The Annotated Personal Property Securities Act 2009 (Cth) [3 ed.] 9781925672756

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The Annotated Personal Property Securities Act 2009 (Cth)

Nicholas Mirzai Jason Harris

3rd Edition

2018

The Annotated Personal Property Securities Act 2009 (Cth)

Disclaimer No person should rely on the contents of this publication without first obtaining advice from a qualified professional person. This publication is sold on the terms and understanding that: (1) the authors, consultants and editors are not responsible for the results of any actions taken on the basis of information in this publication, nor for any error in or omission from this publication; and (2) the publisher is not engaged in rendering legal, accounting, professional or other advice or services. The publisher, and the authors, consultants and editors, expressly disclaim all and any liability and responsibility to any person, whether a purchaser or reader of this publication or not, in respect of anything, and of the consequences of anything, done or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of this publication. Without limiting the generality of the above, no author, consultant or editor shall have any responsibility for any act or omission of any other author, consultant or editor.

The Annotated Personal Property Securities Act 2009 (Cth)

Nicholas Mirzai Jason Harris CCH AUSTRALIA LIMITED GPO Box 4072, Sydney, NSW 2001 Head Office Macquarie Park

3 Edition rd

2018

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About Wolters Kluwer Wolters Kluwer is a leading provider of accurate, authoritative and timely information services for professionals. Our position — ‘‘When you have to be right’’ — is built on the delivery of expert information that is timely, relevant, accurate, comprehensive and easy to use. We are a member of the Wolters Kluwer group, a leading global information services provider with a presence in more than 25 countries in Europe, North America and Asia Pacific. Wolters Kluwer — When you have to be right. Enquiries are welcome on 1300 300 224. National Library of Australia Cataloguing-in-Publication data Author: Title:

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Mirzai, Nicholas Annotated Personal Property Securities Act 2009 (Cth): with Regulations 2010 (Cth)/Nicholas Mirzai and Jason Harris. 3rd Edition 9781925672756 Includes index. Australia. Personal Property Securities Act 2009. Personal property — Australia. Harris, Jason

ISBN: 978-1-925672-75-6

Commonwealth legislation reproduced  2018 CCH Australia Limited All rights reserved. No part of this work covered by copyright may be reproduced or copied in any form or by any means (graphic, electronic or mechanical, including photocopying, recording, recording taping, or information retrieval systems) without the written permission of the publisher.

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Contents Page Foreword to Third Edition ................................................................................. vi Foreword to Second Edition ............................................................................ viii Foreword to First Edition ................................................................................... ix Preface ............................................................................................................. xi Wolters Kluwer Acknowledgments .................................................................. xii About the Authors ........................................................................................... xiii Author Acknowledgments ............................................................................... xiv How to Use This Book ..................................................................................... xv Guide to Preliminary Discussion ..................................................................... xxi Preliminary Discussion ................................................................................. xxiii Guide to Annotations for the Personal Property Securities Act 2009 ............... lxiii Personal Property Securities Act 2009 ................................................................1 Corporations Act 2001 ...................................................................................777 Personal Property Securities Regulations 2010 ...............................................823 References .....................................................................................................861 Abbreviations ................................................................................................863 Glossary of Terms ..........................................................................................865 List of Citations ..............................................................................................871 Case Table .....................................................................................................873 Section Finding List ........................................................................................887 Index .............................................................................................................905

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Foreword to Third Edition The third edition of this work is a worthy successor to the earlier editions and addresses the developing body of Australian case law concerning the Personal Property Securities Act 2009 (Cth) (‘‘PPSA’’). The Explanatory Memorandum to the Personal Property Securities Bill 2009 (Cth) ([5.1]ff) noted the benefit of a register of personal property securities that would provide greater transparency and certainty as to the status of security interests over third party property. The purpose of the PPSA was also noted by Ward JA (with whom Bathurst CJ and Beazley P agreed) in the Court of Appeal of the Supreme Court of New South Wales in Power Rental Op Co Australia, LLC v Forge Group Power Pty Ltd (in liq) (recs and mgrs apptd) (2017) 93 NSWLR 765; [2017] NSWCA 8 at [83] as follows: ‘‘. . . the ‘mischief’ that the PPSA was intended to address was the uncertainty and complexity of the various statutory and common law regimes applicable to security interests in personal property. The legislature sought to ameliorate this by providing a new national system of registration of interests of that kind and introducing a system of default rules to determine, among other things, priorities in respect of interests in personal property’’. The avoidance of uncertainty and complexity is, of course, a desirable objective. The case law addressed in this edition nonetheless highlights the range of practical challenges that the introduction of the PPSA has posed for the systems of lenders, suppliers of goods and other parties that take security over personal property. The authors address (in their commentary to PPSA s 8) questions that are now emerging as to whether particular forms of security (using that term broadly) such as a maritime lien, a constructive trust, a fund created under a deed of company arrangement or a creditor’s right of subrogation to a trustee’s right of indemnity can constitute a security interest within the scope of the PPSA. The authors also address (in their commentary to PPSA s 12) significant Court decisions that have considered the policy underlying the PPSA and its application in a range of factual settings: see for example Power Rental Op Co Australia, LLC v Forge Group Power Pty Ltd (in liq) (recs and mgrs apptd) (2017) 93 NSWLR 765; [2017] NSWCA 8 (dealing with the concept of a fixture adopted in the PPSA) and Central Cleaning Supplies (Aust) Pty Ltd v Elkerton (2014) 98 ACSR 52; [2014] VSC 61, rev’d (2015) 321 ALR 181; (2015) 296 FLR 25; [2015] VSCA 92 (dealing with temporary perfection of a retention of title arrangement). The authors also discuss (in their commentary to PPSA s 13) the amendments dealing with the concept of a ‘‘PPS Lease’’ made by the Personal Property Securities Amendment (PPS Leases) Act 2017 (Cth), which commenced on 20 May 2017, applying to contracts entered into from that date. This edition contains a useful discussion (in the commentary to PPSA s 153, 165 and 267) of the issues that have arisen in recent case law in respect of incorrect or incomplete information in financing statements, particularly the failure to record the Australian company number of the grantor, and of the vesting provisions in s 267 of the PPSA: see for example Re OneSteel Manufacturing Pty Ltd (admins apptd) (2017) 93 NSWLR 611; (2017) 344 ALR 657; (2017) 316 FLR 402; (2017) 118 ACSR 307; [2017] NSWSC 21. The authors also address the Review of the Personal Property Securities Act Final Report (Whittaker review) tabled in Parliament in March 2015. These matters raise questions as to whether there is scope for simplification of aspects of the registration process, so as to reduce the risk of the numerous errors in registration that have been addressed in recent case law.

vii The authors’ ambitions are not limited to their comprehensive commentary as to the PPSA, and they provide a detailed and helpful commentary on provisions of the Corporations Act 2001 (Cth), including s 588FL–588FO, that interact with the PPSA. The interaction of the PPSA and the Corporations Act is of real practical significance, where much litigation involving the PPSA has arisen in the context of corporate insolvency and the vesting provisions that may apply in that context. This edition, like earlier editions, continues to provide comprehensive references to international case law dealing with comparable Canadian and New Zealand legislation that cast light on the PPSA. This edition has all the virtues of annotations to complex legislation, promoting a close focus upon the text and operation of the relevant sections. The authors should be congratulated on the new edition of this valuable work. Justice Ashley Black Supreme Court of New South Wales 5 March 2018

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Foreword to Second Edition The enactment of the Personal Property Securities Act 2009 (Cth) (the ‘‘PPSA’’) heralded a new beginning for laws governing title to and securities over personal property. The significant reforms promised to replace existing complex, inconsistent and ad hoc common law and legislation with a single national law, creating a uniform and functional approach to personal property securities. The area was ripe for change. The Act was introduced to increase consistency in the arrangements for creating, dealing with and enforcing security interests in personal property. To facilitate this, a single national online register of personal property securities replaced the then existing confusing array of electronic and paper-based national, state and territory registers. The PPSA commenced operation in January 2012. The transitional period has come to an end as of January this year and the PPSA is now in full force and effect. The question then becomes how successful has the PPSA been thus far in conquering the difficulties and achieving the goals it was implemented to achieve? The second edition of this book goes a long way in answering that question. Authors Jason Harris and Nicholas Mirzai, in updating and expanding their discussion of the Act, both in light of case law developments and legislative amendments in the last two years, have thoughtfully analysed changes to the Act and its application since commencement. They identify common pitfalls, clarify grey areas and seek to inform readers of pertinent issues this legislation covers. Recognising that the Act was born as a product of the legislature drawing on experiences of international jurisdictions, mainly Canada and New Zealand, this edition continues to provide useful insight and commentary of recent cases from those other jurisdictions, which further assist in delivering a clearer picture of the aims, and informing the interpretation, of the PPSA in Australia. Additionally, the authors have updated the ‘‘further reading’’ headings at the end of each provision, ensuring that this book continues to be a comprehensive and exhaustive statement on the current state of the law, providing readers with a single go-to source on the PPSA. In the current climate of increasingly online transactions relating to personal property, and with the transitional provisions having ceased operation, there is no doubt that this consolidated guide remains, even more so in its updated form, a crucial resource for the business community, the legal profession and the banking and finance sectors. Justice Stephen Gageler High Court of Australia 6 June 2014

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Foreword to First Edition The law relating to securities over personal property is about to experience revolutionary change. When the Personal Properties Securities Act 2009 (Cth) (familiarly known as the ‘‘PPSA’’) comes into force, there will be an entirely new national system for the regulation of such securities. Hitherto, the law governing title to and securities over personal property had evolved in a haphazard way from diverse sources. First, there was the common law, replete with strange Latin tags and archaic Norman French expressions. Then there came waves of statutory regulation, undertaken (in Australia) principalIy on a state by state (and territory by territory) basis, at least until the national legislative schemes for regulating corporations imposed some order on securities given by corporations. All that has been swept away by the PPSA. The change is radical, not incremental. There is much to learn. Australia was not the first nation to introduce PPS legislation. Wisely, the legislature awaited, and observed the effects of, changes in other jurisdictions: specifically, Canada and New Zealand. The drafters of the PPSA were able to draw on overseas experience, and to benefit from the lessons learnt, often the hard way, elsewhere. The hotch potch of legal sources and regulatory arrangements that will be replaced by the PPSA has many disadvantages. At a practical level: registration requirements vary from jurisdiction to jurisdiction. In a federation such as Australia, there is the obvious, highly inconvenient and expensive problem of multiple registration where security is taken over personal property that is located throughout the federation. That problem is exacerbated because the registration requirements are not uniform. It is exacerbated further because the registers themselves have become cumbersome and unwieldy. Variations in the applicable legislative schemes have meant that defects in or failure to observe matters of form may vary in their consequences. Under the Corporations Act 2001 (Cth), defects of form may be overcome. For state legislation, the validity of registration is usually criticalIy dependant on form. That is unsatisfactory. The focus on form rather than substance can be seen in other ways. By way of example only, a chattel mortgage may be registered (and, for perfection of the security interest thereby granted, should be registered). A retention of title provision in a contract is incapable of registration, but is, under the existing regulatory system, effective despite registration. Yet the substance of each is the same. Someone who is owed money has the right to have recourse to personal property to satisfy the debt. Again, that is unsatisfactory. Much of this inconvenience and expense will be swept away on commencement of the PPSA. The benefits to business, and thus to consumers, are obvious. But equally, there will be, at least at the outset, a significant compliance burden cast on business. How are lawyers, lenders, and others who have a vital commercial interest in the regulation of securities over personal property to come to grips with this change? Jason Harris and Nicholas Mirzai provide an answer to this question. The labour that Harris and Mirzai have undertaken is huge. That is obvious on even a brief perusal of this book. Their labours have made the PPSA accessible to those whose operations will be affected by it. They have drawn together, to illustrate the operation of the PPSA, pre-existing case law in Australia and elsewhere (to the extent that it is relevant), legislative material from overseas jurisdictions and case law dealing with those legislative regimes.

x Thus, for each provision of the PPSA, Harris and Mirzai have laid out analogous provisions in other jurisdictions, an outline of the section and the way in which it relates to other key provisions of the PPSA, and an explanation of the key concepts that are found in the section. But they go further. They give detailed commentary, supported by overseas case law where relevant. And they provide further reading references. This book does far more than provide a primer to the operation of the PPSA. The depth of the research, and the erudition which is displayed, are sure to make it the first point of reference for all those who need to understand, and consider or advise upon, the operation and impact of the PPSA. Harris and Mirzai deserve both thanks and congratulations for their labours in producing this book. I have no doubt that it will become an indispensable reference tool for all those concerned with the operation of the PPSA. The Honourable Justice Robert McDougall Chambers, Supreme Court of New South Wales 28 September 2011

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Preface Consistent with the theme of the first two editions of this publication we remain of the view that anyone dealing with personal property needs to have at least a rudimentary understanding of the Personal Property Securities Act 2009 (Cth) (PPSA). From resins used to make plastic products (see In the matter of Gelpack Enterprises Pty Ltd (in liquidation) [2015] NSWSC 1558) to monies held on account of security for costs (See Dura (Australia) Constructions Pty Ltd (ACN 004 284 191) (in liquidation) (recs and mgrs appd) v Hue Boutique Living Pty Ltd (formerly SC Land Richmond Pty Ltd) (ACN 106 117 506) [2014] VSCA 326, the PPSA has continued to exercise the minds and operations of commercial participants and those who advise them. Since the release of the second edition there has been a steady growth in domestic case law which has been addressed in this edition. This edition also marks the introduction of a new section of commentary in respect of the changes made by the PPSA to the Corporations Act 2001 (Cth) in response to the general direction of the jurisprudence at the time of writing. We have also added a separate introduction in respect of the admirable Statutory review of the Personal Property Securities Act 2009 conducted by Mr Bruce Whittaker. We, like many others, await Parliament’s response to the Final Report tabled on 18 March 2015. With close to six years’ experience since this work was first published we have reflected on and revisited the existing commentary and case law and have refined the annotations accordingly. We remain acutely aware of the overarching aim of this book as a ready reference on all issues concerning the PPSA and while priding ourselves on being thorough in our analysis, we appreciate the needs of the busy practitioner to access relevant information expeditiously. The addition of further foreign jurisprudence (where relevant) while maintaining the form and structure familiar to previous editions of this text endeavours to further our commitment to the busy practitioner. As always, we are most grateful to the colleagues, academics, commentators, jurists, clients, students, instructing solicitors (and sometimes even opponents) — in no particular order — whose collective comments have improved many aspects of this resource and demanded a consistently high standard of analysis and discussion. We are humbled by your continued support, positive and constructive, and hope that this edition receives as much review and wear as the previous two editions. The Personal Property Securities Act 2009 and the Personal Property Securities Regulations are current to 1 July 2017. Nicholas Mirzai Jason Harris

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Wolters Kluwer Acknowledgments Wolters Kluwer wishes to thank the following who contributed to and supported this publication: Director | Commercial & Strategy: Lauren Ma Head of Publishing & Digital Strategy: Lilia Kanna Head of Legal Content: Carol Louw Content Coordination: Nathan Grice Editor: Emma Gleeson Production Team Leader: Katherine Joy Aguado Legislation Editor: Napoleon Doles Jr. Sub-Editor: Charlene Diocancil Production Editor: Raigin Guillermo Indexer: Edwin Arciaga Cover Designer: Jessica Crocker

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About the Authors Nicholas Mirzai Barrister at law LLB (Honours and University Medal)/B Bus (Fin) (UTS) Nicholas is a barrister at the New South Wales Bar and a member of Level 22 Chambers in Sydney, NSW. His predominantly civil practice sees him regularly engaged in corporate, commercial, securities and insolvency disputes in both advisory and advocate capacities. Nicholas also lecturers at the University of Technology, Sydney in Commercial Law and Finance Law. Prior to being called to the Bar Nicholas was Associate to the Honourable Justice W M C Gummow AC, and the Honourable Justice S J Gageler at the High Court of Australia, Tipstaff to the Honourable Justice R I Barrett at the Supreme Court of New South Wales and Law Clerk at King & Wood Mallesons (formerly Mallesons Stephen Jaques). He can be contacted at [email protected]. Jason Harris BA LLB (WSU), LLM (ANU), FGIA Associate Professor, UTS Faculty of Law Jason teaches corporate law, commercial law and insolvency law at UTS. He has previously worked at UNSW and the ANU. Jason’s research is in the area of corporate rescue and debt restructuring, directors’ duties and accessorial liability, corporate groups and the PPSA. Jason is a fellow of the Governance Institute of Australia, and a member of Insol International, the Australian Restructuring Insolvency and Turnaround Association, the Insolvency and Corporations committees of the Law Council of Australia. Jason is a former president of the Australian Corporate Law Teachers’ Association and former Chair of the Governance Institute’s national education committee. Jason has written 12 books and over 90 articles and his research has been cited in the Supreme Courts of NSW, South Australia, Western Australia and by the Federal Court as well as by several parliamentary and government inquiries.

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Author Acknowledgments The list of persons to thank for their feedback is long, but in summary we thank David Brown (Adelaide Law School), John Stumbles and Sheelagh McCracken (Sydney Law School); Michael Murray (Murrays Legal); Paul Rogerson (NRMA); Diccon Loxton and Andrew Boxall (Allens- Linklaters); Nuncio D’Angelo and James de Szell (Norton Rose Fulbright); Jim Johnson (Frederick Jordan Chambers), Daniel Tirado (Toyota Finance) and Matthew Tenace (St George) for their many useful discussions with us on PPSA matters. All errors, omissions and misunderstandings remain the sole responsibility of the authors. Nicholas would like to extend his gratitude to the profession for its continued regard and use of this book — even where it has been used against him in the course of argument. He would particularly like to thank Professor John Stumbles, Christopher Athanassios and his co-author Jason Harris among his colleagues at Level 22 Chambers (particularly his former floor clerk Erin Mc Cabe) for graciously indulging his thoughts on the PPSA and its intricacies. Nicholas is ever grateful for the patience and encouragement of his wife Bernadette and the unwavering support of Asher, Lorenza and Chantel. Jason would also like to thank his colleagues and students in Commercial Law and Insolvency who have worked through the implementation of the PPSA with curiosity and patience that has stimulated a lively classroom environment in which to explore the new and emerging law. Jason particularly thanks his co-author Nicholas for his support and friendship. Lastly, Jason thanks his family Kathy, Ciaran, Erin and Katie for their continuing love and support over the time spent working on ‘‘the book’’.

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How to Use This Book As with the first edition of this text, the structure, format and layout of this edition have been maintained to help direct readers quickly to the information they require. This summary outlines the various techniques adopted by the authors in this regard and presents a guide to each of the headings incorporated in the annotations.

Introductory comments For those approaching the Personal Property Securities Act 2009 (Cth) for the first time or for those seeking a broader understanding of the rationale behind it, the introductory sections of this text aim to put the PPSA reform into context and discuss elements of the regime at a conceptual and policy level. While a concise overview, the introductory comments are referred to throughout the substantive commentary of this book as many of the provisions can only be fully appreciated in light of the overarching framework of the regime when taken as a whole. In that regard, the introductions are not strictly confined to explaining elementary concepts of securities law although they also seek to facilitate this purpose.

Annotations Each substantive provision of the PPSA has a corresponding annotation. With the exception of several administrative parts of the Act (which are dealt with as whole Parts as opposed to conducting a section-by-section analysis) the sections of the Act have been commentated upon using the following heading structure: [x.1] [x.2] [x.3] [x.4] [x.5] [x.6]

Comparable provisions in foreign regimes Outline Cross-references Concepts Commentary Further reading

For convenient and quick access, each heading appears at the same decimal place for each annotation whereby the section number itself determines the first number. Using s 20 as an example, the annotations to s 20 have the following headings: [20.1] [20.2] [20.3] [20.4] [20.5] [20.6]

Comparable provisions in foreign regimes Outline Cross-references Concepts Commentary Further reading

xvi Similarly, all subheadings follow a linear pattern of subsequent decimal values. For example, if the commentary to s 20 has four different sub-parts they would appear as follows: [20.5.1] [20.5.2] [20.5.3] [20.5.4]

Introduction Attachment requirement Writing requirements for perfection by registration Written security agreements

Heading Contents The six heading levels focus on providing answers or guidance for the benefit of different users. Comparable provisions in foreign regimes — x.1 As discussed in Intro.VII, the Australian PPSA conceptually derives from the US, Saskatchewan, Ontario and New Zealand regimes. Structurally, however, the various statutes differ considerably — particularly with respect to drafting style. This part of the annotations provides readers with parallels between the Australian PPSA and the four foreign systems identified — to the extent that a direct parallel can be drawn. This is designed to quickly direct readers to the relevant foreign provisions for the purposes of further research. For the purpose of clarity, where this symbol appears, [–], it means that no relevant cross-reference exists. Outline — x.2 The outline section is aimed to provide a concise description of the relevant section whereby readers can quickly ascertain whether or not the particular section is of relevance to them. Typically no more than a few sentences, the outline aims to cut through the detail and provide a general overview of the effect of the provision. Cross-references — x.3 The cross-references section aims to provide a checklist or series of flags to other provisions of the Australian PPSA which may affect the operation of the particular provision being discussed. While elaborated upon throughout the commentary to the section, the cross-reference list clearly highlights the interconnected nature of certain provisions and helps readers navigate through the Act. The cross-references also comprehensively refer readers to specific PPS Regulations relevant to the section discussed. Concepts — x.4 The concepts section provides definitions for terms used throughout the section which impact on its scope, operation and overall effect. The terms addressed are not restricted to those defined by s 10, although these are included where relevant. At a fundamental level of statutory interpretation, an understanding of the concepts is imperative to understanding the scope and effect of the relevant provision. That said, it should be noted that where a concept forms the heart of an operative provision it is often addressed in the commentary itself and not in the concepts section. It should also be noted that the concepts of the security interest, the

xvii grantor and the secured party are relevant for almost every section of the Act and so reference has not been made to them specifically in the ‘‘Concepts’’ section. Commentary — x.5 The commentary section comprises the detailed analysis of the section drawing on foreign case law, leading texts, academic articles, the explanatory memorandum, ALRC reports and other PPS publications to provide insight into the mechanics of the PPSA. It is in this part where the intricacies of each provision and sub-provision are explained and expanded upon. While a vast body of foreign resources exist in relation to PPS-type regimes, the authors have endeavoured to be selective in presenting only those authorities relevant to the operation of the Australian Act — either through parallel legislative provisions or conceptual similarities. Further reading — x.6 Recognising that the magnitude and scope of the PPSA is impossible to exhaustively canvass in one handbook, the ‘‘Further reading’’ section provides references to all relevant explanatory memorandum paragraphs, ALRC Report 64 concepts and academic articles which further discuss the particular provision being addressed. Again the authors have been selective to present only the most relevant resources to focus points of discussion as opposed to provide a cursory overview.

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GUIDE TO PRELIMINARY DISCUSSION Intro. I — What is the Personal Property Securities Act 2009 ....................................................................................................xxiii Intro. II — Why was the Personal Property Securities Act 2009 introduced? — Legislative History ........................................ xxiv The process of law reform ...................................................................... xxiv Why reform personal property securities law? ........................................ xxv Intro. III — Pre-Personal Property Securities Act 2009 law with respect to security interests ..................................................... xxvi A. What is security? ........................................................................... xxvi B. The legal position .........................................................................xxvii (i) Mortgages ................................................................................xxviii (ii) Charges .................................................................................... xxix (iii) Liens ......................................................................................... xxx (iv) Pledges ..................................................................................... xxx C. General comments .......................................................................... xxx Intro. IV — Principles of the Personal Property Securities Act 2009 ............................................................................................. xxxi A. ‘‘Irrelevance’’ of title .................................................................... xxxi B. Substance as opposed to form .....................................................xxxiii C. Preservation of commercial realities ...........................................xxxiii D. Primacy and predictability of the register ................................... xxxiv E. Consumer protection ..................................................................... xxxv F. Preservation of the existing law where the Act does not apply ...................................................................................... xxxvi Intro. V — Structure of the Personal Property Securities Act 2009 and drafting stylistics ...........................................................xxxvii A. Structure of the Personal Property Securities Act 2009 ............................................................................................xxxvii B. Drafting stylistics ........................................................................xxxvii Annotated Personal Property Securities Act 2009 (Cth)

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Intro. VI — Foreign regimes ................................................................... xl A. Article 9 of the Uniform Commercial Code — United States Model ........................................................................... xl B. Personal Property Security Act, SS 1993, c P-6.2 — Saskatchewan Model .................................................................... xl C. Personal Property Security Act, RSO 1990, c P.10 — Ontario Model ..............................................................................xli D. Personal Property Securities Act 1999 (NZ) ...................................xli Intro. VII — Forms and practice statements ........................................xli Forms .....................................................................................................xli Practice statements ...............................................................................xlii Intro. VIII — The cessation of the transitional period .........................lii Intro. IX — The Whittaker review .......................................................lvii

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Intro. I — What is the Personal Property Securities Act 2009? The Personal Property Securities Act 2009 (Cth) (PPSA) is essentially a statutory system for addressing priority disputes between parties who take security interests over personal property in Australia. It is based on a referral of powers from the Australian States to the Commonwealth and largely replaces existing State and Federal registers for security interests in different types of personal property such as motor vehicles. The PPSA also replaces the Statebased bills of sale legislation. The PPSA commenced operation on 31 January 2012 and the transitional provisions pursuant to Ch 9 ceased on or about 31 January 2014. Importantly, despite its lengthy transitional period, the PPSA applies to all security interests which arose on or after 31 January 2012. In order to alleviate the effect of the PPSA and its significant changes, the transitional provisions, contained largely in Ch 9 of the PPSA, sought to provide deemed compliance for existing security agreements (called ‘‘transitional security agreements’’) and the security they confer (called ‘‘transitional security interests’’). Whether or not the transitional provisions were effective in their conferral of temporary perfection upon transitional security interests (see particularly s 322 of the PPSA) remains to be seen. However, what is clear at this stage is that the temporary perfection status afforded by Ch 9 has ceased and all security interests taken over personal property to which the PPSA applies will need to comply with the requirements imposed by the legislation (or risk losing priority should such an interest become enforceable). The PPSA represents both a confirmation of existing secured transactions law in some areas and a significant departure from existing principles in others. Elements of the pre-PPSA law confirmed by the PPSA include notice-based registration requirements, unenforceability of security interests that are not properly registered upon insolvency and a system of priorities based largely (though not entirely) on temporal priority — whereby, ‘‘first in time’’ prevails. However, the PPSA also represents a radical departure from some pre-PPSA concepts, most notably the principle of nemo dat quod non habet (no one [can] give what one does not have). The PPSA is focused on regulating the priority and enforcement of competing security interests. Competitions in priority under the PPSA are not (unlike the pre-PPSA law) based on who has superior ‘‘title’’. The PPSA no doubt came as a shock to lessors and suppliers with retention of title agreements who may be deemed to be secured parties under the regime. Furthermore, certain transactions (such as long term leases, commercial consignments and transfers of book debts) are deemed to be security interests (see s 12(3), 13). The failure to perfect a security interest can result in mandatory subordination of one’s interest under the PPSA, regardless of who has legal title or ownership of the underlying property, the subject of the security interest. While a change to existing commercial law principles, the PPSA largely builds upon the Common Law and commercial practices as they have developed in Australia. For instance, the PPSA is not concerned with the form or scope of Annotated Personal Property Securities Act 2009 (Cth)

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commercial transactions but rather with their substance and effect. Indeed, the definition of a security interest in s 12(1) is based on the substance of the transaction and not on its form. This may mean that the use of long standing terms such as ‘‘floating charges’’ become obsolete (see Pt 9.5). Although some provisions set out what matters must be addressed in security agreements, the PPSA largely operates on the basis that the commercial dealings between two or more contracting parties is to be regulated by non-PPSA laws. It is generally only when there is a priority conflict in relation to personal property that the PPSA becomes operational. The PPSA has and will continue to affect many commercial transactions and the transition to the statutory system has been, and will continue to be, a challenge for many commercial parties, consumers and those who advise them. Participants are required to adapt to a new commercial law lexicon, with terms such as ‘‘charges’’ and ‘‘chattel mortgages’’ giving way to the general security agreement, security interest, chattel paper and purchase money security interest (PMSI). While it will no doubt present some difficulty to abandon or reconceptualise long standing principles such as the nemo dat rule and the ‘‘crystallisation’’ of a floating charge, the PPSA provides significant benefits by reformulating the ambiguities of secured transactions which arose at Common Law into a new comprehensive system.

Intro. II — Why was the Personal Property Securities Act 2009 introduced? — Legislative History The process of law reform The process of law reform that led to the introduction of the Personal Property Securities Act 2009 (Cth) (PPSA) was gradual. In 1972, the Law Council of Australia (known as the Molomby Committee) recommended a substantial reform of consumer credit laws: see Law Council of Australia, Report on Fair Consumer Credit Laws (1972). As part of that proposal, the Committee Report noted ‘‘the need for reform of the whole area of goods securities’’. While this eventually led to the reform of consumer finance laws, the process of reform of commercial securities laws entered a prolonged period of debate and review. In the early 1990s, several State law reform bodies and the Australian Law Reform Commission (ALRC) began investigating personal property securities reform which culminated in the release of ALRC Report 64 Personal Property Securities (1993). This was followed by a discussion paper published by the Commonwealth Attorney-General’s Department in 1995 which led to several conferences convened by Professor David Allen of Bond University. This process resulted in the creation of a draft bill which became known as the Bond Bill (2002). Professor Allen was instrumental in pushing for law reform which led the Standing Committee of Attorneys-General to release an options paper in 2006 canvassing the law reform. This was followed by the formulation of the Personal Property Securities Bill 2008 which underwent extensive consultation. Upon submission to the Commonwealth Parliament, the Senate Legal and Constitutional Affairs Committee considered the Bill, and several related Bills (namely, the Personal Property Securities (Consequential Amendments) Bill and the Personal Property Securities

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(Corporations and Other Amendments) Bill) in 2009 and 2010, leading to further revisions before the Acts were passed by the Parliament. Since that time further amendments have been made; see Personal Property Securities (Corporations and Other Amendments) Act 2011 (Cth). Pursuant to s 343(1) of the PPSA, the Minister must cause a review of the operation of the Act within three years after the registration commencement time. In accordance with this section, on 4 April 2014, the Hon George Brandis QC announced that the PPSA will be reviewed under the lead of Ashurst partner Mr Bruce Whittaker. An interim report from this review is due 31 July 2014 with a final report due on 30 January 2015. The focus of the review is on the impact of the PPSA on small business and the simplification of the Act and its provisions (although the review is not restricted exclusively to these purposes). Why reform personal property securities law? The need to reform personal property securities law was based on a number of factors. Most importantly, technological change in financing techniques and structures led to the traditional classifications of security devices becoming quickly outdated. Much as the Financial Services Reform Act 2001 (Cth) led to a ‘‘substance’’ over ‘‘form’’ approach to financial product regulation, the Personal Property Securities Act 2009 (Cth) (PPSA) adopted this rationale moving away from the form of the security device to focus on the substance of the transaction. This provides the benefit of regulating many common transactions that are aimed at providing security but avoid the notification and registration requirements of traditional bills of sale and company charges (such as retention of title clauses). The pre-PPSA regulatory framework was filled with overlapping legal regimes and produced a number of inconsistencies in the treatment of substantially similar transactions. The aim of introducing the PPSA was to simplify commercial and securities law by providing a consistent regime to deal with priority disputes over personal property securities. As the Court of Appeal for British Columbia said in 674921 BC Ltd v Advanced Wing Technologies Corp (2006) 9 PPSAC (3d) 43; 263 DLR (4th) 290 at [1], the PPSA: ‘‘swept away various statutory, common law and equitable rules dealing with secured transactions involving personal property . . . This patchwork of rules relating to constructive and actual knowledge, title, registration, crystallization, realization and priorities had developed over many years in response to changing exigencies and without any overall rationale. The new unified statutory scheme (‘PPSA’) applies to all interests that ‘in substance’ create security interests on personal property’’. In New Zealand, in the first major case on the PPSA (NZ) (Graham v Portacom New Zealand Ltd [2004] 2 NZLR 528), Justice Hansen noted that the PPSA replaced a ‘‘confusing hotchpotch of rules and regulations under common law and statute with a comprehensive system for registering security interest in chattels and other personal property’’. The whole purpose of the PPSA was to recognise that the core concept of a security interest under the Act overrode Annotated Personal Property Securities Act 2009 (Cth)

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certain conventional legal rules so as to introduce a consistent and comprehensive system for resolving disputes over personal property securities: Waller v New Zealand Bloodstock Ltd [2006] 3 NZLR 629 at [27] (CA). As the Supreme Court of Canada said in Trade Finance Inc v Bank of Montreal [2011] SCC 26 at [27], where the PPSA applies ‘‘it renders irrelevant the distinctions between the wide variety of instruments which existed at common law and in equity for taking a security interest in another person’s property’’. That the jurisprudence which has developed abroad remains important to the interpretation of the PPSA domestically was confirmed in the first Australian case to substantively consider the operation and effect of the regime, Re Maiden Civil (P&E) Pty Ltd (2013) APPSR ¶701-008; Albarran v Queensland Excavation Services Pty Ltd (2013) 277 FLR 337; [2013] NSWSC 852 at [32].

Intro. III — Pre-Personal Property Securities Act 2009 law with respect to security interests In understanding how the PPSA alters the existing position at common law with respect to security interests, it is worth briefly examining the law as it stood before the Act took force. Caution should be exercised in this regard however. The PPSA is a Commonwealth statute that is meant to represent a change from the previous regime, and it is, in the authors’ view, erroneous to commence interpretation of its provisions by starting with pre-PPSA notions. In some instances, as will be discussed in turn throughout this book, the legal position is the opposite of what once governed. In other cases, the PPSA introduces a totally new concept altogether (such as chattel paper). This brief account has thus only been included as an introduction to securities law for those unfamiliar with its workings. A. What is security? The term security can be defined as ‘‘a transaction whereby a person to whom an obligation is owed by another person called the ‘debtor’ is afforded, in addition to the personal promise of the debtor to discharge the obligation, rights exercisable against some property of the debtor in order to enforce discharge of the obligation’’: Edward I Sykes and Sally Walker, The Law of Securities (5th ed, 1993) 3. ‘‘Taking security’’ is thus the creation of an ancillary or additional right — a right which accompanies and provides an avenue of recourse for the secured party in the case of a failure of the debtor to meet some primary obligation. While a security interest is ancillary, this should not cause its effects to be trivialised as it is often the case that the security interest provides better recourse for the secured party than enforcing the promise against the debtor’s primary obligation(s). Consider the following example: Debtor A borrows money from Bank B in exchange for both the promise from Debtor A to repay the loan, typically inclusive of an interest component, and the ability for Bank B to seize and sell Debtor A’s computer, motor vehicle and dining set should they not meet their obligation to repay.

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The first right so described, namely the promise to repay, comprises the primary obligation and is enforceable as a right in personam, that is, a right against the person — in this case Debtor A. Should Debtor A go bankrupt or fail to meet the obligations set out in the agreement between Debtor A and Bank B, Bank B is forced to put in a proof of debt of some description against Debtor A’s estate or sue Debtor A in an action regarding the debt to recover the amount owed to it. The second right so described, namely the right to seize and sell particular items of Debtor A’s property, constitutes the ancillary right — the security — which operates as a right in rem, that is, a right against the world at large. Note the irrelevance of this right where Debtor A complies with the terms of the agreement between Bank B and themselves — such is the nature of taking security. In the converse, note the critical importance of the right where Debtor A, for whatever reason, is unable to meet the primary obligation(s) owing to Bank B. Assuming Debtor A is forced into bankruptcy and hence is unable to meet the relevant obligation(s), Bank B can point to particular items of property encumbered by Debtor A for the purpose of securing the loan. Bank B, assuming validity of the underlying agreement, can exercise powers of seizure and sale to recover the primary obligation owed. Any shortfall can additionally be recovered from Debtor A’s estate through the same proof of debt mechanisms outlined above. Enforcing a security interest does not circumvent a right to recover in personam (against the person). However, the security interest does offer priority in that Bank B need not wait to be reimbursed from Debtor A’s estate (a sum which is often substantially less than the obligation owing based on the pool of assets available from Debtor A’s remaining estate). The reason for this substantial reduction in return to creditors is based typically on the money owed to creditors over and above the asset pool available as part of Debtor A’s estate. In the absence of enforceable security, distribution of the bankrupt’s estate occurs on a pari passu basis (meaning ‘‘with equal step’’) such that all creditors of a particular class are paid in full before moving to the next class of creditors until either all creditors are paid or the asset pool is depleted. Where the asset pool is insufficient to meet all debts owing and admitted by the administrator of the estate (as is often the case) a percentage is paid based on the size of the obligation owing which could range anywhere between 0 and 100 cents in the dollar. ‘‘Taking security’’ thus provides a method of addressing default risk. B. The legal position While the concept of security appears to be somewhat straightforward in application, ensuring that an interest is properly secured contains the potential for many validity and subsequent priority issues to arise. The ramifications of failing to hold a valid security interest in priority to other such interests could mean the difference between complete recovery and recovery of nothing at all. Indeed, so fundamental is the effectiveness of taking security to commercial business that in recent times more abstract commercial applications of the Annotated Personal Property Securities Act 2009 (Cth)

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concept have developed including ‘‘securitisation’’ and ‘‘security lending’’: eg see Beconwood Securities v ANZ (2008) 26 ACLC 512. While much time and effort has been spent attempting to implement ways and means of improving the framework as it stood prior to the PPSA, so fragmented were the various principles that each layer of reform added new complexity and inconsistency to the existing model. The most evident example of this is the distinction made between a mortgage and a retention of title arrangement. Both instruments operate such that the holder of legal title surrenders possession of the underlying property in favour of the debtor. Only on default do the seizure and sale powers (or like enforcement mechanisms) arise. In substance, both instruments (which have been simplified by way of this illustration however duly make the point) grant the holder of the legal title to the property an interest akin to security. However, under pre-PPSA law, only the mortgage is characterised as a security interest and is duly registrable — the retention of title arrangement is not a security interest and no register existed for such instruments. Both legal title and the form of the instrument comprise the focus of this analysis. The proliferation of instruments seeking to circumvent or distort registration requirements for taxation and other such purposes have thus arisen where clever drafting has resulted in a large degree of complexity and inconsistency. What was recognisable as a security interest under pre-PPSA law was thus limited to the following four instruments: (i) Mortgages (ii) Charges (iii) Liens (iv) Pledges.

(i) Mortgages The term ‘‘mortgage’’ is commonly associated to affairs with real property, arising typically when a person seeks to purchase real estate. While common for dealings with land, mortgages are not limited in such a way and may apply to secure dealings with personal property. Mortgages over land are commonly ‘‘equitable’’ mortgages as opposed to ‘‘legal’’ mortgages — as discussed below. By definition, a mortgage is essentially ‘‘a security created by agreement for the payment of a debt, or a future advance, which involves an actual or executory conveyance of real or personal property: See further Tyler, Young and Croft, Fisher & Lightwood’s Law of Mortgage, (3rd ed, 2013). A legal mortgage constitutes the assignment or transfer of the legal interest in property to the mortgagee (Santley v Wilde [1899] 2 Ch 474), as distinct from the concept of an equitable charge. The mortgagee holds the legal title for the benefit of the holder of the equitable title, that is, the mortgagor. Upon satisfaction of the underlying obligation (typically the complete repayment of a debt owed plus interest and related costs), legal title is transferred back from the mortgagee to the mortgagor and the property subject to the mortgage becomes unencumbered.

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As this interest comprised one of the recognised classes of securities in Australia, the interest created traditionally required registration in order to be recognised at law: Rose v Inland Revenue Commissioner [1952] 1 Ch D 499 at 510–511. Over the course of the legal mortgage, the mortgagor retains the ‘‘equity of redemption’’, that is, the right to have the property transferred back to them upon satisfaction of obligations owing to the mortgagee: see Salt v the Marquess of Northampton [1892] AC 1 at 18–19. This mortgage is called a ‘‘legal’’ mortgage because it is recognised by a court exercising common law jurisdiction. The rules regarding legal mortgages were strictly enforced including the doctrine of forfeiture and the imposition of formal requirements by way of writing and statutory compliance. This did not, however, fetter the imposition of equitable notions and over time the equitable mortgage developed along the lines of preventing unconscionability and giving effect to the intention of the parties regardless of form. Thus, by contrast, an equitable mortgage does not purport to transfer title from the mortgagor to the mortgagee at the outset of a security arrangement. The reverse thus applies in the instance of default, that is, where the mortgagor fails to satisfy the obligations owed to the mortgagee, the security is triggered and legal title is to be transferred to the mortgagee.

(ii) Charges For the purposes of analysing how charges operate, the concept of an equitable charge will be explored. An equitable charge bestows proprietary rights upon the chargee (that is, the party benefiting from the security interest) to appropriate an asset or class of assets should the chargor (that is, the party owing the obligations) default on obligations owing to them. Like a mortgage, taking security under a charge does not require the transfer of possession of the property from the chargor to the chargee at the outset of the arrangement and indeed typically possession will not be transferred unless and until enforcement action is taken upon execution of the instrument. Charges can arise by operation of law or by agreement and have been used widely in a commercial sense in either ‘‘fixed’’ or ‘‘floating’’ vicinities. A fixed charge attaches to specific property at the outset of the charge’s operation whereby the chargor can no longer deal with such property in the ordinary course of business without the direct consent of the chargee. A fixed charge thus commonly attaches to property which is not typically subject to day-today dealing and/or transfer, such as plant and equipment. A floating charge on the other hand does not attach to any specific item of property at the outset of the charge’s operation but rather attaches to the property owned by the chargor at the moment of default. Upon default, a process known as ‘‘crystallisation’’ occurs, encompassing all property held by the chargor at that particular point in time. Until this point, however, the chargor is free to use the assets in the ordinary course of business: see Agnew v IRC [2001] 2 AC 710; Re Spectrum Plus Ltd (in liq) [2005] 2 AC 680; Fire Nymph Products Ltd v The Heating Centre Pty Ltd (in liq) (1992) 7 ACSR 365. Floating charges thus became popular instruments for taking security over assets which are typically subject to transferability, such as inventory. Taking both a fixed and floating charge has thus become a commercially acceptable means of taking ‘‘all-assets’’ Annotated Personal Property Securities Act 2009 (Cth)

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security. Again, like mortgages, charges required registration in particular circumstances in order to be enforceable.1 As will be discussed in due course, the PPSA makes the distinction between a fixed and floating charge and the concept of crystallisation largely irrelevant (see Pt 9.5). See the discussion on circulating assets or non-circulating assets in particular at s 340.

(iii) Liens A contractual lien can be defined as an instrument that entitles a party to retain possession of encumbered property until a debt incurred with respect to such property has been paid: see for example Stapley v Towing Masters Pty Ltd (trading as Dynamic Towing) [2009] NSWCA 382. In essence, a lien is a security interest which arises by possession of the underlying collateral. There are several types of lien including possessory, equitable and non-statutory maritime liens. A common example of a possessory lien is one held by a legal practitioner over client files and information with respect to work done on a relevant matter. While the holder of a contractual lien does not possess an express right of sale, they may withhold possession.

(iv) Pledges A pledge is a possessory security, otherwise referred to as a ‘‘pawn’’. Using a pledge to take security operates through use of a bailment whereby the pledgor leaves property with the pledgee. A pledge and a lien share many attributes at law. One distinguishing feature is that the secured party, the pledgee, has a right of sale if certain conditions are not met (namely, the repayment of funds plus interest/costs within the specified life of the security interest does not occur). The beneficiary of a lien has no such automatic right. C. General comments The approach to the concept of a security interest at common law was thus largely a case-by-case task of ascertaining whether or not a particular interest fits within one of the above four definitions so defined. While effective and operative up until the PPSA, it should be conceded that the common law approach to securities law was ill-equipped to account for instruments used in contemporary commerce. Contractual set-off agreements, hire purchase instruments, flawed assets, subordination agreements, retention of title clauses and even certain classes of lease arrangements have each attracted varying determinations from different courts over the years. This has reduced the precedential value of judicial decisions and resulted in unnecessary variations of drafting techniques to reach different practical ends while further confusing and hindering the principled development of the law. The ambiguity which has arisen has had an obvious and direct result on obtaining credit — as risk and uncertainty goes up, so does the price. 1

See for example, Corporations Act 2001 (Cth) s 262; Registration of Interests in Goods Act 1986 (NSW).

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As previously stated, the Court, when asked to resolve a priority dispute, was to be led generally from the form of the transaction and the holder of particular classes of title in the underlying property, in order to determine whether the agreement contemplated an attachment of a security interest, resulting in valid recourse, or conclude that the agreement should be properly characterised as one providing mere rights in personam (against the person). The absence of comprehensive legislative intervention has been criticised for years prior to the development of the PPSA and it indeed provides a longstanding and invited change to securities law with respect to personal property.

Intro. IV — Principles of the Personal Property Securities Act 2009 The PPSA is founded on several core principles and rationales which are seminal to an understanding of how it operates and functions. These principles duly form part of an introduction to the PPSA and resonate strongly throughout the commentary of this book and the text of the statute itself and should be well understood as the contextual backdrop upon which the PPSA was drafted. It should also be noted at the outset that no one rationale takes preference to any other and the intention of the legislature should be generally appreciated as a collective amalgamation of founding principles as encapsulated in the statutory language itself and, where appropriate, the relevant extrinsic material behind the legislation. That being said the principles can largely be dealt with in a piecemeal fashion as follows: A. ‘‘Irrelevance’’ of title B. Substance as opposed to form C. Preservation of commercial realities D. Primacy and predictability of the register E. Consumer protection F. Preservation of the existing law where the Act does not apply. A. ‘‘Irrelevance’’ of title As discussed in Intro.III, under the pre-Personal Property Securities Act 2009 (Cth) (PPSA) securities law, determining who held title was critical to the derivation of who took priority in a dispute over particular collateral. ‘‘Title’’ refers to the legal or equitable rights in property which determined who was recognised as the ‘‘owner’’ of the property at law. The owner of property, strictly speaking, is the holder of the legal title. It is possible however to be the legal owner subject to an existing equitable interest — the creation of a trust is premised on this fact. The trustee retains legal ownership of the property while the beneficiary holds the beneficial or equitable interest. The PPSA is an active departure from this approach as under the Act’s rules for determining priority, title is merely one of many considerations and is not in and of itself determinative of who prevails in a priority dispute. That is to say, the holder of legal title who fails to comply with the PPSA may surrender their interest or hold in subordination to another interest (irrespective of whether or not the subsequent interest holds any legal or equitable title to the Annotated Personal Property Securities Act 2009 (Cth)

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underlying property) by virtue of the Act. Indeed, s 273 of the PPSA provides that: ‘‘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.’’ This was picked up by Sifris J in Warehouse Sales Pty Ltd (in liq) & Lewis and Templeton v LG Electronics Australia Pty Ltd (2014) 291 FLR 407; [2014] VSC 644, where his Honour held (at [37]–[38]): ‘‘The PPSA provides for a priority regime, not a title regime. Under s 273 of the PPSA ownership or title to personal property is not determinative and as a consequence a retention of title (‘ROT’) financier’s ownership interest is replaced by a simple security interest. A ROT supplier must protect that ‘security interest’ by taking possession of the personal property (eg a pledge under pre-PPSA law) or by obtaining a signed security agreement that covers (describes the collateral) and perfecting that security interest by registration of a financing statement on the PPSR. The consequences of non-perfection are that the security interest is ineffective against third parties, and on insolvency a security interest (title) vests in an administrator or liquidator. In other words, it is ineffective in the event of insolvency. Because the ownership or title interest is merely a security interest, nonperfection also results in loss of priority because of PPSA s 55. A further consequence is that a transferee or buyer can take free of the security interest such as under s 43 because of non-registration and, also, under s 46 which provides that a buyer (transferee) takes free of a security interest given by the seller who sells personal property (mainly inventory) in the ordinary course of business of selling personal property of that kind.’’ (citations omitted). Title, and the nature of how title is passed according to a particular instrument, should be used as a factor indicating whether or not a security interest has arisen under the Act and is to be granted no greater weight than any number of other factors in light of the circumstances of each individual transaction. While the PPSA aims to be comprehensive by way of prescribing particular interests and provides a legal test better equipped for contemporary commercial practice, analysis of factors on a case-by-case basis is still essentially due to varying perspectives and degrees of interpretation from the judiciary. In conclusion, as a factor among many (see the commentary to s 12 and 13 for more detail), it must be conceded that how title is conveyed (if at all) carries less weight under the PPSA than it did at Common Law. However, it is worth reiterating that where the PPSA does not apply (due to s 8, failure to meet s 12(1), applying Pt 2.5 or for some other reason) the Common Law approach to resolving priorities retains its residual operation (see s 254). Understanding how title is dealt with therefore remains important under the PPSA despite not being determinative of a priority outcome.

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B. Substance as opposed to form The PPSA makes clear that the ‘‘form’’ of the instrument giving effect to the agreement between the parties is largely irrelevant under the Personal Property Securities Act 2009 (Cth) (PPSA). What is meant by this is that the PPSA does not look to the form of the transaction or how it has been labelled or defined by the parties in order to determine priority disputes. Like title, the form of the instrument is one of many factors to be considered in deriving whether or not a security interest has arisen. Security interests arise under the PPSA pursuant to an ‘‘in substance’’ test. The ‘‘in substance’’ analysis directs the court to examine the substance of the transaction in order to determine whether or not the payment or performance of an obligation is secured by some proprietary interest (see further s 12). Irrespective of how the parties seek to characterise their agreement, where a security interest arises, in substance, the PPSA takes jurisdiction over the enforceability of that interest against third parties. The PPSA also imposes requirements on the parties who wish to preserve their interest. Holding title or declaring that a particular transaction takes a certain form outside the jurisdiction of the PPSA will not prevent the Act from applying. Additionally, particular interests are defined by the PPSA to constitute security interests even where they do not secure payment or performance of an obligation in substance (see s 12 and 13). The purpose of this is explored further in item C regarding preservation of commercial realities. While the pre-PPSA approach retains effect in certain circumstances (and is hence law which should not be forgotten), attempting to cross-reference or parallel a common law understanding of securities law with the provisions of the PPSA is an error in the authors’ view. Only once the former approach to securities law has been put to one side can the benefits of the PPSA be more readily accepted and recognised. Such benefits include the consistency and predictability of a priority regime, the better facilitation of commercial practices, an increase in the transparency and reliability of a central register and the encouragement of plain English drafting techniques for security documentation. C. Preservation of commercial realities The Personal Property Securities Act 2009 (Cth) (PPSA) is deliberately drafted to preserve the commercial realities of Australian business and trade. Nothing in the PPSA seeks to alter the way by which certain transactions arise in a commercial sense nor are the provisions provided to interfere with commercial decision-making or general business sense. The fundamental notion that parties are free to contract as and how they please in accordance with the general law of contract principles has remained after the PPSA took force. From analysis of the US, Canadian and New Zealand models, this intention is consistent among the various PPS regimes. It is worth noting that particular care has been taken by the Australian PPSA to prescribe modified rules for ‘‘investment type’’ collateral (where ‘‘investment’’ has been used here in its general sense) including negotiable instruments and documents of title. In appreciating the transferability of such Annotated Personal Property Securities Act 2009 (Cth)

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instruments, the Act operates in different ways when assessing priority than is afforded for other types of personal property, such as goods. While each collateral class will be addressed in turn throughout the commentary of this book, it is useful from the outset to understand the commercial nature and purpose of particular instruments to better understand how the perfection requirements and priority rules have been shaped around the practicalities of such instruments and their various uses. D. Primacy and predictability of the register At the heart of the Personal Property Securities Act 2009 (Cth) (PPSA) is the Personal Property Securities Register (PPSR), although the Act provides for different methods of ‘‘perfecting’’ a security interest, including possession of the collateral and control (for limited types of intangible property and space objects only). Security interests may be perfected by multiple methods which means that even if secured parties have possession or control of the collateral, they may still perfect by registering their security interest(s). This process is known as registering a ‘‘financing statement’’ which will provide information to be included on the PPSR that gives notice of an actual or potential security interest with respect to a particular grantor’s personal property. In a break from some pre-PPSA registers, the PPSR adopts a notice filing system which does not require the complete security documents to be registered. The PPSA provides mechanisms which allow limited parties to seek copies of security agreements where necessary. The purpose of notice filing is simply to put potential secured parties on notice of a potential existing security interest. The notice may relate to a potential future security interest as a financing statement may be registered even before the parties have concluded their security agreement (s 161). This is permitted under the PPSA to encourage secured parties to be diligent in filing notice of their pending security interests over personal property. As the Supreme Court of Canada said in Bank of Montreal v Innovation Credit Union (2010) 605 17 PPSAC (3d) 1; 325 DLR (4th) at [56]: ‘‘the existence of a registered financing statement does not mean that a PPSA security interest necessarily exists. It only provides notice that one may exist or may be acquired in the future. As such, the notice registration adopted under the PPSA differs from the pre-PPSA registries or other title registers which provide prima facie proof of the security interest.’’ Under the PPSA, primacy will be given to the register and secured parties should thus ensure that the register contains an accurate and contemporaneous account of their security interest(s). Over the course of discussing the priority rules under the PPSA it will quickly become apparent that where a security interest has been perfected by registration, the PPSA affords priority based on what is readily available on the register. Take the simple ‘‘first in time’’ default priority rule for example. The PPSA holds that where there are two perfected security interests in dispute (assume both are perfected by registration) that the interest registered first in time prevails. The rationale here is that the subsequent secured party could have searched the

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register prior to taking their own security interest and discovered the existing interest (for more information see the annotated commentary for s 55). It should be noted, however, that information included on the PPSR will not form constructive notice for secured parties and potential secured parties (see s 300). When seeking to understand how the priority rules apply, it is thus helpful to consider the position of the ‘‘hypothetical third party searcher’’ who consults the register, in good faith, for information regarding the relevant security interest. What information is available on the register, what time the information became available and the means by which the information can be accessed is critical to any judicial determination of when particular interests have arisen and their respective priorities. The rationale here is that the PPSA does not arbitrarily favour the grantor, the secured party or any competing creditor, rather the Act gives effect to what is obtainable by the hypothetical third party searcher acting in good faith. In applying the rules of the PPSA, as harsh as they may appear to be in some circumstances, it is important that such difficult decisions are duly made in order to present consistent, predictable and reliable outcomes in accordance with the Act’s provisions. It is perhaps important to remind practitioners and parties that the statute is based on its own founding principles and need not have unconscionability or fairness superimposed. Such concepts should not impugn the proper application of its provisions. Two qualifications to this principle are to be made in this regard. First, in granting primacy to the register, principles of commercial practicability should not be forgotten, and second, where parties take property free from security interests (see Pt 2.5), there is an underlying consumer protection rationale which should be further considered (see further s 254). E. Consumer protection As will be discussed in due course, foreign Personal Property Securities (PPS) regimes have been referred to as ‘‘consumer protection’’ pieces of legislation. While this is not applicable in the general sense, when considering an overview of the Personal Property Securities Act 2009 (Cth) (PPSA) as a whole, in the authors’ view, there are certain components of the Act which require a consumer protectionist mentality. These provisions include the ‘‘taking free’’ provisions (see Pt 2.5) and ‘‘enforcement’’ rules (see Ch 4). The ‘‘taking free’’ or ‘‘extinguishment’’ provisions of the PPSA (see Pt 2.5) operate to remove any encumbrances over personal property in the face of a bona fide purchaser for value in good faith. Particular provisions in this part operate to the benefit of holders of property acquired predominately for personal, domestic or household use (namely, where the property is purchased by a consumer for a consumer purpose in the general sense — see s 47). In such circumstances, primacy is given to the consumer, that is, any security interest over the property is extinguished where certain conditions under the Act are met. The PPSA is not designed to trick consumers into purchasing property which is encumbered and again in accordance with the commercial realities of contemporary business it is not the intention of the Act Annotated Personal Property Securities Act 2009 (Cth)

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to require consumers to search the register every time they go shopping for low value goods (again see s 47). The enforcement provisions of the PPSA (see Ch 4) specifically provide, at s 119, that the provisions of the PPSA are to be read in conjunction with the provisions of the National Consumer Credit Protection Act 2009 (Cth) which encompasses the National Credit Code (NCC) found in Sch 1 (both defined by the Act as the ‘‘National Credit Code’’ pursuant to s 10). This amalgamated legislation comprises consumer protection legislation under the former Uniform Credit Code in light of the Australian Consumer Law movement which gave rise to the Competition and Consumer Law 2010 (Cth) — formerly the Trade Practices Act 1974 (Cth) and associated state-based legislative regimes. Each of these legislative models seeks to alleviate the disparity between sophisticated businesses and consumers providing avenues for redress and a broad range of remedial assistance. The PPSA, in this regard, borrows concepts from these statutes such as the phrase ‘‘personal, domestic or household use’’ and indeed where specifically alluded to or where implied by the terms used in the statutory provisions, the PPSA should be read with consumer protection principles in mind. F. Preservation of the existing law where the Act does not apply The PPSA operates by way of inclusion. Section 8 of the PPSA prescribes express exclusions from the statute, that is, where the Act does not specify that a particular interest is recognised by the Act and no applicable test is met for the interest’s inclusion — then the PPSA does not apply to such an interest. Where this is the case, the law as it applied pre-PPSA applies to resolve disputes which may arise. Additionally, the PPSA does not operate to distort existing rights at law or in equity. While the holder of legal title of particular property may hold their interest subject to the priority of a secured party, the PPSA does not purport to transfer ownership or affect title in any way. Therefore, where such rights are in issue, parties are to look beyond the provisions of the PPSA. Take the finder of property for example. The PPSA does not define the term ‘‘find’’ or ‘‘finder’’ nor do any provisions operate with respect to security interests taken over goods found. It is nonetheless reasonable to envisage a person finding property and obtaining funds, subject to an interest over such property. Should the true owner discover their property subsequently, who prevails in a priority dispute between true owner and perfected security interest holder? The PPSA does not provide the answer to this priority contest as the interest arises from concepts beyond the Act. Going back to first principles however, what rights can the finder convey? The rights a finder can convey can be no greater than the rights they hold and those rights are rights in rem against all except the true owner of the property. The PPSA, in the authors’ view, thus does not apply against the true owner and the true owner should prevail in accordance with the nemo dat quad non habet, that is, ‘‘no one [can] give what one does not have’’. For more information see, Roy Goode, Goode on Commercial Law (4th Ed, 2009) 450–478.

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Notwithstanding that, as with all legislation, there is room to amend the statute, it is essential to an understanding of the PPSA that its parameters are well understood. The PPSA therefore applies to security interests taken over personal property and not to unencumbered personal property in its own right. While caution should therefore be exercised with reference to the prePPSA position, it is no doubt beneficial to understand the law as it applied pre-PPSA for circumstances where the Act simply does not apply (see above at Intro.III or more information on the pre-PPSA position). Notwithstanding that, as with all legislation, there is room to amend the statute, it is essential to an understanding of the PPSA that its parameters are well understood. The PPSA therefore applies to security interests taken over personal property and not to unencumbered personal property in its own right. While caution should therefore be exercised with reference to the prePPSA position, it is no doubt beneficial to understand the law as it applied pre-PPSA for circumstances where the Act simply does not apply (see above at Intro.III or more information on the pre-PPSA position).

Intro. V — Structure of the Personal Property Securities Act 2009 and drafting stylistics A. Structure of the Personal Property Securities Act 2009 The Personal Property Securities Act 2009 (Cth) (PPSA) is a well-structured addition to Australia’s body of statute law. Unlike other pieces of legislation, the PPSA incorporates a number of helpful legislative aids to assist the interpretation of the statute, including notes corresponding to other areas of the Act relevant to particular concepts. Many primary terms are defined in their own section of the PPSA and all substantive parts and divisions contain explanatory guides and application sections giving context to each set of provisions as part of the whole. While this book does not seek to comment on the guidance provisions as a general rule, the authors advise that these should not be overlooked. The guidance material couples with a lengthy consultation process, thoroughly exploring points of ambiguity and inconsistency with elements of the various foreign Personal Property Securities (PPS) regimes, the result of which has developed a more comprehensive and intuitive statute. Consequentially, the Australian PPSA is considerably longer than any of its foreign counterparts stemming in excess of 343 independent sections and 310 pages. While the underlying rationale of the Australian regime is consistent with foreign initiatives (from a reading of the PPSA itself and explanatory material) the detail included is unparalleled. Again, for such reasons, this commentary has focused on discussing the substantive provisions in depth rather than addressing points of procedure.

B. Drafting stylistics The following example offers a guide to approaching the Personal Property Securities Act 2009 (Cth) (PPSA) provisions generally: Annotated Personal Property Securities Act 2009 (Cth)

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General rule 20(1) 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.

Written security agreements 20(2) 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 (ii) a statement that a security interest is taken in all of the grantor’s present and after-acquired property; or (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. Methods of signing writing 20(3) 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.

Personal property descriptions — consumer property, equipment and inventory 20(4) 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

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only if the personal property is more particularly described, in addition, by reference to item or class. 20(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. Proceeds 20(6) 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.

● Headings: The PPSA is divided into chapters, parts, divisions, sections and subsections — each intuitively labelled. Each chapter contains a part comprising one section of the Act which provides a ‘‘Guide to this part’’ — in addition most parts and some divisions contain their own guiding sections as well as sections ascertaining the ‘‘Application’’ of the chapter, part or division. The headings themselves do not form part of the operative provisions of the PPSA, however, guide the reader through the various concepts and principles the Act addresses. ● Italicised subheadings: The italicised subheadings, such as the terms ‘‘General rule’’ above, are included within sections of the PPSA as a heading for different concepts. Like headings, the italicised terms are inoperative and are only to be used as a guidance mechanism to easily locate particular provisions — such as the main rule or the exceptions to a particular rule. ● Section provisions: The sections of the PPSA are detailed and contain the bracketed number, letter and roman numeral formatting typical of Australian legislation. By way of comparison, the foreign provisions, while substantively achieving the same effect, are generally shorter than the Australian provisions and are denser. The Australian Act, in accordance with plain English initiatives, provides longer provisions which are relatively simpler to read — separating out elements of each provision where relevant. ● Notes: Where applicable, notes accompany the operative provisions of the PPSA which link the reader to other relevant provisions of the Act. Typically this is done to flag exceptions to the rule provided in the particular provision or flag particular provisions that the provision in question is subject to. In all cases, the notes are inoperative in and of themselves and like italicised subheadings and the heading structure of the PPSA should be used only as an aid in interpretation. Annotated Personal Property Securities Act 2009 (Cth)

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Intro. VI — Foreign regimes The foreign regimes that the Australian Personal Property Securities Act 2009 (Cth) (PPSA) is based on, to varying degrees, include, the US Article 9 provisions, various personal property securities legislation across the Canadian provinces and the New Zealand legislation. Each is briefly described here for the purposes of determining the degree to which the intention and effect of the Australian provisions should include considering such foreign law.

A. Article 9 of the Uniform Commercial Code — United States Model The US Article 9 provisions comprise the first readily identifiable Personal Property Securities (PPS) type framework. The idea of a uniform commercial code (UCC) was first endorsed in 1940 when the first UCC text was published as the ‘‘1952 Official Text’’. The UCC has been adopted by all 50 of the United States with Article 9 forming one of the most innovative and successful components. Revised in 1999, the Article 9 provisions are responsible for the first ‘‘substance based’’ approach to securities law. The authors have used the revised formulation for the purposes of the annotated commentary. While substantially different by way of structure, Article 9 (in its original manifestations) formed the basis upon which the Canadian provinces developed the PPS regime. All provisions of the Australian Personal Property Securities Act 2009 (Cth) (PPSA) which represent the equivalent of the Revised Article 9 (1999 text) have been included for each operative section in this commentary.

B. Personal Property Security Act, SS 1993, c P-6.2 — Saskatchewan Model While each of the Canadian provinces harness Personal Property Securities (PPS) regimes that contain different provisions, all but the Ontario regime are largely based on the Saskatchewan model. This model was enacted in 1982 through an initiative undertaken by the Canadian Bar Association regarding a Uniform Personal Property Security Act in 1969. By 1982 a revised uniform approach was conducted and in 1984 the Western Canada Personal Property Security Act Committee formed in the absence of agreement from Ontario. The Article 9 provisions form the substantive basis of the Saskatchewan Personal Property Security Act (PPSA), however, the language adopted in the Saskatchewan regime is substantially closer to the language used in Australian legislation. The proliferation of cases stemming from the Canadian provinces forms the basis of many of the guiding principles of interpretation and application in this commentary. All provisions of the Australian PPSA (Personal Property Securities Act 2009 (Cth)) which represent the equivalent of the Saskatchewan PPS regime have been included for each operative section in this commentary.

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C. Personal Property Security Act, RSO 1990, c P.10 — Ontario Model The Ontario statute comprised the first Canadian Personal Property Securities (PPS) regime; passing in 1967, however, did not come into force until 1976. While there are differences among the various Canadian provinces who have elected to adopt the uniform Western PPS model, in substance the regimes operate to achieve a common goal. The Ontario regime is substantially different in some important respects and judicial determinations from the Ontario courts likewise possess traits of fundamentally different rationales — the detail of which forms the basis of comment throughout this book. In essence, the Ontario model is more principled, presenting broader protections for secured parties through different priority rules and methods of defining security interests (‘‘deemed security interests’’ not forming part of the Ontario regime for instance). While the focus of this book is on the Australian provisions (which are closer to the Saskatchewan model), where relevant, discussion of the Ontario provisions has been included. In addition, all provisions of the Australian PPSA which represent the equivalent of the Ontario regime have been included for each operative section in this commentary.

D. Personal Property Securities Act 1999 (NZ) Both the US and Canadian regimes form the foundation of the New Zealand legislation, albeit with some important differences particularly regarding treatment of insolvency and unperfected security interests. The importance of the New Zealand Personal Property Securities Act (PPSA) in terms of the Australian Act is that it presents the closest legislative style from a drafting perspective. While the body of case law is substantially smaller than among the US and the Canadian provinces, the New Zealand regime further develops the Personal Property Securities (PPS) concept to produce a more detailed piece of legislation on the whole. As a consequence, the Australian PPSA most closely resembles the New Zealand regime, in some instances mirroring the provisions of the New Zealand PPSA. That said, significant departures or provisions independent to the Australian regime do exist and where this is the case the relevant commentary has derived mainly from domestic statutory aids including the PPS Regulations, the Act’s Explanatory Memorandum and the Personal Property Securities Australian Law Reform Commission (ALRC) Report No 64. All provisions of the Australian PPSA which represent the equivalent of the New Zealand regime have thus been included for each operative section in this commentary alongside references to the PPS Regulations, Explanatory Memorandum and ALRC Report No 64.

Intro. VII — Forms and practice statements Forms Specific forms have been developed for the Personal Property Securities Register (PPSR). On 19 August 2013, the Registrar released the Personal Property Securities (Approved Form) Instrument 2013 which contains details Annotated Personal Property Securities Act 2009 (Cth)

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of the current approved forms. The forms are interactive forms designed to be used online. The PPSR website has a ‘‘Forms’’ webpage, at www.ppsr.gov.au/ AsktheRegistrar/ forms/Pages/default.aspx. The following forms are available: ● Amendment statement (in relation to an amendment demand, Personal Property Securities Act 2009 (Cth) (PPSA), s 180(3) ) ● Application to restrict access to data ● B2G account application (business to government) ● Application for government agency account for security interests with concessional fees ● Application for account for registering prescribed property (other registration kinds) ● Notice of intention to dispose of collateral (PPSA s 130) ● Notice of intention to remove accession (PPSA s 95) ● Notice of proposal to retain collateral (PPSA s 135) ● Request to remove data or correct errors made by the Registrar (PPSA Pt 5.7).

Practice statements The Personal Property Securities Registrar (PPS Registrar) has developed a set of Practice Statements, laying out how the PPS Registrar will perform his functions and exercise his powers, under the PPSA and the Personal Property Securities Regulations 2010. The Practice Statements are available at www.ppsr.gov.au/AsktheRegistrar/ PracticeStatements/Pages/default.aspx. They deal with the following topics: 1. access to the PPSR by government agencies at the Commonwealth, state and territory level — fee remission 2. application to the PPS Registrar, where a person seeks to register a financing statement in respect of a court order 3. investigations, s 195A Notices (requiring a person to give information if the Registrar believes on reasonable grounds that the person has information relevant to an investigation), civil penalties, enforceable undertakings and court costs 4. amendment demand process 5. removal, correction and restoration of data in the PPSR, under Pt 5.7 of the PPSA 6. restriction of access to data in the PPSR 7. judicial proceedings under s 218 and 219 of the PPSA — the PPS Registrar’s discretion to intervene in judicial proceedings, and to begin or carry on judicial proceedings in a person’s name to recover damages, with respect to a PPS matter.

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Introduction to practice statements In 2008, the Commonwealth of Australia and the Australian states and territories entered the Personal Property Securities Law Agreement (the Agreement) which, among other purposes, facilitated the development of the Personal Property Securities Act 2009 (Cth) (PPSA). The Agreement is made available by the Council of Australian Governments and can be found at: www.coag.gov.au/sites/default/files/personal_property_securities_IGA.pdf. Clause 4.4 of the Agreement stipulates the maintenance of ongoing cooperative arrangements between the Personal Property Securities (PPS) Registrar and the Australian states and territories mainly with respect to access to the Personal Property Securities Register (PPSR). In addition to the forms and conditions of use available on the PPSR website (see www.ppsr.gov.au/AsktheRegistrar/forms/Pages/default.aspx) there are a series of Practice Statements which, among other functions, detail the Registrar’s initiatives in facilitating this ongoing relationship. The Practice Statements are available at: www.ppsr.gov.au/AsktheRegistrar/Practice Statements/Pages/default.aspx. There is no reference to the creation or maintenance of ‘‘Practice Statements’’ in the PPSA or the Personal Property Securities Regulations 2010 (Cth) (PPS Regulations), however, s 195(2) of the PPSA confers on the PPS Registrar the ‘‘power to do all things necessary or convenient to be done for or in connection with the performance of his or her functions’’. Section 195 is found within Pt 5.9 (Registrar of Personal Property Securities) of the PPSA which is included in Ch 5 (Personal Property Securities Register). Chapter 5 concerns the PPSR; while the power conferred by s 195 is broad, it must be therefore read in this context. As the Practice Statements are not part of the PPSA, a failure to observe them, where relevant, is not a breach of the Act. However, it should be recalled that a party seeking to lodge a financing statement on the PPSR can only do so by request to the PPS Registrar: s 150. Subsection 150(3)(a) permits the Registrar to refuse the registration of a relevant interest for failure to meet a prescribed form. What is readily apparent is that the administrative integrity of the register intersect with legislative rights and obligations under the PPSA. Understanding and complying with Practice Statements where relevant is thus important as even if the Registrar should have registered a particular interest but fails to do so for want of compliance, there is no recourse to be had against the Registrar: see PPSA s 272. The Registrar has updated the Practice Statements from time to time so you should ensure that you are referring to the most recent version.

