreement. An amendment to the enforcement provisions would ensure the PPS Act maintains secured parties’ rights where the security interest is held in crops of livestock.

9.120 The proposed amendments would ensure that a secured party enforcing a security interest in crops, livestock or fish has a right to do what is necessary to recover the collateral, including entering the land where the collateral is located and dealing with the crops or livestock as necessary. 9.121 Accordingly, proposed section 138B would provide that a secured party seizing crops could take possession of the crops or cut, gather or harvest the crops. This provision would authorise the secured party to enter the land or water source on which the crops were located or were growing. This power to enter would however be limited by the grantor’s rights to enter the land or water source. 9.122 The provision would also permit the secured party to dispose of or retain of the crops in accordance with Divisions 2, 3, 4 and 5 of Chapter 4 (Enforcement). [page 648] 9.123 Proposed section 138C would provide that a secured party seizing livestock could take possession of the livestock or its proceeds. It would also allow the secured party to slaughter the livestock or extract the proceeds, such as by shearing the wool on the livestock.

Amendment of section 139 Item 79 9.124 Section 139 provides a Guide to the operation of the rules applying after enforcement (Part 4.4). Section 111 provides that all rights, duties and obligations that arise under the enforcement provisions must be exercised or discharged honestly and in a commercially reasonable manner. Item 79 would amend the Guide in section 139 to reinforce that section 111 applies to rights duties and obligations arising under Part 4.4.

Amendment of section 140 Item 80 9.125 Section 140 provides for the order in which amounts received from enforcement action are to be distributed. This order of distribution

relates to those parties that are owed an obligation secured by an interest in the collateral, not the general order of distribution to all parties generally. This general order of distribution is provided for by other legislation which can operate concurrently with the PPS Act, as provided for by section 254 of the PPS Act. 9.126 This item would clarify that, where there is a Commonwealth, State or Territory law that requires the secured party to apply the property towards another obligation before the obligations referred to in subsection 140(2), that other law would have effect. However, this would not be the case where the other law refers to an obligation that is secured by a security interest in the collateral. This means that the PPS Act would regulate the order of payments in relation to secured obligations but that other legislation would regulate the priority of interests secured by a security interest and other interests.

Amendment of section 141 Item 81 9.127 Section 141 allows a secured party who is entitled to dispose of, or retain, collateral under sections 128 or 134 to take certain steps to reflect the transfer of title resulting from the disposal or retention. The section currently allows the secured party to take any steps that the grantor could take to reflect the transfer of title. This item would amend section 141 to allow the enforcing secured party to take any steps that the person whose title is extinguished could take. This change acknowledges that the grantor may not have title to the collateral, which may instead lie with another secured party (for example, the grantor may hold property subject to a retention of title clause).

Amendment of section 151 Item 82 9.128 See discussion under item 15. [page 649]

Amendment of subsection 174(2)(c)

Item 83 9.129 Section 174 sets out what may be stated in a search result and the use of a search result as evidence in a court or tribunal. The section does not oblige the Registrar to make available any particular written search result in the appropriate form. Subsection 174(2)(c) provides that the order of certain events mentioned in subsection 174(2)(b) may be stated in relation to two or more registrations. However, it is possible that a number of these events may have occurred in relation to a single registration. This amendment would provide that a search result could state the time any relevant events occurred in relation to one or more, instead of two or more, registrations.

Amendment of subsection 178(3) Item 84 9.130 Section 178 sets out the process for a person with an interest in collateral described in a registration to give a written amendment demand to the secured party. Subsection 178(3) currently provides that a secured party must not require payment for compliance with an amendment demand in relation to collateral that is consumer property, and is designed to provide protection to consumers. Consumer property is defined in section 10 of the PPS Act 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. 9.131 This item would amend subsection 178(3) by replacing the reference to consumer property with a test of whether the grantor uses, or intends to use at the time the security interest attaches, collateral predominantly for personal, domestic or household purposes. The effect would be to give equal protection to consumers who use or intend to occasionally use collateral for business purposes.

Amendment of section 237 Item 85 9.132 Section 237 provides that a security agreement may not provide for an Australian law to govern, amongst others, an assignment of an account or chattel paper. However, the definition of security interest in subsection 12(3)(a) refers to a transfer of an account or chattel paper,

not an assignment. 9.133 This item would substitute assignment with transfer to ensure consistency. Similar changes would also be made by items 6–9 (subsection 8(1)(f)); item 13 (subsection 8(4)); item 40 (subsection 24(5)(b) and (d)); item 57 (note to subsection 71(1)) and items 63–64 (the headings to Part 2.7 and section 78).

Amendment of subsection 239(3) Item 86 9.134 This amendment would make the conflict of law rule for intellectual property more consistent with the conflict of law rule that applies to other kinds of [page 650] intangible property. Currently, all issues relating to a security interest in intellectual property or an intellectual property licence are governed by the law of the jurisdiction under which the property or licence is granted. 9.135 This amendment would mean that the law governing security interests would generally be the law that applies in the location of the grantor. However, the law of the location of the intellectual property would apply to transfers of intellectual property. This would provide greater certainty for secured parties taking a security interest in all of the grantor’s property, and for persons taking a transfer of intellectual property.

Amendment of section 241 Items 87 and 88 9.136 Subsections 241(1)–(2) provide that the validity and perfection of an interest in proceeds, other than proceeds that are an account, is governed by the law of the jurisdiction that governed the validity and perfection of the security interest in the collateral that gave rise to the proceeds. Section 239 provides that a transfer of an account is governed by the law of the location of the grantor. As currently drafted, all proceeds that are accounts are within the exclusion, and not

merely proceeds that are accounts that arise from the transfer of the collateral. 9.137 This item would clarify that the only accounts (that are proceeds) that should be exempt from the general rule in section 241 are those that do not arise from a dealing with the collateral. This amendment would mean that accounts that do arise from a dealing with the collateral would be governed by the same law as originally governed the security interest. It would only be other accounts that would be governed by the rules in section 239. This would facilitate transfers of accounts while protecting the interests of the secured party who should not be subject to a different law merely because an item of collateral has been sold and the proceeds, in the form of an account, become governed by a different law Example: A secured party has a security interest in an apple. The grantor sells the apple on credit. The receivable owed to the grantor is an account. The security interest extends to the account as proceeds arising from a dealing in the collateral that gave rise to the proceeds. The security interest in the account should be governed by the same law that governs the security interest in the apple.

Amendment of section 242 Items 89–91 9.138 These items divide Part 7.3 into two Divisions and have no substantive effect.

Amendment of section 252A and 252B Item 104 9.139 Part 7.3 deals with the Constitutional operation of the PPS Act. This item inserts two sections that seek to remove any doubt about the constitutionality of the PPS Act. [page 651] 9.140 The proposed section 252A would clarify that the PPS Act will not operate in such a way as to give preference to a state (or part of a state) over another state (or part of another state). Section 260 which currently provides for a similar outcome is repealed by item 106. 9.141 The proposed section 252B establishes that a provision of the PPS Act

would not apply where it would have the effect of providing for an acquisition of property otherwise than on just terms.

Amendment of subsection 254(2)(h) Item 105 9.142 Section 254 deals with the concurrent operation of the PPS Act with a number of different Acts. A note following subsection 254(2)(h) provides a list of sections of the PPS Act that expressly allow for certain concurrent operation of State and Territory laws. 9.143 This amendment inserts another section into this list to clarify that the order of distribution provided for by section 140 (discussed above at item 80) is another section of the PPS Act that expressly allows for the concurrent operation of State and Territory laws.

Amendment of section 260 Item 106 9.144 This item is dealt with at item 104.

Amendment of section 267 Items 107, 108 and 109 9.145 Sections 267–269 set out when an unperfected security interest will vest in a grantor. The sections operate in conjunction with other provisions in the CA and the Bankruptcy Act 1966 (Cth). The Corporations Act provides that certain unregistered charges are void as against the liquidator (section 266–267). 9.146 Item 107 amends Note 2 to draw attention to the interaction between section 267 of the PPS Act and sections 266–267 of the Corporations Act. 9.147 Item 108 amends Note 2 to draw attention to the interaction between section 267 of the PPS Act and Division 2A of Part 5.7B of the Corporations Act (Vesting of PPSA security interests if not continuously perfected), included by item 179 of Schedule 1. This item would commence at the registration commencement time. 9.148 Item 109 brings the note into line with the standard note used for this purpose of the PPS Act.

Amendment of subsection 267(2) Item 110 9.149 Subsection 267(2) provides that a security interest vests in the grantor immediately before an event (such as the winding up of the company or other events such as those listed in subsection 267(1)(a) if the security interest is unperfected at a particular time (as provided for by subsection 267(1)(b)). [page 652] However, it is possible for a security interest to be created and/or attach after the event referred to in the section. The current effect of the PPS Act is that a security interest that attaches after the event would not vest in accordance with the section. However, a security interest that attaches after the event should also vest in the grantor if it is unperfected by a registration made before the event listed in subsection 267(1). 9.150 This amendment would have the effect that an unperfected security interest that attaches to the collateral after the event referred to in subsection 267(1)(a), in accordance with a security agreement made before that event, would vest in the grantor in the same way that security interests that attach before the relevant time. 9.151 Subsection 267A(2) would be included to protect an innocent purchaser of the collateral and would offer them the same protection as is offered purchasers under the vesting rule in subsection 267(3).

Amendment of subsection 268(1) Item 111 9.152 This item updates a reference in subsection 268(1) as a consequence of the changes made under item 110. Item 112 9.153 Section 268 provides that certain security interests are unaffected by the vesting rules contained in section 267. Section 238 is a choice of law rule that provides that the perfection, and the effect of perfection or non-perfection, of a security interest in goods is governed by the

law of the jurisdiction in which the goods are located at that time. The effect of this amendment is to clarify that the vesting rule is a rule that relates to the effect of non-perfection by expressly providing that the vesting rule does not apply to a security interest for which perfection, and the effect of perfection or non-perfection, is governed by the law of a foreign jurisdiction. This means that when goods are located overseas at the vesting time, they would not be subject to the vesting rules in sections 267 and 267A.

Amendment of section 269 Item 113, 114 and 115 9.154 The amendments in items 113 and 114 are consequential on the inclusion of the new section 267A. 9.155 The amendment in item 115 is consequential to the amendment of subsection 267(1)(b) in the PPS (Consequential Amendments) Act to refer to times rather than days in that subsection.

10.

TRANSITIONAL PROVISIONS

General 10.1

The Bill would make amendments to the Transitional Provisions in Chapter 9 of the PPS Act. [page 653]

10.2

10.3

The PPS Act provides for the transition from current law governing security interests to the PPS Act. The PPS Act would apply to security interests existing before the PPS Act comes into force subject to the transitional provisions. The registration commencement time is a key event in the transitional provisions. It is the time at which the PPS Act and the PPS Register takes practical effect. The PPS Act makes provision for the registration commencement time to be determined by the Minister. If the Minister did not make a determination, the registration commencement time would be the start of the first day of the month that is 26 months after the month in which the PPS Act is given Royal Assent (section 306).

Example: The PSS Act received Royal Assent on 14 December 2009, the migration time would be the start of 1 January 2012 and the registration commencement time would be the start of 1 February 2012. If the Minister determined that the migration time would instead be 1 March 2010, the Minister may also determine an earlier time for the registration commencement time to occur but that time must be after 28 March 2010.

Transitional security agreements Item 118 10.4 A security agreement would be a transitional security agreement if the security agreement was in force immediately before the registration commencement time and the agreement continues in force at and after that time.

Enforceability of transitional security agreements Item 119 10.5 Item 119 proposes the substitution of a new section 311 making it clear that, for the purposes of the PPS Act, a transitional security interests would be enforceable against third parties if it would have been enforceable before the registration commencement time.

Intellectual property Item 120 10.6 Item 120 would substitute a new section 106 to ensure that it only applies in relation to security interests in intellectual property licences created by security agreements entered into at or after the registration commencement time.

Transitional application of the PPS Act Item 121 10.7 A key outcome of the transitional provisions would be to ensure that the rights held by a party prior to the registration commencement time are not prejudiced by the transition to the PPS scheme. 10.8 This preservation of rights would be achieved by the transitional provisions through the attachment rule (proposed section 320), the perfection rule (proposed section 321) and the priority rules of the PPS Act.

[page 654] 10.9

The attachment rule provides that a transitional security interest in collateral would be taken to have attached to the collateral immediately before the registration commencement time (proposed section 320). 10.10 Similarly, the perfection rule (proposed section 321) would provide that a transitional security interest in collateral would be taken to have been perfected from immediately before the registration commencement time until the earliest of the following times: a. the migration of the transitional security interest; b. the preparatory registration of the transitional security interest; c. the amendment of a registration relating to a transitional security interest; d. the perfection of the transitional security interest under the PPS Act, or e. the end of the 24th month after the registration commencement time (proposed subsection 321(2)). 10.11 The period between immediately prior to the registration commencement time and the earlier of the events listed in proposed subsection 321(2) is a period of temporary perfection. During this period, two transitional security interests would have the same priority time for the purposes of subsection 55(4) of the PPS Act. They would therefore have the same priority under the priority rules established by the PPS Act and would have the priority among themselves that they had immediately before the registration commencement time, as if the PPS Act had not been enacted (proposed section 322). 10.12 If none of the events listed in proposed subsection 321(2) occurs and the 24th month following the registration commencement time expires, the transitional security interest would lose its temporary perfection and become an unperfected security interest. As an unperfected security interest, it would be subordinate to a perfected security interest in the same collateral (subsection 55(3)). If both security interests are unperfected, priority would to be determined in accordance with the order of attachment of the security interests (subsection 55(2)).

10.13 If both security interests are transitional security interests, they would both be taken to have attached immediately before the registration commencement time (proposed section 320). Proposed section 322 would then apply so that they would have the priority among themselves that they had immediately before the registration commencement time and as if the PPS Act had not been enacted. 10.14 If the other security interest is not a transitional security interest, the transitional security interest would have priority, because it would have an earlier attachment time (see proposed section 320) for the purposes of subsection 55(2) of the PPS Act. Example: BankB has a security interest in a car owned by GrantA. This security interest was registered on the NSW Register of Encumbered Vehicles and is migrated across to the PPS Register as a migrated security interest. BankB’s security interest would be taken to be perfected from immediately before the registration commencement time. Example: GrantA is a fruit packer. On 30 August 2009 FinanceA lends GrantA $5,000 and takes a security interest in GrantA’s packing machine. There is no Register on which FinanceA can register its interest in the machine. On 1 May 2010, the new PPS Register commences. On 14 May 2010, FinanceB lends GrantA $10,000 and takes a

[page 655] security interest in the same machine. FinanceB registers its interest on the PPS Register on the same day. On 15 July 2010, GrantA becomes insolvent. The priority between FinanceA and FinanceB comes to be determined. FinanceA’s interest would be a transitional security interest and temporarily perfected by the Bill, for a period starting immediately before 1 May 2010, up until 31 May 2012. FinanceA’s interest in GrantA’s machine would therefore have priority over FinanceB’s interest, even though FinanceA’s interest is unregistered.

Amendment of section 333 Item 122 and 123 10.15 These items amend section 333 to provide that if the PPS Registrar does not believe a migrated transitional security interest would have ended at a particular time (proposed subsection 333(4)), the end time for the registration does not need to be included on the PPS Register (proposed subsection 333(3)(a)).

Amendment of section 336 Item 124

10.16 Item 124 would substitute a new section 336 on the preparatory registration of transitional security interests. 10.17 The migration provisions in the Bill would allow a non-migrated transitional security interest to be registered between the migration time and the registration commencement time (proposed section 336). This type of registration is referred to as a preparatory registration in the Bill. 10.18 At any stage between the migration time and the registration commencement time a secured party could apply for a preparatory registration (proposed section 336(1)). The Registrar would only be able to accept the application if he/she were satisfied on reasonable grounds that a transitional security interest would attach to the collateral and that it is operationally practicable for the Registrar to register the financing statement (proposed section 336(2)). 10.19 A secured party that registers their security interest during this time would receive the same protection under the PPS Act as a secured party who registers their security interest within the 24 month temporary perfection period. The time of registration of a preparatory registration would be the registration commencement time (proposed section 336(5)).

Amendment of section 336 Item 125 10.20 Item 125 would include a new section 337 to determine what constitutes an effective registration of a transitional security interest. 10.21 The Registrar would be able to determine that registrations of transitional security interests are effective despite defects that would otherwise render them ineffective under the PPS Act (proposed section 337). This provision is necessary because some transitional registers do not include information that would be required on the PPS Register. In the case of other transitional security [page 656] interests, the Registrar may decide that secured parties should be given an opportunity to correct certain details of the registration where they

have perfected their interest. Example: State vehicle registers do not include information about the grantor of an interest. The PPS Act would enable the Registrar to determine that a migrated State vehicle registration, for a vehicle that is commercial property, is not ineffective merely because a search of the PPS Register, by reference only to the individual or corporate details of the grantor in respect of the collateral, is not capable of returning the relevant registration.

10.22 A registration on the PPS Register would be ineffective because of a defect if, and only if, there is a seriously misleading defect in the data or there is a specified defect (sections 164–165). 10.23 Once the times specified in proposed section 337(4) have lapsed, the registration would become ineffective unless the registration was amended to correct the defect before the relevant time lapses.

Concept of control in inventory and accounts Items 126–132 10.24 Items 126–132 clarify the concept of control in relation to inventory and accounts. 10.25 Item 128 includes general rules to determine when a secured party has control of personal property. Proposed section 341(1A) would provide three tests for whether a secured party has control of personal property. 10.26 The first test would provide that a secured party has control of property if they have control within the ordinary meaning of control. This is intended to be a reference to general law concepts of control. 10.27 The second test would provide that a secured party has control of property if they have control within the meaning of Part 2.3 of the PPS Act. 10.28 The third test would provide that a secured party would have control of inventory or an account if either of the first or second tests applied or if subsection 341(1), (2), (3) or (4) applied. 10.29 Items 126 and 127 would include guidance notes to subsection 340(2) and (5) referring to these general control rules. 10.30 Items 129 to 132 would amend section 341, consequential to the general control rules, to clarify that the general control rules apply to determine whether particular personal property is a circulating asset.

Referral provisions

10.31 Items 92–103 would provide an additional method for a State to become a referring State for the purposes of the PPS Act. 10.32 As an alternative to referral in subsection 244(1)(a) of the PPS Act, a State would be able to adopt the PPS Act as amended by this Bill (subsection 244(8)) and refer power to the Commonwealth to make subsequent amendments to the PPS Act. [page 657] 10.33 Existing referrals of power would not be affected by these amendments. In addition, the existing power for States to refer the PPS Act after its enactment (in addition to the pre-enactment referrals that have been made) would be retained. 10.34 These amendments reflect an approach recently agreed by the Commonwealth and States for the National Consumer Credit Protection legislation. Items 133–153 10.35 These items replace references to investment entitlements with references to intermediated securities.

SCHEDULE 3 11. AMENDMENT OF OTHER ACTS Amendment of Designs Act 2003 Item 1 11.1

11.2

This item would amend the definition of a PPS Act security interest in section 5 of the Designs Act. A PPS Act security interest would be a security interest to which the PPS Act applies other than a transitional security interest within the meaning of the PPS Act. This amendment would replace the definition of PPS security interest inserted by Item 1 of Schedule 2 of the Personal Property Securities (Consequential Amendments) Act 2009 (PPS (Consequential Amendments) Act) and commence immediately after that definition takes effect.

Amendment of Fisheries Management Act 1991 Item 2 11.3

11.4

This item would amend the definition of a PPS Act security interest in section 4(1)) of the Fisheries Management Act. A PPSA security interest would be a security interest to which the PPS Act applies other than a transitional security interest within the meaning of the PPS Act. This amendment would replace the definition of PPS security interest inserted by Item 1 of Schedule 1 of the PPS (Consequential Amendments) Act) and commences immediately after that definition takes effect.

Amendment of Navigation Act 1912 Item 5 11.5

This item would amend the definition of a PPSA security interest in section 6(1) of the Navigation Act. A PPSA security interest would be a security interest to which the PPS Act applies other than a transitional security interest within the meaning of the Act. [page 658]

11.6

This amendment would replace the definition of PPS security interest inserted by Item 6 of Schedule 3 of the PPS (Consequential Amendments) Act and commence immediately after that definition takes effect.

Amendment of Patents Act 1990 Item 16 11.7 This item would amend the definition of a PPSA security interest, listed as an expression in section 3 and defined in the Dictionary in Schedule 1 of the Patents Act. A PPSA security interest would be a security interest to which the PPS Act applies other than a transitional security interest within the meaning of that Act. 11.8 This amendment would replace the definition of PPSA security interest inserted by Item 14 of Schedule 2 of the PPS (Consequential Amendments) Act and this would commence immediately after that

definition takes effect.

Amendment of PPS Act (Consequential Amendments) Act 2009 Item 17 11.9 This item would repeal item 17 of the PPS (Consequential Amendments) Act because it would be redundant as a result of the amendment to the definition of PPS Act security interest in the Fisheries Management Act in item 2. This item would commence immediately after the commencement of item 17.

Amendment of Proceeds of Crime Act 2002 Items 18–28 11.10 This item would make various amendments to the Proceeds of Crime Act to ensure consistency in its operation with the PPS Act. 11.11 Sections 142, 169, 302, 302C and 307 of the Proceeds of Crime Act provide that amounts owing to the Commonwealth related to action to recover proceeds of crime are secured by a charge. 11.12 The amendments would apply subsection 73(2) of the PPS Act to these charges. This would ensure that the priority between a charge created under the Proceeds of Crime Act and a security interest in the same property is determined in accordance with the Proceeds of Crime Act after the registration commencement time. The amendments clarify that PPSA, subsection 73(2) does not apply to Proceeds of Crime Act charges over real property. 11.13 Sections 133, 143 and 170 of the Proceeds of Crime Act provide for the Commonwealth Director of Public Prosecutions to register charges created under the Proceeds of Crime Act. The amendments would ensure that the Director’s power to register is properly aligned with the PPS Act which provides for regulations to be made to enable charges created under the Proceeds of Crime Act (among other things) to be registered on the PPS Register (section 148(c)). Related amendments to section 338 of the Proceeds of Crime Act would ensure that the definition of registration authority is broad enough to include the Registrar of Personal Property Securities. [page 659]

Amendment of Torres Strait Fisheries Act 1984 Item 29 11.14 This item would amend the definition of a PPSA security interest in section 3(1) of the Torres Strait Fisheries Act. A PPSA security interest would be a security interest to which the PPS Act applies other than a transitional security interest within the meaning of the Act. 11.15 This amendment would replace the definition of PPSA security interest inserted by Item 19 of Schedule 1 of the PPS (Consequential Amendments) Act and commence immediately after that definition takes effect.

Amendment of Trade Marks Act 1995 Item 30 11.16 This item would amend the definition of a PPSA security interest in section 6 of the Trade Marks Act. A PPSA security interest would be a security interest to which the PPS Act applies other than a transitional security interest within the meaning of the Act. 11.17 This amendment would replace the definition of PPS security interest inserted by Item 18 of Schedule 2 of the PPS (Consequential Amendments) Act and commence immediately after that definition takes effect.

Amendment of Mutual Assistance in Criminal Matters Act 1987 Items 3 & 4 11.18 These items make amendments to the Mutual Assistance in Criminal Matters Act to clarify how it operates in relation to the PPS Act. 11.19 Section 35J of the Mutual Assistance in Criminal Matters Act provides that amounts owing to the Commonwealth by virtue of certain foreign actions to recover proceeds of crime are secured by a charge. 11.20 Item 3 would apply subsection 73(2) of the PPS Act to charges created by section 35J. This would ensure that the priority between a charge created under section 35J and a security interest in the same property is determined in accordance with the Mutual Assistance in Criminal Matters Act after the PPS Act registration commencement time. The amendments are clarify that subsection 73(2) would not apply to charges over real property.

11.21 Section 35L of the Mutual Assistance in Criminal Matters Act provides for the Commonwealth Director of Public Prosecutions to register charges created under section 35J. Item 4 would amend section 35L to ensure that it is aligned with the PPS Act regulation-making power to include these charges on the PPS Register (subsection 148(c) of the PPS Act).

Amendment of Offshore Petroleum and Greenhouse Gas Storage Act 2006 Item 6 11.22 The OPGGS Act makes reference to charges and debentures under Chapter 2K of the Corporations Act. The Bill would repeal Chapter 2K and therefore this item would delete the definition of charge as it is defined by reference to Chapter 2K of the Corporations Act. [page 660] Item 7 11.23 This item would delete the definition of debenture which is defined by reference to Chapter 2K of the Corporations Act. In future, debenture, would have its ordinary meaning. The effect this might have on the registration of dealings would be dealt with by a transitional provision (item 15) clarifying that the new definition would only apply to dealings that occur after the commencement of the amendment, that is after the registration commencement time. Item 15 11.24 Because sections 468 and 520 (which refer to dealings which form part of the issue of a series of debentures) would be retained but debenture would be undefined, debenture in these provisions would have its ordinary meaning. This item would clarify that the new definition of debenture will only occur at the registration commencement time (the amendments to the Corporations Act will also occur at this time). Item 8, 11 and 14 11.25 These items would repeal subsections 489(5)–(6); 499(5)–(6); 540(5) and 549(5) which specify that the registration of dealings which create charges require the documents specified under section 263 of the

Corporations Act. The lodgement of applications will now be governed by the OPGGS Regulations. Item 10 and 13 11.26 This item would repeal subsections 490(2)(d) and 500(2)(d), which require that the registration of charges and provisional charges in respect of referable titles, are to be made to the responsible Commonwealth Minister. 11.27 These amendments would only provide consequential amendments to the repeal of Chapter 2K in Schedule 1 and would not affect the existing requirements in the OPGGS Act for the validity of dealings.

[page 661]

Personal Property Securities (Corporations and Other Amendments) Bill 2011 2010–2011

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

HOUSE OF REPRESENTATIVES

PERSONAL PROPERTY SECURITIES (CORPORATIONS AND OTHER AMENDMENTS) BILL 2011

EXPLANATORY MEMORANDUM

(Circulated by the authority of the Attorney-General, the Honourable Robert McClelland MP)

[page 662]

PERSONAL PROPERTY SECURITIES (CORPORATIONS AND OTHER AMENDMENTS) BILL 2011 OUTLINE The Personal Property Securities (Corporations and Other Amendments) Bill 2011 (the Bill) is the final set of amendments to the Personal Property Securities Act 2009 (PPS Act) and consequential amendments to other Commonwealth legislation prior to the Personal Property Securities (PPS) regime coming into effect this year. The PPS legislation will rationalise the current Commonwealth, state and territory laws on securities in personal property. It will create one single national set of rules and a single national online register. There will be one comprehensive law with clear rules governing the validity, priorities, enforcement and extinguishment of security interests in all personal property. The PPS (Corporations and Other Amendments) Act 2010 (2010 PPS Act) contained a set of consequential amendments arising from the passage of the PPS Act. This Bill will make a number of amendments which have been raised by stakeholders and practitioners following an inquiry by the Senate Standing Committees on Legal and Constitutional Affairs into the 2010 PPS Act. The Bill contains two schedules: Schedule 1: Corporations Act 2001; and Schedule 2: Personal Property Securities Act 2009. Amendments to the Corporations Act The PPS Act made a number of amendments in order to align the Corporations Act with the functional approach in the PPS Act. These amendments are intended in no way to interfere with existing rights of parties under the Corporations Act. They are intended to incorporate the new PPS Act concepts but also retain existing concepts under the Corporations Act, to the extent that they apply to property or transactions not covered by the PPS Act. The Bill will therefore make it absolutely clear that the intention of the 2010

PPS Act is not to interfere with existing rights of parties under the Corporations Act. The Bill will do this in particular by confirming that: the 2010 PPS Act will not affect a secured party’s capacity to appoint or veto the appointment of a company administrator under a transitional security agreement the liability of receivers and the ability of administrators to avoid liability for transactions entered into by the company before their appointment will be retained the existing ability of the holder of a pledge or lien to enforce is subject to the pledge or lien not being subordinate to another security interest. Amendments to the PPS Act Amendments to the PPS Act will provide important practical measures to ensure that the regime is appropriate for users. The Bill will make a number of amendments to: provide exemptions to the rules on taking personal property free of security interests for temporarily perfected transitional security interests and transitional security interests which were not previously registered by serial number ensure that the definition of security interest is consistent with the New Zealand legislation and remove any potential for confusion [page 663] clarify that CHESS securities are intermediated securities and the means by which CHESS securities can be subject to control ensure access to third party data through the Register as an important consumer protection measure impose conditions on accessing and using data on the Register to ensure that parties cannot sell this data and undermine the Commonwealth’s ability to recover costs associated with the implementation and ongoing administration of the PPS system enable the Registrar to investigate breaches of the rules authorising searches of the Register and registration of security interests on the Register clarify the provisions on security interests in authorised deposit-taking

institutions and the provisions on control of inventory and accounts. Amendments proposed in the Bill would also provide an additional method for states that have not yet referred power to the Commonwealth with respect to PPS to be able to ‘adopt’ the relevant version of the PPS Act (including this Bill) and refer power to the Commonwealth to make subsequent amendments to the PPS Act. Existing referrals of power will not be affected by the amendments.

FINANCIAL IMPACT STATEMENT There is no direct financial impact on Government revenue from this Bill.

NOTES ON CLAUSES There is no direct financial impact on Government revenue from this Bill. Clause 1: Short title 1. Clause 1 is a formal provision specifying the short title of the Bill. It provides that when the Bill is enacted, it is to be cited as the Personal Property Securities (Corporations and Other Amendments) Act 2011. Clause 2: Commencement 2. This clause provides for the commencement of the various proposed amendments. Clause 3: Schedules 3. This is a formal clause that enables Schedules to amend an Act. It provides that each Act that is specified in the Schedule is amended or repealed as set out in the applicable items in the Schedule, and that any other item in a Schedule has effect according to its terms. The Bill contains two Schedules.

SCHEDULE 1 — Corporations Act 2001 Clarify references to registrable charges Items 1, 2 and 13 4. The Corporations Act provides that there can be constructive knowledge of documents lodged with ASIC which relate to charges that are registrable under the Corporations Act (s 130).

[page 664] 5.

6.

However, because after the registration commencement time (RCT) the Corporations Act will no longer require the lodgement of charge notices for registration, charges may no longer be registrable (in terms of the definition in the Corporations Act). While this amendment will delete the constructive knowledge provision, the second part of item 13 will retain the rule in s 130 after the RCT in relation to charges that were registrable charges and registered with ASIC before the RCT.

Retain the existing liability of receivers and voluntary administrators for transactions entered into by the company before their appointment Items 3, 4 and 6 7. The Corporations Act currently provides that controllers and voluntary administrators are personally liable for payments owing under certain transactions entered into by a company before the commencement of the receivership or administration, unless the controller or voluntary administrator specifically disclaims the transaction (s 419A and 443B). 8. The 2010 PPS Act removed a receiver’s liability for these transactions in respect of retention of title property and also removed the administrator’s ability to avoid liability for transactions in respect of retention of title property (PPSA retention of title property is personal property that is used or occupied by, or in the possession of a corporation where the corporation does not have title to the property and a PPSA security interest is attached to the property, within the meaning of the PPS Act and the corporation is the grantor of the PPSA security interest). 9. Therefore, these measures amend s 419A and s 443B so that receivers and administrators would continue to be liable and be able to disclaim transactions in respect of retention of title property to the same extent as they can for other property. That is, the status quo would apply to all future secured transactions, including those in respect of retention of title property. Retain existing arrangements for the enforcement of liens and pledges

Item 5 10. Currently, the holder of a pledge or lien against a company may enforce their lien or pledge by selling the secured property, applying the proceeds towards the amount owed under the lien or pledge, and paying the balance to the company (s 441JA). However, the holder of the pledge or lien may only exercise this power if the pledge or lien is not subordinate to another security interest. 11. The 2010 PPS Act replaced s 441JA with a new s 441EA, which replaced references to liens and pledges with the term possessory security interests. However, the new s 441EA failed to retain the requirement that the lien or pledge not be subordinate to another security interest. 12. The proposed amendment to s 441EA would retain the requirement that the lien or pledge may only be enforced if it is not subordinate to another security interest. [page 665] Removing vesting of security interests that are registered late under a foreign law Items 7, 8, 9, 10 and 11 13. Existing s 266 of the Corporations Act encourages the registration of company charges, as the failure to do so could result in a charge becoming void. 14. Because Chapter 2K of the Corporations Act has been repealed (it will be replaced with Chapter 5 of the PPS Act, s 266 will be replaced with s 588FL, which will have the same purpose as s 266. 15. Section 588FL(2) applies where a security interest has been registered in Australia and provides that a security interest will vest in the grantor where they have not been perfected by registration within six months of the winding up of the company, an administrator being appointed or a deed of company arrangement being executed. Section 588FL(3) is analogous to s 588FL(2) but applies where a security interest has been registered under the law of another country before the company enters into certain forms of external administration.

16. However, it would be preferable for the consequences for failing to register on a foreign register to be determined by the jurisdiction that established the registration requirement. Therefore this measure repeals s 588FL(3). Clarify that the Bill does not affect a secured party’s capacity to appoint a company administrator under a transitional security agreement (or veto the appointment) Item 13 17. Under the Corporations Act, persons with a charge over the whole or substantially the whole of a company’s assets have the power to appoint an administrator to the company. 18. However, it may not be clear that the transitional arrangements under the 2010 PPS Act retain the status quo and that a person who currently has a charge over the whole or substantially the whole of the company property would have a security interest over the whole or substantially the whole of the company property after the RCT, and retain their right to appoint an administrator. 19. The inclusion of this proposed provision in the Corporations Act would clarify that, when determining whether a person has a charge arising under a security agreement entered into before the RCT, PPSA retention of title property is to be disregarded. Minor technical amendments Item 12 20. This amendment corrects an incorrect section reference.

SCHEDULE 2 — Personal Property Securities Act 2009 Harmonise the definition of security interest with NZ law Items 2, 6, 7, 25, 36 and 37 21. Section 12 of the PPS Act defines a security interest to mean an interest ‘in relation to personal property…’, and various other provisions in the PPS Act refer to security interests in a similar way.