Practice statement No 1: Access to PPSR for government agencies The Personal Property Securities Registrar’s Practice Statement No 1 (PS No 1) gives effect to clause 4.4 of the Personal Property Securities Law Agreement (the Agreement), discussed above. Government agencies are able to record interests in particular collateral which are not security interests for the primary purpose of avoiding bona fide dealings with parties unable to participate in such arrangements. The creation of separate interest classes falls Annotated Personal Property Securities Act 2009 (Cth)

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within the rubric of ‘‘prescribed property’’ and is referred to as different ‘‘registration kinds’’. Clause 4 of PS No 1 lists such property classes as including: ● ‘‘Proceeds of Crime; ● Hoon Liens; ● Court Orders; and ● Other Prescribed Property.’’ Clause 7 of PS No 1 highlights that searches will review all registrations of prescribed property irrespective of registration kinds where the searching party is merely looking for security interests. Thus government agencies and other regulatory bodies (where relevant) can prevent impecunious dealings through vigilant maintenance of the Personal Property Securities Register (PPSR). Government agencies (or other parties wishing to make ad hoc registrations: see clauses 26 and 27 of PS No 1) must apply for an account: clause 9 of PS No 1. The PPSA does not differentiate between the registration of a security interest or prescribed property of a particular registration kind for the purposes of administration fees. Clauses 20 and 21 of PS No 1 interestingly leave to the Registrar’s discretion the issue of waiving fees for particular registrations. This may run contrary to the Agreement which stipulated free access. To date, there has been no public complaint brought by governmental agencies with respect to the applicability of administrative fees. Practice Statement 1 was updated by the Registrar on 22 August 2013. At the time of writing this book the most current version was 2.1.

Practice statement No 2: Application to register a financing statement — court orders While actions in court are generally unassignable, that is, aggrieved parties cannot give to someone else their bare right to litigate (not for consideration, nor voluntarily), the fruits of litigation by way of a court order or judgment debt is recognised at law as separate and assignable property thus capable of registration on the Personal Property Securities Register (PPSR). The PPSR facilitates registrations of the kind ‘‘court order’’ via the ‘‘Request to Register a Court Order’’ forms (see www.ppsr.gov.au/AsktheRegistrar/forms/Pages/ default.aspx). The electronic form provided by the PPSR is intuitive and guides users through the registration process. The purpose of the Personal Property Securities Registrar’s Practice Statement No 2 is to consolidate the various statutory provisions and legislative instrument provisions concerning the obtaining and registration of court orders. Practice Statement No 2 was amended by the PPS Registrar on 1 July 2013 and updated on 22 August 2013. At the time of writing this book the most current version was 3.1.

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The main amendment was to the following note: ‘‘Process The process to register a court order on the PPSR involves three main steps: 1. The applicant sends a request to the Registrar, via the contact details below, which attaches a sealed copy of the court order and addresses the following: a. the reasons the court order satisfies the requirements of regulation 5.3(1)(c) to the PPS Regulations; b. the reasons the applicant satisfies the requirements of regulation 5.4(1)(c) to the PPS Regulations; and c. identifying the person who will be identified in the registration as the ‘grantor’ (generally the person against whom the order was made) and the person who will be identified in the registration as the ‘secured party’ (generally the person in whose favour the order was made). 2. The Registrar’s delegate reviews the request and if appropriate grants the applicant temporary access to a court order account to allow the applicant to create the registration. 3. The applicant creates the registration. Upon registration the address for service of the person listed as the secured party will receive verification statement and a token. This information will allow that person to discharge the registration when it is no longer required.’’ The amendment clarifies the need to insert details on the application to register as to why the court order is relevant to the PPS regime. Regulation 5.3(1)(c) refers to what type of court order is prescribed for the purposes of s 148(c) of the PPSA and provides: ‘‘(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.’’ Regulation 5.4(1)(c) refers to what type of registrations are prohibited for the purposes of s 150(3)(d) of the PPSA and provides: ‘‘(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.’’

Practice statement No 3: Investigations, civil penalties and enforceable undertakings The Personal Property Securities Registrar’s Practice Statement No 3 (PS No 3) provides guidance on how the Registrar will exercise his/her powers to Annotated Personal Property Securities Act 2009 (Cth)

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ensure that the Personal Property Securities Register (PPSR) is being used for the purposes intended by the legislature as espoused by the Personal Property Securities Act 2009 (Cth) (PPSA). It is the Registrar who makes decisions of a regulatory nature concerning investigations, civil penalties and enforcement of undertakings (see Pt 6.3 of the PPSA).

Investigations Service of a notice of investigation pursuant to s 195A of the PPSA need not be personal service: PS No 3, p 3. Notions of the concept of service under the Uniform Civil Procedure Rules, while applicable, are not strictly necessary under the personal property securities (PPS) framework. Interestingly, email notice is sufficient: PS No 3, p 3. A failure to comply with the notices constitutes a civil penalty under the PPSA: s 195A(4).

Civil penalty provisions For judicial enforcement or to compel an order from the court, the Registrar may approach the Federal Court of Australia. The civil penalty provisions under the PPSA are listed in PS No 3 at p 3, as reproduced here: ‘‘1. Subsection 151(1) — Application to register a financing statement or financing change statement without the belief, based 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. 2. Subsection 151(2) — Failure to apply for the withdrawal of a registration where the person described in the statement is, or there are reasonable grounds to believe, not a secured party. 3. Subsection 172(3) — Unlawful access of the PPSR or the unlawful use of PPSR data. 4. Subsection 195A(4) — Failure to comply with a 195A Notice issued pursuant to subsection 195A(2) of the Act.’’ In addition, actions outside of the PPSA (such as privacy breaches or breaches of the Commonwealth Criminal Code) may also be pursued by the Registrar, eg by referring the matter to the Office of the Commonwealth Director of Public Prosecutions.

Enforceable undertakings — to pay money to Commonwealth Acceptance of enforceable undertakings for a contravention of the PPSA is at the discretion of the Registrar and will be evaluated in light of the breach and the conduct of the violating party. It should be noted that the phrase ‘‘enforceable undertaking’’ has a narrower meaning in the PPSA than it has in some other Acts. In s 230 of the PPSA, enforceable undertakings are specifically focused on an undertaking to pay a specified amount of money to the Commonwealth within a specified time. This is in contrast to enforceable undertakings under s 87B of the Competition and Consumer Act 2010 (Cth) which are much broader — they can be in connection with almost any matter where the Australian Competition and Consumer Commission (ACCC) has a power or function. They might include undertakings to implement a

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compliance program, issue corrective notices or letters, and to refrain from specified actions which would contravene the law. Nothing prevents the Registrar from approaching the court at any stage to compel more coercive remedies, however, there are no doubt circumstances where undertakings are appropriate and expeditious. PS No 3 is designed to inform parties dealing with the PPSR, and indeed the PPSA more generally, of the methods by which the Registrar will conduct their regulatory function rather than prescribing for participants requirements of form or substance. It also contains the following three annexures: 1. Attachment A — PPS Enforcement Referral Letter 2. Attachment B — Template 195A Notice 3. Attachment C — Template Enforceable Undertaking Practice Statement 3 was updated by the Registrar on 22 August 2013. At the time of writing this book the most current version was 1.2.

Practice statement No 4: Amendment demand process The Personal Property Securities Registrar’s Practice Statement No 4 (PS No 4) is arguably the most relevant Practice Statement for the majority of users of the Personal Property Securities Register (PPSR) (in conjunction perhaps with Practice Statement No 5, which deals with the removal, correction and restoration of data on the PPSR, see below). It concerns the lodging of requests for amendments, defined as ‘‘amendment demands’’. Page 3 of PS No 4 recommends 10 items for inclusion in any amendment demand, as follows: ‘‘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. 6. The Giving of Notice Identifier (if applicable). 7. 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. 8. Any evidence which supports the statement made in paragraph 7. Annotated Personal Property Securities Act 2009 (Cth)

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9. 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.’’ The examples provided by item seven in the above list derive from s 178(1) of the PPSA. Amendment demands are dealt with by Pt 5.6. The process of amendment is explained in a series of four steps: 1. A demand in a form which includes the 10 elements in the above list is issued to the secured party requesting the secured party to lodge a financing change statement on the PPSR. The secured party then has five business days to register a financing change statement, as demanded, or apply to the court for an order, if they wish: PPSA s 179(1) and 182. 2. If the secured party does not take either of these options, the issuer of the demand can then issue an amendment statement to the Registrar: PPSA s 180(3). 3. The Registrar, upon receipt of this amendment statement, then issues an amendment notice to the secured party. A further period of five business days is afforded to the secured party to respond. 4. The Registrar, in light of all available information, makes a determination as to whether the amendment should be made or not and informs the relevant parties. There are two fundamental points to be noted here. ● First, it is at all times the secured party who benefits from registration and thus the secured party, and the secured party alone, who serves to forfeit rights pursuant to the amendment. While other parties may be affected, perfection under the PPSA preserves a position of priority with respect to the party who perfects. It is thus the secured party who is entitled to notice and an opportunity to challenge the demand.2 ● If the underlying security interest is void, or asserted to be such by an external party (perhaps the grantor) then this is an issue of contract and not one necessarily concerning the PPSR. The amendment demand process is split into an administrative process and a judicial process. The administrative process is designed to achieve an amendment on the PPSR. If there is contention, it is best that the matter be litigated — a judicial function which is quite independent from the administrative process made available under Pt 5.6, Div 2, Subdiv A of the PPSA. ● Second, amendments need not only occur as a consequence of an amendment statement. The Registrar, pursuant to the PPSA and in accordance with Practice Statement No 3 (Investigations, civil penalties and enforceable undertakings), has investigative and regulatory powers which may reveal the need to issue amendment notices independent of an 2

However, compare this with s 182(3) of the PPSA. If the parties choose to use the judicial process for considering an amendment demand, then other persons with an interest in the collateral have the right to appear before the court.

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external request. PS No 4 includes a reference to how the Registrar would go about this process. As mentioned above, it is the secured party who stands to lose due to the intervention of the Registrar and thus the administrative nature of the function of the Registrar is not to be misunderstood as any less coercive than that of a consequential court order. The entire process can, however, be avoided. If the secured party agrees with the demand as issued then they can simply lodge their own financing change statement. Indeed a failure to do so, particularly with notice of any inaccuracy, could lead to a finding that the existing registration contained a seriously misleading defect — an outcome which could render the entire registered interest void in any event. The administrative process prevents the clogging of the judicial arm with PPSR related concerns (although the use of the courts is not prohibited and where the application for amendments is contentious it may be necessary). The remainder of PS No 4 stipulates logistically how one should go about utilising the amendment demand process made available by Pt 5.6. For more information on amendment demands generally see s 179–182 of the PPSA and the annotated commentary to these sections. Page 8 of PS No 4 details pragmatic issues with amendment demands in relation to migrated data. It concerns the registration of security interests as ‘‘all present and after acquired property’’ by the Registrar over the period of transition pursuant to Ch 9. Where such interests exist, they cannot be amended and must simply be removed and a new entry registered. The perusal of the PPSR over the period of transition for such defects is highly advised: see also N Mirzai, ‘‘A period of transition: Ch 9 of the Personal Property Securities Act 2009’’ (2012) 20 APLJ 193. Practice Statement 4 was updated by the Registrar on 22 August 2013. At the time of writing this book the most current version was 2.1.

Practice statement No 5: Removal, correction and restoration of data on the PPSR The Personal Property Securities Registrar’s Practice Statement No 5 (PS No 5) relates to Practice Statement No 4 (PS No 4) (Amendment Demand Process). The distinctions between the process of amendment and the process of removal or correction should be well understood prior to utilising either process. The removal or correction process is aimed towards a public interest and the removal of errors or omissions as made by the Registrar (see s 183 of the Personal Property Securities Act (Cth) (PPSA)). It is not designed to help protect or enforce private rights or to alter entries on the Personal Property Securities Register (PPSR) which were once accurate but have since become inaccurate due to a change in circumstances. In such a case the Pt 5.6 amendment demand process is more appropriate. However unlike Pt 5.6, Pt 5.7 of the PPSA concerning removal of data and correction of errors is likely to be a process initiated by the Registrar in the majority of cases. This is not to say that persons seeking data removal, Annotated Personal Property Securities Act 2009 (Cth)

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restoration or correction are precluded from doing so, rather that such persons should consider whether an amendment is more appropriate (whereby an amendment can include removal). An application to remove data must be made in the appropriate form which can be obtained from the ‘‘Forms’’ section of the PPSR website: ‘‘Application to Remove Data or Correct Registration Errors’’ at www. ppsr.gov.au/AsktheRegistrar/forms/Pages/ default.aspx. The remainder of PS No 5 details the enquiry conducted by the Registrar prior to removing or correcting existing data on the PPSR. As stated with respect to PS No 4 above, the rights of the secured party which the relevant registration pertains to may be adversely affected by this process and thus such data is stored externally should it need to be restored (see p 9 of PS No 5). Attachments A and B to PS No 5 contain template notices with respect to removal and correction respectively as a secured party could expect to be issued by the Registrar. Practice Statement 5 was updated by the Registrar on 22 August 2013. At the time of writing this book the most current version was 2.1.

Practice statement No 6: Restrict access to data The Personal Property Securities Registrar’s Practice Statement No 6 (PS No 6) addresses some of the primary concerns raised by the transparency of information on the Personal Property Securities Register (PPSR). Accessing or searching the PPSR is dealt with under Pt 5.5 of the Personal Property Securities Act 2009 (Cth) (PPSA). Under the Personal Property Securities Regulations 2010, reg 5.7, the Registrar must restrict public access to particular entries on the PPSR pursuant to court order or if restriction would be in the public interest. The public interest criteria establishes a discretion. The Registrar can thus restrict particular access on their own volition, however, it is likely that the party who is facing a potential breach of privacy will seek to compel the Registrar to exercise this discretion. There is an appropriate form which can be accessed from the ‘‘Forms’’ section of the PPSR website (see www.ppsr.gov.au/AsktheRegistrar/ forms/Pages/default.aspx). The relevant form is titled: ‘‘Application to Restrict Access to Data’’. On pp 3–4 of PS No 6, the Registrar has sought to highlight that the applicant should have regard to the following when providing reasons in support of their application: ‘‘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).’’

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This process is separate and distinct from amendment and removal or correction, as the data remains valid and operative, that is, the security interest is still registered in the conventional fashion and thus perfection follows. What is prevented is searchability of particular elements of the registration such as particular party names. Restricting access to data should be perceived as an exception to the general rule that information on the PPSR should be publicly accessible. It is hence unlikely that an application would get up without sufficient reasons. If the reasons are complex or do not satisfy the Registrar prima facie then judicial processes can and should be sought. Regulation 5.7(2) stipulates what the Registrar is to consider when asked to apply their discretion. This is extracted here: ‘‘(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; and (d) . . . the public interest in protecting the privacy of the individual grantor’s information . . .’’. Practice Statement 6 was updated by the Registrar on 22 August 2013.

Practice statement No 7: Judicial proceedings sections 218 and 219 The Personal Property Securities Registrar’s Practice Statement No 7 (PS No 7) details the position taken by the Registrar with respect to initiation of (s 219 of the Personal Property Securities Act 2009 (Cth) (PPSA)) or intervention in (s 218) judicial proceedings. While the Registrar cannot be made liable for damages, nor can their staff among other particularised offices (see s 272), this does not prevent their involvement in individual disputes much like the prosecution of breaches of civil penalty provisions pursuant to Pt 6.3. Like many of the Registrar’s functions, intervention or commencement of proceedings can be made without the consent or prompt of any specific party. There is no duty imposed on parties to inform the Registrar that proceedings are on foot. Any party can, however, contact the Registrar for such purposes and p 4 of PS No 7 details the Registrar’s request for documents in such cases to meet the following minimum standard: ‘‘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 Annotated Personal Property Securities Act 2009 (Cth)

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3. a summary of the matters which would recommend the Registrar’s intervention, in view of the matters stated below under the heading ‘Policy Considerations’.’’ The Registrar as an intervening party will bear their own costs and have their own legal team even if the submissions to be made are in support of one party. PS No 7 also makes clear that while the Registrar can and will consider requests by parties to bring proceedings on their behalf, this will not happen as a matter of course and will be restricted to exceptional circumstances. The Registrar will only intervene in proceedings where the relevant party agrees to pay costs and fees properly incurred. Financial difficulty, while considered, does not force the Registrar to bring proceedings to assert individual rights. As a general principle, the Registrar will consider it appropriate from a public interest perspective to commence or intervene in judicial proceedings primarily in the following circumstances: 1. Matters concerning the construction of the PPSA, that is, the interpretation of specific PPSA provisions. 2. Matters of general significance which would potentially affect the public confidence in the PPSR or security interests taken over personal property generally. The dual regulatory and administrative function of the PPS Registrar justifies the nature of the broad powers bestowed upon that office. The continual need to prescribe and keep up-to-date methods of practice in accordance with commercial activity means that these Practice Statements are subject to continuous and ongoing review and update. Irrespective of which Practice Statement is being considered, the source of power or duty exercised by the Registrar should be considered. It is this context which governs the interpretation of the ‘‘form-based’’ or formal requirements stipulated by the statements, the substance of which remains either a product of the PPSA or principles of freedom of contract. Practice Statement 7 was updated by the Registrar on 22 August 2013. At the time of writing this book the most current version was 1.2.

Intro. VIII — The cessation of the transitional period Since the time of publishing of the first edition of this book, Ch 9 of the PPSA has been often cited or referred to in response to the significant reforms the PPSA brings to the commercial law landscape in Australia. Without seeking to over generalise, the transitional period and the temporary perfection conferred by it, whether appropriately applicable to the relevant circumstance or otherwise, has presented an outcome for interested parties often accepted and in resemblance of the pre-PPSA position at law. The status of the PPSA as predominately an instrument of commercial law (albeit affecting many areas of the law) is self-evident in the lack of substantive case law during its first two years in operation. This is not for want of complexity or confusion among the legal profession or interested commercial parties as to the proper operation of the Act but rather has much to do, in the authors’ view, with the expensive, unpredictable and time consuming sport of litigation and the

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undesirability of a particular party to set an adverse precedent in a particular case. In this context, the commercially sensible result is often the adopted one. Within Ch 9, s 306 of the PPSA provides that the ‘‘registration commencement time’’ is the critical date upon which the PPSA takes operative effect in Australia — which, by force of a determination of the Minister, occurred on 30 January 2012. The ‘‘transitional period’’, being the period between the registration commencement time and the expiration of the transitional period — which is the end of 24 months after the registration commencement time, marked, among other things, a 24-month ‘‘grace period’’ whereby transitional security interests (see s 308) obtained the dual benefit of recognition under the PPSA and were temporarily perfected (see s 21(1)(a)). While a number of exceptions, qualifications and limitations operate with respect to temporarily perfected security interests, the common position — as interpolated from the lack of decided cases — appeared to be that temporarily perfected secured parties were entitled to enforce their security interest as against relevant underlying collateral. This typically arose in the context of an insolvent debtor/grantor whereby demands were issued and dealt with by insolvency practitioners who, if and when satisfied that a particular interest was validly constituted, would allow the ‘‘secured party’’ to recover the encumbered property or proceeds resulting from such property. As of 30 January 2014, the transitional provisions of the PPSA have ceased operation. It is now therefore more important than ever to maintain a working understanding of the PPSA either in creating and/or dealing with security interests and the Personal Property Securities Register (see www. ppsr.gov.au) or in properly advising parties who do so. Failing this there are considerable difficulties and exposures as has manifested in the growing body of decided foreign case law and scholarly articles concerning many of the Act’s provisions. To those who are familiar with the PPSA and its workings, the following general analysis isolates three classes of broad circumstances which one should avert their mind to in appreciating the end of the transitional period. To those unfamiliar with the Act generally, the balance of this book should duly assist. The first circumstance concerns the party who has the benefit of a security interest which arose prior to the PPSA taking force (namely, prior to the registration commencement time) and who is still relying on the validity and priority of that interest to secure obligations present and existing after the expiration of the transitional period. In such a case, provided that no other subsection pursuant to s 322(2) is applicable, the secured party would have had the important benefit of s 322(2)(f) over the course of the transitional period — which essentially provides for temporary perfection of the security interest for 24 months after the registration commencement time. However, as the name would inherently suggest, temporary perfection is contingent upon a subsequent active step in taking perfection by the secured party and before the expiration of the 24-month temporary perfection period. The note to s 322(2) is instructive and is reproduced in whole in this regard: Annotated Personal Property Securities Act 2009 (Cth)

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Main rule 322(1) 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.

322(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 (migration of personal property interests); (b) when the security interest is perfected by preparatory registration under Division 7; (c) when a registration under Division 6 or 7 is amended so that the registration perfects the security interest; (d) when the security interest is otherwise perfected registration, or is perfected by possession or control;

by

(e) when the security interest is otherwise perfected (but not temporarily perfected) by this Act, other than under this section; (f) 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.

Exception 322(3) 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.

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Element (b) of the note highlights the consequences of failing to perfect within the 24-month temporary perfection period (or prior to any of the subparagraphs pursuant to s 322(2)) — namely that the security interest ‘‘becomes unperfected’’. It is therefore important to consider what these words actually mean in terms of the protection conferred to secured parties. There are two hypotheses, first, the term ‘‘becomes unperfected’’ means that at the expiration of the transitional period the security interest is taken to be unperfected (namely, as of 31 January 2014). However, the second hypothesis is that the security interest, upon becoming unperfected, is taken to have never been perfected as at the first point it was conferred perfection — that is to say, the security interest is and has been unperfected from the registration commencement time to the present point. The distinction in interpretation produces vastly different results and exposures from the perspective of the secured party. While the second reading may appear to be anomalous, when one reads s 56 of the PPSA and the requirements of ‘‘continuous perfection’’, the second hypothesis appears to be consistent with the overall understanding of temporary perfection under the PPSA and should be preferred. Further, the concept of continuous perfection is clearly relevant and a requirement of preserving perfected status as referred to specifically in element (a) of the note. Thus, to suggest that s 322(2) confers a particular type of temporary perfection immune from consideration of s 56 appears to put too broad a reading on the application of Ch 9. The practical effect of this would be such that if a security interest was created during the transitional period (as opposed to before) and was perfected at some time prior (assuming the interest is validly perfected), then applying the second hypothesis for s 322(2), a transitional security interest which was not subsequently perfected would lose in a priority contest as against the security interest created and perfected later in time. This is so notwithstanding the fact that had the priority contest occurred during the transitional period, the transitional security interest would have prevailed (see s 320). While this may appear to be a harsh result, the transitional provisions were designed, again — as the name suggests, merely to transition secured parties from the former position at common law to the statutory position. To that it can be said that with the expiration of the ‘‘grace period’’ such seemingly harsh results must occur should the PPSA apply the way it was intended. That is to say, the failure to appreciate a need to otherwise perfect during the 24 months warrants, at least on one view, the security interest perfected later in time to prevail. The above circumstance gives rise to consideration of the second general circumstance which involves a secured party who registers prior to the expiry of the transitional provisions but is involved in a priority dispute which arises concerning a point in time during the transitional period. In such a case, the transitional provisions pursuant to Ch 9 of the PPSA remain relevant and operative in the authors’ view. The law as it stood at the time of the relevant dispute is to be necessarily applied as would traditionally be the case. The PPSA offers little exception. If one is misrepresented today, one might bring a claim for misleading and deceptive conduct pursuant to s 18 of Annotated Personal Property Securities Act 2009 (Cth)

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the Australian Consumer Law. However, if one were to bring a claim for such conduct which occurred in 2008 (limitations aside), one would be seeking recourse either pursuant to s 52 of the Trade Practices Act 1974 (Cth) or a statebased variant, for example, s 42 of the Fair Trading Act 1987 (NSW). A working understanding of Ch 9 and the transitional operation of the PPSA will therefore continue to play an important role in the domestic commercial landscape for many years to come — be it through full scale litigation or advice as to the position at law settled prior to a hearing of the relevant matter. The third circumstance does not require a considerable shift from the transitional position and concerns security interests created after the expiration of the transitional period. Indeed such interests are subject to the full operative effect of the PPSA without the benefit of the Ch 9 provisions — but this does not depart from the position of a secured party whose security interest arose after the registration commencement time in any event. Put simply, it would make little difference for the purposes of applying the PPSA whether the security interest was created on 2 February 2012 or 2 February 2014. In both circumstances Ch 9 has little application as what has been created cannot be characterised as a transitional or migrated security interest. That said, an inherent part of the difficulty with applying the PPSA where relevant is not only understanding one’s own interest in the underlying collateral, but any other interest which might be taken and where such an interest stands with respect to one’s interest. Having a perfected security interest for example, as described in this third circumstance, says nothing about priority contests which may arise between this particular interest and an interest with characteristics similar to the two former circumstances discussed. An ongoing appreciation for the interaction between the PPSA and its transitional effect therefore remains useful at least in the short term where such interests are likely to continue to exist. In terms of the practical experience, it is anticipated that many of the difficulties and complexities which have arisen as a consequence of the PPSA will continue to be dealt with in the bankruptcy/insolvency space. It is almost certainly the case that the relevance of a valid security interest where the debtor is able to satisfy the amount secured in full is nominal at best. Thus, at the proverbial front lines of an understanding of this regime is the trustee in bankruptcy or the insolvency practitioner (and those that advise them). Whether or not the apparent concern among commercial parties to avoid setting adverse precedent is justified (among the inherent desire to avoid the time and expense of full scale litigation) and will continue with the expiration of the transitional provisions remains to be seen. That being so, to form the view that the PPSA has been a proverbial ‘‘storm in a tea cup’’ on the basis of decided cases would be an error in the authors’ view. For parties engaged with insolvency specialists and those that advise them concerning questions of construction of the PPS regime, it goes without saying that receiving prompt and accurate advice is key to ensuring your, or your client’s, rights are best protected. In the authors’ experience, for every case

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which is commenced and litigated in Australia’s court system there are at least five that are agitated and settled between conflicting parties. The cessation of the transitional period is likely to give rise to more of both categories of cases. It is clear that the PPS regime is an element of domestic commerce which is here to stay.

Intro. IX — The Whittaker review On 4 April 2014, a review of the PPSA was announced in accordance with s 343. The review was divided generally into four components: 1. The reach of the Act 2. Creation and perfection of security interests; taking free rules; priority rules and other dealings in collateral 3. 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 and the layout of the Act and related matters, 4. The Register. Consultation papers were released between 22 September 2014 and 10 November 2014 and comments were due between 3 November 2014 and 19 December 2014 respectively. Submissions for issues particular to small business were due on 6 June 2014 and submissions regarding general issues with the legislation were due by 25 July 2014. An Interim Report prepared by the reviewer Mr Bruce Whittaker was delivered to the Attorney-General and Parliamentary Secretary to the Prime Minister on 31 July 2014. The Final Report on the review was tabled before Parliament on 18 March 2015. At the time of writing, information in respect of the review process, the consultation papers, the Interim Report and the Final Report are accessible at: www.ag.gov.au/consultations/pages/StatutoryreviewofthePersonalProperty SecuritiesAct2009.aspx. The Final Report considers: ● the effect of the reforms introduced by the Act ● the level of awareness and understanding of the Act ● the incidence and causes of non-compliance with the Act ● opportunities for minimising regulatory and administrative burdens including cost ● opportunities for further efficiencies. In looking at these matters, the Final Report also considers: ● the scope and definitions of personal property ● the desirability of introducing thresholds ● the interaction of the Act with other legislation ● other relevant matters. The Final Report makes a number of recommendations (totaling 394 in number) in respect of various aspects of the PPSA. A list of recommendations Annotated Personal Property Securities Act 2009 (Cth)

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has been tabled at Annexure E of the Final Report commencing on page 502 of the Final Report. The substantive recommendations to the text of the PPSA legislation itself commence at Chapter 4 of the Final Report — the contents page of which begins on page 37 of the Final Report. Without seeking to gloss over the substance or merit of any aspect of the detailed and considered review of Mr Whittaker in the Final Report there are certain issues addressed by the Final Report which deal with substantive difficulties which have arisen from the present language of the PPSA and which are addressed in summary here. One such issue is that of sub-leasing or sub-hiring particularly in circumstances where the sublease or subhire occurs without the consent of the original lessor/bailor. This is dealt with at [7.3.3] of the Final Report. The analysis set out thereto builds on the analysis of whether a lease should be the subject of the vesting provisions of the PPSA (and associated Corporations Act provisions) in the first instance: See s 588FL(4) of the Corporations Act; discussed at [7.3.2], see also [7.3] generally in respect of discussion concerning ‘‘Leases’’. The Final Report considers, at [7.3.11], a shift from a ‘‘possession model’’ which underpins many of the operative provisions of the PPSA to a ‘‘unitary model’’. Annexure C of the Final Report sets out an explanation of the unitary model and a reconceptualization of the creation of particular security interests in particular circumstances. Many of the recommendations relevant to leases and subleases refer to recommendation 51 of the Final Report which seeks a further consultation process to deal specifically with issues raised in respect when the grantor obtains ‘‘rights in the collateral’’ capable of conferring a security interest. Until the recommendations are squarely dealt with, s 34 imposes continued requirements on the original secured party to ensure that any security interest taken over transferred collateral is validly perfected as against the proper grantor (ie the person/entity ultimately in possession of the relevant property). In respect of the difficulty with not having a security agreement with the transferee (and the writing requirements contained in s 20 of the PPSA), the Final Report recommends that s 20(2) of the PPSA be amended to make clear that no such requirement is to impede the original secured party from complying with s 34: See [5.2.3.3] and recommendation 59. At [6.2], the Final Report considers the introductory data fields contained in the electronic financing statement form as part of the AFSA PPS Register interface. At [6.5], the Final Report recommends the deletion of the proceeds field and the deletion of cl 2.4 of Sch 1 of the PPS Regulations: See recommendation 98. At [6.7], the Final Report discusses the AML/CTF Act requirements in respect of describing a natural person grantor and recommends that such a requirement be removed from the PPS Regulations: See recommendation 1077. At [6.7.4], the Final Report considers the requirement to register a security interest against the ABN of a trust and recommends that a registration against the trustee (the individual/entity with

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legal title to the trust assets) ought to be sufficient without needing to register against the ABN of the trust: See, recommendation 110. On issues of lodging a financing statement on the PPS Register, no recommendation was made in the Final Report about the use of a body corporate grantor’s ABN or name to identify it in addition to, or in lieu of, its ACN. At [6.10.1], the Final Report considers the impact of strict deficiencies with particulars contained within financing statements and the consequential difficulty a secured party will face not only with provisions which render ineffective registrations which contain such deficiencies (see s 164 and 165 of the PPSA) but also that the secured party is not, in fact, registered at all in accordance with s 153(1) of the PPSA. The Final Report recommends an amendment to the legislation such that if the field required to be populated is populated then s 153(1) is deemed to be satisfied — leaving defective registrations to be dealt with by other provisions of the PPSA (for example, s 164 and 165 as discussed above): See recommendation 124. At [6.10.2], the Final Report considers s 337A of the PPSA and does not recommend its deletion, notwithstanding the passing of the temporary perfection period conferred by s 322 of the PPSA, in respect of transitional security interests. The Final Report does, however, recommend that the ‘‘PMSI box’’ as contained in the template electronic financing statement made available by AFSA be removed: See, recommendation 241. This change is consistent with the recommendation that s 165(c) of the PPSA be consequentially deleted: See, recommendation 127. In a similar vein, recommendation 239 of the Final Report advocates for a uniform 15-day period to perfect a PMSI in respect of inventory and non-inventory PMSIs: See further [7.7.8.10]. However, the Final Report does not go further to say that inventory PMSIs should equally benefit from the potential for the PMSI holder to extend time to comply with the 15-day period mandated by s 62 of the PPSA by application to the Court under s 293 of the PPSA: For consideration of s 293 of the PPSA see Re Accolade Wines Australia Ltd [2016] NSWSC 1023. At [6.11.9], the Final Report considers the functionality of the AFSA operated PPS Register interface and considers whether the interface should include the technical support functionality recommended by private parties. Recommendations 150 and 151 respectively advocate for further communication between AFSA and those private parties to improve the functionality of the AFSA operated PPS Register interface and recommends an incorporation of those features if possible. At [6.11.13], the Final Report considers whether the PPSA ought to contain a provision whereby a Court has the power to render effective otherwise ineffective registrations (presumably in any circumstance) and recommends against such a power being included in the PPSA: See recommendation 158. At [7.7.1], the final Report considers when a priority contest actually arises (ie the proper point in time to apply the priority rules pursuant to Pt 2.6 of the PPSA) and recommends that the PPSA be amended to reflect that the time of the inquiry is when the priority contest first arises: See recommendation 220. Annotated Personal Property Securities Act 2009 (Cth)

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At [7.8], the Final Report considers trustee liens and the conflict they may potentially have with security interests granted under the PPSA. The Final Report does not recommend any further clarification in respect of such rights, noting s 73 of the PPSA: See recommendation 256. At [7.10.1], the Final Report considers issues concerning accessions and commingled goods. Recommendation 263 provides a pragmatic approach to tracing a security interest taken over discrete goods into a bulk or a final good or goods and how to continue to recognise and account for such interests. This discussion is continued through [7.10] of the Final Report and includes a working example at [7.10.3.2.1]. Recommendation 268 should be read with recommendation 263 as it builds on that analysis. In circumstances where the PPSA does not prescribe how to trace a security interest through mixed goods (see s 31 of the PPSA), the guidance from the Final Report is likely to be of assistance whether the recommendations are adopted or not. At [8.7], the Final Report considers the vesting provisions under the PPSA and recommends that the vesting provisions be retained: See, recommendation 328. At [8.7.3], the terminology ‘‘vests in the grantor’’ is considered and again the recommendation is that the language should be retained: See, recommendation 329. Given the outcome of the vesting provisions, the Final Report considers whether any registration, defective or otherwise, ought to prevent the operation of the vesting provisions (as distinct from priority contests between two competing security interests pursuant to Pt 2.6 of the PPSA) and recommends against this course: See recommendation 321. At Chapter 10 of the Final Report, Mr Whittaker makes some general recommendations about the Final Report and how the recommendations, like the PPSA, should be read together with an overarching goal in mind (rather than as a collection of piecemeal suggestions responding to discrete issues with the legislation). Many of the points raised are similar to those considered when the legislation was first introduced, namely, the need to consider a more collaborative drafting process (including the concerns of the private sector), the need for a fresh education campaign and the need to carefully manage transitional issues if the recommendations are adopted. Whether the recommendations contained in the Final Report are adopted, either wholly or in part, remains to be seen.

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GUIDE TO ANNOTATIONS FOR THE PERSONAL PROPERTY SECURITIES ACT 2009 Chapter 1 — Introduction Part 1.1 — Preliminary ............................................................................. 1 Section 1 Short title ................................................................................... 1 Section 2 Commencement ......................................................................... 1 Section 2A Schedule 1 ............................................................................... 1 Section 3 Guide to this Act ........................................................................ 1 Part 1.2 — General application of this Act ............................................. 4 Section 4 Guide to this part ...................................................................... 4 Section 5 Crown to be bound .................................................................... 4 Section 6 Connection with Australia ........................................................ 4 Section 7 Application in the external territories ..................................... 5 Section 8 Interests to which this Act does not apply .............................. 6 [8.1] Comparable provisions in foreign regimes ................................... 10 [8.2 ] Outline ......................................................................................... 10 [8.3] Cross-references ........................................................................... 11 [8.4] Concepts ....................................................................................... 11 [8.5] Commentary ................................................................................. 12 [8.5.1] Negotiable bills of lading — s 8(1)(a) .................................. 13 [8.5.2] Liens, charges or other interests that are created, arise or are provided for under statute — s 8(1)(b) ................................................................................... 14

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[8.5.3] Liens, charges or other interests provided by general law — s 8(1)(c) ........................................................... 15 [8.5.4] Any right of set-off or right of combination of accounts — s 8(1)(d) ........................................... 17 [8.5.5] Arrangements under the payment systems and netting act — s 8(1)(e) ............................................. 17 [8.5.6] Dealings in relation to land — s 8(1)(f)(i), (ii) ................................................................................. 17 [8.5.7] Transfers of unearned rights to payment — s 8(1)(f)(iii) .............................................................................. 19 [8.5.8] Transfers of future rights of remuneration — s 8(1)(f)(iv) .............................................................................. 19 [8.5.9] Transfers of interests in contracts of annuity or policies of insurance — s 8(1)(f)(v) ............................ 19 [8.5.10] Certain transfers of accounts — s 8(1)(f)(vi)–(ix) .............................................................................. 20 [8.5.11] Certain transfers in beneficial interests in monetary obligations — s 8(1)(f)(x) ........................................ 21 [8.5.12] Interests or charges arising under particular statutes — s 8(1)(g), (jc) .............................................. 21 [8.5.13] Financial accommodation trusts — s 8(1)(h) ........................................................................................... 21 [8.5.14] Water rights — s 8(1)(i) ...................................................... 22 [8.5.15] Interests in fixtures — s 8(1)(j) ........................................... 22 [8.5.16] Interests held by pawnbrokers — s 8(1)(ja), (6) ................................................................................... 24 [8.5.17] Interests in relation to superannuation, retirement savings accounts and approved deposit accounts — s 8(1)(jb) ....................................................... 24 [8.5.18] Declared statutory licenses — s 8(1)(k) .............................. 24 [8.5.19] Declared interests — s 8(1)(l) ............................................. 25 [8.6] Further reading ............................................................................. 25  2018 CCH Australia Limited

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Part 1.3 — Definitions ............................................................................. 26 Division 1 — Introduction ......................................................................... 26 Section 9 Guide to this part .................................................................... 26 Division 2 — The Dictionary ..................................................................... 26 Section 10 The Dictionary ....................................................................... 26 Section 11 Application of the Acts Interpretation Act 1901 .................. 40 Division 3 — Concepts relating to security interests and personal property .................................................................................. 40 Section 12 Meaning of security interest .................................................. 40 [12.1] Comparable provisions in foreign regimes ................................. 42 [12.2] Outline ........................................................................................ 42 [12.3] Cross-references ......................................................................... 42 [12.4] Concepts ..................................................................................... 42 [12.5] Commentary ............................................................................... 43 [12.5.1] The security interest — s 12(1) ........................................... 44 [12.5.1.1] Consent ........................................................................ 46 [12.5.1.2] Relationship to personal property .................................................................................... 48 [12.5.1.3] Proprietary rights ......................................................... 49 [12.5.1.4] Payment or performance of an obligation ................................................................................. 50 [12.5.1.5] When is a security interest created? .................................................................................... 51 [12.5.1.6] Trust arrangements as security devices ...................................................................................... 55 [12.5.2] Scope of security interests, examples and illustrations — s 12(2) ........................................................... 56 [12.5.2.1] Fixed charges — s 12(2)(a) ......................................... 57 [12.5.2.2] Floating charges — s 12(2)(b) ..................................... 58 [12.5.2.3] Chattel mortgages — s 12(2)(c) ................................... 59 [12.5.2.4] Conditional sale agreements — s 12(2)(d) .................................................................................... 59 [12.5.2.5] Hire purchase agreements — s 12(2)(e) ..................................................................................... 61 [12.5.2.6] Pledges — s 12(2)(f) .................................................... 62 [12.5.2.7] Trust receipts — s 12(2)(g) .......................................... 62

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[12.5.2.8] Consignments — s 12(2)(h) ......................................... 62 [12.5.2.9] Leases — s 12(2)(i) ...................................................... 64 [12.5.2.10] Assignments — s 12(2)(j) .......................................... 68 [12.5.2.11] Transfers of title — s 12(2)(k) ................................... 68 [12.5.2.12] Flawed asset arrangements — s 12(2)(l) ..................................................................................... 69 [12.5.3] Deemed security interests — s 12(3) .................................. 70 [12.5.3.1] Transfers of accounts and chattel paper — s 12(3)(a) ................................................................... 70 [12.5.3.2] Commercial consignments — s 12(3)(b) .................................................................................... 75 [12.5.3.3] PPS leases — s 12(3)(c) ............................................... 77 [12.5.4] Charge-backs permitted — s 12(3A), (4) ................................................................................................. 77 [12.5.5] Exclusions to security interests — s 12(5) ............................................................................................. 77 [12.5.6] Subordination agreements excluded by the PPSA — s 12(6) ..................................................................... 78 [12.6] Further reading. .......................................................................... 80 Section 13 Meaning of PPS lease ............................................................ 81 [13.1] Comparable provisions in foreign regimes ................................. 82 [13.2] Outline ........................................................................................ 82 [13.3] Cross-references ......................................................................... 82 [13.4] Concepts ..................................................................................... 83 [13.5] Commentary ............................................................................... 83 [13.5.1] Concept of a lease generally ............................................... 84 [13.5.2] The PPS lease — default application — s 13(1) ........................................................................................... 85 [13.5.3] Application and scope of the PPS lease — s 13(1) ...................................................................................... 88 [13.5.3.1] Priorities ....................................................................... 88 [13.5.3.2] Limitations to the ambit of the PPSA ........................................................................................ 92 [13.5.3.3] Enforcement provisions ............................................... 93 [13.5.4] Exceptions — s 13(2) .......................................................... 93

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[13.5.4.1] Regularly engaged in the business of leasing/bailing goods: s 13(2)(a) and (b) ........................................................................ 94 [13.5.4.2] Consumer property incidental to use of land: s 13(2)(c) .............................................................. 97 [13.5.4.3] Pooling arrangements: s 13(2)(d), reg 1.9 ....................................................................... 97 [13.5.5] Bailments for value — s 13(3) ............................................ 98 [13.5.6] The Personal Property Securities Amendment (PPS Leases) Act 2017 ........................................... 100 [13.6] Further reading ......................................................................... 100 Section 14 Meaning of purchase money security interest .................... 101 [14.1] Comparable provisions in foreign regimes ............................... 102 [14.2] Outline ...................................................................................... 103 [14.3] Cross-references ....................................................................... 103 [14.4] Concepts ................................................................................... 103 [14.5] Commentary ............................................................................. 105 [14.5.1] Rationale ........................................................................... 105 [14.5.2] Definition — s 14(1) ......................................................... 107 [14.5.2.1] All or part of the purchase price — the substantive test ............................................................ 107 [14.5.2.2] Value to acquire rights ............................................... 108 [14.5.2.3] Lessors and bailors of PPS leases — s 14(1)(c) ................................................................ 109 [14.5.2.4] Commercial consignments — s 14(1)(d) .................................................................................. 109 [14.5.3] Exceptions — s 14(2) ........................................................ 109 [14.5.3.1] Sale and lease backs — s 14(2)(a) ................................................................................... 109 [14.5.3.2] Chattel paper, investment instruments, intermediated securities, monetary obligations and negotiable instruments — s 14(2)(b) ....................................................... 110 [14.5.3.3] Predominately for personal, domestic or household use — s 14(2)(c) ............................... 110 [14.5.4] Exceptions to the exception — serial numbered collateral — s 14(2A) ................................................ 111

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[14.5.5] PMSI secures only purchase money obligations – s 14(3) ................................................................... 111 [14.5.6] Collateral covered — s 14(4) ............................................ 112 [14.5.7] Refinancing, renewing, consolidating and restructuring — s 14(5) ........................................................ 113 [14.5.8] Determining which obligations are satisfied and in what order — s 14(6) ........................................ 113 [14.5.9] Purchase money obligations — s 14(7) ............................ 114 [14.5.10] Purchase price and value — s 14(8) ................................ 115 [14.6] Further reading ......................................................................... 116 Section 15 Meaning of intermediated security and related terms ................................................................................................... 116 [15.1] Comparable provisions in foreign regimes ............................... 117 [15.2] Outline ...................................................................................... 117 [15.3] Cross-references ....................................................................... 118 [15.4] Concepts ................................................................................... 118 [15.5] Commentary ............................................................................. 118 [15.5.1] Introduction ....................................................................... 118 [15.5.2] Intermediary — s 15(2) ..................................................... 119 [15.5.3] Financial products ............................................................. 119 [15.5.4] Particular issues for intermediated securities ..................................................................................... 120 [15.6] Further reading ......................................................................... 120 Chapter 2 — General rules relating to security interests Part 2.1 — Guide to this Chapter ........................................................ 121 Section 16 Guide to this Chapter ......................................................... 121 Part 2.2 — Security interests: general principles ............................... 121 Section 17 Guide to this part ................................................................ 121 Section 18 General rules about security agreements and security interests ................................................................................ 122 [18.1] Comparable provisions in foreign regimes ............................... 122 [18.2] Outline ...................................................................................... 122 [18.3] Cross-references ....................................................................... 123 [18.4] Concepts ................................................................................... 123

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[18.5] Commentary ............................................................................. 123 [18.5.1] Effective according to terms — s 18(1) ............................ 123 [18.5.2] After-acquired property — s 18(2) ................................... 124 [18.5.3] Attachment without specific appropriation — s 18(3) ............................................................. 125 [18.5.4] Future advances — s 18(4) ............................................... 125 [18.5.5] Reasonable expenses — s 18(5) ........................................ 127 [18.6] Further reading ......................................................................... 129 Section 19 Enforceability of security interests against grantors — attachment .................................................................................... 129 [19.1] Comparable provisions in foreign regimes ............................... 130 [19.2] Outline ...................................................................................... 130 [19.3] Cross-references ....................................................................... 130 [19.4] Concepts ................................................................................... 130 [19.5] Commentary ............................................................................. 130 [19.5.1] Enforceability — s 19(1) ................................................... 131 [19.5.2] When a security interest attaches — s 19(2) ........................................................................................... 132 [19.5.2.1] Rights in the collateral — s 19(2)(a) ................................................................................... 133 [19.5.2.2] ‘‘Value’’ or ‘‘an act’’ — s 19(2)(b) .................................................................................. 136 [19.5.3] Time of attachment — s 19(3), (4) .................................... 137 [19.5.4] Leases, bailments, consignments and conditional sale agreements — s 19(5), (6) ................................ 137 [19.6] Further reading ......................................................................... 138 Section 20 Enforceability of security interests against third parties ................................................................................................. 138 [20.1] Comparable provisions in foreign regimes ............................... 140 [20.2] Outline ...................................................................................... 140 [20.3] Cross-references ....................................................................... 140 [20.4] Concepts ................................................................................... 140 [20.5] Commentary ............................................................................. 141 [20.5.1] Introduction ....................................................................... 141 [20.5.2] Attachment requirement — s 20(1)(a) .............................. 142

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[20.5.3] Writing requirement for perfection by registration — s 20(1)(b) ............................................................ 142 [20.5.4] Written security agreements — s 20(2) ............................ 143 [20.5.5] Signature — s 20(3) .......................................................... 145 [20.5.6] Particulars relating to personal property — s 20(4), (5) ............................................................................. 146 [20.5.7] Proceeds — s 20(6) ........................................................... 147 [20.6] Further reading ......................................................................... 148 Section 21 Perfection — main rule ....................................................... 148 [21.1] Comparable provisions in foreign regimes ............................... 149 [21.2] Outline ...................................................................................... 149 [21.3] Cross-references ....................................................................... 149 [21.4] Concepts ................................................................................... 149 [21.5] Commentary ............................................................................. 150 [21.5.1] The nature of perfection .................................................... 150 [21.5.2] Temporary perfection — s 21(1)(a) .................................. 151 [21.5.3] Perfection pre-requesites — s 21(1)(b) ............................. 151 [21.5.4] How to perfect — requirements for secured parties — s 21(2) ........................................................... 152 [21.5.4.1] Registration — s 21(2)(a) .......................................... 152 [21.5.4.2] Possession — s 21(2)(b) ............................................ 153 [21.5.4.3] Control — s 21(2)(c) .................................................. 155 [21.5.5] Order of attachment and steps to perfect are irrelevant — s 21(3) .............................................................. 155 [21.5.6] Single registration, multiple interests — s 21(4) ......................................................................................... 156 [21.6] Further reading ......................................................................... 157 Section 22 Perfection — goods possessed by a bailee ......................... 157 [22.1] Comparable provisions in foreign regimes ............................... 158 [22.2] Outline ...................................................................................... 158 [22.3] Cross-references ....................................................................... 158 [22.4] Concepts ................................................................................... 158 [22.5] Commentary ............................................................................. 159 [22.5.1] Additional perfection considerations for goods possessed by bailee — s 22(1). ........................................ 159

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[22.5.2] Temporary perfection for documents in transit — s 22(2), (3), (4) ............................................................ 160 [22.5.3] Application ........................................................................ 160 [22.5.4] Priorities ............................................................................ 161 [22.6] Further reading ......................................................................... 161 Part 2.3 — Possession and control of personal property ................... 161 Section 23 Guide to this part ................................................................ 161 Section 24 Possession ............................................................................. 162 [24.1] Comparable provisions in foreign regimes ............................... 163 [24.2] Outline ...................................................................................... 163 [24.3] Cross-references ....................................................................... 163 [24.4] Concepts ................................................................................... 163 [24.5] Commentary ............................................................................. 164 [24.5.1] Possession as a concept ..................................................... 164 [24.5.2] Perfection by possession ................................................... 165 [24.5.3] Possession is not perfection by possession ................................................................................... 167 [24.6] Further reading ......................................................................... 168 Section 25 Control of an ADI account ................................................. 168 [25.1] Comparable provisions in foreign regimes ............................... 168 [25.2] Outline ...................................................................................... 168 [25.3] Cross-references ....................................................................... 168 [25.4] Concepts ................................................................................... 169 [25.5] Commentary ............................................................................. 169 [25.6] Further reading ......................................................................... 171 Section 26 Control of intermediated securities ................................... 171 [26.1] Comparable provisions in foreign regimes ............................... 172 [26.2] Outline ...................................................................................... 172 [26.3] Cross-references ....................................................................... 172 [26.4] Concepts ................................................................................... 173 [26.5] Commentary ............................................................................. 173 [26.6] Further reading ......................................................................... 173 Annotated Personal Property Securities Act 2009 (Cth)

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Section 27 Control of investment instruments .................................... 174 [27.1] Comparable provisions in foreign regimes ............................... 175 [27.2] Outline ...................................................................................... 175 [27.3] Cross-references ....................................................................... 175 [27.4] Concepts ................................................................................... 176 [27.5] Commentary ............................................................................. 176 [27.6] Further reading ......................................................................... 177 Section 28 Control of a letter of credit ................................................. 177 [28.1] Comparable provisions in foreign regimes ............................... 177 [28.2] Outline ...................................................................................... 177 [28.3] Cross-references ....................................................................... 178 [28.4] Concepts ................................................................................... 178 [28.5] Commentary ............................................................................. 178 [28.6] Further reading ......................................................................... 178 Section 29 Control of negotiable instruments that are not evidenced by a certificate .................................................................. 179 [29.1] Comparable provisions in foreign regimes ............................... 179 [29.2] Outline ...................................................................................... 179 [29.3] Cross-references ....................................................................... 179 [29.4] Concepts ................................................................................... 180 [29.5] Commentary ............................................................................. 180 [29.6] Further reading ......................................................................... 180 Part 2.4 — Attachment and perfection: Specific rules ...................... 181 Division 1 — Introduction ....................................................................... 181 Section 30 Guide to this part ................................................................ 181 Division 2 — Proceeds and transfer ....................................................... 182 Section 31 Meaning of proceeds ............................................................ 182 [31.1] Comparable provisions in foreign regimes ............................... 183 [31.2] Outline ...................................................................................... 183 [31.3] Cross-references ....................................................................... 184 [31.4] Concepts ................................................................................... 184 [31.5] Commentary ............................................................................. 184 [31.5.1] Introduction, requirements and rationale — s 31(1)(a) ............................................................................... 184

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[31.5.2] ‘‘Traceable’’ ...................................................................... 186 [31.5.3] Various applications of tracing principles .................................................................................... 187 [31.5.3.1] Re Hallet’s Estate presumption ................................. 188 [31.5.3.2] ‘‘Lowest Intermediate Balance’’ rule ......................................................................................... 188 [31.5.3.3] Cases of ‘‘New’’ collateral ........................................ 190 [31.5.3.4] Equitable notions and concepts beyond the PPSA ................................................................... 191 [31.5.3.5] Recourse for the original secured party ....................................................................................... 192 [31.5.4] Insurance payments — s 31(1)(b) ..................................... 193 [31.5.5] Redemption of collateral — s 31(1)(c) ............................. 193 [31.5.6] Proceeds of intellectual property — s 31(1)(d) ....................................................................................... 194 [31.5.7] Scope of proceeds — s 31(1)(e) ........................................ 195 [31.5.8] Fiduciary relationships — s 31(2) ..................................... 195 [31.5.9] Interest in the proceeds — s 31(3) .................................... 195 [31.5.10] Crops and livestock — s 31(4), (5), (6) .......................... 195 [31.6] Further reading ......................................................................... 196 Section 32 Proceeds — attachment ...................................................... 196 [32.1] Comparable provisions in foreign regimes ............................... 197 [32.2] Outline ...................................................................................... 197 [32.3] Cross-references ....................................................................... 198 [32.4] Concepts ................................................................................... 198 [32.5] Commentary ............................................................................. 198 [32.5.1] ‘‘Continuous attachment’’ as opposed to ‘‘continuous perfection’’ — s 32(1) ....................................... 199 [32.5.1.1] Provision in the security agreement — s 32(1)(b) ......................................................... 200 [32.5.1.2] Express or implied authorisation — s 32(1)(a) ........................................................................... 200 [32.5.1.3] Taking free provisions ............................................... 202 [32.5.2] Enforcement with respect to both original collateral and proceeds — s 32(2) ................................. 203 [32.5.2.1] Mutual enforcement ................................................... 203

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[32.5.2.2] ‘‘Market value’’ ......................................................... 203 [32.5.2.3] Investment and intermediated instruments ............................................................................. 204 [32.5.3] Knowledge ........................................................................ 204 [32.5.3.1] Actual knowledge ...................................................... 204 [32.5.3.2] Constructive knowledge ............................................ 204 [32.5.4] Persisting rights in personam — s 32(4) ........................... 205 [32.5.5] Priority of proceeds — s 32(5) .......................................... 205 [32.5.6] Anomalies when considering priority of proceeds ...................................................................................... 205 [32.5.6.1] Proceeds of two competing security interests in a mixed account ..................................... 206 [32.5.6.2] Proceeds on account — v — ADI perfection by control over account ................................ 207 [32.5.6.3] PMSI proceeds on account — v — ADI perfection by control over account ........................... 207 [32.5.6.4] Recognising interests in proceeds — v — good faith purchaser for value ....................................................................................... 207 [32.5.6.5] PMSI proceeds on account — v — purchaser of accounts receivable for new value ............................................................................... 208 [32.5.6.6] Proceeds on account — v — rights of set-off ....................................................................... 208 [32.6] Further reading ..................................................................... 208 Section 33 Proceeds — perfection and temporary perfection ........... 208 [33.1] Comparable provisions in foreign regimes ............................... 209 [33.2] Outline ...................................................................................... 209 [33.3] Cross-references ....................................................................... 209 [33.4] Concepts ................................................................................... 209 [33.5] Commentary ............................................................................. 210 [33.5.1] Perfection by registration in original collateral extends to proceeds — s 33(1) ................................... 210 [33.5.2] Temporary perfection with respect to proceeds — s 33(2), (3) .............................................................. 210 [33.6] Further reading ......................................................................... 211

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Section 34 Transferred collateral — temporary perfection after transfer ...................................................................................... 212 [34.1] Comparable provisions in foreign regimes ............................... 213 [34.2] Outline ...................................................................................... 213 [34.3] Cross-references ....................................................................... 213 [34.4] Concepts ................................................................................... 213 [34.5] Commentary ............................................................................. 213 [34.5.1] Scope of temporary perfection — s 34(1) ........................................................................................... 214 [34.5.1.1] 24 Months — maximum period of temporary perfection .......................................................... 214 [34.5.1.2] Period of registration — between five days and 24 months .......................................... 214 [34.5.1.3] Five business days — challenges to priority ................................................................................ 214 [34.5.2] Expiry of temporary perfection — s 34(2), (3) ..................................................................................... 215 [34.6] Further reading ......................................................................... 215 Division 3 — Collateral returned to grantor or debtor .......................... 216 Section 35 Returned collateral — from bailee .................................... 216 [35.1] Comparable provisions in foreign regimes ............................... 216 [35.2] Outline ...................................................................................... 217 [35.3] Cross-references ....................................................................... 217 [35.4] Concepts ................................................................................... 217 [35.5] Commentary ............................................................................. 217 [35.6] Further reading ......................................................................... 218 Section 36 Returned collateral — negotiable instruments and investment instruments ..................................................................... 219 [36.1] Comparable provisions in foreign regimes ............................... 219 [36.2] Outline ...................................................................................... 219 [36.3] Cross-references ....................................................................... 219 [36.4] Concepts ................................................................................... 220 [36.5] Commentary ............................................................................. 220 [36.6] Further reading ......................................................................... 220 Annotated Personal Property Securities Act 2009 (Cth)

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Section 37 Returned collateral — following sale or lease .................. 220 [37.1] Comparable provisions in foreign regimes ............................... 221 [37.2] Outline ...................................................................................... 221 [37.3] Cross-references ....................................................................... 221 [37.4] Concepts ................................................................................... 221 [37.5] Commentary ............................................................................. 222 [37.6] Further reading ......................................................................... 222 Section 38 Returned collateral — accounts and chattel paper .......... 222 [38.1] Comparable provisions in foreign regimes ............................... 223 [38.2] Outline ...................................................................................... 223 [38.3] Cross-references ....................................................................... 223 [38.4] Concepts ................................................................................... 223 [38.5] Commentary ............................................................................. 223 [38.6] Further reading ......................................................................... 224 Division 4 — Relocation of collateral or grantor to Australia etc. ....................................................................................................... 224 Section 39 Relocation — main rule ...................................................... 224 [39.1] Comparable provisions in foreign regimes ............................... 225 [39.2] Outline ...................................................................................... 225 [39.3] Cross-references ....................................................................... 226 [39.4] Concepts ................................................................................... 226 [39.5] Commentary ............................................................................. 227 [39.6] Further reading ......................................................................... 227 Section 40 Relocation — intangible property and financial property .............................................................................................. 228 [40.1] Comparable provisions in foreign regimes ............................... 229 [40.2] Outline ...................................................................................... 230 [40.3] Cross-references ....................................................................... 230 [40.4] Concepts ................................................................................... 230 [40.5] Commentary ............................................................................. 230 [40.6] Further reading ......................................................................... 231 Part 2.5 — Taking personal property free of security interests ........ 231 Section 41 Guide to this part ................................................................ 231 Section 42 Application of this part ....................................................... 231

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Section 43 Taking personal property free of unperfected security interest ................................................................................. 232 [43.1] Comparable provisions in foreign regimes ............................... 232 [43.2] Outline ...................................................................................... 232 [43.3] Cross-references ....................................................................... 233 [43.4] Concepts ................................................................................... 233 [43.5] Commentary ............................................................................. 233 [43.5.1] Main rule — s 43(1) .......................................................... 233 [43.5.2] Exceptions — s 43(2) ........................................................ 235 [43.6] Further reading ......................................................................... 235 Section 44 Taking personal property free of security interest if serial number incorrect or missing .................................................. 235 [44.1] Comparable provisions in foreign regimes ............................... 236 [44.2] Outline ...................................................................................... 236 [44.3] Cross-references ....................................................................... 236 [44.4] Concepts ................................................................................... 236 [44.5] Commentary ............................................................................. 237 [44.5.1] Main rule — s 44(1) .......................................................... 237 [44.5.2] Exceptions — s 44(2) ........................................................ 238 [44.6] Further reading ......................................................................... 238 Section 45 Taking motor vehicles free of security interest ................ 238 [45.1] Comparable provisions in foreign regimes ............................... 240 [45.2] Outline ...................................................................................... 240 [45.3] Cross-references ....................................................................... 240 [45.4] Concepts ................................................................................... 240 [45.5] Commentary ............................................................................. 241 [45.5.1] Main rule — s 45(1) .......................................................... 241 [45.5.2] Exceptions — s 45(2) ........................................................ 241 [45.5.3] Prescribed persons — s 45(3), (4) ..................................... 242 [45.6] Further reading ......................................................................... 242 Section 46 Taking personal property free of security interest in ordinary course of business .......................................................... 242 [46.1] Comparable provisions in foreign regimes ............................... 243 [46.2] Outline ...................................................................................... 243

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[46.3] Cross-references ....................................................................... 243 [46.4] Concepts ................................................................................... 243 [46.5] Commentary ............................................................................. 244 [46.5.1] Overview of s 46 — taking personal property free of security interest in ordinary course of business ....................................................................... 244 [46.5.2] What is in the ordinary course of business? ..................................................................................... 244 [46.5.3] Exceptions — s 46(2) ........................................................ 248 [46.6] Further reading ......................................................................... 249 Section 47 Taking personal, domestic or household property free of security interest ..................................................................... 249 [47.1] Comparable provisions in foreign regimes ............................... 250 [47.2] Outline ...................................................................................... 250 [47.3] Cross-references ....................................................................... 250 [47.4] Concepts ................................................................................... 250 [47.5] Commentary ............................................................................. 251 [47.5.1] Main rule — s 47(1) .......................................................... 251 [47.5.2] Exceptions — s 47(2) ........................................................ 252 [47.5.3] Practical consequences ...................................................... 252 [47.6] Further reading ......................................................................... 253 Section 48 Taking currency free of security interest .......................... 253 [48.1] Comparable provisions in foreign regimes ............................... 253 [48.2] Outline ...................................................................................... 253 [48.3] Cross-references ....................................................................... 253 [48.4] Concepts ................................................................................... 253 [48.5] Commentary ............................................................................. 254 [48.6] Further reading ......................................................................... 254 Section 49 Taking investment instrument or intermediated security free of security interest in the ordinary course of trading ................................................................................................ 254 [49.1] Comparable provisions in foreign regimes ............................... 254 [49.2] Outline ...................................................................................... 254 [49.3] Cross-references ....................................................................... 255 [49.4] Concepts ................................................................................... 255

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[49.5] Commentary ............................................................................. 255 [49.6] Further reading ......................................................................... 255 Section 50 Taking investment instrument free of security interest ................................................................................................ 256 [50.1] Comparable provisions in foreign regimes ............................... 256 [50.2] Outline ...................................................................................... 256 [50.3] Cross-references ....................................................................... 256 [50.4] Concepts ................................................................................... 256 [50.5] Commentary ............................................................................. 257 [50.5.1] Main rule — s 50(1) .......................................................... 257 [50.5.2] Exceptions — s 50(2) ........................................................ 257 [50.5.3] Practical considerations ..................................................... 257 [50.6] Further reading ......................................................................... 257 Section 51 Taking intermediated security free of security interest ................................................................................................ 258 [51.1] Comparable provisions in foreign regimes ............................... 258 [51.2] Outline ...................................................................................... 258 [51.3] Cross-references ....................................................................... 258 [51.4] Concepts ................................................................................... 258 [51.5] Commentary ............................................................................. 259 [51.5.1] Main rule — s 51(1) .......................................................... 259 [51.5.2] Exceptions — s 51(2) ........................................................ 259 [51.6] Further reading ......................................................................... 259 Section 52 Taking personal property free of temporarily perfected security interest ................................................................ 259 [52.1] Comparable provisions in foreign regimes ............................... 260 [52.2] Outline ...................................................................................... 260 [52.3] Cross-references ....................................................................... 260 [52.4] Concepts ................................................................................... 260 [52.5] Commentary ............................................................................. 261 [52.5.1] Main rule — s 52(1) .......................................................... 261 [52.5.2] Exceptions — s 52(2) ........................................................ 261 [52.6] Further reading ......................................................................... 262 Annotated Personal Property Securities Act 2009 (Cth)

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Section 53 Rights of secured party and transferee on taking personal property free of security interest ...................................... 262 [53.1] Comparable provisions in foreign regimes ............................... 262 [53.2] Outline ...................................................................................... 262 [53.3] Cross-references ....................................................................... 263 [53.4] Concepts ................................................................................... 263 [53.5] Commentary ............................................................................. 263 [53.5.1] Scope — s 53(1) ................................................................ 263 [53.5.2] Rights and ramifications for the secured party — s 53(2) ........................................................................... 263 [53.5.3] Rights of the transferee — s 53(3) .................................... 264 [53.6] Further reading ......................................................................... 264 Part 2.6 — Priority between security interests ................................... 264 Division 1 — Introduction ....................................................................... 264 Section 54 Guide to this part ................................................................ 264 Division 2 — Priority of security interests generally .............................. 266 Section 55 Default priority rules .......................................................... 266 [55.1] Comparable provisions in foreign regimes ............................... 267 [55.2] Outline ...................................................................................... 267 [55.3] Cross-references ....................................................................... 267 [55.4] Concepts ................................................................................... 267 [55.5] Commentary ............................................................................. 267 [55.5.1] Default position — s 55(1) ................................................ 268 [55.5.2] Priority between unperfected security interests — s 55(2) ...................................................................... 269 [55.5.3] Perfected security interests vs unperfected security interests — s 55(3) .................................... 270 [55.5.4] Priority between two perfected security interests — s 55(4) ...................................................................... 273 [55.5.5] Priority time — s 55(5), (6) ............................................... 274 [55.6] Further reading ......................................................................... 274 Section 56 How a security interest is continuously perfected ............ 275 [56.1] Comparable provisions in foreign regimes ............................... 275 [56.2] Outline ...................................................................................... 275

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[56.3] Cross-references ....................................................................... 275 [56.4] Concepts ................................................................................... 275 [56.5] Commentary ............................................................................. 275 [56.6] Further reading ......................................................................... 277 Section 57 Priority of security interests perfected by control ........... 277 [57.1] Comparable provisions in foreign regimes ............................... 277 [57.2] Outline ...................................................................................... 277 [57.3] Cross-references ....................................................................... 278 [57.4] Concepts ................................................................................... 278 [57.5] Commentary ............................................................................. 278 [57.5.1] Control primacy — s 57(1) ............................................... 278 [57.5.2] Perfection by control vs perfection by control — s 57(2) ........................................................................ 278 [57.5.3] Perfection by control and proceeds — s 57(2A) ......................................................................................... 279 [57.5.4] Commercial realities — s 57(3) ........................................ 279 [57.6] Further reading ......................................................................... 280 Section 58 Priority of advances ............................................................ 280 [58.1] Comparable provisions in foreign regimes ............................... 280 [58.2] Outline ...................................................................................... 280 [58.3] Cross-references ....................................................................... 280 [58.4] Concepts ................................................................................... 280 [58.5] Commentary ............................................................................. 281 [58.6] Further reading ......................................................................... 281 Section 59 Priority rules and intervening security interests .............. 281 [59.1] Comparable provisions in foreign regimes ............................... 281 [59.2] Outline ...................................................................................... 281 [59.3] Cross-references ....................................................................... 282 [59.4] Concepts ................................................................................... 282 [59.5] Commentary ............................................................................. 282 [59.6] Further reading ......................................................................... 282 Section 60 Transfer of security interests does not affect priority ............................................................................................... 282 [60.1] Comparable provisions in foreign regimes ............................... 282 [60.2] Outline ...................................................................................... 282

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[60.3] Cross-references ....................................................................... 282 [60.4] Concepts ................................................................................... 283 [60.5] Commentary ............................................................................. 283 [60.6] Further reading ......................................................................... 283 Section 61 Voluntary subordination of security interests .................. 283 [61.1] Comparable provisions in foreign regimes ............................... 284 [61.2] Outline ...................................................................................... 284 [61.3] Cross-references ....................................................................... 284 [61.4] Concepts ................................................................................... 284 [61.5] Commentary ............................................................................. 284 [61.6] Further reading ......................................................................... 285 Division 3 — Priority of purchase money security interests ................... 286 Section 62 When purchase money security interests take priority over other security interests ............................................... 286 [62.1] Comparable provisions in foreign regimes ............................... 287 [62.2] Outline ...................................................................................... 287 [62.3] Cross-references ....................................................................... 287 [62.4] Concepts ................................................................................... 287 [62.5] Commentary ............................................................................. 288 [62.5.1] Scope — s 62(1) ................................................................ 288 [62.5.2] PMSIs taken over inventory — s 62(2) ............................. 289 [62.5.3] PMSIs taken over non-inventory ...................................... 289 [62.5.4] Application of the PMSI priority as against ordinary security interests — Foreign case analysis ............................................................................... 290 [62.5.4.1] Scope of PMSIs limited to s 14 purpose ................................................................................... 290 [62.5.4.2] Perfection necessary or express subordination required ........................................................... 291 [62.5.4.3] Formal requirements apply to PMSIs such that a substantial defect may render the interest ineffective ................................................. 291 [62.5.4.4] PMSIs are a discrete class of interest and cannot be held in a capacity beyond what the PPSA prescribes — ‘‘no abuse of process’’ ................................................................... 292

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[62.5.4.5] PMSI arises as soon as elements of the PPSA are satisfied and ceases when the obligations owing are fulfilled ......................................... 292 [62.5.5] Time limitations ................................................................ 292 [62.5.5.1] Erroneous mischaracterisations ................................. 292 [62.5.5.1] Changes in circumstance ........................................... 293 [62.5.6] Failing to tick the ‘‘PMSI box’’ ........................................ 293 [62.6] Further reading ......................................................................... 295 Section 63 Priority between competing purchase money security interests in collateral .......................................................... 295 [63.1] Comparable provisions in foreign regimes ............................... 295 [63.2] Outline ...................................................................................... 296 [63.3] Cross-references ....................................................................... 296 [63.4] Concepts ................................................................................... 296 [63.5] Commentary ............................................................................. 296 [63.6] Further reading ......................................................................... 297 Section 64 Non-purchase money security interests in accounts ........ 297 [64.1] Comparable provisions in foreign regimes ............................... 298 [64.2] Outline ...................................................................................... 298 [64.3] Cross-references ....................................................................... 298 [64.4] Concepts ................................................................................... 299 [64.5] Commentary ............................................................................. 299 [64.5.1] Non-PMSI trumps PMSI — s 64(1) .................................. 299 [64.5.2] Notice — s 64(2) ............................................................... 301 [64.5.3] Proceeds and new value – s 64(3) ..................................... 301 [64.6] Further reading ......................................................................... 301 Section 65 Possession of goods shipped by a common carrier ........... 302 [65.1] Comparable provisions in foreign regimes ............................... 302 [65.2] Outline ...................................................................................... 302 [65.3] Cross-references ....................................................................... 302 [65.4] Concepts ................................................................................... 302 [65.5] Commentary ............................................................................. 302 [65.6] Further reading ......................................................................... 302 Annotated Personal Property Securities Act 2009 (Cth)

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Division 4 — Priority of security interests in transferred collateral ............................................................................................. 303 Section 66 Application of this Division ................................................ 303 Section 67 Priority when transferor-granted interest has been continuously perfected ...................................................................... 303 [67.1] Comparable provisions in foreign regimes ............................... 303 [67.2] Outline ...................................................................................... 304 [67.3] Cross-references ....................................................................... 304 [67.4] Concepts ................................................................................... 304 [67.5] Commentary ............................................................................. 304 [67.6] Further reading ......................................................................... 304 Section 68 Priority when there is a break in the perfection of the transferor-granted interest ........................................................ 304 [68.1] Comparable provisions in foreign regimes ............................... 306 [68.2] Outline ...................................................................................... 306 [68.3] Cross-references ....................................................................... 306 [68.4] Concepts ................................................................................... 306 [68.5] Commentary ............................................................................. 307 [68.5.1] Transferor-granted interest prevails — s 68(1) ........................................................................................... 307 [68.5.2] Transferee-granted interest prevails — s 68(2) ........................................................................................... 307 [68.5.3] Particulars — s 68(3), (4), (5) ........................................... 307 [68.6] Further reading ......................................................................... 308 Division 5 — Priority of creditors, and purchasers of negotiable instruments, chattel paper and negotiable documents of title ................................................................................ 308 Section 69 Priority of creditor who receives payment of debt ........... 308 [69.1] Comparable provisions in foreign regimes ............................... 308 [69.2] Outline ...................................................................................... 309 [69.3] Cross-references ....................................................................... 309 [69.4] Concepts ................................................................................... 309 [69.5] Commentary ............................................................................. 309 [69.6] Further reading ......................................................................... 310

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Section 70 Priority of person who acquires a negotiable instrument or an interest in a negotiable instrument .................... 311 [70.1] Comparable provisions in foreign regimes ............................... 311 [70.2] Outline ...................................................................................... 311 [70.3] Cross-references ....................................................................... 311 [70.4] Concepts ................................................................................... 312 [70.5] Commentary ............................................................................. 312 [70.6] Further reading ......................................................................... 313 Section 71 Priority of person who acquires chattel paper or an interest in chattel paper .................................................................... 314 [71.1] Comparable provisions in foreign regimes ............................... 314 [71.2] Outline ...................................................................................... 314 [71.3] Cross-references ....................................................................... 314 [71.4] Concepts ................................................................................... 315 [71.5] Commentary ............................................................................. 315 [71.6] Further reading ......................................................................... 316 Section 72 Priority of holder of negotiable document of title ............ 316 [72.1] Comparable provisions in foreign regimes ............................... 316 [72.2] Outline ...................................................................................... 316 [72.3] Cross-references ....................................................................... 316 [72.4] Concepts ................................................................................... 317 [72.5] Commentary ............................................................................. 317 [72.6] Further reading ......................................................................... 317 Division 6 — Priority of other interests .................................................. 317 Section 73 Priority between security interests and declared statutory interests .............................................................................. 317 [73.1] Comparable provisions in foreign regimes ............................... 319 [73.2] Outline ...................................................................................... 319 [73.3] Cross-references ....................................................................... 319 [73.4] Concepts ................................................................................... 319 [73.5] Commentary ............................................................................. 320 [73.6] Further reading ......................................................................... 320 Annotated Personal Property Securities Act 2009 (Cth)

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Section 74 Execution creditor has priority over unperfected security interest ................................................................................. 321 [74.1] Comparable provisions in foreign regimes ............................... 321 [74.2] Outline ...................................................................................... 321 [74.3] Cross-references ....................................................................... 321 [74.4] Concepts ................................................................................... 322 [74.5] Commentary ............................................................................. 322 [74.6] Further reading ......................................................................... 323 Section 75 Priority of security interests held by ADIs ....................... 323 [75.1] Comparable provisions in foreign regimes ............................... 323 [75.2] Outline ...................................................................................... 323 [75.3] Cross-references ....................................................................... 323 [75.4] Concepts ................................................................................... 323 [75.5] Commentary ............................................................................. 324 [75.6] Further reading ......................................................................... 324 Section 76 Priority of security interests in returned goods ................ 324 [76.1] Comparable provisions in foreign regimes ............................... 325 [76.2] Outline ...................................................................................... 325 [76.3] Cross-references ....................................................................... 325 [76.4] Concepts ................................................................................... 325 [76.5] Commentary ............................................................................. 326 [76.6] Further reading ......................................................................... 327 Section 77 Priority of certain security interests if there is no foreign register .................................................................................. 327 [77.1] Comparable provisions in foreign regimes ............................... 328 [77.2] Outline ...................................................................................... 328 [77.3] Cross-references ....................................................................... 328 [77.4] Concepts ................................................................................... 329 [77.5] Commentary ............................................................................. 329 [77.6] Further reading ......................................................................... 329  2018 CCH Australia Limited

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Part 2.7 — Transfer of interests in collateral ..................................... 329 Section 78 Guide to this part ................................................................ 329 Section 79 Transfer of collateral despite prohibition in security agreement ............................................................................ 330 [79.1] Comparable provisions in foreign regimes ............................... 330 [79.2] Outline ...................................................................................... 330 [79.3] Cross-references ....................................................................... 330 [79.4] Concepts ................................................................................... 331 [79.5] Commentary ............................................................................. 331 [79.6] Further reading ......................................................................... 332 Section 80 Rights on transfer of account or chattel paper — rights of transferee and account debtor .......................................... 332 [80.1] Comparable provisions in foreign regimes ............................... 333 [80.2] Outline ...................................................................................... 334 [80.3] Cross-references ....................................................................... 334 [80.4] Concepts ................................................................................... 334 [80.5] Commentary ............................................................................. 334 [80.6] Further reading ......................................................................... 335 Section 81 Rights on transfer of account or chattel paper — contractual restrictions and prohibitions on transfer .................... 336 [81.1] Comparable provisions in foreign regimes ............................... 336 [81.2] Outline ...................................................................................... 336 [81.3] Cross-references ....................................................................... 336 [81.4] Concepts ................................................................................... 337 [81.5] Commentary ............................................................................. 337 [81.6] Further reading ......................................................................... 337 Chapter 3 — Specific rules for certain security interests Part 3.1 — Guide to this Chapter ........................................................ 339 Section 82 Guide to this Chapter ......................................................... 339 Part 3.2 — Agricultural interests ......................................................... 339 Section 83 Guide to this part ................................................................ 339 Section 84 Relationship between security interest in crops and interest in land ................................................................................... 340 [84.1] Comparable provisions in foreign regimes ............................... 340 [84.2] Outline ...................................................................................... 340

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[84.3] Cross-references ....................................................................... 340 [84.4] Concepts ................................................................................... 341 [84.5] Commentary ............................................................................. 341 [84.6] Further reading ......................................................................... 341 Section 84A Attachment of security interests to crops while they are growing and to the products of livestock ......................... 341 [84A.1] Comparable provisions in foreign regimes ............................ 342 [84A.2] Outline ................................................................................... 342 [84A.3] Cross-references .................................................................... 342 [84A.4] Concepts ................................................................................ 342 [84A.5] Commentary .......................................................................... 343 [84A.6] Further reading ...................................................................... 343 Section 85 Priority of crops .................................................................. 343 [85.1] Comparable provisions in foreign regimes ............................... 343 [85.2] Outline ...................................................................................... 343 [85.3] Cross-references ....................................................................... 344 [85.4] Concepts ................................................................................... 344 [85.5] Commentary ............................................................................. 344 [85.6] Further reading ......................................................................... 346 Section 86 Priority of livestock ............................................................. 346 [86.1] Comparable provisions in foreign regimes ............................... 346 [86.2] Outline ...................................................................................... 346 [86.3] Cross-references ....................................................................... 346 [86.4] Concepts ................................................................................... 347 [86.5] Commentary ............................................................................. 347 [86.6] Further reading ......................................................................... 347 Part 3.3 — Accessions ........................................................................... 347 Section 87 Guide to this part ................................................................ 347 Section 88 Continuation of security interests in accessions ............... 348 [88.1] Comparable provisions in foreign regimes ............................... 348 [88.2] Outline ...................................................................................... 348 [88.3] Cross-references ....................................................................... 348 [88.4] Concepts ................................................................................... 348  2018 CCH Australia Limited

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[88.5] Commentary ............................................................................. 350 [88.6] Further reading ......................................................................... 350 Section 89 Default rule — interest in accession has priority ............. 350 [89.1] Comparable provisions in foreign regimes ............................... 350 [89.2] Outline ...................................................................................... 350 [89.3] Cross-references ....................................................................... 351 [89.4] Concepts ................................................................................... 351 [89.5] Commentary ............................................................................. 351 [89.6] Further reading ......................................................................... 351 Section 90 Priority interest in whole — before security interest in accession is perfected ...................................................... 351 [90.1] Comparable provisions in foreign regimes ............................... 352 [90.2] Outline ...................................................................................... 352 [90.3] Cross-references ....................................................................... 352 [90.4] Concepts ................................................................................... 352 [90.5] Commentary ............................................................................. 352 [90.6] Further reading ......................................................................... 353 Section 91 Priority interest in whole — security interest in accession attaches after goods become accession ........................... 354 [91.1] Comparable provisions in foreign regimes ............................... 354 [91.2] Outline ...................................................................................... 354 [91.3] Cross-references ....................................................................... 354 [91.4] Concepts ................................................................................... 354 [91.5] Commentary ............................................................................. 355 [91.6] Further reading ......................................................................... 355 Section 92 Secured party must not damage goods when removing accession ............................................................................ 355 [92.1] Comparable provisions in foreign regimes ............................... 355 [92.2] Outline ...................................................................................... 355 [92.3] Cross-references ....................................................................... 356 [92.4] Concepts ................................................................................... 356 [92.5] Commentary ............................................................................. 356 [92.6] Further reading ......................................................................... 356 Annotated Personal Property Securities Act 2009 (Cth)

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Section 93 Reimbursement for damage caused in removing accessions ........................................................................................... 356 [93.1] Comparable provisions in foreign regimes ............................... 357 [93.2] Outline ...................................................................................... 357 [93.3] Cross-references ....................................................................... 357 [93.4] Concepts ................................................................................... 357 [93.5] Commentary ............................................................................. 357 [93.6] Further reading ......................................................................... 357 Section 94 Refusal of permission to remove accession ....................... 357 [94.1] Comparable provisions in foreign regimes ............................... 358 [94.2] Outline ...................................................................................... 358 [94.3] Cross-references ....................................................................... 358 [94.4] Concepts ................................................................................... 358 [94.5] Commentary ............................................................................. 358 [94.6] Further reading ......................................................................... 358 Section 95 Secured party must give notice of removal of accession ............................................................................................. 359 [95.1] Comparable provisions in foreign regimes ............................... 360 [95.2] Outline ...................................................................................... 360 [95.3] Cross-references ....................................................................... 360 [95.4] Concepts ................................................................................... 360 [95.5] Commentary ............................................................................. 360 [95.6] Further reading ......................................................................... 361 Section 96 When person with an interest in the whole may retain accession .................................................................................. 361 [96.1] Comparable provisions in foreign regimes ............................... 361 [96.2] Outline ...................................................................................... 361 [96.3] Cross-references ....................................................................... 362 [96.4] Concepts ................................................................................... 362 [96.5] Commentary ............................................................................. 362 [96.6] Further reading ......................................................................... 363 Section 97 Court order about removal of accession ........................... 363 [97.1] Comparable provisions in foreign regimes ............................... 363 [97.2] Outline ...................................................................................... 363

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[97.3] Cross-references ....................................................................... 363 [97.4] Concepts ................................................................................... 363 [97.5] Commentary ............................................................................. 363 [97.6] Further reading ......................................................................... 363 Part 3.4 — Processed or commingled goods ....................................... 364 Section 98 Guide to this part ................................................................ 364 Section 99 Continuation of security interests in goods that become processed or commingled .................................................... 364 [99.1] Comparable provisions in foreign regimes ............................... 364 [99.2] Outline ...................................................................................... 364 [99.3] Cross-references ....................................................................... 364 [99.4] Concepts ................................................................................... 365 [99.5] Commentary ............................................................................. 366 [99.6] Further reading ......................................................................... 366 Section 100 Perfection of security interest in goods that become processed or commingled applies to product or mass ..... 366 [100.1] Comparable provisions in foreign regimes ............................. 366 [100.2] Outline .................................................................................... 366 [100.3] Cross-references ..................................................................... 366 [100.4] Concepts ................................................................................. 367 [100.5] Commentary ........................................................................... 367 [100.6] Further reading ....................................................................... 367 Section 101 Limit on value of priority of goods that become part of processed or commingled goods .......................................... 368 [101.1] Comparable provisions in foreign regimes ............................. 368 [101.2] Outline .................................................................................... 368 [101.3] Cross-references ..................................................................... 368 [101.4] Concepts ................................................................................. 368 [101.5] Commentary ........................................................................... 368 [101.6] Further reading ....................................................................... 369 Section 102 Priority where more than one security interest continues in processed or commingled goods ................................. 370 [102.1] Comparable provisions in foreign regimes ............................. 370 [102.2] Outline .................................................................................... 370 [102.3] Cross-references ..................................................................... 370

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[102.4] Concepts ................................................................................. 371 [102.5] Commentary ........................................................................... 371 [102.6] Further reading ....................................................................... 371 Section 103 priority of purchase money security interest in processed or commingled goods ....................................................... 372 [103.1] Comparable provisions in foreign regimes ............................. 372 [103.2] Outline .................................................................................... 372 [103.3] Cross-references ..................................................................... 372 [103.4] Concepts ................................................................................. 372 [103.5] Commentary ........................................................................... 373 [103.6] Further reading ....................................................................... 373 Part 3.5 — Intellectual property .......................................................... 373 Section 104 Guide to this part .............................................................. 373 Section 105 Implied references to intellectual property rights .......... 373 [105.1] Comparable provisions in foreign regimes ............................. 374 [105.2] Outline .................................................................................... 374 [105.3] Cross-references ..................................................................... 374 [105.4] Concepts ................................................................................. 374 [105.5] Commentary ........................................................................... 375 [105.6] Further reading ....................................................................... 375 Section 106 Intellectual property licences and transfers of intellectual property .......................................................................... 376 [106.1] Comparable provisions in foreign regimes ............................. 376 [106.2] Outline .................................................................................... 377 [106.3] Cross-references ..................................................................... 377 [106.4] Concepts ................................................................................. 377 [106.5] Commentary ........................................................................... 377 [106.6] Further reading ....................................................................... 378 Chapter 4 — Enforcement of security interests Part 4.1 — Guide to this Chapter ........................................................ 379 Section 107 Guide to this Chapter ....................................................... 379 Part 4.2 — General rules ...................................................................... 379 Section 108 Guide to this part .............................................................. 379  2018 CCH Australia Limited

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Section 109 Application of this Chapter .............................................. 380 [109.1] Comparable provisions in foreign regimes ............................. 381 [109.2] Outline .................................................................................... 381 [109.3] Cross-references ..................................................................... 381 [109.4] Concepts ................................................................................. 381 [109.5] Commentary ........................................................................... 382 [109.6] Further reading ....................................................................... 382 Section 110 Rights and remedies .......................................................... 382 [110.1] Comparable provisions in foreign regimes ............................. 383 [110.2] Outline .................................................................................... 383 [110.3] Cross-references ..................................................................... 383 [110.4] Concepts ................................................................................. 383 [110.5] Commentary ........................................................................... 383 [110.6] Further reading ....................................................................... 383 Section 111 Rights and duties to be exercised honestly and in a commercially reasonable manner ................................................. 383 [111.1] Comparable provisions in foreign regimes ............................. 384 [111.2] Outline .................................................................................... 384 [111.3] Cross-references ..................................................................... 384 [111.4] Concepts ................................................................................. 384 [111.5] Commentary ........................................................................... 384 [111.6] Further reading ....................................................................... 386 Section 112 Rights and remedies under this Chapter ........................ 386 [112.1] Comparable provisions in foreign regimes ............................. 387 [112.2] Outline .................................................................................... 387 [112.3] Cross-references ..................................................................... 387 [112.4] Concepts ................................................................................. 387 [112.5] Commentary ........................................................................... 387 [112.6] Further reading ....................................................................... 388 Section 113 Recovering judgment or issuing execution does not extinguish a security interest in collateral ................................ 389 [113.1] Comparable provisions in foreign regimes ............................. 389 [113.2] Outline .................................................................................... 389 [113.3] Cross-references ..................................................................... 389

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[113.4] Concepts ................................................................................. 389 [113.5] Commentary ........................................................................... 389 [113.6] Further reading ....................................................................... 389 Section 114 Rights and remedies under this Chapter are cumulative .......................................................................................... 390 [114.1] Comparable provisions in foreign regimes ............................. 390 [114.2] Outline .................................................................................... 390 [114.3] Cross-references ..................................................................... 390 [114.4] Concepts ................................................................................. 390 [114.5] Commentary ........................................................................... 390 [114.6] Further reading ....................................................................... 391 Section 115 Contracting out of enforcement provisions .................... 391 [115.1] Comparable provisions in foreign regimes ............................. 392 [115.2] Outline .................................................................................... 392 [115.3] Cross-references ..................................................................... 393 [115.4] Concepts ................................................................................. 393 [115.5] Commentary ........................................................................... 393 [115.6] Further reading ....................................................................... 394 Section 116 Application while there is a receiver or another controller of property ....................................................................... 394 [116.1] Comparable provisions in foreign regimes ............................. 395 [116.2] Outline .................................................................................... 395 [116.3] Cross-references ..................................................................... 395 [116.4] Concepts ................................................................................. 395 [116.5] Commentary ........................................................................... 395 [116.6] Further reading ....................................................................... 396 Section 117 Obligations secured by interests in personal property and land .............................................................................. 396 [117.1] Comparable provisions in foreign regimes ............................. 398 [117.2] Outline .................................................................................... 398 [117.3] Cross-references ..................................................................... 398 [117.4] Concepts ................................................................................. 398 [117.5] Commentary ........................................................................... 398 [117.6] Further reading ....................................................................... 399

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Section 118 Enforcing security interests in accordance with land law decisions .............................................................................. 399 [118.1] Comparable provisions in foreign regimes ............................. 401 [118.2] Outline .................................................................................... 401 [118.3] Cross-references ..................................................................... 401 [118.4] Concepts ................................................................................. 401 [118.5] Commentary ........................................................................... 402 [118.6] Further reading ....................................................................... 402 Section 119 Relationship with consumer credit legislation ................ 402 [119.1] Comparable provisions in foreign regimes ............................. 403 [119.2] Outline .................................................................................... 403 [119.3] Cross-references ..................................................................... 403 [119.4] Concepts ................................................................................. 403 [119.5] Commentary ........................................................................... 403 [119.6] Further reading ....................................................................... 408 Section 120 Enforcement of security interests in liquid assets — general ........................................................................................... 408 [120.1] Comparable provisions in foreign regimes ............................. 409 [120.2] Outline .................................................................................... 409 [120.3] Cross-references ..................................................................... 409 [120.4] Concepts ................................................................................. 410 [120.5] Commentary ........................................................................... 410 [120.6] Further reading ....................................................................... 410 Section 121 Enforcement of security interests in liquid assets — notice to higher priority parties and grantor ............................ 410 [121.1] Comparable provisions in foreign regimes ............................. 411 [121.2] Outline .................................................................................... 411 [121.3] Cross-references ..................................................................... 412 [121.4] Concepts ................................................................................. 412 [121.5] Commentary ........................................................................... 412 [121.6] Further reading ....................................................................... 412 Part 4.3 — Seizure and disposal or retention of collateral ................ 412 Division 1 — Introduction ....................................................................... 412 Section 122 Guide to this part .............................................................. 412

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Division 2 — Seizing collateral ............................................................... 413 Section 123 Secured party may seize collateral .................................. 413 [123.1] Comparable provisions in foreign regimes ............................. 413 [123.2] Outline .................................................................................... 414 [123.3] Cross-references ..................................................................... 414 [123.4] Concepts ................................................................................. 414 [123.5] Commentary ........................................................................... 415 [123.6] Further reading ....................................................................... 416 Section 124 Secured party who has perfected a security interest in collateral by possession or control ................................. 416 [124.1] Comparable provisions in foreign regimes ............................. 417 [124.2] Outline .................................................................................... 417 [124.3] Cross-references ..................................................................... 417 [124.4] Concepts ................................................................................. 417 [124.5] Commentary ........................................................................... 417 [124.6] Further reading ....................................................................... 418 Section 125 Obligation to dispose of or retain collateral ................... 418 [125.1] Comparable provisions in foreign regimes ............................. 418 [125.2] Outline .................................................................................... 418 [125.3] Cross-references ..................................................................... 418 [125.4] Concepts ................................................................................. 419 [125.5] Commentary ........................................................................... 419 [125.6] Further reading ....................................................................... 419 Section 126 Apparent possession of collateral .................................... 420 [126.1] Comparable provisions in foreign regimes ............................. 420 [126.2] Outline .................................................................................... 420 [126.3] Cross-references ..................................................................... 420 [126.4] Concepts ................................................................................. 420 [126.5] Commentary ........................................................................... 421 [126.6] Further reading ....................................................................... 421 Section 127 Seizure by higher priority parties — notice ................... 421 [127.1] Comparable provisions in foreign regimes ............................. 423 [127.2] Outline .................................................................................... 423 [127.3] Cross-references ..................................................................... 423

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[127.4] Concepts ................................................................................. 423 [127.5] Commentary ........................................................................... 424 [127.6] Further reading ....................................................................... 424 Division 3 — Disposing of collateral (including by purchasing collateral) ............................................................................................ 424 Section 128 Secured party may dispose of collateral ......................... 424 [128.1] Comparable provisions in foreign regimes ............................. 425 [128.2] Outline .................................................................................... 425 [128.3] Cross-references ..................................................................... 425 [128.4] Concepts ................................................................................. 426 [128.5] Commentary ........................................................................... 426 [128.6] Further reading ....................................................................... 426 Section 129 Disposal by purchase ........................................................ 426 [129.1] Comparable provisions in foreign regimes ............................. 427 [129.2] Outline .................................................................................... 427 [129.3] Cross-references ..................................................................... 427 [129.4] Concepts ................................................................................. 427 [129.5] Commentary ........................................................................... 428 [129.6] Further reading ....................................................................... 428 Section 130 Notice of disposal of collateral ......................................... 429 [130.1] Comparable provisions in foreign regimes ............................. 430 [130.2] Outline .................................................................................... 430 [130.3] Cross-references ..................................................................... 430 [130.4] Concepts ................................................................................. 430 [130.5] Commentary ........................................................................... 431 [130.6] Further reading ....................................................................... 431 Section 131 Duty of secured party disposing of collateral to obtain market value .......................................................................... 431 [131.1] Comparable provisions in foreign regimes ............................. 432 [131.2] Outline .................................................................................... 432 [131.3] Cross-references ..................................................................... 432 [131.4] Concepts ................................................................................. 432 [131.5] Commentary ........................................................................... 433 [131.6] Further reading ....................................................................... 434

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Section 132 Secured party to give statement of account .................... 435 [132.1] Comparable provisions in foreign regimes ............................. 436 [132.2] Outline .................................................................................... 436 [132.3] Cross-references ..................................................................... 436 [132.4] Concepts ................................................................................. 437 [132.5] Commentary ........................................................................... 437 [132.6] Further reading ....................................................................... 437 Section 133 Disposing of collateral free of interests ........................... 437 [133.1] Comparable provisions in foreign regimes ............................. 438 [133.2] Outline .................................................................................... 438 [133.3] Cross-references ..................................................................... 438 [133.4] Concepts ................................................................................. 438 [133.5] Commentary ........................................................................... 438 [133.6] Further reading ....................................................................... 438 Division 4 — Retaining collateral ........................................................... 439 Section 134 Proposal of secured party to retain collateral ................ 439 [134.1] Comparable provisions in foreign regimes ............................. 439 [134.2] Outline .................................................................................... 439 [134.3] Cross-references ..................................................................... 439 [134.4] Concepts ................................................................................. 440 [134.5] Commentary ........................................................................... 440 [134.6] Further reading ....................................................................... 440 Section 135 Notice of retention of collateral ........................................ 440 [135.1] Comparable provisions in foreign regimes ............................. 441 [135.2] Outline .................................................................................... 441 [135.3] Cross-references ..................................................................... 442 [135.4] Concepts ................................................................................. 442 [135.5] Commentary ........................................................................... 442 [135.6] Further reading ....................................................................... 442 Section 136 Retaining collateral free of interests ................................ 442 [136.1] Comparable provisions in foreign regimes ............................. 443 [136.2] Outline .................................................................................... 444 [136.3] Cross-references ..................................................................... 444 [136.4] Concepts ................................................................................. 444

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[136.5] Commentary ........................................................................... 444 [136.6] Further reading ....................................................................... 444 Division 5 — Objection to purchase or retention ................................... 445 Section 137 Persons entitled to notice may object to proposal .......... 445 [137.1] Comparable provisions in foreign regimes ............................. 445 [137.2] Outline .................................................................................... 445 [137.3] Cross-references ..................................................................... 445 [137.4] Concepts ................................................................................. 446 [137.5] Commentary ........................................................................... 446 [137.6] Further reading ....................................................................... 447 Section 138 Person making objection may be requested by secured party to prove interest ........................................................ 447 [138.1] Comparable provisions in foreign regimes ............................. 447 [138.2] Outline .................................................................................... 447 [138.3] Cross-references ..................................................................... 447 [138.4] Concepts ................................................................................. 448 [138.5] Commentary ........................................................................... 448 [138.6] Further reading ....................................................................... 448 Division 6 — Seizure and disposal or retention of crops and livestock ............................................................................................... 448 Section 138A Meaning of take and water source ................................. 448 [138A.1] Comparable provisions in foreign regimes .......................... 449 [138A.2] Outline ................................................................................. 449 [138A.3] Cross-references .................................................................. 449 [138A.4] Concepts .............................................................................. 449 [138A.5] Commentary ........................................................................ 449 [138A.6] Further reading .................................................................... 449 Section 138B Seizure and disposal or retention of crops ................... 449 [138B.1] Comparable provisions in foreign regimes .......................... 450 [138B.2] Outline ................................................................................. 450 [138B.3] Cross-references ................................................................... 450 [138B.4] Concepts ............................................................................... 450 [138B.5] Commentary ......................................................................... 450 [138B.6] Further reading ..................................................................... 451

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Section 138C Seizure and disposal or retention of livestock ............. 451 [138C.1] Comparable provisions in foreign regimes .......................... 451 [138C.2] Outline ................................................................................. 451 [138C.3] Cross-references ................................................................... 451 [138C.4] Concepts ............................................................................... 452 [138C.5] Commentary ......................................................................... 452 [138C.6] Further reading ..................................................................... 452 Part 4.4 — Rules applying after enforcement ..................................... 452 Section 139 Guide to this part .............................................................. 452 Section 140 Distribution of proceeds received by secured party ................................................................................................... 453 [140.1] Comparable provisions in foreign regimes ............................. 454 [140.2] Outline .................................................................................... 454 [140.3] Cross-references ..................................................................... 454 [140.4] Concepts ................................................................................. 455 [140.5] Commentary ........................................................................... 455 [140.6] Further reading ....................................................................... 456 Section 141 Secured party may take steps to reflect transfer of title ...................................................................................................... 456 [141.1] Comparable provisions in foreign regimes ............................. 456 [141.2] Outline .................................................................................... 456 [141.3] Cross-references ..................................................................... 456 [141.4] Concepts ................................................................................. 456 [141.5] Commentary ........................................................................... 456 [141.6] Further reading ....................................................................... 456 Section 142 Entitled persons may redeem collateral .......................... 457 [142.1] Comparable provisions in foreign regimes ............................. 457 [142.2] Outline .................................................................................... 457 [142.3] Cross-references ..................................................................... 457 [142.4] Concepts ................................................................................. 458 [142.5] Commentary ........................................................................... 458 [142.6] Further reading ....................................................................... 458 Annotated Personal Property Securities Act 2009 (Cth)

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Section 143 Entitled persons may reinstate security agreement ....... 459 [143.1] Comparable provisions in foreign regimes ............................. 459 [143.2] Outline .................................................................................... 459 [143.3] Cross-references ..................................................................... 459 [143.4] Concepts ................................................................................. 459 [143.5] Commentary ........................................................................... 460 [143.6] Further reading ....................................................................... 460 Section 144 When certain enforcement notices are not required .............................................................................................. 460 [144.1] Comparable provisions in foreign regimes ............................. 461 [144.2] Outline .................................................................................... 461 [144.3] Cross-references ..................................................................... 461 [144.4] Concepts ................................................................................. 461 [144.5] Commentary ........................................................................... 461 [144.6] Further reading ....................................................................... 461 Chapter 5 — Personal property securities register Part 5.1 — Guide to this Chapter ........................................................ 463 Section 145 Guide to this Chapter ....................................................... 463 Part 5.2 — Establishment of the register ............................................ 464 Section 146 Guide to this part .............................................................. 464 Section 147 Personal property securities register ............................... 464 [147.1] Comparable provisions in foreign regimes ............................. 465 [147.2] Outline .................................................................................... 465 [147.3] Cross-references ..................................................................... 465 [147.4] Concepts ................................................................................. 465 [147.5] Commentary ........................................................................... 465 [147.6] Further reading ....................................................................... 465 Section 148 What the register contains ............................................... 466 [148.1] Comparable provisions in foreign regimes ............................. 466 [148.2] Outline .................................................................................... 466 [148.3] Cross-references ..................................................................... 466 [148.4] Concepts ................................................................................. 466 [148.5] Commentary ........................................................................... 467 [148.6] Further reading ....................................................................... 468

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Part 5.3 — Registration ........................................................................ 468 Section 149 Guide to this part .............................................................. 468 Section 150 Registration — on application ......................................... 468 [150.1] Comparable provisions in foreign regimes ............................. 469 [150.2] Outline .................................................................................... 469 [150.3] Cross-references ..................................................................... 469 [150.4] Concepts ................................................................................. 470 [150.5] Commentary ........................................................................... 470 [150.5.1] The role of registration .................................................... 470 [150.5.2] Timing of registration ..................................................... 472 [150.5.3] Registration of pre-PPSA security interests ....................................................................................... 472 [150.5.4] Access to information on the PPSR ................................ 473 [150.6] Further reading ....................................................................... 473 Section 151 Registration — belief about security interest ................. 473 [151.1] Comparable provisions in foreign regimes ............................. 475 [151.2] Outline .................................................................................... 475 [151.3] Cross-references ..................................................................... 476 [151.4] Concepts ................................................................................. 476 [151.5] Commentary ........................................................................... 476 [151.6] Further reading ....................................................................... 479 Section 152 Registration — location of personal property and interested persons outside Australia ................................................ 480 [152.1] Comparable provisions in foreign regimes ............................. 480 [152.2] Outline .................................................................................... 480 [152.3] Cross-references ..................................................................... 480 [152.4] Concepts ................................................................................. 480 [152.5] Commentary ........................................................................... 480 [152.6] Further reading ....................................................................... 481 Section 153 Financing statements with respect to security interests .............................................................................................. 481 [153.1] Comparable provisions in foreign regimes ............................. 483 [153.2] Outline .................................................................................... 483 [153.3] Cross-references ..................................................................... 483

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[153.4] Concepts ................................................................................. 484 [153.5] Commentary ........................................................................... 484 [153.5.1] Item 1 of s 153(1) — the secured party ........................... 484 [153.5.2] Item 2 of s 153(1) — the grantor .................................... 485 [153.5.3] Item 3 of s 153(1) — giving of notices ........................... 487 [153.5.4] Item 4 of s 153(1) — the collateral and proceeds ...................................................................................... 487 [153.5.5] Item 5 of s 153(1) — the end time for registration .................................................................................. 488 [153.5.6] Item 6 of s 153(1) — subordination ................................ 488 [153.5.7] Item 7 of s 153(1) — security interest (whether it is a PMSI) ................................................................. 488 [153.5.8] Item 8 of s 153(1) — any matter prescribed by the regulations ...................................................... 489 [153.6] Further reading ....................................................................... 490 Section 154 Financing statements with respect to prescribed property .............................................................................................. 490 [154.1] Comparable provisions in foreign regimes ............................. 491 [154.2] Outline .................................................................................... 491 [154.3] Cross-references ..................................................................... 491 [154.4] Concepts ................................................................................. 491 [154.5] Commentary ........................................................................... 491 [154.6] Further reading ....................................................................... 492 Section 155 Meanings of verification statement and registration event ................................................................................ 492 [155.1] Comparable provisions in foreign regimes ............................. 492 [155.2] Outline .................................................................................... 493 [155.3] Cross-references ..................................................................... 493 [155.4] Concepts ................................................................................. 493 [155.5] Commentary ........................................................................... 493 [155.6] Further reading ....................................................................... 493 Section 156 Verification statements — registrar to give to secured parties ................................................................................... 493 [156.1] Comparable provisions in foreign regimes ............................. 494 [156.2] Outline .................................................................................... 494

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[156.3] Cross-references ..................................................................... 494 [156.4] Concepts ................................................................................. 494 [156.5] Commentary ........................................................................... 494 [156.6] Further reading ....................................................................... 494 Section 157 Verification statements — secured parties to give notice to grantors ............................................................................... 495 [157.1] Comparable provisions in foreign regimes ............................. 496 [157.2] Outline .................................................................................... 496 [157.3] Cross-references ..................................................................... 496 [157.4] Concepts ................................................................................. 496 [157.5] Commentary ........................................................................... 496 [157.6] Further reading ....................................................................... 496 Section 158 Verification statements — publication as alternative .......................................................................................... 497 [158.1] Comparable provisions in foreign regimes ............................. 497 [158.2] Outline .................................................................................... 497 [158.3] Cross-references ..................................................................... 497 [158.4] Concepts ................................................................................. 497 [158.5] Commentary ........................................................................... 497 [158.6] Further reading ....................................................................... 498 Part 5.4 — When a registration is effective ........................................ 498 Section 159 Guide to this part .............................................................. 498 Section 160 Registration time — general ............................................ 499 [160.1] Comparable provisions in foreign regimes ............................. 499 [160.2] Outline .................................................................................... 499 [160.3] Cross-references ..................................................................... 499 [160.4] Concepts ................................................................................. 499 [160.5] Commentary ........................................................................... 500 [160.6] Further reading ....................................................................... 500 Section 161 Registration time — security agreements and interests .............................................................................................. 500 [161.1] Comparable provisions in foreign regimes ............................. 500 [161.2] Outline .................................................................................... 500 [161.3] Cross-references ..................................................................... 500

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[161.4] Concepts ................................................................................. 500 [161.5] Commentary ........................................................................... 501 [161.6] Further reading ....................................................................... 501 Section 162 Registration time — transfers .......................................... 501 [162.1] Comparable provisions in foreign regimes ............................. 501 [162.2] Outline .................................................................................... 501 [162.3] Cross-references ..................................................................... 502 [162.4] Concepts ................................................................................. 502 [162.5] Commentary ........................................................................... 502 [162.6] Further reading ....................................................................... 502 Section 163 Effective registration ......................................................... 502 [163.1] Comparable provisions in foreign regimes ............................. 502 [163.2] Outline .................................................................................... 503 [163.3] Cross-references ..................................................................... 503 [163.4] Concepts ................................................................................. 503 [163.5] Commentary ........................................................................... 503 [163.6] Further reading ....................................................................... 503 Section 164 Defects in registration — general rule ............................ 503 [164.1] Comparable provisions in foreign regimes ............................. 504 [164.2] Outline .................................................................................... 504 [164.3] Cross-references ..................................................................... 504 [164.4] Concepts ................................................................................. 504 [164.5] Commentary ........................................................................... 504 [164.5.1] Overview of s 164 — defects in registration — general rule ......................................................... 504 [164.5.2] Seriously misleading ....................................................... 505 [164.5.3] Seriously misleading defects ........................................... 508 [164.5.4] Defects that were not seriously misleading ................................................................................... 509 [164.6] Further reading ....................................................................... 509 Section 165 Defects in registration — particular defects ................... 510 [165.1] Comparable provisions in foreign regimes ............................. 510 [165.2] Outline .................................................................................... 510 [165.3] Cross-references ..................................................................... 510

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[165.4] Concepts ................................................................................. 511 [165.5] Commentary ........................................................................... 511 [165.5.1] Deemed defects ............................................................... 511 [165.5.2] Serial number defects ...................................................... 511 [165.5.3] Grantor identification defects .......................................... 512 [165.5.4] PMSI defects ................................................................... 512 [165.5.5] Further prescribed defects ............................................... 513 [165.5.6] Transitional defects ......................................................... 513 [165.6] Further reading ....................................................................... 513 Section 166 Defects in registration — temporary effectiveness ........ 513 [166.1] Comparable provisions in foreign regimes ............................. 514 [166.2] Outline .................................................................................... 514 [166.3] Cross-references ..................................................................... 515 [166.4] Concepts ................................................................................. 515 [166.5] Commentary ........................................................................... 515 [166.6] Further reading ....................................................................... 515 Section 167 Security interest in certain property becomes unperfected ........................................................................................ 516 [167.1] Comparable provisions in foreign regimes ............................. 516 [167.2] Outline .................................................................................... 516 [167.3] Cross-references ..................................................................... 517 [167.4] Concepts ................................................................................. 517 [167.5] Commentary ........................................................................... 517 [167.6] Further reading ....................................................................... 517 Section 168 Maintenance fees ............................................................... 517 [168.1] Comparable provisions in foreign regimes ............................. 518 [168.2] Outline .................................................................................... 518 [168.3] Cross-references ..................................................................... 518 [168.4] Concepts ................................................................................. 518 [168.5] Commentary ........................................................................... 518 [168.6] Further reading ....................................................................... 518  2018 CCH Australia Limited

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Part 5.5 — Accessing the register to search for data ......................... 519 Section 169 Guide to this part .............................................................. 519 Section 170 Search — general .............................................................. 519 [170.1] Comparable provisions in foreign regimes ............................. 520 [170.2] Outline .................................................................................... 520 [170.3] Cross-references ..................................................................... 520 [170.4] Concepts ................................................................................. 520 [170.5] Commentary ........................................................................... 520 [170.5.1] Commentary on s 170 — search — general ........................................................................................ 520 [170.5.2] Failing to search .............................................................. 521 [170.5.3] Access to PPSR prohibited by court or registrar ....................................................................................... 522 [170.6] Further reading ....................................................................... 522 Section 171 Search — criteria .............................................................. 522 [171.1] Comparable provisions in foreign regimes ............................. 523 [171.2] Outline .................................................................................... 523 [171.3] Cross-references ..................................................................... 523 [171.4] Concepts ................................................................................. 523 [171.5] Commentary ........................................................................... 523 [171.6] Further reading ....................................................................... 525 Section 172 Search — by reference to details of grantor who is an individual ................................................................................... 526 [172.1] Comparable provisions in foreign regimes ............................. 529 [172.2] Outline .................................................................................... 529 [172.3] Cross-references ..................................................................... 529 [172.4] Concepts ................................................................................. 529 [172.5] Commentary ........................................................................... 530 [172.6] Further reading ....................................................................... 530 Section 173 Search — interference with privacy ................................ 530 [173.1] Comparable provisions in foreign regimes ............................. 531 [173.2] Outline .................................................................................... 531 [173.3] Cross-references ..................................................................... 531 [173.4] Concepts ................................................................................. 531 [173.5] Commentary ........................................................................... 532 [173.6] Further reading ....................................................................... 532

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Section 174 Search — written search results and evidence etc. ........ 532 [174.1] Comparable provisions in foreign regimes ............................. 533 [174.2] Outline .................................................................................... 533 [174.3] Cross-references ..................................................................... 533 [174.4] Concepts ................................................................................. 533 [174.5] Commentary ........................................................................... 534 [174.6] Further reading ....................................................................... 535 Section 175 Copies of financing statements and verification statements ........................................................................................... 535 [175.1] Comparable provisions in foreign regimes ............................. 535 [175.2] Outline .................................................................................... 535 [175.3] Cross-references ..................................................................... 536 [175.4] Concepts ................................................................................. 536 [175.5] Commentary ........................................................................... 536 [175.6] Further reading ....................................................................... 536 Section 176 Reports by registrar .......................................................... 536 [176.1] Comparable provisions in foreign regimes ............................. 537 [176.2] Outline .................................................................................... 537 [176.3] Cross-references ..................................................................... 537 [176.4] Concepts ................................................................................. 537 [176.5] Commentary ........................................................................... 537 [176.6] Further reading ....................................................................... 537 Part 5.5A — Conditions on data access ............................................... 538 Section 176A Guide to this part ........................................................... 538 Section 176B Access to registered data — conditions ........................ 538 [176B.1] Comparable provisions in foreign regimes .......................... 539 [176B.2] Outline ................................................................................. 539 [176B.3] Cross-references ................................................................... 539 [176B.4] Concepts ............................................................................... 539 [176B.5] Commentary ......................................................................... 540 [176B.6] Further reading ..................................................................... 540  2018 CCH Australia Limited

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Section 176C Access to third party data .............................................. 540 [176C.1] Comparable provisions in foreign regimes .......................... 542 [176C.2] Outline ................................................................................. 542 [176C.3] Cross-references ................................................................... 542 [176C.4] Concepts ............................................................................... 542 [176C.5] Commentary ......................................................................... 542 [176C.6] Further reading ..................................................................... 542 Part 5.6 — Amendment demands ........................................................ 542 Division 1 — Introduction ....................................................................... 542 Section 177 Guide to Part 5.6 (amendment demands) ....................... 542 General commentary ........................................................................... 543 Section 178 How amendment demands are given .............................. 544 [178.1] Comparable provisions in foreign regimes ............................. 545 [178.2] Outline .................................................................................... 545 [178.3] Cross-references ..................................................................... 545 [178.4] Concepts ................................................................................. 546 [178.5] Commentary ........................................................................... 546 [178.5.1] How amendment demands are given? ............................. 546 [178.5.2] What should be included in the amendment demand? .................................................................. 547 [178.5.3] Five business days ........................................................... 547 [178.5.4] Who pays for the amendment? ........................................ 547 [178.6] Further reading ....................................................................... 548 Division 2 — Amendment demands: administrative and judicial process ................................................................................... 548 Subdivision A — Administrative process ................................................. 548 Section 179 Scope of subdivision .......................................................... 548 [179.1] Comparable provisions in foreign regimes ............................. 549 [179.2] Outline .................................................................................... 549 [179.3] Cross-references ..................................................................... 549 [179.4] Concepts ................................................................................. 549 [179.5] Commentary ........................................................................... 550 [179.5.1] Excluding security trust instruments ............................... 550 [179.5.2] Nature of administrative process ..................................... 550 [179.5.3] Flow chart ........................................................................ 550 [179.6] Further reading ....................................................................... 551

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Section 180 Administrative process — amendment notices .............. 551 [180.1] Comparable provisions in foreign regimes ............................. 552 [180.2] Outline .................................................................................... 552 [180.3] Cross-references ..................................................................... 552 [180.4] Concepts ................................................................................. 552 [180.5] Commentary ........................................................................... 554 [180.6] Further reading ....................................................................... 554 Section 181 Administrative process — registration amendments ....................................................................................... 554 [181.1] Comparable provisions in foreign regimes ............................. 555 [181.2] Outline .................................................................................... 556 [181.3] Cross-references ..................................................................... 556 [181.4] Concepts ................................................................................. 556 [181.5] Commentary ........................................................................... 556 [181.6] Further reading ....................................................................... 556 Subdivision B — Judicial process ........................................................... 557 Section 182 Judicial process for considering amendment demand ............................................................................................... 557 [182.1] Comparable provisions in foreign regimes ............................. 558 [182.2] Outline .................................................................................... 558 [182.3] Cross-references ..................................................................... 558 [182.4] Concepts ................................................................................. 558 [182.5] Commentary ........................................................................... 558 [182.5.1] Similar approach as used for caveats .............................. 558 [182.5.2] Serious or arguable case .................................................. 559 [182.6] Further reading ....................................................................... 560 Part 5.7 — Removal of data and correction of registration errors .................................................................................................. 561 Section 183 Guide to this part .............................................................. 561 Section 184 Removal of data — general grounds ............................... 561 [184.1] Comparable provisions in foreign regimes ............................. 562 [184.2] Outline .................................................................................... 562 [184.3] Cross-references ..................................................................... 562 [184.4] Concepts ................................................................................. 562 [184.5] Commentary ........................................................................... 562 [184.6] Further reading ....................................................................... 563

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Section 185 Removal of data — registration ineffective for 7 years or more ..................................................................................... 563 [185.1] Comparable provisions in foreign regimes ............................. 563 [185.2] Outline .................................................................................... 564 [185.3] Cross-references ..................................................................... 564 [185.4] Concepts ................................................................................. 564 [185.5] Commentary ........................................................................... 564 [185.6] Further reading ....................................................................... 564 Section 186 Incorrectly removed data — restoration ........................ 564 [186.1] Comparable provisions in foreign regimes ............................. 564 [186.2] Outline .................................................................................... 565 [186.3] Cross-references ..................................................................... 565 [186.4] Concepts ................................................................................. 565 [186.5] Commentary ........................................................................... 565 [186.6] Further reading ....................................................................... 565 Section 187 Records of removed data .................................................. 566 [187.1] Comparable provisions in foreign regimes ............................. 566 [187.2] Outline .................................................................................... 566 [187.3] Cross-references ..................................................................... 566 [187.4] Concepts ................................................................................. 566 [187.5] Commentary ........................................................................... 566 [187.6] Further reading ....................................................................... 566 Section 188 Correction of registration errors ..................................... 566 [188.1] Comparable provisions in foreign regimes ............................. 567 [188.2] Outline .................................................................................... 567 [188.3] Cross-references ..................................................................... 567 [188.4] Concepts ................................................................................. 567 [188.5] Commentary ........................................................................... 567 [188.6] Further reading ....................................................................... 567 Annotated Personal Property Securities Act 2009 (Cth)

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Part 5.8 — Fees, administrative review and annual reports ............. 568 Section 189 Guide to this part .............................................................. 568 General commentary ........................................................................... 568 Section 190 Registration and search fees ............................................. 568 Section 191 Review of decisions ............................................................ 569 Section 192 Annual reports ................................................................... 570 Part 5.9 — Registrar of personal property securities ........................ 570 Section 193 Guide to this part .............................................................. 570 General commentary ........................................................................... 570 Section 194 Registrar — establishment of office ................................ 571 Section 195 Registrar — functions and powers .................................. 571 Section 195A Registrar — investigations ............................................ 571 Section 196 Registrar — acting appointments .................................... 572 Section 197 Registrar — delegation ..................................................... 572 Section 198 Registrar — resignation ................................................... 573 Section 199 Registrar — termination .................................................. 573 Section 200 Deputy registrar — establishment of office .................... 573 Section 201 Deputy registrar — functions and powers ...................... 574 Section 202 Deputy registrar — resignation ....................................... 574 Section 203 Deputy registrar — termination ...................................... 574 Chapter 6 — Judicial proceedings Part 6.1 — Guide to this Chapter ........................................................ 575 Section 204 Guide to this Chapter ....................................................... 575 Part 6.2 — Judicial proceedings generally .......................................... 575 Division 1 — Introduction ....................................................................... 575 Section 205 Guide to this part .............................................................. 575 General commentary ........................................................................... 575 Section 206 Scope of this part ............................................................... 576 General commentary ........................................................................... 576 Division 2 — Conferral of jurisdiction .................................................... 578 Section 207 Jurisdiction of courts ........................................................ 578 Section 208 Cross-jurisdictional appeals ............................................. 578 Section 209 Courts to act in aid of each other ..................................... 579  2018 CCH Australia Limited

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Division 3 — Transfers between courts ................................................... 580 Section 210 Application of this Division .............................................. 580 Section 211 Exercise of transfer power ................................................ 581 Section 212 Criteria for transfers between courts .............................. 582 Section 213 Initiating transfers between courts .................................. 582 Section 214 Documents and procedure ................................................ 582 Section 215 Conduct of transferred proceedings ................................ 583 Section 216 Entitlement to practise as barrister or solicitor ............. 583 Section 217 Limitation on appeals ....................................................... 584 Division 4 — Registrar’s role in judicial proceedings ............................ 584 Section 218 Intervention in judicial proceedings ................................ 584 Section 219 Initiation of judicial proceedings ..................................... 584 Part 6.3 — Civil penalty proceedings .................................................. 585 Division 1 — Introduction ....................................................................... 585 Section 220 Guide to this part .............................................................. 585 General commentary ........................................................................... 585 Section 221 What is a civil penalty provision? .................................... 586 Division 2 — Obtaining an order for a civil penalty ............................... 587 Section 222 Federal Court may order person to pay pecuniary penalty for contravening civil penalty provision ............................ 587 Section 223 Contravening a civil penalty provision is not an offence ................................................................................................. 587 Section 224 Persons involved in contravening civil penalty provision ............................................................................................. 588 Section 225 Recovery of a pecuniary penalty ...................................... 588 Division 3 — Civil penalty proceedings and criminal proceedings ......................................................................................... 588 Section 226 Civil proceedings after criminal proceedings ................. 588 Section 227 Criminal proceedings during civil proceedings .............. 588 Section 228 Criminal proceedings after civil proceedings ................. 589 Section 229 Evidence given in proceedings for penalty not admissible in criminal proceedings .................................................. 589 Annotated Personal Property Securities Act 2009 (Cth)

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Division 4 — Enforceable undertakings relating to contraventions of civil penalty provisions ........................................... 590 Section 230 Acceptance of undertakings relating to contraventions of civil penalty provisions ....................................... 590 Section 231 Enforcement of undertakings .......................................... 590 Chapter 7 — Operation of laws Part 7.1 — Guide to this Chapter ........................................................ 591 Section 232 Guide to this Chapter ....................................................... 591 Part 7.2 — Australian laws and those of other jurisdictions ............. 591 Section 233 Guide to this part .............................................................. 591 Section 234 Scope of this part ............................................................... 592 [234.1] Comparable provisions in foreign regimes ............................. 592 [234.2] Outline .................................................................................... 592 [234.3] Cross-references ..................................................................... 592 [234.4] Concepts ................................................................................. 592 [234.5] Commentary ........................................................................... 592 [234.6] Further reading ....................................................................... 593 Section 235 Meaning of located ............................................................ 593 [235.1] Comparable provisions in foreign regimes ............................. 594 [235.2] Outline .................................................................................... 594 [235.3] Cross-references ..................................................................... 594 [235.4] Concepts ................................................................................. 594 [235.5] Commentary ........................................................................... 595 [235.5.1] Electronic data — s 235(1), (2) ....................................... 595 [235.5.2] Located — s 235(3), (4), (5), (6), (7) .............................. 595 [235.6] Further reading ....................................................................... 596 Section 236 Commonwealth laws may provide for governing law ....................................................................................................... 596 [236.1] Comparable provisions in foreign regimes ............................. 596 [236.2] Outline .................................................................................... 596 [236.3] Cross-references ..................................................................... 596 [236.4] Concepts ................................................................................. 597 [236.5] Commentary ........................................................................... 597 [236.6] Further reading ....................................................................... 597  2018 CCH Australia Limited

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Section 237 Express agreement ............................................................ 597 [237.1] Comparable provisions in foreign regimes ............................. 598 [237.2] Outline .................................................................................... 598 [237.3] Cross-references ..................................................................... 598 [237.4] Concepts ................................................................................. 598 [237.5] Commentary ........................................................................... 598 [237.6] Further reading ....................................................................... 599 Section 238 Governing laws — goods .................................................. 599 [238.1] Comparable provisions in foreign regimes ............................. 600 [238.2] Outline .................................................................................... 600 [238.3] Cross-references ..................................................................... 600 [238.4] Concepts ................................................................................. 600 [238.5] Commentary ........................................................................... 601 [238.5.1] Main rule — s 238(1), (1A) ............................................ 601 [238.5.2] Moved goods — s 238(2), (2A) ...................................... 603 [238.5.3] Moved between jurisdictions — in the normal course — s 238(3) .......................................................... 603 [238.5.4] Registers of ships — s 238(4) ......................................... 604 [238.6] Further reading ....................................................................... 604 Section 239 Governing laws — intangible property ........................... 604 [239.1] Comparable provisions in foreign regimes ............................. 606 [239.2] Outline .................................................................................... 606 [239.3] Cross-references ..................................................................... 606 [239.4] Concepts ................................................................................. 606 [239.5] Commentary ........................................................................... 607 [239.5.1] Main rule — s 239(1), (2) ............................................... 607 [239.5.2] Intellectual property — s 239(3) ..................................... 607 [239.5.3] ADI accounts — s 239(4), (5) ......................................... 607 [239.5.4] Letters of credit — s 239(6) ............................................ 607 [239.6] Further reading ....................................................................... 607 Section 240 Governing laws — financial property and rights evidenced by letters of credit ............................................................ 608 [240.1] Comparable provisions in foreign regimes ............................. 609 [240.2] Outline .................................................................................... 609 [240.3] Cross-references ..................................................................... 609 [240.4] Concepts ................................................................................. 609

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[240.5] Commentary ........................................................................... 610 [240.5.1] Attachment — s 240(1), (2), (3) ...................................... 610 [240.5.2] Perfection — s 240(4), (5) .............................................. 610 [240.6] Further reading ....................................................................... 610 Section 241 Governing laws — proceeds ............................................. 610 [241.1] Comparable provisions in foreign regimes ............................. 611 [241.2] Outline .................................................................................... 611 [241.3] Cross-references ..................................................................... 611 [241.4] Concepts ................................................................................. 611 [241.5] Commentary ........................................................................... 611 [241.6] Further reading ....................................................................... 612 Part 7.3 — Constitutional operation .................................................... 612 Division 1 — Introduction ....................................................................... 612 Section 242 Guide to this part .............................................................. 612 General commentary ........................................................................... 612 Division 2 — Constitutional basis ........................................................... 613 Section 243 Constitutional basis for the PPSA ................................... 613 [243.1] Comparable provisions in foreign regimes ............................. 614 [243.2] Outline .................................................................................... 614 [243.3] Cross-references ..................................................................... 614 [243.4] Concepts ................................................................................. 614 [243.5] Commentary ........................................................................... 614 [243.5.1] Overview ......................................................................... 614 [243.5.2] Non-referring states — s 243(2) ..................................... 615 [243.5.3] Operation outside Australia — s 243(5) ......................................................................................... 615 [243.6] Further reading ....................................................................... 615 Section 244 Meaning of referring state ................................................. 616 [244.1] Comparable provisions in foreign regimes ............................. 618 [244.2] Outline .................................................................................... 619 [244.3] Cross-references ..................................................................... 619  2018 CCH Australia Limited

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[244.4] Concepts ................................................................................. 619 [244.5] Commentary ........................................................................... 619 Section 245 Meaning of referred PPS matters ...................................... 619 General commentary ........................................................................... 620 Section 246 Non-referring state operation — overview ..................... 621 Section 247 Non-referring state operation — persons ....................... 621 Section 248 Non-referring state operation — activities ..................... 622 Section 249 Non-referring state operation — interests ...................... 623 Section 250 Non-referring state operation — inclusion of data in register ........................................................................................... 623 General commentary ........................................................................... 623 Section 251 Personal property taken free of security interest when act begins to operate ............................................................... 624 General commentary ........................................................................... 624 Section 252 Priority between constitutional and nonconstitutional security interests ....................................................... 624 General commentary ........................................................................... 624 Division 3 — Constitutional guarantees ................................................. 625 Section 252A No constitutional preference to one state over another ............................................................................................... 625 Section 252B No unjust acquisition of property ................................. 625 General commentary ........................................................................... 625 Part 7.4 — Relationship between Australian laws ............................. 628 Division 1 — Introduction ....................................................................... 628 Section 253 Guide to this part .............................................................. 628 Division 2 — Concurrent operation ........................................................ 628 Section 254 Concurrent operation — general rule ............................. 628 [254.1] Comparable provisions in foreign regimes ............................. 630 [254.2] Outline .................................................................................... 630 [254.3] Cross-references ..................................................................... 630 [254.4] Concepts ................................................................................. 630 [254.5] Commentary ........................................................................... 630 [254.6] Further reading ....................................................................... 634 Annotated Personal Property Securities Act 2009 (Cth)

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Section 255 Concurrent operation — regulations may resolve inconsistency ...................................................................................... 634 [255.1] Comparable provisions in foreign regimes ............................. 635 [255.2] Outline .................................................................................... 635 [255.3] Cross-references ..................................................................... 635 [255.4] Concepts ................................................................................. 635 [255.5] Commentary ........................................................................... 636 [255.6] Further reading ....................................................................... 636 Division 3 — When other laws prevail .................................................... 636 Section 256 When other laws prevail — certain other Commonwealth Acts ......................................................................... 636 [256.1] Comparable provisions in foreign regimes ............................. 636 [256.2] Outline .................................................................................... 636 [256.3] Cross-references ..................................................................... 637 [256.4] Concepts ................................................................................. 637 [256.5] Commentary ........................................................................... 637 [256.6] Further reading ....................................................................... 637 Section 257 When other laws prevail — security agreements ........... 637 [257.1] Comparable provisions in foreign regimes ............................. 638 [257.2] Outline .................................................................................... 638 [257.3] Cross-references ..................................................................... 638 [257.4] Concepts ................................................................................. 638 [257.5] Commentary ........................................................................... 638 [257.6] Further reading ....................................................................... 639 Section 258 When other laws prevail — personal property, security interests and matters excluded from state amendment referrals .............................................................................................. 639 [258.1] Comparable provisions in foreign regimes ............................. 640 [258.2] Outline .................................................................................... 640 [258.3] Cross-references ..................................................................... 640 [258.4] Concepts ................................................................................. 640 [258.5] Commentary ........................................................................... 640 [258.6] Further reading ....................................................................... 641  2018 CCH Australia Limited

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Section 259 When other laws prevail — exclusion by referring state law or territory law .................................................. 641 [259.1] Comparable provisions in foreign regimes ............................. 642 [259.2] Outline .................................................................................... 642 [259.3] Cross-references ..................................................................... 642 [259.4] Concepts ................................................................................. 642 [259.5] Commentary ........................................................................... 642 [259.6] Further reading ....................................................................... 643 Division 4 — When this act prevails ....................................................... 643 Section 261 When this act prevails — registration requirements ...................................................................................... 643 [261.1] Comparable provisions in foreign regimes ............................. 644 [261.2] Outline .................................................................................... 644 [261.3] Cross-references ..................................................................... 644 [261.4] Concepts ................................................................................. 644 [261.5] Commentary ........................................................................... 644 [261.6] Further reading ....................................................................... 644 Section 262 When this act prevails — assignment requirements ...................................................................................... 645 [262.1] Comparable provisions in foreign regimes ............................. 646 [262.2] Outline .................................................................................... 646 [262.3] Cross-references ..................................................................... 646 [262.4] Concepts ................................................................................. 646 [262.5] Commentary ........................................................................... 646 [262.6] Further reading ....................................................................... 646 Section 263 When this act prevails — formal requirements relating to agreements ....................................................................... 647 [263.1] Comparable provisions in foreign regimes ............................. 648 [263.2] Outline .................................................................................... 648 [263.3] Cross-references ..................................................................... 648 [263.4] Concepts ................................................................................. 648 [263.5] Commentary ........................................................................... 648 [263.6] Further reading ....................................................................... 648 Annotated Personal Property Securities Act 2009 (Cth)

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Section 264 When this act prevails — attachment and perfection of security interests ......................................................... 649 [264.1] Comparable provisions in foreign regimes ............................. 649 [264.2] Outline .................................................................................... 649 [264.3] Cross-references ..................................................................... 649 [264.4] Concepts ................................................................................. 650 [264.5] Commentary ........................................................................... 650 [264.6] Further reading ....................................................................... 650 Chapter 8 — Miscellaneous Part 8.1 — Guide to this Chapter ........................................................ 651 Section 265 Guide to this Chapter ....................................................... 651 Part 8.2 — Vesting of certain unperfected security interests ............ 651 Section 266 Guide to this part .............................................................. 651 Section 267 Vesting of unperfected security interests in the grantor upon the grantor’s winding up or bankruptcy etc. .......... 652 [267.1] Comparable provisions in foreign regimes ............................. 653 [267.2] Outline .................................................................................... 654 [267.3] Cross-references ..................................................................... 654 [267.4] Concepts ................................................................................. 654 [267.5] Commentary ........................................................................... 654 [267.6] Further reading ....................................................................... 657 Section 267A Vesting in grantor of security interest that attaches after winding up etc. .......................................................... 658 [267A.1] Comparable provisions in foreign regimes .......................... 659 [267A.2] Outline ................................................................................. 659 [267A.3] Cross-references .................................................................. 659 [267A.4] Concepts .............................................................................. 659 [267A.5] Commentary ........................................................................ 659 [267A.6] Further reading .................................................................... 660 Section 268 Security interests unaffected by section 267 ................... 660 [268.1] Comparable provisions in foreign regimes ............................. 661 [268.2] Outline .................................................................................... 661 [268.3] Cross-references ..................................................................... 661 [268.4] Concepts ................................................................................. 661 [268.5] Commentary ........................................................................... 661 [268.6] Further reading ....................................................................... 662

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Section 269 Certain lessors, bailors and consignors entitled to damages .............................................................................................. 662 [269.1] Comparable provisions in foreign regimes ............................. 663 [269.2] Outline .................................................................................... 663 [269.3] Cross-references ..................................................................... 663 [269.4] Concepts ................................................................................. 663 [269.5] Commentary ........................................................................... 663 [269.6] Further reading ....................................................................... 664 Part 8.3 — Exercise and discharge of rights, duties and obligations .......................................................................................... 664 Section 270 Guide to this part .............................................................. 664 Section 271 Entitlement to damages for breach of duties or obligations .......................................................................................... 664 [271.1] Comparable provisions in foreign regimes ............................. 665 [271.2] Outline .................................................................................... 665 [271.3] Cross-references ..................................................................... 665 [271.4] Concepts ................................................................................. 665 [271.5] Commentary ........................................................................... 665 [271.6] Further reading ....................................................................... 666 Section 272 Liability for damages ........................................................ 667 [272.1] Comparable provisions in foreign regimes ............................. 667 [272.2] Outline .................................................................................... 667 [272.3] Cross-references ..................................................................... 667 [272.4] Concepts ................................................................................. 667 [272.5] Commentary ........................................................................... 667 [272.6] Further reading ....................................................................... 668 Section 273 Application of act not affected by secured party having title to collateral .................................................................... 668 [273.1] Comparable provisions in foreign regimes ............................. 668 [273.2] Outline .................................................................................... 668 [273.3] Cross-references ..................................................................... 668 [273.4] Concepts ................................................................................. 668 Annotated Personal Property Securities Act 2009 (Cth)

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[273.5] Commentary ........................................................................... 668 [273.6] Further reading ....................................................................... 669 Part 8.4 — Provision of information by secured parties ................... 669 Section 274 Guide to this part .............................................................. 669 Section 275 Secured party to provide certain information relating to security interest ............................................................... 670 [275.1] Comparable provisions in foreign regimes ............................. 672 [275.2] Outline .................................................................................... 672 [275.3] Cross-references ..................................................................... 672 [275.4] Concepts ................................................................................. 673 [275.5] Commentary ........................................................................... 673 [275.6] Further reading ....................................................................... 674 Section 276 Obligation to disclose successor in security interest when request made .............................................................. 674 [276.1] Comparable provisions in foreign regimes ............................. 674 [276.2] Outline .................................................................................... 674 [276.3] Cross-references ..................................................................... 675 [276.4] Concepts ................................................................................. 675 [276.5] Commentary ........................................................................... 675 [276.6] Further reading ....................................................................... 675 Section 277 Time for responding to a request ..................................... 675 [277.1] Comparable provisions in foreign regimes ............................. 675 [277.2] Outline .................................................................................... 675 [277.3] Cross-references ..................................................................... 675 [277.4] Concepts ................................................................................. 676 [277.5] Commentary ........................................................................... 676 [277.6] Further reading ....................................................................... 676 Section 278 Application to court for exemption or extension of time to respond to requests .......................................................... 676 [278.1] Comparable provisions in foreign regimes ............................. 677 [278.2] Outline .................................................................................... 677 [278.3] Cross-references ..................................................................... 677 [278.4] Concepts ................................................................................. 677  2018 CCH Australia Limited

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[278.5] Commentary ........................................................................... 677 [278.6] Further reading ....................................................................... 677 Section 279 Persons may recover costs arising from request ............ 678 [279.1] Comparable provisions in foreign regimes ............................. 678 [279.2] Outline .................................................................................... 679 [279.3] Cross-references ..................................................................... 679 [279.4] Concepts ................................................................................. 679 [279.5] Commentary ........................................................................... 679 [279.6] Further reading ....................................................................... 679 Section 280 Application to court for response to request etc. ........... 679 [280.1] Comparable provisions in foreign regimes ............................. 680 [280.2] Outline .................................................................................... 680 [280.3] Cross-references ..................................................................... 680 [280.4] Concepts ................................................................................. 680 [280.5] Commentary ........................................................................... 680 [280.6] Further reading ....................................................................... 681 Section 281 Application to court in relation to costs charged ........... 681 [281.1] Comparable provisions in foreign regimes ............................. 682 [281.2] Outline .................................................................................... 682 [281.3] Cross-references ..................................................................... 682 [281.4] Concepts ................................................................................. 682 [281.5] Commentary ........................................................................... 682 [281.6] Further reading ....................................................................... 683 Section 282 Consequences of not complying with court order .......... 683 [282.1] Comparable provisions in foreign regimes ............................. 683 [282.2] Outline .................................................................................... 683 [282.3] Cross-references ..................................................................... 683 [282.4] Concepts ................................................................................. 684 [282.5] Commentary ........................................................................... 684 [282.6] Further reading ....................................................................... 684 Section 283 Estoppels against persons who respond to a request ................................................................................................ 684 [283.1] Comparable provisions in foreign regimes ............................. 685 [283.2] Outline .................................................................................... 685 [283.3] Cross-references ..................................................................... 685 [283.4] Concepts ................................................................................. 685

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[283.5] Commentary ........................................................................... 685 [283.6] Further reading ....................................................................... 685 Part 8.5 — Notices and timing .............................................................. 686 Section 284 Guide to this part .............................................................. 686 General commentary ........................................................................... 686 Section 285 Application of this part — notices etc. ............................ 687 Section 286 Notices — writing .............................................................. 687 Section 287 Notices — registered secured parties .............................. 687 Section 288 Notices — more than one registered secured party ....... 688 Section 289 Notices etc must be given to persons registered as secured parties using identifier ........................................................ 688 Section 290 Notices — deceased persons ............................................. 688 Section 291 Notices — court orders ..................................................... 688 Section 292 Notices — formal defects .................................................. 689 Section 293 Timing — applications for extension of time .................. 689 Section 294 Timing — references to time in this act .......................... 690 Part 8.6 — Onus of proof and knowledge ........................................... 690 Section 295 Guide to this part .............................................................. 690 Section 296 Onus of proof ..................................................................... 691 [296.1] Comparable provisions in foreign regimes ............................. 692 [296.2] Outline .................................................................................... 692 [296.3] Cross-references ..................................................................... 692 [296.4] Concepts ................................................................................. 692 [296.5] Commentary ........................................................................... 692 [296.6] Further reading ....................................................................... 692 Section 297 Meaning of constructive knowledge .................................. 693 [297.1] Comparable provisions in foreign regimes ............................. 693 [297.2] Outline .................................................................................... 693 [297.3] Cross-references ..................................................................... 693 [297.4] Concepts ................................................................................. 693 [297.5] Commentary ........................................................................... 694 [297.6] Further reading ....................................................................... 694  2018 CCH Australia Limited

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Section 298 Actual or constructive knowledge by bodies corporate and other entities ............................................................. 694 [298.1] Comparable provisions in foreign regimes ............................. 695 [298.2] Outline .................................................................................... 695 [298.3] Cross-references ..................................................................... 696 [298.4] Concepts ................................................................................. 696 [298.5] Commentary ........................................................................... 696 [298.6] Further reading ....................................................................... 696 Section 299 Actual or constructive knowledge in relation to certain property transfers ................................................................ 696 [299.1] Comparable provisions in foreign regimes ............................. 697 [299.2] Outline .................................................................................... 697 [299.3] Cross-references ..................................................................... 697 [299.4] Concepts ................................................................................. 697 [299.5] Commentary ........................................................................... 697 [299.6] Further reading ....................................................................... 698 Section 300 Registration of data does not constitute constructive notice ............................................................................. 698 [300.1] Comparable provisions in foreign regimes ............................. 698 [300.2] Outline .................................................................................... 698 [300.3] Cross-references ..................................................................... 698 [300.4] Concepts ................................................................................. 698 [300.5] Commentary ........................................................................... 698 [300.6] Further reading ....................................................................... 699 Part 8.7 — Forms and regulations ....................................................... 699 Section 301 Guide to this part .............................................................. 699 General commentary ........................................................................... 699 Section 302 Approved forms ................................................................. 700 Section 303 Regulations ........................................................................ 701 Chapter 9 — Transitional provisions Part 9.1 — Guide to this Chapter ........................................................ 703 Section 304 Guide to this Chapter ....................................................... 703 General commentary ........................................................................... 703 Annotated Personal Property Securities Act 2009 (Cth)