[page 666] 22. The corresponding provisions in the New Zealand personal property securities legislation do not include the words in relation to and the addition of the words in relation to may suggest that the definition in the PPS Act is different, and broader, to that in the New Zealand legislation. 23. Because the definition of security interest is fundamental to the PPS scheme and because it is desirable to harmonise the scheme with the corresponding New Zealand legislation, the proposed amendments would remove all references in the definition of security interest to in relation to personal property. Clarify that CHESS falls within the definition of an intermediated security Item 8 24. ASX Settlement and Transfer Corporation Pty Limited (ASTC) operates the Clearing House Electronic Subregister System (CHESS) which is a computerised register of securities holdings. The definition of intermediary (a person who operates a clearing and settlement facility under an Australian CS facility licence) under s 15(2) of the PPS Act is intended to include the ASTC. 25. Existing s 15(5) and (6) of the PPS Act may create confusion as to whether the ASTC is in fact an intermediary because they provide that neither the right to maintain a securities account on behalf of others, nor the right to operate a clearing and settlement facility under an Australian CS licence, both of which apply to the ASTC, are themselves sufficient to meet the definition of intermediary. 26. This amendment would clarify that ss 15(5) and 15(6) do not apply to the ATSC and therefore clarify that the ASTC falls within the definition of intermediary. Items 9, 13 27. Further confusion may be caused by the definition of a securities account, which is defined as an account to which interests in financial products may be credited or debited. This does not accord with the kind of securities accounts held by the ASTC because accounts held

by the ASTC are not accounts to which interests can be debited or credited. Rather, the securities accounts held by the ASTC are a record of holdings and transfers of interests in financial products. 28. The proposed amendment would clarify that the definition of securities account in the context of intermediated securities includes the securities accounts held by the ASTC. Clarify the classification of property in the PPS Act Item 10 29. A previous version of the PPS Bill deleted all references to equipment but the reference to equipment in s 20(4) of the PPS Act remained. This reference to equipment is therefore anomalous and this amendment would remove it. Clarify how control is taken over CHESS securities Item 14 30. The most common way in which secured parties take control of CHESS securities is by sponsorship agreements entered into with participants (such as [page 667] brokers). The participants agree with the secured parties and grantors not to deal with the securities without the consent of the secured parties. 31. However, s 26 (control of intermediated securities) currently does not make provision for this kind of control in sponsorship agreements. 32. Therefore this amendment would provide, similarly to the provision in s 27 for the control of investment instruments, that a secured party would have control of an intermediated security if there is an agreement under which the secured party is able to control electronic communications for dealing with the intermediated security. Ensure that secured parties of serial-numbered goods have the benefit of the 24 month transitional period where not currently registered by serial

number Item 15 33. Section 44 provides that a buyer or lessee can take property, which may or must be described by reference to a serial number, free of a security interest where the serial number on the registration is incorrect or missing. 34. However, certain transitional security interests that are presently registered on a State or Commonwealth register; for example, a charge over aircraft on the ASIC Register of Company of Charges; are not registered by serial number. When these transitional security interests are migrated to the PPS Register they will not be registered by serial number and a buyer or lessee of the property would be able to take free of the transitional security interest in the property. 35. Consequently, s 44 will be amended so as not to apply to transitional security interests, but only for a period of 24 months after the RCT. 36. This amendment would provide parties with security interests in serialnumbered property, which are not currently registered by serial number, an assurance that they have 24 months after the RCT to register by reference to the serial number of the goods without losing their security interest in the property. 37. However, there are some existing registers which provide that charges which ought to have been registered by reference to their serial numbers are subject to an analogous taking free rule to s 44 where the serial number is missing or incorrect (for example, interests registered on the State Registers of Encumbered Vehicles (REVs)). 38. Therefore an exception will be provided to maintain the law as it presently operates in respect of those interests. Ensure that secured parties have the benefit of a 24 month transitional period in relation to buyers or lessees of property Item 16 39. The transitional arrangements in the PPS Act provide up to 24 months temporary perfection (perfection is the additional step of registration, possession, control or temporary perfection, for determining priority over competing security interests), for existing security interests, in order to allow secured parties time to register their existing security

interests on the PPS register. [page 668] 40. However, s 52 enables a person to buy or lease certain personal property free of a security interest that is temporarily perfected by the 24 month temporary perfection method. 41. Therefore, in order to retain the existing position during the 24 month transitional period, this amendment would ensure that a person who buys or leases personal property cannot take it free of a security interest that is perfected only by the 24 month temporary perfection method. Allow the simplification of security agreements involving grantors who are sole traders and partnerships Item 23 42. Section 116 of the PPS Act excludes the operation of Part 4.3 of the PPS Act in relation to property while a person is a receiver, a receiver and manager, or a controller of the property. 43. The intention was that for these security interests, Part 5.2 of the Corporations Act would apply instead. However, a number of the provisions in Part 5.2 apply only to receivers and managers and not to controllers. 44. It was therefore considered desirable to apply Part 4.3 to controllers who are not receivers or receivers and managers. 45. This amendment would enable small and medium sized enterprises to have simpler security agreements by relying on the enforcement provisions in the PPS Act rather than having to incorporate detailed enforcement provisions into their security agreements. Item 22 46. This amendment is consequential to the amendment in item 23 and would enable controllers (other than receivers and receivers and managers) to contract out of s 116 (so that Part 4.3 would not apply to them) should they so choose.

Belief that collateral secures obligation Items 30, 31, 32, 33 and 55 47. The PPS Act requires that a person cannot register a financing statement unless the person has a reasonable belief that the registered secured party is or will become a secured party (s 151). This applies to both true security interests (where the security interest secures an obligation and there is that belief) and to deemed security interests (where the security interest does not actually secure an obligation but there is the belief that the party registered as a secured party is or will become a secured party). 48. However, some provisions only refer to the requisite belief in respect of true security interests and not the belief in respect of deemed security interests. 49. These amendments will clarify that the person registering a financing statement must have the belief that the person described as the secured party is or will become the secured party in relation to the collateral. 50. The proposed amendment in item 53 is consequential to these amendments. [page 669] Allow regulations to be made prescribing circumstances in which a registration is not seriously misleading and therefore ineffective Item 35 51. The PPS Act (paragraph 164(1)(a)) provides that where a security interest is seriously misleading, it will be ineffective. 52. However, it will not always be completely clear whether a security interest is seriously misleading and therefore ineffective. 53. This amendment would provide a regulation-making power for registrations not to be seriously misleading, and therefore ineffective, in the prescribed circumstances. Registrar — investigations

Item 49 and 53 54. The PPS Act provides the Registrar with a number of specific powers and functions. These include: to register financing statements that are not contrary to s 151 (registration — belief that collateral secures an obligation); to investigate unauthorised searches of the PPS Register (s 172(5)); and to apply to the Federal Court for an order that a wrongdoer has contravened a civil penalty provision in s 151 or s 72 (ss 222(1)). 55. The performance of these powers and functions requires an investigatory power. 56. Proposed s 195A will provide the Registrar with the power to conduct an investigation into any matter for the purpose of performing his or her functions. 57. Furthermore, because the Registrar has no specific investigatory powers, s 195A would confer a power on the Registrar to require a person (except the Commonwealth, a State or Territory or their agencies and authorities) who the Registrar reasonably believes has information relevant to an investigation, to provide that information to the Registrar. In order to make the Registrar’s investigatory power enforceable, a failure to comply with the Registrar’s request for information could incur a civil penalty. 58. Item 49 amends s 172(3) to ensure that the source of power to conduct the investigation is the proposed s 195A (and not, independently, s 172(5)) (this is intended to avoid any doubt about whether the power to require information under s 195A will apply to an investigation of a s 172(3) contravention). 59. The privilege against self-incrimination and client legal privilege are intended to apply with respect to the Registrar’s information gathering powers. Conditions on data access Item 52 Access to registered data — conditions

60. The PPS Register will alert subscribers when any registration for a nominated organisational grantor that is described by its ACN, ARSN or ARBN is made or amended. 61. This would allow parties to rely on old searches of the PPS Register where they have not received an alert in the meantime. This is appropriate where the [page 670] person commissioning the searches is the same in both cases but it is undesirable for agents to be able to resell old search results to third parties and affect the Commonwealth’s ability to recover its costs of implementing, and the ongoing administrative costs of, the PPS Register. 62. The proposed provisions on the conditions of use of data registered on the PPS Register would therefore prevent the unauthorised ‘derivative’ use of that data; for example, by warehousing the data for sale to third parties in direct competition with the Commonwealth. Access to third party data 63. A search of the PPS Register for security interests in motor vehicles may include access to third party data, that is, data that is not owned by the Commonwealth. For example, access to data on stolen and written-off motor vehicles, an important consumer protection measure, will be provided by the National Exchange of Vehicle and Driver Information System (NEVDIS) which is administered by AustRoads (an incorporated entity comprised of the State and Territory roads and traffic authorities). 64. Proposed s 176C will provide that users of third party data may be required to agree to conditions as part of the approved form set under s 302. A breach of the terms and conditions could result in an action for damages by the third party against the user under s 271 (entitlement to damages for breach of duty or obligations). This is because AustRoads is a statutory body, jointly owned by the States and Territories, and access to the 3rd party data will be provided automatically on acceptance of the terms and conditions. Furthermore, the public would have access to the terms and conditions prior to commencing a

transaction on the PPS Register. 65. This measure will also allow for the regulations to prescribe third party data providers. Items 1, 3, 4, 5, 24, 34, 38, 39, 40, 41, 42, 44, 45, 47, 48, 50, 51 and 56 66. The proposed amendments in these items are consequential to the proposed amendments relating to the access and use of third party data. They are either definitional or amend references like search the register to accessing the register to search for data, reflecting that third party data is to be provided through the PPS Register. 67. Item 51 would also correct the reference in s 174(4) to collateral, which should instead refer to personal property. Meaning of referring state Item 54 68. Section 244 of the PPS Act defines referring State. A referring State is, generally speaking, a State that has agreed that the PPS Act, including future Commonwealth amendments, applies in that State in any areas that would otherwise be outside of the Commonwealth’s Constitutional powers. A State is a referring State if it both adopts or refers the relevant version of the Act (as defined in s 244) and provides a referral of power to amend it. As Western Australia is expected to do so after the enactment of this Bill, the definition of relevant version would be amended to add the new Act to those which have amended the PPS Act. [page 671] 69. The Bill also provides for Western Australia to adopt the PPS Act as amended from time to time. This provides a more flexible way for Western Australia to adopt the PPS Act, particularly if Western Australia has passed general adoption provisions that have not commenced. Clarify that a continuously perfected transitional security interest can have priority over a non-transitional security interest perfected by control

Items 57, 58 70. The PPS Act confers priority on security interests perfected through control (s 57). 71. This would include priority over transitional security interests which have had the benefit of the 24 month temporary perfection period and which have been perfected during this period in some other way. 72. However, this priority conflicts with the purpose of the temporary perfection transitional provisions, which are intended to ensure that transitional security interests do not lose their existing priority as a result of the PPS Act (provided that secured parties take adequate steps before the end of the 24 month temporary perfection period to protect their security interests). 73. The protection conferred on transitional security interests should include priority over subsequent, non-transitional security interests perfected by control. Therefore this amendment will make it clear that a perfected transitional security interest has priority over a security interest perfected only by control that is not a transitional security interest. 74. Item 57 is a consequential amendment to the above amendment. Meaning of circulating security interests Item 59 75. Section 51C in the Corporations Act incorporates a definition of circulating security interest. 76. However, the definition could be read as inferring that the interest of an assignee under an equitable assignment of an account or chattel paper is a circulating security interest and it would therefore rank behind preferential creditors (such as employee entitlements) following a company insolvency. 77. This would change the existing law under which equitable assignments are not subject to the interests of preferential creditors. 78. Therefore, this proposed amendment to the definition of circulating asset in s 340 would clarify that the transfer of an account or chattel paper does not give rise to a circulating asset. Minor Technical amendments

Items 11, 12, 17, 18, 19 79. The proposed amendments of s 21(2)(c)(i), 25 and 75 would clarify that a security interest in an authorised deposit-taking institution (ADI) is only subject to control, for the purposes of perfection, where the secured party is the ADI. [page 672] Item 20 80. The proposed amendment of paragraph 112(2)(b) would correct an anomaly as the provision should be consistent with s 79 (transfer of collateral despite prohibition in security agreement). Item 26, 27, 28 and 29 81. The proposed amendments to paragraphs 148(a) and (c) would ensure consistency with other provisions in the PPS Act relating to the definitions of financing statement and financing change statement, and the process of registration (for example, ss 10 and 150). 82. It would also clarify that s 148(c) does not, in effect, mandate the registration of data in relation to personal property prescribed by the regulations made for the purposes of that paragraph. It would make it clear that the register will only hold data in financing statements registered under s 150 of the PPS Act (that is, a person may apply to register a financing statement (ss 150(1)). Item 21 83. The proposed amendment of section 115 would correct an anomaly in a reference to s 96. Item 43 84. The note to s 171(1)(e)) requires a minor amendment to a paragraph reference (the reference to paragraph (e) is amended to refer to paragraph (d)). Item 46 85. This proposed amendment would make the purpose of the table in s

172 (2) clearer. Items 60, 61 and 62 86. The proposed amendments to the provisions on control of inventory and accounts would clarify that the provisions on the control of ADIs in this context are for the purposes of determining whether a security interest is circulating or non-circulating.

[page 673]

Personal Property Securities Regulations 2010 Explanatory Statement EXPLANATORY STATEMENT Select Legislative Instrument 2010 No 291 Personal Property Securities Act 2009 Personal Property Securities Regulations 2010 Section 303 of the Personal Property Securities Act 2009 (the Act) provides that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed, for carrying out or giving effect to the Act. The Act implements a single national law creating a uniform and functional approach to personal property securities. It establishes uniform rules for creating a valid security interest, provides coherent rules governing the priority of competing security interests (and other interests), establishes when a person acquires personal property free of a security interest, and streamlines regimes for enforcement of security interests. Personal property is any form of property other than real property. The Act applies to transactions which have the effect of securing a payment or other obligation by taking an interest in personal property (for example, a charge, consignment or pledge) regardless of the form of the transaction, the nature of the debtor or the jurisdiction in which the personal property or parties are located. The Act will be supported by a single national online register of personal

property securities (the register). The register will replace the existing confusing array of both electronic and paper-based national, State and Territory registers of personal property securities. The Regulations sets out a number of provisions relating to: the types of interests over personal property that are or are not subject to the operation of the Act; the interaction between the enforcement provisions in the Act and the National Consumer Credit legislation; and matters pertaining to the register (including access to and suspension of the register, the information required to effect a registration, how the collateral or prescribed property is to be described in a registration, and how grantors and secured parties are to be identified in a registration). Details of the Regulations are set out in the Attachment. Consultations on the Regulations commenced with the release of discussion papers in August 2008 and November 2009. An Exposure Draft of the Regulations was released [page 674] for consultation in April 2010. The Regulations were updated based on submissions received from relevant peak industry bodies, States and Territories agencies, and Commonwealth agencies. The Act is based on a referral of power from the States and Territories. The Personal Property Securities Law Intergovernmental Agreement 2008 (PPS IGA) provides that the Commonwealth may not make the Regulations without approval from the State and Territory parties. The PPS IGA provides that the State and Territory parties will be taken to have approved the Regulations if the Commonwealth has notification in writing from at least three State or Territory parties (including at least two referring States) that they approve the Regulations. This approval was provided on 12 November 2010. The Act specifies no other conditions that need to be satisfied before the power to make the Regulations may be exercised. The Regulations are a legislative instrument for the purposes of the Legislative Instruments Act 2003. The Regulations commence on the day after they are registered on the Federal Register of Legislative Instruments

Details of the Personal Property Securities Regulations 2010

PART 1 — PRELIMINARY Division 1 — Preliminary Regulation 1.1 — Name of Regulations This regulation provides that the title of the Regulations is the Personal Property Securities Regulations 2010. Regulation 1.2 — Commencement This regulation provides for the Regulations to commence on the day after they are registered.

Division 2 — General application of the Act Regulation 1.3 — Application of the Act to external Territories This regulation provides that the Personal Property Securities Act 2009 (the Act) will apply to Australia’s Indian Ocean Territories (Christmas Island and the Cocos (Keeling) Islands). This is required as the law of Western Australia applies to those territories, and Western Australia’s current PPS arrangements will cease to operate upon commencement of the new PPS arrangements under the Act. Regulation 1.4 — Interests to which the Act does not apply Subregulation 1.4 (1) Subregulation 1.4(1) provides that the Act will not apply to a right or interest in personal property mentioned in section 260–5 (amounts collected by the Commissioner from a third party) of Schedule 1 to the Taxation Administration Act 1953. This is in order to avoid ambiguity and to maintain the existing relationship between section 260–5 and security interests in personal property. Subregulation 1.4 (2) Subregulation 1.4(2) provides that section 74 (execution creditor has priority over unperfected security interest) will apply to the following interests: [page 675]

a lien, charge or other interest in personal property of a kind prescribed in paragraph 8(1)(b) or (c); or an interest provided for by a transaction described in subparagraph 8 (1) (f)(ii) or (iv). This regulation will ensure that the kinds of interests purported to be dealt with under section 74, which may arise under statute or common law, are not, at the same time, excluded under subsection 8(1) of the Act. The reference to paragraphs 8(1)(f)(ii) and (iv) is intended to ensure that the range of interests that an execution creditor may claim in the context of section 74 will not be constrained by subsection 8(1). This includes, for example, garnishee orders. Example A receives judgment against B and causes a writ of execution to be issued against B. As a result, B’s car is seized. Section 74 of the Act will give A priority over unperfected security interests in B’s car. Without subregulation 1.4(2), paragraph 8(1)(b) or (c) of the Act (interests to which the Act does not apply) will together prevent section 74 from having this effect.

Regulation 1.5 — Interests to which the Act applies The Act does not apply to the transfer of a right to payment in connection with an interest in land, where the land is specifically identified (subparagraph 8(1)(f) (ii)). Subparagraph 8(1)(f)(ii) will exclude the transfer of a real property mortgage loan in connection with the issue by the person of a mortgage-backed security and mortgage-backed securities (MBS) themselves from the operation of the Act, if the writing evidencing the transfer identifies the land secured by the mortgages which are being transferred. However, notwithstanding that it may be connected to land, the Act is intended to apply to the transfer of a real property mortgage loan and the MBS itself, so as to facilitate the securitisation of mortgage payments. This regulation clarifies that the Act applies to the transfer of a real property mortgage loan under an all mortgage-backed security, even in cases where the transfer identifies the land secured by the mortgage. Example The Bank A bundles the rights of repayment for a number of outstanding loans they have provided over farm properties near Tumut, NSW. Bank A sells this bundle of loan repayment rights (the sale’s documentation specifies some of the more prominent farms involved) to Company B, which agrees to pay Bank A back for the bundle over the next five years. Concurrent with and consequent to the transfer of the bundled rights, mortgage-backed securities in relation to the repayment rights are issued to a number of investors in Company B in relation to the

repayment rights who finance this purchase with a loan from Bank C. Bank C then on sells the right to repayment from the sale of the bundled rights to a private investor, Mr D. Mr D’s interest in the right to repayment is a security interest to which the Act applies in accordance with subregulation 1.5(1)(b). The interest of Bank C in the mortgage-backed securities is a security interest to which the Act applies in accordance with subregulation 1.5(1)(a).

Division 3 — Definitions Regulation 1.6 — Definitions This regulation defines a number of terms used in the Regulations. A number of these terms are discussed below. [page 676] ACN is the number given by ASIC to a company upon registration under the Corporations Act 2001. The Regulations provides when the ACN can be used to identify, in a registration on the register, a body corporate that is a secured party, a grantor, or that holds or has an interest in prescribed property. Act means the Personal Property Securities Act 2009, the enabling legislation under which these Regulations are made. agriculture is prescribed in the Regulations as a class of collateral. This collateral class includes personal property that is crops and/or livestock. aircraft is defined in such a way that it encompasses aircraft that has a nationality and registration mark assigned to it under the Chicago Convention, as well as those that are “aircraft engine”, “airframe” or “helicopter” as defined in the Convention on International Interests in Mobile Equipment 2001 (Cape Town Convention). This encompasses all aircrafts that are registrable by the Civil Aviation Safety Authority, as well as those aircraft objects that are registrable on the International Registry established under the Cape Town Convention. The Cape Town Convention creates a uniform international legal framework to protect investors in aircraft objects. The International Registry established under this convention is an international register of security interests over aircraft objects. The Australian Government is considering whether to accede to the Cape Town Convention. Allowing aircraft objects to be included in the definition of “aircraft” will assist in the transition to the Cape Town Convention

rules, if Australia were to accede to the Cape Town Convention. aircraft engine has the meaning given in the Aircraft Protocol. Adopting the same definition as the Aircraft Protocol will assist in the transition to the Cape Town Convention rules, if Australia were to accede to the Cape Town Convention. Aircraft Protocol is a protocol to the Cape Town Convention. The Aircraft Protocol adapts the Cape Town Convention provisions to meet the particular requirements of aircraft finance. airframe has the meaning given in the Aircraft Protocol. Adopting the same definition will assist in the transition to the Cape Town Convention rules, if Australia were to accede to the Cape Town Convention. The definition for airframe excludes those used in military, customs or police services, and requires that the airframe (when appropriate engines are installed) must be certified by a competent aviation authority to transport at least eight persons or goods in excess of 2750 kilograms. At the time of writing, the competent aviation authority in Australia is the Civil Aviation Safety Authority. all present and after acquired property is prescribed in the Regulations as a class of collateral or proceeds. This collateral class is used where the collateral or proceeds includes: personal property as at the registration time for the financing statement for the security interest or the prescribed property; and personal property after the registration time for the financing statement for the security interest or the prescribed property. all present and after acquired property, except is prescribed in the Regulations as a class of collateral or proceeds. This collateral class is used where the collateral or proceeds includes all present and after acquired property, except for an item or class of personal property recorded in the financing statement as being exempted from being collateral or proceeds in the financing statement. Example Company X grants Bank Y a security interest over all its present and after acquired property, except for an old car that is a collector’s item. When Bank X registers its security interest on the register, it assigns the collateral class “all present and after acquired property, except” to the collateral, and records in the registration that the car is exempted from being collateral.

[page 677]

AML-CTF Act means the Anti-Money Laundering and Counter-Terrorism Financing Act 2006. The AML-CTF Act provides an alternative method of identifying grantors and secured parties. The Regulations therefore specify when identification in accordance with the AML-CTF Act is taken to be sufficient for the purpose of the identification of grantors, secured parties and persons that hold or have an interest in prescribed property, in a registration on the register. ARBN is the number given by ASIC to a registrable body under Part 5B.2 of the Corporations Act 2001. The Regulations provides when the ARBN can be used to identify, in a registration on the register, a registrable body that is a secured party, grantor, or that holds or has an interest in prescribed property. ARSN is the number given by ASIC to a registered scheme upon registration under section 601EB of the Corporations Act 2001. The Regulations provides when the ARSN can be used to identify, in a registration on the register, a registered scheme that is a secured party, grantor, or that holds or has an interest in prescribed property. ASIC means the Australian Securities and Investments Commission. ASIC is the entity that assigns ACNs, ARBNs and ARSNs under the Corporations Act 2001. Australian Business Register means that register established under section 24 of the A New Tax System (Australia Business Number) Act 1999. The Australian Business Register includes, among other information, the ABN (defined in the Act). The Regulations provides when the ABN can be used to identify the secured party, grantor, or person that holds or has an interest in prescribed property. chassis number means the numbers or letters, or both, that uniquely identifies a motor vehicle. The Regulations prescribes when the chassis number can be used to identify a motor vehicle. Chicago Convention means the Convention on International Civil Aviation signed in Chicago in December 1944, as amended by Protocols mentioned in subsection 3A(2) of the Air Navigation Act 1920. The Chicago Convention is referred to in clause 2.2 of Schedule 1, which provides that the relevant serial number description for small aircraft is the nationality and registration mark assigned to the aircraft in accordance with the Chicago Convention. helicopter has the meaning given in the Aircraft Protocol. Adopting the same definition will assist in the transition to the Cape Town Convention rules, if Australia were to accede to the Cape Town Convention.

The definition for helicopter excludes those used in military, customs or police services, and requires that the airframe (when appropriate engines are installed) must be certified by a competent aviation authority to transport at least five persons or goods in excess of 450 kilograms. At the time of writing, the competent aviation authority in Australia is the Civil Aviation Safety Authority. hull identification number means the numbers or letters, or both, that uniquely identifies a watercraft. A hull identification number must be allocated to a watercraft by, or approved to be allocated to a watercraft by, the relevant registration authority, a person approved by the relevant registration authority, or the watercraft’s manufacturer. The Regulations prescribe when the hull identification number may or must be used in a registration to identify personal property that is a watercraft. manufacturer’s number means the numbers or letters, or both, that uniquely identifies an aircraft, motor vehicle or outboard motor. The Regulations prescribe when a manufacturer’s number may or must be used in a registration to identify personal property that is an aircraft, motor vehicle or outboard motor. migrated security interest is flagged as having the meaning given by section 332 of the Act. National Names Index is an index of title created by ASIC. The National Names Index records, among other information, the ACN, ARBN and ARSN allocated to an entity under the Corporations Act 2001. [page 678] original registration time for migrated data registered under section 333 of the Act, means the time at which the security interest or prescribed property was registered on the transitional register. outboard motor means an internal combustion engine that has a propeller and a manufacturer’s number, is designed to be attached to a boat or vessel, and is intended for use to propel a boat or vessel. Outboard motors are referred to in the Regulations due to such property being considered to be ‘watercraft’ in some instances (see transitional meaning of ‘watercraft’ in regulation 9.1). prescribed property is flagged as being property that is mentioned in subregulation 5.3(1).

registered scheme is flagged as having the meaning given by section 9 of the Corporations Act 2001 (the Corporations Act). registration time is flagged as having the meaning given by subsection 160(1) of the Act. responsible entity is flagged as having the meaning given by section 9 of the Corporations Act. small aircraft means personal property that satisfies the definition of “aircraft”, but is not an “airframe”, “aircraft engine” or “helicopter”. Small aircraft therefore include all machines or craft that can derive support in the atmosphere from the reactions of the air, other than the reactions of the air against the earth’s surface, vehicle identification number means the numbers or letters, or both, that uniquely identifies a motor vehicle. The Regulations prescribe when a vehicle identification number may or must be used in a registration to identify personal property that is a motor vehicle. watercraft means a boat or vessel, other than a seaplane, that is used or intended to be used in navigation or for any purpose on water, and has a hull identification number or an official number issued by the Registrar of Ships (within the meaning of the Shipping Registration Act 1981). The Regulations prescribes when a watercraft may or must be described, by its hull identification number or official number. An amphibious vehicle, that is a vehicle that can run both on land and water, may be a watercraft if it has either a hull identification number or an official number issued by the Registrar of Ships. Note 2 This note to regulation 1.6 also flags that several other words and expressions used in the Regulations have the meaning given by the Act. This includes, but is not limited to, “ABN”, “account”, “chattel paper”, “crops”, “financial property”, “goods”, “intangible property”, “intermediated security”, “investment instrument”, “livestock”, “National Credit Code”, “negotiable instrument” and “transitional register”. Regulation 1.7 — Meaning of motor vehicle This regulation defines “motor vehicle” for the purposes of the Act. Subregulation 1.7(2) includes in the definition of motor vehicle, property of a

kind that are ordinarily characterised as motor vehicles. This includes cars, trucks, motor-cycles (both on-road and off-road), and self-propelled agricultural and mining equipment. The property must be capable of a speed of at least 10 km/h, have one or more motors that have a total power greater than 200 W, and have either a vehicle identification number, a chassis number or a manufacturer’s number. However, the vehicle must not run on rails, tram lines or other fixed paths. Example Mrs Y borrows money from Financer Z to buy a ride-on mower. The ride-on mower is built to be propelled on land by a motor forming part of the vehicle, and has a manufacturer’s number. However, it is not capable of speeds of at least 10 km/h and its motor does not have a total power greater than 200 W. This ride-on mower is not a motor vehicle under subregulation 1.7(2).

[page 679] Example A motorised wheelchair is built to be propelled wholly on land by a motor forming part of the wheelchair. However, it is not capable of a speed of at least 10 km/h, its total power is not greater than 200 W, and it does not have any of the required serial numbers. This motorised wheelchair is not a motor vehicle under subregulation 1.7(2).

Subregulation 1.7(3) includes in the definition of motor vehicle goods without motor power that are designed to be towed behind or attached to an ordinary motor vehicle (for example, trailers or caravans). The motor vehicle must be capable of travelling at a speed greater than 10 km/h, and have either a vehicle identification number, a chassis number or a manufacturer’s number. Example Company X owns a caravan that weighs one tonne and is designed to be attached to a four wheel drive vehicle. When the caravan is attached to the four wheel drive, the four wheel drive is able to travel at more than 10 km/h. This caravan is a motor vehicle under subregulation 1.7(3).

The kinds of property that are covered in the definition of motor vehicle in subregulations 1.7(2) and (3) are broad enough to encompass the different definitions in existing State and Territory Acts relating to recording encumbrances against motor vehicles. This allows current registered interests to be migrated from such registers to the new register as “motor vehicles”. Note that an amphibious vehicle — that is a vehicle that can run both on land and water — may be a motor vehicle under subregulation 1.7(2), if is built to be propelled wholly on land by a motor that forms part of the vehicle. This is notwithstanding that it may also have another motor that propels the amphibious vehicle through water. However, if the amphibious vehicle is such that the one

motor propels the vehicle on both land and water, then it will not satisfy the definition of “motor vehicle” under this regulation. Regulation 1.8 — Meaning of security interest This regulation provides that the extinguishment of a beneficial interest in an account or chattel paper is not a security interest under the Act. The type of transaction that this regulation is targeted at includes when debt instruments are sold by a seller to a special purpose vehicle (SPV), and the SPV then on-sells the receivables to investors. The event described in the Regulations may arise, for example, when the securitisation vehicle’s interest over the receivables is extinguished. An extinguishment of a beneficial interest in an account or chattel paper may occur in the following circumstances: when the seller makes a further advance to the underlying obligor and the receivable cannot remain in the securitisation structure; or when the seller breaches a representation and warranty made in relation to the assets when they were assigned to the securitisation vehicle.

PART 2 — GENERAL RULES FOR SECURITY INTERESTS Regulation 2.1 — T Taking motor vehicles free of security interests This regulation has the effect that a motor vehicle that satisfies the definition of motor vehicle in regulation 1.7 will be taken free of a security interest in circumstances if a search of the register using the serial number does not disclose a registration on the register (section 45 of the Act). Example Miss A’s tractor has a manufacturer’s number, is capable of a speed of at least 10 km/h, and has a motor with a total power greater than 200 W. It therefore meets the definition of “motor vehicle” under regulation 1.7. Bank A registers its security interest over Miss A’s tractor and other property. Bank A makes only one registration covering the tractor and the other property.

[page 680] On 20 April, Mr X decides to buy the tractor from Miss A. Mr X searches for a registration over the tractor using the relevant serial number (in this case, the manufacturer’s number). Mr X’s search does not disclose Bank A’s registration against the tractor, as Bank A’s registration did not include the serial number.

Later on that same day, Bank A registers its security interest in the tractor using the serial number. On 21 April, Mr X and Miss A enter into a contract for the sale of the tractor to Mr X. Relying on the search undertaken on 20 April, Mr X does not search the register again. Mr X will acquire the tractor free of Bank A’s security interest, despite the fact that, at the time the contract was entered into, Bank A had perfected its security interest in the tractor by a registration using the tractor’s serial number. Regulation 2.2 — Taking motor vehicles from prescribed persons This regulation provides that a buyer or lessee takes a motor vehicle free of a security interest, as provided under subsection 45(3) of the Act, where the motor vehicle is bought or leased from a person: that holds a current 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. The regulation has the effect that a person who is licensed to deal in only particular kinds of motor vehicles (for example, second hand motor vehicles) can sell or lease motor vehicles of that kind free of a security interest. The rationale for this regulation is that a purchaser or lessee who acquires an interest in a motor vehicle from a licensed motor vehicle dealer or trader should not have to search the register prior to acquiring their interest. All jurisdictions, except Tasmania, Queensland and South Australia, have a licensing scheme over new motor vehicle dealers or traders generally. Queensland and South Australia have a licensing scheme over motor vehicle dealers or traders of second hand motor vehicles. Tasmania does not have a licensing scheme for motor vehicle dealers and traders. Notwithstanding this, purchasers of motor vehicles in these states are equally protected via section 46 of the Act (taking personal property free of security interest in ordinary course of business).

PART 3 — SPECIFIC RULES FOR CERTAIN SECURITY INTERESTS This heading is a placeholder only to ensure that the Parts in the Regulations correspond with the Parts in the Act. Regulations are not made under this Part at

this time.

PART 4 — ENFORCEMENT OF SECURITY INTERESTS Regulation 4.1 — Relationship with consumer credit legislation This regulation provides that a specified provision of Chapter 4 of the Act mentioned in an item in this regulation is taken to have been complied with in the circumstances mentioned in the item, if a provision of the National Credit Code (the Code) has been complied with in the circumstances mentioned in the item. The Act is not intended to exclude or limit the operation of the Code. There are overlaps between the Act and the Code when credit is provided, or is intended to be provided, wholly or predominantly for personal, domestic, or household purposes, and the collateral is used wholly or predominantly for personal, domestic, or household purposes. The Code does not apply where the credit was intended for business purposes, even if the credit is secured against personal property that is used wholly or predominantly for personal, domestic or household purposes. [page 681] As the Act is not intended to exclude or limit the operation of the Code, to the extent that the two frameworks are able to operate concurrently, a secured party will have to comply with both the enforcement requirements in Chapter 4 of the Act (enforcement of security interests) and the enforcement provisions of the Code. By prescribing provisions of the Code that, once complied with, are deemed to constitute compliance with the Act, this regulation assists in ensuring that compliance with both regimes is not unnecessarily onerous on secured parties undertaking enforcement action.

PART 5 — PERSONAL PROPERTY SECURITIES REGISTER Regulation 5.1 — Access to register This regulation provides that the Registrar can suspend the operation of the register for not more than 4 hours, provided that 7 days notice of the suspension is given by publication of a notice in a manner provided for under subsection

147(6). This regulation is intended to allow the Registrar to close the register for up to four hours for routine maintenance. The Registrar may also suspend some or all of the register’s functions under subsection 147(5) when it is impractical to provide access. However, suspension of the register under subsection 147(5) results in that day not being counted as a ‘business day’ (see definition of ‘business day’ in section 10 of the Act). Regulation 5.2 — Notification of suspension of access to register This regulation provides that the Registrar may publish notice of a refusal to give access to, or a suspension of the operation of, the register on an Internet website that is maintained by the Registrar. Regulation 5.3 — What the register contains This regulation provides that data in relation to the following personal property may be contained in the register: motor vehicles that have been, or will be, impounded or immobilised under the law due to involvement in the commission of certain offences (“hoon liens” registration) personal property that is subject to an order or notice, or is confiscated or forfeited, under a provision in the proceeds of crime law (“proceeds of crime” registration) personal property that is subject to a court or tribunal order that prevents dealing with the property or orders its sale or disposal (“court orders” registrations); and any other property that, prior to registration commencement time, was registrable on a transitional register (“other prescribed property” registration). This allows property that is currently registrable on transitional registers to also be registrable on the register. Such registrations assist prospective purchasers and lenders to obtain up-to-date information about the status of personal property (in addition to any security interests to which the property may be subject). Example Mr A offers to buy a car from an acquaintance. The acquaintance agrees but advises that he will not be able to deliver the car straight away. Mr A searches the register. The search result discloses that the car is subject to a confiscation order under proceeds of crime legislation. This information is contained in the register in accordance with regulation 5.3(1)(b).