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Part 9.2 — Key concepts ....................................................................... 705 Section 305 Guide to this part .............................................................. 705 Section 306 Meaning of migration time and registration commencement time ........................................................................... 706 [306.1] Comparable provisions in foreign regimes ............................. 707 [306.2] Outline .................................................................................... 707 [306.3] Cross-references ..................................................................... 707 [306.4] Concepts ................................................................................. 707 [306.5] Commentary ........................................................................... 707 [306.5.1] Migration time — s 306(1) ............................................. 707 [306.5.2] Registration commencement time — s 306(2) ......................................................................................... 708 [306.6] Further reading ....................................................................... 709 Section 307 Meaning of transitional security agreement ..................... 709 [307.1] Comparable provisions in foreign regimes ............................. 709 [307.2] Outline .................................................................................... 709 [307.3] Cross-references ..................................................................... 710 [307.4] Concepts ................................................................................. 710 [307.5] Commentary ........................................................................... 710 [307.6] Further reading ....................................................................... 711 Section 308 Meaning of transitional security interest .......................... 712 [308.1] Comparable provisions in foreign regimes ............................. 712 [308.2] Outline .................................................................................... 712 [308.3] Cross-references ..................................................................... 712 [308.4] Concepts ................................................................................. 712 [308.5] Commentary ........................................................................... 713 [308.6] Further reading ....................................................................... 713 Part 9.3 — Initial application of this Act ............................................ 713 Section 309 Guide to this part .............................................................. 713 General commentary ........................................................................... 714 Section 310 When this Act starts to apply, and in relation to which matters .................................................................................... 714 [310.1] Comparable provisions in foreign regimes ............................. 714 [310.2] Outline .................................................................................... 715 [310.3] Cross-references ..................................................................... 715 [310.4] Concepts ................................................................................. 715

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[310.5] Commentary ........................................................................... 715 [310.6] Further reading ....................................................................... 715 Section 311 Enforceability of transitional security interests against third parties .......................................................................... 716 [311.1] Comparable provisions in foreign regimes ............................. 716 [311.2] Outline .................................................................................... 716 [311.3] Cross-references ..................................................................... 716 [311.4] Concepts ................................................................................. 716 [311.5] Commentary ........................................................................... 716 [311.6] Further reading ....................................................................... 716 Section 312 Declared statutory security interests ............................... 717 [312.1] Comparable provisions in foreign regimes ............................. 717 [312.2] Outline .................................................................................... 717 [312.3] Cross-references ..................................................................... 717 [312.4] Concepts ................................................................................. 717 [312.5] Commentary ........................................................................... 717 [312.6] Further reading ....................................................................... 717 Section 313 Enforcement of security interests in intellectual property licences ................................................................................ 718 [313.1] Comparable provisions in foreign regimes ............................. 718 [313.2] Outline .................................................................................... 718 [313.3] Cross-references ..................................................................... 718 [313.4] Concepts ................................................................................. 718 [313.5] Commentary ........................................................................... 718 [313.6] Further reading ....................................................................... 719 Section 314 Enforcement of security interests provided for by security agreements ........................................................................... 719 [314.1] Comparable provisions in foreign regimes ............................. 719 [314.2] Outline .................................................................................... 719 [314.3] Cross-references ..................................................................... 719 [314.4] Concepts ................................................................................. 719 [314.5] Commentary ........................................................................... 719 [314.6] Further reading ....................................................................... 720 Section 315 Starting time for registrations ......................................... 720 [315.1] Comparable provisions in foreign regimes ............................. 720 [315.2] Outline .................................................................................... 720

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[315.3] Cross-references ..................................................................... 720 [315.4] Concepts ................................................................................. 720 [315.5] Commentary ........................................................................... 721 [315.6] Further reading ....................................................................... 721 Section 316 Governing laws .................................................................. 721 [316.1] Comparable provisions in foreign regimes ............................. 721 [316.2] Outline .................................................................................... 721 [316.3] Cross-references ..................................................................... 721 [316.4] Concepts ................................................................................. 721 [316.5] Commentary ........................................................................... 721 [316.6] Further reading ....................................................................... 722 Section 317 Constitutional and non-constitutional interests ............. 722 [317.1] Comparable provisions in foreign regimes ............................. 722 [317.2] Outline .................................................................................... 722 [317.3] Cross-references ..................................................................... 722 [317.4] Concepts ................................................................................. 722 [317.5] Commentary ........................................................................... 723 [317.6] Further reading ....................................................................... 723 Section 318 References to charges and fixed and floating charges ................................................................................................ 723 [318.1] Comparable provisions in foreign regimes ............................. 723 [318.2] Outline .................................................................................... 723 [318.3] Cross-references ..................................................................... 723 [318.4] Concepts ................................................................................. 724 [318.5] Commentary ........................................................................... 724 [318.6] Further reading ....................................................................... 724 Part 9.4 — Transitional application of this Act .................................. 725 Division 1 — Introduction ....................................................................... 725 Section 319 Guide to this part .............................................................. 725  2018 CCH Australia Limited

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Division 2 — Attachment, perfection and priority of transitional security interests .............................................................. 726 Section 320 Guide to priority rules for transitional security interests .............................................................................................. 726 [320.1] Comparable provisions in foreign regimes ............................. 727 [320.2] Outline .................................................................................... 727 [320.3] Cross-references ..................................................................... 727 [320.4] Concepts ................................................................................. 727 [320.5] Commentary ........................................................................... 728 [320.6] Further reading ....................................................................... 730 Section 321 Attachment rule ................................................................. 730 [321.1] Comparable provisions in foreign regimes ............................. 731 [321.2] Outline .................................................................................... 731 [321.3] Cross-references ..................................................................... 731 [321.4] Concepts ................................................................................. 731 [321.5] Commentary ........................................................................... 731 [321.6] Further reading ....................................................................... 732 Section 322 Perfection rule ................................................................... 732 [322.1] Comparable provisions in foreign regimes ............................. 733 [322.2] Outline .................................................................................... 733 [322.3] Cross-references ..................................................................... 733 [322.4] Concepts ................................................................................. 733 [322.5] Commentary ........................................................................... 734 [322.5.1] Main rule — s 322(1) ...................................................... 734 [322.5.2] Exceptions and replacement rules — s 322(2) ......................................................................................... 734 [322.5.3] Imposition of regulations — s 322(3) ............................. 736 [322.6] Further reading ....................................................................... 736 Section 322A Priority rule — priority between transitional security interest and security interest perfected by control .......... 737 [322A.1] Comparable provisions in foreign regimes .......................... 737 [322A.2] Outline ................................................................................. 737 [322A.3] Cross-references .................................................................. 737 [322A.4] Concepts .............................................................................. 737 Annotated Personal Property Securities Act 2009 (Cth)

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[322A.5] Commentary ........................................................................ 737 [322A.6] Further reading .................................................................... 738 Section 323 Priority rule — priority otherwise undetermined ......... 738 [323.1] Comparable provisions in foreign regimes ............................. 738 [323.2] Outline .................................................................................... 738 [323.3] Cross-references ..................................................................... 738 [323.4] Concepts ................................................................................. 739 [323.5] Commentary ........................................................................... 739 [323.6] Further reading ....................................................................... 740 Section 324 Priority rule — certain security interests upon insolvency or bankruptcy ................................................................. 740 [324.1] Comparable provisions in foreign regimes ............................. 740 [324.2] Outline .................................................................................... 741 [324.3] Cross-references ..................................................................... 741 [324.4] Concepts ................................................................................. 741 [324.5] Commentary ........................................................................... 741 [324.6] Further reading ....................................................................... 742 Division 6 — Migration of personal property interests .......................... 742 Section 330 Scope of Division ............................................................... 742 Section 331 Requirement for Commonwealth officers etc to provide data ....................................................................................... 742 [331.1] Comparable provisions in foreign regimes ............................. 742 [331.2] Outline .................................................................................... 743 [331.3] Cross-references ..................................................................... 743 [331.4] Concepts ................................................................................. 743 [331.5] Commentary ........................................................................... 743 [331.6] Further reading ....................................................................... 743 Section 332 Meaning of migrated security interest .............................. 744 [332.1] Comparable provisions in foreign regimes ............................. 744 [332.2] Outline .................................................................................... 744 [332.3] Cross-references ..................................................................... 744 [332.41] Concepts ............................................................................... 744 [332.5] Commentary ........................................................................... 745 [332.6] Further reading ....................................................................... 745 Section 333 Registration with respect to migrated data .................... 745 [333.1] Comparable provisions in foreign regimes ............................. 747

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[333.2] Outline .................................................................................... 747 [333.3] Cross-references ..................................................................... 747 [333.4] Concepts ................................................................................. 747 [333.5] Commentary ........................................................................... 748 [333.6] Further reading ....................................................................... 748 Section 334 Incorrectly registered migrated data .............................. 749 [334.1] Comparable provisions in foreign regimes ............................. 749 [334.2] Outline .................................................................................... 749 [334.3] Cross-references ..................................................................... 749 [334.4] Concepts ................................................................................. 750 [334.5] Commentary ........................................................................... 750 [334.6] Further reading ....................................................................... 750 Section 335 No requirement for notice of verification statement ............................................................................................ 750 [335.1] Comparable provisions in foreign regimes ............................. 751 [335.2] Outline .................................................................................... 751 [335.3] Cross-references ..................................................................... 751 [335.4] Concepts ................................................................................. 751 [335.5] Commentary ........................................................................... 751 [335.6] Further reading ....................................................................... 751 Division 7 — Preparatory registration relating to transitional security interests .................................................................................. 752 Section 336 Preparatory registration — transitional security interests .............................................................................................. 752 [336.1] Comparable provisions in foreign regimes ............................. 753 [336.2] Outline .................................................................................... 753 [336.3] Cross-references ..................................................................... 753 [336.4] Concepts ................................................................................. 753 [336.5] Commentary ........................................................................... 754 [336.6] Further reading ....................................................................... 754 Annotated Personal Property Securities Act 2009 (Cth)

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Division 8 — Transitional security interests: registration defects .................................................................................................. 754 Section 337 Registration effective despite certain defects .................. 754 [337.1] Comparable provisions in foreign regimes ............................. 755 [337.2] Outline .................................................................................... 756 [337.3] Cross-references ..................................................................... 756 [337.4] Concepts ................................................................................. 756 [337.5] Commentary ........................................................................... 756 [337.6] Further reading ....................................................................... 757 Section 337A Registration defective if collateral is not covered by transitional security agreement .................................... 757 [337A.1] Comparable provisions in foreign regimes .......................... 757 [337A.2] Outline ................................................................................. 757 [337A.3] Cross-references .................................................................. 757 [337A.4] Concepts .............................................................................. 757 [337A.5] Commentary ........................................................................ 757 [337A.6] Further reading .................................................................... 758 Part 9.5 — Charges and fixed and floating charges ........................... 759 Section 338 Guide to this part .............................................................. 759 Section 339 References to charges and fixed and floating charges ................................................................................................ 759 [339.1] Comparable provisions in foreign regimes ............................. 760 [339.2] Outline .................................................................................... 760 [339.3] Cross-references ..................................................................... 760 [339.4] Concepts ................................................................................. 760 [339.5] Commentary ........................................................................... 760 [339.6] Further reading ....................................................................... 763 Section 340 Meaning of circulating asset ............................................. 763 [340.1] Comparable provisions in foreign regimes ............................. 765 [340.2] Outline .................................................................................... 765 [340.3] Cross-references ..................................................................... 765 [340.4] Concepts ................................................................................. 765 [340.5] Commentary ........................................................................... 765 [340.6] Further reading ....................................................................... 767  2018 CCH Australia Limited

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Section 341 Meaning of control and inventory .................................... 767 [341.1] Comparable provisions in foreign regimes ............................. 768 [341.2] Outline .................................................................................... 769 [341.3] Cross-references ..................................................................... 769 [341.4] Concepts ................................................................................. 769 [341.5] Commentary ........................................................................... 769 [341.5.1] Overview ......................................................................... 769 [341.5.2] General rules ................................................................... 770 [341.5.3] Control of inventory ........................................................ 770 [341.5.4] Control of accounts ......................................................... 770 [341.6] Further reading ....................................................................... 771 Section 341A Control of an ADI account ............................................ 771 [341A.1] Comparable provisions in foreign regimes .......................... 772 [341A.2] Outline ................................................................................. 772 [341A.3] Cross-references .................................................................. 772 [341A.4] Concepts .............................................................................. 772 [341A.5] Commentary ........................................................................ 772 [341A.6] Further reading .................................................................... 773 Part 9.6 — Review of operation of Act ................................................ 773 Section 342 Guide to this part .............................................................. 773 General commentary ........................................................................... 773 Section 343 Review of operation of Act ............................................... 774

Annotated Personal Property Securities Act 2009 (Cth)

Personal Property Securities Act 2009

PERSONAL PROPERTY SECURITIES ACT 2009 CHAPTER 1 — INTRODUCTION PART 1.1 — PRELIMINARY ¶1-005 1

This Act may be cited as the Personal Property Securities Act 2009.

¶1-010 2

SECTION 1 SHORT TITLE

SECTION 2 COMMENCEMENT

This Act commences on the day after it receives the Royal Assent.

¶1-015 2A

SECTION 2A SCHEDULE 1 Schedule 1 has effect.

Note: Schedule 1 contains application, saving and transitional provisions relating to amendments of this Act.

¶1-020

SECTION 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. Annotated Personal Property Securities Act 2009 (Cth)

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Pt 1.1 — Preliminary

2

Personal Property Securities Act 2009 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. 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).

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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. 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. Annotated Personal Property Securities Act 2009 (Cth)

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Pt 1.1 — Preliminary

4

Personal Property Securities Act 2009 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. Schedule 1 contains application, saving and transitional provisions relating to amendments of this Act.

PART 1.2 — GENERAL APPLICATION OF THIS ACT ¶1-025 SECTION 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.

¶1-030 SECTION 5 CROWN TO BE BOUND 5 This Act binds the Crown in each of its capacities.

¶1-035 SECTION 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.

6(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.

6(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

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(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.

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SECTION 7 APPLICATION IN THE EXTERNAL TERRITORIES

Extension to Norfolk Island 7(1) This Act extends to Norfolk Island. 7(2) A reference in this Act to ‘‘Australia’’ includes a reference to Norfolk Island. Extension to other external Territories 7(3) This Act extends to such other external Territories (if any) as are prescribed by the regulations for the purposes of this section. 7(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. 7(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. Annotated Personal Property Securities Act 2009 (Cth)

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Part 1.2 — General application of this Act

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Personal Property Securities Act 2009 Acts Interpretation Act 1901 definition of Australia 7(6) To avoid doubt, this section applies despite paragraph 17(a) of the Acts Interpretation Act 1901 (definition of Australia).

¶1-045 SECTION 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;

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(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 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; Annotated Personal Property Securities Act 2009 (Cth)

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Part 1.2 — General application of this Act

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Personal Property Securities Act 2009 (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 (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. Exceptions to subsection (1) 8(2) The following table has effect: Provisions of this Act that apply to interests mentioned in subsection (1) Item Despite subsection applies in relation to the following (1), the following interest mentioned in subsection (1): provision: 1 section 73 (a) a lien, charge or other interest in personal property of a kind described in paragraph (1)(b) or (c); and (b) an interest provided for by a transaction described in subparagraph (1)(f)(ii). 2 section 80 a right of set-off (see paragraph (1)(d)).

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Provisions of this Act that apply to interests mentioned in subsection (1) Item Despite subsection applies in relation to the following (1), the following interest mentioned in subsection (1): provision: 3 sections 117 and 118 an interest provided for by the creation or transfer of an interest in land (see subparagraph (1)(f)(i)). 4 paragraph 140(2)(a) a lien, charge or other interest in personal property of a kind described in paragraph (1)(b) or (c). 5 paragraph 148(c) and a lien, charge or other interest in personal regulations made for property of a kind described in paragraph the purposes of that (1)(b) or (c). paragraph 6 a provision an interest mentioned in subsection (1) prescribed by (including an interest prescribed by regulations made for regulations made for the purposes of the purposes of this paragraph (1)(l)) that is prescribed by item regulations made for the purposes of this item.

8(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. Transfer of interests and rights 8(4) 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. Water rights 8(5) 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. Pawnbroker security interests 8(6) 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 Annotated Personal Property Securities Act 2009 (Cth)

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Part 1.2 — General application of this Act

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Personal Property Securities Act 2009 (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.

[8.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[8.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 23 s4 s4 § 9-109(d)

Outline

Despite being recognised as a ‘‘codification’’ of securities law, the Personal Property Securities Act 2009 (Cth) (PPSA) is not designed to provide a complete code for all forms of security interests in personal property. As noted in s 12, the PPSA is concerned exclusively with consensual security interests. Section 8 sets out a number of different types of arrangements which are specifically excluded from the operation of the Act, unless s (2) or (3) apply. These exclusions reflect a mix of public policy issues (eg wage assignments), nonconsensual arrangements (such as statutory interests) and arrangements that have little to do with commercial finance (eg general law liens). The justification for excluding the arrangements covered by s 8(1) is that either there are existing registration regimes (such as those covering interests in real property) or because the arrangements would not otherwise mislead a third party dealing with the grantor (for example where there is no issue of apparent possession). The list of exclusions in this section are similar (but not identical) to those that are found in foreign PPSA regimes. Additionally, consistent with the relatively greater degree of detail incorporated by the Australian statute, not all of the exclusions appear in each of those regimes.

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[8.3] Cross-references ● Personal Property Securities Regulations 2010 (Cth) reg 1.4 prescribes rights or interests in personal property covered by Sch 1 s 260-5 of the Taxation Administration Act 1953 (Cth). Regulation 1.4 also clarifies the extension of s 74 to paragraphs 8(1)(b), (c) and (1)(f)(ii) and (1)(f)(iv): see s 8(2). ● Regulation 1.5 prescribes that the Act applies to mortgage-backed securities (MBS) and real property mortgages where they are transferred to a person in connection with the issue of an MBS. ● Section 73 provides priority rules for interests arising under law and declared statutory interests.

[8.4]

Concepts

● Any right of set-off or right of combination of accounts A bank has a common law right to set-off amounts owed to the bank by use of funds held by the customer (in that capacity) in an account with the bank. The bank may achieve this set-off by combining two or more accounts held with it. The bank’s right arises by operation of law and does not depend upon express agreement with the customer. In this context, the term set-off means the same thing as the right to combine accounts: see generally Garnett v M’Kewan (1872) LR 8 Ex 10; National Westminster Bank Ltd v Halesowen Presswork & Assemblies Ltd [1972] AC 785. ● Chattel paper Chattel paper is a new concept created by the PPSA which is defined as one or more writings that evidence a monetary obligation and a security interest in (or lease of) specific goods. This is discussed in [12.5.3]. ● Lien, charge or other interest that is created, arises or is provided for under law A lien is a form of security device that may arise by operation of the common law or equity (see Intro.III). Liens are generally ‘‘possessory’’ security interests, that is, the secured party takes possession of the underlying collateral until the primary obligation is satisfied in full. For an example of a case concerning a contractual lien, which was covered by the PPSA (as it arose by consent), albeit applying the transitional provisions: see NCO Finance Aust Pty Ltd v Australian Pacific Airports (Melbourne) Pty Ltd [2013] FCCA 2274. This case is discussed further in Ch 9 at [321.5], [322.5.2] and [323.5]. A lien may also arise under statute. The PPSA does not apply to liens which arise by statute, however, as these do not constitute security interests for the purposes of s 12 due to a lack of a consensual agreement between the parties. ● Negotiable bill of lading A bill of lading is evidence of title to goods which are subject to a contract of carriage. A negotiable bill involves the owner of the goods (either the party shipping the goods, or the consignee who is due to receive the goods) covered by the bill transferring title to the goods by endorsing the bill (known as negotiation). A bill of lading is not Annotated Personal Property Securities Act 2009 (Cth)

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Personal Property Securities Act 2009 ordinarily negotiable, and is not classified as a negotiable instrument. A bill of lading will only be negotiable if transferability is indicated on its face. See generally BHP Trading Asia Ltd v Oceaname Shipping Ltd (1996) 67 FCR 211. A bill of lading fits within the scope of the concept of a ‘‘document of title’’: see s 10.

● Negotiable instrument This is defined in s 10. ● Transfer of an account See s 12(3) for further commentary.

[8.5]

Commentary [8.5.1] Negotiable bills of lading — s 8(1)(a) ...............................................13 [8.5.2] Liens, charges or other interests that are created, arise or are provided for under statute — s 8(1)(b) ........................................................14 [8.5.3] Liens, charges or other interests provided by general law — s 8(1)(c) ................................................................................................................15 [8.5.4] Any right of set-off or right of combination of accounts — s 8(1)(d) ............................................................................................................................17 [8.5.5] Arrangements under the Payment Systems and Netting Act — s 8(1)(e) ................................................................................................................17 [8.5.6] Dealings in relation to land — s 8(1)(f)(i), (ii) .................................17 [8.5.7] Transfers of unearned rights to payment — s 8(1)(f)(iii) ..............19 [8.5.8] Transfers of future rights of remuneration — s 8(1)(f)(iv) ............19 [8.5.9] Transfers of interests in contracts of annuity or policies of insurance — s 8(1)(f)(v) .................................................................................19 [8.5.10] Certain transfers of accounts — s 8(1)(f)(vi)–(ix) .........................20 [8.5.11] Certain transfers in beneficial interests in monetary obligations — s 8(1)(f)(x) ....................................................................................................21 [8.5.12] Interests or charges arising under particular statutes — s 8(1)(g), (jc) ......................................................................................................................21 [8.5.13] Financial accommodation trusts — s 8(1)(h) ................................21 [8.5.14] Water rights — s 8(1)(i) ....................................................................22 [8.5.15] Interests in fixtures — s 8(1)(j) .........................................................22 [8.5.16] Interests held by pawnbrokers — s 8(1)(ja), (6) ............................24 [8.5.17] Interests in relation to superannuation, retirement savings accounts and approved deposit accounts — s 8(1)(jb) ..............................24 [8.5.18] Declared statutory licenses — s 8(1)(k) .........................................24 [8.5.19] Declared interests — s 8(1)(l) ..........................................................25

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[8.5.1] Negotiable bills of lading — s 8(1)(a) This exclusion does not appear in the revised Uniform Commercial Code (UCC) Article 9, although UCC Article 2, § 2-505 provides a statutory security interest in certain circumstances. Section 2(1)(qq) of the Saskatchewan Personal Property Security Act, SS 1993, c P-6.2 (PPSA) excludes negotiable bills of lading from the definition of security interest. Section 4(2) of the Ontario PPSA (Personal Property Security Act, RSO 1990, c P.10) states that the rights of buyers and sellers under the Ontario Sale of Goods Act (which includes the rights of a seller under a bill of lading) are not affected by the PPSA. Note that similar powers appear in the sale of goods legislation in Australia: see for example s 24 of the Sale of Goods Act 1923 (NSW). Of course, the rights arising under that section and its equivalent provisions in other states would also fit within the exception in s 8(1)(b) (an interest in personal property arising under a law of a state or territory). See further Barclays Business Credit Inc v Fletcher Challenge Canada Ltd (1993) 5 PPSAC (2d) 105, 13 OR (3d) 118. Section 23(a) of the New Zealand PPSA (Personal Property Securities Act 1999 (NZ)) contains the same wording to s 8(1)(a). It should be noted that a bill of lading is a document that denotes title to the goods being shipped and is not of itself a security device. Of course, the drafting of the contracts involved in the arrangement may include a security device. Cuming, Walsh and Wood note that part of the rationale for this exclusion is so parties to a negotiable bill of lading do not have to comply with the requirements of the enforcement provisions of the PPSA.3 This is consistent with the preservation of commercial realities, a policy initiative the PPSA is structured upon. It should be noted however that an exclusion under s 8(1) does not mean that the terms of the PPSA are irrelevant to the transaction or instrument in question for the following reasons: ● Firstly, the terms of the exclusion are subject to the parties intending to create or provide for a security interest in the goods. Thus, the seller may rely upon a retention of title clause in the contract which can constitute an ‘‘in substance’’ security interest under s 12(1). ● Secondly, a bill of lading can constitute personal property which can be used as collateral. The exclusion merely provides that a negotiable bill of lading is not, without more, a security interest to which the PPSA rules of perfection and priority apply. Furthermore, s 72 provides that the holder of a negotiable document of title can have priority over a perfected security interest in the document of title provided that two conditions (in s 72(a) and (b)) are satisfied. Other rules that apply to negotiable bills of lading include: ● s 22 (possession rule for a bailee who issues a negotiable document of title) — see also s 65 regarding priorities 3

Cuming R, Walsh C and Wood R, Personal Property Securities Law, 2005 Irwin Law at p 108.

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● s 35 (temporary perfection rules in returned collateral where the bailee issues a negotiable document of title) ● s 52 (buyer or lessee for new value in a negotiable document of title takes free of a security interest in the document in certain circumstances).

[8.5.2] Liens, charges or other interests that are created, arise or are provided for under statute — s 8(1)(b) As previously stated, security devices that arise pursuant to statutory provisions are excluded from the operation of the Personal Property Securities Act 2009 (Cth) (PPSA) because they are not consensual security devices. Furthermore, the policy underpinning this exception is that the statutory security devices serve particular policy purposes and are best regulated by the respective terms of the statutes from which they derive. There are many examples of specific statutory security devices: see for example Air Services Act 1995 (Cth), s 59; Corporations Act 2001 (Cth), s 443F; Partnership Act 1892 (NSW), s 41(a); Sale of Goods Act 1923 (NSW), s 42. A trust over property imposed by statute has been held in Canada to constitute a lien under this exception: Royal Bank v Sparrow Electric Corp [1997] 1 SCR 411; 2 PPSAC (2d) 68. What is less clear is the extent of this exception to security devices that are ‘‘provided for under statute’’. Many security devices that are provided for under statutory provisions will be excluded under s 8 regardless as they arise under general law (s 8(1)(c)): see for example maritime liens. The phrasing of s 8(1)(b) raises questions as to what extent a statute can address a security device before it can be said that the lien, charge or other interest is ‘‘provided for under statute’’. Canadian cases on the issue of a landlord’s general law right of distress for rent have found that such rights are caught by this exception despite the fact that the exception only applies to liens, charges or other interests ‘‘given by’’ statute (which is synonymous with interests created or arising under statute): Commercial Credit Corp v Harry D Shields Ltd (1981) 1 PPSAC 301; 122 DLR (3d) 736 (Ont HCJ); Dube v Bank of Montreal (1986) 7 PPSAC 223 (Sask CA). Thus, the provision for enforcement rights under a statute should be sufficient to exclude the right under this provision. While a statutory mechanism that regulates the enforcement of a security device can be said to be ‘‘provided for under statute’’, it is doubtful that the parliament’s intention is to exclude any security device that is merely mentioned. It is submitted that the purpose of this exclusion is satisfied where the competing statute deals with the priority rights of the security interest but not simply by mentioning the security device. This analysis is favoured by Cuming, Walsh and Wood, 2nd ed pp 164–165. See further, Pt 7.4 regarding conflicts between the PPSA and other Australian legislation. A fund created under a deed of company arrangement arises under law and hence is excluded from being a security interest (that is, Pt 5.3A of the Corporations Act): Re Pluton Resources Ltd (Rec & Man Appt) (in liq) [2017] WASC 142.

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Regarding priority disputes, the Canadian courts have ruled that any competition between a statutory security device and PPSA security interest is to be determined in accordance with the rules of the statute that gave rise to the security interest, or otherwise to the common law rules (including the ‘‘first in time’’ rule): see generally Leavere v Port Colborne (City) (1995) 122 DLR (4th) 200 (Ont CA). See also Bank of Montreal v Innovation Credit Union [2010] SCC 47; (2010) 17 PPSAC (3d) 1. Section 73 of the PPSA provides rules for determining this priority contest. However, as is discussed further in s 73, this may pose challenges for priority contests involving garnishee notices by the ATO.

[8.5.3] Liens, charges or other interests provided by general law — s 8(1)(c) Section 10 defines the term ‘‘general law’’ as the ‘‘principles and rules of the common law and equity’’. Liens, charges and other interests provided by general law would not come under the Personal Property Securities Act 2009 (Cth) (PPSA) regardless of this specific exclusion because they arise automatically based on particular circumstances rather than because of a security agreement. Thus, the requirement in s 12(1) that the security interest be ‘‘provided for’’ by a transaction would not be satisfied by an equitable lien that arises automatically rather than by specific agreement between the parties. The rationale behind this exception again looks towards the preservation of commercial realities and practices. As such landlords, innkeepers, mechanics, etc, operating in their ordinary course, do not have to comply with the perfection rules of the PPSA: Bank of Montreal v 414031 Ontario Ltd (1983) 2 PPSAC 248; 45 CBR (NS) 77 (Ont DC). Maritime liens arise by operation of law rather than by a consensual transaction and are excluded from the concept of a security interest: The Ship ‘‘Sam Hawk’’ v Reiter Petroleum Inc [2016] FCAFC 26. Consensual liens that arise under contract will not necessarily be excluded by the provision and may come within the s 12(1) definition of security interest where the parties intend for the lien to operate as a security device: see for example, NCO Finance Aust Pty Ltd v Australian Pacific Airports (Melbourne) Pty Ltd [2013] FCCA 2274 (contractual lien over a motor vehicle for non-payment of parking fees). The phrase ‘‘other interests’’ has been interpreted ejusdem generis (of the same kind) with the terms liens and charges: Farm Credit Corp v Valley Beef Producers Co-operative Ltd (2002) 5 PPSAC (3d) 1; 218 DLR (4th) 86 (Sask CA). In Canada, this exception has been held to apply to a constructive trust: Ellingsen (Trustee of) v Hallmark Ford Sales Ltd (2000) 1 PPSAC (3d) 307; 190 DLR (4th) 47 (BC CA); Bank of Montreal v i Trade Finance Inc (2011) 17 PPSAC (3d) 250; 332 DLR (4th) 193. For a discussion of the interaction between the remedy of a constructive trust and the PPSA priority provisions see Caterpillar Financial Services Ltd v 360networks Corp (2007) 10 PPSAC (3d) 311; 27 CBR (5th) 115 (BC CA). In National Australia Bank Ltd v Garrett [2016] FCA 714 at [28], it was held that a remedial constructive trust is not a security interest because it does not involve a transaction. Annotated Personal Property Securities Act 2009 (Cth)

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The Supreme Court of British Columbia in Re Cliffs Over Maple Bay (2010) 16 PPSAC (3d) 237; 65 CBR (5th) 241 questioned whether a resulting trust would fit within this exception, although decided the issue on other grounds (the underlying judgment and the analysis of the trust arrangement as a resulting trust were overturned on appeal: Re Cliffs Over Maple Bay [2011] BCCA 180). The interests of a beneficiary under a trust has been held not to constitute a security interest as it does not secure any obligation independent of those arising pursuant to the trust: Stiassny v The North Shore City Council [2009] 1 NZLR 342 at [29] (NZ CA). For further discussion of the status of trust arrangements as security interests see the commentary for s 12(2)(g). A creditor’s right of subrogation to the right of indemnity held by a trustee arises by operation of law and hence is not a security interest: Thomson v Golden Destiny Investments Pty Ltd (No 2) [2015] NSWSC 1929 at [134]. A right of subrogation is excluded under this: Re N’Amerix Logistix Inc (2001) 57 OR (3d) 248 (Ont SCJ). For a discussion of the right of subrogation see s 53. In respect of monies paid into a joint account as a condition imposed by an intermediate appellate court (following an application for security for costs), the Victorian Court of Appeal held that the party applying for security for costs, if granted, acquired an equitable charge in the monies in the joint account when ultimately paid and that this charge arose by operation of the law: See Dura (Aust) Constructions Pty Ltd (in liq) (recs and mgrs apptd) v Hue Boutique Living Pty Ltd (formerly SC Land Richmond Pty Ltd) [2014] VSCA 326 at [130]. In this regard, Santamaria JA (with whom Maxwell P and Whelan JA agreed) held (at [109]): ‘‘It was not in contention that the funds in the joint account were ‘personal property’ for the purposes of the PPSA. It will be noticed that an equitable charge, such as that acquired by Hue over the moneys paid into the joint account, naturally falls under the description of ‘a lien, charge, or any other interest in personal property, that is created, arises or is provided for by operation of the general law’ found in s 8(1)(c) of the PPSA. Such interests are not covered by the PPSA.’’ In Treasury Wine Estates Vintners Ltd v Garrett [2016] FCA 715, Beach J considered whether a contractual indemnity constituted a ‘‘security interest’’ for the purposes of the PPSA. In this regard, his Honour held (at [21]): ‘‘But an indemnity is not a security interest for the purposes of the PPSA. An indemnity is contractual. It is a promise by one party that it will keep the other harmless against loss that may arise as a result of entering into a transaction. Moreover, the contractual promise was only made by the first plaintiff.’’ His Honour followed that: ‘‘to the extent that the first to third defendants contend that the security interests arise ‘as a matter of equity and law’, any such interests cannot be registered (s 8(1)(c))’’.

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[8.5.4] Any right of set-off or right of combination of accounts — s 8(1)(d) A right of set-off, in a general sense, allows one party which owes a debt to another party to ‘‘set-off’’ a counter claim they have against the debt. Set-off may arise at general law, in equity or under statute (eg Corporations Act 2001 (Cth) s 553C). A bank also has a right of set-off by combining two or more accounts held by an account-holder who owes it money. Neither a right of set-off nor a right to combine accounts is a security interest as it operates over mutual contractual obligations rather than attaching to particular personal property: see Gullifer L (ed), Goode on Legal Problems of Credit and Security (2008, Sweet & Maxwell) at [7–14]. Furthermore, these rights typically arise automatically under general law and so would be excluded regardless under s 8(1)(a). This exclusion clarifies that even where the parties agree to a contractual right of set-off or combination over particular funds this will be excluded. Professor Gilmore (who co-authored the initial draft of UCC Article 9) noted that this exception was ‘‘hopelessly irrelevant. Of course a right of set-off is not a security interest and has never been confused with one: the statute might as appropriately exclude fan dancing’’: at pp 316–317. It is possible that a right to set-off may be combined with further rights over personal property which may take the arrangement outside of this exclusion. Of course, in that case it is the other arrangements (such as flawed asset arrangements) which will render the arrangement a security interest not the mere set-off right. See further the commentary for s 12(1).

[8.5.5] Arrangements under the Payment Systems and Netting Act — s 8(1)(e) The Payment Systems and Netting Act 1998 (Cth) (PSNA) provides certainty for the clearing and settlement of payments by allowing the Reserve Bank to approve certain payment systems. The PSNA also provides certainty for netting arrangements, including multilateral, market and close-out netting arrangements, upon the insolvency of one of the parties involved. For a discussion of close out netting see Re Lindholm; Opes Prime Stockbroking Ltd (admin apptd) (recs and mgrs apptd) (2008) 171 FCR 473; [2008] FCA 1425.

[8.5.6] Dealings in relation to land — s 8(1)(f)(i), (ii) Interests in land are covered by detailed legislation around Australia including the Torrens system of land title. There is thus no need for the Personal Property Securities Act 2009 (Cth) (PPSA) to cover interests in land. Although the s 12(1) definition of a security interest already excludes interests in land because it applies only to interests in personal property (see the definition of personal property in s 10), these exclusions are included for clarification purposes. There is of course a distinction between land (as real property) and personal property, but there are items of property which can fall between these two categories. For example, the right to payment under a mortgage covering real property would fit within the definition of an account in s 10 [see further s 12], but this would fall within s 8(1)(f)(ii). Furthermore, Annotated Personal Property Securities Act 2009 (Cth)

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the use of real property mortgages as collateral for a security agreement is the use of personal property. Under the PPSA the real property mortgage document may itself constitute chattel paper — see further the commentary to s 12(3)(a). The proceeds generated from the transfer of land have been found to be excluded to a prior security interest in Canada: 5198837 Manitoba Ltd v Ozirny (2007) 12 PPSAC (3d) 121; 221 Man R (2d) 211 (MB QB). It should be noted that the enforcement of security interests covering both land and personal property is addressed at s 117. The definition of land in s 10 ‘‘includes all estates and interests in land, whether freehold, leasehold or chattel, but does not include fixtures’’. Fixtures are defined in s 10 as ‘‘goods, other than crops, that are affixed to land’’. The Australian PPSA differs from the Canadian statutes as it also excludes fixtures whereas the Canadian statutes do not. This has led to judicial consideration of whether items are fixtures or not. These will be considered at [8.5.15]. The phrase ‘‘in connection with an interest in land’’ also appears in the NZ PPSA (Personal Property Securities Act 1999 (NZ), s 23(e)(ii)) and has been interpreted as including a guarantee (secured by a mortgage) related to a debt arising from the purchase of land: Blue Water Resort Ltd v Marac Finance Ltd [2008] NZHC 1307. The New Zealand Court of Appeal has held that the phrase should not be construed narrowly: Marac Finance Ltd v Greer [2012] 2 NZLR 497; [2012] NZCA 45. In that case, the court held that there was no distinction between the terms transfer and assignment for the purposes of this exclusion (rejecting an argument that only absolute transfers of legal title would be caught by the exclusion). That case involved transferring the right to collect rent on a property being transferred from the mortgagor to the mortgagee, which the court found was covered by the exception. The court explained the policy underpinning the exclusion as follows (at [50]): ‘‘we consider that there is sense in giving the land mortgagee the better right to rents than the personal property mortgagee. The ability of a mortgagee to get the rent in the event of a default by the mortgagor is an important aspect of the funding of tenanted properties. If the land mortgagee does not have a first ranking PPSA security interest it will have to enter into a complex priority arrangement with the prior PPSA security interest holder. All that adds complexity to the transaction which, in turn, may lead to an increased cost of funds for the debtor’’. It should be noted that the PPSA applies to mortgage backed securities (and transfers in connection with mortgage backed securities) which are prescribed under the Personal Property Securities Regulations 2010 (Cth) reg 1.5. The Canadian PPSA statutes differ markedly on this exception. For a review of the case law see McLaren R, Secured Transactions in Personal Property in Canada, Carswell (looseleaf) at (3.02)[6]. There is a considerable body of case law in the United States on whether a security interest taken over hotel room receipts is rent for the purposes of this exclusion in UCC Article 9 (which, under s 9-109(11), specifically includes

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leases and rent as an interest in real property, where as the Australian provision merely states an interest in a right to payment in connection with an interest in land): see the review of the authorities in Re Old Colony LLC (2012) 476 BR 1, 18ff (Bankr Dist Mass).

[8.5.7] Transfers of unearned rights to payment — s 8(1)(f)(iii) This exclusion is founded on the policy that compliance with the Personal Property Securities Act 2009 (Cth) (PPSA) is unnecessary because no third party would be misled by this transaction as the transferee is obliged to perform the obligation in exchange for payment. The US courts have held that this exception is included ‘‘because such a transaction has nothing to do with commercial financing transactions’’: District of Columbia v Thomas Funding Corp (1991) 593 A.2d 1030, 1034 (DC CA); Marandola v Marandola Mechanical Inc (2004) 53 UCC Rep.Serv.2d 1057 (RI Superior Court). A similar exclusion applies under Uniform Commercial Code (UCC) Article 9, where the courts have held that the transferor must completely extricate themselves from the obligation. In Petron Trading Co Inc v Hydrocarbon Trading and Transport Co Inc (1986) 663 F Supp 1153 (US DC, ED Pennsylvania), the Court held that a transferor who continued to have involvement in performing the obligation did not satisfy the terms of the exclusion (then UCC Art 9-104(f) — see now (Rev) UCC Art 9 § 9-109(d)(6)).

[8.5.8] Transfers of future rights of remuneration — s 8(1)(f)(iv) The assignment of future remuneration has been recognised as potentially infringing public policy (at least for public servants): see Field v Battye [1939] SASR 235. Section 324 of the Fair Work Act 2009 (Cth) allows employees to direct their employers to make deductions from their wages, but this assignment can be withdrawn by the employee at any time.

[8.5.9] Transfers of interests in contracts of annuity or policies of insurance — s 8(1)(f)(v) In GE Canada Equipment Financing GP v ING Insurance Co of Canada (2009) 14 PPSAC (3d) 49; 308 DLR (4th) 127 (Ont CA) Cronk JA stated (at [29]) that the policy underpinning this exclusion is based on the fact that insurance companies maintain their own records for insurance policies and therefore there is no need to maintain a separate Personal Property Securities (PPS) register to cover their priority. His Honour, quoting from Smith J in Re Rektor (1983) 3 PPSAC 32; 47 CBR (NS) 267 (Ont SC), concluded that this exception avoids: ‘‘the unnecessary duplication of notice systems concerning transfers that create interests or claims in or under insurance policies. This is achieved by excluding such interests or claims from the PPSA notice and registration scheme. Simply put, notice under the PPSA is not required to perfect a security interest falling within the ambit of [this exception]’’. For a discussion of competing priorities in insurance policies see Colonial Mutual General Insurance Co Ltd v ANZ Banking Group (New Zealand) Ltd [1995] Annotated Personal Property Securities Act 2009 (Cth)

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3 All ER 987. For assignment of interests in life insurance policies see Life Insurance Act 1995 (Cth) s 200. This exception applies to rights under insurance policies only and does not extend to all insurance-related transactions: Commercial National Bank v Seubert & Associates Inc (2002) 807 A 2d 297 (the assignment of rights to insurance files by a broker) (Superior Court of Pennsylvania). In American Bank FSB v Cornerstone Community Bank (2012) 903 F.Supp.2d 568 at 575 (US DC-ED Tennessee) it was noted that: ‘‘the vast majority of courts which have addressed whether the insurance exclusion provision of Article 9 applies to transactions in the premium finance insurance company context have found the insurance exclusion provision prohibits the application of Article 9 to any transaction stemming from a premium financing company insurance transaction or any transaction involving collateral consisting of unearned insurance premiums within that context’’. The mere taking out of a policy does not fit within this exception: Re Paul (1986) 53 OR (2d) 225; 5 PPSAC 86. The phrase ‘‘an interest or claim in or under’’ has been interpreted in Canada as referring only to interests enforceable by the courts: 436399 Ontario Inc v Bank of Nova Scotia (1983) 3 PPSAC 187; 49 CBR (NS) 142 (a car repairer was paid directly by its customers’ insurance companies but the car repairer had no legal right or claim over these monies as it was owed money by its customers who in turn had a claim against the insurer, the direct payments were matters of convenience only). A security interest in unearned insurance premiums has been held in the United States to fit within the similar exception under UCC Art 9: see the review of the authorities in Re JII Liquidating Inc (2006) 344 BR 875 (Bankruptcy Court-ND Illinois). A similar position exists in Canada: See the Ontario Court of Appeal case Re Stelco (2005) 7 PPSAC (3d) 281; 253 DLR (4th) 524. The US courts have also held that this exception does not apply to rights to settlement funds arising from litigation where the rights are assigned and the settlement funds are paid out of the defendant’s insurance policy: Advocate Financial LLC v Longenecker & Associates Ltd (2008) 2008 La App LEXIS 1538 (Louisiana Court of Appeal). Payments under contracts of insurance are proceeds within the definition in s 31(1)(b).

[8.5.10] Certain transfers of accounts — s 8(1)(f)(vi)–(ix) The range of transactions listed in s 8(1)(f)(vi)–(ix) are included as they are unlikely to mislead third parties regarding the status of the transaction. The equivalent to s 8(1)(f)(vi) has been interpreted in Canada as not involving a factoring arrangement where the transfer of the account is absolute: see Royal Bank v Canadian Commercial Corp (2001) 3 PPSAC (3d) 81; 243 NBR (2d) 122. A similar exclusion exists under the UCC Article 9: see The Supreme Court of Wyoming’s decision in Daly v Shrimplin (1980) 610 P 2d 397 at 401

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(‘‘This exclusion applies only to assignments of a non-commercial nature and not to those which are financing in nature’’). In Daly, the court also held that a ‘‘collection only’’ assignment does not involve an advance of money, rather the money is paid only if the collection is made (at 401). In People ex rel, Franchise Tax Board v Credit Managers Assn (1977) 76 Cal App 3d 344 (Cal CA), the Court held that the assignment of an account which was for the purpose of collection and also (on the facts) to facilitate the resolution of a dispute between the parties did not fit within this exception. See also Gold Coast Leasing Co v California Carrots Inc (1979) 93 Cal App 3d 274 (Cal CA).

[8.5.11] Certain transfers in beneficial interests in monetary obligations — s 8(1)(f)(x) This exception does not appear in the Canadian or New Zealand PPSA statutes (Personal Property Security Act, SS 1993, c P-6.2 (Saskatchewan), Personal Property Security Act, RSO 1990, c P.10 (Ontario), Personal Property Securities Act 1999 (NZ)) or under Uniform Commercial Code (UCC) Art 9 and was included after a request from the securitisation industry. It refers to trust back arrangements which commonly occur in securitisation transactions. These arrangements apply in relation to surplus amounts arising from the receivables held by the special purpose vehicle. Third parties are unlikely to be misled regarding the status of the transaction as the originator of the receivables retains a beneficial interest in the surplus to the Special Purpose Vehicle’s (SPV’s) interest.

[8.5.12] Interests or charges arising under particular statutes — s 8(1)(g), (jc) These exclusions all relate to security interests that arise under the listed statutes and seem to have been only included for clarification purposes given s 8(1)(b).

[8.5.13] Financial accommodation trusts — s 8(1)(h) This exception catches a ‘‘quistclose’’ trust arrangement where funds are provided for a specific purpose which fails and a resulting trust is recognised: Quistclose Investments Ltd v Rolls Razor Ltd [1970] AC 567. This exception does not appear in the Canadian or New Zealand PPSA statutes (Personal Property Security Act, SS 1993, c P-6.2 (Saskatchewan), Personal Property Security Act, RSO 1990, c P.10 (Ontario), Personal Property Securities Act 1999 (NZ)) or in Uniform Commercial Code (UCC) Art 9. In Canada, the courts have found that resulting trusts are caught within the exception for interests under general law: see Re Skybridge Holidays Inc (1999) 15 PPSAC (2d) 24 (BC CA). See also Re Cliffs Over Maple Bay [2011] BCCA 180; Carevest Capital Inc v 1262459 Alberta Ltd [2011] ABQB 148. This is one of many examples where the Australian PPSA includes legislative provisions for particular circumstances which have raised questions in foreign litigation. Annotated Personal Property Securities Act 2009 (Cth)

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[8.5.14] Water rights — s 8(1)(i) This exception is clarified by s 8(5) to include a right that a person has against another person to receive (or otherwise gain access to) water. Concerns have been raised regarding this exclusion as there is no standard register for interests in water rights that can be relied upon in place of the Personal Property Securities Register (PPSR). The state and territory rules regarding water rights are also not uniform. The exclusion appears to be based on political expediency rather than economic or commercial reasons.

[8.5.15] Interests in fixtures — s 8(1)(j) The term ‘‘fixtures’’ is defined under s 10 as meaning goods that are affixed to land, not including crops. At common law, a fixture is a chattel that has become part of the land through attachment: see Australian Provincial Assurance Co Ltd v Coroneo (1938) 38 SR (NSW) 700. The reference to the term fixtures must mean fixtures according to common law: Power Rental Op Co Australia, LLC v Forge Group Power Pty Ltd (in liq) (recs and mgrs apptd) (2017) 93 NSWLR 765; [2017] NSWCA 8 at [94]. Initially, the consultation PPS Bill did not include this exception, however, a decision was subsequently made to exclude fixtures (unlike other PPSA statutes in Canada or New Zealand [Personal Property Security Act, SS 1993, c P-6.2 (Saskatchewan), Personal Property Security Act, RSO 1990, c P.10 (Ontario), Personal Property Securities Act 1999 (NZ)] or in Uniform Commercial Code (UCC) Art 9) and leave issues with their priority and enforcement to state and territory laws. In determining whether a chattel has become a fixture or remains as a discrete personal property in its own right (and therefore subject to the Personal Property Securities Act 2009 (Cth) (PPSA) unless another exception applies), the courts must determine the objective intention of the parties. This will take into account the degree of annexation of the item as well as the purpose served by the annexation at the time the property became affixed. See the summary of the law on point in National Australia Bank Ltd v Blacker (2000) 104 FCR 288. While a tenant may have a right to remove fixtures, the fixtures remain part of the land until they are removed: North Shore Gas Co Ltd v Commissioner of Stamp Duties (NSW) (1940) 63 CLR 52. It should be noted that the definition of land in s 10 excludes fixtures and thus breaks from the position at general law. Query whether a fixture could be classified as an ‘‘interest in land’’ and otherwise excluded under s 8(1)(f)(i), although this exclusion makes that question unnecessary. The door of course remains open to include fixtures in the PPSA by repealing this paragraph. In the leading decision involving the collapse of the Forge Power group, the courts at both first instance and on appeal applied the exposition of principles in the Blacker case (National Australia Bank Ltd v Blacker (2000) 104 FCR 288; [2000] FCA 1458 at [10]):

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‘‘There is a variety of general principles which should be considered in assessing whether an item of personal property has become attached to land in a manner designed to achieve a specific objective or a variety of objectives, such as to become a part of the realty and therefore, a fixture. Whether an item has become a fixture depends essentially upon the objective intention with which the item was put in place. The two considerations which are commonly regarded as relevant to determining the intention with which an item has been fixed to the land are first, the degree of annexation, and secondly, the object of annexation.’’ In Blacker, Conti J relied on the following frequently cited passage from the judgment of Sir Frederick Jordan in Australian Provincial Assurance Co Ltd v Coroneo (1938) 38 SR (NSW) 700 at [712]: ‘‘The test of whether a chattel which has been to some extent fixed to land is a fixture is whether it has been fixed with the intention that it shall remain in position permanently or for an indefinite or substantial period, or whether it has been fixed with the intent that it shall remain in position only for some temporary purpose. In the former case, it is a fixture, whether it has been fixed for the better enjoyment of the land or building, or fixed merely to steady the thing itself, for the better use or enjoyment of the thing fixed. If it is proved to have been fixed merely for a temporary purpose it is not a fixture. The intention of the person fixing it must be gathered from the purpose for which and the time during which the user in the fixed position is contemplated. If a thing has been securely fixed, and in particular if it has been so fixed that it cannot be detached without substantial injury to the thing itself or to that to which it is attached, this supplies strong but not necessarily conclusive evidence that a permanent fixing was intended. On the other hand, the fact that the fixing is very slight helps to support an inference that it was not intended to be permanent. But each case depends on its own facts.’’ Judge Conti went on (at [13]) to identify relevant factors that the courts generally take into account in determining the purpose or object and degree of annexation: ‘‘whether the attachment was for the better enjoyment of the property generally or for the better enjoyment of the land and/or buildings to which it was attached; ● the nature of the property the subject of affixation; ● whether the item was to be in position either permanently or temporarily; ● the function to be served by the annexation of the item. At [14] Conti J identified the factors that the courts generally ought to take into account in determining the purpose or object and degree of annexation as follows: ● whether removal would cause damage to the land or buildings to which the item is attached; ● the mode and structure of annexation; Annotated Personal Property Securities Act 2009 (Cth)

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Personal Property Securities Act 2009 ● whether removal would destroy or damage the attached item of property; ● whether the cost of renewal would exceed the value of the attached property’’.

In Forge Power, the relevant property consisted of large gas turbines that were operated on trailers and could be removed and hence were not fixtures. The turbines were attached to the land by cables but this was to protect them from high winds (the area could be affected by cyclones). The Court of Appeal stated (at [96]): ‘‘There is nothing in the PPSA to support the suggestion that Parliament intended personal property that is affixed to land, but not in such a way as to become part of the land at common law, to be a species of property not governed by the PPSA.’’

[8.5.16] Interests held by pawnbrokers — s 8(1)(ja), (6) This exclusion is justified on the basis that pawnbrokers are heavily regulated by state and territory statutes. The exception only applies where the collateral is valued at less than $5,000 and the interest arises in the ordinary course of a licensed pawnbroker business and would not apply to serial numbered property (such as motor vehicles). It should be noted that the $5,000 figure is arbitrary (as discussed at [47.5.1]) based primarily on the Australian legislature’s perception of what constitutes ‘‘low value’’ or ‘‘consumer’’ type property. This exclusion appears in the Ontario PPSA (Personal Property Security Act, RSO 1990, c P.10) but not in other Canadian provinces, nor in New Zealand or in Uniform Commercial Code (UCC) Art 9. While the Australian PPSA (Personal Property Securities Act 2009 (Cth)) is modelled on these regimes, provisions like this one highlight the varying perspectives among Personal Property Securities (PPS) jurisdictions.

[8.5.17] Interests in relation to superannuation, retirement savings accounts and approved deposit accounts — s 8(1)(jb) This exclusion was inserted by the Personal Property Securities (Corporations and Other Amendments) Act 2010 (Cth). The Explanatory Memorandum explains that (Sch 2 at [20]): ‘‘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.’’

[8.5.18] Declared statutory licenses — s 8(1)(k) A license, as defined by s 10, must be 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). See s 10 for a definition of licence.

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A list of licenses have been declared by state and territory legislation as being outside of the scope of the Personal Property Securities Act 2009 (Cth) (PPSA), see: ● (ACT) Personal Property Securities Act 2010 ● (NT) Personal Property Securities (National Uniform Implementation) Act 2010 ● (NSW) Personal Property Securities Legislation Amendment Act 2010 ● (Qld) Personal Property Securities (Ancillary Provisions) Act 2010 ● (SA) Statutes Amendment (Personal Property Securities) Act 2011 ● (Tas) Personal Property Securities (National Uniform Legislation) Implementation Act 2010 ● (Vic) Personal Property Securities (Statute Law Revision and Implementation) Act 2010 ● (WA) Personal Property Securities (Consequential Repeals and Amendments) Act 2011. There is a broader question of whether a license is personal property. The definition of personal property in s 10 includes a reference to licenses. The characteristics of property and interests in property were described by Lord Wilberforce in National Provincial Bank Ltd v Ainsworth [1965] AC 1175 at 1,247–8 who stated: ‘‘Before a right or an interest can be admitted into the category of property, or of a right affecting property, it must be definable, identifiable by third parties, capable in its nature of assumption by third parties, and have some degree of permanence or stability.’’ See also R v Toohey; Ex parte Meneling Station Pty Ltd (1982) 158 CLR 327. For a discussion of the Canadian law see Saulnier v Royal Bank of Canada [2008] 3 SCR 166; 298 DLR (4th) 193. Section 12(5) states that a license is not a security interest in itself. However, it is clear that a license may constitute collateral to support a security interest provided that the license is transferable and not declared by state or territory legislation to be excluded. See further Exclusions to security interests discussed in the commentary to s 12 at [12.5.3].

[8.5.19] Declared interests — s 8(1)(l) At the time of writing the Personal Property Securities Regulations 2010 have declared that ‘‘the Act does not apply to a right or interest in personal property mentioned in s 260-5 of Sch 1 to the Taxation Administration Act 1953 (Cth)’’.

[8.6] Further reading ● ● ● ●

Explanatory Memorandum [1.13–1.14, 2.13]. ALRC Report No 64 [3.8, 3.12, 3.15; see also 5.11–5.50]. Whittaker Report [4.3], [4.5], [5.1], [7.8]. Roderick Wood and Michael Wylie, ‘‘Non-consensual security interests in personal property’’ (1992) 30 Alberta Law Review 1055.

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Personal Property Securities Act 2009

● John Stumbles, ‘‘The PPSA: The Extended Reach of the Definition of the PPSA Security Interest’’ (2011) 34(2) UNSWLJ 448. ● Nicholas Mirzai and Samuel Kang, ‘‘Systems of registration: Synergies between Torrens and the Personal Property Securities regime’’ (2012) 21 Australian Property Law Journal 32.

PART 1.3 — DEFINITIONS Division 1 — Introduction ¶1-050 SECTION 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).

Division 2 — The Dictionary ¶1-055 SECTION 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. 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.

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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).

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. Annotated Personal Property Securities Act 2009 (Cth)

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Personal Property Securities Act 2009 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;

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Part 1.3 — Definitions (d) an intermediated security; (e) an investment instrument; (f) a negotiable instrument. circulating asset has the meaning given by section 340. civil penalty provision has the meaning given by section 221.

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. Annotated Personal Property Securities Act 2009 (Cth)

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Personal Property Securities Act 2009 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: (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’’).

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Example 2: A description that identifies collateral as ‘‘fruit’’ is sufficient to identify collateral that is apples.

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. 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. 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; Annotated Personal Property Securities Act 2009 (Cth)

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Personal Property Securities Act 2009 (iii) any other financial instrument; (iv) any other financial asset. 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. 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;

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(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. 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 paragraphs (a) to (d); or (f) 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). 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. 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; (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; Annotated Personal Property Securities Act 2009 (Cth)

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Personal Property Securities Act 2009 (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). 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. intermediary has the meaning given by section 15. intermediated security has the meaning given by section 15. 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] (Repealed by No 96 of 2010) [investment entitlement account] (Repealed by No 96 of 2010) [investment entitlement intermediary] (Repealed by No 96 of 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; (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;

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(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. 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;

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Personal Property Securities Act 2009 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).

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). 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;

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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. new value means value other than value provided to reduce or discharge an earlier debt or liability owed to the person providing the value. non-referring State means a State that is not a referring State. Note: For the meaning of referring State, see section 244.

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 Annotated Personal Property Securities Act 2009 (Cth)

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Personal Property Securities Act 2009 (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. 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). 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 (b) 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). 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

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(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. 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. 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). third party data conditions has the meaning given by section 176C (access to third party data). 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. wool means the natural fibre from any livestock that produce fleece that can be shorn (such as sheep, goats, alpacas and llamas). Annotated Personal Property Securities Act 2009 (Cth)

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Personal Property Securities Act 2009 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.

¶1-060 SECTION 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. 11(2) Amendments of the Acts Interpretation Act 1901 made after that time do not apply to this Act.

Division 3 — Concepts relating to security interests and personal property ¶1-065 SECTION 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.

12(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; (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;

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(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. 12(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. 12(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. 12(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. 12(4A) 12(5)

(Repealed by No 96 of 2010) 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. 12(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.

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[12.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 17 s 2(1)(qq), 3(1) s 1(1), (2) § 1-201(35), 9-109

[12.2] Outline Section 10 provides a general definitions and interpretation provision for the purposes of the PPSA, however, some terms are of such critical importance that they have been defined pursuant to their own section under the PPSA. The term ‘‘security interest’’ is one such term and is central to the concept of the PPSA. Section 12 has been included to prescribe the appropriate test and standard. If an instrument cannot be defined as a ‘‘security interest’’ pursuant to s 12, then the PPSA will not generally apply to it, although there may be sections of the PPSA that extend beyond the concept of a consensual security interest as defined by s 12(1) (see s 8(2), 12(3), 13 for details). Even if an arrangement does come within the concept of a security interest under s 12 it may be excluded by the operation of s 8 (see [8.5]). While the definition provided here is not dissimilar to what has been discussed above at Intro.III (especially What is a security and The legal position), the focus of analysis is different — that is, parties look to the substance of the transaction as opposed to its form. Title, by reference to its legal and equitable notions as developed under general law, is not determinative under the ‘‘in substance’’ approach to security interests prescribed by s 12(1). That is, for the purposes of defining when security interests arise under the PPSA, title, and the concept of nemo dat quod non habet (no one [can] give what one does not have), is but one of many factors relevant to a proper analysis of the instrument giving rise to the interest. It is no longer determinative of the secured party’s rights or the priority of their interests.

[12.3]

Cross-references

● Section 12 provides the definition for the foundation concept underpinning the PPSA — the concept of a security interest. It is mentioned in almost every section of the PPSA. ● Section 8 excludes certain arrangements from the operation of the PPSA even where they would constitute a security interest under this section. Personal Property Securities Regulations 2010 (Cth) reg 1.8.

[12.4]

Concepts

● Account This is defined in s 10. See also Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd (in liq) (recs and mgrs apptd) (2017) 320 FLR 259; [2017] WASC 152. See further Strategic Finance Ltd v Bridgman [2013] 3 NZLR 650; [2013] NZCA 357 (which considered the equivalent, though not identical definition of ‘‘accounts receivable’’ in the NZ PPSA, s 16). A right to

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● ●

●

●

●

●

43

receive a tax refund due to the closure of a business is not an account: Re Langdon; Forge Group Ltd (recs and mgrs apptd) (in liq) (2017) 118 ACSR 434; [2017] FCA 170. ADI account This is defined by s 10 as ‘‘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 authorised deposit taking institution (ADI) that is payable on demand or at some time in the future (as agreed between the ADI and the person or persons)’’. This concept is discussed in more detail in s 25. Chattel paper This is defined by s 10. See further [12.5.3]. Licence This is defined by s 10. See further Exclusions to security interests discussed in the commentary at [12.5.5]. See also Declared statutory licenses discussed at [8.5.18] for a list of licences excluded from the Act. Personal property This is defined by s 10 means property (including a licence) other than: ‘‘(a) land; or (b) 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’’. See further Exclusions to security interests discussed in the commentary at [12.5.3]. PPS Lease This important concept (which is a deemed security interest) is discussed in detail under s 13. Security interest This foundational concept that underpins the PPSA regime is discussed below. Transaction The focus of s 12(1) is on transactions rather than on any particular instrument: National Australia Bank Ltd v Garrett [2016] FCA 714 at [28].

[12.5] Commentary [12.5.1] The security interest — s 12(1) ........................................................44 [12.5.1.1] Consent ..................................................................................46 [12.5.1.2] Relationship to personal property .....................................48 [12.5.1.3] Proprietary rights .................................................................49 [12.5.1.4] Payment or performance of an obligation ........................50 [12.5.1.5] When is a security interest created? ..................................51 Annotated Personal Property Securities Act 2009 (Cth)

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Personal Property Securities Act 2009 [12.5.1.6] Trust arrangements as security devices ............................55 [12.5.2] Scope of security interests, examples and illustrations — s 12(2) ............................................................................................................................56 [12.5.2.1] Fixed charges — s 12(2)(a) ..................................................57 [12.5.2.2] Floating charges — s 12(2)(b) .............................................58 [12.5.2.3] Chattel mortgages — s 12(2)(c) ..........................................59 [12.5.2.4] Conditional sale agreements — s 12(2)(d) ........................59 [12.5.2.5] Hire purchase agreements — s 12(2)(e) ............................61 [12.5.2.6] Pledges — s 12(2)(f) ..............................................................62 [12.5.2.7] Trust receipts — s 12(2)(g) ..................................................62 [12.5.2.8] Consignments — s 12(2)(h) .................................................62 [12.5.2.9] Leases — s 12(2)(i) ................................................................64 [12.5.2.10] Assignments — s 12(2)(j) ...................................................68 [12.5.2.11] Transfers of title — s 12(2)(k) ...........................................68 [12.5.2.12] Flawed asset arrangements — s 12(2)(l) .........................69 [12.5.3] Deemed security interests — s 12(3) ..............................................70 [12.5.3.1] Transfers of accounts and chattel paper — s 12(3)(a) .....70 [12.5.3.2] Commercial consignments — s 12(3)(b) ...........................75 [12.5.3.3] PPS leases — s 12(3)(c) .........................................................77 [12.5.4] Charge-backs permitted — s 12(3A), (4) .......................................77 [12.5.5] Exclusions to security interests — s 12(5) .....................................77 [12.5.6] Subordination agreements excluded by the PPSA — s 12(6) .....78

[12.5.1] The security interest — s 12(1) Section 12 is one of, if not, the most important section of the PPSA. As the learned authors Ziegel J and Denomme D state4: ‘‘its [the equivalent Ontario PPSA provision] purpose is to collapse the multiplicity of consensual security devices available at common law or in equity, or sanctioned by state, and to replace them with the generic concept of a security agreement creating a security interest’’. In the New South Wales Court of Appeal decision, Power Rental Op Co Australia, LLC v Forge Group Power Pty Ltd (in liq) (recs and mgrs apptd ) (2017) 93 NSWLR 765; [2017] NSWCA 8, Ward JA stated (Bathurst CJ and Beazley P agreeing) (at [83]): ‘‘the ‘mischief’ that the PPSA was intended to address was the uncertainty and complexity of the various statutory and common law regimes applicable to security interests in personal property. The legislature sought to ameliorate this by providing a new national system of registration of interests of that kind and introducing a system of 4

Ziegel J and Dennome D, The Ontario Personal Property Security Act Commentary and Materials, 2nd ed 2000 Butterworths at p 48.

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default rules to determine, among other things, priorities in respect of interests in personal property’’. Despite its central importance, if s 12(1) is compared to the definition of ‘‘security’’ found in Intro III, there is little difference between the underlying concept of security at common law and the approach taken by the PPSA. The PPSA goes no further by way of establishing statutory requirements or guidelines to distinguish a security interest from other instruments. A court interpreting s 12(1) is instructed only to look to the substance of the transaction as opposed to its form. The conceptual vagueness employed by the statutory definition of a security interest in s 12 is, as a matter of construction, quite deliberate. The PPSA is not designed to establish specific forms of security interests which fall within the scope of the Act — to do so would run contrary to the point of the reform. Instead, the very purpose of the PPSA is to move away from the pre-PPSA law that was based largely on the form of the security device adopted. As the Supreme Court of Canada said in Bank of Montreal v Innovation Credit Union [2010] SCC 47; (2010) 17 PPSAC (3d) 1 at [18], the PPSA extends ‘‘to almost anything which serves the function of a security interest’’. The PPS legislation enacted overseas has adopted similar terminology in defining the security interest. The case law that has developed throughout Canada and New Zealand has drawn support from the following four principles enunciated by Cuming R, Walsh C and Wood R5 which assist in establishing a security interest for the purposes of this section: ● the security interest must be consensual ● the security interest must relate to personal property ● the security interest must bestow some form of ‘‘proprietary right’’ ● the security interest must secure the payment or performance of an obligation or obligations. It should be noted that the four requirements discussed here operate as no more than guidelines in satisfying the primary test for a security interest pursuant to s 12(1). There is no need to formally satisfy each element listed here, however, in analysing interests which are not straight forward consideration should be had to the principles set out. The approach taken to the legislation abroad is to read the section broadly in light of the overarching rationale and policy of the PPSA: see the Supreme Court of Canada’s decision in Canada Trustco Mortgage Corp v Port O’Call Hotel Inc (1996) 11 PPSAC (2d) 1; 133 DLR (4th) 609. This approach is inherently sensible and has been adopted in interpretation of the Australian PPSA: See Dura (Aust) Constructions Pty Ltd (in liq) (recs and mgrs apptd) v Hue Boutique Living Pty Ltd (formerly SC Land Richmond Pty Ltd) [2014] VSCA 326 at [107] (discussed below at [12.5.1.1]); Davidson v Registrar of Personal Property Securities [2015] AATA 549 at [21]–[22]. 5

Cuming R, Walsh C and Wood R, Personal Property Securities Law, 2005 Irwin Law.

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Consent

A security interest will not arise under the PPSA unless the grantor consensually provides for or grants it in favour of the secured party. In circumstances where the secured party seeks to perfect their security interest by registration, ie lodging a financing statement on the Personal Property Securities Register (PPSR), the security interest must be included in a security agreement (see s 20 of the PPSA). It is worth noting that the relevant consent of the grantor is what is in issue and not the consent of the debtor. The debtor is the person to whom the primary obligations attach, most often being the requirement to repay a said sum of money borrowed from the secured party. The grantor is the party who bestows upon the secured party a security interest over particular personal property (see s 10 of the PPSA; ‘‘debtor’’ and ‘‘grantor’’). Given the commercial nature of such dealings, the debtor is often the same party as the grantor. However, importantly, this need not be the case. A common example of this would be a guarantee that includes a security interest over the guarantor’s personal property where the guarantor, by definition, is not the debtor. The consent of the grantor is typically in issue where a security interest might arise automatically by operation of law. Where the security interest does not depend on the voluntary consent and will of the grantor, it is not a consensual security agreement which is regulated by the PPSA. An interest that arises because of a court order (such as an award of equitable relief) does not arise from a consensual transaction and hence is not a PPSA security interest under s 12(1): Sandhurst Golf Estates Pty Ltd v Coppersmith Pty Ltd [2014] VSC 217. Section 8(1)(c) expressly excludes interests which arise or are provided for by operation of the law. Reference should be made to that section for further discussion. Consent to create a security interest may be found in a written document, in oral agreements or a combination of both: Haliburton Broadcasting Group Inc v Van Duyn (2008) 14 PPSAC (3d) 77 (Ont Superior Court of Justice). It should be noted, however, that there may be writing requirements in certain circumstances if the secured party wishes to enforce the security interest against third parties, for instance in circumstances where the secured party does not possess or control the underlying collateral: see s 20. While perhaps self-evident, it is worth further noting that the consent requirement for the creation of a security interest is limited to security interests which fall within the scope of s 12(1) of the PPSA. Where s 12(1) is not being applied, such as in circumstances where a PPS lease is created (which constitutes a security interest by force of s 12(3) of the PPSA), it is entirely likely that the lessee never consents to the taking of a security interest by the lessor over the underlying property. Nor would it necessarily be the case that the lessor would turn its mind to taking such a security interest in circumstances where it is the true owner of the underlying property. In Dura (Aust) Constructions Pty Ltd (in liq) (recs and mgrs apptd) v Hue Boutique Living Pty Ltd (formerly SC Land Richmond Pty Ltd) [2014] VSCA 326,

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Santamaria JA (with whom Maxwell P and Whelan JA agreed) held (at [110]–[111], [115], [121] and [126]–[127]: ‘‘Section 12 uses the word ‘transaction’. The PPSA does not itself proffer a definition of this central concept. It does not qualify the use of the word ‘transaction’ in the phrase ‘provided for by a transaction’ with any epithet. The word itself is one of considerable generality; it covers a broad range of activities. The Shorter Oxford English Dictionary provides several meanings of transaction including ‘3. The action of transacting or fact of being transacted . . . 4. That which is or has been transacted, esp. a piece of business; a deal. A physical operation, action, or process.’: See, Shorter Oxford English Dictionary (Oxford University Press, 6th ed, 2007) 3320. The word is apt to describe conduct giving rise to rights, where the creation of those rights may be said to be consensual as between parties, as well as conduct as a result of which rights arise by operation of law, notwithstanding the absence of any consent inter partes. It is itself apt to describe a payment into a joint account such as occurred in the present case: the payment (like all payments) involved an action in which something passed from one person to another. The word ‘transaction’ is an ordinary English word and should be given its ‘natural and ordinary meaning’: See, Alcan (NT) Alumina Pty Ltd v Cmr of Territory Revenue (Northern Territory) (2009) 239 CLR 27, 47 [48] (Hayne, Heydon, Crennan and Kiefel JJ). ... The exclusion from the application of the Act, by operation of s 8, of interests in personal property which arise by operation of law, notwithstanding that they may be said to arise from transactions (using that term in its broadest possible sense), strongly suggests that the use of the term ‘transaction’ in s 12 is confined to consensual transactions inter partes [Noting that: The suggestion appears to be reinforced by the proviso in s 8(1)(b): ‘unless the person who owns the property in which the interest is granted agrees to the interest’.] ... Authority from other jurisdictions also supports the proposition that the ‘transaction’ giving rise to such an interest has to be ‘consensual’. In iTrade Finance [2011] 2 SCR 360 the Supreme Court of Canada considered the meaning of a ‘security interest’ under s 2 of the Personal Property Security Act 1990 Ontario. It held that the ‘transaction’ giving rise to such an interest had to be ‘consensual’. ... In my opinion, because the interest of Hue in the moneys paid into court did not arise out of a consensual transaction between it and Dura, its interest in the funds was not a ‘security interest’ within s 12 of the PPSA. It follows that Dura was not the ‘grantor’ of a security interest, nor was Hue a ‘secured party’ under the PPSA. Annotated Personal Property Securities Act 2009 (Cth)

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Personal Property Securities Act 2009 Further, in so far as Hue acquired an equitable charge over the moneys paid into court, the PPSA did not apply as that charge answered the description of ‘a lien, charge, or any other interest in personal property, that is created, arises or is provided for by operation of the general law’, within the meaning of s 8(1)(c) of the PPSA. Its interest arose as a result of Dura complying with the condition imposed by the Court of Appeal. There was no contractual or any other transaction or arrangement between the parties. Hue did not agree to the Order and did not agree to a stay of its judgment in exchange for the payment into the joint account: See also, [8.5.3].’’

See also, National Australia Bank Ltd v Garrett [2016] FCA 714 at [28]–[33] per Beach J.

[12.5.1.2] Relationship to personal property A security interest consists of an ‘‘interest in personal property’’ as collateral to secure the payment or performance of an obligation. Mere contractual rights, such as that undertaken by a surety without including an interest in property, are not security interests nor are their proprietary in nature so as to allow for a security interest to be taken over them. It is the relationship between the obligation and a right against personal property that generates the security interest (cf commentary to s 12(2) below). Furthermore, the collateral forming the subject matter of the security agreement must be personal property for the purposes of s 12(1). Section 10 defines property as anything that is not land or a statutory right that is declared not to be personal property. The characteristics of property and interests in property were described by Lord Wilberforce in National Provincial Bank Ltd v Ainsworth [1965] AC 1175 at 1,247–8 who stated: ‘‘Before a right or an interest can be admitted into the category of property, or of a right affecting property, it must be definable, identifiable by third parties, capable in its nature of assumption by third parties, and have some degree of permanence or stability.’’ See also R v Toohey; Ex parte Meneling Station Pty Ltd (1982) 158 CLR 327. For a discussion of the Canadian law see Saulnier v Royal Bank of Canada [2008] 3 SCR 166; 298 DLR (4th) 193. Interests in both legal and equitable property may be included as collateral for a security interest: see for example 356447 BC Ltd v Canadian Imperial Bank of Commerce (1998) 13 PPSAC (2d) 155; 157 DLR (4th) 682 (BC CA) (assignment of equitable interest in business to secure repayment of a loan). For a further discussion of trusts as security devices see 12(2)(g) (below). It should be reiterated that s 8(1)(j) excludes fixtures from the operation of the PPSA. The PPSA requires personal property to be classified under one, and only one, of the available classes of collateral at any given point in time (see PPS Regulations Sch 1, cl 2.3 — see also s 153).

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By way of encouraging a degree of uniformity for the purpose of perfection by registration and thus priority under the PPSA, each property class is defined by the Act (see s 10). It is important to correctly characterise property in order to ascertain and adopt the best method of perfection for that particular property class.

[12.5.1.3] Proprietary rights ‘‘Proprietary rights’’ refer to rights the party granting the security interests holds in the particular item(s) of property or the rights the granting party (termed the ‘‘grantor’’ — see s 10) will, in the future, hold over such property. The grantor requires ‘‘proprietary rights’’ due to the inclusion of the words ‘‘an interest in personal property’’ in s 12(1). The term ‘‘interest in personal property’’ is defined by s 10 of the PPSA as ‘‘includes a right in the personal property’’. The phrase ‘‘right in the personal property’’ is not defined by s 10, however s 19(2)(a) of the PPSA makes reference to a security interest ‘‘attaching’’ at the point in time when the grantor has ‘‘rights in the collateral’’. In this regard, s 19(5) of the PPSA provides that: ‘‘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 grantor under a conditional sale agreement (including an agreement to sell subject to retention of title) when the grantor obtains possession of the goods.’’ (emphasis added) Thus, rights in the collateral and therefore an interest in personal property, extends beyond ownership rights. Put another way, while ownership of the property is certainly a proprietary right, a right to possession for instance is also a proprietary right, albeit the possessing party having no claim to the legal title or ownership of the subject property: see Re Maiden Civil [2013] NSWSC 852 at [26] per Brereton J; see also [19.5.2.1]. The distinction is critical as owners of property who grant possession to a different party may subject themselves to a competing security interest entered on behalf of the possessing party. A simple lease demonstrates the point: Assume Party A (lessor) leases a motor vehicle to Party B (lessee). Party B wishes to obtain finance and grants an ‘‘all present and after-acquired security interest’’ to Party C. In such circumstances, Party C would take an interest in the motor vehicle owned by Party A regardless of the fact that Party B does not own or have good title to the motor vehicle.

As s 12(1) specifically directs, the identity of who holds title is irrelevant for determining whether or not a security interest exists. The nature and extent of proprietary rights required to grant a security interest are discussed under s 19. The central concept underpinning s 12 is the granting of an interest in the collateral. As the US Court of Appeals for the 11th Circuit said: ‘‘a security interest is not a promise to pay a debt; it is an interest in some collateral that a lender can take if a debtor does not fulfil a payment obligation’’: Reese v Ellis, Annotated Personal Property Securities Act 2009 (Cth)

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Painter, Ratterree & Adams LLP (2012) 678 F.3d 1211 (USCA 11th Circ), in the context of a discussion of the difference between a promissory note and a security interest. In a recent Canadian case it was held that a mother who purchased a truck for her son considered that it was a loan, and her son intended to repay it, but neither of these points were sufficient to involve the granting of a security interest in the truck: Director under the Seizure of Criminal Property Act 2009 v Kaytor [2012] SKQB 346 (the mother claimed an interest in the truck when it was seized by police for its use in cocaine trafficking). The Supreme Court of Canada in i Trade Finance Inc v Bank of Montreal (2011) FPPSR ¶700-125; 2011 SCC 26; [2011] 2 SCR 360 at [27], noted that the Ontario PPSA does not prescribe how a security interest may be granted in personal property, because where it applies ‘‘it renders irrelevant the distinctions between the wide variety of instruments which existed at common law and in equity for taking a security interest in another person’s property’’. This reasoning usefully applies to s 12(1) in the authors’ view. The US courts have held that the underlying security agreement does need to include a security interest clause, with a mere listing of collateral in the agreement not being sufficient to grant the security interest in the collateral: Gateway Hotel Partners LLC v C.I.R. (2014) T.C. Memo. 2014-5, 2014 WL 92027 (US Tax Court). Equitable interests that satisfy the definition of s 12(1) may be properly registered under the PPSA: Re Production Enhancement Group Inc (2011) 18 PPSAC (3d) 6; 79 CBR (5th) 33 (Alta QB).

[12.5.1.4] Payment or performance of an obligation A security interest will only exist where there is a current and active obligation or obligations extending from the party subject to the secured obligation (typically a debtor) to the secured party. Once the underlying obligation is extinguished or satisfied, the security interest no longer exists: see for example, Hughes v Fea [2013] NZHC 2863 (lease of goods with an obligation to replace goods as and when they were disposed of, obligation was discharged at the instant that the goods were replaced hence no security interest in the replaced goods). As stated above, while the terms ‘‘debtor’’ and ‘‘grantor’’ may be considered synonymously in most instances (that is, the grantor will also be the debtor and vice versa), technically the person owing the obligation to the secured party is called the ‘‘debtor’’ and the person granting the security interest is termed the ‘‘grantor’’. There is no requirement under the PPSA that these two roles be held by the same person, although in most cases they will be. Additionally, while security is typically associated with the repayment of a facility or line of credit, the PPSA also applies to security agreements entered for the performance of an obligation so long as the obligation is validly enforceable at law (see further the definition of ‘‘grantor’’ pursuant to s 10). No particular form of words is needed to give rise to a security interest, provided that the arrangement grants an interest in personal property which ‘‘in substance’’ secures the payment or performance of an obligation: Re Miller (1977) 545 F 2d 916 (US CA 5th Circ); 356447 B.C. Ltd v Canadian Imperial Bank

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of Commerce (1998) 13 PPSAC (2d) 155; 157 DLR (4th) 682 (BC CA). The court will apply an objective test in assessing whether the parties consented to a transaction that secures the payment or performance of an obligation in substance: Kaak v Bank of Montreal (2003) 5 PPSAC (3d) 187 (Ont Superior Court of Justice) affirmed (2003) 6 PPSAC (3d) 13 (Ont CA). The objective test looks to the terms of the security interest itself (where a security agreement exists) or the nature of the relationship between the parties (for oral security interests). The New Zealand Court of Appeal in JS Brooksbank and Co (Australasia) Ltd v EXFTX Ltd (in rec and liq) (2009) 10 NZCLC 264,520; [2009] NZCA 122 at [51] (referring to Widdup L and Mayne L, Personal Property Securities Act: a conceptual approach, 2002 revised ed, LexisNexis at [2.9]) noted that: ‘‘The direction to have regard to what a transaction does ‘in substance’ suggests that the focus should be on what the transaction purports to do.’’ A mere investment in a business will not constitute a security interest as it does not secure the payment or performance of an obligation, even if the parties seek to clothe the investment as a secured loan: Dapper Apper Holdings Ltd v 895453 Ontario Ltd (1996) 11 PPSAC (2d) 57; 38 CBR (3d) 284 (Ontario CJ).

[12.5.1.5] What is the source of the security interest? Prior to the commencement of the PPSA, a supplier would typically supply goods to a purchaser subject to a ‘‘retention of title’’ clause which was either included in the trade agreement between the supplier and purchaser or provided on each and every invoice sent from the supplier to the purchaser in respect of each bundle of goods. Given that retaining title did not, at common law, constitute the creation of a security interest which required registration, there was little, if any, significance in creating multiple quasi-security interests upon each and every individual supply of goods. However, as is discussed further below at [12.5.2.4], retention of title arrangements or selling goods conditionally likely constitutes a security interest for the purposes of the PPSA. As the secured party bears the onus of perfecting any such interest, the source of the security interest(s) is therefore of significance. In Central Cleaning Supplies (Aust) Pty Ltd v Elkerton [2014] VSC 61, Central Cleaning Supplies (Aust) Pty Ltd supplied cleaning equipment and products to Swan Services Pty Ltd. In September 2009, Swan Services signed a credit application. Among other things, the credit application provided for 30 days’ credit to be afforded to Swan Services. The credit application also included a statement that the supply of goods was governed by Central Cleaning’s ‘‘Standard Terms and Conditions’’. Thereafter, from time to time Central Cleaning supplied Swan Services with cleaning equipment and products. Printed at the bottom of the relevant invoices was a retention of title ‘‘condition of sale’’ which stated that the goods, the subject of the particular invoice, remained the property of Central Cleaning until the whole of the purchase price had been paid by Swan Services in full for those goods. Annotated Personal Property Securities Act 2009 (Cth)

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Justice Ferguson of the Supreme Court of Victoria held that each individual invoice containing the retention of title clause gave rise to separate security interest for the purposes of the PPSA (at [33]). As these invoices were all issued after 30 January 2012, the corresponding security interest was not a transitional security interest (at [34]) which was fatal to Central Cleaning’s claim against the liquidators of Swan Services. Central cleaning appealed. On appeal, the Court held in Central Cleaning Supplies (Aust) Pty Ltd v Elkerton (in his capacity as joint and several liquidator of Swan Services Pty Ltd (in liq)) [2015] VSCA 92, at [17]–[18], that: ‘‘Although ‘security interest’ is defined by reference to transactions, ‘security agreement’ is not. Instead, the latter definition speaks of ‘an agreement’ or ‘an act’ by which a security interest ‘is created, arises or is provided for’. On ordinary principles of interpretation, the legislature must have intended that each of these alternatives — ‘is created’, ‘arises’ and ‘is provided for’ — has its own work to do. The legislature has thus specified three types of relationships between the ‘agreement or act’, on the one hand, and the security interest, on the other. The existence of any one of those relationships will qualify the agreement or act as a ‘security agreement’. The three alternatives would seem to connote differing degrees of directness of that relationship. To take the two extremes (and converting the passive voice of the statutory language into the active voice), there is an obvious difference between an agreement or act ‘which creates’ a security interest and an agreement or act ‘which provides for’ a security interest.’’ On this basis the Court went further, at [23], to provide that: ‘‘On this analysis, the relevant definitions will be satisfied if the agreement or act said to constitute the transitional security agreement makes provision for the grant of future security interests in goods supplied.’’ Turning to the factual matrix before the Court, the Court held (at [30]–[34], [36], [39]–[40]) that: ‘‘In our view, Swan’s credit application was simply that — an application. The signing and lodgment of the application was a unilateral act by Swan, a request to Central that any future supply of equipment be on terms that payment was not due for 30 days. Swan thereby signified its intention to create legal relations with Central on those terms but until Swan’s offer was accepted, no such relations would come into existence. On ordinary principles, therefore, the mere signing of the credit application did not create a contract, and its lodgment with Central did not impose on Central a contractual obligation to do anything. Swan had simply made an offer to acquire equipment from Central on the terms set out in the application. More particularly, Swan was offering to purchase equipment from Central on an ongoing basis, and to do so subject to Central’s ‘Standard Terms and Conditions as in force from time to time’, in return for Central agreeing to provide 30 day credit. The

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credit application ‘was in substance an application [by Swan] to become an account customer, and it was to cover all future dealings’ with Central. In the absence of any other communication by Central of its acceptance, the terms in the application would not become binding on either party unless and until Central supplied equipment to Swan and extended the 30 day credit which Swan had requested. As a matter of contract, therefore, Swan did not become bound by the ‘Credit Application Terms’ until the first supply of equipment after the credit application was made. (That was the supply in respect of which Central issued the invoice dated 4 September.) Central’s acceptance of Swan’s application for credit was an acceptance by conduct. The relevant conduct was the delivery of the equipment which Swan had ordered, and the sending of the invoice confirming that the supply was on 30 day credit. By that conduct, Central signified its acceptance of Swan as an account customer. The sending of the invoice was the critical step, of course, as it was the first communication confirming that credit was being provided. ... It is immaterial that the credit application form did not set out Central’s ‘Standard Terms and Conditions’. On ordinary principles, Swan’s signing of the credit application bound it to accept those terms and conditions for all future supplies of equipment. Clause 2 of the ‘Credit Application Terms’ (set out above) could not have been clearer in that regard. ... It is clear that, in its terms, each ROT clause had application only to the invoiced goods the subject of the particular supply. The result of the contractual analysis, however, is that: ● Swan’s application for credit included an undertaking to be bound, in respect of every supply of equipment, by Central’s standard terms of supply; ● the ROT clause was in existence, as a standard term of supply, at the date on which the credit agreement became binding on Swan, being the date on which Swan received the first invoice for equipment supplied; and ● under that agreement, Swan accepted that all future supplies of equipment would be governed by that standard term (which would be expressed in each case to relate to the particular equipment supplied). On this view, an agreement came into force — at the time of the first supply of equipment — which did ‘provide for the grant of’ a security interest in relation to all future supplies of equipment. That agreement was a ‘transitional security agreement’, and each of the security interests granted in respect of equipment supplied subsequently was a Annotated Personal Property Securities Act 2009 (Cth)

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Personal Property Securities Act 2009 ‘transitional security interest’. Central is therefore able to enforce the ROT clauses notwithstanding the absence of registration.’’

The Victorian Court of Appeal decision emphasises the need to look closely at the contractual relationship between the parties when considering the source of the security interest: See also, N Mirzai, ‘‘The master agreement, terms of trade or the invoices: What is the source of the security interest?’’ (2015) 24 APLJ 335. In Re Gelpack Enterprises Pty Ltd (in liquidation) [2015] NSWSC 1558, the Supreme Court of New South Wales was required to determine what, if anything, gave rise to a security interest asserted by the Plaintiff, Primaplas Pty Ltd, in resins it supplied to the Defendant, Gelpack Enterprises Pty Ltd, which was in liquidation. In this regard, Brereton J held (at [20], [22]): ‘‘Under the 2007 contract, Primaplas reserved the right unilaterally to change the terms and conditions. While undertaking to give notice of its intention to do so, where possible, such notice — let alone consent — was not a pre-condition to a change. The 2007 contract authorised Primaplas to change the terms and conditions from whenever it chose to do so. ... The fact that the covering letter requested signing and return of the terms and conditions did not make such signing and returning a precondition to the new terms taking effect. That is made clear enough in the letter itself, emphasising that the new terms apply to any orders accepted after that notification. Nor does the fact that the terms and conditions themselves provide for acceptance have that consequence. The terms and conditions of 2012 are a generic document intended to apply both to new accounts and to existing customers, and if they operated — as they did in this case — by virtue of the authority conferred in the 2007 contract, no further act of acceptance was required.’’ As the terms and conditions in this matter had been altered by a notification in August 2012, and Primaplas had registered a security interest in respect of the August 2012 notification, the Court held that it need not strictly go further and that a security interest was founded (at [23]). However, Primaplas had also included a ‘‘retention of title’’ type clause on each invoice connected with each supply of goods. In respect of this, Brereton J held (at [26]–[28]): ‘‘Moreover, as I have said, each of the invoices and other related documentation contained references to Primaplas’s terms of trade, and the invoices in particular drew attention to the retention of title clause. The better view, I think, is that, at least in this case, the note at the foot of each invoice did not amount to a new contractual term but reminded the recipient that the retention of title clause contained in the terms and conditions of trade that were incorporated in every purchase included such a clause. By continuing to pay those invoices and re-order further goods, knowing that the terms and conditions included such a clause,

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Gelpack either ratified Mr Hone’s entry into the 2012 terms and conditions or, by the repeated course of dealing, incorporated into each separate contract between them the retention of title clause. Accordingly, in my view, Gelpack did agree in a binding way to grant a security interest at least in the nature of a retention of title clause in respect of goods supplied to it by Primaplas. Moreover, the conclusion I have reached concerning the effect of the 1 August 2012 letter means that it also agreed to grant a security interest in all present and after-acquired property in the terms of the 2012 terms and conditions.’’ Notwithstanding the overall conclusions reached by the Court in the above cases, in the authors’ view, given that retention of title arrangements are, for all intents and purposes, simply security interests for the purposes of the PPSA — their continued use is of limited utility and suppliers should revisit their standard terms of trade with a view to avoiding the creation of multiple security interests in circumstances where this may be fatal to the priority and/or enforceability of any such interests. The better approach, without seeking to imply that any one approach must be used or is appropriate to be used in all cases, is for the supplier to expressly take a ‘‘purchase money security interest’’ (PMSI) (within the meaning of s 14 of the PPSA: See the commentary to s 14) over the goods it may/will supply to the purchaser in the master agreement or terms of trade annexed to the agreement that it enters with the purchaser at the outset of the commercial relationship. If any wording is to then appear on invoices rendered by the supplier to the purchaser in respect of individual supplies, that wording may simply remind the purchaser that the goods supplied on the invoice are and remain subject to the master agreement or terms of trade annexed to that agreement. Prior to the first supply of goods, the supplier should then attend to the ‘‘perfection’’ (see s 21 of the PPSA) of their PMSI by lodging a financing statement (ie registering) on the Personal Property Securities Register (PPSR) as appropriate and as relevant: Consider In the matter of Gelpack Enterprises Pty Ltd (in liquidation) [2015] NSWSC 1558 at [34] per Brereton J. However, in respect of taking steps to perfect a PMSI, note also s 44 and 45 of the PPSA regarding collateral which may or must be described by serial number; Note also, in all circumstances, independent legal advice should be sought by the supplier when looking to amend its terms of trade to appropriately isolate and deal with circumstances specific to that supplier and/or the goods it supplies.

[12.5.1.6] Trust arrangements as security devices While a trust itself is not necessarily an instrument caught by the PPSA, where the trust requires elements of taking security the PPSA may apply. Attempting to guise a security interest within a trust instrument is thus ineffective under the PPSA. The purpose of a trust, determined largely from analysis of the underlying trust deed, should guide the court in ascertaining whether or not a security interest has arisen. Trusts may come within the concept of a security interest under the PPSA but only where the trust secures payment or Annotated Personal Property Securities Act 2009 (Cth)

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performance of an obligation in substance. See further Re Skybridge Holidays Inc (1999) 15 PPSAC (2d) 24 (BC CA); Ogden v Award Realty Inc (1999) 14 PPSAC (2d) 99; Ellingsen (Trustee of) v Hallmark Ford Sales Ltd (2000) 1 PPSAC (3d) 307; 190 DLR (4th) 47 (BC CA); North Shore City Council v Stiassny [2009] 1 NZLR 342 (NZ CA); Re Cliffs Over Maple Bay [2011] BCCA 180. See also Jonathan Orpin, ‘‘The Personal Property Securities Act 1999 and Trusts — When Is an Interest under a Trust a Security Interest?’’ (2008) 14 New Zealand Business Law Quarterly 109; James Glister, ‘‘The Role of Trusts in the PPSA’’ (2011) 34 UNSWLJ 628.

[12.5.2] Scope of security interests, examples and illustrations — s 12(2) Since the publication of the first edition of this text, there have been some noteworthy academic examinations as to the scope, application and effect of s 12(2) of the PPSA. The initial view taken by the authors was that s 12(2) offered no more than a list of mere examples and did not add to or subtract from the operative effect of s 12(1). The basis for this view is that s 12(2), read literally, is prefaced with the opening words ‘‘For example’’. To the contrary, the specific inclusion of particular ‘‘examples’’ within s 12(2) has led to the emergence of the view that the notion of a ‘‘security interest’’ goes further than applying strictly to the conferral of an interest in a proprietary right. Tolhurst, Colburn and Peckham in their article ‘‘Security interests at the margins’’ (2012) 40 ABLR 241 point specifically (at 245) to the ‘‘flawed asset arrangement’’ which is included within s 12(2) at subparagraph (l). The inclusion of this instrument, among other instruments, lead the learned authors to suggest that the proper construction of s 12(1) is to read that section in light of s 12(2). Informed by s 12(2), s 12(1) goes further than securing the discharge of primary obligations (despite including such instruments) and looks additionally to ensuring the specific performance of such obligations (at 250). The learned authors then suggest that, on this basis, an appropriate definition for ‘‘security interest’’ under the PPSA is: ‘‘Where a transaction is intended to enhance a promisee’s prospect of receipt or discharge of some promised performance and the transaction transfers or provides access to some personal property to ensure or discharge that promised performance then that transaction gives rise to a security interest.’’ This view is not without its support throughout the commentary. The primary support for the view stems from the fact that, as a matter of construction, the terms of the legislation should be read in support of one another, that is to say, s 12(2) informs the proper reading of s 12(1) — parliament’s intention could not be that the legislation is inconsistent with itself: See Stumbles, ‘‘The PPSA: The extended reach of the definition of the PPSA security interest’’ (2011) 34(2) UNSWLJ 448, 451–452. While the authors appreciate the availability of the argument that mere contractual rights are sufficient to give rise to a security interest for the

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purposes of s 12(1) of the PPSA, the argument is not without its difficulties. Absent judicial consideration of the point, the authors are of the view that the proper construction of s 12(1) is that unless and until an interest in a proprietary right is conferred — a security interest does not arise. To take a security interest requires recourse to property, namely — rights in rem, as a fundamental proposition. In this light, to the extent that the examples provided for by way of s 12(2) do not meet the requirements of s 12(1) (and the authors do not suggest that this is the case) the relevant instruments are not security interests. That is to say, in circumstances where a court is satisfied that an instrument constitutes one of the categories under s 12(2) but is not satisfied that s 12(1) is met — the court should find that the instrument is not a security interest. This view is supported, in the authors’ view, by the language of s 12(2) which, importantly, only applies ‘‘if the transaction, in substance, secures payment or performance of an obligation’’. Further, an ‘‘interest in personal property’’ which confers less than an interest in proprietary rights faces difficulties when applying the principles of attachment (discussed at s 19). The relevant ‘‘rights’’ in the collateral capable of conferring an interest which attaches, in the authors’ view, are, by necessity, proprietary rights. For these reasons, the authors prefer not to endorse the proposed definition put forward by the learned authors but readily recognise the availability of such an argument should an appropriate case arise.

[12.5.2.1] Fixed charges — s 12(2)(a) A fixed charge is defined in Intro III as an instrument encumbering specified items of a grantor’s property for the benefit of a secured party. Possession does not transfer to the secured party in the absence of enforcement action on the instrument; however the grantor cannot freely deal with the property in the ordinary course of business subject to the charge. A fixed charge is thus inappropriate for many property types that require regular use and transferability, such as inventory. There is a degree of obsolesce in discussing fixed and floating charges under the PPSA as the Act fundamentally changes how such instruments are characterised. The concept of the floating charge has been largely replaced by the more holistic term a security interest over ‘‘circulating assets’’ (or circulating security interest), while the concept of a fixed charge has been replaced by the PPSA concept of a security interest in non-circulating assets (or non-circulating security interest). These concepts are dealt with under Pt 9.5 of the PPSA. The term ‘‘circulating security interest’’ also attracts definition in the Corporations Act 2001 (Cth), s 51C. The issue of how to treat fixed charges under the PPSA was discussed in some depth in the Supreme Court of Canada case, Royal Bank v Sparrow Electric Corp (1997) 12 PPSAC (2d) 68; 143 DLR (4th) 385. The case concerned a fixed charge with a licence to deal with inventory (including sale of inventory) and the interaction of this instrument with the PPSA. The Court found that all Annotated Personal Property Securities Act 2009 (Cth)

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instruments seeking definition as a ‘‘floating charge’’ under the PPSA were in fact no more than fixed charges. For the purposes of the PPSA the nomenclature should be abandoned, in the authors’ view, to avoid this issue altogether (see also Pt 9.5). One of the founding principles of the PPSA is to treat security interests in equal step unless modified by an issue of substance (for example, in the case of purchase money security interests, see s 14). The Supreme Court noted (at [63]): ‘‘[Under the PPSA] a fixed charge over all present and future inventory represents a proprietary interest over a dynamic collective of present and future assets. To this extent, as stated above, this form of security interest challenges our traditional conception of a fixed charge; to the same extent, in my opinion, our conception of this form of charge must change to meet the modern realities of commercial law, and in particular the legislative provisions which have been brought to bear in this appeal.’’ While the PPSA on this point is reasonably clear, in the authors’ view, it will take some time for the fixed and floating charge terminology to phase out of commercial dealings — as was the case among the Canadian provinces: see further, Roderick Wood, ‘‘The Floating Charge in Canada’’ (1989) 27 Alberta Law Review 191.

[12.5.2.2] Floating charges — s 12(2)(b) The nature of a floating charge was discussed in Intro III. It attaches to no specific items of property, however, hovers above all the relevant assets of the granting party until enforced where it ‘‘crystallises’’ and attaches to all the relevant property held at the point of crystallisation. Like a fixed charge, the essence of a floating charge is largely eroded by the PPSA provisions. Prior to the PPSA, a floating charge was a popular security instrument whereby the grantor could deal with the encumbered property in the ordinary course of business (see Pt 9.5 for more information on fixed and floating charges and circulating assets). The Supreme Court of Canada case of Royal Bank v Sparrow Electric Corp (1997) 12 PPSAC (2d) 68; 143 DLR (4th) 385 (discussed above) again relevantly discusses the remaining effect (if any) of the floating charge under the PPSA. In that case the Court noted that essentially all security interests under the PPSA were in the nature of fixed charges, although the Act leaves the door open for the parties to agree as to how the grantor may use the collateral during the term of the security agreement. Indeed the floating charge and its resilience even after the PPSA took force evidences the dangers of seeking to parallel the law as it applied prior to the PPSA, with an understanding of how the PPSA functions. As the Ontario Court of Appeal held in Credit Suisse Canada v 1133 Yonge Street Holdings Ltd (1998) 14 PPSAC (2d) 61; 5 CBR (4th) 174 at [20]: ‘‘The purpose of the PPSA is to establish and clarify priorities and notions of attachment and perfection which relate to the registration and operation of security instruments . . . attempts to interpret the PPSA and the regime it establishes in terms of the old forms of security are not

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helpful, and that those old forms and their concepts do not govern how the PPSA regime should unfold.’’ In New Zealand, the Court of Appeal in IRC v Stiassny [2013] NZLR 140; [2012] NZCA 93 at [55] has said that ‘‘issues relating to the crystallisation of floating charges and title to the funds in dispute have little or no bearing on priority issues under the PPSA. Care should be taken not to import pre-PPSA language and concepts into the interpretation of the PPSA’’. The concept of crystallisation of a floating charge has no relevance for the application and interpretation of the PPSA: Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd (in liq) (recs and mgrs apptd) [2017] WASC 152; Re Amerind Pty Ltd (recs and mgrs apptd) (in liq) [2017] VSC 127 at [453] (‘‘the concept of crystallisation is now redundant under the PPSA’’; not affected by the appeal: [2018] VSCA 41); Langdon, in the matter of Forge Group Ltd (recs and mgrs apptd) (in liq) [2017] FCA 170 at [40]. It should be noted, however, that Pt 9.5 of the Australian PPSA requires that references to fixed and floating charges be read as references to security interests in non-circulating assets and security interests in circulating assets (respectively) at least in certain circumstances. This is discussed further in the annotations to Pt 9.5. The distinction between these two forms of security interests is also important for the application of the insolvency provisions of the Corporations Act 2001 (Cth) which rely upon this distinction for making priority payments to employees during receivership and liquidation. See further Lionel Meehan, ‘‘Circulating Security Interests under the Personal Property Securities Act 2009 (Cth) Compared to Floating Charges’’ (2011) 22 Journal of Banking and Finance Law and Practice 322; Alice Tranter-Wilson, ‘‘The Circulating Security Interest in Review: Architectures of Certainty, Flexibility and Control’’ (2017) 28 Journal of Banking and Finance Law and Practice 3. See also Commonwealth v Byrne [2018] VSCA 41.

[12.5.2.3] Chattel mortgages — s 12(2)(c) The term ‘‘chattel mortgage’’ should not be a source of confusion, it is simply a mortgage (as traditionally defined in Intro III) with respect to personal property or ‘‘chattels’’. As mortgages were recognised as valid security interests prior to the PPSA, and as the PPSA does not alter how a mortgage is created, it is likely that the law as it stood prior to the PPSA will be relevant in determining whether or not a valid mortgage exists. It should be noted, however, that a mortgage, by definition, deals with transfers of title. Mere reliance on legal title will not protect the secured party from the application of the PPSA. A mortgage should thus be treated like any other security interest and duly perfected in order to retain priority.

[12.5.2.4] Conditional sale agreements — s 12(2)(d) Conditional sale agreements, including retention of title or ‘‘Romalpa clause’’ arrangements,6 refer to instruments which purport to convey title only after 6

See generally, Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (2000) 202 CLR 588; [2000] HCA 25; Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] 1 WLR 676.

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the primary obligation(s) owing to the relevant creditor has been met in full. Referred to as ‘‘quasi-securities’’ due to their effectiveness at securing payment without being caught by the common law securities regime, they will now typically constitute security interests under the PPSA and the provisions of the PPSA thus regulate priority disputes involving them. The fact that title is expressly retained by one party to an agreement concerning collateral has no relevance to the system of priorities under the PPSA: Royal Bank v Moosomin Credit Union (2003) 7 PPSAC (3d) 118; 241 Sask R 1 (Sask CA). Like the concept of a floating charge it is arguable that conditional sale agreements are a convoluted way of achieving a simple result which is now addressed by the PPSA. This is because in the absence of a title based priorities regime, holding title until the obligation owing is satisfied will not, of itself, protect the interest of the party seeking to essentially secure their interest. Recognising title retention devices as security interests may also be justified on the basis of ostensible ownership. That is, to an external third party the grantor who has possession seems to own the property. Secured parties may be able to protect their interests by obtaining the super priority granted to security interests that are purchase money security interests (PMSI) which are discussed in s 14 and 62. Of course, an arrangement where there is no enforceable contract until payment is made in full is not a security device and would not fit within this category: JS Brooksbank and Co (Australasia) Ltd v EXFTX Ltd (in rec and liq) (2009) 10 NZCLC 264,520; [2009] NZCA 122 (where goods were delivered by mistake to the debtor prior to payment being received — there was no intention to create an interest to secure a payment or performance of an obligation). See also Ellingsen (Trustee of) v Hallmark Ford Sales Ltd (2000) 1 PPSAC (3d) 307; 190 DLR (4th) 47 (BC CA) (purported sale of a motor vehicle failed due to lack of finance and hence conferred no security interest). One practical issue for suppliers with retention of title arrangements concerns whether the supply contract includes an enforceable title retention clause. It is common for supply arrangements to be governed by a variety of documents that pass between the parties. These may include credit applications, master supply agreements, standard terms and conditions, purchase orders, delivery dockets and invoices. It is possible for a supplier to believe that they have an enforceable retention of title clause but for that provision to not form part of the enforceable contract between the parties. This occurred in Central Cleaning Supplies (Aust) Pty Ltd v Elkerton [2014] VSC 61, where a credit application and standard terms and conditions were held not to include a retention of title provision that was supplied to purchasers on an invoice. The supplier claimed to have a transitional security interest in supplied goods, which, if correct, would mean that registration on the PPSR during the transition period would not be required (see s 322). The supplier demanded the return of the unsold goods when the purchaser entered liquidation. The liquidator rejected the claim based on the vesting rule for unperfected security interests upon liquidation (see s 267), and this decision was challenged by the supplier in a court application. The court agreed with the liquidator that the retention of title clause was not part of the original contract, and hence was not part of a

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transitional security agreement. Each supply constituted a separate contract (albeit one whose terms included provisions in the standard terms and conditions), and hence any security interest in supplies made under contracts after the commencement of the PPSA involved an unperfected security interest that vested in the purchaser upon liquidation. The supplier therefore had no rights to demand the return of the supplies and could only prove in the liquidation as an unsecured creditor. For a contrasting decision where a prior credit application was found to be a transitional security agreement that included subsequent supplies after the commencement of the PPSA, see: Industrial Progress Corporation Pty Ltd v Wilson [2013] WASC 225 (the standard terms and conditions included a retention of title clause, whereas in Central Cleaning the retention of title clause was included on later invoices): Note Central Cleaning was overturned on appeal in Central Cleaning Supplies (Aust) Pty Ltd v Elkerton [2015] VSCA 92 — see above at [12.5.1.5]. Among the various Canadian provinces, the use of conditional sale agreements has continued despite the effect of the PPSA and interpretation has followed that of lease arrangements: see for example Newcourt Credit Group Inc v GA Finance Inc (1998) 13 PPSAC (2d) 372; Re Gauntlet Energy Corp (2003) 5 PPSAC (3d) 236; 20 Alta LR (4th) 314 (Alta QB). A distinction is to be drawn here between conditional sale agreements, hire purchase agreements and true leases. While attempting to label particular instruments under one of these heads offers little benefit in determining whether or not the PPSA applies to a particular instrument, in the authors’ view, the drafting mechanics of each independent agreement must still be relied on for this purpose (see s 12(2)(i)). See further Bruce Whittaker, ‘‘Retention of title clauses under the Personal Property Securities Act 2009 (Cth)’’ (2010) 21 Journal of Banking and Finance Law and Practice 273.

[12.5.2.5] Hire purchase agreements — s 12(2)(e) The term ‘‘hire purchase’’ is uncommon among foreign PPSA jurisdictions perhaps due to its closeness in definition to conditional sale agreements and financing leases (discussed at s 12(2)(d) and 12(2)(i) respectively). Under a hire purchase agreement, the hiring party is more readily accepted as a holder of a mere possessory interest (similar to that of a lessee) while under conditional sale agreements ownership, that is, legal title, is more readily accepted to be conveyed at the creation of the agreement. The distinction is overly technical and largely unnecessary pursuant to the PPSA as Blair J emphasised in the Ontario Superior Court of Justice case, Re 1153496 Ontario Ltd (1996) 11 PPSAC (2d) 149; 25 BLR (2d) 285: ‘‘At common law, however, and under the pre-PPSA statutory regime, there was a certain amount of confusion as a result of the inconsistencies in remedies available to a creditor who held security on personal property in the event of a default by the debtor. The remedies available depended upon how the agreement in question was characterized. Was it a conditional sale, a hire-purchase, a chattel leasing agreement, an equitable charge, or some other form of personal property security? The Annotated Personal Property Securities Act 2009 (Cth)

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Personal Property Securities Act 2009 rights and duties of creditors and debtors varied, depending upon the answer . . . the PPSA is designed to clarify and simplify this situation.’’

The subtleties of security interests are discussed further below at s 12(2)(i). In White v Spiers Earthworks Pty Ltd (2014) 99 ACSR 214; [2014] WASC 139, a hire purchase agreement covering equipment used in a business that had been sold to the hirer was found to be an in substance security interest and a PPS lease.

[12.5.2.6] Pledges — s 12(2)(f) Like mortgages, pledges were recognised security interests prior to the PPSA and continue to be so under the Act. They are sufficiently defined in Intro III and provide security by allowing the secured party to take possession of the relevant collateral which effectively prevents any potential improper or unauthorised dealings by the grantor. For the purposes of complying with the PPSA, however, pledge holders are largely unaffected. Perfection by possession is a valid form of perfection under the PPSA and no additional steps to perfect by registration are necessary to retain priority over the underlying collateral: see John Deere Ltd v Firdale Farms Ltd (Receiver of) (1987) 8 PPSAC 52; 45 DLR (4th) 641 at [75]–[76] (Man CA).

[12.5.2.7] Trust receipts — s 12(2)(g) The term ‘‘trust receipt’’ is not defined by the PPSA. At general law a trust receipt is also referred to as a letter of trust, letter of lien, letter of pledge or letter of hypothecation and is used by banks as a security device for dealings with goods covered by a documentary letter of credit. Trust receipts were carved out from the registration requirements for company charges under Corporations Act 2001 (Cth), s 262(2)(c) (now repealed).7

[12.5.2.8] Consignments — s 12(2)(h) A consignment of property operates much like a retention of title arrangement by way of securing payment or performance of an underlying obligation. It has become a popular mechanism for suppliers of inventory in particular although it is not strictly limited to such applications. Under a consignment, title to the property consigned never passes to the consignee, however, the consignee has the right to deal with the property in the ordinary course of business. The proceeds of sale (or a percentage of them) flow to the consignor and in return the consignee need not pay for the property up front (that is, a consignment is a form of inventory finance). While commercial in orientation, the PPSA expressly provides that consignments that are not commercial also come within the scope of the PPSA. Like many of the other agreements addressed by s 12(2), consignments take many forms — some ‘‘true’’ and some as ‘‘security.’’ True consignments allow consignees to send property back to the consignor without obligation and thus it can be said that the consignee never possesses proprietary rights in the 7

For a discussion of the role of the trust receipt in the formulation of UCC Art 9 see Grant Gilmore, Security Interests in Personal Property, (Little Brown & Co, 1965) Ch 4.

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collateral as to form a security interest. Rather the consignee is acting as the agent of the consignor: see Weiner v Harris [1910] 1 KB 285. Where a consignment is commercial in nature, the PPSA applies regardless of whether or not the consignment constitutes a true or security function (pursuant to s 12(3)(b)). Where a consignment is non-commercial however, the PPSA will not apply to true consignments. The determination of the court will be required here in accordance with the facts and circumstances of each particular case. In the Ontario Superior Court of Justice case, Access Cash International Inc v Elliot Lake & North Shore Corp for Business Development (2000) 1 PPSAC (3d) 209 at [21], Molloy J held: ‘‘In deciding whether an arrangement between parties is a consignment, the court will consider the presence or absence of certain indicia found to be characteristic of a consignment. In the list that follows, ‘supplier’ refers to the consignor or vendor (depending on whether the arrangement is a consignment or sale) and ‘merchant’ refers to the consignee or purchaser. The following are indicia of consignment: ● The merchant is the agent of the supplier. ● Title in the goods remains in the supplier. ● Title passes directly from the supplier to the ultimate retail purchaser and does not pass through the merchant. ● The merchant has no obligation to pay for the goods until they are sold to a third party. ● The supplier has the right to demand the return of the goods at any time. ● The merchant has the right to return unsold goods to the supplier. ● The merchant is required to segregate the supplier’s goods from his own. ● The merchant is required to maintain separate books and records in respect of the supplier’s goods. ● The merchant is required to hold sale proceeds in trust for the supplier; ● The supplier has the right to stipulate a fixed price or a price floor for the goods. ● The merchant has the right to inspect the goods and the premises in which they are stored. ● The goods are shown as an asset in the books and records of the supplier and are not shown as an asset in the books and records of the merchant. ● The shipping documents refer to the goods as consigned. ● The supplier maintains insurance on the goods after they are delivered to the merchant. ● It is apparent from the merchant’s dealings with others that the goods belong to the supplier rather than the merchant.’’ Annotated Personal Property Securities Act 2009 (Cth)

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Where these factors are prevalent it is likely the court will determine the instrument constitutes a true consignment as opposed to a security interest. His Honour noted (at [22]) that the most important criteria were the agency relationship; the right of the merchant to return the goods; and the stipulation that no payment is due to the supplier until the goods have been sold to a third party. The Access Cash criteria were applied by the court in Re Arcabi Pty Ltd (recs & mgrs apptd) (in liq) (2014) 288 FLR 236; [2014] WASC 310. In Arcabi, the court emphasised that it is important to focus on the substance rather than the form of the transaction. The court held that notes and coins held on consignment by Arcabi on behalf of clients were not an in substance security interest because the title retained by the clients was not retained to secure the payment or performance of an obligation owed by Arcabi to them.

[12.5.2.9] Leases — s 12(2)(i) Leases which constitute ‘‘deemed security interests’’ for the purposes of the PPSA are defined under the commentary for s 13. However, where a lease is for a term of less than one year (or 90 days in the case of serial numbered collateral), the PPSA will only apply where the instrument, in substance, secures payment or performance of an obligation. Like conditional sale agreements, hire purchase agreements and consignments, the line between operating or ‘‘true’’ instruments and financing or security instruments has proven to be difficult to discern in every given case.8 Nonetheless, the task must be undertaken on a case by case basis in determining whether or not the PPSA applies to the particular transaction and thus guiding factors have emerged leading a court to conclude that a security interest has arisen. The factors are compiled by Cuming R, Walsh C and Wood R and can be summarised as follows: ● an automatic vesting of ownership upon completion of the lease term ● an obligation to purchase ● the term of the lease itself (a longer term leans towards a security as opposed to true lease) ● commercially useful life of the subject matter (where a lease covers the entire viable period, or close to the useful life of the property, a court is more inclined to find that the lease is a security lease) ● the payment obligations imposed on the lessee (if the lessee is required to pay close to the commercial value of the underlying property, a security lease is more readily inferred than otherwise) ● the price of an option to purchase (where this is a nominal figure relative to the value of the lease repayments and the commercial value of the property it is likely that the arrangement constitutes a security lease) 8

For an in-depth examination of the PPSA and its application to lease arrangements see, Nicholas Mirzai, ‘‘The Personal Property Securities Act and commercial lease arrangements: A practitioner’s guide’’ (2011) 22 JBFLP 3.

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● the price to renew the lease or availability of renewal (can work both in favour of a finding for a security lease and against. More likely to trigger the effect of s 13 also) ● whether the lease is ‘‘open-ended’’ (the concept of which will be discussed below) ● the role of the parties (for instance, who bears the onus of repairs and maintenance to the property if so required? Where the lessee bears the burden as though they are the true owner of the property a security lease is more readily inferred) ● the nature of contractual remedies available (if there is an accelerated payment clause or a sudden increase in ‘‘rents’’ owed this reflects a financial remedy inconsistent with the existence of a true lease). For a useful review of the authorities, with a discussion of the range of factors that may be used by the court: see Royal Bank v Cow Harbour Construction Ltd (2012) 19 PPSAC (3d) 31, 59 Alta LR (5th) 215 (Alta QB). The question of whether a lease constituted a security interest came under judicial consideration in the Ontario Court of Justice case, Adelaide Capital Corporation v Integrated Transportation Finance Incorporated (1994) 6 PPSAC (2d) 267; 111 DLR (4th) 493. The facts of the case involved 87 trailers or vans subject to four lease agreements entered into between GL Inc and ITFI between December 1986 and August 1990. The lease agreements were registered. The registrations in January and December 1987 variously described the collateral in question as being ‘‘equipment’’, ‘‘book debts’’ and ‘‘other’’. The collateral was not described as ‘‘inventory’’, which in fact it was (the problems of which arise as a separate issue under the PPSA — see Pt 5.3 in particular). A trust company provided finance to ITFI, taking security by way of what can be described as a fixed charge debenture. The trust company registered a subsequent financing statement in February 1990.9 That registration was for a period of one year and was allowed to expire without being renewed. The registration additionally contained, in the optional collateral description field of the financing statement, a description that identified the collateral as ‘‘50 new cube vans’’. Blair J noted (at [21]) that ‘‘a lease agreement between parties may have all the appearances of being a ‘true’ lease, and may, indeed, be such an arrangement, but still be caught by the registration requirements of the PPSA if it also serves, in the overall transaction, to secure payment or performance of an obligation’’. His Honour continued (at [41]): ‘‘If the financing markets are to achieve the kind of stability and predictability, in terms of priority, which the PPSA envisages, creditors who are truly in the business of financing transactions should be required to indicate the collateral over which they are claiming a security interest, and not leave matters to guesswork as to whether they have truly leased the property to the debtor/lessee or not.’’ 9

A ‘‘financing statement’’ is the document which is filed to register a security interest under the PPSA. Under the Act, there is no longer a need to register the security agreement itself. For more information on the distinction between financing statements and security agreements generally, see s 10, 20 and Pt 5.3.

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The view taken by his Honour is not without its criticisms: see for example GMAC Commercial Credit Corp Canada v TCT Logistics Inc (2004) 238 DLR (4th) 487; 6 PPSAC (3d) 163 (Ont CA). However, in the authors’ view, where attributes of both an operating and a financing lease are present, the interest should be caught by the PPSA on grounds of consistency of interpretation of the PPSA. In any event, secured parties (lessors) who recognise the potential for the lease to be characterised as a security interest for the purposes of the PPSA should comply with the regime to avoid exposure. In DaimlerChrysler Services Canada Inc v Cameron (2007) 11 PPSAC (3d) 19; [2007] BCCA 144 at [31], Kirkpatrick JA (on behalf of the Court of Appeal for British Columbia, and in considering the guiding factors outlined in this commentary) followed the approach taken by the Ontario Supreme Court in the case of Re Ontario Equipment (1976) Ltd (1981) 1 PPSAC 303; 125 DLR (3d) 321 at [7]–[9]:10 ‘‘It is of the essence of a lease intended as security within the meaning of the Personal Property Security Act that the property in the subject of the lease is to pass ultimately to the lessee, who is obliged to pay the lessor what might be reasonably regarded as the purchase price with interest and carrying charges over the life of the lease. In such a case the transaction is not unlike a conditional sale agreement or hire purchase agreement. What I consider to be a practical definition of the distinction between a true lease and a lease by way of security was adopted in Re Crown Cartridge Corp., Debtor (1962), 220 F. Supp. 914, by Croake D.J. from the decision of Referee Asa S. Herzog: The test in determining whether an agreement is a true lease or a conditional sale is whether the option to purchase at the end of the lease term is for a substantial sum or a nominal amount . . . If the purchase price bears a resemblance to the fair market price of the property, then the rental payments were in fact designated to be in compensation for the use of the property and the option is recognized as a real one. On the other hand, where the price of the option to purchase is substantially less than the fair market value of the leased equipment, the lease will be construed as a mere cover for an agreement of conditional sale. The critical issue in every case is the intention of the parties and this depends upon the facts of the case. In Re Speedrack Ltd. (1980), 1 PPSAC 109, 33 CBR (NS) 209, 11 BLR 220, for example, the facts led to the conclusion that the lease was a security for the financing of the ultimate purchase of the subject-matter, and the failure to register a financing statement left the security interest unperfected and subordinate to the interest of the trustee in bankruptcy.’’ 10

Affirmed on appeal, Re Ontario Equipment (1976) Ltd (1982) 141 DLR (3d) 766; 35 OR (2d) 194.

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‘‘Of significance also is the relevant weight placed on particular factors over and above others. The factor analysed in this case was the remedy upon default. Her Honour continued in DaimlerChrysler Services at [45]–[46] (quoting from Professor Cuming’s article ‘‘True Leases and Security Leases under Canadian Personal Property Acts’’ (1983) 7 Can Bus LJ 251 at 278–279): ‘Default remedies cannot, by themselves, be a determinant because most lessees do not default; consequently, the other provisions in the leases are the ones which in practice govern the relationship of the parties. As is the case with other peripheral indicia of security agreements, default rights and remedies have corroborative value and are relevant to the extent that they help to tip the balance.’ [Emphasis added.] In the instant case, it appears that the learned chambers judge accorded more than ‘corroborative value’ to the default provisions. They did more than ‘tip the balance’. Instead, the default provisions played a determinative role in her decision that the impugned transaction was a security lease. It is important to bear in mind that the other factors considered by the chambers judge were classified as either equivocal or indicative of a true lease.’’ Importantly, this process of ‘‘weighing of factors’’ is not an exercise which should be restricted to the proper characterisation of lease arrangements and hence it has been considered in some detail in this commentary. A weighing up of appropriate factors when analysing any given instrument is the process of characterisation necessitated by the ‘‘in substance’’ test espoused by s 12(1). In the authors’ view, it is the preferred approach in determining the existence of any security interest, where they relevantly arise, irrespective of the form the underlying interest takes. While the factors no doubt vary between different instruments and as such, the significance of particular factors will also vary (compare leases and consignments for instance), the proper consideration and analysis of the following factors commonly arises: ● methods of enforcement ● length of time purported to bind the parties ● options to purchase (or obligations to purchase) — if any ● value of the underlying property, its commercial life and the aggregate sum of all obligations owing from the debtor. It is further worth noting that while title or ownership is a factor, and more particularly if/when title or ownership flows under the transaction, its weight will be affected by the nature of the underlying collateral, the context of the transaction and the terms of the instrument itself. It is true to say that in many circumstances, factors outside of the flow of title will determine whether or not a security interest has arisen. Annotated Personal Property Securities Act 2009 (Cth)

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[12.5.2.10] Assignments — s 12(2)(j) An assignment, put simply, refers to a transfer of property from one party to another. An assignment is absolute in essence, that is, there remains behind no interest held by the assignor. Where it can be said that an interest remains, the purported instrument is rarely an assignment at all rather a revocable mandate or creation of a trust. This principle of assigning property applies equally at common law and in equity and the way in which property is assigned is not distorted by the PPSA: see Canada Trustco Mortgage Corp v Port O’Call Hotel Inc (1996) 11 PPSAC (2d) 1; 133 DLR (4th) 609 at [44] (SCC). Issues commonly arise in a commercial sense where there is an assignment of book debt or accounts receivable: see Fairbanx Corp v Royal Bank (2010) 16 PPSAC (3d) 96; 68 CBR (5th) 102; Radius Credit Union Ltd v Royal Bank (2009) 14 PPSAC (3d) 124; 306 DLR (4th) 444; Royal Bank v Sparrow Electric Corp (1997) 12 PPSAC (2d) 68; 143 DLR (4th) 385. It should be noted that transfers of accounts or chattel paper will be deemed as security interests under s 12(3)(a), however, they may still satisfy the requirements of an ‘‘in substance’’ security interest under s 12(1). A valid equitable assignment of a chose in action can constitute a security interest: 356447 BC Ltd v Canadian Imperial Bank of Commerce (1998) 13 PPSAC (2d) 155; 157 DLR (4th) 682 at [11] (BC CA). This is not to say that all assignments, at law or in equity, will now require compliance with the PPSA (see for example s 8(1)(f)). Rather where parties attempt to mask a security interest behind the veil of an assignment, this will not prevent the PPSA from applying to the transaction pursuant to the ‘‘in substance’’ test (see s 12(1)).

[12.5.2.11] Transfers of title — s 12(2)(k) Intro IV makes clear that title is largely irrelevant for the purposes of determining priority under the PPSA. The movement of title however retains utility as a contributing factor to be used when determining whether or not a security interest has arisen on a particular set of facts. Like an assignment, the transfer of title will not in and of itself create a security interest. When consumers purchase goods from a retail store for instance, the transfer of good title from retailer to consumer does not create a security interest. Where the goods themselves are not paid for immediately however, and in the absence of the taking free provisions the transfer of title in these circumstances, could create a security interest. The issue arose in the British Columbia Court of Appeal case, Re Ellingsen (2000) FPPSR ¶700-115; 2000 BCCA 458; (2000) 1 PPSAC (3d) 307, where the sale of a truck was held at trial to constitute a security agreement while on appeal the decision was overturned. Justice Donald held at [18]: ‘‘With respect, I do not think the evidence reasonably supports the finding that this was a sale and that Hallmark retained a security interest after it released the truck. The deal was subject to financing by a third party which never materialized. There was no enforceable instrument on which Hallmark could sue Ellingsen for the purchase price. As Hallmark

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did not sign the Motor Vehicle Purchase Agreement it was never brought into effect. Ellingsen did not agree to pay cash for the new truck and at no time did Hallmark agree to finance the deal itself. The documents make it plain that credit was to be approved by a lending institution.’’ Indeed the term ‘‘transfer of title’’ is somewhat misleading as without additional conditions imposed a mere transfer can never amount to a security interest. In the authors’ view, this category of interest was included under s 12(2) to prevent attempts to circumvent the statutory requirements where applicable much like the above category of assignments (see s 12(2)(j)): see Ford Motor Co of Canada Ltd v Manning Mercury Sales Ltd (Trustee of) (1997) 12 PPSAC (2d) 1; 140 DLR (4th) 344 at [57]. Transfers of title also encapsulate sale and lease back arrangements of which further discussion arises at s 14(2)(a).

[12.5.2.12] Flawed asset arrangements — s 12(2)(l) The ‘‘flawed asset’’ comprises the final example encompassed by s 12(2) and can be defined as the conditions imposed on an asset (typically an account) which trigger before other interests arise (such as competing security interest). It is commonly used in a commercial sense with respect to an account held with a bank whereby the bank will not authorise the instruction to pay at the request of the account holder until the rights owing to the bank are duly met. The concept arose in the case of Re Bank of Credit and Commerce International SA (No 8) [1998] AC 214 and has been the cause of substantial comment since.11 The concern, in summary, is recognising a security interest taken over an obligation to repay (which the bank owes to the debtor). While arrangements of this kind are thus often complex, it is plain that in practical terms, a flawed asset facilitates a securing role from the perspective of the bank (hence inclusion under the PPSA). It is interesting to note that the PPSA expressly excludes rights of set-off, netting and the combination of accounts pursuant to section 8(1)(d) and (e), however flawed asset arrangements are caught by the Act. Typically, in a commercial sense, the flawed asset is simply the mechanism by which these rights are effectuated, however the point may prove to be an entirely academic one as no case law among the relevant US, New Zealand or Canadian provinces addresses this point. Indeed in the authors’ view, wherever issues of flawed assets arise, triggering events on accounts, the Payment Systems and Netting Act 1998 (Cth) should be consulted in conjunction with the PPSA (see also s 8 regarding exclusions to the PPSA). See further Diccon Loxton, ‘‘One flaw over the cuckoo’s nest: making sense of the ‘flawed asset arrangement’ example, security interest definition and set-off exclusion in the PPSA’’ (2011) 34(2) UNSWLJ 472. In that article the learned author argues that a simple flawed asset arrangement is unlikely to constitute a security interest, although extra rights conferred under particular 11

See, Peter Ward, ‘‘Personal property securities reform and the Conceptual Impossibility Doctrine’’ (2009) 20 JBFLP 106.

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arrangements may constitute a security interest, depending on what the extra rights purported to do in relation to personal property.

[12.5.3] Deemed security interests — s 12(3) The ‘‘deeming’’ of particular interests as security interests despite a failure of such interests to satisfy the ‘‘in substance’’ test prescribed by s 12(1) reflects a policy decision made by the Australian legislature to give primacy to commercial practice and is discussed in more detail under s 13 below (see s 13). The position is not unique to the Australian PPSA and similar legislative initiatives form part of foreign PPS regimes. To ‘‘deem’’ is to, in essence, require compliance with the PPSA in circumstances where an objective third party not privy to the relationship or dealing between the parties could potentially act to their detriment by assuming that a party other than the true owner of particular property was indeed the owner of such collateral. A simple lease example demonstrates the point: Party A leases a motor vehicle to Party B for a one year period. Some time after, Party B seeks to borrow funds and approaches Party C. Party C would be forgiven in their assessment of Party B’s assets to assume that Party B owned the motor vehicle and could otherwise encumber it. It is on this basis that the PPSA deems such an interest to constitute a security interest irrespective of whether or not the lease would otherwise satisfy s 12(1).

For the purposes of completeness, and in conjunction with s 13, transfers of chattel paper or an account and the formulation of a commercial consignment have been included as security interests largely in concordance with the New Zealand and Canadian provisions and in light of the commercial applicability of such instruments. Note also however that the original Ontario statute did not include provision for ‘‘deemed’’ security interests. This reflects varying policy perspectives between the uniform Canadian provinces and the Ontario regime. The Australian position appears to be more pragmatic than principled, broadening the scope of the PPSA where commercially necessary as opposed to reading provisions in a strict fashion. It should also be noted that the enforcement provisions in Pt 4 of the PPSA do not apply to deemed security interests unless they secure the payment or performance of an obligation: s 109.

[12.5.3.1] Transfers of accounts and chattel paper — s 12(3)(a) An account is defined by s 10 as meaning: ‘‘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

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(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: (a) an ADI account; (b) chattel paper; (c) an intermediated security; (d) an investment instrument; (e) a negotiable instrument.’’ The simplest example of an account is a book debt. The concept of an account was considered by the New Zealand Court of Appeal in 2013 in Strategic Finance Ltd v Bridgman [2013] 3 NZLR 650; [2013] NZCA 357. That case considered the meaning of the term ‘‘accounts receivable’’ in s 16 of the NZ PPSA, which is defined in similar terms to the s 10 definition of account, although it is broader: ‘‘NZ PPSA s 16(1) account receivable means 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 that case, the Court explained the concept as follows (at [55]–[59]): ‘‘‘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. An obligation of this nature will involve an existing liability on the part of the first party which is legally enforceable by the second party . . . When ‘monetary’ and ‘obligation’ are read together, it is also clear that the liability must be to pay an identifiable sum on an ascertainable date. This will include a claim of that nature based on debt statute or money had and received. A possible liability to pay an unidentifiable sum at an unascertainable future date will not suffice. The fact that in terms of the definition the monetary obligation ‘need not have been earned by performance’ confirms that existing monetary obligations that are not earned by performance under a contract are within the definition. Such obligations will include those that exist under deed, statute or by virtue of a court order, independently of any need for performance. Recognition of obligations which are not dependent on the need for performance does not mean, however, that an obligation that requires performance in order to come into existence will be recognised. The absence of performance in that case will simply mean that there is no obligation in existence.’’ Strategic Finance was applied in Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd (in liq) (recs and mgrs apptd) (2017) 320 FLR 259; [2017] WASC 152, where Annotated Personal Property Securities Act 2009 (Cth)

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the court explained the concept of a monetary obligation as follows (at [260]–[261]): ‘‘an existing legal obligation on one party to pay an identifiable monetary sum to another on an ascertainable date arising from the disposing of property or the granting of a right or providing services in the ordinary course of granting rights or providing services of that kind subject to the specified exceptions. I consider that a claim for payment for services provided pursuant to an agreement is capable of constituting a monetary obligation provided that the agreement contains a mechanism for ascertaining the amount to be paid and the payment date. If there is a legally enforceable obligation and a corresponding existing liability to make payment then it is immaterial that enforcement by court proceedings is required or that a court is required to resolve a dispute as to the amount to be paid or the payment date. Contractual claims of this nature may be contrasted with a right to claim damages in tort or equity, which the court in Strategic Finance held did not constitute monetary obligations. In the case of a right to claim damages in tort or equity a legally enforceable obligation and corresponding liability does not arise until judgment. By way of contrast, a legally enforceable contractual obligation and corresponding liability arises when there is performance in accordance with the terms of the contract.’’ An account may be contrasted with the concept of chattel paper, which involves both a monetary obligation and a security interest. As noted in the s 10 definition of an account, the concepts of accounts and chattel paper are mutually exclusive. If collateral is chattel paper it cannot be an account, and a monetary interest without a security interest in property cannot be chattel paper. Chattel paper is defined by s 10 as meaning 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 s 105) (b) a security interest in specific intellectual property or a specific intellectual property licence but does not include any of the following: (a) a document of title (b) an intermediated security (c) an investment instrument (d) a negotiable instrument.

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Chattel paper is a new type of personal property that is created by the PPSA. It is simply the combination of what constituted two separate items of personal property prior to the PPSA: ● a chose in action (a debt), and ● a security interest in specific goods. ‘‘Specific goods’’ is defined in the Sale of Goods Act 1923 (NSW) s 5 as ‘‘goods identified and agreed upon at the time a contract of sale is made’’. This term is used to denote particular items (such as a motor vehicle with a specific vehicle identification number (VIN)) rather than generic described goods (such as 100 tonnes of wheat). See further Ch 26 of Widdup L and Mayne L’s book [12.5.3.1]), which gives a detailed argument as to why the concept of specific goods in the PPSA should not be based on the Sale of Goods Act definition. Prior to the PPSA the methods for transferring the two items of personal property that make up chattel paper came under different legal regimes. The PPSA makes the assignment of both items easier through the recognition of the chattel paper as a discrete class of personal property. Common examples of chattel paper are hire purchase and leasing agreements. Chattel paper is also common for manufacturing businesses that may face cash-flow timing problems where customers pay over time (and the manufacturer retains title until full payment is made) and need to use their receivables as collateral. Thus, an equipment leasing company will hold choses in action (property rights in something intangible, or which is not in one’s possession, but enforceable through legal or court action) with respect to the lease of their goods which can be classified as accounts. Where the chose in action is combined (through one or more connected documents) with a security interest in particular goods (ie the leased property) then the writings (which include both interests) form chattel paper. The leasing company may then use its accumulated chattel paper as collateral for financing purposes by assigning the chattel paper to a finance company. A useful explanation of chattel paper financing is given in Joseph Levie, ‘‘Security Interests in Chattel Paper’’ (1969) 78 Yale Law Journal 935. See also the detailed examination given in Thomas Jackson, ‘‘Embodiment of Rights in Goods and the Concept of Chattel Paper’’ (1983) 50 University of Chicago Law Review 1051 and with respect to the Australian PPSA: Anthony Duggan, ‘‘Chattel paper’’ (2013) 41 ABLR 214. See generally Chapter 26 of Widdup L and Mayne L’s book at [12.5.3.1]). Professor Gilmore (one of the co-drafters of the UCC Art 9), noted that: ‘‘[c]hattel paper, despite the novelty of the nomenclature, is . . . an exclusively professional preserve: the people who deal with it know what they are dealing with and know the rules of the game. No classification difficulty need be anticipated . . .’’. It should be noted that the secured party with a security interest in chattel paper does not obtain a direct security interest in the underlying specific goods that are the subject matter of the transaction that gave rise to the chattel Annotated Personal Property Securities Act 2009 (Cth)

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paper. As Widdup L and Mayne L note [12.5.3.1]), the secured party in this circumstance has in reality two security interests: 1. a security interest in the monetary obligation owed from the transferee of the goods to the seller (under a conditional sale or hire purchase) or lessor, and 2. a security interest in the seller/lessor’s security interest in the underlying goods. Under the PPSA, both accounts and chattel paper may be used as collateral for a secured transaction. Both forms of personal property may also be transferred as part of a commercial transaction. Section 12(3)(a) deems the transfer of an account or chattel paper to be a security interest even if it does not secure the payment or performance of an obligation. These deemed security interests are common features of overseas PPSA statutes, however interestingly the ALRC recommended against including deemed security interests in favour of relying only on the ‘‘in-substance’’ approach: ALRC Report No 64 at [5.17]. Transfers of accounts and chattel paper are popular in both the factoring and the securitisation markets, with a broad variety of arrangements including both recourse and non-recourse loans. Where the transferee has recourse against the transferor the arrangement is similar (in substance) to a secured loan using book debt as collateral. Emphasising the rationale set out above, the justification for including transfers of accounts and chattel paper as deemed security interests is based on simplicity and on the concept of ostensible ownership. The simplicity argument is premised on the difficulties that may be associated with ascertaining whether a transfer of accounts or chattel paper is in substance a security device given the range of transactional structures used for these types of arrangements. The ostensible ownership argument is founded on the notion that third parties may find it difficult to determine whether particular arrangements are genuine transfers or are really disguised security devices. Given these arrangements are largely used by finance companies a policy decision was made to deem the arrangements to be security interests so as to bring them within the scope of the PPSA regime. The Ontario Court of Appeal considered transfers of accounts and factoring arrangements in Fairbanx Corp v Royal Bank (2010) 16 PPSAC (3d) 96; 68 CBR (5th) 102 and noted (at [11]): ‘‘The concept of the PPSA applying to a transfer of accounts where the transfer does not secure the performance of an obligation, i.e. an absolute transfer, is difficult to reconcile conceptually with the purpose of the Act, which is to provide a priority system for lenders who take security over the borrower’s assets. However, application of the Act to a transfer of accounts is in fact necessary for the effective operation of the PPSA to ensure that one system of priorities based on notice through registration and searches, applies to all transactions that affect entitlement to a borrower’s assets. The effect is that anyone who intends to lend money and to take security on the assets of a debtor, including on its accounts

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receivable, will be able to ascertain, by searching under the PPSA, whether and to what extent those assets have already been encumbered in any way.’’ See also TCE Capital Corp v Kolenc (Trustee of) (1999) 14 PPSAC (2d) 257; 172 DLR (4th) 186 (Ont SC). It should be noted that several forms of transferring accounts and chattel paper that do not serve any security functions and that would not mislead third parties are excluded from the operation of the PPSA by s 8(f)(vi)–(ix). Reference should be made to the commentary for s 8. The PPSA includes several specific rules related to transfers of accounts or chattel paper: see s 38, 71 (chattel paper only), 80, 81, 268, 339. See further John Stumbles, ‘‘The Impact of the Personal Property Securities Act on Assignments of Accounts’’ (2013) 37(2) Melbourne University Law Review 415; Widdup L and Mayne L, Personal Property Securities Act: a conceptual approach, 2002 revised ed, LexisNexis, Chapter 26; N Mirzai and P Richter, ‘‘Why the Australian Finance Industry Should Pay Closer Attention to Chattel Paper’’ (2014) 25(4) JBFLP 228.