Regulation 5.4 — Prohibited registration This regulation has the effect that registrations of personal property prescribed in regulation 5.3 can only be made by certain persons. This ensures that only persons currently permitted to register details on state and territory security interest registers, or those persons authorised to make registrations on the register, will be able to register prescribed property on the register. [page 682] Regulation 5.5 — Financing statements This regulation refers readers to Schedule 1 for matters prescribed for items of the table in subsection 153(1) of the Act, and to Schedule 2 for matters prescribed for items of the table in section 154 of the Act. Regulation 5.6 — Verification statements — publication as alternative This regulation provides that the Registrar may publish a single verification statement in relation to a number of registration events on an Internet website maintained for the Registrar. Subregulation (2) provides that the statement must not include the date of birth of the grantor. It is expected that a verification statement will be published on the website if the events affect a very large number of registrations, and the Registrar considers that it will be inconvenient for verification statements to be sent to the secured party. For example, in respect of migrated data from transitional registers to the new register. The Registrar’s ability to issue a single verification statement will facilitate this migration process. Example The ASIC Register of Company Charges is a transitional register containing registrations which will be migrated and registered on the register. When the registrations migrated from ASIC are registered on the register, the Registrar will be able to publish a single verification statement notifying interested parties that company charges registered on the ASIC Register of Company Charges have been registered on the register. This avoids the need for the Registrar to send a verification statement for every charge currently registered on the ASIC Register of Company Charges, and also avoids secured parties being inundated with such statements.

Regulation 5.7 — Access to the register prohibited This regulation provides that access to the register is prohibited if: a court has ordered that access to the data is prohibited; or

the Registrar considers that it is in the public interest that access to the data should not be permitted. There is a clear imperative to withhold data when a court has ordered that the data should be withheld from the search result. Therefore, access to data will be restricted on this basis. Alternatively, the Registrar may also consider that it will be in the public interest to withhold data from a search result. This acknowledges that it is impossible to list all the circumstances where access to the register should be prohibited. Consequently, the Registrar will be able to consider, on a case by case basis and taking into account the public interest, when access should be prohibited. Subregulation (2) prescribes the matters that the Registrar must take into account when determining whether to withhold access to the data in the public interest. This subregulation was developed in consultation with the privacy commissioners’ office at both the State and Federal level. However, subregulation (2) does not contain an exhaustive list of matters that the Registrar may take into account in making a determination. The search results will not disclose details about a registration that is access prohibited. Instead, the searcher will be informed that the registration is “access prohibited” and to contact the Registrar’s Office. The Registrar’s Office will have in place business processes to determine how these registrations can be accessed in appropriate circumstances. Regulation 5.8 — Search — criteria This regulation provides that the method by which the results of a search will be worked out must allow for case-insensitive searching. This is to avoid the possibility that relevant registrations will not appear in the search results, due to the mere fact that the incorrect case has been used for one or more of the letters entered. [page 683] Example Jane McDoe borrows money from Finance Co, using her jewellery collection as collateral. Prior to approving the loan, Finance Co undertakes a search on the register using Jane’s name and date of birth as it appears on her driver’s licence, as the search criteria. The search is undertaken using Miss McDoe’s actual first name and date of birth, but with the surname as “Mcdoe”. As regulation 5.8 allows for case insensitive searching, the search results will still disclose registrations

against Jane under the surname ‘McDoe’.

Regulation 5.9 — Administrative process — statements in relation to amendment demand Division 2 of Part 5.6 of the Act provides that a person may give a secured party an amendment demand to register a financing change statement to amend or discharge a registration. If the secured party fails to make the necessary amendments, the person can give a statement to the Registrar regarding the amendment demand (subsection 180(3)). Upon receiving the amendment statement, the Registrar will then send an amendment notice to the secured party requiring that the amendment demanded be applied to the registration. If the secured party fails to make the amendment demanded within the relevant period, the Registrar may make the amendment (subsection 180(1)). This regulation sets out the statements that must be included in an application for an amendment demand under subsection 180(3). The information contained in the statement to amend the registration pursuant to subsection 180(3) should give the Registrar sufficient information to make an informed decision whether to make the amendment or discharge the registration as requested. Example Bank X registers a security interest over Grantor A’s apple and banana crops. The security agreement between Bank X and Grantor only provides for the apple crop to be security, and so the registration should only be against the apple crop. Grantor A therefore sends an amendment demand to Bank X. Six days after sending the amendment demand to Bank X, Grantor A sends a statement to the Registrar. Grantor A makes all the necessary statements under subsection 180(3) and regulation 5.10. The Registrar is therefore assured that the requirements for sending the amendment notice to the secured party have been met and can make an informed decision whether to amend the registration as requested by Grantor A.

Regulation 5.10 — Removal of data This regulation allows the Registrar to remove data (including an entire registration) from the register, if the removal of the data is required by a court order.

PART 6 — JUDICIAL PROCEEDINGS This heading is a placeholder only to ensure that the Parts in the Regulations correspond with the Parts in the Act. Regulations are not made under this Part at this time.

PART 7 — OPERATION OF LAWS Regulation 7.1 — When Act prevails — formal requirements relating to arrangements This regulation, prescribed under paragraph 263(1)(c) of the Act, lists the State and Territory laws whose formal requirements will not affect the effectiveness of a security agreement. As a general rule, a security agreement is effective according to its terms, subject only to the laws of the Commonwealth, State or Territory, or the common law (subsections 18(1) and 257(1) of the Act). This regulation provides an exception to that general rule. That is, the effectiveness of a security agreement will not be subject to legislation prescribed in this regulation. [page 684]

PART 8 — MISCELLANEOUS This heading is a placeholder only to ensure that the Parts in the Regulations correspond with the Parts in the Act. Regulations are not made under this Part at this time.

PART 9 — TRANSITIONAL PROVISIONS Regulation 9.1 — Transitional meaning of watercraft This regulation provides that “watercraft” also includes outboard motors that have an engine number that is subject to a transitional security interest and before registration commencement time, the outboard motor was registered on a transitional register, under legislation that conferred priority on security interests that are registered on that transitional register. This regulation assists with the migration of interests over outboard motors currently registered on the Queensland Register of Encumbered Vehicles (Queensland REV) to the register, as interests over outboard motors are currently registered on the Queensland REV using its serial number and without grantor details. This ensures that all security interests over outboard motors that arise prior to registration commencement time in Queensland are registered under the collateral class ‘watercraft’ on the register (watercraft can be described by serial number) and not the collateral class ‘other good’ (which cannot be registered

against a serial number and requires grantor details). Regulation 9.2 — Temporary perfection rule — exception This regulation provides that temporary perfection under section 322 will not apply to a transitional security interest that, before the PPS registration commencement time, was registrable on a transitional register that conferred priority but was not so registered. Such transitional interests need to be excluded, otherwise these interests will have an unfair advantage over security interests registered after the registration commencement time that they will not otherwise have. This is shown in the example below. Example In November 2010, Company A grants Financier X a charge over its property. The relevant law provides that the charge is registrable on Transitional Register X, and that registered charges have priority over unregistered charges. Financier X does not register its interest. Assume that the PPS registration commencement time occurs in May 2011. In June 2011, Company A grants Financier Y a security interest over the same assets. Financier Y immediately registers its security interest on the register. If not for regulation 9.2, section 322 will have the effect that Financier X’s charge will have priority over Financier Y. This is notwithstanding that prior to the PPS registration commencement time, Financier X will have lost out to all registered security interests.

This regulation also recognises that an exemption must be made where the legislation governing the transitional register provided a time in which secured parties must register their interest on that transitional register, and that time period had not yet lapsed as at the PPS registration commencement time (see paragraph 9.2(2)(a)). Example Prior to the PPS Act, the Corporations Act 2001 required that where a company creates a charge, the company must ensure that it lodges a notice in the prescribed form setting out particulars of the charge within 45 days of the charge being created. Thirty days before the registration commencement time, Company A takes a charge over Company B’s assets in relation to a debt owed by Company B. As the time period for registering on the transitional register had not yet lapsed when the PPS registration

[page 685] commencement time occurred, Company A’s security interest will therefore have temporary perfection from immediately before the PPS registration commencement time under section 322.

This regulation (in subregulation 9.2(3)) also clarifies that a provisional

registration recorded on the ASIC Register of Company Charges immediately prior to the PPS registration commencement time, will have the benefit of the temporary perfection provided under section 322. Regulation 9.3 — Sunset of Part 9 This regulation provides that the transitional provisions contained in Part 9 of the Regulations, will cease to have effect immediately after the end of the month that is 24 months after the PPS registration commencement time. This is in line with the sun-setting of a number of transitional provisions in the Act.

SCHEDULE 1 —FINANCING STATEMENT MATTERS FOR ITEMS OF THE TABLE IN SUBSECTION 153(1) OF THE ACT PART 1 — MATTERS FOR ITEMS 1 AND 2 Part 1 contains the matters prescribed for items of the table in subsection 153(1); that is, it contains the rules to correctly identify either the secured party or grantor in a financing statement registered on the register, as well as the source of those relevant identifiers. These clauses are required primarily to ensure the accuracy of information recorded for grantors. Accuracy of grantor details is critical since the register is partly indexed by grantor details (the only exception being registration of financing statements over consumer property that is described by serial number). Since an entity can be described in many ways, it is important that the regulations provide rules on which identifier to use and from where that identifier should be sourced. This will allow the secured party to know which documents and details they need to obtain from the grantor, and searchers will also know what grantor details they should enter in their searches. The identifier rules also apply when identifying the secured party in a registration. This is to achieve consistency in how the secured party and grantor identifiers are recorded. The relevant identifier varies, depending on the entity type of the secured party or grantor. The item that applies to the person with the lowest item number in the tables will be the relevant identifier and source. Clause 1.1 — Definitions for Part 1 This clause provides a definition for “individual” for the purposes of Part 1. The definition of “individual” clarifies that a sole trader is to be identified using

the “individual” identifier rules (clause 1.2), notwithstanding that the individual may be a sole trader and has an ABN. It also clarifies that where the individual is a partner or a trustee, and the enterprise carried on by the partnership or trust has been allocated an ABN, then that individual will not be identified using the ‘individual’ identifier rules in clause 1.2. Example Joe Bloggs and Jane Doe are partners carrying on a business which has been allocated ABN 123456789. A partnership is not a separate legal entity. However, since the business has been allocated an ABN, Joe and Jane are not treated as ‘individuals’ for the purposes of Part 1, and are therefore not to be identified in the registration as per the identifier rules in the “individual” table in clause 1.2 (they will instead be identified using the “partner” identifier rules in clause 1.4).

[page 686] Clause 1.2 — Individual secured party or grantor This clause provides the relevant rules for identifying a grantor or secured party who is an individual. The table in this clause outlines the hierarchy of identifiers (and source of those identifiers) that may be used to describe the grantor or secured party. The relevant identifier will be that which applies to the individual and has the lowest item number in the table. Grantor details include date of birth It is important to note at the outset that the identifier rules for an individual grantor or secured party are similar, the only difference being that a date of birth is required for a grantor but is not required for a secured party. Dates of birth for grantors are required as, unlike secured party details, grantor details is a search criteria, and the date of birth is an additional filter to ensure that only registrations for that specific grantor are shown in a search result. Example If Joe Bloggs was the grantor, Joe’s first name, surname and date of birth will be recorded on the register (in relation to registrations over consumer property that does not have a serial number). If Joe was a secured party, only Joe’s first name and surname will be recorded.

Details contained on a transitional register Table item 1 in clause 1.2 provides the identifiers required in relation to

registration that are migrated from transitional registers under section 333 of the Act. Table item 1 is an acknowledgement that it will not be reasonable to make contact with all the secured parties or grantors specified in migrated registrations to obtain updated details. Consequently, table item 1 provides that whichever secured party and grantor identifiers were recorded on the transitional register, will be the relevant identifier on the PPS register for that migrated registration. Example Joe Doe borrows money from Car Finance Co to buy his car. Car Finance Co registers its security interest over the car on the NSW Register of Encumbered Vehicle (REVs). The interest is registered on REVs against the car’s vehicle identification number (VIN), and notes that the secured party is “Car Finance Co”. When this registration is migrated to the register, the secured party identifier might be entered as “Car Finance Co”. This is notwithstanding that, for non- migrated registrations, Car Finance Co will be identified using its ACN.

A similar table item is also contained the identifier tables for bodies corporate (clause 1.3), partners (clause 1.4), trustees (clause 1.4), and bodies politic (clause 1.5). AML-CTF Act Requirements Table item 2 in clause 1.2 allows the identifier for the individual obtained pursuant to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML-CTF Act) to be the relevant identifier. This recognises that additional costs would have been incurred by organisations had they been required to comply with two streams of rules dealing with individual identity. By specifying that the identifiers recorded as per the AML-CTF Act is sufficient, organisations will not be required to re-verify their customers and obtain information that complies with the new identifier rules under this regulation. [page 687] Example Mr X and Ms Y are partners of a business. In June 2010, the partnership borrows additional capital from Bank Z, and provides the partnership cars as collateral. Bank Z obtains details of the partners and the partnerships, as required under the AML-CTF Act. In particular, it obtains the full name of the partnership and verifies that this is the name recorded on a certified copy of the partnership agreement. The PPS reform is implemented in May 2011. In that month, Bank Z registers the security interest over the partnerships cars on the register. As there are multiple cars, Bank Z decides not to register the security interest against the serial numbers, but against the partnership details (this is allowed as the cars are commercial property). The partnership details obtained by Bank Z under AML-CTF Act rules can be validly recorded on the register.

Example Assume that Mr X and Ms Y are not customers of Bank Z prior to the PPS registration commencement time. On June 2001, they obtain their first loan from Bank Z. Bank Z records its security interest on the register. The partnership will be identified using the partnership ABN, as opposed to the name recorded on the partnership agreement. This is because the ABN identifier is the item that applies to the partnership with the lowest item number.

AML-CTF Act organisations should be aware that while their own registrations will be valid under this regulation, so too will the registrations of other AMLCTF Act organisations which may have recorded security interests against the same grantors and same property but under different names (that is, the names may be different but are nevertheless valid identifiers as per the AML-CTF Act). Individual’s details on driver’s licence, passport etc It is expected that table items 3–8 of clause 1.2 will apply in relation to new registrations (that is, registrations not migrated from a transitional register) and grantors not identified under the AML-CTF Act rules. In brief, it provides that an individual is to be identified using the details recorded on: their current Australian driver’s licence; if they do not have such a driver’s licence, their current Australian proof of age card; if they do not have such a driver’s licence or proof of age card, their current Australian passport if they do not have such a driver’s licence, proof of age card or passport, their current Australian visa if they do not have such a driver’s licence, proof of age card, passport or visa, their passport from the jurisdiction in which they ordinarily reside; if they do not have such a driver’s licence, proof of age card, passport, visa, or passport from the jurisdiction in which they ordinarily reside, their birth certificate. An individual’s first name, surname, and date of birth noted on the driver’s licence are the first relevant set of identifiers. The driver’s licence was chosen as a preferred identifier source since it is expected that individuals are more likely to carry a driver’s licence than a proof of age card, passport, visa, or birth certificate, and can readily provide these details to a financier. Clause 1.3 — Body corporate secured party or grantor This clause provides the relevant rules for identifying a grantor or secured party that is a body corporate.

[page 688] Body corporate trustees This clause firstly clarifies how corporate trustees are to be identified. Corporate trustees could potentially be identified using the body corporate identifiers (clause 1.3) or the trustee identifiers (clause 1.5). Subclause 1.3(1) clarifies that where the trustee has an ARSN, it should be identified using the body corporate identifiers (clause 1.3). Other trustees that do not have an ARSN are not to be identified using the body corporate identifiers in clause 1.3. Example ABC Ltd (ACN 111 111 111) is the responsible entity for DEF Trust (ARSN 222 222 222). ABC Ltd grants a security interest to Bank X in its capacity as the responsible trustee of DEF Trust. ABC Ltd will be identified in a registration by its ARSN.

Hierarchy of identifiers for body corporate This clause provides a hierarchy of identifiers (and source of those identifiers) for bodies corporate that are grantors or secured parties. The relevant identifiers in clause 1.3 will be that which applies to the body corporate and has the lowest item number in the table. Table item 1 in clause 1.3 provides that whichever secured party and grantor identifiers were recorded on the transitional register, will be the relevant identifier on the PPS register for that migrated registration. It is expected that table items 2 to 5 of clause 1.2 applies in relation to new registrations (that is, registrations not migrated from a transitional register). In brief, it provides that: a responsible entity of a registered scheme is to be identified by its ARSN; if there is no ARSN, then it is to be identified by its ACN; if there is no ARSN or ACN, it is to be identified by its ARBN; and if there is no ARSN, ACN or ARBN, it is to be identified using the name of the body corporate, as provided in the body corporate’s constitution or equivalent document. Clause 1.4 — Secured party or grantor is a partner This clause provides a hierarchy of identifiers (and source of those identifiers) for partners that are grantors or secured parties. The relevant identifier will be

that which applies to the partner and has the lowest item number in the table. Table item 1 in this clause provides that whatever secured party and grantor identifier was recorded on the transitional register, will be the relevant identifier on the PPS register for that migrated registration. Table item 2 provides that if the entity is a partner in a partnership carrying on an enterprise to which an ABN has been allocated, the relevant identifier is the ABN. Otherwise, table item 3 provides that the partner is to be identified using the individual identifier table (clause 1.2). Clause 1.5 — Secured party or grantor is a trustee This clause provides a hierarchy of identifiers (and source of those identifiers) for grantors or secured parties that are trustees. The relevant identifier will be that which applies to the trustee and has the lowest item number in the table. Table item 1 provides that whatever identifier was recorded on the transitional register for the trustee, will be the relevant identifier on the PPS register for that migrated registration. Table item 2 provides that where the trustee is of a trust that is carrying on an enterprise to which an ABN has been allocated, the relevant identifier is the ABN. [page 689] Otherwise, table item 3 provides that the trustee is to be identified using the individual identifier table (clause 1.2). Clause 1.6 — Body politic secured party or grantor This clause provides a hierarchy of identifiers (and source of those identifiers) for bodies politic. The relevant identifier will be that which applies to the body politic and has the lowest item number. Table item 1 in this clause provides that whatever secured party and grantor identifier was recorded on the transitional register, will be the relevant identifier on the PPS register for that migrated registration. Table item 2 provides that if the body politic is carrying on an enterprise to which an ABN has been allocated, the relevant identifier is the ABN.

Otherwise, table item 3 provides that the body politic is to be identified using the name of the body politic that is recorded in the constitution of the body politic.

PART 2 — MATTERS FOR ITEM 4 Clause 2.1 — Application of Part 3 — personal property that is intermediated security This clause provides that, for the purpose of describing collateral and proceeds in a financing statement (item 4 of subsection 153(1) of the Act), personal property that are intermediated securities are to be treated as financial property. Clause 2.2 — Description by serial number This clause provides when personal property may or must be described by a serial number in a financing statement registered, or to be registered, on the register. It will also identify which serial number is allowed to be used to describe the personal property. Serial-numbered goods receive special treatment under the Act because they are generally highly mobile personal property (with the exception of intellectual property) and can be readily identified by a number that is unique, accurate and affixed permanently to the property. The purpose of prescribing property as a serial-numbered good is to ensure that such property is subject to specific rules under the Act; for example, in relation to the acquisition of property free of a security interest where the serial number is incorrect or missing (subsection 45(1)). Serial number description — mandatory Paragraphs 2.2(1)(a) and (b) provides that consumer property for the following collateral classes must be described by serial number: aircraft; intangible property that is further described as a design, patent, plant breeder’s right, or trademark (or a licence over such intangible personal property); motor vehicles; and watercraft. Requiring property used for consumer purposes to be described by serial number will promote privacy protection to grantors. Such property will be identified and searchable on the register using the serial number, and not by the grantor’s name (item 2 of subsection 153(1)).

Example Mr B approaches a bank for a loan to buy a boat, and offers the bank an interest over the boat. Mr B intends to use the boat to go on non-commercial fishing expeditions. Mr B is concerned that if the bank registers its security interest over his boat, his details will be available for everyone to see on the register. The bank assures Mr B that since the boat is

[page 690] consumer property, it will be registered against its hull identification number and there will be no need to record Mr B as a grantor on the registration.

Subparagraph 2.2(1)(a)(ii) provides that consumer property that is “intangible property” that is further described in the financing statement as a design, patent, plant breeder’s right or trade mark, must be described by serial number. The reason for this is that IP Australia allocates unique serial numbers to such personal property, and in the interest of maintaining the privacy of individuals, and to assist in ease of searching the register, this serial number will be required to be entered in order to describe the property. Example Mr X is an accidental inventor. With the help of his lawyer, he lodges a patent application with IP Australia and obtains a patent application number. Mr X then obtains finance from Bank Z in order to develop his invention further. Bank Z registers a financing statement over the collateral on the register. Since Mr X does not have an ABN, the collateral is consumer property. Bank Z chooses “intangible property” in the drop down of collateral classes, and is further required to choose a further descriptor. Bank Z chooses “intellectual property” and “patent” as the further descriptors (that is, “intangible property: intellectual property: patent”). Bank Z will then be required to enter in the relevant patent serial number.

In general, only serial-numbered goods that are consumer property must be described by serial number. An exception to this rule exists for commercial property that is an aircraft that is further described as an aircraft engine, airframe, helicopter or small aircraft (paragraph (b) of subclause 2.2(1)). This is because Australia is considering acceding to the Cape Town Convention. The International Registry under the Cape Town Convention requires aircraft objects (that is, aircraft engine, airframe and helicopter) to be registered by their serial numbers. Mirroring the International Registry rules for aircraft objects (and for consistency, also small aircraft) will therefore assist in the transition to the Cape Town rules in the event that Australia accedes to the Convention. Example Bank X has a purchase money security interest over an aircraft engine bought by Airline Ltd. Bank X registers a financing statement for the above security interest. In the financing statement, Bank X chooses “aircraft” in the drop down for collateral classes. It then chooses a further descriptor “aircraft

engine” (that is, “aircraft: aircraft engine”). Since the additional descriptor “aircraft engine” has been chosen, Bank X will be required to enter in the relevant serial number for the aircraft engine.

It should be noted, however, that a non serial-numbered registration over commercial aircraft can still be made by not further describing the collateral as an aircraft engine, airframe or helicopter. Example Bank Y has a purchase money security interest over 10 aircraft engines bought by AustAir Ltd. Assume that Bank Y only wants to make one registration to perfect its security interest over these 10 aircraft engines. In the financing statement, Bank Y therefore chooses “aircraft” in the drop down for collateral classes. At this point, a free text field is available, allowing Bank Y to describe the collateral in free text (this is optional). There is no requirement to describe each of the 10 aircraft engines against its serial number, since the collateral has not been further described as “aircraft engine”.

Serial number description — optional Paragraph 2.2 (1)(c) provides that commercial property for the following collateral classes may be described by serial number: motor vehicles; [page 691] watercraft; and intangible property that is further described as a design, patent, plant breeder’s right, or trademark (or a licence over such intangible personal property). The general rule is that if the collateral is commercial property, then there is no requirement to describe the collateral by its serial number. This recognises that in relation to commercial transactions, it will not always be reasonable to separately register each property covered by a security interest on the register. (The exception to this rule is commercial property that is an aircraft that is further described as an aircraft engine, airframe, helicopter or small aircraft, which must be described by serial number. The reasons for this exception are discussed above). Example Motor Dealer A Ltd has obtained floor plan financing from Financier B to finance the acquisition of 200 cars. Financier B has a purchase money security interest over the cars under the financing agreement. Financier B determines that instead of registering its security interest over each of the 200 cars, it will make a general registration against the motor vehicles held by Motor Dealer A. This will be sufficient to perfect its security interest over the cars.

Since registration against the serial number of serial-numbered property is only

optional for commercial property, searchers will need to determine whether to undertake a serial number search, a search against the commercial grantor’s details, or both, when searching for a registration for the personal property. Example Bake Stuff Co (ACN 123456789) runs a struggling bakery. It approaches Bank Z for a loan and offers its delivery van as collateral. Prior to agreeing to the loan, Bank Z searches the register against the VIN of the delivery van. It notes that there are no registrations against the VIN. Bank Z then searches the register against the ACN of the company. Bank Z comes across a registration which notes that Bank A has a purchase money security interest over Bake Stuff Co’s motor vehicles.

Serial numbers Subclause 2.2(3) provides the acceptable serial numbers to use to describe the property. Specifying the serial numbers that can be used to describe collateral ensures consistency in the serial numbers used to identify the property, and provides guidelines for searchers on relevant serial numbers they should use in a search. Example Financier A has a security interest over a car that is consumer property. The car has both a vehicle identification number (VIN) and a chassis number. Financier A notes that paragraph (c) of clause 2.2(3) of Schedule 1 of the Regulations requires that a motor vehicle with a VIN must be described by its VIN and not its chassis number. Financier A therefore registers the car using its VIN. Example In the above example, Financier B is also offered the car as collateral for a loan. Financier B searches the register. Financier B knows, based on paragraph 2.2 (3)(b) of Schedule 1 of the Regulations, that since the car has a VIN, any registrations on the register over the car will be against the VIN. It therefore searches the register using the VIN as the search criteria.

Clause 2.3 — Classes of collateral Table item 4(c) of subsection 153(1) of the Act provides that a financing statement must include a description of the collateral by reference to a single class as prescribed by the Regulations. [page 692] This clause provides that the classes of collateral are as follows: (i) agriculture; (ii) aircraft; (iii) all present and after-acquired property;

(iv) all present and after-acquired property, except; (v) financial property; (vi) intangible property; (vii) motor vehicle; (viii)other goods; and (ix) watercraft. Separating collateral into classes will make it easier for users of the register to filter for particular security interest registrations, in particular where there are many registrations made against a grantor’s name or identifier. Definitions for the collateral classes are provided: in this clause (see “other goods”); in other regulations (see regulation 1.6 for “aircraft”, “agriculture”, “all present and after- acquired property”, “all present and after acquired property, except” and “watercraft”, regulation 1.7 for “motor vehicle”, and regulation 9.1 for “watercraft” registrable on a transitional register); or in the dictionary section of the Act (see “financial property” and “intangible property”). Clause 2.4 — Description of proceeds Table item 4(d) of subsection 153(1) of the Act provides that any description of proceeds in a financing statement must comply with the Regulations. This clause provides that proceeds must be described in a registration as: all present and after acquired property; in a way that identifies the items that are to be proceeds; and in a way that identifies the class of property that are to be proceeds (including identifying the class by identifying a larger class of personal property that wholly includes the class). It is important to ensure that secured parties are able to reflect the interest in proceeds that they may have under a security agreement in a financing statement registered on the register. Proceeds described as all present and after acquired property will mean that all assets of the grantor that satisfy the definition of “proceeds”, will be taken as proceeds to which the security interest attaches. This is the widest possible description of proceeds.

This regulation also mirrors the definition of “description” in section 10, which clarifies that a description of proceeds identifying a larger class of personal property that wholly includes the class that specifically identifies the proceeds is an allowable description. Example Bank X has a security interest over apple crops grown by Fruit Grower Ltd. The security agreement specifies that Bank X’s security interest continues in the proceeds, and that the proceeds apply only to the apples harvested from the apple trees. Bank X registers a financing statement with respect to the security interest. Proceeds are described as ‘fruits’. This will be a sufficient description, as ‘fruits’ is a larger class of personal property that wholly includes apples.

PART 3 — MATTERS FOR ITEM 7 Clause 3.1 — Purchase money security interest Table item 7 of subsection 153(1) of the Act provides that a financing statement is to include an indication of whether the security interest is, or is to be, a purchase money security interest (to any [page 693] extent) if the security interest is in respect of a class of collateral prescribed by the regulations for the purposes of this clause. A purchase money security interest is defined in section 14 of the Act. Section 14 provides that a security interest in certain types of collateral cannot be subject to a purchase money security interest, for example: collateral that the grantor intends to use predominantly for personal, domestic or household purposes (unless the collateral is of a kind required or permitted by the regulations to be described by serial number); or collateral that is a chattel paper, an investment instrument, an intermediated security, a monetary obligation or a negotiable instrument. This clause therefore provides that, for the purposes of table item 7 of subsection 153(1) of the Act, a financing statement can have an indication of whether the security interest is, or is to be, a purchase money security interest, for the class of collateral that can be subject to a purchase money security interest under section 14 of the Act. This avoids the need to specify again those collateral types that are

contemplated under section 14 as possibly having a purchase money security interest.

PART 4 — MATTERS FOR ITEM 8 Clause 4.1 — Prescribed matters — financing statement Table item 7 of subsection 153(1) of the Act provides that a financing statement is to include 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. This clause provides the matters that are to be included in a financing statement that is registered on the register. Inventory and Control The Act sets out the requirements for determining whether collateral is a “circulating asset” in section 340 (in Part 9.5 of the Act). It provides, among other things, that the kinds of property mentioned in subsection 340(5) are not circulating assets if the registration discloses that the secured party has control of that property, and the secured party does, in fact, have control. Clause 5.1 therefore allows registrants to indicate whether the secured party has control of property of the kind mentioned in subsection 340(5) as follows: by indicating that the collateral may include current asset subject to control, for the purposes of Part 9.5; and by indicating that the collateral may include inventory, for the purposes of Part 9.5. Transitional security interest This clause also provides that a registration will need to indicate whether the registration relates to a transitional security interest or not. This clause reflects paragraph (c) of subsection 320(3) of the Act. Migrated security interest This clause also provides that a registration must disclose that the collateral is subject to a migrated security interest, and the name of the transitional register from which the migrated data is sourced. This applies to migrated data that is registered under section 333 (registration of migrated data from a transitional register).

[page 694] Data from external registers This clause also provides that the “original registration time” and the name of the transitional register from which the migrated data is sourced, is required to be recorded for migrated registrations. Migrated security interests are security interests recorded in an existing register (transitional register) that are migrated to the PPS Register (section 332 of the Act). The original registration time is therefore the date that a migrated registration was registered on the transitional register. Example Financier F had registered its interest over Mr O’s car on a state register of encumbered vehicles on 19 August 2008. This register is identified as a transitional register that will be migrated to the PPS Register. Financier F’s registration is migrated from the transitional register to the register. The resulting registration will therefore include the following details: — that the registration is a “transitional” registration — that the registration is a “migrated” registration — the “original start date”, which is the date the data was first registered on the transitional register; and — the name of the transitional register from which the migrated data was sourced.

It should be noted that a financing statement or financing change statement is required to be in the “approved form” for it to be registered (subsection 150(3)). The Registrar will approve a form by written instrument (section 302). The “approved form” may require additional information than is prescribed in the Act and the Regulations (including administrative type information, such as the contact person for the secured party group).

SCHEDULE 2 — FINANCING STATEMENT MATTERS FOR THE TABLE IN SECTION 154 OF THE ACT PART 1 — PRELIMINARY Clause 1.1 — Definitions for Schedule 2 This clause provides the definitions for terms referred to in Schedule 2. The definition of “individual” clarifies that a sole trader is to be identified using the “individual” identifier rules (clause 2.1), notwithstanding that the individual may be a sole trader and has an ABN.

It also clarifies that where the individual is a partner or a trustee, and the enterprise carried on by the partnership or trust has been allocated an ABN, then that individual will not be identified using the “individual” identifier rules in clause 1.2.

PART 2 — MATTERS FOR ITEM 1 Clauses 2.1 to 2.4 — Identifiers for persons who hold or has an interest in prescribed property These clauses provide the rules regarding how to identify persons who hold or have an interest in prescribed property described in a registered financing statement, as well as the source of those relevant identifiers. These clauses mirror the corresponding clauses in Schedule 1 regarding secured party and grantor identifiers that are required for financing statements in relation to security interests. This is to achieve consistency between the recording of a person’s identifier for both security interest and non-security interest registrations. As with clauses 2.1 to 2.5 in Schedule 1, the relevant identifier will vary, depending on the entity type of the person that owns or has an interest in the prescribed property. The table item that applies to the person with the lowest item number will provide the relevant identifier and source of the identifier.

[page 695]

Part E Determinations and Instruments Practice Statements

[page 697]

PPS Determinations and Instruments [Current to March 2014]

Compiled by Craig Wappett and Bruce Whittaker CONTENTS Introduction Table summarising the determinations and instruments made under the PPSA Personal Property Securities (Migration Time and Registration Commencement Time) Determination Personal Property Securities (Approved Form) Instrument 2013 Personal Property Securities (Migrated Security Interests and Effective Registration) Determination 2011 Personal Property Securities (Fees) Determination 2013 Personal Property Securities (Priority of Statutory Interests) Instrument 2011 Personal Property Securities (Reports) Determination 2011 Personal Property Securities (Search Result Data) Determination 2011 Verification Statement — Migrated Data Verification Statement — ASIC ABN/ACN Data Fix (CR089)

[page 698]

PPS Determinations and Instruments [DI1.1] Introduction The following table sets out the determinations and instruments made by the Attorney-General and the Registrar of Personal Property Securities under the provisions of the Personal Property Securities Act 2009 (PPSA) and that are reproduced in this section. This section and the table below will be updated on a progressive basis as further determinations and instruments are released.

[DI1.2] Table summarising the determinations and instruments made under the PPSA Name Personal Property Securities (Migration Time and Registration Commencement Time) Determination made 21 November 2011 by the Attorney-General registered 21 November 2011 (F2011L02397) Personal Property Securities (Approved Form) Instrument 2011 made 17 November 2011 by the Registrar of Personal Property Securities Repealed and substituted with Personal Property Securities (Approved) Form Instrument

Enabling Section s 306

Details of Instrument Sets the migration time and the registration commencement time, marking the actual commencement of the PPSA.

s 302(3)

s 302(3)

Provides approved forms for the purposes of the PPSA for use for financing statements, financing change statements, verification statements, certain notices and search requests.

2013 made 19 August 2013 by the Registrar of Personal Property Securities Personal Property Securities (Migrated Security Interests and Effective Registration) Determination 2011

made 21 November 2011 by the Registrar of Personal Property Securities registered 21 November 2011 (F2011L02395)



s 333(1)

s 337(2)

Identifies the classes of personal property that are registrable by the Registrar on the PPS Register under the PPSA during the migration time. Specifies registrations that are effective despite defects in data in the financing statement registered by the Registrar.

[page 699] Name Personal Property Securities (Fees) Determination 2011 made 8 December 2011 by the Attorney-General registered 16 December 2011 (F2011L02719) Repealed and substituted with Personal Property Securities (Fees) Determination 2013 made 17 June 2013 by the Attorney-General registered Personal Property Securities (Priority of Statutory Interests) Instrument 2011 made 8 December 2011 by the Attorney-General

Enabling Section s 190

s 73(4)

Details of Instrument Determines the fees payable for the purposes of the PPSA and also specifies the kinds of arrangements for the payment of fees that may be approved by the PPS Registrar under s 190(4) of the PPS Act.