[12.5.3.2] Commercial consignments — s 12(3)(b) Commercial consignments are defined in s 10 as meaning 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.’’ The wording of this definition suggests that the inclusion of commercial consignments irrespective of whether or not the instrument satisfies s 12(1) is aimed at addressing the ostensible ownership problem outlined above and the potential confusion that may be felt by third parties who are not otherwise made aware that the consignee in possession of the goods is not the owner. In determining whether or not a consignment satisfies s 12(1) or not, a similar analysis is contained in 12.5.2 above. The Ch 4 enforcement provisions only apply if the consignment satisfies the test pursuant to s 12(1). The distinction between ‘‘true’’ consignments and ‘‘commercial’’ consignments arose in the Saskatchewan Court of Queen’s Bench decision, Farm Credit Corp v Valley Beef Producers Co-operative Ltd (2001) 3 PPSAC (3d) 26; Annotated Personal Property Securities Act 2009 (Cth)

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211 Sask R 222.12 The facts of the case concern a breeder who entered into an agreement with the producers’ co-operative under which the co-operative obtained a loan from a bank for the purpose of purchasing cattle in the name of the co-operative but which were used for the benefit of the breeder. The test applied in relation to the Breeders Agreement between the parties focused on determining whether or not a principal/agency relationship had arisen (a strong indicator that the consignment was a ‘‘true’’ consignment). Justice Klebuc held, in this regard (at [26]–[28]), that: ‘‘Whether a consignment is subject to the provisions of the PPSA is dependent on the contractual relationship between the consignor and the consignee. If the relationship can be characterized as one between a principal and an agent, then it may be a true consignment. If in substance the relationship is one of a seller and buyer and not principal and agent, then it constitutes a commercial consignment to which the PPSA applies. It is generally accepted that if the consignee has a legal right to return to the consignor any or all of the consigned goods without obligation, then the arrangement is likely a true consignment. Conversely, if the right to return goods is simply one for a credit against the obligation to pay for the goods, then it is likely a commercial assignment: Stephanian’s Persian Carpets Ltd Re (1980), 34 C.B.R. (N.S.) 35 (Ont. Bktcy.). I would add that in a true principal and agent relationship, the agent consignee is obligated to recognize the consignor’s right to the proceeds of disposition.’’ His Honour continued (at [29]), citing Cuming R and Wood R, Saskatchewan and Manitoba Personal Property Security Acts Handbook, 1994, Carswell at p 48: ‘‘[A]dditional factors that tend to characterize a relationship of seller and buyer and not principal and agent: (i) freedom given to the consignee to set the sale price of the goods at any level above that set by the consignor, accompanied by a right to retain as remuneration the difference between the sale price and the set price; (ii) contractual assumption by the consignee of the risk of loss of or damage to the consigned goods; and (iii) a right given to the consignee to buy the consigned goods and then sell them on his own account.’’ See also Glengarry AET Inc (Trustee of) v Manhattan Electric Cable Corp (1986) 6 PPSAC 112 (Ont SC); Access Cash International Inc v Elliot Lake & North Shore Corp for Business Development (2000) 1 PPSAC (3d) 209 (Ont SCJ). In Re Arcabi Pty Ltd (recs & mgrs apptd) (in liq) (2014) 288 FLR 236; [2014] WASC 310, the Court held that notes and coins held on consignment by a dealer were not covered by a commercial consignment because there was 12

Note: While the decision was partially overturned on appeal, the proper characterisation of a commercial consignment was dealt with at first instance. For the appeal decision see, Farm Credit Corp v Valley Beef Producers Co-operative Ltd (2002) 5 PPSAC (3d) 1; 218 DLR (4th) 86.

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insufficient evidence that the clients dealt in goods of that kind in the ordinary course of business and because most of the creditors of the consignor believed that Arcabi sold goods of others. The result of this analysis is that where a court is satisfied that a consignment is in fact a commercial consignment, the rules of the PPSA apply and a failure to perfect renders the secured party’s interest vulnerable to subsequent perfected creditors over the same collateral, that is, the consigned property. In the authors’ view a conservative approach is thus justified by way of recognising the potential for a consignor to lose first priority to their property in essence. Where such interests arise or it is uncertain whether the consignment is a true consignment or a commercial consignment, perfection should duly follow: see Community Futures Development Corp of Howe Sound v Spargo (2000) 1 PPSAC (3d) 274; 2000 BCSC 1471; Community Futures Development Corp of Howe Sound v Spargo (2000) 1 PPSAC (3d) 263; 76 BCLR (3d) 190 (BC SC).

[12.5.3.3] PPS leases — s 12(3)(c) See discussion of s 13.

[12.5.4] Charge-backs permitted — s 12(3A), (4) These sections clarify the uncertainty that existed prior to the PPSA as to the validity of charge-backs. Charge-backs allow a party who owes an obligation to take security over that obligation. For example, a bank may take a security interest over an account held by one of its customers. See further Peter Ward, ‘‘Personal property securities reform and the Conceptual Impossibility Doctrine’’ (2009) 20 Journal of Banking and Finance Law and Practice 106. Reference should also be made to s 25 and 75 which consider the perfection and priority of security interests in authorised deposit taking institution accounts (ADI accounts).

[12.5.5] Exclusions to security interests — s 12(5) Section 12(5) provides express exclusions from the PPSA of particular interests irrespective of whether the ‘‘in substance’’ test is satisfied. Section 12(5) thus operates in conjunction with s 8. To date, the PPS Regulations specify that the extinguishment of a beneficial interest in an account or chattel paper is not a security interest: Personal Property Securities Regulations 2010 (Cth) Reg 1.8. With regards to licences pursuant to s 12(5)(a), s 10 of the PPSA defines the term ‘‘licence’’ as: ‘‘either of the following, if it is transferable by the licencee (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; Annotated Personal Property Securities Act 2009 (Cth)

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Personal Property Securities Act 2009 (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.’’ See Declared statutory licenses discussed at [8.5.18]. Section 12(5) makes it clear that while a licence is not itself a security interest (and generally does not confer proprietary rights in any personal property) a licence can however constitute an item of personal property, but only if it has the characteristics of transferability (even if that right is limited). Licences which satisfy transferability requirements can thus be used as collateral for the purpose of creating a security interest. See further Re Elite Sydney Pty Ltd [2016] NSWSC 1934. In the authors’ view, a licence can be distinguished from the instruments described under s 12(2) on the grounds that it generally does not confer proprietary rights in any personal property. This is so even where a licence purports to secure payment or performance of an obligation, in substance. It is likely, however, that if this is the case that the instrument is not a licence and it should be prudently remembered that the form of the instrument is irrelevant in considering whether or not a security interest arises. Where properly described, characterised and constituted, a licence does not give rise to a security interest pursuant to s 12(5)(a). In practical terms, a licensor need not comply with the PPSA by way of perfecting their interest, and the law relating to the scope and extent of the licence agreement stem beyond the PPSA. The restriction is somewhat confused however as a licence can be subject to a security interest under the PPSA, that is, there is property in the licence itself. This is particularly important with respect to intellectual property licences which have been expressly included in the definition of ‘‘licence’’ pursuant to s 10. Part 3.5 of the PPSA operates in this regard due to the growing commercial value associated with intellectual property and its increased use as a form of collateral. How far one can go by way of characterising a particular instrument as a ‘‘licence’’ is not strictly defined and like with respect to consignments and leases, judicial interpretation is required. The use of licences as forms of collateral is particularly important with respect to intellectual property licences which have been expressly included in the definition of ‘‘licence’’ pursuant to s 10. Part 3.5 of the PPSA operates in this regard due to the growing commercial value associated with intellectual property and its increased use as a form of collateral.

[12.5.6] Subordination agreements excluded by the PPSA — s 12(6) Subordination agreements are generally beyond the scope of the PPSA’s application. While recognised by the Act as an important mechanism of contractually altering priorities (pursuant to s 61), no formal requirements are imposed by the PPSA on such agreements (unless the subordination gives rise

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to a security interest in its own regard). Section 12(6) expressly excludes subordination agreements from the definition of a security interest. To ‘‘subordinate’’, in essence, means to render an interest held in priority subject to some other interest. Under the PPSA, and indeed under the law prior to the PPSA, a secured party can effectively postpone or render: ● all or any part of their rights with respect to the primary obligation (that is, as between the secured party and the debtor) owed by the debtor to a third party (pursuant to s 12(6)(a)), or ● all or any part of their rights with respect to the security agreement (that is, as against third parties) to a third party (pursuant to s 12(6)(b)). While no additional requirements pursuant to the PPSA are necessary for parties seeking to enter into a subordination agreement, all the protections associated with the Act similarly do not apply and thus the principles of contract law should be sought in enforcing rights beyond those conferred by s 61 (see s 61). Without seeking to embark upon the interaction between the concepts of subordination and the purchase money security interest discussed at s 14 of the PPSA, the introduction of the concept of a purchase money security interest, in effect, overcomes the difficulty of one party approaching another party for express subordination. Like the ‘‘deeming’’ provisions of the PPSA (see s 12(3) and 13) where one is able to satisfy s 14 such that the relevant security interest is, as a matter of fact, a purchase money security interest, then one need not concern oneself with express subordination as priority over the collateral to which the purchase money relates is afforded priority in any event (assuming the holder of the purchase money security interest otherwise meets the perfection requirements under the PPSA). For more information on purchase money security interests see s 14 of the PPSA. The PPSA recognises subordination agreements on the following two-fold rationale. First, while the agreement effects a third party (who can duly enforce the benefit pursuant to s 61(2)(b)) subordination agreements cannot be used as mechanisms to alter the priorities between those parties not bound by the agreement and thus the interest obtained by the beneficiary of a subordination agreement is no higher than that of the original secured party. Secondly, the commercial reality of many transactions will require the alteration of priorities which can not be effectuated by the PPSA default priority regime. Take the following example: Debtor A borrows funds from Secured Party B who takes an ‘‘all present and after acquired property’’ security interest (or a ‘‘General Security Agreement’’ as it is commonly referred to among the Canadian provinces) over Debtor A’s personal property. Debtor A, among other personal property, has proprietary rights in a motor vehicle. Creditor C wishes to take first priority in the motor vehicle and arranges for Secured Party B to subordinate their interest over the motor vehicle for the benefit of Creditor C (who also registers an interest). Creditor C in return satisfies Debtor A’s obligations to Secured Party B, that is, Creditor C pays the amount owing to Secured Party B in accordance with the market value of the motor vehicle.

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Secured Party B cannot retain first priority against all the remaining collateral (recognised at the time the original security interest was perfected) without the use of a subordination agreement. Subordination agreements are thus particularly useful in facilitating carve outs from larger security interests. In the converse, Creditor C cannot obtain first priority in a discrete item of Debtor A’s personal property without the subordination of Secured Party B and thus both parties benefit from the availability of subordination. Note also that this final payment is as agreed between the parties. The value of the motor vehicle will not necessarily reflect the complete obligation owing by Debtor A to Secured Party B (as will often be the case). As these agreements are not bound by PPSA principles the negotiating power of the secured party and interested creditor will determine the terms of the agreement entered. The concept of subordination was discussed in considerable depth in the Newfoundland and Labrador Court of Appeal case, Re Hickman Equipment (1985) Ltd (2006) 10 PPSAC (3d) 206; 274 DLR (4th) 372. In this case, the effect of a subordination agreement was analysed particularly the scope of the agreement to go beyond the priorities of those parties bound (see s 61 for a more detailed discussion).

[12.6] Further reading ● ● ● ●

● ●

● ● ● ●

●

●

Explanatory Memorandum [2.10–2.13]. ALRC Report No 64 [5.3–5.29]. Whittaker Report [4.1], [4.2], [4.3], [5.1], [7.1], [7.7], [8.7], [9.3]. Michael Bridge, Roderick Macdonald, Ralph Simmonds and Catherine Walsh, ‘‘Formalism, functionalism and understanding the law of secured transactions’’ (1998) 44 McGill Law Journal 567. Matthew Broderick, ‘‘PPSA and construction law’’ (2013) 29 Building and Construction Law Journal 298. Cheyne Clarke, ‘‘The threshold requirements of the PPSA: Does s 12 require an interest in rem in order to create a security interest?’’ (2016) 27 Journal of Banking and Finance Law and Practice 6. Brian Coburn, ‘‘Consignment sales and the PPSA’’ (1981) 6 Canada Business Law Journal 40. Anthony Duggan, ‘‘Chattel paper’’ (2013) 41 Australian Business Law Review 214. James Glister, ‘‘The Role of Trusts in the PPSA’’ (2011) 34 UNSWLJ 628. Diccon Loxton, ‘‘One flaw over the cuckoo’s nest: making sense of the ‘flawed asset arrangement’ example, security interest definition and setoff exclusion in the PPSA’’ (2011) 34(2) UNSWLJ 472. Diccon Loxton, ‘‘New bottle for old wine? The characterisation of PPSA security interests’’ (2012) 23 Journal of Banking and Finance Law and Practice 163. Diccon Loxton, ‘‘In with the Old, Out with the New? The Rights of a Replaced Trustee Against its Successor, and the Characterisation of Trustees’ Proprietary Rights of Indemnity’’ (2017) 45 Australian Business Law Review 285.

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● Sheelagh McCracken, ‘‘Conceptualising the Rights of a Lessee under the Personal Property Securities Regime: the Challenge of ‘New Learning’ for Australian Lawyers’’ (2011) 34(2) UNSWLJ 547. ● Nicholas Mirzai, ‘‘The persistence of equitable doctrine with respect to the law relating to personal property securities: assessing the impact of the Personal Properties Securities Act 2009 (Cth)’’ (2013) 24 Journal of Banking and Finance Law and Practice 3. ● Chris Pearce, ‘‘Retention of old titles: Pre-PPSA retention of title agreements and unfair preferences’’ (2016) 44 Australian Business Law Review 397. ● John Stumbles, ‘‘The PPSA: The Extended Reach of the Definition of the PPSA Security Interest’’ (2011) 34(2) UNSWLJ 448. ● See also the series of four articles by Professors McCracken, Stumbles and Tolhurst in (2015) 33 Journal of Contract Law on the topic of ‘‘Title Transfer Collateral Arrangements’’ under the PPSA. ● John Stumbles, ‘‘The Impact of the Personal Property Securities Act on Assignments of Accounts’’ (2013) 37(2) Melbourne University Law Review 415. ● Gregory Tolhurst, Tony Coburn and Alan Peckham, ‘‘Security interests at the margins’’ (2012) 40 Australian Business Law Review 241. ● Roderick Wood, ‘‘The Floating Charge in Canada’’ (1989) 27 Alberta Law Review 191. ● Bruce Whittaker, ‘‘Retention of title clauses under the Personal Property Securities Act 2009 (Cth)’’ (2010) 21 Journal of Banking and Finance Law and Practice 273.

¶1-070 13(1)

SECTION 13 MEANING OF PPS LEASE A PPS lease means a lease or bailment of goods:

(a) for a term of more than 2 years; or (b) (Repealed by No 39 of 2017) (c) for a term of up to 2 years 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 2 years; or (d) for a term of up to 2 years, or a lease for an indefinite term, 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 2 years 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 2 years). (e) (Repealed by No 74 of 2015) 13(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 Annotated Personal Property Securities Act 2009 (Cth)

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Personal Property Securities Act 2009 (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 (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. Bailments for value only 13(3) This section only applies to a bailment for which the bailee provides value.

[13.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 16 s 2(1)(y) s 1(1) no equivalent, but see UCC § 1-201(35), 1-203 and UCC Art 2A

[13.2] Outline Unlike its foreign counterparts, the Australian PPSA provides a separate section for defining PPS leases (typically the term is provided for under the Act’s relevant definitions or interpretation section). The intuitive reasoning behind this approach is to emphasise the different nature with which a lease interest is regarded under the PPSA relative to prior law. Under the PPSA, a lease, even where it does not secure payment or performance of an obligation, may be defined as a security interest for the purposes of the Act subject to the requirements of s 13. Termed ‘‘deemed security interests’’ abroad (particularly in New Zealand), the PPSA expressly incorporates certain instruments not typically associated with the creation of a security interest in (specifically, leases and bailments in this section) in order to facilitate and enforce a consistent priority regime for all interests that may give rise to security arrangements. This is a section that has been the subject of law reform since the last edition, with the removal of the 90-day deeming rule for serial numbered property in 2015 and the removal of indefinite terms (s 13(1)(b)) and changes from one year to two years in 2016. Further discussion appears at [13.5.6].

[13.3] Cross-references ● Section 12 includes PPS leases as deemed security interests. ● Section 14 includes a PPS lease within the concept of a purchase money security interest (PMSI).

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● Section 19(5) provides for attachment under a PPS lease when the grantor obtains possession of the goods. ● Section 109 excludes deemed security interests from the Ch 4 enforcement rules.

[13.4]

Concepts

The ‘‘PPS Lease’’ is itself a concept which will form the focus of the following commentary. Other concepts arising from this section include: ● Bailment See Bredenkamp v Gas Sensing Technology Corp; Re Welldog Pty Ltd (In Liq) (Rec and Man Apptd) [2017] FCA 1065; Re Arcabi Pty Ltd (recs & mgrs apptd) (in liq) (2014) 288 FLR 236; [2014] WASC 310. ● Consumer property This is defined by s 10. ● For a term In Bredenkamp v Gas Sensing Technology Corp; Re Welldog Pty Ltd (In Liq) (Rec and Man Apptd) [2017] FCA 1065, it was held that a uncertainty regarding when a bailment relationship would end meant that the bailment was not ‘‘for a definite term’’ but rather was for an indefinite term (which was previously relevant under s 13(1)(b) — now-repealed). ● Possession See s 24. ● Regularly engaged in the business of leasing goods This is discussed below. ● Serial numbered goods Certain collateral may or must be described in a financing statement by serial number. This is discussed in s 153. ● Value The concept of value is defined by s 10. See also Bredenkamp v Gas Sensing Technology Corp; Re Welldog Pty Ltd (In Liq) (Rec and Man Apptd) [2017] FCA 1065; Re Arcabi Pty Ltd (recs & mgrs apptd) (in liq) (2014) 288 FLR 236; [2014] WASC 310. See further [19.5.2]ff, especially [19.5.2.2].

[13.5] Commentary [13.5.1] Concept of a lease generally ............................................................84 [13.5.2] The PPS lease — default application — s 13(1) ............................85 [13.5.3] Application and scope of the PPS lease — s 13(1) .......................88 [13.5.3.1] Priorities ................................................................................88 [13.5.3.2] Limitations to the ambit of the PPSA ................................92 [13.5.3.3] Enforcement provisions ......................................................93 [13.5.4] Exceptions — s 13(2) .........................................................................93 [13.5.4.1] Regularly engaged in the business of leasing/bailing goods: s 13(2)(a) and (b) .......................................................................94 Annotated Personal Property Securities Act 2009 (Cth)

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Personal Property Securities Act 2009 [13.5.4.2] Consumer property incidental to use of land: s 13(2)(c) ..................................................................................................................97 [13.5.4.3] Pooling arrangements: s 13(2)(d), reg 1.9 .........................97 [13.5.5] Bailments for value — s 13(3) .........................................................98 [13.5.6] The Personal Property Securities Amendment (PPS Leases) Act 2017 ..........................................................................................................................100

[13.5.1] Concept of a lease generally The term ‘‘lease’’ is generally understood as an agreement whereby a leasehold interest or possessory interest in property (compare a mere licence to use which confers no proprietary interest in the underlying property) is conveyed to another usually in exchange for consideration of rent or other periodical payment. At law, a lessor (the owner of the property who provides the lease to the lessee), retains reversionary legal title to the property leased and can thus enforce their ownership interest over the property should the lessee breach the lease agreement. The lease agreement will also usually confer on the lessor various rights (such as the right to periodic inspections). Although a lessee has a proprietary interest in the leased property, and typically has the exclusive use of the leased property, the lessee’s use and enjoyment of the property will be restricted by the terms of the lease and by the lessor’s reversionary interest. Strictly speaking, a lessee therefore cannot sell, transfer or otherwise deal with the leased property as though it were their own property, unless the lease so provides (in which case, query whether the instrument creates a lease or some other type of transaction). The common law rule applied in such circumstances can be quoted as nemo dat quad non habet, that is, ‘‘no one [can] give what one does not have’’. Under pre-PPSA law, a lessee cannot pass better title to a third party than that which they have themselves. Over time the concept of a lease and its varying applications and uses resulted in a divide between what is commonly understood to be an ‘‘operating’’ or ‘‘true’’ lease as distinct from a ‘‘financing’’ or ‘‘security’’ lease. A ‘‘financing’’ or ‘‘security’’ lease, typically involves a transfer of title from the lessor to the lessee when the period of possession enjoyed by the lessee ends. In the alternative, an ‘‘operating’’ or ‘‘true’’ lease functions in the absence of any intention at the outset to transfer title from the lessor to the lessee at any stage. How the PPSA applies to leases appears to be obvious from these simplistic definitions such that the first instrument, the financing lease, would be caught by the PPSA as the entire lease operates much like a simple mortgage with possession enjoyed by the lessee and ultimately the transfer of title, whereas the second instrument, the operating lease, would not be caught. However, as the body of case law in Australia and abroad illustrates, the distinction is often not clear and it is not uncommon for leases to contain both financing and operating characteristics. It is this ambiguity that s 13 aims to address. The failure of owners and lessors to appreciate the limits of the protection provided by the transitional provisions where their arrangements constitute a PPS lease is further illustrated in the decision in White v Spiers Earthworks Pty

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Ltd [2014] WASC 139 (16 April 2014). In that case a lessor under a pre-PPSA hire purchase arrangement covering vehicles used in the mining industry failed to perfect its interest under pre-PPSA law involve chattel securities (in this case motor vehicles). As in the case of Re Maiden Civil (P&E) Pty Ltd [2013] NSWSC 852, the owner was not protected by the deemed perfection provisions in s 322 because of the operation of PPS Reg 9.2. This meant that the transitional security interest was unperfected when the grantor entered voluntary administration and hence the vesting rule in PPSA s 267 applied. One further interesting aspect of the White v Spiers case is the approach that the Court took to assessing the nature of the owner’s security interest in the vehicles under the hire purchase arrangement. Although the arrangement fit within s 13 as a PPS lease, the Court held that this issue did not need to be decided as the relationship was an in substance security interest under s 12(1).

[13.5.2] The PPS lease — default application — s 13(1) There are two methods the PPSA utilises in addressing whether a lease is an operating or financing lease. The first involves the application of the ‘‘in substance’’ test as discussed above at s 12(1). The second is a blanket operation of the Act for perfection and priority purposes for instruments which satisfy one of the following classifications, regardless of whether or not s 12(1) is also satisfied: ● A lease or bailment of goods for more than two years — s 13(1)(a) ● A lease or bailment where a combination of all options to renew (automatic or at the request of either party), if any, would extend the aggregate term of possession beyond two years — s 13(1)(c) ● A lease or bailment where the lessee or bailee enjoys uninterrupted or substantially uninterrupted possession of the property for two years or more — but the section only applies where the lessee or bailee has had possession for at least two years — s 13(1)(d) The definitions pursuant to s 13(1) should not present conceptual difficulty and should be applied in a literal way. Take the following example: Lessor A arranges six month lease over their computer system in favour of Lessee B. The lease contains an agreement that the lease may be extended for three additional months with the consent of both parties. This provision operates in perpetuity such that so long as both the lessor and lessee consent to extend the lease, the underlying agreement will continue to bind both parties. Is this a PPS Lease?

Pursuant to s 13(1)(c) this is a PPS Lease. Subparagraph 13(1)(b) may also apply. In the interests of not being caught by s 13, for whatever reason, parties should be careful and precise when preparing their leasing arrangements. Alternatively, and in the preferred view of the authors’, parties should seek advice in order to comply with the perfection requirements of the Act where there is doubt about whether or not these provisions apply. The use of ‘‘two years’’ as a benchmark under this section shares a similar rationality to that of short and long term assets as part of accounting Annotated Personal Property Securities Act 2009 (Cth)

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principles. There is a level of permanency which is associated for possession for more than a year. More importantly, the inclusion of this provision at all has been subject to debate particularly in Ontario. As previously stated, originally the Ontario PPS regime did not include special provision for ‘‘leases for a term of more than one year’’ as the PPSA was never intended to operate beyond instruments that create security interests over personal property. There is some theoretical accuracy to this proposition however in practice, the operating/financing lease dichotomy would continue detracting from the objective of the Act to provide a clear and consistent approach to securities law. In the authors’ view, the inclusion of s 13 in the Australian Act is a valuable one (note, however, the exceptions below at [13.5.3], especially [13.5.3.2]). A mere non-exclusive license to use personal property will not constitute a lease for the purposes of the PPSA: Stoke Resources & Consulting Inc v Auto Body Services Red Deer Ltd [2011] ABCA 370. In the context of the former s 13(1)(b) of the PPSA, now-repealed, consideration of whether a lease, which was anticipated to be for a period for less than one year but which did not provide for fixed period of time, constituted a ‘‘PPS lease’’ within the meaning of s 13(1)(b) was the subject of Carrafa (as liquidatiors of Relux Commercial Pty Ltd (ACN 155 749 438) (in liq) v Doka Formwork Pty Ltd (2014) 104 ACSR 163; [2014] VSC 570, where Relux Commercial Pty Ltd leased formwork and associated equipment (formwork equipment) from Doka Formwork Pty Ltd. The relevant clause of the agreement was as follows: ‘‘The duration of any rental period commences on the date which the ordered material leaves the Doka warehouse. Any rental period will end on the date the rented material is returned to the Doka warehouse. Any partial return and/or delivery of material shall be deducted pro-rata according to agreed rental rates.’’ In interpreting this clause, Sifris J held (at [26]): ‘‘the Doka terms indicate that the lease was for an indefinite period only ending when the formwork equipment was returned to Doka’’. Whether the parties anticipated that the period of the lease would, in actual fact, be less than one year in total did not alter the plain language of the agreement and did not prevent the lease from being characterised as a ‘‘PPS lease’’ for the purposes of the PPSA. In Doka Formwork, the consequence of constituting a PPS lease which was not perfected (for a particular period) led the Court to find (at [59]–[60]) that: ‘‘As noted by courts who have previously considered these and similar provisions of the Act, the effect of these provisions is to extinguish the lessor’s interest in the property where it is not registered within time: See, Albarran v Queensland Excavation Services Pty Ltd (2013) 277 FLR 337 at 359; White v Spiers Earthworks Pty Ltd (2014) 99 ACSR 214 at 221.

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This can lead to seemingly draconian outcomes, particularly where the property is valuable such as in this case where the Formwork Equipment was valued at over a million dollars. The impact of these provisions is compounded by the broad scope of the PPSA and the large number of interests covered by it: See, s 12 of the Personal Property Securities Act 2009 (Cth). Despite these consequences, as noted in the Explanatory Memorandum, these provisions are needed ‘to prevent security interests being granted fraudulently with knowledge of an imminent administration, liquidation or deed of company arrangement’: Explanatory Memorandum, Personal Property Securities (Corporations and other Amendments) Bill 2010 (Cth) 13. Moreover, in order to avoid these consequences, security interest holders can simply ensure they register their interests as soon as possible after they are granted.’’ This is consistent with the approach taken by Matheson J in Gelowitz v Garcon Enterprises Ltd (1995) 132 Sask R 273, who held (at [19]–[21]): ‘‘Section 2(y) [see now s. 2(1)(g) of the 1993 Act] defines ‘a lease for a term of more than one year’ as including ‘a lease for an indefinite term, including a lease for an indefinite term that is determinable by one or both of the parties not later than one year after the day of its execution’. The wholesale rental agreement does not contain any time limit. Although clause 5.1 states that either Holdco or Garcon was entitled to terminate the agreement without cause at the end of any month upon one month’s clear notice, the evidence is clear that the agreement was still in existence on April 24, 1995, when Holdco caused the inventory and other personal property of Garcon to be seized. The wholesale rental agreement clearly falls within the extended definition of a ‘lease for a term of more than one year’, and is therefore a security agreement encompassed by the Personal Property Security Act.’’ In the authors’ view, consistent with the authorities referred to above, the preferred approach to the interpretation of s 13(1)(b) of the PPSA is to consider whether the relevant contract or agreement has a definitive or defined term or period without regard to whether this term or period is then referrable to more than one year or any other date. The bracketed words in s 13(1)(b) make clear, as a matter of construction, that the determinability of the lease prior to one year is an irrelevant consideration. If the lease does not have a defined term, the better view is that it is a PPS lease. In the authors’ view, for avoidance of doubt, lessors of personal property ought to revise their lease terms to include a fixed or defined term or period or adopt an internal practice of assuming that the lease constitutes a PPS lease and complying with the requirements of the PPSA (which is likely s 21 of the PPSA among other sections). Lessors ought to seek independent legal advice in respect of their particular position and circumstances. Annotated Personal Property Securities Act 2009 (Cth)

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[13.5.3] Application and scope of the PPS lease — s 13(1) In further support of a separate section for establishing the PPS lease, several foreign cases have turned directly on point. For further discussion, see: ● [13.5.3.1] Priorities ● [13.5.3.2] Limitations to the ambit of the PPSA ● [13.5.3.3] Enforcement provisions.

[13.5.3.1]

Priorities

As the PPS lease is a deemed security interest it will fall within the system of priorities set out by the PPSA. This is perhaps the most striking difference between the PPSA and the prior law and it provides a clear example of the reduced role of the nemo dat (‘‘no one [can] give what one does not have’’) rule under the PPSA. Where one considered that what one is dealing with can be appropriately characterised as a PPS lease, the words of the Supreme Court of Canada are instructive. In Re Giffen (1998) 13 PPSAC (2d) 255; 155 DLR (4th) 332 the Supreme Court of Canada considered a dispute as to priority over a car that was leased by a bankrupt for more than one year and where the lessor failed to perfect its security interest. Arguments were raised regarding the superior title of the lessor, but the Court responded (at [28]): ‘‘this dispute cannot be resolved through the determination of who has title to the car because the dispute is one of priority to the car and not ownership in it. It is in this context that the PPSA must be given its intended effect . . .’’. The dramatic effect of deeming PPS leases to be security interests can be seen in the first major case that applied the PPSA in Australia: Re Maiden Civil (P&E) Pty Ltd; Albarran v Queensland Excavation Services Pty Ltd (2013) 277 FLR 337; [2013] NSWSC 852. In that case, Maiden Civil took possession of three large Caterpillar vehicles for use in its construction business during the period between 2010–2012. The vehicles were leased from Queensland Excavation Services (QES), although the precise terms of the lease were not fully recorded in writing. QES has acquired the vehicles using finance from both Westpac (for two vehicles) and Esanda (for the third vehicle). The contract between Maiden Civil and QES provided for Maiden Civil to pay QES’s finance costs plus an additional fee to QES. When finance on the third vehicle (financed by Esanda) was fully paid Maiden Civil stopped making payments in relation to it, but kept paying for the other two vehicles until it became insolvent and entered voluntary administration. QES did not register a security interest on the PPSR to cover its interest in the vehicles as it relied upon its status as owner and because the lease contracts were transitional security interests that did not require registration. Maiden Civil obtained finance from Fast Financial, during 2012, which was provided under a secured loan that was fully in writing and listed the three vehicles as collateral. Fast Financial registered its interest in the vehicles with an effective registration on the PPSR. When Maiden Civil experienced financial difficulties

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it entered voluntary administration, and Fast Financial appointed a receiver. QES claimed priority over the three vehicles as owner/lessor. Another company, Central Plant Hire, had seized one of the vehicles as security for an undocumented loan it said was outstanding from Maiden Civil. The receiver appointed by Fast Financial claimed priority over all three vehicles on the basis that Fast Financial had a perfected security interest in them which took priority over the unperfected interests of QES and Central Plant Hire. The NSW Supreme Court held that the contract over the vehicles between Maiden Civil and QES was in the nature of a finance lease for a period of more than one year, which meant that it was PPS lease under s 13 and hence a deemed security interest under s 12(2). The court held that Maiden Civil had paid off the vehicle financed by Esanda and therefore owned it, while it was merely leasing the remaining two vehicles that were subject to finance from Westpac. With respect to the vehicles subject to financing, QES had a transitional security interest as its contract pre-dated the PPSA but it was not entitled to the protection of deemed perfection under s 322 as it had not complied with registration laws prior to the PPSA that applied in the Northern Territory (where the vehicles were used, compared with Queensland, which had different registration laws, where QES was based): s 322(3) and PPS Regulations 2010 (Cth) reg 9.2. The court held that Fast Financial’s security interest satisfied the attachment requirement in s 19 and the writing requirements of s 20, but noted that QES’s contract did not satisfy s 20 as it was not in writing and did not cover the required elements of s 20(2). The court determined that Fast Financial’s perfected security interest had a higher priority to QES’s unperfected security interest. The court also held that there was insufficient evidence to verify the claims of Central Plant Hire to the vehicle, and even if sufficiently proved it would have also been unperfected and been subordinate to Fast Financial’s perfected security interst. One point raised in the judgment of particular importance to the operation of s 13 is that the court confirmed (as discussed in overseas PPSA cases) that a lessee could grant a security interest in the leased property and that security interest would not be limited to the lessee’s rights where there was a priority contest involving the collateral. QES had argued that Maiden could not grant a security interest that was any greater than its rights as lessee and hence when the lease was terminated for non-payment there was nothing left to support the security interest. The court relied upon both Canadian (Re Giffen [1998] 1 SCR 91; (1998) 155 DLR (4th) 332) and New Zealand case law (Graham and Gibson v Portacom New Zealand Ltd (2004) FPPSR ¶700-001; [2004] 2 NZLR 528 and New Zealand Bloodstock Ltd v Waller and Agnew (2005) FPPSR ¶700-002; [2006] 3 NZLR 629) in rejecting this argument. The court drew support from s 19(5) and noted (at [26], [35], [73]): ‘‘Thus pursuant to s 19(5), Maiden — as a PPS lessee in possession of the Caterpillars — had rights in the Caterpillars, to which a security interest could attach. These rights are not limited to possessory rights, but include proprietary rights . . . ... Annotated Personal Property Securities Act 2009 (Cth)

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Personal Property Securities Act 2009 . . . a person with an interest rooted in title to property in the possession of another, once perfected, can, in the event of default by the debtor, look to the property ahead of all others to satisfy his claim; but if that interest is not perfected, it is vulnerable, even though rooted in title to the goods, because a third party may derive an interest in the same goods by virtue of some dealing with the person in possession of them, and may become entitled to priority, ahead of the person holding the unperfected security interest, to look to the goods to satisfy a claim . . . . . . Maiden did not have only a mere right to possession under the QES leases. The Canadian and New Zealand cases already mentioned demonstrate that a PPS lessee on taking possession of the collateral acquires not only a possessory right but also proprietary rights to the extent that it can grant security interests to third parties, so that the lessor’s interest if unregistered is vulnerable to being defeated by security interests so granted to such third parties. The PPSA treats the lessee under a PPS lease as the grantor of a security interest with rights in the collateral, and the lessor as a secured party, because it sees the transaction as, in substance, a security transaction, though in form it is a lease. As the cases mentioned show, it recognises that the lessee may validly and effectively grant security interests in the collateral to third parties, that can take priority of the lessor’s unperfected interest, because the lessee is regarded for that purpose as having rights in the collateral. Maiden acquired possessory and proprietary rights in the Caterpillars upon taking possession of them, and granted a security interest in them to Fast under the General Security Deed.’’

The court also held that s 267 (vesting rules) applied to render QES’s security interest vested in Maiden Civil as grantor upon Maiden Civil’s voluntary administration commencing. It is worth making short mention of two decisions that were central to the reasoning in Re Maiden Civil: Graham and Gibson v Portacom New Zealand Limited (2004) FPPSR ¶700-001; [2004] 2 NZLR 528 (Portacom) and New Zealand Bloodstock Limited v Waller and Agnew (2005) FPPSR ¶700-002; [2006] 3 NZLR 629 (Waller). It should be noted that one significant point made in the Re Maiden Civil case is that overseas cases may be used to assist with interpreting the Australian PPSA where there are similarities: see Re Maiden Civil at [32] (‘‘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 well-established in Canada and New Zealand, to apply.’’) In Portacom, the manufacturer of portable buildings leased five buildings to NDG over a four-year period (which covered the period before and after the commencement of the PPSA in New Zealand). The lease agreement prohibited the lessee from alienating the buildings and recognised that Portacom had a security interest in the buildings for the purposes of the PPSA. NDG (the lesee) had granted a secured debenture to a bank, which registered a financing statement to perfect its security interest. Portacom (the lessor) did not

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however perfect its security interest (either by possession or by registering a financing statement). When the bank appointed receivers Portacom challenged their right to sell the leased buildings. The court accepted that the leases extended beyond one year and therefore the lessor’s position was deemed to be a security interest (at [10]). The court held that the PPSA recognises that a lessee may grant a security interest in the leased property (referring to the New Zealand equivalent of s 19(5)): at [18]. Hansen J held (at [19]): ‘‘the lease [for more than one year] is treated as a security agreement and the lessee is treated as the owner of the leased goods for registration and priority purposes. If the lessor fails to register its interests, it loses priority to a perfected security interest over the leased goods’’. The court found that as the bank’s security agreement covered all of NDG’s assets, this included its rights over the leased buildings (at [31]). As the bank had a perfected security interest it was entitled to priority and the receiver could thus sell the buildings. The Portacom decision was considered in the leading decision on the New Zealand PPSA: the New Zealand Bloodstock case. In that case, a company, Glenmorgan, had issued a secured debenture (which contained a fixed and floating charge) to another company Lock in 1999 (before the PPSA commenced in New Zealand) which was subsequently registered on the first day of operation of the New Zealand PPSA on 1 May 2002. In 2001, Glenmorgan executed a finance lease over a horse with New Zealand Bloodstock who retained title for the duration of the lease (which extended beyond one year). New Zealand Bloodstock did not perfect their security interest. Glenmorgan then allowed the horse to be used in England and New Zealand Bloodstock’s lease was varied to require all income from England to be applied to reduce debt owed to New Zealand Bloodstock. The English operations were actually managed by a company related to Glenmorgan. Approximately £175,000 was paid to New Zealand Bloodstock under this arrangement. New Zealand Bloodstock then terminated the lease after Glenmorgan defaulted and repossessed the horse. Lock then appointed receivers over Glenmorgan, under its secured debenture and the receivers applied to the court to recover possession of the horse that had been leased. The Court of Appeal (by majority) found that the New Zealand equivalent to s 19(5) allowed Glenmorgan to have rights in the collateral to grant a security interest to Lock (which was perfected). This created a priority contest as New Zealand Bloodstock’s lease for more than one year was also a security interest which was resolved by the PPSA in favour of Lock (a perfected interest defeats an unperfected security interest: see s 55(3)). The majority of the Court found that Lock’s charge attached to the horse as after-acquired property upon the commencement of the PPSA (see further s 18(3)). Baragwanath (for the majority) stated clearly the stark change that the PPS lease concept had brought upon personal property law (at [74]–[75]): Annotated Personal Property Securities Act 2009 (Cth)

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Personal Property Securities Act 2009 ‘‘[the conclusion that Lock takes priority over the lessor] means that with respect to priority of competing security interests under the PPSA the nemo dat principle is ousted. The consequence is to empower Glenmorgan to add to the security passing to Lock under Lock’s debenture a proprietary interest in the stallion, even though the agreement between New Zealand Bloodstock and Glenmorgan had provided to the contrary . . . The result follows Parliament’s decision that the kind of leasehold interest retained by New Zealand Bloodstock should, as a matter of policy, be treated as a mere security interest which requires registration to be perfected. Since that did not occur, Lock’s competing security interest which was duly registered and so perfected took priority. The major lessons of the case are twofold: the statutory altering of the proprietary rights of a lessor; and the crucial importance of registration. These are policy choices which have been made and significantly alter what would otherwise have been the position.’’

See also Dunphy v Sleepyhead Manufacturing Co Ltd [2007] 3 NZLR 602 at [37]; Paccar Financial Services v Sinco Trucking Ltd (Trustee of) (1989) 9 PPSAC 7; International Harvester Credit Corp of Canada v Bell’s Dairy Ltd (1986) 6 PPSAC 138; 30 DLR (4th) 387.

[13.5.3.2] Limitations to the ambit of the PPSA In the British Columbia Supreme Court case of Re Western Express Air Lines Inc (2005) PPSAC (3d) 229; 10 CBR (5th) 154 the concept of a ‘‘deemed security interest’’ was again subject to judicial consideration. The property in question was a number of aircraft leases whereby WAE Inc sought protection under the Companies’ Creditors Arrangement Act, RSC 1985, c C-36 from having to pay out funds to its creditors. The creditors asserted that as the PPSA created a deemed security interest on the facts, that certain aircraft hence constituted ‘‘assets’’ for the purpose of the company’s existing charges and that the lessors should be required to pay a portion of these charges to the creditors in accordance with the co-existing Federal statute. Due to the breadth of the PPSA, in both scope and ambit, there will often be situations such as this one where multiple pieces of legislation apply. In analysing the relationship between the PPSA definitions and other statutes the court held (at [12]–[17]): ‘‘[W]hile the interest of a lessee under such a ‘pure’ lease is deemed to be a security interest for these purposes it is clear that (quoting from Cumming and Wood at p. 114) this does not mean that a secured creditor who takes a security interest in leased goods can claim priority over the lessor. The security interest attaches only to the interest of the lessee. What a deemed security interest (such as a lease for more than one year) does is to treat the lease as a security agreement and treat the lessee as the owner, but only for registration and priority purposes. If one applies this principle of the ‘limited purpose’ nature of the security interest, i.e. for only registration and priority, the aircraft lessors in this case with their properly registered leases take priority as against any of

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the secured creditors holding general security agreements . . . the Existing Charges cannot attach to the perfected interests of the aircraft lessors in the aircraft assets, only to the interest of Westex under the leases.’’ The operative definitions under the PPSA should thus be confined to the Act itself and in particular, when regarding interests the Act deems to be security interests as opposed to those interests which satisfy the requirements of s 12, only for the purposes of perfection and priority. This is an important point: the PPSA covers registration and priority between PPSA security interests, it is not a complete code. Deemed security interests must comply with the PPSA in order to protect their priority if a priority contest arises under the PPSA, but the title held by an owner/lessor/consignor/bailor is not otherwise affected for non-PPSA dealings.

[13.5.3.3] Enforcement provisions Important also are the exclusion provisions under Ch 4 of the PPSA with respect to PPS leases. The enforcement provisions pursuant to Ch 4 do not apply to PPS leases (see Ch 4 for more detail). In the British Columbia Supreme Court case, Accent Leasing & Sales Ltd v Babic (2007) 12 PPSAC (3d) 1; 62 RPR (4th) 269, the application of enforcement provisions to deemed security interests was considered. The facts of the case concern the lease of a vehicle for 36 months. Upon the default of the lessee, the lessor took possession of the property and brought an action for damages under the lease. One of the issues the Court was asked to consider was whether the enforcement provisions of the British Columbia PPSA applied. The Court held (at [24]) ‘‘the characterization [was] of a true lease, not a security lease, and hence Part 5 of the PPSA [the equivalent of the Australian Ch 4] is inapplicable’’. The Australian PPSA operates in the same respect, however, where the instrument also secures payment or performance of an obligation the enforcement provisions will apply (see further s 109).

[13.5.4] Exceptions — s 13(2) The strength of the criticisms, particularly with respect to the Ontario statute, in imposing a class of ‘‘deemed’’ security interest where particular instruments would not otherwise be caught by the Personal Property Securities Act 2009 (Cth) (PPSA) has been recognised through the inclusion of exceptions. The exceptions are designed to ensure operating leases, where the lessor does not typically engage in leasing on a regular basis, are not subject to s 13(1) of the PPSA. A PPS lease thus does not arise where, although a lease or bailment satisfies the requirements of s 13(1), the following additional conditions apply: ● the lessor is not regularly engaged in the business of leasing goods — s 13(2)(a) ● the bailor is not regularly engaged in the business of bailing goods — s 13(2)(b) ● the lease is over consumer property which is part of or incidental to the use and enjoyment of land — s 13(2)(c). Annotated Personal Property Securities Act 2009 (Cth)

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● the lease or bailment is part of a pooling arrangement — s 13(2)(d), Personal Property Securities Regulations 2010, reg 1.9. In White v Spiers Earthworks Pty Ltd [2014] WASC 139 (16 April 2014) a vendor of an earthmoving business which agreed to sell its equipment as part of selling its business was held (at [24]) to have regularly engaged in the business of leasing its equipment following the court’s acceptance of affidavit evidence by the secured party that stated that it had regularly engaged in the business of leasing equipment.

[13.5.4.1] Regularly engaged in the business of leasing/ bailing goods: s 13(2)(a) and (b) With regards to the first exception (and by way of extension, the second exception), the interpretation of the phrase ‘‘regularly engaged in the business of leasing goods’’ was subject to judicial consideration in the Alberta Court of Appeal case of David Morris Fine Cars Ltd v North Sky Trading Inc (1996) 11 PPSAC (2d) 14. The case involved a car dealer which had advertised the provision of buying, selling and leasing services with respect to motor vehicles. This was so despite only actually arranging one or two leases every year. The standard practice of the car dealer was to refer the leasing arrangements onto an associated credit company of the manufacturer. A deal had been entered for the provision of a 46-month lease with the lessee (who subsequently went bankrupt). The lease arrangement was not registered and not otherwise perfected. The Court was asked to analyse the effect of the PPSA in light of the definition for a ‘‘lease for more than one year’’. The Court held, with respect to what constitutes ‘‘regularly engaged in the business of’’: ‘‘We agree that the clause ‘regularly engaged in business’ in s. 1(1)(y) of the PPSA means something quite different than the clause ‘in the ordinary course of business’ found in s. 30(2). The former pertains to whether the lessor is in the business of leasing. The focus is the business practice of that lessor. The latter pertains to whether the particular transaction was made in the course of conducting that business. The focus is whether other persons in that type of business engage in similar transactions.’’ The conclusion was thus that the equivalent to s 13(2)(a) applied. A finance company that occasionally uses leases as part of its financing arrangements was found to be regularly engaged in the business of leasing: Paccar Financial Services v Sinco Trucking Ltd (Trustee of) (1989) 9 PPSAC 7; 74 Sask R 181 (Sask CA). It is not the number or frequency of leases entered into by the lessor that matters: Karkoulas v Farm Credit Canada (2005) 8 PPSAC (3d) 249; 270 Sask R 291 (Sask QB). For a case where the lessor was not found to be regularly engaged in the business of leasing see Planwest Consultants Ltd v Milltimber Holdings Ltd (1995) 10 PPSAC (2d) 116; 32 Alta. L.R. (3d) 397 (Alta QB — appeal dismissed (1997) 54 Alta LR (3d) 256). In Rabobank New Zealand Ltd v McAnulty [2011] 3 NZLR 192; [2011] NZCA 212 at [46], it was noted that ‘‘it requires some straining of the concept ‘regular’ to say it includes a single, isolated transaction’’. The court went on to say that (at [47]):

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‘‘We doubt that that is what Parliament intended. It is clear that a course of business involving a series of leasing transactions will involve regular engagement in the business of leasing. We think it is equally clear that a single transaction in circumstances where it can be established that the transaction was a one-off would not be ‘regular’. Where a transaction was the first but has been followed by others, a good case can be made for the proposition that even the first was ‘regular’ because it was the start of the regular engagement in the business. That will be a factual issue in the particular case.’’ In the McAnulty case the one off transaction involved a bailment where an owners’ syndicate for a horse paid for agistment services for the horse. As that was the only bailment transaction involving the horse, and the syndicate paid for it (rather than the bailee paying for it), it could not be said that the syndicate was regularly engaged in the business of bailing or leasing the horse. See also Hughes v Fea [2013] NZHC 2863 (one off leasing transaction did not make lessor regularly engaged in the business of leasing). It is for the party asserting that a PPS lease exists to put on evidence that the lessor was regularly engaged in the business of leasing (or bailing) goods: see Rabobank New Zealand Ltd v McAnulty [2011] 3 NZLR 192; [2011] NZCA 212; Air Liquide New Zealand Ltd v Supagas 2009 Ltd [2012] NZHC 2583. In Forge Group Power Pty Limited (In Liquidation) (receivers and Managers Appointed) v General Electric International Inc [2016] NSWSC 52, Hammerschlag J held that the phrase ‘‘regularly engaged in the business of leasing’’ was not confined to engaging in such conduct in the jurisdiction to which the PPSA applied (at [30]–[35]): ‘‘There are a number of considerations which, in my view, make it clear that s 13(2)(a) does not restrict business activity to be regarded to that which solely occurs within Australia. First, the plain words of s 13(2)(a) place no such geographic limitation or restriction on the activity to be assessed, and there is no warrant to read them as so doing: see Thompson v Goold & Co [1910] AC 409 at 420; Bermingham v Corrective Services Commissioner of NSW (1988) 15 NSWLR 292 at 302. Indeed, the general operation of the PPSA is not confined to goods or property in Australia. By s 6, it applies to a security interest in goods or financial property (even if they are outside Australia) if the grantor is an Australian entity. Secondly, the restriction would not serve the policy underlying the s 13(2)(a) exclusion. The evident (perhaps self-evident) purpose of the exclusion was referred to in the Review of the Personal Property Securities Act 2009 — Final Report (27 February 2015) commissioned by the Attorney-General as required by s 343 of the PPSA, and tabled in Parliament on 18 March 2015, in the following terms: 4.3.5.7.1 . . . Any lease that satisfies the term requirements in s 13 has the capacity to mislead outsiders. It could also be unclear for such a lease whether it is also an in-substance security interest under s 12(1). The thinking behind s 13 accepts however that it Annotated Personal Property Securities Act 2009 (Cth)

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Personal Property Securities Act 2009 would not be fair to impose the implications of s 13 and the Act on ad hoc lessors, and that it should only apply to lessors that are in the business of leasing and so should be expected to have investigated the content of the laws that affect their business, including the Act. There is no need in this context to limit the application of the section to leases of goods of the particular type that the lessor regularly leases out. A leasing transaction within Australia, by an entity regularly engaged in such business internationally, cannot fairly be described as ad hoc. Such an entity has no less an incentive to investigate local law requirements when it engages in business activity in this jurisdiction, than does an entity regularly carrying on such business only within Australia. Concomitantly, such an entity wishing to conduct business within Australia would not get the benefit of being able to register its lease. Thirdly, components of a transaction may involve cross-border activity. The limitation which the defendants suggest raises the uninviting spectre of lengthy and detailed examination of such activity in a quest to determine whether activity outside of Australia is part of carrying on business within it.’’

In respect of the use of the term ‘‘regularly’’ and what constitutes ‘‘regularly’’ for the purposes of s 13(2)(a) of the PPSA, Hammerschlag J preferred the Canadian approach in David Morris to the New Zealand approach in Rabobank New Zealand in holding that (at [49]–[53]): ‘‘The word ‘regular’ can in one of its meanings connote periodic or a recurrence at fixed times. However it can also, and in this case in my view does, mean, as the Canadian authorities consider, normal, that is, not abnormal in the context of the lessor’s business, but a proper component of it: see Macquarie Concise Dictionary (4th ed 2006, Macquarie Dictionary Publishers Pty Ltd) at 1025. The New Zealand approach does not, I respectfully suggest, sufficiently recognise that the exclusion is directed to activity which constitutes engaging in the business of leasing, not to engaging in the activity of entering into leases. Engaging in the business of leasing is clearly a concept of wider reach than merely entering into leases. For example, a person who sets up a significant infrastructure, including, say, acquiring significant capital equipment for lease and then advertises its ability and willingness to lease that equipment would be engaged in the business of leasing, and may be doing so regularly, before any particular transaction is concluded and in my opinion, even if none ever is. In my opinion, the correct approach is to recognise that frequency or repetitiveness of transactions is a factor relevant to, and in an appropriate case may be the critical factor in, the assessment of whether the leasing business being engaged in is regular. But it is not to be equated with it, as the New Zealand approach appears to require.

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The New Zealand approach would not, incorrectly, in my opinion, permit a conclusion of regularity where an initial transaction was intended to be followed by others, but no more transactions of the type concerned actually eventuated, despite the best intentions, advertised willingness over a significant period of time and ability of the lessor to enter into more. In my opinion, in considering frequency or repetitiveness as an element of regularity of business, account may be taken of more than simply actual transactions entered into.’’ The decision of Hammerschlag J on this issue was not challenged on appeal: Power Rental Op Co Australia, LLC v Forge Group Power Pty Ltd (in liq) (recs and mgrs apptd) (2017) 93 NSWLR 765; [2017] NSWCA 8. If a business only occasionally does something, and that conduct is merely incidental to its business and is not part of its standard business model then it is less likely to be regularly engaged in the business of leasing or bailing goods: Bredenkamp v Gas Sensing Technology Corp; Re Welldog Pty Ltd (In Liq) (Rec and Man Apptd) [2017] FCA 1065.

[13.5.4.2] Consumer property incidental to use of land: s 13(2)(c) As to the third exception with respect to the use and enjoyment of land — the PPSA does not apply to land and there is thus no reason why it should apply to goods related to the use and enjoyment of land where a security interest, pursuant to the s 12 ‘‘in substance’’ test, does not arise. The issue has been raised abroad with respect to land fixtures (see also ALRC Report No. 64: 5.42–5.45). Pursuant to s 8(1)(j), the Australian PPSA does not apply to interests in fixtures. This picks up on an omission in the New Zealand PPSA to address fixtures and the law that applies in Australia for defining and dealing with fixtures is thus real property law. Once goods no longer constitute fixtures, that is, they have been removed from the land — a security interest arising over such goods will be governed by the PPSA. In determining whether or not a fixture should be removed from real property, the principles regarding removal of accessions under the PPSA (see Pt 3.3) will provide assistance. It is, however, worth reiterating that the PPSA is not applicable to real property interests and thus the law to be applied should be the law of real property.

[13.5.4.3] Pooling arrangements: s 13(2)(d), reg 1.9 A ‘‘pooling arrangement’’ is one or more hire, lease or bailment arrangements in which interchangeable goods are pooled for collective use, passed between multiple users and equivalent goods can be ultimately returned in place of the original goods, in circumstances where none of the arrangements have the substantive effect of securing payment or performance of an obligation: Personal Property Securities Regulations 2010, reg 1.9(2). An example of a pooling arrangement is the ‘‘lease and subsequent sub lease of pallets as part of the transportation of goods stored on the pallets’’: Personal Property Securities Register (PPSR), Fact Sheet, Leases and Bailments under the Personal Property Securities Act 2009 (Cth), p 1. Annotated Personal Property Securities Act 2009 (Cth)

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[13.5.5] Bailments for value — s 13(3) The concept of a bailment was put simply by Windeyer J in Hobbs v Petersham Transport Co Pty Ltd (1971) 124 CLR 220 at 238, that is, ‘‘the delivery of goods of one person, the bailor, into the possession of another person, the bailee, upon a promise, express or implied, that they will be redelivered to the bailor or dealt with in a stipulated way’’. Bailments can be granted for value or gratuitously and sub-bailments (where the bailee bails the goods to a subsequent bailee) can arise at common law: Mason v Westside Cemeteries Ltd (1996) 29 CCLT (2d) 125 at 135; Westpac Banking Corporation v Royal Tongan Airlines (1996) Aust Torts Reports ¶81-403.13 Section 13 will only apply to a bailment where the bailee provides value for possession of the underlying collateral. The term ‘‘value’’ means consideration that is sufficient to support a contract, including an antecedent debt or liability (see s 10). The rationale being that the form of the instrument is irrelevant, if a bailment extends beyond one year it carries characteristics of permanency in the same fashion as a long term lease and thus the PPSA defines the arrangement as a PPS Lease and the Act applies. The value does need to be sufficiently certain so as to constitute valid consideration: Bredenkamp v Gas Sensing Technology Corp; Re Welldog Pty Ltd (In Liq) (Rec and Man Apptd) [2017] FCA 1065. In that case, the court expressly did not discount the possibility of indirect consideration constituting value, but in that case, it was too remote to constitute value. Bailments provide an iconic example of how the PPSA differs from the common law ‘‘title based’’ system of priority. In the leading PPSA decision of the Saskatchewan Court of Appeal, International Harvester Credit Corp of Canada v Bell’s Dairy Ltd (Trustee of) (1986) 6 PPSAC 138; 30 DLR (4th) 387, the distinction was made out. The Court of Appeal analysed the application of the Act in the following way (at [19]–[22]): ‘‘[A]s a matter of common law, that under a contract of bailment the bailee derives a right to possession only, with title remaining in the bailor . . . The law has long been concerned with security transactions under which title to goods rests with one person (the true owner), while their possession is enjoyed by another (the ostensible owner). The potential for mischief in such arrangements is obvious . . . as a general rule the common law did not allow the lessor’s title to leased goods to be defeated through some dealing of the lessee. However, the Personal Property Security Act has effected far- reaching changes to the law. The object of this Act is to modernize and consolidate the law of personal property as security for debts. The scope of the statute includes all transactions, regardless of their form and irrespective of the intention of the parties, that either create or are deemed to create a security interest in personal property and fixtures. For the first time, both consignments of goods and true leases of goods are treated by the law as though the parties had intended the property to serve as security for the amounts 13

See further Neil Palmer, Palmer on Bailment (3rd ed, Sweet & Maxwell 2009).

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owing by the consignee or lessee as the case may be. This is a singularly important departure from the law as it existed before this Act came into being.’’ In understanding bailments reference has also been made to their likeness to operating leases and the similarities between the two instruments persists under the PPSA: see Re Winnipeg Motor Express Inc (2009) 15 PPSAC (3d) 24; 56 CBR (5th) 265. One area where the concept of a ‘‘bailment for value’’ is of seminal importance (which, on the authors’ research, has not been the subject of any Australian authority) is the storage circumstance. Consider a scenario whereby Party A stores goods to the value of $100,000 with Party B on a week to week basis, namely, Party A continues to incur storage charges on a week to week basis unless and until the goods are removed from Party B’s storage facility. The question is, does this constitute or create a security interest for the purposes of the PPSA particularly in light of s 13(1)(b) and 12(3)? On a plain reading of the term ‘‘value’’, there appears to be little reason why the above storage arrangement would not, at a minimum, constitute or fall within the scope of a bailment for an indefinite period (within the meaning of s 13(1)(b) of the PPSA). If this is correct, does every party who stores goods with a storage provider need to perfect their security interest or face the potential for their property vesting in the storage facility pursuant to s 267 of the PPSA? In the authors’ view, the safe answer to this question is ‘‘yes’’, if the PPSA applies, perfecting the resulting security interest in accordance with s 21 of the PPSA would avoid the operation of s 267. One argument against construing a storage arrangement as a ‘‘PPS lease’’, an argument which has the support of the authors on the basis that it produces a commercially sensible result, is that a storage arrangement of the kind being considered here does not, absent more, constitute a ‘‘bailment for value’’ within the meaning of s 13(3) of the PPSA and therefore it is not a security interest which would otherwise need to be perfected by the party storing its goods. This is because in a traditional bailment for value, possession of the underlying collateral flows one way which payment or ‘‘value’’ flows the other way. In the above example, Party A would provide possession to Party B and Party B would pay Party A for that possession. Such is the case with an orthodox lease — the lessee is the one providing value to the lessor in exchange for possession. A storage scenario is fundamentally different in that possession and payment each flow in one direction. However, if storage does not involve any direct payment or benefit it may not be sufficiently certain to constitute value: Bredenkamp v Gas Sensing Technology Corp; Re Welldog Pty Ltd (In Liq) (Rec and Man Apptd) [2017] FCA 1065. The inherent limitation of the above argument is that it is predicated on the basis that storing another’s goods is incapable of itself constituting ‘‘value’’ as that term is defined by s 10 of the PPSA. Respectfully, storing another’s goods needs to constitute no more than ‘‘consideration that is sufficient to support a Annotated Personal Property Securities Act 2009 (Cth)

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contract’’ to meet the definition of ‘‘value’’ under s 10 of the PPSA. The authors are of the view that, on a plain reading, there is little room to construe the plain language of the definition of value so as to remove storage as a form of consideration — notwithstanding the commercially sensible result this construction would produce. As stated, the position remains unconsidered in Australian jurisprudence.

[13.5.6] The Personal Property Securities Amendment (PPS Leases) Act 2017 On 19 May 2017, the Personal Property Securities Amendment (PPS Leases) Act 2017 (Cth) (the Amending Act) received royal assent. The Amending Act made two important changes to s 13 of the PPSA: 1. References to leases or bailments for ‘‘more than one year’’ changed to ‘‘more than 2 years’’, and 2. The repeal of s 13(1)(b) of the PPSA replaced with an amendment to s 13(1)(d) to include consideration of an ‘‘indefinite term’’. Put simply, rather than this consideration arising from the outset of the lease or bailment, as a matter of contractual construction, the consideration now only arises after the grantor has had two years of uninterrupted possession of the relevant collateral. Importantly, the amendments only apply to leases entered after the commencement of the Amending Act: See, Personal Property Securities Amendment (PPS Leases) Bill 2017 Explanatory Memorandum at Item 6. For this reason, in the authors’ view, an appreciation of s 13 without amendment will still likely be of significant value unless and until all leases or bailments being considered have been created after 19 May 2017.

[13.6] Further reading ● Explanatory Memorandum [2.140]. ● ALRC Report No 64 [5.29–5.43]. ● Whittaker Report [4.3], [4.5], [5.1], [6.2], [7.3], [8.7], [9.2]. ● Douglas Baird and Thomas Jackson, ‘‘Possession and ownership: an examination of the scope of Article 9’’ (1983) 35 Stanford Law Review 175. ● Nicholas Mirzai, ‘‘The Personal Property Securities Act and commercial lease arrangements: A practitioner’s guide’’ (2011) 22 Journal of Banking and Finance Law and Practice 3. ● Sheelagh McCracken, ‘‘Conceptualising the Rights of a Lessee under the Personal Property Securities Regime: the Challenge of ‘New Learning’ for Australian Lawyers’’ (2011) 34(2) UNSWLJ 547.

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SECTION 14 MEANING OF PURCHASE MONEY SECURITY INTEREST

General definition 14(1) 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. Exceptions 14(2) 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. 14(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. Mixed securities 14(3) 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. 14(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 Annotated Personal Property Securities Act 2009 (Cth)

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Personal Property Securities Act 2009 money security interest only to the extent that it is granted in the purchase money collateral. Renewal etc. 14(5) 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). Application of payments to obligations 14(6) 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. Purchase money obligations 14(7) 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). References to purchase price and value 14(8) 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.

[14.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

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s 16 s 2(1)(jj) s 1(1) § 9-103

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Outline

Purchase money security interests (PMSIs) present a special class of interest which rank in priority to perfected security interests and arise in particular circumstances. This ‘‘super’’ priority category is a creation unique to the PPSA and like other important concepts which are central to a proper understanding of the Act, is defined in its own section (unlike its foreign counterparts). As PMSIs relate primarily to the rules of perfection, priority and enforcement, they are largely irrelevant as between the secured party and the debtor regarding payment or performance of a primary obligation or obligations. Notwithstanding this fact, as many of the PPSA disputes concern priority contests with third parties, PMSIs have attracted considerable judicial and academic attention abroad.

[14.3]

Cross-references

● Sections 62–65 provide priority rules for PMSIs. ● Section 153 requires a financing statement to indicate whether the security interest is a PMSI.

[14.4] Concepts The PMSI is a concept which derives from the PPSA, however, its definitional utility will be discussed in the balance of the commentary. Other concepts which arise in this section include: ● Chattel paper This is defined by s 10. See further s 12. ● Commercial consignment This is defined by s 10. See further s 12. ● Intermediated security This is defined by s 10. See further s 26. ● Investment instrument This is defined by s 10. See further [27.4], which discusses the meaning of ‘‘investment instrument’’ as part of the commentary on s 27 (Control of Investment Instruments). ● Monetary obligation This is not specifically defined in the PPSA. However, an account is defined as a monetary obligation (whether or not earned by performance) arising from disposing of property, granting a right or providing a service in the ordinary course of granting rights or providing services of that kind. The term monetary obligation seems to refer to the concept of a debt although as a matter of statutory construction the terms surrounding it are all forms of instruments (either physical or electronic in nature). Viewed in that context it may be possible to consider a monetary obligation as referring to a written undertaking to pay a sum of money such as a promissory note-however that is already caught by the term negotiable instrument; or a debenturebut that is already caught by the term investment instrument. A letter of credit is also caught by the definition of a negotiable instrument. In the Annotated Personal Property Securities Act 2009 (Cth)

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Personal Property Securities Act 2009 authors’ view, a monetary obligation will include an account (as the former is part of the definition of the latter) but not every monetary obligation will necessarily be an account as the monetary obligation may arise otherwise than from disposing of property or granting a right or providing a service in the ordinary course of a business of granting rights or providing services of that kind. Monetary obligation was defined by the New Zealand Court of Appeal in Strategic Finance Ltd v Bridgman [2013] 3 NZLR 650; [2013] NZCA 357. The Court explained the concept as follows (at [55]–[57]): ‘‘‘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. An obligation of this nature will involve an existing liability on the part of the first party which is legally enforceable by the second party ... When ‘monetary’ and ‘obligation’ are read together, it is also clear that the liability must be to pay an identifiable sum on an ascertainable date. This will include a claim of that nature based on debt statute or money had and received. A possible liability to pay an unidentifiable sum at an unascertainable future date will not suffice’’. The approach in Strategic Finance was applied in Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd (in liq) (recs and mgrs apptd) (2017) 320 FLR 259; [2017] WASC 152 at [261]–[262].

● Negotiable instrument This is defined by s 10. See further s 29. ● Predominantly for personal, domestic or household use This is defined by s 10. See further [47.5]. ● Renewed, Refinanced, Consolidated or Restructured This is discussed below at [14.5.7]. ● Sale and lease back This is discussed below at [14.5.3]. ● Serial numbered property This is discussed below in [14.5.4]. See further s 153. ● Value This is defined in s 10. See also Agricultural Credit Corp of Saskatchewan v Pettyjohn (1991) 1 PPSAC (2d) 273; 79 DLR (4th) 22 (Sask CA) (approval of loan constituted value even where funds not provided until after the purchase which used interim bridging finance PMSI still recognised). See further [19.5.2]ff.

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Commentary

[14.5.1 Rationale ............................................................................................105 [14.5.2] Definition — s 14(1) ........................................................................107 [14.5.2.1] All or part of the purchase price — the substantive test ................................................................................................................107 [14.5.2.2] Value to acquire rights ......................................................108 [14.5.2.3] Lessors and bailors of PPS leases — s 14(1)(c) ...............109 [14.5.2.4] Commercial consignments — s 14(1)(d) .........................109 [14.5.3] Exceptions — s 14(2) .......................................................................109 [14.5.3.1] Sale and lease backs — s 14(2)(a) .....................................109 [14.5.3.2] Chattel paper, investment instruments, intermediated securities, monetary obligations and negotiable instruments — s 14(2)(b) ..................................................................................................110 [14.5.3.3] Predominately for personal, domestic or household use — s 14(2)(c) ................................................................................................110 [14.5.4] Exceptions to the exception — serial numbered collateral — s 14(2A) .............................................................................................................111 [14.5.5] PMSI secures only purchase money obligations — s 14(3) .......111 [14.5.6] Collateral covered — s 14(4) ..........................................................112 [14.5.7] Refinancing, renewing, consolidating and restructuring — s 14(5) .................................................................................................................113 [14.5.8] Determining which obligations are satisfied and in what order — s 14(6) ...............................................................................................................113 [14.5.9] Purchase money obligations — s 14(7) ........................................114 [14.5.10] Purchase price and value — s 14(8) ............................................115

14.5.1

Rationale

A purchase money security interest (PMSI) is defined by s 14(1) of the PPSA subject to the exceptions in s 14(2). It arises as a concept under the PPSA due to the inherent unfairness of the default priority regime in some circumstances to which we now turn. As Professor Goode notes:14 ‘‘What establishes the priority for the purchase-money security interest is . . . the inequity that would result in allowing the prior chargee a windfall increase in his security brought about not with the debtor’s money or new funds injected by the prior chargee but with the financing provided by the later incumbrancer.’’ If the debtor already owns the collateral then no PMSI can arise: North Platte State Bank v Production Credit Association of North Platte (1972) 200 NW 2d 1 (Neb SC). However, if the debtor is merely testing out the property in order to determine whether or not they want to purchase it with the loan funds then a 14

Gullifer L (ed), Goode on Legal Problems of Credit and Security, 4th ed, 2008, Sweet and Maxwell at [5–63].

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loan made to allow them to subsequently purchase the property can still be a PMSI: Re Hooks (1984) 40 BR 715 (Bankr Ct MD Georgia). Take the following example for instance: Grantor A secures funds borrowed from Secured Party B who takes an ‘‘all present and after-acquired property’’ security interest over Grantor A’s personal property. Secured Party B perfects their interest by registration. Subsequent to the interest becoming perfected, Creditor C leases goods to Grantor A and perfects a security interest over such goods. Grantor A defaults and both Secured Party B and Creditor C seek to enforce their security interest.

Under the default priority rules (see s 55), Secured Party B prevails against Creditor C as they perfected their interest first in time. Despite Creditor C’s prudence in perfecting their interest, and despite being the holder of good title, pursuant to the default priority rules, Creditor C can never prevail against Secured Party B’s interest who will always be perfected first in time. In the absence of the PMSI construct, any grantor who has subjected their personal property to an ‘‘all present and after-acquired property’’ security interest could never convey separate perfected interest to other parties but for the secured party expressly agreeing to subordinate its general security interest in favour of the new secured party. Put simply, were there no PMSI construct, there would be a substantial alteration in commercial dealings which have become commonplace in Australia and this would, among other things, be inconsistent with the overarching objectives of the PPSA. The essential effect of the PMSI super priority is therefore the alteration of the default priority rules pursuant to Pt 2.6. The fundamental rule is that a PMSI perfected later in time prevails over an earlier perfected security interest that is not a PMSI (see s 62–65). As the decision in Re Hickman Equipment (1985) Ltd (2004) 7 PPSAC (3d) 56; 239 Nfld & PEIR 312 (N&L CA) at [25] (sub nom Canadian Imperial Bank of Commerce v John Deere Ltd) noted: ‘‘With the coming into force of the PPSA, new means were established to secure priority over other interests. In particular . . . holders of a purchase money security interest can perfect that interest by registration and thereby achieve ‘super priority’, including priority over holders of charges such as that under the GSA.’’ Further, in Re DCD Industries (1995) Ltd (2005) 7 PPSAC (3d) 251, 253 DLR (4th) 171 at [9] (sub-nom Kubota Canada Ltd v Case Credit Ltd), the Alberta Court of Appeal stated: ‘‘vendors remain prepared to sell inventory and equipment to a business which has granted a general security agreement, because the business is nonetheless able to grant priority to those vendors in relation to the goods which are the subject of the sale. The lender holding the general security agreement is not able to assert priority over the vendor, even though the wording of that agreement purports to grant priority to the lender over all after-acquired property’’.

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Where a PMSI is unperfected however, and in the absence of express subordination, the PMSI will not receive priority to a perfected security interest (see s 62 for more detail): see also Re DCD Industries (1995) Ltd (2005) 7 PPSAC (3d) 251 (Alta CA). The carve-out for express subordination is important to recognise as the PMSI operates to effectively provide the same effect as express subordination. For a discussion on the effects of subordination agreements generally under the PPSA see [12.5.6].

[14.5.2] Definition — s 14(1) Purchase money security interests (PMSIs) arise in four ways under the PPSA pursuant to s 14(1), s 14(1)(a) and (b) by way of substantive assessment of the transaction and s 14(1)(c) and (d) by virtue of the deemed security interest provisions. A PMSI can be created where a creditor provides funds that enable an existing debt covered by a PMSI to be bought out: Battlefords Credit Union Ltd v Ilnicki (1991) 82 DLR (4th) 69; 93 Sask R 7 (Sask CA). Of course, merely providing funds that happen to be used to pay out an existing secured loan will not (of itself) create a PMSI: Unger v Royal Bank of Canada (1983) 30 Sask R 183; 51 CBR (NS) 145 (Sask QB). In this regard, the party asserting that a PMSI arises is required to provide that such funds were provided for the exact purpose of giving rise to a PMSI and those funds, as a matter of fact, were applied by the grantor for that purpose. A PMSI may form part of a broader security facility as part of a general security agreement which covers all current and future property of the grantor: Re Paradise Valley Marine Ltd (1997) 7 CBR (4th) 252 (BC SC). The PMSI super priority will only apply to the extent that the security interest qualifies as a PMSI. As a PMSI is concerned with the priority position of the relevant interest, no particular words are required in the security agreement in order to create a PMSI. Further, the words used by the parties are not conclusive of PMSI status as it is the substance of the arrangement which must fit within the statutory definition: See, Instant Auto Loans Inc v Spak (2000) 15 PPSAC (2d) 287 at [15] (BC SC); Money in a Minute Auto Loans Ltd v Price (2002) 4 PPSAC (3d) 99 (BC SC); Royal Bank v Moosomin Credit Union (2003) 7 PPSAC (3d) 118; 241 Sask R 1 (Sask CA).

[14.5.2.1] All or part of the purchase price — the substantive test Section 14(1)(a) refers essentially to the provision of personal property on credit terms. Under such circumstances, the Grantor would not obtain a proprietary interest (typically possession) in the relevant property ‘‘but for’’ the provision of the property from the creditor. As title is irrelevant for the purposes of the PPSA, the supplier is recognised as the secured party with a purchase money security interest (PMSI) over the relevant collateral. This is the nature of the substantive test. Take the above example reiterated here for convenience: Annotated Personal Property Securities Act 2009 (Cth)

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Grantor A secures funds borrowed from Secured Party B who takes an ‘‘all present and after-acquired property’’ security interest over Grantor A’s personal property. Secured Party B perfects their interest by registration. Subsequent to the interest becoming perfected, Creditor C leases goods to Grantor A and perfects a security interest over such goods. Grantor A defaults and both Secured Party B and Creditor C seek to enforce their security interest.

Applying the substantive test, it can be said that ‘‘but for’’ the provision of the leased goods from Creditor C, Grantor A would never have obtained proprietary rights in the relevant collateral capable of attaching Secured Party B’s secured interest. Put simply, Secured Party B requires the provision of the property from Creditor C before they have any interest such property at all. The costs of insurance and obtaining an extended warranty on property are not part of the purchase price and hence do not come within the scope of the PMSI: Re White (2006) 352 BR 633 (Bankr Ct ED Louisiana).

[14.5.2.2] Value to acquire rights A similar ‘‘but for’’ test is applied pursuant to s 14(1)(b), that is, but for the value supplied by the secured party, the grantor would not be able to acquire proprietary rights in the underlying collateral. The purchase money security interest (PMSI) status thus extends not only to particular personal property which forms the subject of a security agreement but also to any funds used to acquire such property for this purpose. Of course, a PMSI only arises where it can be shown that the value was provided to go towards acquiring rights in the specified collateral and that the value actually does go toward this purpose. As the US Court of Appeals for the 3rd Circuit said in Pristas v Landaus of Plymouth Inc (1984) 742 F2d 797 at 800: a ‘‘purchase-money security interest exists if the collateral is the item purchased and it secures its own price’’. Mere intention and authorisation is not sufficient. Where the funds are misappropriated, the secured party will not benefit from a PMSI, if any security interest were to arise at all. The best way to overcome this in a practical sense, in the authors’ view, is to provide funds directly to the vendor of the relevant goods with whom the relevant collateral lies. The situation is much like a mortgage over real property, the funds typically flow from the mortgagee/bank directly to the vendor and never pass through the mortgagor. In the Saskatchewan Court of Queen’s Bench decision, Farm Credit Corp v Valley Beef Producers Co-operative Ltd (2001) 3 PPSAC (3d) 23; 211 Sask R 222, money was leant by a secured party for the purpose of providing the purchase price for particular cattle. The court held that this constituted a PMSI and the secured party retained priority with respect to the proceeds of sale of the cattle (for a discussion of how proceeds are treated under the PPSA see Pt 2.4, Div 2). While the judgment went on appeal, the appeal did not raise issues concerning the characterisation of the PMSI: Farm Credit Corp v Valley Beef Producers Co-operative Ltd (2002) 5 PPSAC (3d) 1; 218 DLR (4th) 86. The creation of a PMSI was approved in Agricultural Credit Corp of Saskatchewan v Pettyjohn (1991) 1 PPSAC (2d) 273; 79 DLR (4th) 22 (Sask CA)

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even where the debtor had obtained interim bridging finance to acquire the collateral.

[14.5.2.3] Lessors and bailors of PPS leases — s 14(1)(c) PPS leases are defined extensively under s 13 (see s 13). By virtue, interests arising from PPS leases are purchase money security interests (PMSIs). This is because a lessor or bailor effectively arms the debtor with a proprietary interest in the underlying collateral, namely possession, without which any other security interest over that particular collateral cannot attach and thus cannot be perfected (for more information on perfection particulars see s 21).

[14.5.2.4] Commercial consignments — s 14(1)(d) Commercial consignments are discussed under s 12(3) (see s 12). Like PPS leases, by virtue of the instrument itself, commercial consignments constitute purchase money security interests (PMSIs).

[14.5.3] Exceptions — s 14(2) Due to the super priority status afforded by purchase money security interests (PMSIs) it is important to understand the scope of the provisions to prevent rogue use of this unique priority class. The exceptions contained in s 14(2) are designed to prevent attempts at utilising PMSI priority where the underlying interest is not a PMSI.

[14.5.3.1] Sale and lease backs — s 14(2)(a) The term ‘‘sale and lease back’’ refers to transactions that are typically financing arrangements. The original seller (often the owner of the collateral — although not necessarily always the case) requires funds however does not wish to sell the collateral outright as the property retains utility to them. The property is thus sold and leased back from the purchaser (who provides the purchase price) often with an intention to repurchase — again however this is not necessary and a sale and lease back arrangement can arise where no binding option to purchase is provided. While this relationship creates a security interest in substance, pursuant to s 12(1), it was not characterised as such under pre-PPSA law which had many priority and taxation ramifications: see further Margaret Young, ‘‘Floating charge restrictive clauses and unsecured negative pledge covenants in Australian corporate debt financing’’ (1999) 10 JBFLP 205. This type of agreement raises finance without losing possession of the underlying collateral. One of the reasons this is not characterised as a purchase money security interest (PMSI) is that it does not enhance the assets of the debtor. The justification for recognising PMSI priority over existing general security agreements is to reward a creditor who facilitates the debtor acquiring further assets: Wheatland Industries (1990) Ltd v Baschuk (1994) 8 PPSAC (2d) 247; 127 Sask R 178 (Sask QB). See also Unisource Canada Inc v Hongkong Bank of Canada (1998) 14 PPSAC (2d) 112; 43 BLR (2d) 226 (appeal dismissed (2000) 15 PPSAC (2d) 95), which considered the issue of proceeds of a PMSI. Annotated Personal Property Securities Act 2009 (Cth)

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The Australian PPSA makes it clear that sale and lease back agreements cannot constitute PMSIs. For a discussion of the difference between a repurchase arrangement and a secured loan see: In re Palmdale Hills Property LLC (2011) 457 BR 29 (US Bankr Appeal Panel 9th Circ).

[14.5.3.2] Chattel paper, investment instruments, intermediated securities, monetary obligations and negotiable instruments — s 14(2)(b) As a collective class, this exception can be understood as the non-application of the purchase money security interest (PMSI) priority status to ‘‘documentary’’ type property or rights arising from such documents in a commercial sense. The rationale here is again to protect the integrity and operation of such instruments in accordance with principles of commercial practicality. The Australian provisions are not unlike their foreign counterparts in this regard.

[14.5.3.3] Predominately for personal, domestic or household use — s 14(2)(c) The terms ‘‘predominately for personal, domestic or household use’’ arise several times throughout the PPSA. The terms are defined under s 10 of the Act (see s 10) and derive from Australia’s consumer protection legislation — Sch 2 of the Competition and Consumer Act 2010 (Cth) (the Australian Consumer Law), formerly the Trade Practices Act 1974 (Cth) and associated state Fair Trading statutes. The terms have no precise equivalent in foreign PPS regimes. For more information on what constitutes predominately personal, domestic or household use see s 47. While property predominately used in a personal, domestic or household fashion is commonly regarded as synonymous with ‘‘consumer’’ property, this is not technically accurate in the PPSA context. The difference is important with respect to purchase money security interests (PMSIs). Under the PPSA, property must first be defined as personal property or land. Once property is characterised as ‘‘personal’’ it can be further identified as ‘‘consumer’’ or ‘‘commercial’’ property. ‘‘Consumer’’ property in this sense is a broad classification and encompasses more than what is recognised by the PPSA as property predominately acquired for personal, domestic or household use. The reverse, however, is true, that is, property predominately acquired for personal, domestic or household use constitutes consumer property for the purposes of the PPSA. The ‘‘predominance’’ test or classification should thus be thought of as a sub-set or sub-class of the broader ‘‘consumer property’’ classification. A PMSI therefore cannot arise over property acquired predominately for personal, domestic or household use, however can arise over all remaining property which forms part of the category of ‘‘consumer’’ property (see also [47.5]).

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[14.5.4] Exceptions to the exception — serial numbered collateral — s 14(2A) Unlike the majority of the PPSA provisions (which aim to be somewhat intuitive) s 14(2A) appears, prima facie, to be an over complication of a relatively simple point. The essence of the section is to exclude from the general exception for property predominately acquired for personal, domestic or household use — property that may or must be described by serial number. Serial numbers are an important part of the PPSA, as will be seen when discussing the registration requirements in particular (see s 153). With registration being the most popular method of perfection under the PPSA and registration being an essential element of the purchase money security interest (PMSI) super-priority under s 62, the iterative detail of s 14(2A) is potentially justified to prevent participants from misinterpretation. The term ‘‘serial number’’ is defined under s 10 (also s 44). In order to identify what type of personal property attracts consideration of serial number description the Regulations must also be consulted. The Personal Property Securities Regulations 2010 (Cth) Sch 1, reg 2.2(1)(a) prescribes that aircraft, intangible property (namely specific types of intellectual property), motor vehicles and watercraft may or must be described by serial number depending on the nature for which these goods were acquired. If acquired for consumer purposes, the property must be described by serial number and if acquired for commercial purposes the property may be described by serial number. The flexibility in the severity of the requirement is arguably arbitrary, however, for the purposes of s 14(2A) these considerations are largely irrelevant (for further discussion see s 44). It is difficult to see how any of the prescribed collateral classes can be used predominately for personal, domestic or household use to which the exception under s 14(2A) applies, except for motor vehicles. While the regulations are subject to change, PMSIs can thus, at present, be taken over motor vehicles irrespective of the purpose for which they are acquired. The superior priority as between secured parties conferred by the PMSI must, however, be considered in light of the ‘‘taking free’’ or ‘‘extinguishment’’ provisions of the PPSA pursuant to Pt 2.5 — of which all security interests exist subject to. Section 45 specifically discusses the taking free provisions with respect to motor vehicles and thus the exception provided for by s 14(2A) is limited in the authors’ view (see s 45 for further information).

[14.5.5] PMSI secures only purchase money obligations — s 14(3) Different obligations may arise under the same security agreement and similarly different security interests may apply to the same collateral (which is how priority disputes arise in the first place). A purchase money security interest (PMSI), however, will only apply to property securing the purchase money itself and not other monies. Once this money is repaid the PMSI is equally extinguished (this point is further discussed at 14.5.6). Take the following example: Annotated Personal Property Securities Act 2009 (Cth)

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Debtor A wishes to borrow money from Secured Party B. Secured Party B lends one aggregate sum to Debtor A, however, this sum comprises two separate purposes as stipulated by the security agreement, that is, the money has a specific direction with respect to purchasing particular goods and the balance of the money leant is on general terms. Debtor A uses the funds advanced for the purposes described. The direct purpose funds are used to purchase goods subject to an ‘‘all present and after-acquired property’’ security interest, perfected earlier in time and held by Creditor C. Creditors D, E and F hold different interests against Debtor A for various items of property (acquired with use of the general funds). Secured Party B, recognising the PMSI interest arising with respect to the claim against Creditor C registers a financing statement and indicates that the entire sum leant is under PMSI conditions. Debtor A subsequently defaults and Secured Party B seeks to enforce their perfected PMSI against all creditors.

Pursuant to s 14(3), Secured Party B holds a PMSI only with respect to goods held by Debtor A over which Creditor C has an interest. Secured Party B thus holds, at best, a mere security interest with respect to claims against Creditors D, E and F. The interest is tentative as Secured Party B’s registered financing statement may be held to contain a seriously misleading defect by indicating that it is a PMSI when the interest is in fact only a PMSI with respect to funds lent for the specific purpose (for more information on seriously misleading defects see s 164–166). The convenience of registering one financing statement to encompass multiple security interests should thus, in the authors’ view, be preserved for like interests, that is, one financing statement should be registered for all security interests and a separate financing statement for all PMSIs. While this may increase the cost of compliance it avoids this issue arising. Further, as a matter of pragmatism, the PPSR is not equipped to register both PMSIs and non-PMSIs within the one registration. A similar issue has arisen with respect to interests that are transitional attempting to be coupled with interests that are not transitional (namely, arising after the commencement of the PPSA). In the authors’ view, there is some force to the argument that it is seriously misleading (see s 164) to describe an interest as a PMSI when it is a mere security interest. For this reason, commercial parties or their legal advisors should be careful when considering the question of whether or not any/all of the collateral securing payment or performance of an obligation constitutes a PMSI.

[14.5.6] Collateral covered — s 14(4) In reference to the example in [14.5.5], the scope of the PMSI additionally only attaches to the amount secured for that particular purpose. If Secured Party B lent $500,000 in total to Debtor A, with only $50,000 secured by way of a PMSI, in a priority dispute between Creditor C and Secured Party B, pursuant to s 14(4) the PMSI would only operate with respect to the collateral purchased for the $50,000 and indeed may be an amount less than $50,000 (taking into account depreciation, amortisation etc). For more information, see s 62.

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[14.5.7] Refinancing, renewing, consolidating and restructuring — s 14(5) A purchase money security interest (PMSI) ceases to be effective when the underlying obligation over which the PMSI has been taken is satisfied in full. While the terms ‘‘refinancing,’’ ‘‘renewing’’, ‘‘consolidating’’ and ‘‘restructuring’’ are not defined by the PPSA the priority afforded by the PMSI is not dependent on the holder of the interest and thus methods used in achieving a refinancing are largely irrelevant. Rights under a PMSI are duly transferable and will be effective in accordance with the register such that lodging a financing change statement may be a necessary course to amending the existing register entry (that is, by way of substituting secured parties — see further at s 150). Additionally, in order to obtain the benefit of the earlier registration date it is worth assigning or transferring an existing PMSI as opposed to creating and registering a new security interest.

[14.5.8] Determining which obligations are satisfied and in what order — s 14(6) By default, where there are multiple obligations owing by a debtor to a creditor in various capacities (including on an unsecured, secured or purchase money security interest (PMSI) basis), pursuant to s 14(6), the debtor satisfies the unsecured obligations first, followed by the secured obligations and finally the PMSI obligations last. This can be illustrated by way of example. Assume Secured Party A agrees to lend $100,000 to Grantor B. As part of the security agreement it is expressly stipulated that $50,000 will go towards the acquisition of inventory, $30,000 will be perfected by Grantor B’s general pool of personal property and $20,000 will be unsecured. Grantor B repays $60,000 before defaulting. In the absense of an express intention as to which obligation is paid in what order, Grantor B satisfies the $20,000 unsecured debt first, the $30,000 secured debt second and only $10,000 towards the PMSI debt over inventory. Secured Party A can thus enforce their PMSI against the inventory.

This default position is, however, subject to the intentions of the debtor and not the secured party absent any express terms upon which the parties agree. In the preparation of a security agreement where the potential for multiple obligations arise, the authors’ thus advise the inclusion of an express provision stipulating the order in which the obligations are satisfied. This subsection sets out the order in which obligations are to be satisfied where there are both PMSI and non-PMSI interests in the collateral. This issue was considered in the Canadian case of Nicholson Leasing 1994 Ltd v Saskatchewan Government Growth Fund II Ltd (1999) 14 PPSAC (2d) 285 (Alta QB). In that case assets were purchased from a creditor under what was perceived to be a PMSI. The debtor was advised by the creditor that a certain obligation was outstanding and the debtor proceeded to satisfy the obligation owing. There was an express understanding that the registrations would Annotated Personal Property Securities Act 2009 (Cth)

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discharge upon receipt of the funds. The creditor subsequently found GST amounts owing in addition to the outstanding amount quoted and refused to discharge the obligation. The creditor sought to attach PMSI status to the GST owing. The Court held, with the satisfaction of the debt in full, no additional obligation was owing and in any event that the PMSI provisions would not come to the aid of the creditor should a priority dispute arise. The position in Australia should follow the same course. The authors’ thus advise that secured parties holistically appreciate the nature of the obligations owing under a PMSI. Over the course of the transitional period, there have been a series of questions as to whether or not standard terms of trade dictate the order in which payments are made. For example, if a part payment is made with respect to a secured party who holds a PMSI and an ‘‘all present and afteracquired’’ personal property security interest (ALLPAP), which obligations are satisfied first? The PPSA position is clear, but the contractual position — namely, the intention of the order of payments between the parties, is not. For example, if a payment is made pursuant to an invoice rendered, and that payment is referable by some invoice identifier, then can it be said that the payment was first made with respect to the ALLPAP? By reference to s 14(6), the answer would be yes. However, while it is not conclusive, and there is no Australian case law on point, there is some force to the argument, in the authors’ view, that any payment made pursuant to an invoice satisfies that particular invoice and any security interest — be it a PMSI or otherwise — attaching to such obligations is extinguished. Any general monies owing between debtor and creditor (perhaps for other invoices or for the provision of property or monies generally), and any security interest(s) attaching to such monies, continue without being affected by the payment of the invoice.

[14.5.9] Purchase money obligations — s 14(7) The term ‘‘purchase money obligations’’ has been used in discussing the existence of a purchase money security interest (PMSI) throughout this commentary. Section 14(7) explicitly defines the concept in the nature discussed, that is, the PMSI only exists insofar as the obligations owing are ‘‘purchase money obligations’’. Collateral or ancillary obligations flowing from the primary right, such as maintenance and reasonable repair costs perhaps not encompassed in the original security agreement, should therefore be duly considered when creating a PMSI. It is also important to recognise that the value of the collateral securing the obligation need not directly correlate with the funds advanced at the time the PMSI is created (and indeed this will often be the case). The PMSI attaches to particular collateral, not to the value of the obligation itself however the PMSI survives and bestows priority on the holder unless and until the entire obligation is satisfied by the debtor. The following example illustrates this point:

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Debtor A borrows $100,000 from Secured Party B. Debtor A purchases a $100,000 motor vehicle in accordance with the purpose of the security agreement and a PMSI is duly perfected by registration. The motor vehicle depreciates over time to $50,000 and the debtor defaults on the advance with $80,000 still owing.

In these circumstances, Secured Party B can not rely on their PMSI status to receive more than the value of the underlying collateral, that is, the $50,000, even where Debtor A has property in excess of the collateral. At the same time, however, Debtor A cannot argue that because the collateral is only worth $50,000 that their obligation to Secured Party B should be reduced to this amount. Secured Party B will retain a right in personam (against the person) against Debtor A for the shortfall in such circumstances. If a surplus were to arise upon enforcement of the security interest, the surplus is also to flow back to the debtor unless otherwise specified by the security agreement.

[14.5.10] Purchase price and value — s 14(8) The term ‘‘purchase price’’ is not defined under the PPSA, however, it is used synonymously with the term ‘‘value’’ pursuant to s 14(8). The term ‘‘value’’ is defined under s 10, however, specific reference is made to a modified definition pursuant to s 14 (see section (c) of the definition at s 10). Value, in the general sense, refers to consideration that is capable of supporting a contract. For the purposes of the PPSA, this refers to consideration which facilitates the creation of a valid security agreement. There is little mysticism to the term and indeed the concept of consideration under general contract law principles should apply. Value, pursuant to s 14(8), also includes credit charges and interest payable on the purchase money security interest (PMSI). The PMSI, thus, not only attaches to the primary obligation but further to any credit charges or interest on the primary obligation. The following example illustrates how this provision works: Debtor A borrows $10,000 from Secured Party B in order to purchase specific goods. The goods are purchased for the purpose described in the security agreement and Secured Party B perfects their PMSI. Debtor A repays $8,000, however, defaults before the remaining $2,000 is paid. Debtor A has also granted a security interest perfected prior to Secured Party B’s interest over ‘‘all present and after-acquired property’’ — the benefit of which is held by Creditor C. Secured Party B and Creditor C seek to enforce their interests. Credit charges and interest payable to date on Secured Party B’s advance add up to $700. Secured Party B seizes and sells the collateral for $3000. Creditor C’s claim at the time of seizure and sale amounts to $2,000.

Pursuant to s 14(8), Secured Party B recovers $2,700 in priority to Creditor C’s claim for $2,000. In the absence of this provision, Secured Party B would recover $2,000 in priority, however, would be forced to rely on the default priority rules with respect to further credit charges and interest payable. Creditor C would prevail in this regard with a ‘‘first in time’’ security interest (see s 55 for more information on priorities). Annotated Personal Property Securities Act 2009 (Cth)

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[14.6] Further reading ● Explanatory Memorandum [2.140, 2.145–2.149]. ● ALRC Report No 64 [7.2–7.6]. ● Whittaker Report [7.7]. ● Adrian Drinkwater, ‘‘The rise and fall of purchase money security interests at general law and under Article 9 regimes’’ (2010) 21 Journal of Banking and Finance Law and Practice 5. ● Anthony Duggan, ‘‘Romalpa agreements post-PPSA’’ (2011) 33 Sydney Law Review 645. ● Sheelagh McCracken, ‘‘Conceptualising the Rights of a Lessee under the Personal Property Securities Regime: the Challenge of ‘New Learning’ for Australian Lawyers’’ (2011) 34(2) UNSWLJ 547. ● Bruce Whittaker, ‘‘Retention of title clauses under the PPSA’’ (2010) 21 Journal of Banking and Finance Law and Practice 273.

¶1-080 SECTION 15 MEANING OF INTERMEDIATED SECURITY AND RELATED TERMS Meaning of intermediated security 15(1) An intermediated security is the rights of a person in whose name an intermediary maintains a securities account. Meaning of intermediary 15(2)

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.

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An intermediary does not include a central bank.

15(4) An intermediary (including a central securities depository) is an intermediary only while acting in the capacity of an intermediary. 15(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. 15(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. Meaning of securities account 15(7)

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.

[15.1] Comparable provisions in foreign regimes New Zealand Saskatchewan

PPSA 1999 PPSA 1993

Ontario

PPSA 1990

USA

UCC Article 9 (rev)

s 16 s 2 (see also the Securities Transfer Act 2007) s 1 (see also the Securities Transfer Act 2006) § 9-102 (see also UCC Art 8)

[15.2] Outline The PPSA applies to security interests taken over intermediated securities as collateral where the intermediary or the grantor are located in Australia: s 6(1A). There are various specific rules in the PPSA that apply to security interests in intermediated securities which are outlined below, under the heading ‘‘Cross-references’’. Annotated Personal Property Securities Act 2009 (Cth)

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[15.3] Cross-references ● Section 14(2)(b) provides that a purchase money security interest (PMSI) cannot be taken over intermediated securities. See [14.5.2.1]ff. ● Section 26 provides the rules for taking control of intermediated securities. ● Section 31 provides specific rules related to the identification of proceeds generated by dealings in intermediated securities. ● Section 49 and 51 provide specific taking free rules for intermediated securities. ● Section 109(3)(b) provides that the enforcement rules in Ch 4 do not generally apply to security interests in intermediated securities where the secured party has perfected their interest by control over the collateral. ● Personal Property Securities Regulations 2010 Sch 1 item 2.1 states that intermediated securities are classified as financial property for the purposes of information required to be included in a financing statement.

[15.4]

Concepts

● Financial products This central concept is discussed at [15.5.3]. ● Intermediated security This is defined under s 15(1) as the rights of a person in whose name an intermediary maintains a securities account. ● Intermediary This is defined under s 15(2) and is discussed below at [15.5.2]. ● Securities account This is defined under s 15(7). The term ‘‘account’’ has a specific meaning for the purposes of the PPSA and is defined by s 10. This definition would however severely limit the application of s 15 and it seems likely that the term account in relation to securities accounts is meant to have its general meaning.

[15.5]

Commentary

[15.5.1] Introduction .....................................................................................118 [15.5.2] Intermediary — s 15(2) ...................................................................119 [15.5.3] Financial products ..........................................................................119 [15.5.4] Particular issues for intermediated securities .............................120

[15.5.1]

Introduction

Section 15 is a definitional provision which involves several important concepts that are discussed below. The statutory regimes for defining intermediated securities and then taking security interests in them in New Zealand, Canada and the United States is different from the Australian PPSA so the foreign cases are unlikely to provide much direct guidance.

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[15.5.2] Intermediary — s 15(2) The main concept under s 15 is that of an intermediary in relation to intermediated securities. An intermediary is defined in s 15(2) as an Australian financial services licence (AFSL) holder who is permitted by the AFSL to maintain securities accounts on behalf of others (or a person authorised under foreign law to maintain securities accounts) or a clearing and settlement facility with a Clearing and settlement (CS) facility license (other than a person prescribed by the regulations. At the time of writing there were no persons prescribed). The application of s 15(2) to licensed CS facilities would bring Austraclear and the Australian Securities Exchange (ASX) Settlement and Transfer Corporation within the scope of the provision. Amendments were made in 2011 to clarify that s 15(2) is intended to apply to the ASX Settlement and Transfer Corporation Pty Ltd (ASTC): see the Explanatory Memorandum to the Personal Property Securities (Corporations and Other Amendments) Bill 2011 (Cth) at [24]–[26]. Section 15(3) excludes a central bank from being an intermediary. Section 15(5) and (6) clarify the extent of the concept of an intermediary. The temporal requirement in s 15(4) should also be noted.

[15.5.3] Financial products The term ‘‘financial products’’ has a specific meaning under the PPSA. For investment instruments (see [27.5]; s 10 and reg 1.10) it has the same meaning as in the Corporations Act 2001 (Cth) (see Pt 7.1 Div 3 of that Act). For intermediated securities however s 10 of the PPSA defines financial products as shares, bonds and any other financial instruments or financial assets (and any interests in those classes) other than cash. This definition was included to ensure consistency with the UNIDROIT Convention on Substantive Rule for Intermediated Securities (2009). The phrase ‘‘other financial instruments or other financial assets’’ is unclear. At its broadest it could include a large range of investment instruments. However, the definition of investment instrument in s 10 specifically excludes intermediated securities. The definitions for both ‘‘securities account’’ and ‘‘investment instruments’’ include a reference to ‘‘financial products’’ and both the Corporations Act 2001 (Cth) definition and the PPSA definition (for purposes other than investment instruments) include references to shares. The definition of financial products in s 10 of the PPSA also includes bonds. Bonds issued by governments or government instrumentalities are included as financial products for the purposes of the Corporations Act (s 764A of that Act). However, given the categories of ‘‘any other financial instrument’’ and ‘‘any other financial asset’’ in the s 10 definition of financial product in the PPSA (which applies for any purpose other than for investment instruments) it would seem that the use of the term ‘‘bonds’’ without the limitation to government securities as used in the Corporations Act refers to the general use of the term as simply meaning debt instruments. If this is correct then the term ‘‘bonds’’ when used as a category of financial products includes Annotated Personal Property Securities Act 2009 (Cth)

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debentures (ie bonds issued by corporations). This is consistent with the UNIDROIT convention which uses the term bonds rather than debentures. Defining the scope of financial products becomes important when seeking to perfect a security interest by registration where what purports to be a financial product forms the underlying collateral of the arrangement. While perfection by registration remains available and is important with respect to financial products, parties dealing with such property should also be aware of the ability to perfect by control (see s 25–29).

[15.5.4] Particular issues for intermediated securities Where a security interest arises in intermediated securities the secured party need not rely on registration of a financing statement as a step to perfecting their security interest as they may perfect by taking control of the collateral: see s 21, 26. Where the secured party in relation to collateral that consists of intermediated securities wishes to register a financing statement, they will need to ensure that the written security agreement includes a sufficient description of the collateral: s 20(2) and 20(4) or (5). As noted above, the PPS Regulations state that intermediated securities fit within the class of collateral designated as financial property: see Personal Property Securities Regulations 2010 Sch 1 item 2.3. See further [20.5.4]; Pt 5.3 with respect to perfection by registration.

[15.6] Further reading ● Explanatory Memorandum [–]. ● ALRC Report No 64 [–]. ● Whittaker Report [5.3].

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CHAPTER 2 — GENERAL RULES RELATING TO SECURITY INTERESTS

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SECTION 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.

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SECTION 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. Annotated Personal Property Securities Act 2009 (Cth)

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Personal Property Securities Act 2009 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). 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.

¶2-015 SECTION 18 GENERAL RULES ABOUT SECURITY AGREEMENTS AND SECURITY INTERESTS 18(1) A security agreement is effective according to its terms. 18(2) A security agreement may provide for security interests in after-acquired property. 18(3) A security interest in after-acquired property attaches without specific appropriation by the grantor. 18(4) A security agreement may provide for future advances. 18(5) A security interest is taken to secure reasonable expenses in relation to the enforcement of the security interest, unless the parties agree otherwise.

[18.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 35 s 9(1) s9 § 9-201

[18.2] Outline Section 18 provides a list of general provisions which aid the central concepts of Pt 2.2 of the PPSA. While miscellaneous in nature, the provisions are essential as they define the scope and breadth of the PPSA. It is perhaps useful

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to refer to the balance of Pt 2.2 before referring to s 18 as the importance of each subsection is made apparent in the context of the surrounding sections.

[18.3]

Cross-references

[18.4]

Concepts

● Attachment This is defined by s 19. See also Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd (in liq) (recs and mgrs apptd) (2017) 320 FLR 259; [2017] WASC 152. ● After-acquired property This is defined by s 10 as meaning personal property acquired by the grantor after a security agreement is made. ● Future advance This is defined by s 10. See further below. ● Reasonable expenses See s 127. See also Re Jensen & Jensen [2015] FCCA 2721.

[18.5]

Commentary

[18.5.1] Effective according to terms — s 18(1) ........................................123 [18.5.2] After-acquired property — s 18(2) ...............................................124 [18.5.3] Attachment without specific appropriation — s 18(3) ..............125 [18.5.4] Future advances — s 18(4) .............................................................125 [18.5.5] Reasonable expenses — s 18(5) .....................................................127

[18.5.1] Effective according to terms — s 18(1) As a security agreement operates inter partes, that is, between the parties, principles of contract law in respect of the relevant rights and responsibilities between the parties. The Victorian Court of Appeal stated in Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (2014) 49 VR 86; [2014] VSCA 326 at [117] that ‘‘s 18 reflects the basic principle of freedom of contract: security agreements are effective according to their terms’’. The PPSA simply operates in accordance with the terms so described and is largely concerned with any security interest which may arise by operation of the agreement as opposed to satisfaction of the primary obligation. For enforcement remedies in personam (against the person), namely, against the debtor, the secured party should consult general contract principles or other legislation where relevant. For enforcement remedies in rem (against a thing), namely, against the underlying collateral, the secured party should consult the PPSA as well as the terms and limitations (such as subordination provisions) in the underlying security agreement. The underlying principle of the PPSA is that the Act does not establish the relevant relationship that formulates the security interest. The law of contract continues to apply to the relationship between the secured creditor(s) and its debtor(s). This section (together with s 254) recognises the continuing role that Annotated Personal Property Securities Act 2009 (Cth)

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contract law will play in regulating the creditor/debtor relationship and the rights of secured parties in relation to the collateral: 674921 BC Ltd v Advanced Wing Technologies Corp (2006) 9 PPSAC (3d) 43; 263 DLR (4th) 290 at [5] (BC CA). In the Saskatchewan Court of Appeal decision in CPC Networks Corp v Eagle Eye Investments Inc (2012) 405 Sask R 86; 95 CBR (5th) 76 at [30], Jackson JA said: ‘‘A security agreement must be construed as a specialized form of contract, but the principles of contract law are also in play. The overarching principle of contract interpretation is to give effect to the intention of the parties— keeping in mind, as may be necessary, the nature of the contract as a security agreement and having regard for commercial reasonableness, good faith and the priority structure both inside and outside of bankruptcy.’’

[18.5.2] After-acquired property — s 18(2) A security agreement may be pre-drafted in anticipation of the grantor obtaining proprietary rights over such property at some foreseeable future time. While any security interest purporting to attach to collateral will not do so unless and until the actual rights are acquired in the collateral there are two interconnected benefits with pre-drafting agreements: ● first, the pre-drafted security agreement can facilitate the registration of a financing statement (see s 153) although a financing statement may be registered on the Personal Property Securities Register (PPSR) even without an executed security agreement (s 161) as the process of registration merely provides notice that a security agreement exists as opposed to requiring registration of a copy of the security agreement itself. ● second, assuming actual rights over the underlying collateral are obtained at some stage prior to the seeking of enforcement, the perfected interest will be recognised as at the date of registration (that is, the earlier date) rather than the date the rights actually attached (see further s 19, 21, 55). It should be noted, however, that the purported secured party must have a belief on reasonable grounds that the relevant security interest will actually arise. Abusing the registration process by lodging financing statements without belief on reasonable grounds is subject to penalty under the PPSA (see further s 151). Parties who suffer loss as a result of a breach of this obligation may seek compensation from the registered secured party under s 271. Further, the description used to describe collateral for the purposes of lodging a financing statement should clearly enunciate an intention to attach to afteracquired property: see further s 153. In the Saskatchewan Court of Queen’s Bench decision, Redi-Mix Ltd v Hub Dairy & Barn Systems Ltd (1987) 7 PPSAC 165; 41 DLR (4th) 360, this issue came under consideration. The facts concerned a security interest taken over ‘‘all debts, accounts, choses in action, claims, demands, and moneys now due or owing or accruing due or which

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may hereafter before due or owing to the Assignor’’. The financing statement recorded this interest as an ‘‘assignment of accounts’’ with no additional description. Justice McLellan held that the onus was on the grantor to demonstrate an intention contrary to the assignment of all accounts both presently existing and after-acquired, that is, the secured party benefits from a broad interpretation of the Act. Deriving the intention of the parties at the time the agreement was entered is thus critical to determining whether or not the security interest extends to after-acquired property.

[18.5.3] Attachment without specific appropriation — s 18(3) There is no need, pursuant to s 18(3), for the grantor or the secured party to take any additional steps to validate the attachment of a security interest where the security agreement stipulates that the interest will be taken in afteracquired property. The interest arises as soon as the grantor receives proprietary rights in the relevant collateral: Re Langdon; Forge Group Ltd (Recs and Mgrs Apptd) (In Liq) (2017) 118 ACSR 434; [2017] FCA 170. In Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd (in liq) (recs and mgrs apptd) (2017) 320 FLR 259; [2017] WASC 152 at [326], it was held that attachment under s 18(3) ‘‘connotes the creation of an interest of a proprietary nature’’. For a discussion of what constitutes proprietary rights see [12.4.1 (C)]. This is consistent with the equitable principle in Holroyd v Marshall [1861–1873] All ER Rep 414.

[18.5.4] Future advances — s 18(4) A ‘‘future advance’’ is defined under s 10. The term refers to advances made after the security agreement has arisen. A security interest can encompass such advances giving rise to statutory recognition of the concept of ‘‘tacking’’ to some degree. The PPSA arguably goes one step further to prescribe that notice does not vitiate the secured party’s right to claim future advances as part of their priority interest. Such is the position under the common law rule in Hopkinson v Rolt (1861) 9 HL Cas 514, which is now rendered somewhat obsolete. This does not however extend to third ranking securities by way of assigning a first ranking security interest, that is, the doctrine of tabula in naufragio (a plank in a shipwreck15) is not directly applicable: Willoughby v Willoughby (1756) 99 ER 1366. This is to say that the assignment of a security interest with first priority to the holder of a security interest with third priority does not make the later advance a ‘‘future advance’’ of the first interest (which would otherwise prevail against the holder of a security interest in second priority). Although in CPC Networks Corp v Eagle Eye Investments Inc (2012) 405 Sask R 86; 95 CBR (5th) 76 at [31], the Saskatchewan Court of Appeal noted that could be done via specific contracting, assuming that there was not otherwise a disruption of the system of priorities or on insolvency law. In that case, it was held that there was no contractual intention to extend the priority of the first loan to advances made under the assignee’s (otherwise unsecured) loan. 15

This is a phrase used in law to describe the power subsisting in a third (or subsequent) mortgagee, who took the third mortgage without notice of the second mortgage, and then acquired the first mortgage.

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In the Ontario Court of Justice decision, Canamsucco Road House Food Co v LNGAS Ltd (1991) 2 PPSAC (2d) 203, a dispute arose as to whether a third party advance could ever constitute a ‘‘future advance’’. The facts of the case concern a bank holding an ‘‘all present and after-acquired property’’ security interest over the debtor’s property. The assets were subsequently sold to a third party and a security interest arose over the purchase price in second priority to that held by the bank. Money was borrowed against the property creating a third security interest. The funds borrowed were used by the debtor to satisfy the obligation owing to the bank in first priority on the condition that the bank’s security interest was assigned to the third priority security interest holder. The third priority security interest holder asserted, upon seeking to enforce the instrument, that their subsequent security interest was a ‘‘future advance’’ in light of the assigned first priority under the PPSA. Justice Mercier held (and the point was not challenged on appeal: Canamsucco Road House Food Co v LNGAS Ltd (1997) 12 PPSAC (2d) 227) at [6]: ‘‘The respondents claim that as a result of C.I.B.C.’s G.S.A. being assigned to 936 and because that G.S.A. contained clauses to the effect that future purchasers would become part of its security, the first G.S.A. (in favour of C.I.B.C. and now assigned to 936) and the third G.S.A. (in favour of 936), merged together through some ‘tacking’ principle to give 936 priority for the full indebtedness guaranteed under both G.S.A.’s over C’s G.S.A. I cannot ascribe to that theory. That would mean a person with a third charge could gain priority over one with a second charge simply by paying off the first charge and obtaining an assignment of same. The fact the owner of the second charge was, in this instance, the person responsible for satisfying the first charge and defaulted in that obligation does not alter the fact that it would be inequitable to allow a third charge to take precedence over a second charge by obtaining an assignment of the first charge. It is true that the first charge in this case attaches to after acquired property, and it continues to do so when assigned, but only to the extent of the amount owing under that first charge.’’ See also, Near Horbay Inc v Great West Golf & Industrial Inc (2000) 2 PPSAC (3d) 179; 87 Alta LR (3d) 98 (Alta QB); CPC Networks Corp v Eagle Eye Investments Inc (2012) 405 Sask R 86; 95 CBR (5th) 76 (Sask CA). The rationale behind recognition of future advances follows the underlying rationale of primacy of the register under the PPSA, that is, any subsequent secured party has the ability to discover a previous security interest by virtue of the original registration. Subsequent secured parties should thus, by default, be aware that future advances may arise in priority to any interest they may wish to take over the same collateral. From a pragmatic perspective, in the authors’ view, all secured parties should include a provision for future advances and all subsequent secured parties should assume such provisions have been made and seek to subordinate the senior secured party’s interest to the extent that any future advances have arisen or may arise.

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This does not eliminate the effectiveness of factoring of accounts receivable and other debt factoring, see s 64.

‘‘Future advances’’ under the PPSA include reasonable expenses incurred in the enforcement of the security interest. The overlap is somewhat unnecessary as even without the incorporation of this provision, reasonable expenses in the enforcement of a security interest arise by default, that is, s 18(5) is to be read with s 140(2)(b). It is in the interest of the secured party to preserve the operation of this provision by expressly providing for it in the security agreement. The grantor stands neither to gain nor to lose from the inclusion of this provision. Notwithstanding this fact, the security agreement can provide for different terms including that the security interest does not include the recovery of enforcement costs. For more information about enforcement of security interests generally, see Ch 4. The inclusion of reasonable expenses within the security interest is an interesting aspect to the PPSA, consideration of which might arise with respect to the rights of a respective secured party as against an insolvency practitioner or trustee should the grantor enter into liquidation or bankruptcy respectively. Where an insolvency practitioner is appointed to a grantor company, it is the assets of the company which form the relevant pool of assets from which the insolvency practitioner and not the assets which are otherwise subject to a security interest. The entire objective of taking a security interest is to avoid the pari passu distribution of assets which governs distributions to unsecured creditors (see s 555 and 556 of the Corporations Act 2001 (Cth)). To take security effectively removes the encumbered assets from the relevant pool unless and until the secured obligations are satisfied in full. Thus, where an insolvency practitioner elects to deal with secured property, the expenses incurred in dealing with such assets are to be recovered from the assets of the company and not the personal property being dealt with. This is so unless it can be said that an ‘‘incontrovertible benefit’’ is conveyed to the secured party as a result of actions taken by the insolvency practitioner. In Monks v Poynice Pty Ltd (1987) 8 NSWLR 662 at 663–664, Young J held: ‘‘It seems to me that equity, if not the common law, finds that a person is liable to pay a reasonable sum for services provided to it in at least four circumstances, notwithstanding that there is no contract. First, it does so where there is a request expressed or implied for the performance of the service . . . The second situation is where the party benefited, accepted or acquiesced in the provision of the service under circumstances where it must have known that the service was not being rendered gratuitously ... The third class of case, and it may indeed be that these are overlapping categories, and many cases in this third class fall into classes one and Annotated Personal Property Securities Act 2009 (Cth)

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Personal Property Securities Act 2009 two, is where the service that is provided is necessary to be carried out for the protection of the defendant’s personal property . . . Fourthly, there is a class of case where the service conferred incontrovertible benefit on the defendant and it would be unconscionable for the defendant to keep the benefit of the service without paying a reasonable sum (sic) therefore.’’

The onus is on the party asserting the conveying of an incontrovertible benefit (namely, the insolvency practitioner) to establish that such a benefit flowed: See Dean-Willcocks v Nothintoohard Pty Ltd (2005) 53 ACSR 587 per Barrett J; Affirmed on appeal in Dean-Willcocks v Nothintoohard Pty Ltd (in liq) (2007) 25 ACLC 109. It has otherwise been asserted by insolvency practitioners that the recovery or realisation of proceeds payable on account of collateral which would otherwise be the subject of a PMSI, for example, falls within the ‘‘salvage principle’’ such that the costs associated with such recovery are properly payable from the recovered assets/funds. The salvage principle derives from Re Universal Distributing Co Ltd (in liquidation) (1933) 48 CLR 171; see also, Stewart v Atco Controls Pty Ltd (in liq) (2014) 252 CLR 307; [2014] HCA 15; Thackray v Gunns Plantations Ltd (2011) 85 ACSR 144; [2011] VSC 380 at [42] per Davies J. In practice, this scenario has arisen in the context of personal property the subject of a valid retention of title clause. A secured party is often a manufacturer or supplier of stock to a retailer who, at some subsequent stage, enters administration, receivership or liquidation. The insolvency practitioner, dealing with the business in an attempt to provide the best result for creditors as a collective class, deals with the underlying assets of the company (including the stock subject to retention of title terms). The insolvency practitioner has two options, they can make the stock available for the collection of the relevant secured party or they can trade on the business, sell the stock and recover the proceeds. It is in the interests of the company, assuming the stock can be sold, for the stock to be sold as the value of the stock (at cost) plus the profit margin provides a benefit to the company. To the secured creditor, however, whether the stock is sold or not they are entitled exclusively to the cost price of the stock. In the view of the authors — it is in the interests of the secured creditor to either demand that the stock be returned or obtain an undertaking from the insolvency practitioner that the proceeds from the sale of the stock are being held in a separate account, on trust, for the benefit of the secured creditor very early in the appointment of the external administrator. Should the secured creditor not adopt one of these courses and the stock the subject of their security is sold and proceeds deposited into the company’s general bank account, the secured creditor (supplier) runs the risk of the funds being commingled with other funds such that any security interest would need to be traced (see s 32). While there are mechanisms under the PPSA for the recovery of proceeds, should the funds not be readily identifiable (funds being a fungible) it is for the secured party to make good a tracing claim involving a

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court application and the application of the PPSA and principles at general law. Like many aspects of the PPSA, preserving rights is easier and more efficient than seeking to enforce or deal with personal property after the fact.

● ● ● ●

Explanatory Memorandum [2.1–2.2, 2.74, 2.138]. ALRC Report No 64 [8.4–8.10]. Whittaker Report [5.2]. Roderick Wood, ‘‘Turning lead into gold: the uncertain alchemy of ‘all obligations’ clauses’’ (2003) 41 Alberta Law Review 801.

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SECTION 19 ENFORCEABILITY OF SECURITY INTERESTS AGAINST GRANTORS — ATTACHMENT

Attachment required for enforceability 19(1) A security interest is enforceable against a grantor in respect of particular collateral only if the security interest has attached to the collateral. Attachment rule 19(2)

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. Time of attachment 19(3) 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. 19(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). Goods leased, bailed, consigned or sold under a conditional sale agreement. 19(5) 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 grantor under a conditional sale agreement (including an agreement to sell subject to retention of title) when the grantor obtains possession of the goods. Annotated Personal Property Securities Act 2009 (Cth)

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Personal Property Securities Act 2009 19(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).

[19.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 40 s 12(1) s 11(2) § 9-203

[19.2] Outline ‘‘Attachment’’, as a concept, is not unique to the PPSA, however, it is central to the Act and represents an active departure from the pre-PPSA approach to securities law. Section 19 details the rules of attachment which apply to all security interests including the definition of the term for the purposes of the PPSA.

[19.3] Cross-references ● Sections 84–86 deal with the issue of attachment of security interests over agricultural products.

[19.4]

Concepts

● Consigned See s 10, 12(2)(h). ● Possession See s 24. Section 19(5) uses the term ‘‘obtains possession’’, which should be contrasted with merely having possession: C Dixon Fuels Ltd v SWS Fuels Ltd (2011) 17 PPSAC (3d) 175; [2011] NSCA 35 (Nova Scotia CA). A similar wording is used in s 62. ● PPS lease This is defined by s 13. ● Value This is defined by s 10. See further [19.5.2]ff, especially [19.5.2.2].

[19.5] Commentary [19.5.1] Enforceability — s 19(1) .................................................................131 [19.5.2] When a security interest attaches — s 19(2) ...............................132 [19.5.2.1] Rights in the collateral — s 19(2)(a) .................................133 [19.5.2.2] ‘‘Value’’ or ‘‘an act’’ — s 19(2)(b) .....................................136

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[19.5.3] Time of attachment — s 19(3), (4) .................................................137 [19.5.4] Leases, bailments, consignments and conditional sale agreements — s 19(5), (6) ..................................................................................................137

Section 19(1) imposes an essential requirement that a security interest attach to property before it can be enforced. Attachment involves the creation of an interest of a proprietary nature: see Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd (in liq) (recs and mgrs apptd) (2017) 320 FLR 259; [2017] WASC 152. Section 19(2) defines the term ‘‘attaches’’, which is not otherwise defined by the Act (as s 10 refers back to s 19(2)). Attachment refers to the moment where a security interest is recognised against particular personal property defined by the security agreement. As noted in s 12, the substance of the transaction must give rise to a security interest in personal property in order to secure the payment or performance of an obligation. Importantly, where no security interest has or will attach to personal property there is fundamentally no security interest. This may occur for a number of reasons, each of which is a matter of contractual interpretation and outside of the scope of the PPSA. For instance, a contract may fail to facilitate the attachment of a security interest because there is a condition precedent to the contract coming into effect that has not yet been satisfied. Furthermore, even if the contract is effective, it may not, on its terms, confer any rights in personal property. The concept of attachment should not be confused with the pre-PPSA concept of crystallisation of a floating charge: Re Langdon; Forge Group Ltd (Recs and Mgrs Apptd) (In Liq) (2017) 118 ACSR 434; [2017] FCA 170 at [36]–[37] (‘‘there is no role for crystallization . . . [a]ll security interests under the PPSA, are, employing traditional language, ‘fixed’’’). The crystallisation of a floating charge involved the automatic attachment of the security to the collateral as specified in the security agreement, which converted the floating charge into a fixed charge. This process of crystallisation had important consequences for legal priority contests, however, these issues are no longer relevant as priority is determined by the PPSA rules, rather than how the security interest is characterised. In Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd (in liq) (recs and mgrs apptd) (2017) 320 FLR 259; [2017] WASC 152 at [334], the court stated that ‘‘the attachment rule leaves no room for the continued operation of the concept of crystallisation’’. In Re Langdon; Forge Group Ltd (Recs and Mgrs Apptd) (In Liq) (2017) 118 ACSR 434; [2017] FCA 170 at [36], the court held that attachment does not depend on an event of default or crystallisation before attachment occurs (citing the 2nd edition of this book at [12.5.2.2]). Where there has been no attachment of a security interest to particular collateral, the purported security interest is unenforceable and the PPSA provisions are largely irrelevant. If the secured party has registered a financing statement without the attachment of a security interest they may be required by the grantor to register a financing change statement to end the registration against the grantor. This process involves serving an amendment Annotated Personal Property Securities Act 2009 (Cth)

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demand and using either the courts or the PPS Registrar to enforce the amendment of the entry on the Personal Property Securities Register (PPSR). This is discussed further in s 178–182.

[19.5.2] When a security interest attaches — s 19(2) Section 19(2) is critical to effectuating one of the underlying policies of the PPSA, that priority contests are not to be determined by the form of the transaction or by who has a claim in title. While it is not correct that say that title is irrelevant, it is no longer important for determining priority contests. Under the PPSA the first step to establishing priority when dealing with a PPSA security interest is to establish that the security interest has attached to the collateral under s 19. This step is essential because it verifies that the secured party has rights in the collateral that may be enforced against the grantor of the security interest. The attachment step is primarily directed to the relationship between the grantor and the secured party. The relationship between the secured party and competing interests in the collateral held by third parties is dealt with under s 20 (perfection). A security interest arises from a security agreement, which must be a consensual transaction: Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (2014) 49 VR 86; [2014] VSCA 326. Section 19 defines what it means for a security interest to ‘‘attach’’ to personal property. The starting position is that a security interest may attach to collateral that the grantor does not own. This marks a break from the prePPSA law which applied (subject to certain exceptions) the nemo dat (‘‘no one [can] give what one does not have’’) principle. The ability to attach a security interest to personal property over which the grantor does not have title is a conceptual hurdle participants and practitioners will need to face particularly when dealing with deemed security interests (such as PPS leases and commercial consignments) and suppliers with retention of title claims who have traditionally relied on the strength of their title without needing to register notice of a security interest. As the cases of Re Maiden Civil (P&E) Pty Ltd (2013) APPSR ¶701-008; Albarran and Pleash v Queensland Excavation Services Pty Ltd (2013) 277 FLR 337; [2013] NSWSC 852 (the case concerning the construction vehicles) and Waller v New Zealand Bloodstock Ltd [2006] 3 NZLR 629 (the case concerning the lease of a horse: see s 13) demonstrate, the owner of personal property who has a deemed security interest and who fails to perfect their security interest can be subordinated where the debtor grants a further security interest that attaches to the property and is properly perfected. The timing of attachment under s 19 does not limit or alter the operation of the default priority rule in s 55: The Healy Holmberg Trading Partnership v Grant [2012] NZCA 451. While the process of attachment is not, strictly speaking, a ‘‘prerequisite’’ to perfection, that is to say the order of attachment and taking steps to perfect is irrelevant (see s 21(3)), attachment must occur prior to seeking enforcement of a security interest. The simple question being, how can one enforce one’s

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[19.5.2.1] Rights in the collateral — s 19(2)(a) The concept of rights in the collateral eludes precise definition. The provision of security over the grantor’s collateral in a valid and enforceable security agreement creates ‘‘rights in the collateral’’. The legal owner of personal property will clearly have rights in the collateral and may grant a security interest that attaches to that collateral. However, what rights short of ownership will constitute sufficient ‘‘rights in the collateral’’ for the purposes of s 19 is imprecise. The Supreme Court of Canada held in iTrade Finance Inc v Bank of Montreal (2011) FPPSR ¶700-125; [2011] 2 SCR 360 at [44]: ‘‘What is considered as ‘rights’ in the collateral encompasses a range of interests beyond legal and equitable title.’’ The Supreme Court further held that without rights in the collateral the nemo dat rule would continue to apply and no security interest could be granted that would be enforceable against third parties: at [44]. The Supreme Court of Canada noted in an earlier case (Re Giffen (1998) 13 PPSAC (2d) 255; 155 DLR (4th) 332 at [26]) that: ‘‘The rights of parties to a transaction that creates a security interest are explicitly not dependent upon either the form of the transaction or upon traditional questions of title. Rather they are defined by the Act itself.’’ The US courts have held that a grantor need not have legal ownership in order to grant a security interest in collateral: Merchants Bank v Atchison (In re Atchison) (1987) 832 F.2d 1236 (US CA 11th Cir); Foothill Capital Corp. v Clare’s Food Market, Inc. (In re Coupon Clearing Serv., Inc.) (1997) 113 F.3d 1091 (USCA 9th Cir); In re Ferandos (2005) 402 F.3d 147 (US CA 3rd Cir). It should be noted that s 19(5) (discussed below) provides that possession of collateral in certain circumstances is sufficient to provide rights in the collateral. The US courts have held that mere possession is not sufficient, it must be combined with some element of use and control of the collateral by the purported grantor: Merchants Bank v. Atchison (In re Atchison) (1987) 832 F.2d 1236 (US CA 11th Cir). For example in Caterpillar Financial Services Corp v Peoples National Bank NA (2013) 710 F.3d 691 (US CA 7th Cir) it was held that the owner of equipment that had been legally transferred to a special purpose vehicle in order to ring fence the assets from creditors of the transferor had sufficient rights in the collateral to grant a security interest in the transferred collateral because it maintained possession and use of the collateral and had not disclosed the transfer to third parties (hence it had apparent ownership). Annotated Personal Property Securities Act 2009 (Cth)

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interest over property which the grantor has no proprietary rights over which it can properly convey? The ability of the secured party to have a fully perfected security interest requires, at its most basic element, that the security interest attach to some collateral, which in turn requires that the grantor have had some rights to grant the interest in the collateral to the secured party. The definition of attachment can be broken into component parts as follows.

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The ability of a lessee to grant a security interest in leased property under s 19(5) was applied in the decision of Re Maiden Civil (P&E) Pty Ltd (2013) APPSR ¶701-008; Albarran and Pleash v Queensland Excavation Services Pty Ltd (2013) 277 FLR 337; [2013] NSWSC 852. That case concerned the construction vehicles leased on a long term basis by Maiden Civil from QES, although QES did not perfect its security interest as a PPS lessor. Maiden Civil had also granted a security interest in the vehicles to another financier (Fast Financial) who had perfected their interest. When Maiden Civil stopped paying its lease fee to QES and entered voluntary administration the lease (albeit an oral lease) was terminated by QES but this did not mean that it’s interest as lessor took priority over the vehicles because Maiden Civil was able to grant a security interest to Fast Financial that, in a PPSA priority contest, went beyond the duration of its lease. The court said (at [73]): ‘‘Maiden did not have only a mere right to possession under the QES leases. The Canadian and New Zealand cases already mentioned [i.e. Re Giffen and the Portacom and NZ Bloodstock cases] demonstrate that a PPS lessee on taking possession of the collateral acquires not only a possessory right but also proprietary rights to the extent that it can grant security interests to third parties, so that the lessor’s interest if unregistered is vulnerable to being defeated by security interests so granted to such third parties. The PPSA treats the lessee under a PPS lease as the grantor of a security interest with rights in the collateral, and the lessor as a secured party, because it sees the transaction as, in substance, a security transaction, though in form it is a lease. As the cases mentioned show, it recognises that the lessee may validly and effectively grant security interests in the collateral to third parties, that can take priority of the lessor’s unperfected interest, because the lessee is regarded for that purpose as having rights in the collateral. Maiden acquired possessory and proprietary rights in the Caterpillars upon taking possession of them, and granted a security interest in them to Fast under the General Security Deed.’’ Of course, a security interest can only bestow an interest over the rights that are available to the relevant grantor. If the grantor does not have any rights with respect to the personal property in question then any security interest purportedly granted in such property could never conceivably attach. For example, a person cannot grant a security interest in the property of a stranger and thereby bind the stranger, as they have no rights in that property to grant to the secured party. In Scott Auto Sales Ltd v Becker (2012) 19 PPSAC (3d) 329; 99 CBR (5th) 148 (BCSC), the court found that the purported grant of a security interest in a motor vehicle failed because the secured party (the car dealership that sold the vehicle) had transferred ownership of the vehicle to a Ms Haz, on the instructions of Mr Becker. Mr Becker had purchased the vehicle for Ms Haz as a deposit for the payment of the purchase price of a larger acquisition of property from Ms Haz. The car dealership registered a security interest against the car, but the court found that as ownership had properly passed to Ms Haz, and she was a stranger to the contract between the dealership and Mr

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Also, where an agreement is made subject to a condition precedent which is not satisfied there can be no rights in the collateral arising from the agreement to allow the attachment of a security interest: 994814 Ontario Inc v RSL Canada Inc (2006) 9 PPSAC (3d) 240; 20 CBR (5th) 163 (Ont CA) (machines delivered under contract that specified they had to receive safety approval before contract binding, the PPSA did not apply as approval had not occurred so there was no binding contract). However, it would be mistake to think that, for the purposes of a priority contest between security interests in the PPSA, a grantor is limited to granting a security interest to the rights they hold. Such a view would be consistent with the pre-PPSA nemo dat (‘‘no one [can] give what one does not have’’) rule, but one of the central points of the PPSA is the introduction of a new code for resolving priority disputes (and as s 12 notes) without regard to title. The ability of a lessee or bailee to grant a security interest is not limited to their possessory rights. As noted in the well-known New Zealand High Court decision Graham v Portacom New Zealand Ltd [2004] 2 NZLR 528 at [28]: ‘‘As against the lessee’s secured creditors, the lessee has rights of ownership in the goods sufficient to permit a secured creditor to acquire rights in priority to those of the lessor.’’ This was applied in the first Australian PPSA case on PPS leases: Re Maiden Civil (P&E) Pty Ltd (2013) APPSR ¶701-008; Albarran and Pleash v Queensland Excavation Services Pty Ltd (2013) 277 FLR 337; [2013] NSWSC 852 at [26]–[34], [70]–[81]. This gives rise to the question of what protection is given (if any) to owners of personal property under the PPSA. For example, would a thief have rights in the collateral sufficient to facilitate the attachment of a security interest that could defeat the title of the true owner? The answer is no. The reason is that while a thief possesses the stolen property their possessory title is defeasible to that of the true owner. If the thief purported to grant a security interest in the stolen property the competition between the purported secured party and the true owner (if they came forward) would not be a priority competition for the purposes of the PPSA. This may be contrasted with the position of a lessor with a PPS lease deemed as a security interest. Although a PPS lessor may be the owner of the collateral, it is also a secured party for the PPSA purposes and hence must comply with the PPSA, despite the lessee or bailee only having a limited interest in the collateral. A lessor (who has the reversionary title) who grants a long term lease (see s 13) is deemed to be a secured party pursuant to s 12(3). The lease might also be an in substance security interest under s 12(1) if it satisfies the ‘‘in substance’’ test. If the lessor fails to perfect their deemed security interest they may be vulnerable to competing security interests that are perfected (s 55(3)) or to third parties who may take the collateral free from the lessor’s ‘‘security interest’’ (see Pt 2.5). The lessor cannot rely on their title to defeat a subsequent security interest as their PPS lease deems their ownership interest to be a security interest for the purposes of the PPSA. Therefore, any priority competition will be determined according to the rules of the PPSA and not Annotated Personal Property Securities Act 2009 (Cth)

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Becker, the security interest could not attach to the car. Put simply, Mr Becker had no rights in the car to grant to the dealership.

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under common law principles of nemo dat quod non habet (‘‘no one [can] give what one does not have’’). This was confirmed in Re Maiden Civil (P&E) Pty Ltd (2013) APPSR ¶701-008; Albarran and Pleash v Queensland Excavation Services Pty Ltd (2013) 277 FLR 337; [2013] NSWSC 852. Where a thief grants a security interest in stolen property to a secured party who perfects their security interest, the true owner is not relying upon a security interest or a deemed security interest. Therefore, there is no PPSA priority contest between the secured party (who took the security from the thief) and the owner. The owner would prevail, as the PPSA priority rules would not apply. See further Gray v Royal Bank of Canada (1997) 12 PPSAC (2d) 126; 143 DLR (4th) 179 (BC SC). The notion of ‘‘rights in the collateral’’ is interrelated with the s 12(1) definition of an ‘‘interest in personal property’’. An ‘‘interest’’ can only arise if the party conveying the interest has sufficient ‘‘rights’’. By definition, in the view of the authors, the term ‘‘rights in the collateral’’ requires the conveying of proprietary rights and not mere or personal equities. While the creation of mere or personal equities are enforceable interests as matters of general law and equity, they do not, in and of themselves, create security interests. However, this view is not universally adopted and there is scope for debate, see s 12(1). For a discussion of the attachment of security interests over partnership property see: Silver Spoon Developments Ltd v Botham Holdings (Trustee of) (2008) 13 PPSAC (3d) 257; 299 DLR (4th) 519 (BC SC). For a detailed review of the law and policy of ‘‘rights in the collateral’’ see: Bruce Whittaker, ‘‘The scope of ‘rights in the collateral’ in subsection 19(2) of the PPSA — can bare possession support attachment of a security interest?’’ (2011) 34 UNSWLJ 524; Sheelagh McCracken, ‘‘Conceptualising the rights of a lessee under the personal property securities regime: the challenge of ‘new learning’ for Australian lawyers’’ (2011) 34 UNSWLR 547.

[19.5.2.2] ‘‘Value’’ or ‘‘an act’’ — s 19(2)(b) ‘‘Value’’ is a term defined by s 10 of the PPSA as meaning consideration that is sufficient to support a contract and includes an antecedent debt or liability which takes the meaning. The court does not enquire as to the adequacy of the consideration as long as it represents real legal value: Erjo Investments Ltd v Michener Allen Auctioneering Ltd (2004) 6 PPSAC (3d) 220; 241 Sask R 228 (Sask CA). The value provided need not be provided to the debtor or grantor: Re Terminal Moving and Storage Co Inc (1980) 631 F 2d 547 (USCA 8th Circ); Re Reliable Manufacturing Corp (1983) 703 F 2d 996 (USCA 7th Circ). The agreement to provide loan funds will represent value even where the funds are not provided until a later date: Agricultural Credit Corp of Saskatchewan v Pettyjohn (1991) 1 PPSAC (2d) 273; 90 Sask R 206 (Sask CA). ‘‘An act’’ refers simply to a form of consideration in lieu of payment. Not all contracts which provide a security interest will be in the form of a loan

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The act which, in the authors’ view, is anticipated by this section, is the grantor obtaining rights in the underlying collateral after the agreement has been drafted. On the whole, the attachment requirements are practical, and no additional formal or administrative steps need to be taken in order for attachment to arise.

[19.5.3] Time of attachment — s 19(3), (4) Section 19(3) permits the parties to a security agreement to determine the time at which a security interest arises (and expires where necessary). In the absence of such an express provision in the security agreement itself, a security interest will arise where the grantor obtains rights in the relevant collateral (where ‘‘rights’’ refers to the rights of a proprietary nature as discussed above). As with many elements of the PPSA, mere intention is insufficient, that is, if at the time expressly incorporated by the security agreement the grantor does not in fact have the necessary rights in the relevant collateral then irrespective of what is stated in the security agreement, attachment will not occur and a security interest will thus not arise. Similarly, pursuant to s 19(4) merely describing the interest as a ‘‘floating charge’’, for instance, will not necessary give legal force to an underlying intention that a security interest will attach at some later stage. While a security interest is effective according to its terms, pursuant to s 18(1), the terms of the agreement are interpreted in accordance with the PPSA principles such that the form of the transaction is largely irrelevant. If a security agreement seeks to delay attachment, it should express this intention in clear terms. Section 19(4) provides statutory recognition of the view of the court in Re G M Homes Inc (1984) 4 PPSAC 116; 10 DLR (4th) 439 (Sask CA) where notwithstanding the form of the security agreement as a floating charge the court declined to read into the terms of the agreement that a security interest would attach at a later stage into such terms. See also Innovation Credit Union v Bank of Montreal (2010) 17 PPSAC (3d) 1; 235 DLR (4th) 605 (SCC); Royal Bank v Sparrow Electric Corp (1997) 12 PPSAC (2d) 68; 143 DLR (4th) 385 (SCC). For more information on the legal status of the concept of a ‘‘floating charge’’ under the PPSA see Pt 9.5.

[19.5.4] Leases, bailments, consignments and conditional sale agreements — s 19(5), (6) For the purposes of providing clarity, s 19(5) of the Australian PPSA expressly prescribes that possession of personal property by the grantor is sufficient for the purposes of ascertaining ‘‘rights’’ over the collateral, where goods are: ● leased or bailed to the grantor under a PPS lease (see s 13), or ● consigned to the grantor (see s 12), or ● sold to the grantor pursuant to a conditional sale agreement (including sale subject to retention of title) (see s 12). Annotated Personal Property Securities Act 2009 (Cth)

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arrangement (although this will commonly be the case), other obligations may be the subject of a security interest as agreed between the parties.

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Section 19(5) should, however, also be read together with s 19(6) which holds that the right to possession does not limit any other rights in the collateral. This provision operates in two respects. Firstly, it ensures that mere possession will not give rise to a security interest in every respect (noting that s 19(5) is carefully drafted to encapsulate deemed security interests pursuant to s 12 and 13), and second, it clarifies the misconception that proprietary rights equate solely to ownership rights. The purpose of these subsections again addresses the central issue of what can constitute a security interest under the Act. Section 19 concludes with a note regarding the principles of attachment with regards to specific collateral types. In the interests of consolidating the commentary to particular collateral types, discussion of particular attachment principles with respect to such collateral is included where such collateral is discussed (for instance, with respect to crops and motor vehicles).

[19.6] Further reading ● Explanatory Memorandum [2.16–2.17, 2.21–2.23]. ● ALRC Report No 64 [8.30–8.37]. ● Whittaker Report [5.1], [7.4]. ● Sheelagh McCracken, ‘‘Conceptualising the rights of a lessee under the personal property securities regime: the challenge of ‘new learning’ for Australian lawyers’’ (2011) 34 UNSWLR 547. ● Struan Scott, ‘‘The PPSA: the continued relevance of conventional legal principles in determining the existence of a security interest’’ (2009) 15 New Zealand Business Law Quarterly 203. ● John Stumbles, ‘‘The PPSA: The Extended Reach of the Definition of the PPSA Security Interest’’ (2011) 34(2) UNSWLJ 448. ● Gregory Tolhurst, Tony Coburn and Alan Peckham, ‘‘Security interests at the margins’’ (2012) 40 Australian Business Law Review 241. ● Bruce Whittaker, ‘‘The scope of ‘rights in the collateral’ in subsection 19(2) of the PPSA — can bare possession support attachment of a security interest?’’ (2011) 34 UNSWLJ 524.

¶2-025 SECTION 20 ENFORCEABILITY OF SECURITY INTERESTS AGAINST THIRD PARTIES General rule 20(1) 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;

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(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.

20(2) 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 (ii) a statement that a security interest is taken in all of the grantor’s present and after-acquired property; or (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. Methods of signing writing 20(3) 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.

Personal property descriptions — consumer property, equipment and inventory 20(4) 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. 20(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. Annotated Personal Property Securities Act 2009 (Cth)

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Personal Property Securities Act 2009 Proceeds 20(6) 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.

[20.1] Comparable provisions in foreign regimes New Zealand Saskatchewan

PPSA 1999 PPSA 1993

Ontario USA

PPSA 1990 UCC Article 9 (rev)

s 37, 38, 39, 41 s 10(5), 10(3), 10(4), 19, 24(1), 25 s 19, 22, 23 § 9-308–9-314

[20.2] Outline Section 20 prescribes the PPSA requirements in order for a security interest to be enforceable against third parties, namely the formal requirements concerning the security agreement. While the introduction of a third party typically gives rise to the perfection rules under the PPSA, s 20 provides an overview of the enforceability requirements before the particular methods of perfection under the PPSA are specified pursuant to s 21. By way of conceptualising the various operative provisions of the PPSA, s 19 focuses on the underlying collateral and whether or not a security interest attaches (which affects the rights between the secured party and the grantor), s 20 focuses specifically on the particulars of the security agreement (which affects the rights in the collateral as between the secured party and third parties) and s 21 focuses on the methods of perfection (with perfection being necessary to achieve priority between PPSA security interests). Where a secured party can satisfy the required elements of s 19, 20 and 21 it can be said to have a perfected security interest in the collateral.

[20.3]

Cross-references

The concept of enforceability against third parties is an essential step to perfection which arises under many provisions in the PPSA. ● Section 311 provides that s 20 does not apply to certain transitional security interests. ● Note the distinction between the security agreement (discussed at s 20) and the financing statement (discussed at s 150).

[20.4] Concepts ● Attachment See s 19. ● Commercial property See s 10.