Declares certain statutory interests created, arising or provided for under the Corporations Act 2001 and Bankruptcy Act 1966 are of a

registered 16 December 2011(F2011L02722)

Personal Property Securities (Reports) Determination 2011 made 12 December 2011 by the Registrar of Personal Property Securities registered 16 December 2011 (F2011L02718) Personal Property Securities (Search Result Data) Determination 2011 made 16 December 2011 by the Registrar of Personal Property Securities registered 21 December 2011 (F2011L02773) Verification Statement — Migrated Data

s 176(3)

s 174(7)

s 158

made 3 February 2012 by the Registrar of Personal Property Securities

kind to which s 73(2) of the PPS Act applies. Provides these Acts will determine the relative priority between these statutory interests and security interests under the PPSA Identifies the matters that may be the subject of reports of matters relating to registered data on application by a person.

Sets out data in relation to a secured party, a grantor or personal property that may be included in a search result.

Provides that registrations were made on the PPS Register in relation to the interests in personal property that were the subject of registrations on the transitional registers specified.

[page 700] Name

Enabling Section

Details of Instrument

Verification Statement ASIC ABN/ACN data fix (CR089)

made 5 June 2012 by the Registrar of Personal Property Securities

s 158

Provides that registrations were made on the PPS Register in relation to the interests in personal property that were the subject of registrations on the Register of Company Charges maintained by ASIC (with a significant proportion of migrated registrations made against grantors identified by an ABN).

[page 701]

Personal Property Securities (Migration Time and Registration Commencement Time) Determination Name of Determination 1 This Determination is the Personal Property Securities (Migration Time and Registration Commencement Time) Determination.

Commencement 2 This Determination commences on 21 November 2011.

Interpretation 3 In this Determination: Act means the Personal Property Securities Act 2009.

Migration time 4 For paragraph 306(1)(b) of the Act, the migration time is the start of 21 November2011.

Registration commencement time 5 For paragraph 306(2)(b) of the Act, the registration commencement time is the start of 30 January 2012. [page 702] EXPLANATORY STATEMENT

Personal Property Securities (Migration Time and Registration Commencement Time) Determination

Summary The Personal Property Securities (Migration Time and Registration Commencement Time) Determination (the determination) is made under section 306 of the Personal Property Securities Act 2009 (the Act) by the AttorneyGeneral. The determination sets both the migration time and the registration commencement time.

Background The Act provides that the Minister may determine the migration time and the registration commencement time. Although the Act was given the Royal Assent on 14 December 2009, the registration commencement time effectively marks its actual commencement (sections 310 and 315). For example, an application to register a financing statement in respect of a security interest may only be made at or after the registration commencement time. The repeal or amendment of certain Acts, including the Corporations Act 2001 (Cth), is also contingent on the registration commencement time. An exception to this arises in respect of the migration of certain interests in personal property from transitional registers, such as the ASIC Register of Company Charges, to the Personal Property Securities Register. The migration time is the time at which this process will commence. It must start at a time no less than 28 days before the day on which the registration commencement time occurs. The determination of the migration time and registration commencement time was contingent on the delivery of a fully functioning Personal Property Securities Register. The Register is the centrepiece of personal property securities reform. In addition to the significant IT infrastructure that has been successfully developed to support the Register, a national contact centre and user support services have been developed with the Insolvency and Trustee Service Australia (which will assume ongoing responsibility for the operation of the PPS Register) in readiness for a commencement time of 30 January 2012.

Notes on Sections

Section 1 — Name of Determination Section 1 provides for the citation of the Determination as the Personal Property Securities (Migration Time and Registration Commencement Time) Determination.

Section 2 — Commencement Section 2 provides that the Determination commences on 21 November 2011.

Section 3 — Interpretation This section provides that the definition of Act is the Personal Property Securities Act 2009. [page 703]

Section 4 — Migration time Section 4 specifies that the migration time is 21 November 2011.

Section 5 — Registration commencement time Section 5 provides that the registration commencement time is 30 January 2012.

Consultation Consultation with industry has been extensive involving the Department working closely with key stakeholders, including the banking and finance sector. A trial of data migration and pre-load of certain transitional security interests was conducted in June and July 2011. During the trial, all data from existing registers was migrated, with the exception of the ASIC Register of Company Charges, and all data from preload participants was loaded into the production environment for the PPS Register. The trial also confirmed the amount of time required for data migration and pre-load. All transitional registers have advised that they are ready to commence data migration as scheduled. Another key element to the consultation was the design and execution of user acceptance testing of the PPS IT system with the participation of stakeholders. The participants included the Attorney-General’s Department, banks and other financial institutions, information brokers and the Insolvency and Trustee Service Australia. Testing was successfully completed on 11 November 2011. The Department also undertook an assessment of overall readiness for the commencement of PPS reform, including that of Government as well as industry and other stakeholders.

Regulatory Impact Analysis The Office of Best Practice Regulation has previously advised that the personal property securities reforms do not require a Regulatory Impact Statement because the reforms do not involve compulsion and it will be a commercial decision whether businesses register. It is not designed to impose any additional compliance costs on business or individuals or have any adverse impacts on competition.

Legislative instrument The determination is made under subsection 306(5) of the Act. The determination is a legislative instrument, however, section 42 (Disallowance of legislative instruments) of the Legislative Instruments Act 2003 does not apply to the determination.

[page 705]

Personal Property Securities (Approved Form) Instrument 2013 Name of Instrument 1 This Instrument is the Personal Property Securities (Approved Form) Instrument 2013.

Commencement 2 This Instrument commences on 19 August 2013. The Personal Property Securities (Approved Form) Instrument 2011 is repealed by the commencement of this instrument.

Definition 3 In this Instrument: Act means the Personal Property Securities Act 2009.

Approval of attached forms 4 For subsection 302(3) of the Act, each form attached to this Instrument is an approved form for the purposes of the provision or provisions of the Act to which the form is expressed to apply. Note For subsection 302(4) of the Act, some approved forms may require a person using the form to comply with either or both of: (a) registered data conditions within the meaning of section 176B of the Act; and (b) third party data conditions within the meaning of section 176C of the Act.

Other approved forms — application to register financing statement or financing change statement 5 (1) For subsection 302(3) of the Act, an interactive form provided at the

internet address: https://transact.ppsr.gov.au/ for the purpose of making an application to register a financing statement, or a financing change statement, is an approved form of an application to which paragraph 150(3)(a) of the Act applies. (2) For subsection 302(3) of the Act, an electronic communication in a format required by the Registrar for communication through the relevant computer to computer interface administered by the Registrar is an approved form of an application to register a financing statement, or a financing change statement, to which paragraph 150(3)(a) of the Act applies. Example An application made through a business to government channel designed in accordance with specifications issued by the Registrar.

[page 706] Note 1 The specifications of the format will be available at http://www.ppsr.gov.au from the registration commencement time. Note 2 For subsection 302(4) of the Act, some approved forms may require a person using the form to comply with either or both of: (a) registered data conditions within the meaning of section 176B of the Act; and (b) third party data conditions within the meaning of section 176C of the Act.

Other approved forms — verification statement 6 For subsection 302(3) of the Act, the form of a statement generated by the Register for the purpose of verifying the registration of a financing statement, or a financing change statement with respect to a security interest is an approved form of a verification statement to which section 155 of the Act applies.

Other approved forms — notice of verification statement 7 (1) Copy of verification statement For subsection 302(3) of the Act, a copy of a verification statement, dealt with in accordance with subsections (2) and (3), is an approved form of notice of a verification statement to which subsection 157(1) of the Act applies.

(2) If the notice of a verification statement: (a) relates to an individual; and (b) is to be given to a grantor other than that individual; the copy of the verification statement mentioned in subsection (1) must have all references to that individual’s birth details fully obliterated in a way that does not allow the references to be seen if the obliteration can be removed. (3) If the notice of a verification statement relates to a motor vehicle, it is not necessary to display in the copy of the verification statement mentioned in subsection (1) references to information contained in the National Exchange of Vehicle and Driver Information System (also known as ‘NEVDIS’). (4) Replication of content of verification statement For subsection 302(3) of the Act, the form of a document that: (a) is created by a secured party; and (b) replicates the information contained in the verification statement, other than information that has not been replicated in accordance with subsections (5) and (6); and (c) states that it is a ‘Notice of Verification Statement’ provided for the purposes of section 157 of the Act; is an approved form of notice of a verification statement to which subsection 157(1) of the Act applies. (5) If the notice of a verification statement: (a) relates to an individual; and (b) is to be given to a grantor other than that individual; references in the verification statement to that individual’s birth details must not be replicated in the document mentioned in subsection (4). (6) If the notice of a verification statement relates to a motor vehicle, it is not necessary to replicate references in the verification statement to information contained in [page 707] the National Exchange of Vehicle and Driver Information System (also known as ‘NEVDIS’) in the document mentioned in subsection (4).

Other approved forms — access to register to search for data 8 (1) For subsection 302(3) of the Act, an interactive form provided at the internet address: http://transact.ppsr.gov.au/ for the purpose of making an application for access to the register to search for data is an approved form of an application to which paragraph 170(3)(b) of the Act applies. (2) For subsection 302(3) of the Act, an electronic communication in a format required by the Registrar for communication through the relevant computer to computer interface administered by the Registrar is an approved form of an application for access to the register to search for data to which paragraph 170(3) (b) of the Act applies. Example An application made through a business to government channel designed in accordance with specifications issued by the Registrar. Note 1 The specifications of the format will be available at http://www.ppsr.gov.au from the registration commencement time. Note 2 For subsection 302(4) of the Act, some approved forms may require a person using the form to comply with either or both of: (a) registered data conditions within the meaning of section 176B of the Act; and (b) third party data conditions within the meaning of section 176C of the Act.

Other approved forms — search results 9 For subsection 302(3) of the Act, a search certificate generated by the Register as a search result for the purposes of section 174 of the Act is an approved form of a search result to which that section applies.

Other approved forms — data given to Registrar from transitional register 10 For subsection 302(3) of the Act, the approved form of giving data to the Registrar for the purposes of paragraph 330(b) of the Act is by an electronic communication of the data to the Registrar in the format specified by the Registrar for the purposes of that section. Note The format is set out in the Data Migration and Pre-load Technical User Guide and the specific technical user guide for the relevant transitional register.

Other approved forms — preparatory registration relating to transitional security interests 11 For subsection 302(3) of the Act, the approved form of applying to the Registrar under subsection 336(1) of the Act is by an electronic communication to the Registrar in the format required by the Registrar for the purposes of that subsection. Note The format is set out in the Data Migration and Pre-load Technical User Guide.

[page 708]

SCHEDULE 1 — ATTACHED FORMS For section 4 of the Instrument the following forms are attached: 1. ITSA Credit Application (section 190) (CA4(P)0813). 2. Notice of Intention to Remove Accession (section 95) (version N17(P)0813). 3. Notice of Intention to Dispose of Collateral (section 130) (version N15(P)0813). 4. Notice of Proposal to Retain Collateral (section 135) (version N16(P)0813). 5. Amendment Statement (section 180) (version D1(P)0813).

[page 709]

Personal Property Securities (Migrated Security Interests and Effective Registration) Determination 2011 Name of Determination 1 This Determination is the Personal Property Securities (Migrated Security Interests and Effective Registration) Determination 2011.

Commencement 2 This Determination commences as follows: (a) on 21 November 2011 — sections 1 to 4; (b) at the registration commencement time — section 5. Note Registration commencement time is defined in subsection 306(2) of the Personal Property Securities Act 2009.

Definition 3 In this Determination: Act means the Personal Property Securities Act 2009.

Registration using migrated data — registrable personal property 4 (1) For subsection 333(1) of the Act, a class of personal property is registrable if subsection (2) or (3) applies. (2) A class of personal property that is registrable is personal property to which the following apply: (a) the personal property has been prescribed under paragraph 148(c) of the Act;

at or after the migration time, but before the registration (b) commencement time: (i) data relating to the personal property has been given to the Registrar in the approved form; and (ii) the Registrar has accepted the data. (3) A class of personal property that is registrable is personal property to which the following apply: (a) the personal property is subject to a transitional security interest; (b) the transitional security interest was registered on a transitional register; (c) the registration of the transitional security interest in relation to the property was effective immediately before the data was given to the Registrar; (d) registration of the transitional security interest was authorised by the law under which the register was maintained; [page 710] (e) at or after the migration time, but before the registration commencement time: (i) data relating to the personal property has been given to the Registrar in the approved form; and (ii) the Registrar has accepted the data.

Registration effective despite defects 5 (1) This section applies to the registration of a transitional security interest that includes a defect that would make the registration ineffective, under section 164 or 165 of the Act. (2) For subsection 337(2) of the Act, a class of registration is registrations for which the following apply: (a) the personal property is subject to a transitional security interest; (b) the transitional security interest was registered on a transitional register; (c) the registration of the transitional security interest in relation to the

property was effective immediately before the data was given to the Registrar; (d) registration of the transitional security interest was authorised by the law under which the register was maintained; (e) at or after the migration time, but before the registration commencement time: (i) data relating to the personal property has been given to the Registrar, in the approved form; and (ii) the Registrar has accepted the data; (f) the transitional security interest was registered under subsection 333(2) of the Act; (g) the defect is that the financing statement registered by the Registrar included, or omitted to include, data, whether or not the data was recorded in the transitional register. [page 711] EXPLANATORY STATEMENT Personal Property Securities (Migrated Security Interests and Effective Registration) Determination 2011

Summary The Personal Property Securities (Migrated Security Interests and Effective Registration) Determination 2011 (the determination) is made under sections 333 and 337 of the Personal Property Securities Act 2009 (the Act) by the Personal Property Securities Registrar. The determination under section 333 identifies the classes of personal property that are registrable by the Registrar on the Personal Property Securities Register (the PPS Register) during the migration time. The determination under section 337 specifies registrations that are effective despite defects in data in the financing statement registered by the Registrar.

Background An important element to the transitional provisions of the Act is the process of

‘data migration’ which involves the giving of data by an officer or agency of the Commonwealth, a State or a Territory in relation to personal property currently held in a transitional register maintained under a law of the Commonwealth, a State or a Territory to the Registrar. In order for the data given to the Registrar to be registered on the PPS Register, the Registrar must determine that a class or classes of personal property are registrable. Section 4 of this determination identifies the two classes to be migrated. Section 337 permits the Registrar to cure relevant defects arising from this data migration process for a limited period. A registration on the PPS Register would be ineffective because of a defect if, and only if, there is a seriously misleading defect in any data relating to the registration or there is a specified defect (sections 164 and 165).

Notes on Sections

Section 1 — Name of Determination Section 1 provides for the citation of the Determination as the Personal Property Securities (Migration Security Interests and Effective Registration) Determination 2011.

Section 2 — Commencement Paragraph 2(a) provides that sections 1 to 4 of the Determination commences on 28 November 2011. Paragraph 2(b) provides that section 5 commences at the registration commencement time as defined by subsection 306(2) of the Personal Property Securities Act 2009.

Section 3 — Interpretation This section provides that the definition of Act is the Personal Property Securities Act 2009. [page 712]

Section 4 — Registration using migrated data — registrable personal property This section determines that personal property that is prescribed under paragraph 148(c) of the Act and given to, and accepted by, the Registrar at or after the migration time, but before the registration commencement time is registrable for the purposes of subsection 333(1). Regulation 5.1 of the Personal Property Securities Regulations 2010 states the relevant types of personal property prescribed by paragraph 148(c). These include impounded, immobilised or forfeited motor vehicles and personal property that is subject to an order of a court. The second class of personal property that is determined to be registrable is personal property that is subject to a ‘migrated security interest’ as defined in section 332 of the Act. That provision requires that a registration in a transitional register in relation to the property was effective immediately before the data was given to the Registrar; that is, the registration was effective immediately before it was migrated from the transitional register. The Act also requires that the registration in the transitional register be authorised by the law under which the register was maintained (paragraph 332(d)).

Section 5 — Registration effective despite defects Under sections 164 and 165 of the Act, a defect may result in the registration being defective. This section identifies the class of registrations that will remain effective despite the existence of defects in the registration. A key policy intention behind the migration of data from transitional security registers to the PPS Register is to maintain the effectiveness of registrations that had been effective under the previous legislation applicable to the transitional security interest. For example, if a registrable charge under the Corporations Act has been effectively registered under that Act and is migrated to the PPS Register, it can be expected to have the same priority as it would have had under the Corporations Act (sections 322 and 323 of the Act). However, the determination recognises that some defects or omissions in data will inevitably result due to the migration process itself and that the specific data requirements for financing statements on the PPS Register set out in section 153 of the Act and Schedule 1 to the Personal Property Securities Regulations 2010 may not be satisfied. Accordingly, defects in registered data that would otherwise render the registration ineffective are made effective by this determination, but only for the periods specified in subsection 337(4) of the Act. This temporary period of effectiveness is intended to allow secured parties reasonable time to amend migrated registrations so that the data contained in the registrations are in accordance with the PPS legislative requirements. This is consistent with the use of transitional provisions under the Act in implementing the PPS reforms. The determination, whilst ensuring the effectiveness of migrated registrations, is, nonetheless, subject to the rest of the Act. Therefore, though a registration may not be defective under sections 164 and 165, the absence of required data may have consequences under other provisions of the Act; for example, the provisions relating to the taking of personal property free of security interests (Part 2.5). Similarly, data registered with respect to personal property that is not in a class determined in section 4 of the Determination will not be made effective by section 5 (section 334 of the Act). [page 713]

Consultation Consultation with industry has been extensive involving the Department working closely with key stakeholders across the banking and finance sector. A trial of data migration and pre-load of certain transitional security interests was conducted in June and July 2011. During the trial, all data from existing registers was migrated, with the exception of the ASIC Register of Company Charges, and all data from preload participants was loaded into the production environment for the PPS Register. The trial also confirmed the amount of time required for data migration and pre-load. All transitional registers have advised that they are ready to commence data migration as scheduled. The Department also undertook an assessment of overall readiness for the commencement of PPS reform, including that of government as well as industry and other stakeholders.

Regulatory Impact Analysis The Office of Best Practice Regulation has previously advised that the personal property securities reforms do not require a Regulatory Impact Statement because the reforms do not involve compulsion and it will be a commercial decision whether businesses register. It is not designed to impose any additional compliance costs on business or individuals or have any adverse impacts on competition.

[page 715]

Personal Property Securities (Fees) Determination 2013 PART 1 — PRELIMINARY

Name of Determination 1 This Determination is the Personal Property Securities (Fees) Determination 2013.

Commencement and repeal of earlier determination 2 This Determination commences on 1 July 2013. The Personal Property Securities (Fees) Determination 2011 is repealed by the commencement of this Determination.

Definitions 3 In this Determination: Act means the Personal Property Securities Act 2009. contact centre means the place at which the Commonwealth, on the request of a person, submits applications under the Act in an electronic form on behalf of the person. Note Several other words and expressions used in this Determination have the meaning given by section 10 of the Act, for example: collateral financing change statement financing statement grantor registration time serial number verification statement.

PART 2 — FEES

Registration and search fees 4 (1) For subsection 190(1) of the Act, the fee for a matter listed in an item of the table in this section: (a) is as listed in column 3 of the item; or (b) if subsection (2) applies in relation to the matter — is the contact centre fee listed in column 4 of the item. (2) For paragraph (1)(b), the contact centre fee will apply in relation to a matter if a person who makes an application under items 9–15 of the table requests the contact centre to submit the application in an electronic form on the person’s behalf.

Item 1

Matter To apply under subsection 150(1) of the Act to register a financing statement that has no end time

Contact centre Fee ($) fee($) 140.00 N/A

[page 716]

Item 2

3

Matter To apply under subsection 150(1) of the Act to register a financing statement with an end time of up to the end of the day 7 years after the registration time To apply under subsection 150(1) of the Act to register a financing statement with an end time of: (a) more than the end of the day 7 years after the registration time; and (b) up to the end of the day 25 years after the registration time

Contact centre Fee ($) fee($) 8.00 N/A

40.00

N/A

4

5

6

7

8

9

10

To apply under subsection 150(2) of the Act to register a financing change statement that amends a financing statement that has no end time to include an additional grantor To apply under subsection 150(2) of the Act to register a financing change statement that amends a financing statement that has an end time of up to the end of the day 7 years after the registration time to: (a) extend the end date; or (b) include an additional grantor. To apply under subsection 150(2) of the Act to register a financing change statement that amends a financing statement that has an end time of: (a) more than the end of the day 7 years after the registration time; and (b) before the end of the day 25 years after the registration time To apply under subsection 150(2) of the Act to register a financing change statement that amends a financing statement if the amendment does not extend the end date or include an additional grantor To attach, in an application mentioned in any of items 1 to 7, a document to a financing statement or a financing change statement To apply under subsection 170(1) of the Act to search the register using a grantor’s details To apply under subsection 170(1) of the Act to search the register using the serial number by which collateral has

140.00

N/A

8.00

N/A

40.00

N/A

4.00

N/A

4.00

N/A

4.00

4.00

4.00

4.00

11

been described To apply under subsection 170(1) of the Act to search the register using the unique identifier allocated to a registered financing statement

4.00

4.00

[page 717]

Item 12

13

14

15

Matter To apply under subsection 170(1) of the Act to search the register using the unique identifiers allocated to two registered financing statements To apply under subsection 170(1) of the Act to search the register using an earlier nominated time as the search criteria To request, in an application under subsection 170(1) of the Act, for written search results in relation to a previously conducted search of the Register by the applicant To apply under paragraph 175(b) of the Act for a copy of a verification statement

Contact centre Fee ($) fee($) 4.00 12.50

N/A

12.50

4.00

12.50

4.00

12.50

Reports by the Registrar 5 For subsection 190(1) of the Act, the fee to apply under subsection 176(1) of the Act to obtain a report mentioned in item 2 of the table in section 4 of the Personal Property Securities (Reports) Determination 2011, is calculated at the rate of $300 for each hour, or part of an hour, of preparation of the report.

Remitting fees

6 Despite sections 4 and 5, the Registrar may remit, in whole or in part, the fees payable by the Commonwealth, or a State or Territory government.

PART 3 — ARRANGEMENTS

Arrangement for monthly payment in arrears 7 (1) For subsection 190(4) of the Act, an arrangement is that fees for transactions conducted with the registry by a person during a month are payable in arrears on the receipt by the person of the statement of summary of transactions, entitled PPSR statement/invoice, for the fees. (2) The Registrar may, for fees payable under the arrangement, approve an amount that may be incurred under the arrangement.

Arrangement for payment for reports 8 For subsection 190(4) of the Act, an arrangement is that the fee to obtain the report mentioned in section 5 is payable on the receipt by the applicant of an invoice for the fee.

[page 719]

Personal Property Securities (Priority of Statutory Interests) Instrument 2011 Name of Instrument 1 This Instrument is the Personal Property Securities (Priority of Statutory Interests) Instrument 2011.

Commencement 2 This Instrument commences on 30 January 2012.

Definitions 3 In this Instrument: Act means the Personal Property Securities Act 2009.

Priority between security interests and declared statutory interests 4 For subsection 73(4) of the Act, subsection 73(2) of the Act applies to: (a) a lien that arises under subsection 443F(1) of the Corporations Act 2001; and (b) a lien that arises under subsection 189AC(2) of the Bankruptcy Act 1966. [page 720] EXPLANATORY STATEMENT Personal Property Securities (Priority of Statutory Interests) Instrument 2011

Summary The Personal Property Securities (Priority of Statutory Interests) Instrument 2011 (the Instrument) is made under subsection 73(4) of the Personal Property Securities Act 2009 (the PPS Act) by the Attorney-General. The Instrument declares that certain statutory interests created, arising or provided for under the Corporations Act 2001 and Bankruptcy Act 1966 are of a kind to which subsection 73(2) applies. The effect of the Instrument is that those Acts will determine the relative priority between statutory interests provided for by those Acts and security interests under the PPS Act.

Background Generally, the PPS Act’s detailed provisions governing the priority of competing interests in the same collateral only pertain to security interests within the meaning of section 12. The PPS Act specifically does not apply to a number of interests; in particular, it excludes a lien or charge that is created, arises or is provided for under a law of the Commonwealth, unless the person who owns the property in which the interest is granted agrees to the interest (paragraph 8(1) (b)). However, the table in subsection 8(2) of the PPS Act provides that certain provisions of the PPS Act are applicable to otherwise excepted interests. Relevantly, item 1 provides that section 73 applies to a lien or charge described in paragraph 8(1)(b). Under subsection 73(2), a Commonwealth, a State or a Territory law may determine the priority between a statutory interest arising under that law and a security interest in the same collateral. However, the relevant law must declare that subsection 73(2) applies. In the absence of such a declaration the Minister may by legislative instrument declare that subsection 73(2) applies to statutory interests of a kind to which that subsection refers (subsection 73(4)). A key intention of PPS reform was to maintain existing rights in the absence of sound policy reasons to alter them. To this end, this Instrument is intended to maintain the priorities that existed under the Corporations Act and Bankruptcy Act in relation to an administrator’s lien and a controlling trustee’s lien provided for, respectively, under those Acts.

Notes on Sections

Section 1 — Name of Determination Section 1 provides for the citation of the Determination as the Personal Property Securities (Priority of Statutory Interests) Instrument 2011.

Section 2 — Commencement The Instrument commences on 30 January 2012.

Section 3 — Interpretation This section provides that the definition of Act is the Personal Property Securities Act 2009. [page 721]

Section 4 — Priority between security interests and declared statutory interests The Corporations Act, as amended by the Personal Property Securities (Corporations and Other Amendments) Act 2010 (the PPS (CoA) Act), provides that an administrator’s right of indemnity under section 443D has priority over certain debts of the company secured by a circulating security interest in property of the company (section 443E). Subsection 443F(1) of the Corporations Act provides that the administrator’s indemnity is secured by a lien over the company’s property. Under that Act the lien has priority over a security interest to the extent that the right of indemnity has priority over debts secured by the security interest (subsection 443F(2)). As the lien is created by a Commonwealth law it is generally excluded from the application of the PPS Act (paragraph 8(1)(b)); however, it is a statutory interest for the purposes of subsection 73(2). Paragraph 4(a) of the Instrument provides that subsection 73(2) applies to a lien that arises under subsection 443F(1) of the Corporations Act. The effect of this declaration is that priority between a security interest and a lien under section 443F in the same property is to be determined by the Corporations Act. Similarly, the effect of paragraph 4(b) is that it provides that the Bankruptcy Act will be the law that determines the priority of the statutory interest, the controlling trustee’s lien created by section 189AC of that Act, and a security interest in the same property.

Consultation Consultation in regard to PPS reform has been extensive with the Department working closely with key stakeholders including banks, equipment financiers and information brokers. In the explanatory memorandum to the PPS (CoA) Act, the Department indicated that an Instrument of this kind would be made rather than by including a declaration in the relevant Act. As the Instrument is designed to maintain certain aspects of the existing law, insolvency practitioners have indicated their support.

Regulatory Impact Analysis The Office of Best Practice Regulation has previously advised that the personal property securities reforms do not require a Regulatory Impact Statement

because the reforms do not involve compulsion and it will be a commercial decision whether businesses register. It is not designed to impose any additional compliance costs on business or individuals or have any adverse impacts on competition.

[page 723]

Personal Property Securities (Reports) Determination 2011 Name of Determination 1 This Determination is the Personal Property Securities (Reports) Determination 2011.

Commencement 2 This Determination commences on the day after it is registered.

Interpretation 3 In this Determination: Act means the Personal Property Securities Act 2009.

Matters that may be the subject of reports 4 For subsection 176(3) of the Act, the table sets out matters that may be the subject of reports under section 176 of the Act, on application by a person. Item 1 2 3 4 5 6



Matter The registration of a security interest if the grantor is not an individual Any other matter relating to registered data in relation to the person Registrations that are due to expire in a particular period Registrations conducted in a particular period Searches conducted in a particular period Transactions that incur a fee and are conducted on the Register in a particular period

[page 724] EXPLANATORY STATEMENT Personal Property Securities (Reports) Determination 2011

Summary The Personal Property Securities (Reports) Determination 2011 (the Determination) is made under subsection 176(3) of the Personal Property Securities Act 2009 (the Act) by the Personal Property Securities Registrar. The Determination identifies the matters that may be the subject of reports under section 176.

Background A person can request, in the approved form, a report of matters relating to registered data in relation to that person (subsection 176(1)). The Registrar is able to determine the different matters that a report may contain. A request for a report rnay incur a fee under section 190.

Notes on Sections

Section 1 — Name of Determination Section 1 provides for the citation of the Determination as the Personal Property Securities (Reports) Determination 2011.

Section 2 — Commencement The Determination commences on the day after it is registered.

Section 3 — Interpretation This section provides that the definition of Act is the Personal Property Securities Act 2009.

Section 4 — Matters that may be the subject of reports The table in this section sets out the matters that may be the subject of reports under section 176 of the Act. The first matter identified in the table is the registration of a security interest if the grantor is not an individual; that is, an organisational grantor. A person is able to request notification when any registration for an organisational grantor that is described by ARSN, ACN or ARBN is made or amended, including discharge. Under certain provisions of the Act the priority of a registration may be affected by a subsequent registration in relation to the collateral in which the interested party already has an interest. This report will allow a user to request a notification be sent to them when any activity occurs against registrations for the specified company identifier. A person may then perform a search of the PPS Register using the organisation’s identifier and view the details of the registration events (registrations made and/or amended). This report replicates a report previously provided by Australian Securities and Investment Commission in relation to charges on its Register of Company Charges. The second matter that may be subject of reports is any other matter relating to registered data in relation to the person. This will enable a person to request reports on an ad hoc basis in respect of the registered data that relates to them as a secured party [page 725] or account holder. Reports may contain information derived from data registered with respect to the secured party or account holder. For example, in addition to registration and search activity, reports may also pertain to fees and pending applications, among other things. A report may also provide a person with information about the number and type of registrations that are due to expire in a given time period. This will provide secured parties an easy way to manage their registrations to ensure they do not expire before any obligations which the collateral may secure are fully met. Reports will also be available to account customers through the PPS Register in relation to registrations and searches conducted in a given time period, as well as

all transactions that may incur a fee in a particular period.

Consultation Consultation in regard to PPS reform has been extensive with the Department working closely with key stakeholders including banks, equipment financiers and information brokers. In respect of reports under section 176, stakeholders were provided with documents that detailed the requirements for the reports functionality in the PPS Register. The documents described the nature of the proposed reports, set out the context in which the reports would be created, their likely contents and the mode of delivery of the reports. The reports are designed to assist in managing a person’s use of the Register. It is intended that several of the reports, which will be available to account customers through the PPS Register application, will be made available without charge.

Regulatory Impact Analysis The Office of Best Practice Regulation has previously advised that the personal property securities reforms do not require a Regulatory Impact Statement because the reforms do not involve compulsion and it will be a commercial decision whether businesses register. It is not designed to impose any additional compliance costs on business or individuals or have any adverse impacts on competition.

[page 727]

Personal Property Securities (Search Result Data) Determination 2011 Name of Determination 1 This Determination is the Personal Property Securities (Search Result Data) Determination 2011.

Commencement 2 This Determination commences on the day after it is registered.

Definition 3 In this Determination: Act means the Personal Property Securities Act 2009.

Search result data 4 For subsection 174(7) of the Act, the table sets out data that is determined in relation to a secured party, a grantor and personal property. Item 1 2 3 4

5

Data Data contained in the National Exchange of Vehicle and Driver Information System An attachment file that has been included in the Register as part of a registration Data relating to an attachment file If the grantor is an individual and the collateral is described on the Register as consumer property, a statement that the grantor exists which contains no other information If the grantor is an individual and the collateral is described on the Register as commercial property, a statement of the name of

6

the grantor which contains no other information An organisation name verified by the Australian Business Register or the Australian Securities and Investments Commission

Note Under subsection 174(4) of the Act, the Registrar may include, or may authorise to be included, in a search result, any data, including third party data, determined by the Registrar in relation to a secured party, a grantor or personal property.

[page 728] EXPLANATORY STATEMENT Personal Property Securities (Search Result Data) Determination 2011

Summary The Personal Property Securities (Search Result Data) Determination 2011 (the determination) is made under subsection 174(7) of the Personal Property Securities Act 2009 (the Act) by the Personal Property Securities Registrar. This determination sets out data in relation to a secured party, a grantor or personal property that may be included in a search result.

Background The Personal Property Securities Register (PPSR) is required to be established and maintained by the Registrar under the subsection 147(1) of the Act. The PPSR will replace a significant number of existing registers of securities and related interests currently administered by Commonwealth, State and Territory agencies. The introduction of a single national framework and fee structure will replace the existing fragmented, complex and inconsistent law and registration arrangements providing greater legal and financial certainty to financiers. Accessing the PPSR to search for data in relation to a security interest or personal property and obtaining accurate search results are essential to the successful operation of the regime. A search result is intended to provide prospective users of the PPSR with notice of any security interests in a grantor’s personal property. A written search result (a search certificate) would be admissible as evidence in a court or tribunal and, in the absence of evidence to the contrary, proof of matters stated in the search result (subsection 147(1)). The written search result will generally state the data contained in any registered

financing statement returned by the search; most importantly, the details required in subsection 153(1). However, other data may be included by way of a determination by the Registrar (subsection 174(4)). This data may include third party data. The data set out in the determination is not an exhaustive list of the matters that may be stated in a search result. Search results will, of course, contain details described in any registered financing statements returned.

Notes on Sections

Section 1 — Name of Determination Section 1 provides for the citation of the Determination as the Personal Property Securities (Search Result Data) Determination 2011.

Section 2 — Commencement Section 2 provides that the Determination commences on the day after it is registered.

Section 3 — Interpretation This section provides that the definition of Act is the Personal Property Securities Act 2009. [page 729]

Section 4 — Search Result Data The table in section 4 sets out data in relation to a secured party, a grantor and personal property. Data contained in the National Exchange of Vehicle and Driver Information System (NEVDIS) may be included in a search result only where a motor vehicle search is conducted. NEVDIS data is owned by Austroads Ltd and is not stored on the PPSR. The PPSR will request data via an interface from NEVDIS for a serial number and retrieve the relevant vehicle information if available. The data returned in a search result may include a number of details about a vehicle including any stolen or written off notifications against the vehicle. An attachment file that has been included in the Register as part of a registration, or data relating to an attachment file may be included in a search result. An attachment file may be added as part of the registration of a financing statement or a financing change statement. Attachments may also be migrated from transitional registers, such as the ASIC Register of Company Charges. The data relating to an attachment may be derived from the free text description that may be included when an attachment is included in a registration. An example of what the free text description may contain would be the inclusion of a reference to a specific section in the attachment that is particularly relevant to the collateral. The data in relation to an individual grantor that may be returned in a search result will be dependent on the collateral type. If the collateral is described as consumer property, a statement that the grantor exists, but no other information will be returned as the grantor details in the search result. When collateral is described as commercial property, a statement of the name of the grantor will be returned as the grantor details, but not the grantor’s date of birth. The data to be included in respect of individual grantors is intended to take into account the privacy of the individual. Generally, an organisation that is a body corporate will be registered, whether as a secured party or a grantor, by an identifier other than the organisation’s name; for example, an Australian Company Number. However, a search result may also include an organisation’s name if it is verified by the Australian Business Register or the Australian Securities and Investments Commission.

Consultation Consultation in regard to PPS reform has been extensive with the Department

working closely with key stakeholders including banks, equipment financiers and information brokers. However, no specific consultation was considered necessary in respect of this determination as consultations in relation to the Personal Property Securities Act 2009 and Personal Property Securities Regulations 2010 had raised issues regarding the data to be contained in a search result. This determination reflects the outcomes of those consultations.

Regulatory Impact Analysis The Office of Best Practice Regulation has previously advised that the personal property securities reforms do not require a Regulatory Impact Statement because the reforms do not involve compulsion and it will be a commercial decision whether businesses register. It is not designed to impose any additional compliance costs on business or individuals or have any adverse impacts on competition.

[page 731]

Verification Statement — Migrated Data This verification statement is made under section 158 of the Personal Property Securities Act 2009. Pursuant to section 333 of the Personal Property Securities Act 2009, registrations on the Personal Property Securities Register were made in relation to the interests in personal property that were the subject of registrations on the transitional registers listed below. The registration time on the Personal Property Securities Register for the registrations is determined by subsection 333(5) of the Personal Property Securities Act 2009. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16.

Name of Register Register of Co-operative Charges (ACT) General Register of Deeds and Instruments (ACT) Fisheries Register (Cth) Australian Register of Ships (Cth) Register of Company Charges (Cth) Security Interest in Goods Register (NSW) Register of Encumbered Vehicles (NSW) Registry of Cooperatives and Associations (NSW) Bills of Sale (NT) Stock Mortgages Register (NT) Registry of Cooperatives (Qld) Bill of Sales Register (Qld) Register of Encumbered Vehicles (Qld) Vehicle Securities Register (SA) Land Titles, Registry of Deeds and Crop Liens (SA) Co-operatives and Associations (SA)

Number 1 6,716 357 1,979 1,563,193 28,165 1,965,779 244 430 679 39 18,043 306,924 120,306 30,481 20

17. 18. 19. 20. 21. 22. 23.

Register of Bill of Sale, Stock, Wool and Crop Mortgages and Co-operative Charges (Tas) Motor Vehicle Securities Register (Tas) Register of Cooperative Charges (Vic) Register of Liens on Crops and Liens on Wool and Stock Mortgages (Vic) Vehicle Securities Register (Vic) Bill of Sale Register (WA) Register of Encumbered Vehicles (WA)

37,738 66,032 39 7,021 358,383 1,022 371,284

In the event that any registrations recorded on the above registers are rejected during the migration process, the owners of the above registers will contact the affected parties. DAVID BERGMAN Registrar of Personal Property Securities Dated 3 February 2012

[page 733]

Verification Statement — ASIC ABN/ACN Data Fix (CR089) This verification statement is made under section 158 of the Personal Property Securities Act 2009.

Background Pursuant to section 333 of the Personal Property Securities Act 2009, registrations on the Personal Property Securities Register (PPSR) were made in relation to the interests in personal property that were the subject of registrations on the Register of Company Charges (Cth) maintained by the Australian Securities and Investments Commission. A significant proportion of the migrated registrations were made against grantors identified by an Australian Business Number (ABN).

Notice of registration events Between 23 April 2012 and 14 May 2012 (inclusive), by means of a bulk change process known as CR089, financing change statements were registered in relation to 885,238 registrations migrated from the Register of Company Charges. The changes resulted in replacing grantors identified on the PPSR by an ABN with the same grantors identified by an Australian Company Number (ACN), where the grantors had both an ABN and an ACN. The identity of the grantors was not affected. [Signature block removed] DAVID BERGMAN Registrar of Personal Property Securities Dated 5 June 2012

[page 735]

PPSA Practice Statements [Current to March 2013]

CONTENTS Introduction Table summarising the Practice Statements issued by the PPS Registrar Personal Property Securities Registrar’s Practice Statement No 4 Amendment Demand Process Personal Property Securities Registrar’s Practice Statement No 5 Removal, Correction and Restoration of Data on the PPSR Personal Property Securities Registrar’s Practice Statement No 6 Restrict Access to Data Personal Property Securities Registrar’s Practice Statement No 7 Judicial Proceedings Sections 218 and 219

PPSA Practice Statements [PS1.1] Introduction The following table sets out the Practice Statements that have been issued by the PPS Registrar to assist parties in their interactions with the Personal Property Securities Register (PPSR). The Practice Statements provide guidance as to how the PPS Registrar will perform the functions and exercise the powers conferred

on the Registrar under the Personal Property Securities Act 2009 (PPSA) and the Personal Property Securities Regulations 2010. The table below will be updated on a progressive basis as further Practice Statements are issued by the PPS Registrar and includes all Practice Statements issued to date. However, only Practice Statements that are referred to in the commentary are reproduced in full in this section. For other Practice Statements, please refer to the PPSR website at www.ppsr.gov.au/AsktheRegistrar/PracticeStatements. [page 736]

[PS1.2] Table summarising the Practice Statements issued by the PPS Registrar Name PPS Registrar’s Practice Statement No 1 Access to PPSR for government agencies

Release Date Details 21 May 2012 Provides guidance as to how government agencies at the Commonwealth, state and territory level may: apply for the access required in order to transact in the PPSR in relation to prescribed property which may be registered as other “Registration Kinds” on the basis that fees are remitted; and apply for access to the PPSR in relation to security interests on the basis that fees are remitted. PPS Registrar’s Practice 21 May 2012 Explains how a person seeking Statement No 2 to register a financing Application to Register a statement in respect of a court Financing Statement — Court order should apply to the PPS Orders Registrar.

PPS Registrar’s Practice Statement No 3 Investigations, Civil Penalties and Enforceable Undertakings

PPS Registrar’s Practice Statement No 4 Amendment Demand Process

PPS Registrar’s Practice Statement No 5 Removal, Correction and Restoration of Data on the PPSR

8 June 2012 Provides guidance as to how the PPS Registrar will exercise his or her powers in relation to investigations, 195A notices, civil penalties and enforceable undertakings under the PPSA. 21 May 2012 Outlines the background to the amendment demand process and the approach of the PPS Registrar to the administrative process for an amendment demand. 21 May 2012 Explains how the PPS Registrar will maintain the data in respect of security interests and other prescribed property that is contained in the PPSR and, in particular, how the Registrar will generally exercise the power to remove, restore or correct data within the PPSR in accordance with Pt 5.7 of the PPSA. [page 737]

Name PPS Registrar’s Practice Statement No 6 Restrict Access to Data

PPS Registrar’s Practice Statement No 7

Release Date Details 30 January Explains how the PPS 2012 Registrar will restrict access to data contained in the PPSR, and in what circumstances the Registrar may consider that it is in the public interest to restrict access to data contained in a registration. 19 November Provides general guidance 2012 regarding how a person

Judicial Proceedings Sections 218 and 219

seeking the intervention or assistance of the PPS Registrar in relation to judicial proceedings should apply and sets out the circumstances in which the Registrar will exercise the discretion to intervene in or to begin and carry on judicial proceedings.

[page 739]

Personal Property Securities Registrar’s Practice Statement No 4 Amendment Demand Process Background and Purpose Part 5.6 of the Personal Property Securities Act 2009 (Cth) (PPS Act) provides for a resolution process for disputes regarding registrations where one party considers that: 1. no collateral described in the registration secures any obligation (including a payment) owed by a debtor to the secured party; or 2. the registration describes particular collateral in which the person has an interest, which does not secure any obligation (including a payment) owed by a debtor to the secured party. Part 5.6 of the PPS Act provides three avenues to pursue a resolution to such a dispute: 1. the parties reach a resolution reached between themselves through the exchange of an amendment demand; 2. the administrative process for an amendment demand; and 3. the judicial process for an amendment demand. This practice statement outlines the background to the amendment demand process and the approach of the Registrar of Personal Property Securities (the Registrar) to the administrative process for an amendment demand.

Key terms Amendment Demand An amendment demand is a written demand to a secured party that is made by a person with an interest in the subject collateral, relates to a registration which is in respect of a security interest in the subject collateral; and requires the

secured party to amend a registration to end the effective registration; or omit particular collateral from the description. The amendment demanded must be an “authorised amendment”. Pursuant to section 178 of the PPS Act, an authorised amendment is: 1. an amendment to end effective registration (including an amendment to remove the registration), because no collateral described in the registration secures any obligation (including a payment) owed by a debtor to the secured party; or 2. an amendment to omit the collateral, because 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. The recommended contents of an amendment demand are: 1. This statement: “This is amendment demand which is provided under section 178 of the Personal Property Securities Act 2009.” 2. Date. 3. The secured party’s name. 4. The secured party’s address for service. 5. The PPSR registration number. [page 740] 6. 7.

8. 9.

The Giving of Notice Identifier (if applicable). The amendment that is demanded and the reason it is authorised, with reference to section 178 of the PPS Act. For example: 7.1. an amendment to end effective registration (including an amendment to remove the registration), because no collateral described in the registration secures any obligation (including a payment) owed by a debtor to the secured party; or 7.2. an amendment to omit the following collateral [state the collateral], because the person has an interest in that collateral and it does not secure any obligation (including a payment) owed by a debtor to the secured party. Any evidence which supports the statement made in paragraph 7. The name of the person who is making the amendment demand. If the amendment demand is made by a company, the full legal name of the

company and the name, position and the capacity in which the person acts on behalf of the company. 10. A return address to which the secured party may send any response to the amendment demand.

Amendment Statement An amendment statement is a written document, in the approved form “Amendment Statement”, which is provided to the Registrar by a person who has who has issued an amendment demand to a secured party at least 5 business days prior.

Amendment Notice An amendment notice is a notice issued by the Registrar to a secured party of a registration in respect of which an amendment demand has been issued to the secured party. An amendment notice may be issued following the receipt of an amendment statement or on the Registrar’s own volition. Amendment notices are discussed in further detail below.

Administrative Process Overview In general there are four stages of the amendment demand administrative process: 1. the Amendment Demand 2. the Amendment Statement 3. the Amendment Notice 4. the Registrar’s Decision The first step, the amendment Demand, is also a precondition to the judicial process for an amendment demand.

Use of the Administrative Process In accordance with section 179 of the PPS Act, the administrative process for an amendment demand is only available in the following circumstances: 1. the secured party has been given an amendment demand; 2. no application for a financing change statement has been made;

3.

no proceedings are currently before a court, in relation to an application under section 182 (the judicial process), that relate to the amendment demanded; and [page 741]

4.

the security agreement which provides for the security interest is not an instrument or document: 5. by which a person issues or guarantees, or provides for the issue or guarantee of, an obligation secured by a security interest; and 6. in which another person is appointed as trustee for the person to whom the obligation secured by the security interest is owed. The administrative process will stop being available if: 1. registered is amended (including removed) in accordance with the amendment demanded; 2. proceedings come before a court, in relation to an application under section 182, that related to the amendment demanded.

Stage One — the Amendment Demand The party seeking an amendment to a registration sends an Amendment Demand to the secured party at the address for service provided for the secured party in the registration. For further information regarding the definition and recommended contents of an amendment demand please refer to the key terms section above. If the secured party is a deregistered company, the party seeking an amendment should also send a copy of the Amendment Demand to the Australian Securities and Investments Commission, Property Law Group, GPO Box 9827, Brisbane Qld 4001. Sending a copy to ASIC at this stage may help to expedite the process at later steps. Upon deregistration, the assets of a company vest in ASIC accordingly it is appropriate that ASIC is informed of the demand. The secured party may respond to the demand.

Stage Two — Amendment Statement If 5 business days have elapsed since the Amendment Demand was given and the secured party has not responded or their response did not include compliance

with the demand, the party who sent the Amendment Demand may give an Amendment Statement to the Registrar. An Amendment Statement is an approved form under the PPS Act which is available from the form page of PPSR website www.ppsr.gov.au. Amendment statements should be addressed to: Personal Property Securities Insolvency and Trustee Services National Service Centre GPO Box 1944 Adelaide SA 5001 Alternatively, it may be sent via email to [email protected]. The Registrar will consider that an amendment statement is given and effective if it is in the approved form “Amendment Statement” and the form is complete. As noted on the approved form, it is not mandatory to attach the original amendment demand. However, applicants should note that in making a decision the Registrar will only have regard to the matters outlined in the heading “Stage 4 — Registrar’s Decision” below. This includes the amendment notice. As noted above, if the amendment statement enclosed the amendment demand, the amendment demand will also be attached to the amendment notice. However, if the amendment statement did not enclose the amendment demand, the amendment notice will contain a statement to that effect. [page 742]

Stage Three — Amendment Notice Amendment Notice following Amendment Statement Following receipt of an Amendment Statement which is complete and not otherwise defective, the Registrar will give an Amendment Notice to the secured party as soon as reasonably practicable. The secured party may respond to the amendment demand as set out in the Amendment Notice, within the period stipulated by the Amendment Notice. If the secured party is a deregistered Australian company, the Registrar may also send a copy to the Australian Securities and Investments Commission inviting a response to the matters set out in the Amendment Notice.

As mentioned above an amendment notice is a notice issued by the Registrar to a secured party. Amongst other things, the amendment notice sets out the amendment demanded and invites the secured party to respond with the reason(s) why the amendment is unauthorised. An amendment notice will only be issued if an amendment demand has been given to a secured party. In general, the Registrar will not issue an amendment notice unless the Registrar has received amendment statement which is complete and not otherwise defective. However, the Registrar may issue an amendment notice if there is evidence that an amendment demand has been given to the secured party and the Registrar suspects on reasonable grounds that the amendment is authorised. The Registrar will give the amendment notice to the secured party, at the address specified in the registration for the giving of notice to the secured party, by: 1. sending it to the address by pre-paid post, fax or email; or 2. leaving it at the address. The amendment notice will: 1. State the amendment demanded. 2. Invite the secured party to respond before the end of: 2.1. five business days after the notice is given; or 2.2. a longer period approved by the Registrar, (the “response period”). 3. Set out the effect of section 181 of the PPS Act; that is at the end of the response period the Registrar must register a financing change statement amending the registration in accordance with the amendment demand, unless the Registrar suspects on reasonable grounds that the amendment is not authorised under section 178 of the PPS Act. 4. If the amendment notice is in response to an amendment statement, attach a copy of the amendment statement. If the amendment statement enclosed the amendment demand, the amendment demand will also be attached to the amendment notice. However, if the amendment statement did not enclose the amendment demand, the amendment notice will contain a statement to that effect. 5. Provide details of any other matter that the Registrar considers relevant. In general the response period will be 5 business days. However, a longer

period may be approved if appropriate. For example, if the amendment demand is extensive, sent only via post, or if the amendment notice is sent to the secured party within in 5 business days of the Christmas or Easter public holiday period. [page 743]

Amendment Notice (Registrar’s own volition) The Registrar may issue an amendment notice to a secured party if the Registrar is satisfied that amendment demand has been given to the secured party and the Registrar suspects on reasonable grounds that the amendment demanded is authorised, in accordance with section 178 of the PPS Act. In determining whether there are reasonable grounds to suspect that the amendment demanded may be authorised, and therefore that an amendment notice should be sent, the Registrar may have regard to the following: 1. any information or matter contained in the amendment demand; 2. any information contained in correspondence or records which relates in any way to the amendment demand; 3. any information that is contained in the PPSR and readily available; 4. any other relevant information.

Stage 4 — Registrar’s Decision Pursuant to section 181 of the PPS Act, at the end of the response period the Registrar must register a financing change statement to amend the registration in accordance with the amendment demand, unless the Registrar suspects on reasonable grounds that the amendment is unauthorised. The Registrar may also register a financing change statement amending the registration in accordance with the amendment demand before the expiration of the response period if: 1. the secured party has responded; and 2. the Registrar has no reason to believe that the secured party intends to give any further response. In general, the Registrar will consider that there is no reason to believe that a secured party that has responded intends to provide a further response, unless the secured party states such an intention in the initial response. However, the Registrar will not take any action under section 181, if the administrative process has stopped being available, that is if:

the registration is amended (including removed) in accordance with the amendment demanded; 2. proceedings come before a court, in relation to an application under section 182, that related to the amendment demanded (discussed further under the heading “Judicial Process” below). In determining whether there are reasonable grounds to suspect that the amendment is authorised, and therefore whether a financing change statement should be registered, the Registrar will have regard to: 1. the response (if any) of the secured party to the amendment notice; and 2. any other relevant information. 1.

Judicial Process As an alternative to the administrative process (and in circumstances where the administrative process is not available), section 182 allows the both the secured party and person who made the amendment demand to apply to court for an order relating to the amendment demand. The administrative process preconditions do not apply to the judicial process. However, a person who gave the amendment demand cannot make an application to court under section 182 before the end of five business days after the demand is given. [page 744] It is open for the Registrar to intervene in proceedings of this nature (section 218 of the PPS Act). For further information regarding the Registrar’s approach to intervention in judicial proceedings see Registrar’s Practice Statement No 7 — Judicial Proceedings — Sections 218 and 219.

Removal of Data as a result of an Amendment Notice Data removed from the PPSR because of an amendment under this section must not be made available for search in the PPSR by reference to any time before (or after) the time of removal, if the Court so orders; or if Registrar so decides. The Registrar will not make data removed as a result of an amendment demand publically available for search in the register by reference to any time

before (or after) the time of removal if, having regard to the information contained in the amendment notice and any response received from the secured party, the Registrar considers that the data was never accurate.

Note on practice regarding registrations migrated as “ALLPAAP — no exceptions” Background Many security interests were migrated to the PPSR with the collateral class “All present and after acquired property — no exceptions. For example all registrations that were migrated from the ASIC register of Company Charges were migrated with the collateral class of ALLPAAP. In many cases the underlying security interest may cover a narrower scope of collateral. For example, the migrated security interest may have been a fixed charge. The selection of that collateral class occurred as a consequence of the data migration process — it was not a result of a choice by the secured parties involved.

Remedy It is not possible to directly amend the collateral class of the migrated registration. The position can be regularised only by removing the migrated registration and re-registering the fixed charge with a link to the migrated registration to preserve its priority. This solution is likely to be impractical to implement on a large scale.

Searching Details of the actual scope of the underlying security interest can be obtained by viewing the attachments to the migrated registration, which will usually comprise an ASIC Form 309 together with the security document.

Effect Section 337A of the Personal Property Securities Act 2009 limits the effectiveness of a transitional registration to only that collateral covered by a transitional security agreement. The effect of this provision is to make clear that it would not be possible for a secured party to rely on a migrated “ALLPAAP — no exceptions” registration to assert an interest in collateral which is not covered by the security document underlying the migrated registration.

[page 745]

Registrar’s comments The Registrar encourages interested parties first to review the attachments to the migrated registration. They may decide that provides sufficient comfort as to the scope of the underlying security interest. However, the Registrar understands that, as a matter of practice, parties may request and provide (on a voluntary basis) advices of ‘no interest’ in respect of particular collateral. Such advices may, for example, be provided by an existing financier at the request of a buyer or another financier in order to provide additional assurance that the other party will not be adversely impacted by the pre-existing registration with the ‘ALLPAAP — no exceptions’ collateral class. Using searches, and such advices where appropriate, rather than requiring the pre-existing ALLPAAP registrations to be replaced, is likely to significantly reduce the costs associated with transitioning to the PPSR.

Further information Enquiries about any of the matters discussed in this practice statement may be directed via email to [email protected].

[page 747]

Personal Property Securities Registrar’s Practice Statement No 5 Removal, Correction and Restoration of Data on the PPSR Background and Purpose The Personal Property Securities Register (PPSR) is an online register, which allows parties to make registrations in respect of security interests in personal property and other prescribed personal property such as ‘hoon liens’ and ‘proceeds of crime’ over personal property. In order to ensure the data in the register is accurate, the Personal Property Securities Act 2009 (PPS Act) and the Personal Property Securities Regulations 2010 (PPS Regulations) place restrictions on the circumstance in which a registration can be made. For example a person may only apply to register a financing statement in respect of a security interest, if the person believes, on reasonable grounds, that the person named as the secured party in the statement is or will become a secured party in relation to the collateral. The Registrar of Personal Property Securities (Registrar) is responsible for establishing and maintaining PPSR. This Registrar’s practice statement explains how the Registrar will maintain the data in respect of security interests and other prescribed property that is contained in the PPSR. In particular, it explains how the Registrar will generally exercise the power to remove, restore or correct data within the PPSR in accordance with Part 5.7 of the PPS Act.

Remove, Restore or Correct Data on the PPSR The Registrar may, on the Registrar’s initiative, register a financing change statement to remove, correct or restore data on the PPSR. There are a number of ways that it might come to the Registrar’s attention that certain data registered

on the PPSR should be removed or corrected, or that data that no longer exists on the PPSR should be restored. These include but are not limited to: the receipt of an application from an individual or an organisation to remove, correct or restore data; as a result of an investigation under section 195A of the PPS Act; and as a result of, or arising out of, the administrative process for an amendment demand.

Application A person seeking to have data removed, restored or corrected on the PPSR should make an application in writing to the Registrar, using the form “Application to Remove Data or Correct Registration Errors” which is available from the forms page of the PPSR website (www.ppsr.gov.au). Any person may make such an application to the Registrar. However, the Registrar has complete discretion in relation to the consideration of any such application. In completing the “Application to Remove Data or Correct Registration Errors”, the applicant should have regard to the grounds upon which Registrar may remove, restore or correct data and provide sufficient evidence in support of one or more of those [page 748] grounds. Those grounds are discussed in further detail below. The Registrar will only exercise the discretion to remove, restore or correct data if the Registrar is satisfied there grounds to do so. Important: the “Application to Remove Data or Correct Registration Errors” is not an alternative to the amendment demand process. If a person seeking to remove data from the PPSR is a person with an interest in the collateral and the data requested to be removed amounts to an authorised amendment demand, the person should utilise the amendment demand process described in Part 5.6 of the PPS Act. See further Registrar’s Practice Statement No 4 — Amendment Demand Process. If the Registrar considers that the amendment demand process is the more appropriate procedure an application to remove data will be rejected. Please also note the effect of a successful Application to Remove Data or Correct Registration Errors will be to remove or amend the effect of the registration. If your purpose is directed at making the data not available for

public search rather than challenging the correctness of the data you should make an application to restrict public access to the data using the form “Application to Restrict Access to Data”. See further Registrar’s Practice Statement No 6 — Restrict Access to Data.

Process to Remove, Restore or Correct Data on the PPSR If it comes to the Registrar’s attention that, in relation to certain data registered on the PPSR, grounds might exist which suggest that the data should be removed, restored or corrected, the Registrar may investigate the matter. If the Registrar suspects that grounds might exist to remove, restore or correct data and the Registrar is of the opinion that the data’s removal, restoration or correction (as the case may be) might adversely affect a person; the Registrar may give notice to that person. The Registrar will not give any notice in relation to a removal that is urgently required. The notices will be titled “Notice in respect of Discretion to Remove Data” and “Notice in respect of Discretion to Restore Data” or “Notice in respect of Discretion to Correct Data”. The details of what the notices must contain are set out at attachments A and B to this Practice Statement. If the Registrar has sent a Notice in respect of Discretion to Remove Data to a person, the Registrar will only register a financing change statement to remove data if, the Registrar is satisfied that, based upon the information set out in: 1. the Notice in respect of Discretion to Remove Data that was sent to the person; and 2. the response (if any) of the person to whom the Notice was sent, there are grounds to remove the data and the removal of that data is appropriate. If no Notice in respect of Discretion to Remove Data was sent, the Registrar will only register a financing change statement to remove data if, the Registrar is satisfied that there are grounds to remove the data and the removal of that data is appropriate. Similarly, if the Registrar has sent a notice regarding the restoration or correction of data to a person, the Registrar will only register a financing change statement to restore or correct data if, it appears to the Registrar based upon the information set out in: 1. the notice that was sent to the person; and 2. the response (if any) of the person to whom the notice was sent,

[page 749] that (where the financing statement is to restore data) the data was incorrectly removed or (where the financing statement is to correct data) that the data contains an error or omission that was made by the Registrar. If no notice regarding the restoration or correction of data was sent, the Registrar will only register a financing change statement to restore or correct data if it appears to the Registrar that the data was incorrectly removed or that the data contains an error or omission that was made by the Registrar, respectively. Please note that, in most instances, it is unlikely that a “Notice in respect of Discretion to Restore Data” or “Notice in respect of Discretion to Correct Data” will be sent, because the restoration or correction of errors will merely place a person in the position that they should have been in and the Registrar will not consider a person to be adversely affected by such action.

Removal of Data The Registrar will only register a financing change statement to remove data, including an entire registration, from the PPSR if the Registrar is satisfied that one of the general grounds set out in section 184 of the PPS Act (and corresponding regulations) exists or if the data has been ineffective for 7 years or more.

General Grounds The general grounds upon which the Registrar may remove data from the PPSR are as follows: 1. The application to register the data was: 1.1. frivolous; or 1.2. vexatious. 2. The data is offensive. 3. The retention of the data in the PPSR is contrary to the public interest. In general, in determining whether the retention of the data in the register is contrary to the public interest the Registrar will have regard to the following: 3.1. whether the public is likely to be misled by the data in its present

4.

form; 3.2. whether the removal of the data will assist in maintaining the integrity of the PPSR; and 3.3. any other relevant matter. The registration of the data is prohibited by regulations made for the purposes of section 150(3)(d) of the PPS Act. The table below sets out the data that is prohibited by regulations. The kinds of registrations listed in the second column are prohibited unless the financing statement or financing change statement is lodged by a person named in the third column.

Item

Registration Kind

a

A motor vehicle that has been impounded, immobilised or forfeited, or is subject to an impoundment, immobilisation or forfeiture application, under a law that provides for impoundment, immobilisation or forfeiture of a motor vehicle because it is being used, or has been used, in the commission of certain offences.

Persons permitted to register a financing statement or a financing change statement (i) A police commissioner; or (ii) a person authorised to register personal property on a transitional register; or (iii) a person authorised by a relevant agency to register data in relation to prescribed property.

[page 750] Item

b

Registration Kind

Persons permitted to register a financing statement or a financing change statement Personal property that is (i) A proceeds of crime subject to a notice or an order, authorised person; or or is confiscated or forfeited, under a provision of a proceeds (ii) a person authorised to of crime law. register personal property on a transitional register; or

(iii) a person authorised by a relevant agency to register data in relation to prescribed property. Personal property that is (i) The person who applied for subject to an order of a court or the order; or tribunal (however described) that: (ii) if the order was made on (i) prevents or restricts a the court’s own initiative — person dealing with the the person in whose favour the property; or order is made. (ii) enforces another court order (however described); or (iii) orders the sale or other disposal of all or part of the property. Personal property that: (i) A person authorised to register personal property on a (i) is not mentioned in transitional register; or paragraph (a), (b) or (c); and (ii) A person authorised by a relevant agency to register data (ii) immediately before the in relation to prescribed registration commencement property. time, could have been registered on a transitional register maintained under a law of the Commonwealth, a State or a Territory. Registration of a security None interest in relation any of the property set out in (a), (b), (c) or (d).

c

d

e

5. 6. 7.

The removal of the data is required by a court order. The application to register the data was not made in the approved form. The Registrar considers that the removal of the data is required urgently in the public interest.

8.

A court order requires the data to be removed urgently. This includes any order made as the result of an interlocutory process including a mareva order.

Registration ineffective for 7 years or more The Registrar will register a financing change statement to remove data (including an entire registration) with respect to a security interest from the PPSR to reflect the fact [page 751] that the registration has been ineffective for 7 years or more. A registration with respect to a security interest is ineffective from the earliest of the following times (section 163 of the PPS Act): 1. the end time (if any) registered for the collateral; 2. if the registration is amended to omit the collateral description — the amendment time; or 3. the time when the description of the collateral in the registration stops being available for search in the PPSR (by reference to that time) in respect of the secured party.

Effect of Removal of Data No verification statement will be issued in respect of a financing change statement which is registered by the Registrar to remove data with respect to a security interest to reflect the fact that the registration has been ineffective under section 163 of the PPS Act for 7 years (sections 156 and 185 of the PPS Act). A verification statement will generally be issued in respect of a financing change statement which is registered by the Registrar to remove data on any other ground. Data which is removed on the grounds that it has been ineffective for 7 years or more or pursuant to a court order which expressly orders that the data will be available prior to the date of removal will be available for search in the PPSR by reference to any time before the time of removal, but not by reference to any time after the data is removed. In all other cases, if the Registrar registers a financing change statement to remove data which is an entire registration, that data will not be publically

available for search in the PPSR by reference to any time before (or after) the time of removal if the Registrar considers that it is appropriate. For example, if the Registrar is of the view that the particular data was never accurate, that data may not be available for search in the PPSR by reference to any time before (or after) the time of removal.

Restoration of Data 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 PPSR under the PPS Act. The Registrar will consider that data was incorrectly removed if: 1. it was removed by the Registrar; and 2. the removal of that data occurred as a result of a mistake. In general, the Registrar will not restore data that was the removed as a result of the amendment demand judicial/amendment process unless: 1. the court has ordered the restoration of the data; or 2. the Registrar, on the original information provided, suspected on reasonable grounds that the amendment was not authorised under section 178 of the PPS Act and the removal of the data was due to a mistake, rather than as a result of the administrative process in relation to amendment demands. For further information in relation to the amendment demand process see Registrar’s Practice Statement No 4 — Amendment Demand Process.

Effect of Restoration of Data A verification statement will be issued in respect of a financing change statement which is registered by the Registrar to restore data. At law, the restored data will be taken to have never been removed (section 186 of the PPS Act). [page 752] If the restoration is to restore an entire registration, a search of the PPSR by reference to a time after the time of restoration, will not reveal that the data was ever removed. If the restoration is in relation to only particular data contained

within the registration, a search of the PPSR by reference to a time after the time of restoration will reveal that the data had been removed. If a person would like to know whether particular data within a registration has been restored by the Registrar, at first instance the person should contact the secured party listed in respect of the registration. If the response is unsatisfactory, the person may email or write to the Registrar, requesting further information and including copies of the correspondence with the secured party. Such communications should be addressed to the Registrar and sent to: Post:

National Service Centre GPO Box 1944 Adelaide SA 5001

Email:

[email protected]

Correction of Errors The Registrar may, at the Registrar’s initiative, register a financing change statement to amend a registration to correct an error or omission made by the Registrar. In general, the Registrar will only be satisfied that a registration contains an error or omission made by the Registrar if the registration occurred via: 1. hard copy form and the details on the PPSR do not match the details that were provided on a hard copy form; 2. the web user interface of the PPSR and the Registrar is aware that there was an error with the PPSR, which caused the error or omission to occur and the error, the correction of that error was within the control of the Registrar, and the Registrar is of the opinion that the Registrar ought to exercise the discretion to correct the data; or 3. a B2G interface of the register and the Registrar is aware that there was an error with the PPSR end of the B2G link which caused the error or omission to occur, the error and correction of that error was within the control of the Registrar, and the Registrar is of the opinion that the Registrar ought to exercise the discretion to correct the data.

Effect of Correction of Data A verification statement will generally be issued in respect of a financing

change statement which is registered by the Registrar to correct data which contained an error or omission that was made by the Registrar. Although a search of the PPSR will reveal that the error once existed, at law, the corrected data will be taken to have never contained the error (section 188 of the PPS Act). If a person is would like to know whether particular data within a registration has been corrected by the Registrar, at first instance the person should contact the secured party listed in respect of the registration. If the response is unsatisfactory, the person may email or write to the Registrar, requesting further information and including copies of the correspondence with the secured party. Such communications should be addressed to the Registrar sent to: [page 753]

Post:

National Service Centre GPO Box 1944 Adelaide SA 5001

Email:

[email protected]

Storage of Removed, Restored and Corrected Data The Registrar will maintain a record of all information that is removed, restored or corrected in accordance with Part 5.7 of the PPS Act. Any such data will be stored separately to the publicly accessible PPSR. The storage of any data removed will be subject to the requirements of the Archives Act 1983 (Cth).

Further Information Enquiries about any information contained in this practice statement may be directed via email to [email protected] or by telephone on 1300 077 000.

Attachment A The “Notice in respect of Discretion to Remove Data” will contain the following information: 1. The data that the Registrar proposes to remove, including the relevant registration number. The data might be an entire registration or particular data contained in a registration.

2. 3. 4.

5.

6. 7.

The ground(s) upon which the Registrar proposes to remove that data. The factual basis upon which the Registrar suspects that the grounds stated above might be satisfied. Invite the secured party to respond before the end of: 4.1. five business days after the notice is given; or 4.2. a longer period approved by the Registrar. State that if the Registrar is satisfied that there are grounds to remove the subject data and the Registrar considers it appropriate to do so, the Registrar will remove the subject data. State that the Registrar’s decision is reviewable by the Administrative Appeals Tribunal. Any other relevant information.

The notice may also: 8. state nature of the registration; 9. any other relevant information that is contained in the register and readily available to the public; and/or 10. if relevant, request the person to provide the secured party group number that relates to the registration.

Attachment B The “Notice in respect of Discretion to Restore/Correct Data” will contain the following information: 1. State the subject data that the Registrar proposes to restore or correct, including the relevant registration number. 2. The factual basis upon which the Registrar suspects that the data was incorrectly removed or contains errors. [page 754] 3.

4.

Invite the person to respond before the end of: 3.1.1. five business days after the notice is given; or 3.1.2. a longer period approved by the Registrar, (the “response period”). State that unless the Registrar is satisfied that the data was not

5. 6.

incorrectly removed or does not contain errors; the Registrar will restore or correct the subject data. State that the Registrar’s decision is reviewable by the Administrative Appeals Tribunal. Any other relevant information.

The notice may also: 7. state nature of the registration; 8. any other relevant information that is contained in the register and readily available to the public; and/or 9. if relevant, request the person to provide the secured party group number that relates to the registration.

[page 755]

Personal Property Securities Registrar’s Practice Statement No 6 Restrict Access to Data Background and Purpose The Personal Property Securities Register (PPSR) is an online register, which allows parties to make registrations in respect of security interests in personal property and other prescribed personal property. The Registrar of Personal Property Securities (Registrar) is responsible for establishing and maintaining the PPSR. The Personal Property Securities Act 2009 (Cth) (PPS Act) section 170 requires the Registrar to give a person access to data contained on the PPSR if the search is authorised, the application is in the approved form, the fee is paid and access to data is not prohibited by the regulations. Personal Property Securities Regulation 2010 (Cth) (PPS Regulations) regulation 5.7 provides that data is prohibited if: 1. a court has ordered that that access to the data is not permitted; or 2. the Registrar considers that it is in the public interest that access to the data should not be permitted. This Registrar’s Practice Statement explains how the Registrar will restrict access to data contained in the PPSR, and in what circumstance the Registrar may consider that it is in the public interest to restrict access to data contained in a registration.

Application to Search for Data A search of the PPSR can be conducted online at www.ppsr.gov.au, via telephone on 1300 007 777 or via hard copy. In accordance with section 171 of the PPS Act, the Registrar will permit a person to search the register by reference to:

the grantor’s details (as required to be included, if at all, in a registered financing statement and only if the applicant acknowledges they are conducting a search for an authorised purpose in accordance with section 172 of the PPS Act); 2. a serial number by which collateral may (or must) be described in the register; 3. a registration number; and 4. a point in time being: a. the time of the search; or b. an earlier nominated time, but only with the consent of the Registrar. With the exception of the “point-in-time” search relating to an earlier nominated time, any search can be conducted online. A person seeking to conduct a “point-in-time” search by reference to an earlier nominated time should either contact the PPS Service via telephone on 1300 007 777 or submit a hard copy “Request for Point-in-time Search” to the address stated above. 1.

Access to Restricted Data The Registrar will restrict access to data if: 1. a court has ordered that access to the data is not permitted; or 2. the Registrar considers that it is in the public interest that access to the data should not be permitted. [page 756] The only information that is publicly available in relation to a registration which has been restricted is the registration number and the end time of the registration. Accordingly, if a person conducts a search by reference to the grantor’s details, serial number or registration number and the registration has been restricted the only information that the person will obtain is the registration number and end time. The person will be charged the full fee for the search.

Registrar’s discretion to Restrict Access to Data The Registrar may restrict access to data if the Registrar considers that it is in

the public interest to restrict access to that data. There are a number of ways that it might come to the attention of the Registrar that access to data should be restricted. These include but are not limited to: 1. the receipt of an application from a member of the public (or a government agency) to restrict access to data; or 2. as a result of an investigation under section 195A.

Application to the Registrar to Restrict Access to Data A person seeking to have access to data restricted should make an application in writing to the Registrar, using the form “Application to Restrict Access to Data”, which is available from the website www.ppsr.gov.au. Any person may make such an application to the Registrar. However, the Registrar has complete discretion in relation to the consideration of any application. In general the Registrar will give more weight to an application which is made by a person with an interest in the property. In completing the “Application to Restrict Access to Data”, the applicant should state whether the application is in respect of a court order or requests the Registrar to exercise discretion restrict data. If the application is in respect of a court order the application must enclose a sealed copy of the court order. If the application is to request the Registrar to exercise discretion the application should provide the reasons why the applicant believes that the data should be restricted, having regard to the following matters: 1. evidence that an individual’s safety may be at risk (for example a restraining order or a police report) 2. whether the information in the PPSR is sufficient to locate the individual; and 3. whether that information is available from other publicly available source (for example the Australian Securities and Investments Commission’s Companies Register or the white pages). In general, data within the PPSR will be publicly available. In deciding whether it is in the public interest to restrict access to data the Registrar will have regard to the following matters set out in regulation 5.7(2) of the PPS Regulations: 1. whether it is necessary to prevent or lessen a serious and imminent threat to the life or health of the individual whose personal details are recorded in the financing statement or of another person;

2. 3. 4.

the interests of a person undertaking a search authorised by section 171 or 172 of the Act; the interests of the secured party in ensuring that notice of the security interest is accessible by authorised searchers; and the public interest in protecting the privacy of the individual grantor’s information. [page 757]

In general, the Registrar will only exercise the discretion to restrict access to data if the registration contains information that allows someone to be located and that information is not otherwise readily available to the public. Important: the “Application to Restrict Data” will not result in the removal of the registration; it merely restricts the public’s ability to access any information regarding the registration other than the registration number and the end time.

Process If it comes to the Registrar’s attention that a court has ordered that access to data is not permitted, and the Registrar has a sealed copy of those orders, the Registrar will restrict access to the relevant registration. If it comes to the Registrar’s attention that, it may be in the public interest to restrict access to data, the Registrar may consider the matter. The Registrar will make a decision as to whether it is in the public interest to restrict access to the data. In making that decision the Registrar will have regard to the various matters outlined above under the heading “Application to the Registrar to Restrict Access to Data”. For example, access to data may be restricted if the combination of the individual grantor’s name, the secured party’s name and/or the collateral description, could help to locate an individual which would not otherwise be located, may result in serious harm to the individual or another person.

Further Information Enquiries about any information contained in this practice statement may be directed via email to [email protected].

[page 759]

Personal Property Securities Registrar’s Practice Statement No 7 Judicial Proceedings Sections 218 and 219 Background and Purpose The Personal Property Securities Act 2009 (Cth) (PPS Act) establishes a single national law governing security interests in personal property, designed to create a more certain, consistent, simpler and cheaper arrangements for personal property securities for the benefit of all parties. The PPS Act allows the Registrar of Personal Property Securities (the Registrar) to intervene in judicial proceedings or commence or carry out proceedings in a person’s name for the recovery of damages, if the proceedings are with respect to a “PPS matter”. This Registrar’s practice statement explains how a person seeking the Registrar’s intervention in, or initiation of judicial proceedings should apply and sets out the circumstances in which the Registrar will exercise the discretion to intervene in or initiate judicial proceedings. Although, this practice statement provides general guidance for the benefit of litigants and their advisers, each application will be reviewed on a case by case basis on its merits. For information regarding the Registrar’s approach to litigation in respect of contraventions of the civil penalty provisions see Registrar’s Practice Statement No 3 — Regulation and Enforcement Policy.

Judicial Proceedings with respect to a PPS Matter Sections 218 and 219 of the PPS Act permit the Registrar, on behalf of the Commonwealth, to: 1. intervene in judicial proceedings with respect to a PPS matter; or 2. commence or carry out proceedings in a person’s name for the recovery of damages with respect to a PPS matter, if the Registrar

considers it is in the public interest. PPS matter is defined in sub-section 206(1) of the PPS Act as a matter: 1. arising under a provision of the PPS Act which authorises an application to be made to a court; or 2. otherwise arising in relation to the PPS Act, other than a matter in respect of which the Federal Court or the Federal Magistrates Court has jurisdiction under the Administrative Decisions (Judicial Review) Act 1977; or 3. otherwise arising in relation to a security agreement or a security interest. A proceeding may give rise to questions of law, such as the construction of the PPS Act or the general law relating to a security agreement or security interest, which makes the proceedings “with respect to a PPS matter”. The Registrar may consider that the matter is of sufficient importance to warrant intervention in, or initiation of, judicial proceedings. [page 760]

Intervening in Judicial Proceedings The Registrar may decide to apply to court to intervene in proceedings: 1. in response to a request made by a party to the proceedings; or 2. at the Registrar’s own initiative.

Application A party who seeks to have the Registrar intervene in proceedings should apply in writing addressing all matters that are relevant to the Registrar’s decision, including at a minimum: 1. a copy of all pleadings filed in the proceedings; 2. legal advice prepared by a solicitor or counsel which addresses the following: a. the likelihood of success in those proceedings; b. the reason(s) the proceedings are in respect of a PPS matter; and c. the matters in which the Registrar’s intervention could assist the court; and

a summary of the matters which would recommend the Registrar’s intervention, in view of the matters stated below under the heading “Policy Considerations”. An application, which addresses the relevant matters should be sent to: The Registrar of Personal Property Securities Insolvency and Trustee Services Australia National Service Centre GPO Box 1944 Adelaide SA 5001 Alternatively, it may be sent via email to [email protected]. 3.

Basis upon which the Registrar Intervenes The Registrar will exercise the discretion to intervene on the following basis: 1. The Registrar will bear the Registrar’s own costs in relation to intervention. To the extent that certain costs can be shared with another party, if the Registrar sees a community of interest (eg experts’ fees, consultants’ reports) the Registrar may consider a cost sharing arrangement. 2. The Registrar will appear through a legal adviser and will not agree to be represented as an intervening party by any other party to the proceedings. 3. If the Registrar supports submissions being made by another party to the proceedings, the Registrar may agree to exchange information with that other party. However, the Registrar will not provide information that would otherwise constitute a breach of the Privacy Act 1988 (Cth). Any information provided by the Registrar to another party to the proceedings will be on a confidential basis and subject to the other party agreeing that the Registrar is entitled to exercise an overriding discretion as to whether the information is put before the court by the Registrar as an intervening party. 4. If the Registrar has conducted an investigation in relation to matters arising in the proceedings, the Registrar will consider favourably a request to provide to other parties to the proceedings a copy the 195A Notice and the response to that notice. The Registrar considers that, notwithstanding an intervention under section 218 may be on foot, the Registrar is entitled to continue an investigation

[page 761] conducted under section 195A of the PPS Act. However, the Registrar will generally prefer to intervene in civil proceedings only after the completion of an investigation, in order that the Registrar may put all relevant information disclosed by reason of that investigation before the court.

Beginning or Carrying on Judicial Proceedings The Registrar may, on behalf of the Commonwealth, cause proceedings to be commenced and carried on in another person’s name: 1. in response to a request made by the person in whose name the proceedings are to be commenced or carried on; or 2. at the Registrar’s own initiative.

Conditions Precedent The Registrar may bring or carry on proceedings, on behalf of the Commonwealth and in the name of a person, by way of initiating proceedings, defending or seeking to be joined to existing proceedings. The Registrar will not bring or carry out proceedings in the name of a person, unless following four conditions are satisfied: 1. the Registrar has received written legal advice that there are reasonable grounds for starting the proceedings; 2. the proceedings are for the recovery of damages with respect to a PPS matter; and 3. the person in whose name the proceedings are to be commenced: 3.1. has provided written consent to the Registrar bringing or commencing proceedings in that person’s name; or 3.2. is a constitutional corporation; and 4. the Registrar considers it is in the public interest to begin or carry on proceedings.

Application Any person who seeks to have the Registrar initiate proceedings in the person’s name should apply in writing to the Registrar, addressing all matters

relevant to the Registrar’s decision, including at a minimum: 1. a copy of all draft pleadings; and 2. legal advice prepared by a solicitor or counsel which addresses the following: 2.1. the likelihood of success in those proceedings; and 2.2. the reason(s) the proceedings are for the recovery of damages with respect to a PPS matter; and 2.3. the grounds that demonstrate it is in the public interest for the Registrar to initiate the proceedings. In addition to the matters stated above, every application must include a summary of the matters which would recommend that the Registrar begin and carry on the proceedings with reference to the matters stated below under the heading “Policy Considerations”. An application, which addresses the relevant matters should be sent to: The Registrar of Personal Property Securities Insolvency and Trustee Services Australia National Service Centre [page 762] GPO Box 1944 Adelaide SA 5001 Alternatively, it may be sent via email to [email protected].

Approach In general, the Registrar will not begin or carry on proceedings for the recovery of damages in the name of a person if the nature of the dispute is purely a private matter. The Registrar considers that the private plaintiff is best placed to assess the costs and benefits of litigation. However, the Registrar will consider bringing proceedings in the following circumstances: 1. the potential plaintiff(s) is not in a financial position to bring proceedings; and 2. the Registrar considers that it is in the public interest to commence proceedings having regard to the general matters beneath the heading

“Policy Considerations” below.

Basis upon which the Registrar Begins or Carries on Proceedings The Registrar does not regard section 219 as a method by which the Registrar may fund litigation that could be brought by a private party who has sufficient funding. The Registrar will exercise its right to begin and carry on proceedings only if the Registrar and the person in whose name the proceedings are to be bought or carried out enter into a litigation funding agreement, in which: 1. the person agrees to assign all rights to conduct the matter to the Registrar; 2. the person agrees to repay the Registrar any costs or fees incurred by the Registrar in the course of the litigation, if: a. the litigation results in the named party receiving damages; and b. the Registrar so requests the fees and/or costs to be repaid; but c. only to the extent that the fees and costs are less than the damages awarded.

Policy Considerations In general, the Registrar will not intervene in, or bring and carry on proceedings of a purely private nature where relevant parties are able to make submissions on all relevant facts to the court. Generally, the Registrar will consider intervening or commencing proceedings only in the following circumstances: 1. Construction of the PPS Act The Registrar is responsible for the maintenance of the Personal Property Securities Register (PPSR) and for the enforcement of the civil penalty provisions under the PPS Act. It may be desirable that judicial interpretation of the PPS Act and the law regarding security agreements and security interests more generally occur with the benefit of submissions from the Registrar. The Registrar will consider engaging in proceedings which may significant affect the interpretation or application of the PPS Act or the law regarding security agreements and security interests. 2. Matter of general significance A proceeding may result in an outcome at law, which affects public confidence in security interests in personal property. If the Registrar

considers that such a result is likely to significantly lessen public confidence in personal property security interests in Australia, the Registrar may intervene in or initiate proceedings. [page 763]

Recovery of Court Ordered Costs Please note, in general, the Registrar will actively pursue the recovery of court ordered costs awarded in the Registrar’s favour as a result of any litigation.

Further information Enquiries about any information contained in this practice statement may be directed via email to [email protected].

Index References are to paragraph numbers ABN definition …. [PPSA.10] Access entitlements PPSA provisions, application of …. [Pt A.57] Access to data see Data access conditions Accessions damage caused in removing — reimbursement for …. [PPSA.93] — secured party, not to damage goods …. [PPSA.92] definition …. [PPSA.10] interest in whole, when person with may retain …. [PPSA.96] notice of removal, requirement for secured party to give …. [PPSA.95] permission to remove, refusal of …. [PPSA.94] removal — court order about …. [PPSA.97] security interests, rules for certain …. [Pt A.45], [PPSA.87]-[PPSA.97] — continuation of security interests in …. [PPSA.88] — default rule, and priority of interest in accession …. [PPSA.89] — Part 3.3, guide to …. [Pt A.45], [PPSA.87] — whole, priority interest in after goods become accession …. [PPSA.91] before security interest perfected …. [PPSA.90] Account for money had and received common law action …. [Pt A.50] Accounts

bank — securitisation and ADIs security interest in ADI account, first ranking priority of …. [PPSA.75] cash payable under, collection of …. [Pt A.48], [PPSA.120] — collections, application of …. [PPSA.120] — garnishee procedure …. [PPSA.120] — higher priority parties and grantor, notice to …. [Pt A.48], [PPSA.121] classification of property …. [Pt A.38] collateral, categorisation of …. [Pt A.36] collection, transfers of accounts for, interests not covered by PPSA …. [PPSA.8] control over …. [PPSA.340] debtor, definition …. [PPSA.10] definition …. [PPSA.10], [PPSA.10.A] returned collateral, from buyer or lessee …. [PPSA.38] securities, definition …. [PPSA.10], [PPSA.15] securitisation, protection of SPV acquiring receivables …. [PPSA.64] transfer, of — contractual restrictions, prohibitions on transfer and …. [PPSA.81] — transferee and account debtor, rights of …. [PPSA.80] ACN definition …. [PPSR1.6] Acquisition of property no unjust …. [PPSA.252B] Acts Interpretation Act 1901 Personal Property Securities Act 2009, application …. [PPSA.11] ADI account — collateral, categorisation of …. [Pt A.36] — control of …. [PPSA.25], [PPSA.341A] — definition …. [PPSA.10]

— receivables, ADI account for collection of priority …. [PPSA.75] third parties, enforceability against …. [PPSA.20] definition …. [PPSA.10] priority of security interests held by …. [Pt A.45], [PPSA.75] Admiralty Act 1988 (Cth) commencement of PPSA, amendment from …. [Pt A.53] Advances definition …. [PPSA.10] future — definition …. [PPSA.10] priority of …. [PPSA.58] After-acquired property definition …. [PPSA.10] security interests in …. [PPSA.18] Agency agreement, transfer of property upon termination of …. [PPSA.12.A] definition …. [PPSA.10] personal property securities, application of general law to …. [Pt A.50] Agreement intermediated security, control by …. [PPSA.26] subordination, as security interest — enforcement …. [PPSA.61] Agricultural interests personal property …. [Pt A.38] security interests, rules for certain …. [PPSA.83]-[PPSA.186] — Part 3.2, guide to …. [PPSA.83] Agriculture classification of property …. [Pt A.38] Air Services Act 1995 (Cth) commencement of PPSA, amendment from …. [Pt A.53] Aircraft

classification of property …. [Pt A.38] definition …. [PPSR1.6] engine, defined …. [PPSR1.6] finance see Aircraft finance manufacturer’s number, defined …. [PPSR1.6] Protocol, defined …. [PPSR1.6] serial number, property requiring unique …. [Pt A.39] small, defined …. [PPSR1.6] Aircraft finance serial numbered goods, aircraft or engine as …. [PPSRSCH1.2.2] Amendment express, definition …. [PPSA.10] Amendment demands administrative process …. [PPSA.180] — registration amendments …. [PPSA.181] — scope of subdivision …. [PPSA.179] definition …. [PPSA.10] how given …. [PPSA.178] — collateral class using finance charge statement …. [PPSA.178.A] judicial process for considering …. [PPSA.182] — case law …. [PPSA.182.A] Part 5.6, guide to …. [PPSA.177] Amendment notice definition …. [PPSA.10] Amendment time definition …. [PPSA.10] Annual reports provision in respect of …. [PPSA.192] Asset circulating See Circulating assets flawed asset arrangement

— meaning of security interest …. [PPSA.12] Assignment security interest, meaning …. [PPSA.12] Attachment definition …. [PPSA.19] floating charges, and time of …. [PPSA.19] perfection and, specific rules in respect of …. [Pt A.40], [PPSA.30][PPSA.40] — enforceability, required for …. [PPSA.19] — Part 2.4, guide to …. [PPSA.30] — timing of attachment …. [PPSA.19] — transitional security interests …. [PPSA.321] proceeds, of …. [PPSA.32], [PPSA.32.A] receivables see Financing rule …. [Pt A.40]-[Pt A.41] Australia definition …. [PPSA.10] entity, definition of Australian …. [PPSA.10] Personal Property Securities Act 2009, and connection with …. [PPSA.6] Australian Business Number ABN, definition …. [PPSA.10] Australian Law Reform Commission (ALRC) 1993 Report, and drivers for reform …. [Pt A.10] reform, discussion paper concerning …. [Pt A.9] Bailment PPS lease, definition …. [Pt A.30], [PPSA.10], [PPSA.13], [PPSA.13.A] storage purposes, for …. [PPSA.12.A] Bankruptcy Bankruptcy Act 1966 — commencement of PPSA, amendment from …. [Pt A.53] — interests not covered by PPSA, and …. [Pt A.32], [Pt A.57], [PPSA.8] definition …. [PPSA.10]

grantor, of, vesting of unperfected security interests in grantor upon …. [PPSA.267], [PPSA.267.A] — deemed security interests, exception in respect of …. [PPSA.268] — non-consensual security interest …. [PPSA.267.A] — security interests unaffected …. [PPSA.268] Bills of Exchange Act 1909 (Cth) inconsistency between PPSA and …. [Pt A.55], [PPSA.256] Bills of lading interests of sellers, and interests not covered by PPSA …. [Pt A.32], [PPSA.8] negotiable — interests not covered by PPSA …. [PPSA.8] Bills of sale focus of pre-PPSA law …. [Pt A.3] rationalisation of law in respect of …. [Pt A.1] Bills of Sale Act 1886 (SA) pre-PPSA law, as significant …. [Pt A.2] Bills of Sale Act 1899 (WA) pre-PPSA law, as significant …. [Pt A.2] Bills of Sale Act 1990 (Tas) pre-PPSA law, as significant …. [Pt A.2] Bills of Sale and Other Instruments Act 1955 (Qld) pre-PPSA law, as significant …. [Pt A.2] Bodies corporate knowledge, actual or constructive, of …. [Pt A.46], [PPSA.298] Bodies politic entities covered by PPSA …. [Pt A.35] Bond Bill reform, workshop concerning …. [Pt A.9] Business days, definition …. [PPSA.10]

ordinary course of, taking personal property free of security interest in …. [Pt A.46], [PPSA.46], [PPSA.46.A] — extinguishment rule and, application …. [PPSA.46.A] Buyers possession, in, PPSA and interaction with other legislation …. [Pt A.46] Canada PPSA legislation in …. [Pt A.22] — common law provinces of …. [Pt A.23] Carrier common, possession of goods shipped by …. [PPSA.65] timing rule for possession of goods transported by common …. [PPSA.24], [PPSA.24A] Certificate control of investment instruments evidenced by …. [PPSA.27] Charges company, rationalisation of law in respect of …. [Pt A.1], [Pt A.51] — focus of pre-PPSA law …. [Pt A.3] fixed and floating …. [PPSA.318] — demise of …. [Pt A.34] — references to …. [PPSA.318], [PPSA.339] interests not covered by PPSA …. [Pt A.32], [PPSA.8] Part 9.5, guide to …. [Pt A.34], [PPSA.338] references to …. [PPSA.318], [PPSA.339] registration and priority, alignment of Corporations Act with PPSA …. [Pt A.51] Chattel mortgage security interest, meaning …. [PPSA.12] Chattel paper authoritative electronic record, possession of …. [Pt A.45] cash payable under, collection of …. [Pt A.48], [PPSA.120] — collections, application of …. [PPSA.120] — garnishee procedure …. [PPSA.120]

— higher priority parties and grantor, notice to …. [Pt A.48], [PPSA.121] classification of property …. [Pt A.38] collateral, categorisation of …. [Pt A.36] deemed security interests and …. [Pt A.30] definition …. [Pt A.30], [PPSA.10] financial property, definition …. [PPSA.10] interest in, priority of person who acquires …. [Pt A.45], [PPSA.71] possession of — evidenced electronically …. [PPSA.24], [PPSA.24A] — taking, as perfection requirement …. [Pt A.42] priority of person who acquires …. [PPSA.71] returned collateral, from buyer or lessee …. [PPSA.38] securitisation — purchase of, protection of SPV for …. [PPSA.71] transfer — contractual restrictions, prohibitions on transfer and …. [PPSA.81] — transferee and account debtor, rights of …. [PPSA.80] modification of contract between …. [PPSA.80] Chattel Securities Act 1987 (Vic) pre-PPSA law, as significant …. [Pt A.2] Chattel Securities Act 1987 (WA) pre-PPSA law, as significant …. [Pt A.2] Cheques Act 1986 (Cth) inconsistency between PPSA and …. [Pt A.55], [PPSA.256] Chicago Convention definition …. [PPSR1.6] Christmas Island Personal Property Securities Act 2009, application in …. [PPSA.7.A] Circuit layout classification of property …. [Pt A.38] Circuit Layouts Act 1989 (Cth)

pre-PPSA law, as significant …. [Pt A.2] Circulating assets definition …. [PPSA.10], [PPSA.340] Civil penalty provisions contravening — offence, not …. [PPSA.223] — pecuniary penalty, power of Federal Court to order person to pay for …. [PPSA.222] — persons involved in …. [PPSA.224] criminal proceedings …. [PPSA.226]-[PPSA.229] — after civil proceedings …. [PPSA.228] — civil proceedings after …. [PPSA.226] — during civil proceedings …. [PPSA.227] — evidence given in proceedings for penalty, admissibility in …. [PPSA.229] definition …. [PPSA.10], [PPSA.221] Part 6.3, guide to …. [PPSA.220] pecuniary penalty, recovery of …. [PPSA.225] undertakings, enforceable, relating to contraventions of — acceptance of …. [PPSA.230] — enforcement of …. [PPSA.231] Clearing and settlement facility definition …. [PPSA.10] Cocos (Keeling) Islands Personal Property Securities Act 2009, application in …. [PPSA.7.A] Collateral categorisation of …. [Pt A.36], [PPSRSCH1.2.3] classification of property …. [Pt A.38] — “free text field” …. [Pt A.38] commercial property — categorisation of …. [Pt A.36] consumer property

— categorisation of …. [Pt A.36] definition …. [PPSA.10] description of property …. [Pt A.38] disposing of …. [PPSA.128]-[PPSA.133] — interests, free of lower ranking …. [PPSA.133] — market value, duty to obtain …. [PPSA.131] scope of duty …. [PPSA.131.A] — notice of proposed disposal …. [PPSA.130] — online auction …. [PPSA.128.A] — purchase, disposal by …. [PPSA.129] — sale, disposal by …. [PPSA.129] — secured party, power to dispose …. [PPSA.128] — statement of account, duty of secured party to give …. [PPSA.132] entitled persons, power to redeem …. [PPSA.142] grantor’s rights …. [PPSA.19.A] intellectual property, categorisation of …. [Pt A.36] inventory — categorisation of …. [Pt A.36] possession — apparent, of …. [PPSA.126] — sufficient right in …. [PPSA.19.A] PPSR prescribed matters …. [PPSRSCH1.4.1] prescribed class …. [PPSRSCH1.3.1] purchase, disposal by …. [PPSA.129] — objection to …. [PPSA.137]-[PPSA.138] interest, request of person making objection to prove …. [PPSA.138] who may object …. [PPSA.137] retention …. [PPSA.122]-[PPSA.138C] — extinguishment of obligations …. [PPSA.136] — interests, free of …. [PPSA.136] — notice of proposed retention …. [PPSA.135] — objection to …. [PPSA.137]-[PPSA.138] interest, request of person making objection to prove …. [PPSA.138]

who may object …. [PPSA.137] — Part 4.3, guide to …. [PPSA.122] — proposal by secured party to retain …. [PPSA.134] — secured party, power to retain …. [PPSA.134] procure transfer of title …. [PPSA.136] — third-party purchasers …. [PPSA.136] — transfer of title, power of secured party to procure …. [PPSA.134] seizing …. [PPSA.123]-[PPSA.127] — apparent possession, seizure by …. [PPSA.126] — higher priority party, notice where …. [PPSA.127] — possession or control, by secured party who has perfected security interest by …. [PPSA.124] — secured party, power to seize …. [PPSA.123], [PPSA.123.A] seizure, disposal and …. [PPSA.122]-[PPSA.138C] — obligation to dispose of or retain …. [PPSA.125] — Part 4.3, guide to …. [PPSA.122] transfer of interests in …. [Pt A.47], [PPSA.78]-[PPSA.81] — Part 2.7, guide to …. [PPSA.78] — prohibition in security agreement, transfer despite …. [PPSA.79], [PPSA.79.A] — successive transfers of accounts or chattel paper …. [PPSA.19.A] Commercial and Consumer Tribunals security interests in personal property, jurisdiction in respect of disputes about …. [Pt A.62] Commercial property classification of property …. [Pt A.38] collateral — categorisation of …. [Pt A.36] personal property descriptions …. [PPSA.20] Commingled goods see Goods Common law interaction between PPSA and …. [Pt A.56]

Commonwealth national personal property securities regime, constitutional basis for …. [Pt A.60]-[Pt A.62], [PPSA.243] Commonwealth Inscribed Stock Act 1911 (Cth) commencement of PPSA, amendment from …. [Pt A.53] Company definition …. [PPSA.10] insolvency see Winding up winding up see Winding up Conflict of laws Part 7.2 — guide to …. [PPSA.233] — scope of …. [PPSA.234] Consignments commercial — definition …. [PPSA.10] goods, of, meaning of security interest …. [PPSA.12] Constitution acquisition of property, no unjust …. [PPSA.252B] guarantees, constitutional …. [PPSA.252A]-[PPSA.252B] jurisdiction of courts and tribunals …. [Pt A.62] national personal property securities regime, constitutional basis for …. [Pt A.60]-[Pt A.62], [PPSA.243] preference, no constitutional, to one State over another …. [PPSA.252A] referral of power by states …. [Pt A.61] Consumer property classification of property …. [Pt A.38] collateral — categorisation of …. [Pt A.36] personal property descriptions …. [PPSA.20] Contract personal property securities, application of general law to …. [Pt A.50]

Contracting out enforcement provisions, of …. [Pt A.48], [PPSA.115] Control circulating assets, of — accounts, specific tests for control over …. [PPSA.341] — tests of …. [PPSA.341] definition …. [PPSA.10] inventory and, definition …. [PPSA.341] perfection by …. [Pt A.42] — multiple security interests perfected by control …. [PPSA.57] — proceeds …. [PPSA.57] — rules …. [PPSA.25]-[PPSA.29] security interests perfected by, priority of …. [PPSA.57] Controllers enforcement provisions — application where property in hands of …. [Pt A.48], [PPSA.116], [PPSA.116.A] Conversion personal property securities, application of general law principles to …. [Pt A.50] Copyright classification of property …. [Pt A.38] Copyright Act 2001 (Cth) pre-PPSA law, as significant …. [Pt A.2] Corporations constitutional, definition …. [PPSA.10] security interests given by, application of PPSA …. [Pt A.35] Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) commencement of PPSA, amendment from …. [Pt A.53] Corporations Act 2001 (Cth) alignment of, with PPSA …. [Pt A.51] inconsistent provisions resolution …. [PPSR7.1]

Personal Property Securities (Corporations and Other Amendments) Act 2010, amendment by …. [Pt A.51] pre-PPSA law, as significant …. [Pt A.2] provisions - concurrent operation …. [PPSR7.1] Courts aid of each other, courts to act in …. [PPSA.209] barrister, entitlement to practise as …. [PPSA.216] jurisdiction see Jurisdiction proceedings, judicial see Judicial proceedings solicitor, entitlement to practise as …. [PPSA.216] transfers between …. [PPSA.210]-[PPSA.217] — appeals, limitation on …. [PPSA.217] — conduct of transferred proceedings …. [PPSA.215] — criteria for …. [PPSA.212] — documents, procedure and …. [PPSA.214] — initiating …. [PPSA.213] — Part 6.2 Division 3, application of …. [PPSA.210] — transfer power, exercise of …. [PPSA.211] Creditor execution, priority over unperfected security interest …. [PPSA.74] payment of debt, priority of creditor who receives …. [PPSA.69], [PPSA.69.A] Crops collateral, categorisation of …. [Pt A.36] definition …. [PPSA.10] goods, definition …. [PPSA.10] growing, attachment of security interests to …. [PPSA.84A] land, relationship of security interests to interest in …. [PPSA.84] liens, rationalisation of law in respect of …. [Pt A.1] — focus of pre-PPSA law …. [Pt A.3] priority of …. [Pt A.45], [PPSA.56] seizure and disposal of …. [PPSA.138B]

Crown Personal Property Securities Act 2009, to be bound by …. [PPSA.5] Crystallisation relevance, ongoing, of concept …. [Pt A.34] Currency classification of property …. [Pt A.38] collateral, categorisation of …. [Pt A.36] definition …. [PPSA.10] financial property — definition …. [PPSA.10] security interest, taking free of …. [Pt A.46], [PPSA.48] Damages breach of duties, entitlement for …. [PPSA.271] liability for …. [PPSA.272] Data access conditions Pt 5.5A, guide to …. [PPSA.176A] registered data …. [PPSA.176B] third party data …. [PPSA.176C] Debtor definition …. [PPSA.10] Defect definition …. [PPSA.10] Deputy Registrar definition …. [PPSA.10] establishment of office …. [PPSA.200] functions …. [PPSA.201] powers …. [PPSA.201] resignation …. [PPSA.202] termination …. [PPSA.203] Description definition …. [PPSA.10]

Designs classification of property …. [Pt A.38] serial number, description by unique …. [Pt A.39], [PPSRSCH1.2.2] Designs Act 1906 (Cth) commencement of PPSA, amendment from …. [Pt A.53] pre-PPSA law, as significant …. [Pt A.2] Determinations and Instruments summary table …. [DI1.2] Disposal collateral, disposing of …. [PPSA.128]-[PPSA.133] — interests, free of lower ranking …. [PPSA.133] — market value, duty to obtain …. [PPSA.131] scope of duty …. [PPSA.131.A] — notice of proposed disposal …. [PPSA.130] — purchase, disposal by …. [PPSA.129] objection, notice of …. [PPSA.138] — sale, disposal by …. [PPSA.129] — secured party, power to dispose …. [PPSA.128] — statement of account, duty of secured party to give …. [PPSA.132] transfer of title to give effect to …. [PPSA.141] District Courts security interests in personal property, jurisdiction in respect of disputes about …. [Pt A.62] Documents of title classification of property …. [Pt A.38] collateral, categorisation of …. [Pt A.36] definition …. [PPSA.10] financial property, definition …. [PPSA.10] negotiable, priority of holder of …. [PPSA.72] Domestic property security interest, taking free of …. [Pt A.46], [PPSA.47] Duties

damages — breach of duties, entitlement for …. [PPSA.271] — liability for …. [PPSA.272] exercise of rights, obligations and …. [PPSA.270]-[PPSA.273] — Part 8.3, guide to …. [PPSA.270] Enforcement application of provisions …. [Pt A.48] contracting out of provisions …. [Pt A.48], [PPSA.115] proceeds, application of …. [PPSA.140] — order of application of proceeds …. [PPSA.140] security interests, of …. [PPSA.107]-[PPSA.144] — Chapter 4 application of …. [Pt A.48], [PPSA.109] deemed security interests, application to …. [PPSA.109] guide to …. [PPSA.107] — consumer credit legislation, relationship with …. [Pt A.48], [PPSA.119] — controllers, where property in hands of …. [Pt A.48], [PPSA.116], [PPSA.116.A] — issuing execution, extinguishing security interest by …. [PPSA.113] — land law decisions, enforcing security interests in accordance with …. [PPSA.118] — liquid assets, enforcement of security interests in …. [Pt A.48], [PPSA.120] collections, application of …. [PPSA.120] garnishee procedure …. [PPSA.120] higher priority parties and grantor, notice to …. [Pt A.48], [PPSA.121] — notices, when not required …. [PPSA.144] — Part 4.2, guide to …. [PPSA.108] — personal property and land, obligations secured by interests in …. [PPSA.117] land laws, alternative use of enforcement provisions in …. [PPSA.117][PPSA.118] — prior law, distinction between PPSA and …. [Pt A.4] — proceeds received by secured party, distribution of …. [PPSA.140]

order of application of proceeds …. [PPSA.140] — receivers or receiver and manager, where property in hands of …. [Pt A.48], [PPSA.116], [PPSA.116.A] — recovering judgment, extinguishing security interest by …. [PPSA.113] — remedies, rights and …. [PPSA.110], [PPSA.110.A], [PPSA.112] commercially reasonable manner, duties and rights to be exercised in …. [PPSA.111], [PPSA.S111.A] cumulative …. [PPSA.114] grantor’s rights, limited to …. [PPSA.112] honestly, duties and rights to be exercised …. [PPSA.111] purpose of provision …. [PPSA.112.A] — rules applying after …. [PPSA.139]-[PPSA.144] Part 4.4, guide to …. [PPSA.139] — third parties, against …. [PPSA.20], [PPSA.20.A], [Pt A.41] — transfer of title, steps by secured party to reflect …. [PPSA.141] third parties, enforceability of security interests against …. [PPSA.20], [PPSA.20.A], [Pt A.41] — security agreement covering collateral …. [PPSA.20] transitional security agreements, of …. [PPSA.314] Enterprise definition …. [PPSA.10] Equipment personal property descriptions …. [PPSA.20] Estoppel personal property securities, application of general law principles to …. [Pt A.50] Evidence burden, evidential, definition …. [PPSA.10] Execution creditor definition …. [PPSA.10] External Territories Personal Property Securities Act 2009, application in …. [PPSA.7]

prescribed, for PPSA Act …. [PPSA.7.A] Extinguishment rules security interests, taking personal property free of — currency …. [Pt A.46] — domestic property …. [Pt A.46] — household property …. [Pt A.46] — intermediated security, taking free of security interest …. [Pt A.46] — investment instrument, taking free of security interest …. [Pt A.46] — motor vehicles …. [Pt A.46] — ordinary course of business, in …. [Pt A.46] — serial numbered property, basic rule for …. [Pt A.46] — unperfected security interest …. [Pt A.46] third party transferees …. [Pt A.46] Family Court definition …. [PPSA.10] State, definition …. [PPSA.10] Federal Circuit Court definition …. [PPSA.10] Federal Court definition …. [PPSA.10] security interests in personal property, jurisdiction in respect of disputes about …. [Pt A.62] Federal Magistrates Court security interests in personal property, jurisdiction in respect of disputes about …. [Pt A.62] Financial products collateral, categorisation of …. [Pt A.36] Financial property agreement, control by …. [PPSA.26] Bills of Exchange Act 1909, inconsistency of PPSA with …. [PPSA.256] collateral, categorisation of …. [Pt A.36] governing laws …. [PPSA.240]

investment instruments — uncertificated, control by agreement in relation to …. [PPSA.27] letter of credit, control of …. [PPSA.28] personal property as …. [PPSRSCH1.2.2] relocation of …. [PPSA.39], [PPSA.40] relocation of security interest in, to Australia …. [PPSA.40] security interests in — relocation to Australia …. [PPSA.40] Financing aircraft finance see Aircraft finance consignments, by commercial — definition …. [PPSA.10] receivables — fixed and floating charges, and Part 9.5 PPSA …. [PPSA.339] — transfer structures third parties, enforceability against …. [PPSA.20], [PPSA.20.A] ship finance see Ship finance Financing statements data to be included in …. [Pt A.37] definition …. [PPSA.10] financing change statement — definition …. [PPSA.10] — registration …. [Pt A.37] personal property, registration prohibited where …. [PPSR5.4] register, notice on …. [Pt A.37] registration of — see also Registration — Australia, need for connection with …. [PPSA.152] — collateral description …. [Pt B.26]-[Pt B.40] — collateral perfected by control …. [Pt B.44]-[Pt B.46] — completion of financing statement …. [Pt B.5]-[Pt B.8] — copy of …. [PPSA.175] — definitions …. [Pt B.3]

— failure to perfect …. [Pt B.4] — free text collateral descriptions …. [Pt B.61]-[Pt B.71] table …. [Pt B.72] — grantor and secured party details …. [Pt B.9]-[Pt B.25] — guide, introduction and scope …. [Pt B.1]-[Pt B.4] — information requirements …. [Pt B.47]-[Pt B.50] — knowledge requirements before …. [PPSA.151] comparative legislation …. [PPSA.151.A] — mandatory, whether …. [Pt B.4] — prescribed property, with respect to …. [PPSA.154] — prohibited, where …. [PPSR5.4] — registration on registers other than PPS Register …. [Pt B.51] — secured party, belief relating to …. [PPSA.151] comparative legislation …. [PPSA.151.A] — secured party group numbers, access codes and registration tokens …. [Pt B.52]-[Pt B.58] — security interests, with respect to …. [Pt B.2], [PPSA.153], [PPSA.153.A] — serial numbered collateral …. [Pt B.41]-[Pt B.43] — time limit …. [Pt B.4] — transfers or other amendments …. [Pt B.60] — verification statements …. [Pt B.59] — who may register …. [PPSA.151] comparative legislation …. [PPSA.151.A] who may register …. [PPSA.151] — comparative legislation …. [PPSA.151.A] Fish definition …. [PPSA.10] take, meaning of …. [PPSA.138A] Fisheries Management Act 1991 (Cth) commencement of PPSA, amendment from …. [Pt A.53] Fixed and floating charge fixed charge

— demise of …. [Pt A.34] — receivables financing and Part 9.5 PPSA …. [PPSA.339] — security interest, meaning …. [PPSA.12] floating charge — attachment of, time of …. [PPSA.19] — receivables financing and Part 9.5 PPSA …. [PPSA.339] — references to, alignment of Corporations Act with PPSA …. [Pt A.51] — security interest, meaning …. [PPSA.12] PPSA, under …. [Pt A.34] Fixtures definition …. [PPSA.10]-[PPSA.10.A] — personal property …. [Pt A.28] — relevance to meaning of “personal property” and “land” …. [PPSA.10.A] interests not covered by PPSA …. [Pt A.32], [Pt A.57], [PPSA.8] Floating charge see Fixed and floating charge Forms approved …. [PPSA.302] — definition …. [PPSA.10] — Part 8.1, guide to …. [PPSA.301] Garage sale rule security interest, taking low-value personal-use property free of …. [Pt A.46], [PPSA.47] Goods collateral, categorisation of …. [Pt A.36] commingled — definition …. [PPSA.10] — priority rules where …. [PPSA.99]-[PPSA.102] — processed or …. [Pt A.45], [PPSA.98]-[PPSA.103] continuation of security interests in goods which become …. [PPSA.99][PPSA.99.A] limit on value of priority of goods …. [PPSA.101]-[PPSA.101.A] more than security interest continues, priority where …. [PPSA.102]

Part 3.4, guide to …. [PPSA.98] perfection of security interests in goods which become …. [PPSA.100] purchase money security interest, priority of …. [PPSA.103] definition …. [PPSA.10] governing laws …. [PPSA.238], [PPSA.238.A] hiring of see Hiring of goods leasing of see Leasing of goods processed, commingled or …. [Pt A.45], [PPSA.98]-[PPSA.103] — continuation of security interests in goods which become …. [PPSA.99][PPSA.99.A] — limit on value of priority of goods …. [PPSA.101]-[PPSA.101.A] — more than security interest continues, priority where …. [PPSA.102] — Part 3.4, guide to …. [PPSA.98] — perfection of security interests in goods which become …. [PPSA.100] — purchase money security interest, priority of …. [PPSA.103] returned — accounts …. [PPSA.38] — bailee, from …. [PPSA.35] — chattel paper …. [PPSA.38] — deemed security interest in returned goods …. [PPSA.38] — investment instruments, from …. [PPSA.36] — negotiable instruments, from …. [PPSA.36] — priority of security interests in …. [PPSA.76], [PPSA.76.A] Goods Act 1958 (Vic) pre-PPSA law, as significant …. [Pt A.2] Goods Securities Act 1986 (SA) pre-PPSA law, as significant …. [Pt A.2] Grantor body corporate …. [PPSRSCH1.1.3], [PPSRSCH2.2.2] body politic …. [PPSRSCH1.1.6], [PPSRSCH2.2.5] collateral, rights in …. [PPSA.19.A] — successive transfers of accounts or chattel paper …. [PPSA.19.A]

definition …. [PPSA.10] individual …. [PPSRSCH1.1.2] partner …. [PPSRSCH1.1.4], [PPSRSCH2.2.3] prior law, distinction between PPSA and …. [Pt A.4] trustee …. [PPSRSCH1.1.5], [PPSRSCH2.2.4] Health Insurance Act 1973 (Cth) commencement of PPSA, amendment from …. [Pt A.53] Hiring of goods hire purchase agreement — registration of owner’s interest under, and focus of pre-PPSA law …. [Pt A.3] — security interest, meaning …. [PPSA.12] security interest — meaning of …. [PPSA.12] Household property security interest, taking free of …. [Pt A.46], [PPSA.47] Import/export transactions governing laws …. [PPSA.316] — agreement, express …. [PPSA.237] Australian entities …. [PPSA.237] letters of credit — Australian law, selection of …. [PPSA.240] location rules …. [PPSA.235] relocation rules, on import to Australia — financial property …. [PPSA.40] — intangible property …. [PPSA.40] — main rule …. [PPSA.39] Information secured parties, provision of information by …. [PPSA.274]-[PPSA.283] — costs arising from request, recovery of …. [PPSA.279] — costs charged, application to court in relation to …. [PPSA.281] — court order, consequences of not complying with …. [PPSA.282]

— estoppels against persons who respond to request …. [PPSA.283] — exemption from answering request, application to court for …. [PPSA.278] — extension of time to answer request, application to court for …. [PPSA.278] — Part 8.4, guide to …. [PPSA.274] — response to request, application to court for …. [PPSA.280] — security interest, requirement to provide certain information relating to …. [PPSA.275] — successor in security interest, obligation to disclose when request made …. [PPSA.276] — time for responding to request …. [PPSA.277] Insolvency definition …. [PPSA.10] response to notices, importance of …. [PPSA.267.A] unperfected security interests …. [Pt A.49] — distinction between PPSA and prior law …. [Pt A.4] — Part 8.2, guide to …. [PPSA.266] Insolvency Trustee Service Australia (ITSA) register, administration by …. [Pt A.37] Instruments Act 1933 (ACT) pre-PPSA law, as significant …. [Pt A.2] Instruments Act 1935 (NT) pre-PPSA law, as significant …. [Pt A.2] Instruments Act 1958 (Vic) pre-PPSA law, as significant …. [Pt A.2] Insurance policy, transfers of interests in, and application of PPSA …. [PPSA.8.A] Insurance Act 1973 (Cth) commencement of PPSA, amendment from …. [Pt A.53] Intangible property collateral, categorisation of …. [Pt A.36]

licence over, description by serial number …. [PPSRSCH1.2.2] relocation of security interest in, to Australia …. [PPSA.40] Intellectual property collateral, categorisation of …. [Pt A.36] definition …. [PPSA.10] focus of pre-PPSA law …. [Pt A.3] licences …. [Pt A.45], [PPSA.106] — collateral, categorisation of …. [Pt A.36] — definition …. [PPSA.10] — enforcement of security interests in …. [PPSA.313] Part 3.5, guide to …. [Pt A.45], [PPSA.104] PPSA — serial numbers and …. [PPSA.44] rights, implied references to …. [PPSA.105] transfers of …. [PPSA.106] Interest definition …. [PPSA.10] Intermediary classification of property, and intermediated securities …. [Pt A.38] collateral, intermediated securities and categorisation of …. [Pt A.36] definition …. [PPSA.10], [PPSA.15] security interest, taking intermediated security free of …. [PPSA.51] Interpretation PPSA, interpreting …. [Pt A.63] — legislative policies relevant to …. [Pt A.64] Inventory collateral — categorisation of …. [Pt A.36] control and, definition …. [PPSA.341] definition …. [PPSA.10] Investment instruments classification of property …. [Pt A.38]

collateral, categorisation of …. [Pt A.36] control of …. [PPSA.27] definition …. [PPSA.10], [PPSR1.10] meaning …. [PPSA.10], [PPSR1.10] possession of …. [PPSA.24], [PPSA.24A] security interest, taking free of …. [Pt A.46], [PPSA.50] Investment interest definition …. [PPSA.10] financial property, definition …. [PPSA.10] Investment schemes registered managed, entities covered by PPSA …. [Pt A.35] Judicial proceedings Chapter 6, guide to …. [PPSA.204] initiation of …. [PPSA.219] intervention in …. [PPSA.218] Part 6.2 — guide to …. [PPSA.205] — scope of …. [PPSA.206] registrar’s role in …. [PPSA.218]-[PPSA.219] Jurisdiction aid of each other, courts to act in …. [PPSA.209] appeals, cross-jurisdictional …. [PPSA.208] conferral of …. [PPSA.207]-[PPSA.209] courts, of …. [Pt A.62], [PPSA.207] definition …. [PPSA.10] foreign, definition …. [PPSA.10] tribunals, of …. [Pt A.62], [PPSA.207] Knowledge constructive — bodies corporate, actual or constructive knowledge by …. [Pt A.46], [PPSA.298] — contents of register, of …. [PPSA.300]

— definition …. [PPSA.10], [PPSA.297] — property transfers, actual or constructive knowledge in relation to certain …. [Pt A.46], [PPSA.299] insider trading, presumption for …. [PPSA.299] Land crops, relationship of security interests to interest in …. [PPSA.84] definition …. [PPSA.10] — personal property …. [Pt A.28] interests in, and interests not covered by PPSA …. [Pt A.32], [PPSA.8] Laws Australian — other jurisdictions, and those of …. [PPSA.233]-[PPSA.241] — relationship between …. [Pt A.55], [PPSA.253]-[PPSA.264] Part 7.4, guide to …. [PPSA.253] Chapter 7, guide to …. [PPSA.232] concurrent operation …. [Pt A.55], [PPSA.254]-[PPSA.255] — general rule …. [Pt A.55], [PPSA.254]-[PPSA.254.A] — regulations, resolution of inconsistency by …. [PPSA.255] constitutional operation …. [PPSA.242]-[PPSA.252B] — Part 7.3, guide to …. [PPSA.242] definition …. [PPSA.10] general law — application, continuing, of …. [Pt A.50] — definition …. [PPSA.10] governing laws …. [PPSA.316] — agreement, express …. [PPSA.237] Australian entities …. [PPSA.237] — Commonwealth laws may provide for …. [PPSA.236] — financial property …. [PPSA.240] — goods …. [PPSA.238], [PPSA.238.A] — intangible property …. [PPSA.239] — letters of credit, rights evidenced by …. [PPSA.240] — Part 7.2

guide to …. [PPSA.233] scope of …. [PPSA.234] — proceeds …. [PPSA.241] guarantees, constitutional …. [PPSA.252A]-[PPSA.252B] import/export transactions, and governing laws …. [PPSA.316] — agreement, express …. [PPSA.237] Australian entities …. [PPSA.237] land law, definition …. [PPSA.10] located, meaning …. [PPSA.235] operation of …. [PPSA.232]-[PPSA.264] other laws prevail, when …. [Pt A.55], [PPSA.256]-[PPSA.260] — Commonwealth Acts, certain others …. [Pt A.55], [PPSA.256] — personal property …. [Pt A.55], [PPSA.258] — referring State law, exclusion by …. [Pt A.55], [PPSA.259] — security agreements …. [PPSA.257] — security interests …. [Pt A.55], [PPSA.258] — State amendment referrals, matters excluded from …. [Pt A.55], [PPSA.258] — Territory law, exclusion by …. [Pt A.55], [PPSA.259] Personal Property Securities Act prevails, when …. [Pt A.55], [PPSA.261][PPSA.264] — agreements, formal requirements relating to …. [Pt A.55], [PPSA.263] — assignment requirements …. [Pt A.55], [PPSA.262] — registration requirements …. [Pt A.55], [PPSA.261] — security interests, attachment and perfection of …. [PPSA.264] pre-PPSA law — form over substance approach …. [Pt A.11] — framework, and conceptually consistent legislative …. [Pt A.20] — gaps in …. [Pt A.13] — key questions under …. [Pt A.5] — overlapping legislation …. [Pt A.12] — process under …. [Pt A.6] — registration

compulsory …. [Pt A.14] procedures, cumbersome …. [Pt A.15] — significant …. [Pt A.2] reform, PPSA as …. [Pt A.1] reforms in other countries — Australia’s PPSA based on …. [Pt A.27] — Canada common law provinces of …. [Pt A.23] PPSA legislation in …. [Pt A.22] — consistency between overseas models …. [Pt A.26] — United Kingdom, recommendations for new law on securities interests and …. [Pt A.25] — United States …. [Pt A.21] state legislation, repeal and amendment from commencement of PPSA …. [Pt A.54] territory legislation, repeal and amendment from commencement of PPSA …. [Pt A.54] Leases goods see Leasing of goods PPS lease see Personal Property Securities lease Leasing of goods operating, distinction from finance lease …. [Pt A.31] PPS lease see Personal Property Securities lease registrationoflessor’s interest under, and focus of pre-PPSA law …. [Pt A.3] security interest — meaning of …. [PPSA.12] Letters of credit Australian law, selection of …. [PPSA.240] control of …. [PPSA.28] rights evidenced by …. [PPSA.240] Liability present, definition …. [PPSA.10]

Licences definition …. [PPSA.10] — personal property …. [Pt A.28] intellectual property …. [Pt A.45], [PPSA.106] — collateral, categorisation of …. [Pt A.36] — definition …. [PPSA.10] — enforcement of security interests in …. [PPSA.313] personal property, meaning of, in relation to …. [PPSA.10] security interest, not …. [Pt A.31], [PPSA.12.A] state or territory, application of PPSA …. [Pt A.57] statutory, excluded …. [PPSA.8] Liens interests not covered by PPSA …. [Pt A.32], [Pt A.57], [PPSA.8], [PPSA.8.A] — general law …. [PPSA.8.A] — statutory liens …. [PPSA.8.A] landlord’s, application of PPSA …. [Pt A.57] — security interests and …. [PPSA.73.A] repairer’s, application of PPSA …. [Pt A.57] secured party’s property subject to …. [PPSA.55.A] solicitor’s, application of PPSA …. [Pt A.57] subcontractor’s, application of PPSA …. [Pt A.57] Liens on Crops of Sugar Cane Act 1931 (Qld) pre-PPSA law, as significant …. [Pt A.2] Liens on Fruit Act 1923 (SA) pre-PPSA law, as significant …. [Pt A.2] Life Insurance Act 1995 (Cth) pre-PPSA law, as significant …. [Pt A.2] Livestock definition …. [PPSA.10] goods, definition …. [PPSA.10] priority of …. [PPSA.86]

seizure and disposal of …. [PPSA.138C] stock mortgages, rationalisation of law in respect of …. [Pt A.1] Lower court definition …. [PPSA.10] Marine Navigation Levy Collection Act 1989 (Cth) commencement of PPSA, amendment from …. [Pt A.53] Marine Navigation (Regulatory Functions) Levy Collection Act 1991 (Cth) commencement of PPSA, amendment from …. [Pt A.53] Marshalling personal property securities, application of equitable doctrine to …. [Pt A.50] Matter definition …. [PPSA.10] PPS matter, definition …. [PPSA.10] transfer matter, definition …. [PPSA.10] Migration personal property interests, of …. [PPSA.330]-[PPSA.335] — data, requirement for Commonwealth officers to provide …. [PPSA.331] — Division 6, scope of …. [PPSA.335] — incorrectly registered migrated data …. [PPSA.334] — registration with respect to migrated data …. [PPSA.333] — verification statement, requirement for notice of …. [PPSA.335] security interests, migrated — definition …. [PPSA.10], [PPSA.332] — personal property interests, migration of …. [PPSA.330]-[PPSA.335] Division 6, scope of …. [PPSA.335] time, meaning …. [PPSA.306] Minerals goods, definition …. [PPSA.10] Mortgage lease of land, over, interests not covered by PPSA …. [PPSA.8]

Motor vehicles collateral, categorisation of …. [Pt A.36] definition …. [PPSA.10] extinguishment rules, application …. [Pt A.46] focus of pre-PPSA law …. [Pt A.3] manufacturer’s number, defined …. [PPSR1.6] meaning under Personal Property Securities Regulations 2010 …. [PPSR1.7] PPSR, registration on when …. [PPSR5.3] prescribed persons, taking from …. [PPSR2.2] Register of Encumbered Vehicles (REVS) — motor vehicle security legislation and …. [Pt A.31] registration on PPSR …. [PPSR5.3] securities, rationalisation of law in respect of …. [Pt A.1] security interests, taking motor vehicles free of …. [PPSR2.1] security interests, taking personal property free of …. [Pt A.46], [PPSA.45] serial number, property requiring unique …. [Pt A.39] vehicle identification number (VIN) — definition …. [PPSR1.6] — searching register by …. [Pt A.37] Motor Vehicles and Boats Securities Act 1986 (Qld) pre-PPSA law, as significant …. [Pt A.2] Motor Vehicles Securities Act 1984 (Tas) pre-PPSA law, as significant …. [Pt A.2] Mutual Assistance in Criminal Matters Act 1987 (Cth) priority of charges created pursuant to …. [Pt A.59] National Consumer Credit Protection Act 2009 (Cth) pre-PPSA law, as significant …. [Pt A.2] National Credit Code definition …. [PPSA.10] enforcement of security interests to which NCC applies …. [Pt A.48], [Pt A.52] interaction, intended, with PPSA …. [Pt A.52]

PPS Regulations 2010, relationship with …. [PPSR4.1] PPSA, concurrent operation with …. [Pt A.52], [PPSA.119] Navigation Act 1912 (Cth) commencement of PPSA, amendment from …. [Pt A.53] Negotiable instruments cash payable under, collection of …. [Pt A.48], [PPSA.120] — collections, application of …. [PPSA.120] — garnishee procedure …. [PPSA.120] — higher priority parties and grantor, notice to …. [Pt A.48], [PPSA.121] classification of property …. [Pt A.38] collateral, categorisation of …. [Pt A.36] control of, not evidenced by certificate …. [PPSA.29] financial property, definition …. [PPSA.10] interest in, priority of person who acquires or …. [PPSA.70] possession of certain …. [PPSA.24], [PPSA.24A] priority of person who acquires …. [PPSA.70] Netting arrangements interests not covered by PPSA …. [Pt A.32], [PPSA.8] New value definition …. [PPSA.10] New Zealand adoption of a PPSA by …. [Pt A.24] Norfolk Island Personal Property Securities Act 2009, extension to …. [PPSA.7] Notices constructive notice, registration of data does not constitute …. [Pt A.46], [PPSA.300] court orders …. [PPSA.291] deceased persons …. [PPSA.290] defects, formal …. [PPSA.292] insolvency of grantor — importance of response to notices …. [PPSA.267.A]

objection, of, definition …. [PPSA.10] Part 8.5, guide to …. [PPSA.284], [PPSA.285] registered secured parties …. [PPSA.287] — identifier, given to persons registered as secured parties using …. [PPSA.289] — more than one …. [PPSA.288] writing …. [PPSA.286] Obligations damages — breach of obligations, entitlement for …. [PPSA.271] — liability for …. [PPSA.272] exercise of rights, duties and …. [PPSA.270]-[PPSA.273] — Part 8.3, guide to …. [PPSA.270] Onus of proof Part 8.6, guide to …. [PPSA.295] provision concerning, in Act …. [PPSA.296] Partnerships entities covered by PPSA …. [Pt A.35] Patents classification of property …. [Pt A.38] description by serial number …. [PPSRSCH1.2.2] PCT number, defined …. [PPSRSCH1.2.2] serial number, description by unique …. [Pt A.39] Patents Act 1990 (Cth) commencement of PPSA, amendment from …. [Pt A.53] pre-PPSA law, as significant …. [Pt A.2] Pawnbroker security interest in personal property taken by, application of PPSA …. [Pt A.32], [PPSA.8] Payment Systems and Netting Act 1998 (Cth) inconsistency between PPSA and …. [Pt A.55], [PPSA.256] Penalty unit

definition …. [PPSA.10] Perfection attachment, specific rules in respect of perfection and …. [Pt A.40], [PPSA.30]-[PPSA.40] — enforceability, required for …. [PPSA.19] — Part 2.4, guide to …. [PPSA.30] — time of attachment …. [PPSA.19] — transitional security interests …. [PPSA.321] automatic …. [PPSA.33] bailee, where goods possessed by …. [PPSA.22] definition …. [PPSA.20]-[PPSA.21.A] main rule …. [Pt A.42], [PPSA.21], [PPSA.21.A] processed goods, over …. [PPSA.100] receivables see Financing security interest, how perfected …. [PPSA.21], [PPSA.21.A] — bailee, where goods possessed by …. [PPSA.22] — financing statement …. [PPSA.21], [PPSA.21.A] temporary perfection …. [Pt A.42], [PPSA.33] — transfer, after …. [PPSA.34], [PPSA.34.A] meaning of transfer …. [PPSA.34.A] time limit …. [PPSA.293.A] transitional security interests, perfection rule …. [PPSA.322] Personal property all present and after acquired definition …. [PPSR1.6] all present and after acquired except definition …. [PPSR1.6] classification …. [Pt A.38] commercial property, definition …. [PPSA.10] concepts relating to security interests and …. [PPSA.12]-[PPSA.15] consumer property, definition …. [PPSA.10] credit, use as security for …. [Pt A.1] definition …. [Pt A.28], [PPSA.10] — prescribed, meaning …. [PPSR1.6] descriptions …. [Pt A.38], [PPSA.20]

hiring of see Hiring of goods intangible property, definition …. [PPSA.10] intermediated security …. [PPSRSCH1.2.1] leasing of see Leasing of goods licence, meaning …. [PPSA.10] migration of personal property interests …. [PPSA.330]-[PPSA.335] — data, requirement for Commonwealth officers to provide …. [PPSA.331] — Division 6, scope of …. [PPSA.335] — incorrectly registered migrated data …. [PPSA.334] — registration with respect to migrated data …. [PPSA.333] — verification statement, requirement for notice of …. [PPSA.335] possession and control …. [PPSA.23]-[PPSA.29] — Part 2.3, guide to …. [PPSA.23] — possession …. [PPSA.24], [PPSA.24A] prescribed property, defined …. [PPSR1.6] prior law, distinction between PPSA and …. [Pt A.4] security interest, taking free of …. [Pt A.46], [PPSA.47] — ordinary course of business, in …. [Pt A.46], [PPSA.46], [PPSA.46.A] extinguishment rule, application …. [PPSA.46.A] — secured party, subrogation of rights on …. [PPSA.53] — temporarily-perfected security interest …. [PPSA.52] — transferee, rights on …. [PPSA.53] Personal property securities (PPS) pre-PPSA law — key questions under …. [Pt A.5] — process under …. [Pt A.6] — significant …. [Pt A.2] reform — background of …. [Pt A.8] — discussion paper concerning …. [Pt A.9] — drivers for …. [Pt A.10] — Law Reform Commission Reports on …. [Pt A.8] Register …. [Pt A.1]

— commencement of …. [Pt A.1] registrar of see Registrar Personal Property Securities Act 2009 (PPSA) Acts Interpretation Act 1901, application …. [Pt A.63], [PPSA.11] application …. [Pt A.1], [Pt A.28], [PPSA.4]-[PPSA.8] — Australia, connection with …. [PPSA.6] — collateral, where secured party having title to …. [PPSA.273], [PPSA.273.A] — external Territories, application in …. [PPSA.7]-[PPSA.7.A] — initial …. [PPSA.309]-[PPSA.311] Part 9.3, guide to …. [PPSA.309] when Act starts to apply, and in relation to which matters …. [PPSA.310] — transitional …. [PPSA.319]-[PPSA.337A] Part 9.4, guide to …. [PPSA.319] changes to and relationship with other legislation …. [Pt A.55] — Commonwealth legislation …. [Pt A.53] — Corporations Act …. [Pt A.51] — National Credit Code …. [Pt A.52] — state and territory legislation …. [Pt A.54] Chapter 2, guide to …. [PPSA.16] Chapter 8, guide to …. [PPSA.265] codification, non-exhaustive, of law, as …. [Pt A.50] commencement …. [PPSA.2] — free of security interest, personal property taken at …. [PPSA.251] common law and, interaction between …. [Pt A.56] constitutional basis for …. [Pt A.60]-[Pt A.62], [PPSA.243] Crown to be bound by …. [PPSA.5] definitions …. [PPSA.9]-[PPSA.11] determinations and instruments under …. [DI1.1] — see also Determinations and Instruments diagram of current PPSA process …. [Pt A.7] Dictionary …. [PPSA.10] entities covered by …. [Pt A.35]

general law and, continuing application …. [Pt A.50] guide to …. [PPSA.3] interests not covered by …. [Pt A.32], [Pt A.57], [PPSA.8] interpreting …. [Pt A.63] — legislative policies relevant to …. [Pt A.64] miscellaneous provisions …. [PPSA.265]-[PPSA.303] — Chapter 8, guide to …. [PPSA.265] overview …. [Pt A.27]-[Pt A.49], [Pt A.66], [PPSA.3] — coverage …. [Pt A.28] — overseas reform basis …. [Pt A.27] Part 1.2, guide to …. [PPSA.4] Part 1.3, guide to …. [PPSA.9] Part 2.2, guide to …. [PPSA.17] personal property, concepts relating to security interests and …. [PPSA.12][PPSA.15] PPS Register, to be established …. [Pt A.1] reform in law, as huge …. [Pt A.1] — background …. [Pt A.8] register, commencement of …. [Pt A.1] regulations under …. [PPSA.303] review of operation …. [Pt A.65], [PPSA.343] — Part 9.6, guide to …. [PPSA.342] security interests, concepts relating to personal property and …. [PPSA.12][PPSA.15] short title …. [PPSA.1] state legislation facilitating …. [C.1] — table …. [C.2] transitional provisions …. [PPSA.304]-[PPSA.343] — Chapter 9, guide to …. [PPSA.304] — key concepts …. [PPSA.305]-[PPSA.308] Part 9.2, guide to …. [PPSA.305] Personal Property Securities Act (PPSA) reform background …. [Pt A.8]

— Australian Law Reform Commission (ALRC) …. [Pt A.8], [Pt A.10] — consultation process …. [Pt A.9] — discussion paper and working group …. [Pt A.9] Canada, PPS legislation …. [Pt A.22] — common law provinces …. [Pt A.23] drivers for …. [Pt A.10] — consistency of legislative framework …. [Pt A.20] international legislative comparisons …. [Pt A.26] New Zealand …. [Pt A.24] pre-PPSA legislation …. [Pt A.11] — compulsory registration …. [Pt A.14] — further advances and prospective liabilities …. [Pt A.17] — gaps in …. [Pt A.13] — notice, concept of …. [Pt A.16] — overlapping …. [Pt A.12] — priority rules …. [Pt A.16] — purchase money security interests (PMSIs) …. [Pt A.19] — receivables financing …. [Pt A.18] — registration procedures …. [Pt A.15] United Kingdom, recommendations for new law …. [Pt A.25] United States model …. [Pt A.21] Personal Property Securities Act (New Zealand) case interpreting s 25 …. [PPSA.111.A] Personal Property Securities (Corporations and Other Amendments) Act 2010 (Cth) Corporations Act, amendment by …. [Pt A.51] Personal Property Securities lease deemed security interests …. [Pt A.30] definition …. [Pt A.30], [PPSA.10], [PPSA.13], [PPSA.13.A], [PPSR1.9] — bailment inclusion …. [PPSA.13.A] indefinite term, for …. [PPSA.13.A] PPS lease, definition …. [Pt A.30], [PPSA.10], [PPSA.13], [PPSA.13.A]

Personal Property Securities register (PPS Register) see Register Personal Property Securities Regulations 2010 (PPSR) 2010 application of Act to external Territories …. [PPSR1.3] commencement …. [PPSR1.2] definitions …. [PPSR1.6] grantor — body corporate …. [PPSRSCH1.1.3], [PPSRSCH2.2.2] — body politic …. [PPSRSCH1.1.6], [PPSRSCH2.2.5] — individual …. [PPSRSCH1.1.2] — partner …. [PPSRSCH1.1.4], [PPSRSCH2.2.3] — trustee …. [PPSRSCH1.1.5], [PPSRSCH2.2.4] individual — definition for Sch 1 …. [PPSRSCH1.1.1] — definition for Sch 2 …. [PPSRSCH2.1.1] — prescribed property, interests in …. [PPSRSCH2.2.1] interests to which the Act — applies …. [PPSR1.5] — does not apply …. [PPSR1.4] name …. [PPSR1.1] Pt 9 end …. [PPSR9.3] pre-PPSA approach …. [Pt A.31] prescribed matters …. [PPSRSCH1.4.1] secured party — body corporate …. [PPSRSCH1.1.3], [PPSRSCH2.2.2] — body politic …. [PPSRSCH1.1.6] — individual …. [PPSRSCH1.1.2] — partner …. [PPSRSCH1.1.4], [PPSRSCH2.2.3] —trustee …. [PPSRSCH1.1.5], [PPSRSCH2.2.4] temporary perfection rule - exception …. [PPSR9.2] transitional provisions, when ceasing …. [PPSR9.3] Plant breeder’s right classification of property …. [Pt A.38] serial number, description by unique …. [Pt A.39], [PPSRSCH1.2.2]

Plant Breeder’s Rights Act 1994 (Cth) commencement of PPSA, amendment from …. [Pt A.53] pre-PPSA law, as significant …. [Pt A.2] Plant Variety Rights Act 1987 (Cth) pre-PPSA law, as significant …. [Pt A.2] Pledge security interest, meaning …. [PPSA.12] Possession chattel paper, of, evidenced electronically …. [PPSA.24], [PPSA.24A] collateral, of — apparent, of …. [PPSA.126] common carrier, of goods shipped by …. [PPSA.65] definition …. [PPSA.10] investment instruments, of …. [PPSA.24], [PPSA.24A] negotiable instruments, of certain …. [PPSA.24], [PPSA.24A] personal property, possession and control …. [PPSA.23]-[PPSA.29] — Part 2.3, guide to …. [PPSA.23] — possession …. [PPSA.24], [PPSA.24A] timing rule for possession of goods transported by common carrier …. [PPSA.24], [PPSA.24A] Practice statements overview …. [PS1.1] PPS Registrar, issued by …. [PS1.2] Pre-PPSA law compulsory registration …. [Pt A.14] derivation …. [Pt A.11] focus …. [Pt A.3] further advances and prospective liabilities …. [Pt A.17] gaps in …. [Pt A.13] key questions under …. [Pt A.5] notice, concept of …. [Pt A.16] overlapping …. [Pt A.12]

PPSA and, key differences …. [Pt A.4] process under …. [Pt A.6] — current process, comparison …. [Pt A.7] purchase money security interests (PMSIs) …. [Pt A.19] receivables financing …. [Pt A.18] registration procedures …. [Pt A.15] table of legislation …. [Pt A.2] Priority ADIs, of security interests held by …. [Pt A.45], [PPSA.75] advances, of …. [PPSA.58] — exceptions …. [PPSA.68], [PPSA.90] agricultural interests — rules, special, for agricultural interests …. [PPSA.85]-[PPSA.86] chattel paper, of security interests perfected by …. [PPSA.57] creditor who receives payment of debt, of …. [PPSA.69], [PPSA.69.A] crops, of …. [Pt A.45], [PPSA.56] declared statutory interests, priority between security interests and …. [Pt A.45], [Pt A.59], [PPSA.73], [PPSA.73.A] default priority rules …. [PPSA.55], [PPSA.55.A] document of title, of holder of negotiable …. [PPSA.72] extinguishment rules and …. [Pt A.43] foreign register, of certain security interests governed by non-Australian laws not on …. [PPSA.77] goods commingled, rules where …. [PPSA.99]-[PPSA.102] interests arising outside of PPSA, of …. [Pt A.58] intervening security interests, priority rules and …. [PPSA.59] livestock, of …. [PPSA.86] Mutual Assistance in Criminal Matters Act 1987, of charges created pursuant to …. [Pt A.59] negotiable instrument, of person who acquires or an interest in …. [PPSA.70], [PPSA.70.A] Part 2.6, guide to …. [PPSA.54] prior law, distinction between PPSA and …. [Pt A.4]

proceeds — returned goods, priority of security interests in …. [PPSA.76], [PPSA.76.A] Proceeds of Crime Act 2002, of charges created pursuant to …. [Pt A.59] purchase money security interests, of …. [Pt A.44], [PPSA.62]-[PPSA.65] — accounts, non-purchase money security interests in …. [PPSA.64] receivables financiers, special priority of …. [Pt A.45] — collateral, priority between competing purchase money security interests in …. [PPSA.63] — time and capacity of protection …. [PPSA.62.A] receivables financing, and priority issues — collection account, priority in relation to security interest in …. [PPSA.75] rules, general …. [Pt A.43] — exception of purchase money security interests (PMSIs) …. [Pt A.44] rules, special …. [Pt A.45] securitisation, priority issues — control, priority position where security interest perfected by …. [PPSA.57] security interests, between …. [PPSA.54]-[PPSA.77] time, meaning …. [PPSA.55.A] transfer of security interests, effect on priority …. [PPSA.60] transferred collateral, of security interests in …. [PPSA.66]-[PPSA.68], [PPSA.68.A] — break in perfection of transferor-granted interest, when …. [PPSA.68], [PPSA.68.A] — continuously-perfected, when transferor-granted interest has been …. [PPSA.67] — Division 4, application of …. [PPSA.66] — negotiable documents of title …. [PPSA.72] — negotiable instruments …. [PPSA.70] transitional security interests, priority rules for — bankruptcy, certain security interests upon …. [PPSA.324] — guide to …. [PPSA.320]

— insolvency, certain security interests upon …. [PPSA.324] — security interest perfect by control, priority between …. [PPSA.322A] — undetermined, priority otherwise …. [PPSA.323] unperfected security interests — priority of execution creditor over …. [PPSA.74] Privacy Act 1988 (Cth) commencement of PPSA, amendment from …. [Pt A.53] Proceeds attachment …. [PPSA.32], [PPSA.32.A] derived from dealing, requirement …. [PPSA.31.A] description …. [PPSRSCH1.2.4] governing law rules …. [PPSA.241] grantor to have interest in …. [PPSA.31.A] meaning …. [PPSA.10], [PPSA.31] perfection, temporary perfection and …. [PPSA.33] priority — returned goods, priority of security interests in …. [PPSA.76], [PPSA.76.A] returned goods, priority of security interests in …. [PPSA.76], [PPSA.76.A] traceable, whether …. [PPSA.31] transfer and …. [PPSA.31]-[PPSA.34] Proceeds of Crime Act 2002 (Cth) priority of charges created pursuant to …. [Pt A.59] Processed goods see Goods Protection of the Sea (Civil Liability) Act 1981 (Cth) commencement of PPSA, amendment from …. [Pt A.53] Protection of the Sea (Harmful Anti-fouling Systems) Act 2006 (Cth) commencement of PPSA, amendment from …. [Pt A.53] Protection of the Sea (Prevention of Pollution from Ships) Act 1983 (Cth) commencement of PPSA, amendment from …. [Pt A.53] Protection of the Sea (Shipping Levy Collection) Act 1981 (Cth)

commencement of PPSA, amendment from …. [Pt A.53] Purchase money security interests (PMSIs) collateral subject to …. [PPSRSCH1.3.1] definition …. [Pt A.19] priority of …. [Pt A.44], [PPSA.62]-[PPSA.65] — accounts, non-purchase money security interests in …. [PPSA.64] receivables financiers, special priority of …. [Pt A.45] — collateral, priority between competing purchase money security interests in …. [PPSA.63] — registration timeframes …. [PPSA.62] — time and capacity of protection …. [PPSA.62.A] — when take priority …. [PPSA.62] Quarantine Act 1908 (Cth) commencement of PPSA, amendment from …. [Pt A.53] Quistclose trusts interests under, application of PPSA …. [2.1850] Quota statutory, as intangible property …. [4.7.450] Receivers enforcement provisions, application where property in hands of …. [Pt A.48], [PPSA.116], [PPSA.116.A] lien of, secured party’s property subject to …. [PPSA.55.A] Receiving court definition …. [PPSA.10] Redemption collateral, power of entitled persons to redeem …. [PPSA.142] Register …. [PPSA.147] access …. [Pt A.37], [PPSR5.1] — prohibited …. [PPSR5.7] — Registrar considerations …. [PPSR5.7] — suspension notification …. [PPSR5.2] administration …. [Pt A.37]

Chapter 5, guide to …. [PPSA.145] contents of …. [PPSA.148], [PPSR5.3] — constructive knowledge of …. [PPSA.300] data removal …. [PPSR5.10] definition …. [PPSA.10] description and classification of property …. [Pt A.38] electronic, wholly …. [Pt A.37] establishment of …. [PPSA.146]-[PPSA.148] — Part 5.2, guide to …. [PPSA.145] foreign, priority of certain security interests if no …. [PPSA.77] free text collateral descriptions …. [Pt B.61]-[Pt B.71] — table …. [Pt B.72] Insolvency Trustee Service Australia, administration by …. [Pt A.37] notice register, and disclosure of information by …. [Pt A.33], [Pt A.37] prohibited registration …. [PPSR5.4] removal of data — general grounds …. [PPSA.184] — incorrectly removed data, restoration of …. [PPSA.186] case law …. [PPSA.186A] — Part 5.7, guide to …. [PPSA.183] — records of removed data …. [PPSA.187] — registration ineffective for 7 years or more, where …. [PPSA.185] searching …. [Pt A.37], [PPSA.169]-[PPSA.176] — criteria …. [PPSA.171], [PPSR5.8] — fees …. [PPSA.190] — generally …. [PPSA.170] — grantor who is individual, by reference to details of …. [PPSA.172] — how to conduct …. [PPSA.172] — Part 5.5, guide to …. [PPSA.169] — permitted purposes only, for …. [PPSA.172] — privacy, interference with …. [PPSA.173] — who can search …. [PPSA.170] — written search results, evidence and …. [PPSA.174]

statements — amendment demand, in relation to …. [PPSR5.9] — financing …. [PPSR5.5] — verification …. [PPSR5.6] suspension …. [PPSA.147.A] — notice method …. [PPSA.147.A] third party data, access to …. [PPSR5.8A] transitional, definition …. [PPSA.10] Register of Encumbered Vehicles (REVS) motor vehicle security legislation and …. [Pt A.31] Registrar acting appointments …. [PPSA.196] delegation …. [PPSA.197] Deputy Registrar — establishment of office …. [PPSA.200] — functions …. [PPSA.201] — powers …. [PPSA.201] — resignation …. [PPSA.202] — termination …. [PPSA.203] establishment of office …. [PPSA.194] functions …. [PPSA.195] investigations …. [PPSA.195A] judicial proceedings, registrar’s role in …. [PPSA.218]-[PPSA.219] Part 5.9, guide to …. [PPSA.193] powers …. [PPSA.195] reports by …. [PPSA.176] resignation …. [PPSA.198] termination …. [PPSA.199] Registration administrative review of decisions concerning …. [PPSA.191], [PPSA.191.A] seriously misleading, effect …. [PPSA.164.A]

application, on …. [PPSA.150] Australia, location of personal property and interested persons outside …. [PPSA.152] commencement time — definition …. [PPSA.10], [PPSA.306], [PPSA.306.A] — PPSA starts to apply at …. [PPSA.310] constructive notice, registration of data does not constitute …. [Pt A.46], [PPSA.300] defects in — general rule …. [PPSA.164], [PPSA.164.A] — grantor description …. [PPSA.164.A] — particular defects …. [PPSA.165] — seriously misleading, description of collateral …. [PPSA.164.A] — temporary effectiveness …. [PPSA.166] — unperfected, security interests in certain property becoming …. [PPSA.167] definition …. [PPSA.10] effective …. [PPSA.163] — when effective …. [PPSA.159]-[PPSA.164] errors, correction of …. [PPSA.188] event, definition …. [PPSA.10], [PPSA.155] fees …. [PPSA.190] — maintenance …. [PPSA.168] — Part 5.8, guide to …. [PPSA.189] financing statements — addresses for giving of notices …. [Pt B.48] — Australia, need for connection with …. [PPSA.152] — collateral description …. [Pt B.26] — collateral including chattel paper …. [Pt B.46] — collateral perfected by control …. [Pt B.44], [Pt B.45] — collateral types of different classes …. [Pt B.28] consumer or commercial property …. [Pt B.27] — completion of financing statement …. [Pt B.5]

— copy of …. [PPSA.175] — duration and other information …. [Pt B.47] — grantor and secured party details …. [Pt B.9] body politic …. [Pt B.23]-[Pt B.25] corporate …. [Pt B.10] details …. [Pt B.13] partnerships …. [Pt B.17]-[Pt B.19] source of grantor’s information …. [Pt B.15] trustees …. [Pt B.20]-[Pt B.22] verification of information …. [Pt B.14] — information requirements …. [Pt B.47]-[Pt B.49] — mandatory, whether …. [Pt B.4] — means of identification …. [Pt B.11] — prescribed classes of collateral …. [Pt B.29], [Pt B.39], [Pt B.40] — prescribed property, with respect to …. [PPSA.154] — Register’s ‘free text field’ functionality …. [Pt B.31], [Pt B.61]-[Pt B.64] benefits …. [Pt B.65]-[Pt B.66] guide …. [Pt B.72] limitations …. [Pt B.67]-[Pt B.68] preparation of descriptions …. [Pt B.71] problems arising from use of …. [Pt B.69]-[Pt B.70] — secured party claiming PMSI …. [Pt B.50] — secured party group numbers, access codes and registration tokens …. [Pt B.52]-[Pt B.58] — security interests, with respect to …. [Pt B.1]-[Pt B.2], [PPSA.153], [PPSA.153.A] definitions …. [Pt B.3] one or more security agreements …. [Pt B.7] parties, more than one …. [Pt B.6] serial numbered property …. [Pt B.16], [Pt B.32], [Pt B.41]-[Pt B.43] — seriously misleading defect …. [Pt B.8] — source of grantor’s information …. [Pt B.12] — subclassifications of collateral …. [Pt B.30], [Pt B.40]

agriculture …. [Pt B.33] aircraft …. [Pt B.34] financial property …. [Pt B.35] general intangibles …. [Pt B.37] intangible property …. [Pt B.36] ‘other goods’ …. [Pt B.38] — time limit, whether …. [Pt B.5] — transfers of security interests or collateral and other amendments …. [Pt B.60] — verification statements …. [Pt B.59] — who may register …. [PPSA.151] comparative legislation …. [PPSA.151.A] migrated data, with respect to …. [PPSA.333] obligation, belief that collateral secures …. [PPSA.151] — comparative legislation …. [PPSA.151.A] Part 5.3, guide to …. [PPSA.149] Part 5.4, guide to …. [PPSA.159] preparatory, relating to transitional security interests …. [PPSA.336] pre-PPSA law — compulsory …. [Pt A.14] — procedures, cumbersome …. [Pt A.15] process …. [PPSA.150] registers other than PPS Register …. [Pt B.51] time …. [PPSA.10], [PPSA.160] — meaning …. [PPSR1.6] — security agreements and interests …. [PPSA.161] — starting time for …. [PPSA.315] — transfers …. [PPSA.162], [PPSA.162.A] transitional security agreement, registration defective if collateral not covered by …. [PPSA.337A] transitional security interests — defects, registration continues despite certain …. [PPSA.337] — preparatory registration …. [PPSA.336]

verification statements — copy of …. [PPSA.175] — meaning …. [PPSA.155] — publication as alternative …. [PPSA.158] — Registrar, requirement to give to secured parties …. [PPSA.156] — secured parties, notice to grantors by …. [PPSA.157] when effective …. [PPSA.159]-[PPSA.164] Registration of Interests in Goods Act 1986 (NSW) pre-PPSA law, as significant …. [Pt A.2] Registration of Interests in Motor Vehicles and Other Goods Act 1989 (NT) pre-PPSA law, as significant …. [Pt A.2] Regulations Part 8.7, guide to …. [PPSA.301] Personal Property Securities Act, under …. [PPSA.303] Reinstatement collateral, power of entitled persons to reinstate …. [PPSA.142], [PPSA.143] Relocation collateral or grantor, of, to Australia — financial property …. [PPSA.40] — intangible property …. [PPSA.40] — main rule …. [PPSA.39] financial property, of …. [PPSA.40] Removal accessions — court order about …. [PPSA.97] Restitutionary claims personal property securities, application of general law principles to …. [Pt A.50] Retention collateral, of …. [PPSA.122]-[PPSA.138C] — extinguishment of obligations …. [PPSA.136]

— interests, free of …. [PPSA.136] — notice of proposed retention …. [PPSA.135] — objection to …. [PPSA.137]-[PPSA.138] interest, request of person making objection to prove …. [PPSA.138] who may object …. [PPSA.137] — Part 4.3, guide to …. [PPSA.122] — proposal by secured party to retain …. [PPSA.134] — secured party, power to retain …. [PPSA.134] — third-party purchasers …. [PPSA.136] — transfer of title, power of secured party to procure …. [PPSA.134] title, of See Retention of title transfer of title to give effect to …. [PPSA.141] Retention of title term, use of …. [Pt A.33] Sale agreement, conditional — meaning of security interest …. [PPSA.12] — security interest, whether constitutes …. [PPSA.12.A] buy-back agreement, and …. [PPSA.12.A] Sale of Motor Vehicles Act 1977 (ACT) pre-PPSA law, as significant …. [Pt A.2] Satellites goods, definition …. [PPSA.10] Search register, searching …. [Pt A.37], [PPSA.169]-[PPSA.176] — criteria …. [PPSA.171], [PPSR5.8] — fees …. [PPSA.190] — generally …. [PPSA.170] — grantor who is individual, by reference to details of …. [PPSA.172] — how to conduct …. [PPSA.172] — Part 5.5, guide to …. [PPSA.169] — permitted purposes only, for …. [PPSA.172]

— privacy, interference with …. [PPSA.173] — who can search …. [PPSA.170] — written search results, evidence and …. [PPSA.174] Secured parties ADI account, control of …. [PPSA.25], [PPSA.341A] body corporate …. [PPSRSCH1.1.3], [PPSRSCH2.2.2] body politic …. [PPSRSCH1.1.6], [PPSRSCH2.2.5] definition …. [PPSA.10] individual …. [PPSRSCH1.1.2] intermediated security, control of …. [PPSA.26] partner …. [PPSRSCH1.1.4], [PPSRSCH2.2.3] provision of information by …. [PPSA.274]-[PPSA.283] — costs arising from request, recovery of …. [PPSA.279] — costs charged, application to court in relation to …. [PPSA.281] — court order, consequences of not complying with …. [PPSA.282] — estoppels against persons who respond to request …. [PPSA.283] — exemption from answering request, application to court for …. [PPSA.278] — extension of time to answer request, application to court for …. [PPSA.278] — Part 8.4, guide to …. [PPSA.274] — response to request, application to court for …. [PPSA.280] — security interest, requirement to provide certain information relating to …. [PPSA.275] — successor in security interest, obligation to disclose when request made …. [PPSA.276] — time for responding to request …. [PPSA.277] trustee …. [PPSRSCH1.1.5], [PPSRSCH2.2.4] Securitisation accounts, protection of SPV acquiring receivables …. [PPSA.64] chattel paper — purchase of, protection of SPV for …. [PPSA.71] extinguishment

— disposal, of security interest by …. [PPSA.32], [PPSA.32.A] protection of SPV acquiring receivables …. [PPSA.64] security interest definition …. [PPSA.12] — exclusions …. [PPSA.12] SPV security, as in substance security interest …. [PPSA.12] Security agreements see Security agreements interests see Security interests intermediated — definition …. [PPSA.10], [PPSA.15] — security interest, taking free of …. [Pt A.46], [PPSA.48] Security agreements after-acquired property, provision for security interests in …. [PPSA.18] attachment, specific rules in respect of perfection and …. [Pt A.40] characterisation of …. [Pt A.29] deemed …. [Pt A.30] definition …. [Pt A.29], [PPSA.10] description and classification …. [Pt A.38] — property requiring unique serial number …. [Pt A.39] description by item or class, adequacy of …. [PPSA.20.A] enforcement of security interests provided for by …. [PPSA.314] entitled persons, power to reinstate …. [PPSA.142] exclusions from PPPSA …. [Pt A.57] form …. [Pt A.33] perfection — attachment, specific rules in respect of perfection and …. [Pt A.40] — declared statutory interests, priority between security interests and …. [Pt A.59] — main rule …. [Pt A.42] rules, general, relating to …. [PPSA.18] “signed or assented to” by debtor - enforceability when not …. [PPSA.19.A] terms, effective according to …. [PPSA.18] third parties, enforceability against …. [Pt A.41]

transitional — definition …. [Pt A.33], [PPSA.10], [PPSA.307], [PPSA.307.A] — registration defective if collateral not covered by …. [PPSA.337A] writing, need for …. [PPSA.20] Security interests accessions, rules for certain security interests …. [Pt A.45], [PPSA.87][PPSA.97] — continuation of security interests in …. [PPSA.88] — default rule, and priority of interest in accession …. [PPSA.89] — Part 3.3, guide to …. [Pt A.45], [PPSA.87] — whole, priority interest in after goods become accession …. [PPSA.91] before security interest perfected …. [PPSA.90] account, rights on transfer of — contractual restrictions, prohibitions on transfer and …. [PPSA.81] — transferee and account debtor, rights of …. [PPSA.80] ADI account, control of …. [PPSA.25], [PPSA.341A] after-acquired property, in …. [PPSA.18] agricultural interests, rules for certain security interests …. [PPSA.83][PPSA.186] — Part 3.2, guide to …. [PPSA.83] attachment, specific rules in respect of perfection and …. [PPSA.30][PPSA.40] — enforceability, required for …. [PPSA.19] — Part 2.4, guide to …. [PPSA.30] — time of attachment …. [PPSA.19] — transitional security interests …. [PPSA.321] characterisation of …. [PPSA.12.A] chattel paper, rights on transfer of — contractual restrictions, prohibitions on transfer and …. [PPSA.81] — transferee and account debtor, rights of …. [PPSA.80] circulating — definition under Corporations Act …. [Pt A.33], [Pt A.51] collateral

— entitled persons, power to redeem …. [PPSA.142] — retention …. [PPSA.122]-[PPSA.138C] Part 4.3, guide to …. [PPSA.122] — seizure, disposal and …. [PPSA.122]-[PPSA.138C] Part 4.3, guide to …. [PPSA.122] — transfer of interests in …. [Pt A.47], [PPSA.78]-[PPSA.81] Part 2.7, guide to …. [PPSA.78] prohibition in security agreement, transfer despite …. [PPSA.79], [PPSA.79.A] common carrier, possession of goods shipped by …. [PPSA.65] concept of, under PPSA and prior law …. [Pt A.4] concepts relating to personal property and …. [PPSA.12]-[PPSA.15] continuously perfected, how …. [PPSA.56] crops — growing, attachment of security interests to …. [PPSA.84A] — land, relationship of security interests to interest in …. [PPSA.84] — priority of …. [Pt A.45], [PPSA.56] declared statutory …. [PPSA.312] deemed …. [Pt A.30] deemed goods …. [PPSA.38] definition …. [Pt A.29], [PPSA.10], [PPSA.12] — flawed asset arrangements …. [PPSA.12.A] — term, use of …. [Pt A.33] enforcement of see Enforcement flawed asset arrangements …. [PPSA.12.A] grantors, enforceability against, and attachment …. [PPSA.19] intermediated securities, control of …. [PPSA.26] investment interests, control of …. [PPSA.27] letter of credit, control of …. [PPSA.28] licence, whether included as …. [PPSA.12.A] livestock — attachment of security interests to …. [PPSA.84A] — priority of …. [PPSA.86]

meaning under Personal Property Securities Regulations 2010 …. [PPSA.12], [PPSA.12.A], [PPSR1.8] migrated — definition …. [PPSA.10], [PPSA.332] — personal property interests, migration of …. [PPSA.330]-[PPSA.335] Division 6, scope of …. [PPSA.335] negotiable instruments not evidenced by certificate, control of …. [PPSA.29] option to purchase …. [PPSA.12.A] Part 2.2, guide to …. [PPSA.17] perfection — attachment, specific rules in respect of perfection and …. [PPSA.30][PPSA.40] Part 2.4, guide to …. [PPSA.30] — bailee, where goods possessed by …. [PPSA.22] — main rule …. [PPSA.21], [PPSA.21.A] — temporary perfection and …. [PPSA.33] transfer, after …. [PPSA.34], [PPSA.34.A] — transitional security interests, perfection rule …. [PPSA.322] personal property, possession and control …. [PPSA.23]-[PPSA.29] — Part 2.3, guide to …. [PPSA.23] — possession …. [PPSA.24], [PPSA.24A] PPSA, under …. [Pt A.29] primary purpose of document, incidental to …. [Pt A.29] priority between …. [PPSA.54]-[PPSA.77] — ADIs, priority of security interests held by …. [Pt A.45], [PPSA.75] — advances, priority of …. [PPSA.58] — chattel paper or interest in, priority of person who acquires …. [Pt A.45], [PPSA.71] — control, priority of security interests perfected by …. [PPSA.57] — creditor who receives payment of debt, priority of …. [PPSA.69], [PPSA.69.A] — declared statutory interests, priority between security interests and …. [Pt A.45], [Pt A.59], [PPSA.73], [PPSA.73.A] — document of title, priority of holder of negotiable …. [PPSA.72]

— foreign register, priority of certain security interests if no …. [PPSA.77] — intervening security interests, priority rules and …. [PPSA.59] — negotiable instrument, priority of person who acquires or interest in …. [PPSA.70] — Part 2.6, guide to …. [Pt A.59], [PPSA.54] — purchase money security interests, priority of …. [Pt A.44], [PPSA.62][PPSA.65] accounts, non-purchase money security interests in …. [Pt A.45], [PPSA.64] collateral, priority between competing purchase money security interests in …. [PPSA.63] time and capacity of protection …. [PPSA.62.A] when take priority …. [PPSA.62] — transfer of security interests, effect on priority …. [PPSA.60] — transferred collateral, of security interests in …. [PPSA.66]-[PPSA.68], [PPSA.68.A] break in perfection of transferor-granted interest, when …. [PPSA.68], [PPSA.68.A] continuously-perfected, when transferor-granted interest has been …. [PPSA.67] Division 4, application of …. [PPSA.66] — transitional security interests, definition …. [PPSA.308] — transitional security interests, priority rules for bankruptcy, certain security interests upon …. [PPSA.324] guide to …. [PPSA.320] insolvency, certain security interests upon …. [PPSA.324] security interest perfect by control, priority between …. [PPSA.322A] undetermined, priority otherwise …. [PPSA.323] — unperfected security interest, priority of execution creditor over …. [PPSA.74] proceeds — attachment …. [PPSA.32], [PPSA.32.A] — meaning …. [PPSA.31] — perfection, temporary perfection and …. [PPSA.33]

— returned goods, priority of security interests in …. [PPSA.76], [PPSA.76.A] — transfer and …. [PPSA.31]-[PPSA.34] meaning of transfer …. [PPSA.34.A] purchase money, definition …. [PPSA.10], [PPSA.14] relocation, to Australia — financial property …. [PPSA.40] — intangible property …. [PPSA.40] — main rule …. [PPSA.39] returned collateral — accounts …. [PPSA.38] — bailee, from …. [PPSA.35] — chattel paper …. [PPSA.38] — deemed security interest in returned goods …. [PPSA.38] — investment instruments, from …. [PPSA.36] — negotiable instruments, from …. [PPSA.36] rules — general, relating to …. [PPSA.16]-[PPSA.81] — specific, for certain security interests …. [PPSA.82]-[PPSA.106] Chapter 3, guide to …. [PPSA.82] sale agreement, whether constitutes …. [PPSA.12.A] subordination, voluntary, of …. [PPSA.61], [PPSA.61.A] taking personal property free of …. [PPSA.41]-[PPSA.53] — currency …. [Pt A.46], [PPSA.48] — domestic property …. [Pt A.46], [PPSA.47] low-value personal-use property …. [PPSA.47] — household property …. [Pt A.46], [PPSA.47] garage sale rule …. [PPSA.47] — incorrect serial number, where …. [PPSA.44] — intermediated security, taking free of security interest …. [Pt A.46], [PPSA.51] ordinary course of trading, in …. [Pt A.46], [PPSA.49] — investment instrument, taking free of security interest …. [Pt A.46],

[PPSA.50] ordinary course of trading, in …. [Pt A.46], [PPSA.49] — missing serial number, where …. [PPSA.44] — motor vehicles …. [Pt A.46], [PPSA.45] licensed dealers, purchase or lease from …. [PPSA.45] — ordinary course of business, in …. [Pt A.46], [PPSA.46], [PPSA.46.A] extinguishment rule and, application …. [PPSA.46.A] — Part 2.5 …. [Pt A.46] application of …. [PPSA.42] guide to …. [PPSA.41] — secured party, subrogation of rights on …. [PPSA.53] — serial numbered property, basic rule for …. [PPSA.44] — temporarily-perfected security interest …. [Pt A.46], [PPSA.52] — transferee, rights on …. [PPSA.53] — unperfected security interest …. [Pt A.46], [PPSA.43] third parties, enforceability against …. [PPSA.20], [PPSA.20.A] title, non-title, priority …. [PPSA.12.A] transitional — attachment …. [PPSA.321] — definition …. [PPSA.10], [PPSA.308] — perfection rule …. [PPSA.322] — preparatory registration relating to …. [PPSA.336] — priority rules for bankruptcy, certain security interests upon …. [PPSA.324] guide to …. [PPSA.320] insolvency, certain security interests upon …. [PPSA.324] transitional and control-perfected security interests, between …. [PPSA.322A] transitional security interests, priority between …. [PPSA.323] undetermined, priority otherwise …. [PPSA.323] — third parties, enforceability against …. [PPSA.311], [PPSA.311.A] trust, whether constitutes …. [PPSA12.A] unperfected, vesting of certain …. [PPSA.266]-[PPSA.269]

— bailors, certain, entitlement to damages …. [PPSA.269] — bankruptcy of grantor, vesting in grantor upon …. [PPSA.267] Corporations Act vesting rule …. [PPSA.267.A] security interests unaffected …. [PPSA.268] — consignors, certain, entitlement to damages …. [PPSA.269] — extinguishment rules …. [Pt A.46] — lessors, certain, entitlement to damages …. [PPSA.269] — Part 8.2, guide to …. [PPSA.266] — winding up of grantor security interests unaffected …. [PPSA.268] vesting in grantor that attaches after …. [PPSA.267A] vesting in grantor upon …. [PPSA.267], [PPSA.267.A] Security Interests in Goods Act 2005 (NSW) pre-PPSA law, as significant …. [Pt A.2] Seizure collateral, of …. [PPSA.123]-[PPSA.127] — apparent possession, seizure by …. [PPSA.126] — higher priority party, notice where …. [PPSA.127] — possession or control, by secured party who has perfected security interest by …. [PPSA.124] — secured party, power to seize …. [PPSA.123], [PPSA.123.A] crops, seizure and disposal of …. [PPSA.138B] disposal and …. [PPSA.122]-[PPSA.138C] — obligation to dispose of or retain …. [PPSA.125] — Part 4.3, guide to …. [PPSA.122] livestock, seizure and disposal of …. [PPSA.138C] Serial number aircraft and engine, as property requiring unique …. [Pt A.39] defects, taking personal property free of security interests where …. [PPSA.44] definition …. [PPSA.10] description by …. [Pt A.39], [PPSRSCH1.2.2] extinguishment rules, application to serial numbered property …. [Pt A.46]

hull identification number definition …. [PPSR1.6] intellectual property requiring unique …. [Pt A.39] PCT number, defined …. [PPSRSCH1.2.2] searching register by …. [Pt A.37] unique, property requiring …. [Pt A.39] Set-off arrangements interests not covered by PPSA …. [PPSA.8] Sheltering personal property securities, application of general law principle to …. [Pt A.50] Ship finance charters of ships, effect of PPSA on …. [PPSA.13] mortgages — focus of pre-PPSA law …. [Pt A.3] — rationalisation of law in respect of …. [Pt A.1] watercraft definition …. [PPSRSCH1.2.2] Shipping Registration Act 1981 (Cth) commencement of PPSA, amendment from …. [Pt A.53] pre-PPSA law, as significant …. [Pt A.2] Slander of title personal property securities, application of general law principles to …. [Pt A.50] State legislation, repeal and amendment from commencement of PPSA …. [Pt A.54] non-referring State operation — activities …. [PPSA.248] — definition …. [PPSA.10] — interests …. [PPSA.249] — overview …. [PPSA.246] — persons …. [PPSA.247] — register, inclusion of data in …. [PPSA.250]

referral of power by …. [Pt A.61] referred PPS matters, meaning …. [PPSA.245] referring, definition …. [PPSA.10], [PPSA.244] Stock mortgages focus of pre-PPSA law …. [Pt A.3] Stock Mortgages and Wool Liens Act 1924 (SA) pre-PPSA law, as significant …. [Pt A.2] Stock, Wool and Crop Mortgages Act 1930 (Tas) pre-PPSA law, as significant …. [Pt A.2] Subordination voluntary, of security interests …. [PPSA.61] Subrogation personal property securities, application of general law principles to …. [Pt A.50] Superior court definition …. [PPSA.10] relevant, definition …. [PPSA.10] Supreme Courts security interests in personal property, jurisdiction in respect of disputes about …. [Pt A.62] Take fish, meaning of …. [PPSA.138A] meaning of …. [PPSA.138A] Taking free rules general law rules, application alongside …. [Pt A.46] Part 2.5 PPSA …. [Pt A.46] — application of …. [PPSA.42] — guide to …. [PPSA.41] priority and …. [Pt A.43] security interests, taking personal property free of …. [PPSA.41]-[PPSA.53] — competing security interests, non-application to …. [PPSA.42]

— currency …. [Pt A.46], [PPSA.48] — domestic property …. [Pt A.46], [PPSA.47] — household property …. [Pt A.46], [PPSA.47] — incorrect serial number, where …. [PPSA.44] — intermediated security, taking free of security interest …. [Pt A.46], [PPSA.51] ordinary course of trading, in …. [Pt A.46], [PPSA.49] — investment instrument, taking free of security interest …. [Pt A.46], [PPSA.50] ordinary course of trading, in …. [Pt A.46], [PPSA.49] — missing serial number, where …. [PPSA.44] — motor vehicles …. [Pt A.46], [PPSA.45] — ordinary course of business, in …. [Pt A.46], [PPSA.46], [PPSA.46.A] application …. [PPSA.46.A] — Part 2.5 …. [Pt A.46] application of …. [PPSA.42] guide to …. [PPSA.41] — secured party, rights on …. [PPSA.53] — serial numbered property, basic rule for …. [PPSA.44] — temporarily-perfected security interest …. [Pt A.46], [PPSA.52] — transferee, rights on …. [PPSA.53] — unperfected security interest …. [Pt A.46], [PPSA.43] third party transferees, protection by …. [Pt A.34] Term deposit definition …. [PPSA.10] Third parties data, access to …. [PPSA.176C] security interests, enforceability against …. [Pt A.41] Time attachment, timing of …. [PPSA.19] carrier, timing rule for possession of goods transported by common …. [PPSA.24], [PPSA.24A] correcting Register, application to court for extension of time for ….

[PPSA.293] — court considerations for order …. [PPSA.293.A] execution, of, definition …. [PPSA.10] migration time, definition …. [PPSA.10], [PPSA.306] Part 8.5, guide to …. [PPSA.284] references to, in Act …. [PPSA.294] registration …. [Pt A.37] — commencement time definition …. [PPSA.10], [PPSA.306], [PPSA.306.A] PPSA starts to apply at …. [PPSA.310] registrations, starting time for …. [PPSA.315] security interests, time of attachment …. [PPSA.19] Title concept of, under PPSA and prior law …. [Pt A.4] irrelevance, under PPSA …. [Pt A.63] retention of see Retention of title Torrens Strait Fisheries Act 1984 (Cth) commencement of PPSA, amendment from …. [Pt A.53] Torrens system interests in land, and interests not covered by PPSA …. [PPSA.8] Tort personal property securities, application of general law principles to …. [Pt A.50] Tracing personal property securities, application of general law principles to …. [Pt A.50] Trade marks classification of property …. [Pt A.38] serial number, description by unique …. [Pt A.39], [PPSRSCH1.2.2] Trade Marks Act 1995 (Cth) commencement of PPSA, amendment from …. [Pt A.53] pre-PPSA law, as significant …. [Pt A.2]

Transfers annuity, of interests in, interests not covered by PPSA …. [PPSA.8] collateral, of interests in …. [Pt A.47], [PPSA.78]-[PPSA.81] — Part 2.7, guide to …. [PPSA.78] — prohibition in security agreement, transfer despite …. [PPSA.79], [PPSA.79.A] contracts, of unperformed, interests not covered by PPSA …. [PPSA.8] insurance policy, of interests in, interests not covered by PPSA …. [PPSA.8] intellectual property, transfers of …. [PPSA.106] interests, of, effect on priority …. [PPSA.60] meaning …. [PPSA.34.A] successive transfers of accounts or chattel paper …. [PPSA.19.A] title, of — meaning of security interest …. [PPSA.12] transferred collateral, of security interests in …. [PPSA.66]-[PPSA.68] — break in perfection of transferor-granted interest, when …. [PPSA.68] — continuously-perfected, when transferor-granted interest has been …. [PPSA.67] — Division 4, application of …. [PPSA.66] Tribunals security interests in personal property, jurisdiction in respect of disputes about …. [Pt A.62] Trust receipt security interest, meaning …. [PPSA.12] Trusts security interest, whether constitutes …. [PPSA.12.A] United Kingdom securities interests, recommendations for new law on …. [Pt A.25] United States reform of law in …. [Pt A.21] Value definition …. [PPSA.10]

Verification statement definition …. [PPSA.10] notice of, requirement for …. [PPSA.335] registration of — copy of …. [PPSA.175] — meaning …. [PPSA.155] — publication as alternative …. [PPSA.158] — secured parties, notice to grantors by …. [PPSA.157] Water craft — definition …. [PPSR1.6], [PPSRSCH1.2.2] description by serial number …. [PPSRSCH1.2.2] — hull identification number, defined …. [PPSR1.6] — manufacturer’s number, defined …. [PPSR1.6] — outboard motor defined …. [PPSR1.6] — property requiring unique serial number …. [Pt A.39], [PPSRSCH1.2.2] — transitional meaning …. [PPSR9.1] rights — focus of pre-PPSA law …. [Pt A.3] — personal property, definition …. [Pt A.28] — tradeable, application of PPSA …. [Pt A.57] source — definition …. [PPSA.10] — meaning of …. [PPSA.138A] Winding up grantor, vesting of unperfected security interests on insolvency of — deemed security interests, exception in respect of …. [PPSA.268] — non-consensual security interest …. [PPSA.267.A] — security interests unaffected …. [PPSA.268] — vesting in grantor that attaches after …. [PPSA.267A] — vesting in grantor upon …. [PPSA.267] Corporations Act vesting rule …. [PPSA.267.A]

Wool definition …. [PPSA.10] goods, definition …. [PPSA.10] Wool International Act 1993 (Cth) commencement of PPSA, amendment from …. [Pt A.53] Writing definition …. [PPSA.10] methods of signing …. [PPSA.20] security agreements, written …. [PPSA.20]