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● Consumer property See s 10. ● Control See s 25–29. ● Description of collateral See s 10 for the definition of ‘‘description’’. See further s 153. ● Encrypted This term is not defined by the PPSA. Encryption refers to the process of converting data into a language which is unintelligible in order to prevent improper use of the data from unauthorised parties. The data, however, must be retrievable from this state for the purposes of the PPSA. ● Equipment See [20.5.6]. ● Evidenced by writing See the definition of writing in s 10. ● Inventory See s 10. ● Perfection See s 21. ● Possession See s 24. ● Proceeds See s 31.

[20.5]

Commentary

[20.5.1] Introduction .....................................................................................141 [20.5.2] Attachment requirement — s 20(1)(a) .........................................142 [20.5.3] Writing requirement for perfection by registration — s 20(1)(b) ..........................................................................................................................142 [20.5.4] Written security agreements — s 20(2) ........................................143 [20.5.5] Signature — s 20(3) .........................................................................145 [20.5.6] Particulars relating to personal property — s 20(4), (5) ............146 [20.5.7] Proceeds — s 20(6) ..........................................................................147

[20.5.1] Introduction The term ‘‘security agreement’’ is defined by s 10 of the PPSA. The definition refers to an agreement or act creating a security interest (whether in writing or otherwise). The words ‘‘or act’’ are important as they confirm that like any simply contract, a security agreement need not be in writing to be enforceable as between the parties to the agreement. Section 20 may be confusing in this regard as it predominately imposes a writing requirement on security agreements. Section 20 relates exclusively to the enforceability of a security Annotated Personal Property Securities Act 2009 (Cth)

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agreement as against third parties (parties not subject to the terms of the security agreement). For PPSA purposes, that is with respect to perfection and priority (see s 21 and 55 respectively), a security agreement will usually involve one or more written instruments documenting the creation of a security interest between the parties to whom it is binding upon. It is in this context that a security agreement is discussed throughout this commentary, however, the fundamental position of the security agreement as a simple contract should not be overlooked (see particularly with respect to Ch 9 regarding the PPSA’s transition).

[20.5.2] Attachment requirement — s 20(1)(a) Section 20(1)(a) of the PPSA prescribes the ‘‘attachment’’ requirement. As previously discussed above (see the commentary to s 19) a security interest cannot become perfected unless it has first attached to the underlying collateral specified in the security agreement. This does not mean, however, that steps to achieve perfection cannot be undertaken prior to attachment in order to preserve an earlier priority date (the particulars of which are discussed below at the commentary to s 21). In short, a security interest registered prior to attachment will hold priority at the point in time the security interest is registered and not at the time the interest attaches, that is, at an earlier time (s 55(4),(5)). This occurs so long as the security interest does in fact attach at some point after registration but before the benefiting party seeks to enforce the interest. There are of course exceptions to the first to register rule including perfection by control, which are discussed in Pt 2.6.

[20.5.3] Writing requirement for perfection by registration — s 20(1)(b) Where a secured party seeks to perfect their security interest by registration, the PPSA requires that the security agreement be in writing. While possession or control of the underlying collateral suffices without a security agreement being reduced to writing (for discussion of these concepts in more detail see the commentary to s 21) it is beneficial, in the author’s view, that all interests creating security be reduced to writing under general principles of prudent practice pursuant to the law of contract. This avoids ambiguity of intention as between the parties and allows both the grantor and the secured party to include terms which best reflect their intentions. In addition, while possession and control is temporary and subject generally to the vicissitudes of life (such as theft or misappropriation) a valid contract in writing can be duplicated and presents a sense of permanency not otherwise enjoyed. As a further point of commercial pragmatism, due to the large number of commercial scenarios whereby possession or control is unavailable (due to the very nature of the agreement or the underlying collateral in question) registration is anticipated to be the most popular method of perfection: see Re 1231640 Ontario Inc (2007) 13 PPSAC (3d) 57; 289 DLR (4th) 684 at [4]. There is the potential for some confusion between complying with s 20 and complying with s 21. While both sections require some formal step to be taken in the instance of perfection by registration, the steps are fundamentally

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While perfection is ultimately unnecessary regarding the enforceability of the underlying agreement between the parties (s 19), it is critical to the enforceability of the security interest against third parties. The PPS Register is described as a ‘‘notice-based’’ system of registration in this regard. The secured party must take the additional step of lodging a financing statement, that is, a separate document, in order to register their interest on the PPS Register (see Pt 5.3). The security agreement never appears on the register, merely the details giving notice of the security interest arising pursuant to the fields of the financing statement. For more information on the registration process see s 21 below.

[20.5.4] Written security agreements — s 20(2) Section 20(2) expressly prescribes the requirement that enforceable security agreements must be evidenced in writing. The agreement must be signed by the grantor (discussed further at s 20(3) below), demonstrate a consensual adoption or acceptance by the grantor of the security agreement and the writing must contain a description of the collateral or a statement which covers either ‘‘all present and after-acquired property’’ of the grantor or ‘‘all present and after-acquired property except’’ of the grantor and any exceptions to this exhaustive coverage. No specific words in the security agreement are needed to create a security interest: 674921 BC Ltd v Advanced Wing Technologies Corp (2006) 9 PPSAC (3d) 43; 263 DLR (4th) (BCCA) (although in that case it was found that the security agreement indicated that a security interest would not arise until a future date). See also Re Numeric Corp (1973) 485 F 2d 1328 (USCA 1st Circ); Re AmexProtein Development Corp (1974) 504 F 2d 1056 (USCA 9th Circ). For a decision where a solicitor was found to be negligent in failing to ensure that the security agreement properly created a security interest in the collateral: see Duckett v McKinnon [2012] BCSC 2147. The detail of the collateral description again provides a point of difference between a security agreement and a financing statement. This is because a financing statement, for the purposes of registering an interest, contains a requirement that the collateral be adequately described. The PPS Regulations (Sch 1, reg 2.3) prescribe certain terms which must be used when describing collateral. Such rules apply to financing statements. While helpful when describing collateral for the purpose of a security agreement, the terms are, in the authors’ view, general and would not of themselves allow a reasonable party to discern particular items of personal property from other property, potentially unencumbered, on the face of the agreement. When describing collateral for the purposes of the security agreement, general contract law principles should apply with the aim of reducing to writing the fullest intentions of both the grantor and the secured party. Where specific collateral Annotated Personal Property Securities Act 2009 (Cth)

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distinct as are the direct purposes of each step. In satisfying s 20(1)(b)(iii) (which in effect means complying with s 20(2)), by reducing the security agreement to writing, the parties do no more than arm the secured party with the potential to register a financing statement and achieve perfection by registration.

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forms the subject of the security agreement, a detailed account of such collateral should follow in the terms of the agreement: see Re Laminated Veneers Co Inc (1973) 471 F 2d 1124 (USCA 2nd Circ). However, merely listing collateral is not enough to create a security interest in them: Gateway Hotel Partners LLC v C.I.R. (2014) T.C. Memo 2014-5; 2014 WL 92027 (US Tax Court). In Brant Avenue Manor Limited Partnership v Transamerica Life Insurance Co of Canada (2000) 1 PPSAC (3d) 73 (Ont SCJ), it was held that where a secured party disposed of the business held as collateral under the security agreement it had committed conversion because the sale of goodwill was not covered in the various security agreements that were involved. In that case, there was no overarching general security agreement. In Citadel Financial Corporation Pty Limited v Elite Highrise Services Pty Limited (No 3) [2014] NSWSC 1926, Brereton J held, in respect of s 20(2) of the PPSA (at [14]–[16]): ‘‘What s 20(2) requires, in respect of the evidence by writing of the security agreement, is that the writing be adopted or accepted by the grantor, not that the security agreement be adopted or accepted by the grantor. I cannot see . . . how an exchange of emails two months before the relevant writing can amount to an adoption or acceptance of the writing in question. Accordingly, I cannot see how the invoice satisfies s 20(2). Citadel also argued that the exchange of emails of 12 June, either alone or together with the subsequent invoice, amounted to an acknowledgment or acceptance in writing, but conceded that the emails without the invoice did not contain a description of the particular collateral as required by s 20(2)(b)(i). As that would then necessarily require that the emails be read with the invoice, and as there is no acknowledgment of the invoice, I do not see how on that basis it can be said that there has been compliance with s 20(2). In my view it is not seriously arguable that Citadel has a security interest entitled to priority over that of CML. I have not overlooked the argument that retention of the scaffolding after receipt of the invoice was a relevant acknowledgement or adopting but I do not see how such retention acknowledges or adopts the writing in an invoice created months after the sale and delivery of the subject matter.’’ In Re Gelpack Enterprises Pty Ltd (in liquidation) [2015] NSWSC 1558, Brereton J also held (at [32]–[33]): ‘‘. . . In this case, the security agreement can be seen to be evidenced in writing in the 2012 terms and conditions. For the reasons I have given, I would find that Mr Hone’s signature is a signature by the grantor but, even if it were not, the conduct of Gelpack in continuing to place orders after receipt of the 2012 terms and conditions is conduct that, in the light of the terms of the letter, reasonably appears to have been done with the intention of adopting or accepting the writing. The ongoing placement of orders and payment of invoices with knowledge of the note at the foot of each invoice is further such conduct. In any of those ways, there was writing adopted or accepted by Gelpack which identified goods supplied

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Although there was some debate as to whether the reference in s 20(2)(a)(ii) to ‘reasonably appears’ is from the position of the bystander or a person in the position of the grantee, probably little turns on that difference. The bystander would at least be taken to be aware of what had preceded the relevant act between the parties and in particular of the relevant writing. In circumstances where the 2012 terms and conditions had been supplied in August 2012 and had been referred to repeatedly on delivery notes and invoices thereafter, it would have appeared to the reasonable bystander that in placing further orders, Gelpack was intending to accept what was in those terms and conditions.’’ A security agreement may be constituted by several documents read together: Hongkong Bank of Canada v National Bank of Canada (1990) 1 PPSAC (2d) 73; 72 DLR (4th) 372; Re Miller (1977) 545 F 2d 916 (USCA 5th Circ). This has also been an issue in several Australian cases that have considered the PPSA (albeit briefly): see the review of the authorities in Central Cleaning Supplies (Aust) Pty Ltd v Elkerton [2014] VSC 61 (retention of title supply arrangement involving multiple documents, retention clause contained on invoices meant that each invoice made up a separate security agreement) — see also Central Cleaning Supplies (Aust) Pty Ltd v Elkerton (2015) 321 ACSR 181; [2015] VSCA 92; Industrial Progress Corporation Pty Ltd v Wilson [2013] WASC 225 (credit application together with separate purchase orders and invoices, retention clause included in standard terms and conditions provided with credit application).

[20.5.5] Signature — s 20(3) The term ‘‘writing’’ is defined by the PPSA pursuant to s 10. All elements of a security agreement required to be in writing can thus be expressed in accordance with how the term is defined. Writing includes traditional methods of recording, that is, handwritten signatures of natural persons, or equivalent typescript where accepted, usually on the document itself in hard copy in the general sense. The PPSA, however, defines writing in a broader sense such that it includes the electronic recording of words or data which can be subsequently retrieved. In determining which form of signature in writing is most appropriate for a particular security agreement, the purpose of the signature should be examined. A signature is a recognised mark that the party who executes the signature agrees or accepts the terms of the agreement to which they seek to be bound by. It includes the providing of a symbol, wholly or partially in the form of encrypted data. A signature is only valid where it evidences the intention of the party subject to the agreement (or an authorised agent in this regard). While digital signatures are accepted by the PPSA, the authenticity of such a signature should be subject to the same scrutiny a handwritten signature faces such as ease or ability to fraudulently duplicate the mark, symbol or series of symbols. Annotated Personal Property Securities Act 2009 (Cth)

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by Primaplas as the collateral caught by the security interest. The requirements of s 20(2) are therefore satisfied.

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In the authors’ view, a digital signature of the type described here should only be used where it readily evidences an intention to be bound without questions arising as to the quality of the writing itself. Signatures should additionally be sufficiently encrypted where stored digitally. While the PPSA recognises the growing use of technology among commercial affairs, the integrity of giving effect to the will of the parties as an element of contract law continues to be of critical importance. The importance of a formal signature as indicating consent to the security agreement was emphasised in the Ontario Court of Appeal case in Astral Communications Inc v 825536 Ontario Inc (Trustee of) (2000) 15 PPSAC (2d) 256; 183 DLR (4th) 455. In P Twin Holdings Pty Ltd v SG Old Pty Ltd [2017] WADC 77, it was held that a solicitor who failed to require a written acknowledgement for a security agreement, so as to ensure compliance with s 20, was negligent and liable to compensate their client for loss of the security interest. The solicitor also failed to register on the PPSR. The signature must be a properly authorised signature: Atlas Industries v Federal Business Development Bank (1983) 3 PPSAC 39 (Sask QB) (signature by employee of the debtor was not authorised); Toronto Dominion Bank v Flexi-Coil Ltd (1993) 4 PPSAC (2d) 288; 107 Sask R 221 (Sask QB) (shareholder and manager signed in personal capacity). In Flexi-Coil, the fact that the signature was in the wrong place also contributed to the court refusing to accept the documents as a signed security agreement. See also Re Gelpack Enterprises Pty Ltd (in liquidation) [2015] NSWSC 1558 (signature of the grantor’s operations manager; the court held that continuing to order and pay for goods under the security agreement was sufficient assent). The person signing must be alerted to the fact that they are signing a security agreement (or a document that is incorporated in a security agreement): Universal Handling Equipment Co v Redipac Recycling Inc (1992) 4 PPSAC (2d) 15 (Ont Court of Justice) (signing a purchase order was not sufficient where no notice that it was connected with a security agreement). In circumstances where the parties have not entered into a formal agreement or particulars of the agreement are missing, the principles of contract law (subject to any statutory regime such as the Australian Consumer Law or relevant Sale of Goods legislation) is applicable. The Court will try to discern the true intention of the parties on the face of the contract (whereby a series of emails back and forth can, in certain circumstances, constitute a contract). There is and remains, of course, a distinction between an agreement and an agreement to agree. This text does not attempt to go into the detail of contractual construction when considering the sufficiency of the writing requirement.

[20.5.6] Particulars relating to personal property — s 20(4), (5) Sections 20(4) and (5) expressly address the point made at [20.5.4], that is, while the use of descriptive classes in the form of the PPS Regulations is sufficient for financing statements, security agreements often require a higher degree of particularisation. Section 20(4) previously applied where the

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descriptor ‘‘consumer property’’, ‘‘commercial property’’ or ‘‘equipment’’ was used in relation to the underlying collateral. This has since been reduced to circumstances where the property has been described as ‘‘consumer property’’ or ‘‘commercial property’’: see Personal Property Securities (Corporations and Other Amendments) Act 2011 (Cth) s 10. The rationale for this change recognises that ‘‘equipment’’ is reasonably specific, particularly where it relates to a general class of personal property. A definition of ‘‘equipment’’ has not been added elsewhere in the PPSA or the PPS Regulations. The importance of a collateral description in the security agreement was considered in the Saskatchewan Court of Appeal case Re Apollo Fitness Academy Inc (1984) 3 PPSAC 280; 6 DLR (4th) 654. In the authors’ view, the detail parties wish to include in a security agreement is a question of commerciality. Where equipment involves hundreds of items of personal property, each at a relatively low value, it may be sufficient to record a security interest over such collateral as simply ‘‘equipment’’. Where equipment, however, encompasses a small number of readily identifiable items, such as expensive machinery, more detail may be required. It follows that the higher the degree of detail included in the description of collateral the less ambiguous the overall agreement will be. This is premised on the commercial viability of compiling such detail and will need to be assessed on a case-by-case basis. What is important from the perspective of the PPSA is that the written security agreement accurately reflects the nature of the agreement between the grantor and the secured party. The PPSA also appreciates that any one piece of collateral may change categories over its life, however, collateral can only be defined as one class of category at one point in time. Inventory can become equipment or consumer goods for instance. A financing change statement should be lodged to amend the register where a collateral changes category (see further Pt 5.3). Section 20(5) holds, with respect to inventory in particular, that the writing requirement under s 20(2) is only met where the property is held as inventory and not when it subsequently changes class: see Community Futures Development Corp of Howe Sound v Spargo (2000) 1 PPSAC (3d) 263; 76 BCLR (3d) 190 at [33] (BCSC). While a temporary perfection or ‘‘grace’’ period protects the secured party from losing their interest the moment the class change occurs, secured parties ought to be prudently aware of parties engaged in high turnover collateral in order to best protect their interests.

[20.5.7] Proceeds — s 20(6) As is discussed further pursuant to s 32, s 20(6) provides that an enforceable security interest with respect to specific items of personal property continues to be enforceable as against the identifiable or traceable proceeds of such property — irrespective of whether or not the security agreement itself specifies this. What should be remembered, however, is that s 20(6) does not, however, address the issue of describing collateral for the purposes of a Annotated Personal Property Securities Act 2009 (Cth)

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registering a financing statement and achieving perfection by registration. Proceeds should be recorded on a financing statement by adding to the end of the relevant collateral description the words ‘‘and any proceeds’’ or words to that effect. The same applies for any of the tier 4 suffixes provided above. See further s 153.

[20.6] Further reading ● Explanatory Memorandum [2.2, 2.9, 2.18, 2.20, 2.26]. ● ALRC Report No 64 [5.50, 6.3–6.8, 7.10–7.13]. ● Whittaker Report [5.2], [5.3], [7.2]. ● Bruce Whittaker, ‘‘Dealings in collateral under the PPSA — in search of a harmonious whole’’ (2013) 24 Journal of Banking and Finance Law and Practice 203.

¶2-030 SECTION 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 (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. 21(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.

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21(3) A security interest may be perfected regardless of the order in which attachment and any step mentioned in subsection (2) occur. 21(4) A single registration may perfect one or more security interests.

[21.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[21.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 43, 44 s 13 s 12 § 9-204(a), (b)

Outline

Section 21 of the PPSA addresses the four ways a security interest can be perfected. Three of the four methods place an active onus on the holder of the security interest (termed the ‘‘secured party’’ as defined by s 10) while the fourth operates by virtue of the Act itself. Like the attachment principles, the Australian PPSA incorporates extended rules for goods possessed by a bailee (comprising s 22 of the Act). For all other interests, perfection must occur in accordance with s 21.

[21.3]

Cross-references

● Section 22 provides rules for perfection by possession of goods by a bailee.

[21.4] Concepts ● Attachment See s 19. ● Control See s 25–29. ● Enforceability against a third party See s 20. ● Registration (of a financing statement) See s 153. ● Possession See s 24. See further Knauf Plasterboard Pty Ltd v Plasterboard West Pty Ltd (In Liquidation) (Receivers and Managers Appointed) [2017] FCA 866 (‘‘the word possession in the PPS Act has its common law meaning, modified to the extent provided for in s 24 of the PPS Act’’). ● Temporary Perfection Temporary perfection refers to a period of grace provided by the PPSA whereby creditors become secured parties temporarily to facilitate some commercial imperative of the PPSA. Due to the broad variety of instruments under which a security interest may arise, the temporary Annotated Personal Property Securities Act 2009 (Cth)

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Personal Property Securities Act 2009 perfection period varies and should be applied as is specified by the PPSA in each relevant circumstance. By way of characterisation, temporary perfection arises in two respects: – to provide a transitional buffer between the pre-PPSA law and the PPSA (provisions largely with a maximum life of two years after the Act takes force — see further Ch 9) – to preserve the commercial realities which follow certain transactions and certain collateral.

[21.5] Commentary [21.5.1] The nature of perfection .................................................................150 [21.5.2] Temporary perfection — s 21(1)(a) ..............................................151 [21.5.3] Perfection pre-requisites — s 21(1)(b) ..........................................151 [21.5.4] How to perfect — requirements for secured parties — s 21(2) ..........................................................................................................................152 [21.5.4.1] Registration — s 21(2)(a) ...................................................152 [21.5.4.2] Possession — s 21(2)(b) .....................................................153 [21.5.4.3] Control — s 21(2)(c) ...........................................................155 [21.5.5] Order of attachment and steps to perfect are irrelevant — s 21(3) ..........................................................................................................................155 [21.5.6] Single registration, multiple interests — s 21(4) .........................156

[21.5.1] The nature of perfection Perfection of a security interest is relevant for determining priority contests between competing interests in collateral. For example, an unperfected security interest may be vulnerable to a purchaser or lessee ‘‘taking free’’ of the security interest under s 43, or may be subordinated to another secured party who has a perfected security interest under s 55(3). Perfection does not, however, affect the nature or validity of the underlying security interest: Bank of Montreal v Innovation Credit Union [2010] SCC 47; (2010) 17 PPSAC (3d) 1 at [49]. The purpose of perfection is to put third parties on notice: In re Bucala (2012) 464 BR 626 (Bankr SD NY). Nor does perfection mean that the security interest is indefeasible — unlike the Torrens system of title by registration with respect to real property. The PPSA is concerned with priority contests between security interests rather than with determining the ultimate owner of collateral. Justice Hansen in Graham v Portacom New Zealand Ltd [2004] 2 NZLR 528 at [12] described perfection as ‘‘the process by which the holder of a security interest obtains the optimal level of protection offered by the Act’’. A security interest is only enforceable under the Act against third parties where it is perfected: see Central Cleaning Supplies (Aust) Pty Ltd v Elkerton [2015] VSCA 92. As will be seen below, the form of perfection, and the type of collateral covered by the security interest, can influence the level of priority offered by perfecting the security interest.

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[21.5.2] Temporary perfection — s 21(1)(a)

That said, each circumstance where temporary perfection is bestowed by the PPSA prescribes its own requirements depending on the nature of the interest held. What s 21(1)(a) provides is that where the PPSA grants temporary perfection to a secured party, the party is deemed to be perfected until the end of the temporary period of perfection. While this may appear to be a convenient way of escaping the general requirements of the PPSA, temporary perfection has a finite duration and will often consist of its own separate requirements. By way of rationale, temporary perfection can be thought of as a ‘‘grace period’’ or period of time in which a secured party might be unable to perfect in the ordinary way. Personal property in transit provides one such example (see s 22(2), (3), (4)), personal property which is transferred provides another (see s 34). Importantly, over the course of the first two years in operation, the PPSA provided a transitional period of temporary perfection essentially with respect to arrangements which would, one, be caught by the PPSA had the PPSA applied at the time the arrangement was entered into (for example, a retention of title arrangement), and two, the ‘‘secured party’’ has complied with the law as it stood prior to the PPSA (for retention of title arrangements, no formal requirements were necessary). For many, temporary perfection provided the solution to disputes concerning priority interests in personal property over the course of the transitional period pursuant to Ch 9 of the PPSA. The lack of wide spread litigation in Australia during the first two years of operation of the PPSA indicates that many of the questions arising from the Act, as matters of construction, were dealt with by the commercial parties subject to the dispute or the insolvency practitioner/trustee appointed to an estate. Notwithstanding this important application of temporary perfection, the cessation of the transitional provisions does not mean that the notion of temporary perfection is now obsolete. See also s 52 which provides a taking free rule for temporarily perfected security interests in certain types of collateral.

[21.5.3] Perfection pre-requisites — s 21(1)(b) Section 21(1)(b) expressly requires that a security interest attaches to the relevant collateral (see s 19) and that the interest is enforceable against third parties (see s 20). While s 19 and 20 operate in their own right, in the absence of s 21(1)(b) there would be no consequence under the PPSA for failing to comply with the statutory requirements. Section 21(1)(b)(iii) provides that in addition to compliance with s 19 and 20, a final requirement that s 21(2) be complied with is necessary in order for a secured party to benefit from a perfected security interest. Annotated Personal Property Securities Act 2009 (Cth)

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Like the notion of the ‘‘deemed’’ security interest, see s 12(3) and 13, temporary perfection (or perfection by force of the Act) is a statutory concept which provides perfection to a secured party (or deemed secured party) without requiring compliance with the PPSA generally (see s 19 and 20).

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[21.5.4] How to perfect — requirements for secured parties — s 21(2) Section 21(2) establishes the three methods available to a secured party seeking to perfect their security interest. The PPSA discusses, in detail, the various requirements and technicalities associated with satisfying registration or possession or control, s 21(2) establishes that only where these methods are satisfied in full does a security interest achieve perfected status. Section 21 can thus be thought of as the operative provision to which other provisions of the PPSA give rise to by virtue of prescribing the relevant requirements. It should be noted that while the various methods of perfection are discussed as ‘‘availabilities’’ to the secured party in this commentary, it is often a combination of the underlying instrument and the relevant collateral that determine which method of perfection is most appropriate and the secured party thus often has very little discretion in this regard.

[21.5.4.1] Registration — s 21(2)(a) A secured party can perfect an interest by registering a financing statement on the PPS Register. A financing statement is defined by s 10 and, as discussed above at the commentary to s 20, is distinct from a security agreement. The particulars and logistics of registration are addressed by Pt 5.3 of the PPSA, however, attention should also be paid to the PPS Regulations when seeking to register an interest (see s 153 for more information). The registration option is available for any collateral class. Importantly, while there is no time limitation contained within s 21 of the PPSA regarding registration (and indeed similarly no such restriction exists under Pt 5.3) commercial parties and their legal representatives are directed to the Corporations Act 2001 (Cth) (Corporations Act), s 588FL which was introduced by the Personal Property Securities (Corporations and Other Amendments) Act 2010 (Cth). Section 588FL essentially provides that, in the general case of corporate grantors, secured parties have until the end of 20 business days to register their relevant security interest. Failure to do so may trigger s 588FL(4) which provides, similar to s 267 of the PPSA, that the security interest vests in the grantor company. This is a departure from the former s 263 of the Corporations Act with respect to company charges under the former Ch 2K of that Act which provided that the charge would be void as against the liquidator. Under the PPSA, the vesting of the interest has the effect that not only is the instrument unenforceable as against an external administrator but also, if the relevant secured party is the appointing party, then the appointment may become invalid upon the dissipation of the interest. Such a question has not, to date, been dealt with squarely although the potential consequences of an automatic vesting for agreements entered by external administrators appointed to a grantor company were considered in Mentha, in the matter of Arrium Limited (administrators appointed) [2016] FCA 972 where Davies J held (at [20]–[21]): ‘‘. . . Concern was expressed that it is arguable on a strict construction of s 588FL of the Act that the security interest granted in favour of EFIC

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under the EFIC Loan [a contract entered by the administrators appointed to Arrium Limited] will immediately and automatically vest in the OneWhyalla Mining Entities because the security will be granted after the ‘critical date’. For this reason, EFIC requested, and the administrators sought, an order under s 588FM extending the time for the security interests in favour of EFIC to be registered under the PPSA. The registration time can be extended by order of the Court: s 588FL(2)(b)(iv) and s 588FM of the Act. ... It is appropriate to make an order under s 588FM extending the registration time to put beyond doubt that s 588FL will not, in this case, operate to vest the security interest in the OneWhyalla Mining Entities automatically because the ‘critical time’, being the commencement of a voluntary administration, has already passed.’’ Pursuant to s 588FM, the secured party who becomes aware of falling outside this time frame may apply to the Court to have the registration time fixed at a date later than the 20 business days. Such was the case before Black J, in Re Cardinia Nominees Pty Ltd (2013) APPSR ¶701-005; [2013] NSWSC 32, where his Honour granted such orders on the condition that liberty to any insolvency practitioner appointment or unsecured creditor be reserved to discharge or vary the orders where they could establish that they were unduly prejudiced. This restriction on the order was made relevant by the lack of financial information about the grantor company. In the matter of Barclays Bank plc (2012) APPSR ¶701-003; [2012] NSWSC 1095, similarly an application before Black J, did not contain the same liberty where the applicant company was able to establish that it, as grantor, was not in financial difficulty. Justice Hammerschlag also granted similar relief in the case of In the matter of Apex Gold Pty Ltd ACN 124 893 778 (2013) APPSR ¶701-009; [2013] NSWSC 881 despite evidence that the grantor company was in financial difficulty. His Honour did so by including the relevant liberty to apply. Both Black J and Hammerschlag J recognised the concept of ‘‘inadvertence’’ from pre-PPSA law with respect to company charges in the above cases. In particular, their Honours make reference to the well-known decision of McLelland J in Re Application of Guardian Securities Limited (1984) 1 NSWLR 95 and its continued relevance. For more information on the operation of s 588FL and 588FM of the Corporations Act see [588FL.2] Outline and [588FM.2] Outline.

[21.5.4.2] Possession — s 21(2)(b) A secured party can alternatively perfect by possession (see for example Re MC United Masonry Ltd (1983) 2 PPSAC 237; 142 DLR (3d) 470 — possession of share certificates). Possession is defined, and the requirements enunciated, by s 24. Section 24 goes beyond the general use of the term, that is, ‘‘actual’’ possession or having literal possession of the underlying collateral, although actual possession satisfies the PPSA requirements. Annotated Personal Property Securities Act 2009 (Cth)

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In Knauf Plasterboard Pty Ltd v Plasterboard West Pty Ltd (In Liquidation) (Receivers and Managers Appointed) [2017] FCA 866, it was accepted by the Court that possession can exist for both tangible and intangible assets, though not necessarily all forms of intangibles due to the definition of possession in s 24. The Court held that merely appointing a receiver over a corporate grantor was not sufficient to constitute perfection by possession (at [144]): ‘‘The receiver upon his or her appointment has the authority to deal with the assets to which he or she is appointed, to the exclusion of the directors of the company, defined by his or her contractual and/or statutory rights to deal with those assets, but that does not amount to actual or apparent possession.’’ Possession by enforcement does not constitute possession for perfection purposes under the PPSA, that is, a party cannot seize or repossess the underlying collateral and claim perfection by possession. This outcome is undesirable in any event as perfection by possession applies only when the collateral is possessed by the secured party (whereby the term ‘‘possession’’ is defined under s 24). In Flown Pty Ltd v Goldrange Pty Ltd (2016) 316 FLR 81; [2016] WASC 419, it was held that a landlord who invalidly re-entered leased premises did not thereby obtain perfection by possession of the collateral (equipment on site). When the landlord failed to comply with the termination provisions of the lease and invalidly re-entered the property, the grantor appointed administrators which caused the security interest in the equipment to vest under s 267 of the PPSA. The later this occurs, the later the priority period afforded to the secured party and any interest perfected before possession is taken would take priority to the repossessing party in any event (see s 55 for more information with respect to priorities). Like registration, perfection by possession can be taken over any collateral that is capable of being possessed. While the PPSA imposes no restriction, certain instruments are premised on the very fact that possession of the collateral will reside with the grantor/debtor and not the secured party (such as leases, consignments or mortgages). While the PPSA does not limit the security interests to which perfection by possession may apply, commercial realities offer a more appropriate guide as to the scope of perfection by possession. It is additionally worth noting here that a security interest can be perfected by more than one mechanism and as long as it is ‘‘continuously perfected’’ (a concept discussed at s 56) it will retain priority from the time at which perfection first arose. In the authors’ view, it is thus beneficial for parties perfecting by possession to also perfect by registration. This is especially so where parties may anticipate even brief or temporary loss of possession over the underlying collateral. This is because the effect of a break in the chain of perfection may have the effect of postponing priority. The PPS Register thus offers a more permanent form of perfection.

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The concept of perfection by control is somewhat more complex relative to registration and possession. This is partially due to it being a limited form of perfection restricted to certain security interests but also because its application differs even among the defined categories to which it is available. The concept of control is addressed by the PPSA at s 25–29.

[21.5.5] Order of attachment and steps to perfect are irrelevant — s 21(3) As previously stated in the commentary to s 19, steps to perfect can occur prior to the attachment of a security interest to the relevant collateral without affecting the validity of the perfected instrument once the grantor obtains rights in the relevant collateral (for a discussion of the appropriate ‘‘rights’’ see s 19). Section 21(3) provides explicit recognition of this as in the usual course parties would expect that a grantor could only convey a security interest once they had rights over the collateral in question. See also s 161. The ability to, in essence, ‘‘pre-perfect’’ or ‘‘pre-register’’ a security interest is not merely academic and is encouraged by the authors as the secured party preserves their priority when pre-perfected, not at the time the security interest attaches but rather at the time the interest is registered (noting that registration is the only possible form of perfection which can benefit from this element of the PPSA in practice as perfection by possession and control give rise to the attachment of a security interest). This is so, as long as the security interest actually attaches prior to a point in time where the security interest is sought to be enforced. The following example demonstrates the point: On 1 May 2011, Grantor A seeks to borrow funds from Creditor B. Creditor B wishes to take security over the personal property of Grantor A, however, Grantor A presently does not have enough collateral to secure the obligations owing. Grantor A informs Creditor B that they will be receiving a piece of sophisticated machinery in two months time. On 7 May 2011 Creditor B registers a security interest specifying each item of Grantor A’s personal property. Grantor A subsequently borrows additional funds from Creditor C. On 1 July 2011 a security interest is created over ‘‘all present and after-acquired property’’ and perfected the same day. Grantor A has rights in the sophisticated machinery by this point. Grantor A defaults such that obligations remain outstanding as to both Creditor B and Creditor C. Creditor C argues that the security interest held by creditor B against the sophisticated machinery is invalid as the interest had not yet attached. Pursuant to s 20(3), Creditor C’s argument fails. In the British Columbia Court of Appeal decision, 674921 BC Ltd v Advanced Wing Technologies Corp (2006) 9 PPSAC (3d) 43; 263 DLR (4th) 290 at [3], this element of the PPSA was considered: Annotated Personal Property Securities Act 2009 (Cth)

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Personal Property Securities Act 2009 ‘‘the Act expressly permits the registration of a financing statement (not the security agreement itself) ‘before a security agreement is made and before a security interest attaches’. Thus a lender, or prospective lender, may effect a registration, which does not require the signature (or even the knowledge) of the customer or borrower, and at a later date, obtain the latter’s written assent to the granting of a security interest. According to Professors R.C. Cuming and R.J. Wood (British Columbia Personal Property Security Act Handbook (4th ed., 1998) at 313), this feature of the PPSA was designed to facilitate commercial financing by enabling a lender to file a financing statement in the registry, confirm its priority position via a search, and then advance funds immediately upon the borrower’s execution of a security agreement. The authors note that although there is ‘potential for abuse of this right’, the Act contains an ‘elaborate system of checks and balances’. (Presumably, one of these checks is the non-enforceability against third parties of any security interest (e.g., one granted orally) until the debtor has signed a security agreement that complies with s. 10.).’’

There is no reason in the view of the authors why the same rationale would not apply to the Australian provision.

[21.5.6] Single registration, multiple interests — s 21(4) Section 21(4) prescribes that a single financing statement may perfect multiple security interests. This position is the same among the Canadian provinces, see Re Hickman Equipment (1985) Ltd (2003) 4 PPSAC (3d) 252; 41 CBR (4th) 101, as accepted on appeal in Re Hickman Equipment (1985) Ltd (2003) 7 PPSAC (3d) 37; 2 CBR (5th) 226; Royal Bank v Agricultural Credit Corp of Saskatchewan (1994) 7 PPSAC (2d) 1; 115 DLR (4th) 569; Prince Edward Island Potato Board v Cardigan Feed Services Ltd (2006) 10 PPSAC (3d) 135; 262 Nfld & PEIR 91. While commercially convenient as the lodgment fee only has to be paid once, the provision, in the authors’ respectful view, is deceptive to some degree. Section 21(4) should read, or include a note to the effect, that security interests of the same type may be registered together and not security interests generally. This is because two types of security interests exist under the PPSA, standard security interests or ‘‘general security agreement’’ (otherwise termed ‘‘GSAs’’, a term common among the Canadian case law on point) and purchase money security interests (PMSIs). Without going into too great depth (the discussion for which is better addressed at s 153), as part of the Australian registration requirements, a field is available on financing statements to indicate whether the security interest is a PMSI. This can only be done once for each financing statement and thus where there is a mixture of both standard security and PMSI collateral in one financing statement it may be misleading to indicate one way or another what interests are held by the secured party, and in what various capacities (see s 164 regarding misleading defects). The logistics of registration thus effect the application of s 21(4). It is for this reason that the in the authors’ view one financing statement be lodged for all standard security interests and another be lodged with respect to PMSIs. The policy objective of minimising cost is not substantially altered by requiring

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‘‘just because s 21(4) of the PPSA allows for multiple security interests to be perfected in a single registration, does not mean that it is reasonable or even possible for the [secured parties] to register their respective interests in a single registration’’.

[21.6] Further reading ● Explanatory Memorandum [2.19, 2.25, 2.27, 2.30–2.33, 2.122]. ● ALRC Report No 64 [–]. ● Whittaker Report [5.3], [6.10], [7.2], [7.7], [9.1], [9.3].

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SECTION 22 PERFECTION — GOODS POSSESSED BY A BAILEE

Perfection of security interest 22(1) 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. Temporary perfection while negotiable document of title in transit 22(2) 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. 22(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. Annotated Personal Property Securities Act 2009 (Cth)

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two financing statements to be registered and compared to the cost of failing to hold a perfected security interest such compliance is advisable. In Re Carpenter International Pty Ltd [2016] VSC 118 at [70], it was stated that:

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Personal Property Securities Act 2009 22(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.

[22.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 50 s 27 s 26 § 9-312(c), (d)

[22.2] Outline The perfection avenues prescribed by s 22 operate in addition to the existing requirements under s 21. Section 22 should thus be read as a supplement to, and not in lieu of, s 21. Section 22 recognises the commercial nature of bailment transactions as a discrete class of security interest and aims to facilitate the various stages of transferring possession by providing the secured party with a method of preserving their interest while still maintaining the ability of the bailee to deal with the underlying personal property in a commercial sense. The provision also incorporates the use of documents of title which adds an extended dimension to the PPSA and should be understood prior to approaching the section.

[22.3]

Cross-references

● Section 21 provides the main perfection rule. ● Section 153 provides for the registration of financing statements.

[22.4]

Concepts

● Document of title This is defined in s 10. See also s 8. ● Negotiable document of title This is discussed below. See also s 8. ● Possession This is defined in s 24. ● Temporary perfection See s 21.

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[22.5]

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Commentary

[22.5.1] Additional perfection considerations for goods possessed by bailee — s 22(1) .............................................................................................159

[22.5.3] Application ......................................................................................160 [22.5.4] Priorities ...........................................................................................161

22.5.1 Additional perfection considerations for goods possessed by bailee — s 22(1) The term ‘‘bailment’’ is not defined by the PPSA, however, is a concept well entrenched in commercial affairs and is thus widely understood and applied as a matter of common law. The authors see no reason why the introduction of the PPSA would alter the general definition of a bailment. A bailment can be described as the temporary transfer of possession of goods from one (the bailor) to another (the bailee) on the condition that the goods will be returned to the bailor at the end of the bailment or dealt with according to the bailor’s instructions. Pursuant to s 12, a bailment constitutes a security interest where it secures payment or performance of an obligation in substance. Pursuant to s 13, a bailment may be a deemed security interest even where it does not secure payment or performance of an obligation. Bailments may therefore also constitute purchase money security interests (PMSIs) pursuant to s 14. As the substance over form approach dictates, merely labelling an interest as a bailment does not, however, automatically create a security interest. Some bailments are purely gratuitous for instance and the underlying effect of the transaction will need to be analysed on a case-by-case basis. See also s 13(3) which excludes gratuitous bailments from the concept of a PPS lease. A security interest can be perfected where the goods are in the possession of a bailee who is neither the grantor nor the debtor (eg where the goods are in transit) which is what this section is concerned with. Section 22(1) prescribes that a security interest can be perfected by registration or possession like any other form of security interest (see s 22(1)(a) and 22(1)(b) respectively). This includes if the goods are in the possession of an agent of the secured party. However, if the secured party does not register a financing statement or take possession of the goods then this section allows the secured party to perfect their security interest by obtaining a document of title from the bailee who possesses the goods. It should be noted that unless the bailee is the agent of the secured party the secured party cannot possess the goods if the bailee possesses them (see s 24). The secured party may also perfect their security interest in the goods possessed by the bailee indirectly by perfecting a security interest in a negotiable document of title that has been issued by the bailee. Annotated Personal Property Securities Act 2009 (Cth)

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[22.5.2] Temporary perfection for documents in transit — s 22(2), (3), (4) ..........................................................................................................................160

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[22.5.2] Temporary perfection for documents in transit — s 22(2), (3), (4) Where a security interest is granted such that possession of the bailed property lies with a party other than the grantor or debtor, the interest will be temporarily perfected from the time the negotiable document of title is issued until the secured party takes possession of the document (pursuant to s 22(2)). The security interest then becomes unperfected unless one of the other three forms of perfection occurs (see s 21). The grace period extends for five business days and thus operates by way of interim perfection to ensure the secured party has time to duly obtain possession or perfect by some other means. If the secured party over the document of title fails to perfect within this time — the temporary perfection period is forfeited and the security interest in the document is treated as unperfected at all material times — including over the five business day ‘‘temporary perfection’’ period. ‘‘Temporary perfection’’ is a class of perfection bestowed by the PPSA and discussed in more detail under s 21.

[22.5.3]

Application

An example of how this section operates is provided in the Explanatory Memorandum (at [2.21]) to the PPSA, extracted in whole as follows: 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 five business days of its issue, the security interest would be deemed to be perfected from the moment the document of title was issued.

The ability to perfect a security interest without having actual possession of the underlying personal property is important to prevent misappropriation as perfection by possession requires actual possession of the collateral (see s 65; see also s 24 regarding possession). The issue arose in the Saskatchewan Court of Queen’s Bench decision, National Bank of Canada v Makin Metals Ltd (1992) 4 PPSAC (2d) 167; 106 Sask R 266. While overruled on appeal regarding whether or not the doctrine of marshalling could apply under the PPSA (see National Bank of Canada v Makin Metals Ltd (1994) 6 PPSAC (2d) 164; 116 Sask R 237), Scheibel J held, with regards to the temporary perfection issue at trial, that the result of a failure of the secured party to obtain an interest in a document of title (as no document was issued on the facts) was that the secured party could only obtain perfection by registration. On the facts, registration did not occur and, as a broader point, registration would only be an effective form of perfection when the security interest duly attached, that is, after the personal property was itself in the hands of the grantor.

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The commercial point to be made here is that priority extends to the perfected security interest in a document of title over a security interest in the underlying collateral which can be rendered unperfected by s 22(3). Parties engaged in the business of bailing collateral should thus be mindful of the legal effect of documents of title under the PPSA. For more information regarding the priority of documents of title see Pt 2.6, Div 5.

[22.6] Further reading ● Explanatory Memorandum [2.27, 2.107]. ● ALRC Report No 64 [–]. ● Whittaker Report [5.3].

PART 2.3 — POSSESSION AND CONTROL OF PERSONAL PROPERTY ¶2-040

SECTION 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; (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.

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[22.5.4] Priorities

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¶2-045 SECTION 24 POSSESSION Possession by one party exclusive of possession by others 24(1) 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. 24(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. Timing rule for possession of goods transported by common carrier 24(3) 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. Possession of certain negotiable instruments 24(4) 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).

Possession of chattel paper that is evidenced electronically 24(5) 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 (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.

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Part 2.3 — Possession and control of personal property Possession of investment instruments

(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; (ii) another person (other than the grantor or the debtor) has 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.

[24.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[24.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 18 s 2(5), 10(2), 24(2) no equivalent no equivalent

Outline

This section clarifies when possession will occur for the purposes of the PPSA. Identifying possession of particular collateral is a foundational concept under the PPSA. The ability to take possession of collateral provides a method of perfecting a security interest over collateral that is capable of being possessed. Possession of the collateral may also offer protection against some of the taking free rules essentially by removing the ability of the grantor to misappropriate the property. The concept of possession is also important for taking priority in respect of purchase money security interests (PMSIs).

[24.3]

Cross-references

● There are no references in the PPS Regulations to possession. Possession is however a central concept under the PPSA and appears in over 40 sections of the Act.

[24.4] Concepts ● Actual or apparent possession The Explanatory Memorandum to the Personal Property Securities Bill 2009 (Cth) states that ‘‘possession under the Bill would not equate to the Annotated Personal Property Securities Act 2009 (Cth)

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24(6) 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:

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common law meaning of possession’’: at [2.32]. Nonetheless, the PPSA offers no definition of possession beyond s 24 and so the application of the term at general law remains useful. Possession at general law has been most notably explained by Pollock F and Wright R, An Essay on Possession in the Common Law (1888, Clarendon Press). They discussed three categories of possession: de facto possession (an actual relation between a person and a thing, a matter of fact), legal possession (the state of being a possessor in the eye of the law) and the right to possess or have legal possession (eg the right of an owner of stolen goods). The basis of possession was explained by Pollock and Wright as the occupation or control over property with an intention to exclude strangers from interfering with the occupier’s use. See generally Parker v British Airways Board [1982] QB 1004. The concept of ‘‘apparent possession’’ originally derives from the bills of sale law where it has been determined according to an objective standard as to who a third party would believe to be in possession of the property: see Robinson v Briggs (1870) LR 6 Exch 1; Koppel v Koppel [1966] 2 All ER 187. ● Chattel paper See [12.5.3]ff, especially [12.5.3.1]. ● Common carrier The common carrier is one who ‘‘holds himself out as ready without discrimination to carry the goods of all persons who may choose to employ him or send him goods to be carried’’: see James v Cth (1939) 62 CLR 339. ● Constructive possession See Flown Pty Ltd v Goldrange Pty Ltd [2016] WASC 419. ● Investment instrument This is defined under s 10 by reference to the definition of financial products in the Corporations Act 2001 (Cth) (see Pt 7.1, Div 3 of that Act). ● Negotiable instrument This is defined under s 10 to include traditional negotiable instruments such as bills of exchange, promissory notes and cheques but also includes further instruments (such as particular letters of credit).

[24.5]

Commentary

[24.5.1] Possession as a concept ...................................................................164 [24.5.2] Perfection by possession .................................................................165 [24.5.3] Repossession is not perfection by possession ..............................167

[24.5.1] Possession as a concept Possession operates differently for the various forms of collateral and instruments governed by the PPSA to best reflect existing commercial practices. The underlying policy of the PPSA is to give notice of security interests through perfection. There are various methods for giving notice to third parties, through registration of a financing statement, through control of

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the collateral (only for limited types of collateral) and through taking possession of the collateral. This section clarifies that the PPSA does not operate on the basis of constructive possession. Pursuant to s 24(1) and (2), possession is a mutually exclusive concept, that is, where one party has possession another cannot and thus only one party can have possession of the underlying collateral at any point in time. Like the PPS Register, possession of the underlying collateral is a permitted form of perfection under the PPSA as it put a third party on notice of an existing security interest. In Knauf Plasterboard Pty Ltd v Plasterboard West Pty Ltd (In Liquidation) (Receivers and Managers Appointed) [2017] FCA 866, Markovic J held (at [126]–[128]): ‘‘The meaning that would otherwise be applicable to the word possession in s 21(2)(b) is, in my opinion, the meaning of that term at common law. In Gamer’s at 243 [Gamer’s Motor Centre (Newcastle) Pty Ltd v NatWest Wholesale Australia Pty Ltd [1987] HCA 30; (1987) 163 CLR 236], Mason CJ rejected a submission that the word ‘possession’, as used in the definition of ‘delivery’ under the Sale of Goods Act 1923 (NSW), would be given its common or ordinary meaning of ‘actual physical custody’. His Honour noted that ‘‘‘possession’’ is an established legal concept, particularly in its application to goods and chattels’. The same must be said of ‘possession’ in its application to articles of personal property covered by the PPS Act. Thus, the word possession in the PPS Act has its common law meaning, modified to the extent provided for in s 24 of the PPS Act. As set out at [100] above, subss 24(1) and (2) limit the meaning of ‘possession’ by reference to the party who has the ‘actual or apparent possession’ of the personal property. That is, as between a secured party and a grantor or debtor, a secured party cannot have ‘possession’ if the grantor or debtor, or someone on their behalf, has actual or apparent possession: s 24(1). Similarly, a grantor or debtor cannot have ‘possession’ of personal property if the secured party, or someone on their behalf, has actual or apparent possession: s 24(2). It is at least clear from the terms of subss 24(1) and (2) that constructive possession is not sufficient. The result is that ‘possession’ in s 21(2)(b) has its common law meaning but limited, relevantly, for the purposes of the issue before me, by the terms of ss 24(1) and (2) to exclude constructive possession. It follows, contrary to Knauf’s submission, that the right to possess does not equate to possession for the purposes of the PPS Act.’’

[24.5.2] Perfection by possession A secured party who possesses the underlying collateral over which their interest arises perfects by possession pursuant to s 21(2)(b) (see [21.5.3]). Perfection is achieved for the purposes of the PPSA at the time the secured party obtains actual or apparent possession of the underlying collateral without any additional formal requirements: See Transamerica Commercial Finance Corp Canada v Royal Bank (1990) 1 PPSAC (2d) 61; 70 DLR (4th) 627 at [19] (Sask CA). The time a security interest is first perfected is important when Annotated Personal Property Securities Act 2009 (Cth)

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considering priority of competing interests pursuant to Pt 2.6. A security interest will remain perfected by possession as long as it is continuously perfected in accordance with the principles of s 56. The consequences of perfecting by possession and subsequently losing possession can result in the security interest becoming subordinated to other security interests arising later in time (irrespective of the fact that the subsequent interests took with notice of the possessing secured party); see [21.5.3]. See also Paccar Financial Services v Sinco Trucking Ltd (Trustee of) (1989) 9 PPSAC 7. Possession is also important for determining whether a PMSI has super priority under s 62: see further C Dixon Fuels Ltd v SWS Fuels Ltd (2011) 17 PPSAC (3d) 175; [2011] NSCA 35. Possession is also the preferred method of perfection for some forms of collateral such as share certificates: see Northwest Equipment Inc v Daewoo Heavy Industries America Corp (2002) 3 PPSAC (3d) 101; 1 Alta LR (4th) 14 at [24] (Alta CA). The Australian PPSA provides particular rules of possession for goods transported by common carrier, certain negotiable instruments, chattel paper evidenced electronically and investment instruments — all of which benefit from perfection by possession by virtue of the taking free provisions pursuant to Pt 2.5 or priority rules pursuant to Pt 2.6. This does not alter the general rule that perfection by possession is available for all forms of collateral, however, it is commercially unfeasible in certain circumstances (for example, a leasing arrangement). Additionally it was held in the Ontario Supreme Court of Justice case, Fairbanx Corp v Royal Bank (2009) 15 PPSAC (3d) 265; 57 CBR (5th) 310 at [5], that intangibles could not be perfected by possession which gives rise to the concept of possession by control discussed over the balance of Pt 2.3. The point of perfecting a security interest generally must be kept in mind when considering perfection by possession. To perfect is essentially to put the world at large on notice of an existing security interest. As s 21 (and the commentary thereto) provides, the onus is predominately on the secured party to ensure their interest is perfected in order to retain particular priorities pursuant to Pt 2.6. That being said, with regards to perfection by possession, what constitutes sufficient possession for the purposes of ‘‘apparent’’ possession is not necessarily a question which can be assessed from the perspective of an unrelated third party looking in on the transaction. The point was made in McCloy v Manukau Institute of Technology (2013) FPPSR ¶700-013; [2013] NZHC 936 at [71] where Collins J held: ‘‘Possession is recognised as a form of perfection because it gives publicity to the existence of that party’s security interest. In determining what is meant by ‘perfection by possession’, regard must be had to that underlying policy rationale. In this case, Hobson Gardens were not in possession of the hoists prior to Mainzeal’s default. Mainzeal had apparent control of the hoists up until that point, even though they were on Hobson Gardens’ building. Hobson Gardens then secured apparent control or possession upon Mainzeal’s default. That amounts to seizure. Section 41(1)(b)(ii) of the Act excludes seizures or repossessions from actions which constitute acquiring possession of collateral’’ (see s 21(2)(b) of the Personal Property Securities Act 2009 (Cth)).

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Some context may assist. Mainzeal was contracted by Hobson Gardens to perform remedial construction work, part of which required the two hoists in question to be placed on the land of Hobson Gardens. The findings of Collins J above are such that even where personal property (here, the hoists) is on the land of the party asserting possession, possession may not automatically follow. Here, possession remained with Mainzeal and was only conferred upon default (and even then subject to the exclusions for repossession). Bank of New Zealand, who asserted priority over the relevant hoists, were in any event perfected earlier in time and thus prevailed. Whether or not his Honour’s analysis is applied in Australia, there is no doubt something to be said about the concept of ‘‘apparent’’ possession and notions of who ‘‘controls’’ the underlying asset even where prima facie possession of the relevant property is with a particular party. An example of this could be property in the form discussed in McCloy v Manukau Institute of Technology where particular machines are located on land owned by a different person or entity but exhibit some characteristic of ownership elsewhere (for instance advertising decals). The ability of a third party to be misled by possession should also be considered. For instance, if a crane or piece of construction equipment is located on a worksite of an entity unrelated to construction then it may well follow that the machinery is not in the possession of the party contracting the services of the constructor. If, however, the crane is otherwise located on a construction site for a construction industry, it may be quite reasonable to conclude that the site owner owns the crane. What this discussion demonstrates is the further appeal of perfecting by registration which, in effect, circumvents these potential complications.

[24.5.3] Repossession does not constitute perfection by possession While a security interest is perfected upon the taking of actual or apparent possession, s 21(2)(b) provides that repossession (for breach of contract perhaps) does not constitute the taking of possession sufficient to perfect a security interest. Fundamentally, repossession constitutes a step to enforce a security interest. In most cases, unless the security interest is otherwise perfected it is not likely that the repossessing party would have ability to repossess (or if they did repossess, they would not have authority to retain possession of the underlying collateral: see Ch 4). This is because an unperfected security interest is subject to the priority of any other perfected security interest in the same collateral (see s 55). Further, even if there are no competing security interests in the same collateral, repossession extinguishes the security interest such that on and from the time of repossession there is no security interest which could be perfected. Put another way, the right to enforce which is sought to be preserved by a perfected security interest is already effectuated upon repossession. All that is left in such circumstances is a residual claim against the debtor for breach of contract (namely, one in damages) should the repossession not satisfy all obligations outstanding. Annotated Personal Property Securities Act 2009 (Cth)

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[24.6] Further reading ● Explanatory Memorandum [2.32–2.38]. ● ALRC Report No 64 [3.6]. ● Whittaker Report [5.3].

¶2-050 SECTION 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).

[25.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

No parallel provision No parallel provision No parallel provision § 9-104

[25.2] Outline This section makes it clear that perfection by control over an authorised deposit taking institution account (ADI account) can only occur if the secured party is the authorised deposit taking institution (ADI). The current wording of the section was inserted by amendments made in 2011; see Personal Property Securities (Corporations and Other Amendments) Act 2011 (Cth), Sch 2, s 12. An ADI will have control over ADI accounts held with it pursuant to the terms of a security agreement.

[25.3] Cross-references ● The concept of control of an ADI account arises under several areas of the PPSA. Control of an ADI over an ADI account perfects any security interest held by the ADI over that account (s 21(2)(c)). ● It is particularly important under the priority rules (see s 75) where control over an ADI account is given priority even as against the ‘‘super priority’’ purchase money security interest; see s 75; see s 14 regarding the definition of a purchase money security interest. See also s 57 which confers priority on security interests perfected by control as against security interests perfected by other methods. ● Control of an ADI account is also relevant in relation to all asset general security agreements (the PPSA equivalent of floating charges), which is discussed below (see also s 340–341A).

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Concepts

● ADI This refers to a body authorised under the Banking Act 1959 (Cth) to accept deposits (authorised deposit taking institution). This term is defined under s 10 as ‘‘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)’’. This is clearly referring to a bank account, including a deposit account and a loan account. ● Control Control is not generally defined by the PPSA but rather is given specific meanings for particular types of collateral through s 25–29. For a general description of what control constitutes and why it is included as a class of perfection under the PPSA see [21.5.4.3].

[25.5]

Commentary

Perfection by control is a relatively new concept under the foreign PPS regimes, as discussed in a general sense at [21.5.4.3]. The legislative mechanics of perfecting by control amongst the Canadian provinces derives from the various Securities Transfer statutes (where enacted), as opposed to the equivalent PPS legislation directly: see Re 1231640 Ontario Inc (2007) 13 PPSAC (3d) 57; 289 DLR (4th) 684 at [4] (Ont CA). For a discussion of the various Securities Transfer Acts see [26.5] below. In Australia, the concept of control over an authorised deposit taking institution account (ADI account) is particularly important for security interests in the nature of floating charges. Perfection by control over personal property generally confers the highest priority where there is a dispute between multiple secured parties. If the authorised deposit taking institution (ADI) does not have control over the ADI account then it could lose out in a priority contest. Where an ADI has a general security agreement over a grantor’s property this will usually include a requirement that the debtor establish an account with the ADI in which funds generated by the grantor’s trading activities are to be paid. This serves to provide the commercial equivalent of a pre-PPSA ‘‘all assets fixed and floating charge’’. Section 339(3) states that a reference to a charge over property is taken to be a reference to a security interest that has attached to either a circulating asset or to personal property that is a non-circulating asset. Sections 339(4) and (5) state that a fixed charge is taken to refer to a security interest that has attached to personal property that is not a circulating asset and floating charges refer to security interests that have attached to circulating assets. The distinction between circulating and non-circulating assets will be relevant for security interests granted by corporations as the pre-PPSA priority of employee entitlements over floating charge claims will persist in respect of charges over circulating assets; see further Pt 9.5. Annotated Personal Property Securities Act 2009 (Cth)

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● ADI Account

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The concept of a circulating asset is then defined in s 340. Section 340(1) defines a circulating asset as being either personal property covered by s 340(5), or pursuant to s 340(1)(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’’. Section 340(5) covers the following types of 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) (b) an account that is the proceeds of inventory (c) an ADI account (other than a term deposit) (d) currency (e) inventory (f) a negotiable instrument. However, these categories of personal property will not be circulating assets if s 340(2) or (3) apply. Only s 340(2) is relevant for ADI accounts and it states that personal property listed under s 340(5) will not be a circulating asset if an effective registration with respect to the property occurs whereby the grantor discloses that the secured party has control of the personal property and the secured party actually has control of the personal property. This means that although an ADI may perfect its security interest by taking control over an ADI account, if it wishes to exclude that account from the ‘‘circulating assets’’ of the grantor then it will also need to register a financing statement which gives public notice of its control over the account. The rationale here is the primacy of the PPS Register which seeks to introduce a level of certainty and predictability with regards to security interests taken over personal property. The 2011 amendments, namely the Personal Property Securities (Corporations and Other Amendments) Act 2011 (Cth), Sch 2, s 64, saw the inclusion of s 341A which seeks to clarify how an ADI can control an ADI account for the purposes of s 340(2). Section 341A allows the ADI who is the secured party to avoid the ADI account being classified as a circulating asset of the grantor in whose name the account is held. This new section has a similar wording to the previous wording of s 25. Section 341A(1)(a) makes it clear that merely being the ADI as a secured party will be sufficient to prove control over the ADI account. Section 341A(2) states that the mere fact that a debtor is permitted by the ADI to direct the disposition of funds from the ADI account will not cause the ADI to lose its control over the ADI account. The Explanatory Memorandum to the 2011 changes makes it clear that only the ADI with which the ADI account is held is permitted to exercise control over an ADI account for the purposes of perfection: at [79] and [86]. It should be noted that s 340(1)(d) also specifies that a secured party may have control over an ADI account within the ordinary meaning of the term control (see s 340(1)(a)). However, this does not apply for the purposes of ascertaining perfection as s 25 states that control over an ADI account for the purposes of s 21 can only

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It should also be noted that not all rights a bank has over accounts held in its customer’s names will constitute a security interest. As noted in the commentary to s 8 (see [8.5.4]), the right of a bank to combine accounts or exercise rights of set-off are excluded from the PPSA.

[25.6] Further reading ● Explanatory Memorandum [2.39–2.48]. ● ALRC Report No 64 [2.17]. ● A Tranter-Wilson, ‘‘The Circulating Security Interest in Review: Architectures of Certainty, Flexibility and Control’’ (2017) 28 JBFLP 3.

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SECTION 26 CONTROL OF INTERMEDIATED SECURITIES

Main rule 26(1) 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. Control by agreement 26(2) 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). Annotated Personal Property Securities Act 2009 (Cth)

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occur if the secured party is the ADI with which the ADI account is held. For more information on fixed charges, floating charges and circulating assets see Pt 9.5.

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Personal Property Securities Act 2009 26(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).

26(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. Control by secured party in whose name securities account is maintained 26(4)

A secured party has control of an intermediated security if:

(a) the securities account is maintained in the secured party’s name; or (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.

[26.1] Comparable provisions in foreign regimes New Zealand Saskatchewan

PPSA 1999 PPSA 1993

Ontario

PPSA 1990

USA

UCC Article 9 (rev)

No equivalent s 2 (see also the Securities Transfer Act 2006) s 1 (see also the Securities Transfer Act 2007) § 9-106 (see also UCC Article 8)

[26.2] Outline This section explains how a secured party may take control of intermediated securities.

[26.3] Cross-references ● Section 14 provides that a security interest in intermediated securities cannot be a purchase money security interest. ● Section 21 notes that security interests in intermediated securities may be perfected by control.

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● Section 31 provides rules for proceeds arising out of intermediated securities.

● Section 57 provides priority rules if more than one secured party has perfected their interest by control. ● Section 109 provides that Ch 4 has a limited application to security interests in intermediated securities that are perfected by control.

[26.4]

Concepts

The key concepts of intermediated securities and securities accounts were discussed in the annotations to s 15.

[26.5]

Commentary

This provision is similar to various provisions in the Securities Transfer Acts in force amongst the Canadian provinces from 2006 (including Ontario and Saskatchewan) and also pursuant to the UCC Article 8 in the United States. The Official Comment to the relevant provision in the UCC Article 8 (§ 8-106) states that ‘‘Obtaining ‘control’ means that the purchaser has taken whatever steps are necessary, given the manner in which the securities are held, to place itself in a position where it can have the securities sold, without further action by the owner’’. The Official Comment goes on to contrast the concept of control with the concept of possession: ‘‘A principal purpose of the ‘control’ concept is to eliminate the uncertainty and confusion that results from attempting to apply common law possession concepts to modern securities holding practices’’. To ‘‘control’’ thus goes beyond mere possession, that is, to have what can be describes as ‘‘quasi-ownership’’ capacity when dealing with the underlying collateral — in this case, the intermediated security. This elevated status thus justifies the PPSA position that security interests perfected by control take priority to all other perfected interests pursuant to s 57. This provision was amended in 2011 to clarify that it applies to security interests over CHESS (Clearing House Electronic Subregister System) intermediated securities; see Personal Property Securities (Corporations and Other Amendments) Act 2011 (Cth), Sch 2, s 13 and 14. As the Explanatory Memorandum to the amending legislation states (at [32]): ‘‘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’’.

[26.6] Further reading ● Explanatory Memorandum [2.39–2.48]. ● ALRC Report No 64 [2.17]. ● Whittaker Report [5.3]. Annotated Personal Property Securities Act 2009 (Cth)

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● Section 49 provides a taking free rule for intermediated securities.

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¶2-060 SECTION 27 CONTROL OF INVESTMENT INSTRUMENTS Main rule 27(1) A person has control of an investment instrument if, and only if, this section so provides. Control of any investment instrument 27(2) 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. Control of investment instruments evidenced by certificates 27(3) 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. Control of investment instruments not evidenced by certificates 27(4) 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. 27(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

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27(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.

[27.1] Comparable provisions in foreign regimes New Zealand Saskatchewan

PPSA 1999 PPSA 1993

Ontario

PPSA 1990

USA

UCC Article 9 (rev)

No equivalent s 2 (see also the Securities Transfer Act 2006) s 1 (see also the Securities Transfer Act 2007) § 9-106 (see also UCC Art 8)

[27.2] Outline This section sets out a series of rules that allow for control over investment instruments.

[27.3] Cross-references ● Section 14 provides that a security interest in investment instruments cannot be a purchase money security interest. ● Section 21 notes that security interests in investment instruments may be perfected by control. ● Section 24 provides rules for possession of investment instruments. ● Section 31 provides rules for proceeds arising out of investment instruments. ● Section 36 provides for the temporary perfection of security interests in investment instruments. ● Sections 49 and 50 provide taking free rules for investment instruments. ● Section 57 provides priority rules if more than one secured party has perfected their interest by control. ● Section 109 provides that Ch 4 has a limited application to security interests over investment instruments that are perfected by control. Annotated Personal Property Securities Act 2009 (Cth)

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(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.

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[27.4] Concepts ● Ability to transfer or otherwise deal (s 27(3)(b)) This subsection can be read in different ways. On one view it is possible that the terms of a security agreement that allow the secured party to transfer the securities may be sufficient to satisfy this subsection. Another view is that this will only be satisfied if the secured party has signed transfer instruments. It should be noted that the equivalent US provision requires an indorsement of the security instrument to the secured party (UCC Art 9 § 8-106(b)). ● Investment instruments This term is defined under s 10 as any of the following: – shares or debentures in a body corporate – debentures, stocks or bonds issued by government – derivatives – foreign exchange contracts that are not derivatives – assignable options to have an allotment of an investment instrument made to the holder of the option – interests or units in a managed investment scheme – units in shares – financial products traded on a licensed financial market – financial products prescribed by the regulations (specifically, reg 1.10), namely: i) Australian carbon credit units ii) carbon units iii) certain eligible international emissions units – any financial product consisting of two or more financial products as listed above These terms have the same meaning as they do in the Corporations Act 2001 (Cth) (see Ch 7 of that Act). Australian carbon credit units, carbon units and eligible international emissions units have specific meanings under their respective legislation (see reg 1.10). The definition of investment instruments in s 10 excludes, however, the creation or transfer of a right to payment in connection with interests in land, unless the writing evidencing the creation or transfer does not specifically identify the land; a document of title (see [8.5.1]); and intermediated security (see s 15, 26) or a negotiable instrument (see further s 29).

[27.5]

Commentary

This section provides several rules that allow for control to be taken over ‘‘investment instruments’’ which constitutes a broader category of collateral than ‘‘intermediated securities’’. The general rule, pursuant to s 27(2), allows the registered owner to perfect by control (where the registered owner is not the debtor or grantor), although the wording does not include nominees of the

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The second rule (s 27(3)) allows for control over certificated investment instruments which imposes an active requirement upon the person claiming control to firstly, have possession of the instruments (see s 24), and secondly, be able to (either personally or through a nominee) transfer the relevant instruments or otherwise deal with them. Section 27(6) provides flexibility regarding the rights of the registered owner of the instrument. Where available, investment instruments should thus be perfected by control in the authors’ view. This is the case not only due to the significant grant of priority conferred by s 57, but also due to the exclusion of such property from attracting PMSI status pursuant to s 14(2).

[27.6] Further reading ● Explanatory Memorandum [2.39–2.48]. ● ALRC Report No 64 [2.17]. ● Whittaker Report [5.3].

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SECTION 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.

[28.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

No equivalent No equivalent No equivalent § 9-107 (see also UCC Art 5)

[28.2] Outline This section provides a rule regarding perfection by control over letters of credit by secured parties. It should be noted that letters of credit can fall within the definition of negotiable instruments under s 10 and therefore reference should also be made to s 29. Annotated Personal Property Securities Act 2009 (Cth)

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secured party to be registered. Section 27(5), however, specifies that an uncertificated investment instrument may be subject to control where the issuer of the instrument registers a person (other than the grantor or the debtor) as the owner on behalf of the person asserting control or where the registered owner gives a written acknowledgement that they hold it on behalf of the controller.

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[28.3] Cross-references ● Section 21 notes that security interests in letters of credit may be perfected by control. ● Sections 239 and 240 contain rules relating to the governing law for different types of letters of credit.

[28.4]

Concepts

● Letter of credit A letter of credit is an instrument under which a bank agrees to make a payment once certain criteria are met. This is different from a bank guarantee which only obliges the bank to make a payment if the principal obligor defaults. Letters of credit are frequently used as instruments to finance trade in the construction industry and are covered by the Uniform Customs and Practice for Documentary Credits 2008 Revision published by the International Chamber of Commerce. A letter of credit that must be presented for payment is expressly included in the concept of negotiable instruments under s 10. Thus, in the authors’ view, where a letter of credit is also a negotiable instrument parties should treat the instrument as a negotiable instrument for all PPSA purposes (including perfection, priority and enforcement). Letters of credit may additionally derive from or be characterised as proceeds of a primary security interest (such as substituting the payment or performance of a particular obligation for an irrevocable letter of credit) which has been recognised under the Saskatchewan PPSA: see National Bank of Canada v Makin Metals Ltd (1994) 6 PPSAC (2d) 164; 116 Sask R 237 (Sask CA). This is a useful way of providing security for the release of already encumbered collateral: see SR Te´le´com & Co v Apex — Micro Manufacturing Corp (2008) 15 PPSAC (3d) 136; 52 CBR (5th) 204 at [10] (BC SC); see also Sperry Inc v Canadian Imperial Bank of Commerce (1985) 4 PPSAC 314; 17 DLR (4th) 236 (Ont CA).

[28.5]

Commentary

This provision is similar to the US UCC Article 9 which also makes specific provision for control over letters of credit. While the New Zealand PPSA does not provide for control as a means of perfection it does allow for possession of a letter of credit (which is included as a negotiable instrument). The Canadian PPSA statutes classify letters of credit as ‘‘instruments’’ which may be perfected by possession.

[28.6] Further reading ● Explanatory Memorandum [2.39–2.48]. ● ALRC Report No 64 [2.17]. ● Whittaker Report [5.3], [9.3].

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SECTION 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. 29(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.

[29.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[29.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

No equivalent No equivalent No equivalent No equivalent

Outline

This section provides for a secured party to control uncertificated negotiable instruments.

[29.3]

Cross-references

● Section 21 notes that security interests in negotiable instruments may be perfected by control. ● Section 31 provides proceeds rules for the discharge of negotiable instruments. ● Section 36 provides for the temporary perfection of security interests in negotiable instruments. ● Sections 69 and 70 provide special priority rules for security interests in negotiable instruments. ● Section 120 provides enforcement rules for negotiable instruments. ● Section 240 contains rules relating to the governing law for negotiable instruments. Annotated Personal Property Securities Act 2009 (Cth)

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[29.4] Concepts ● Negotiable instruments This is defined in s 10. See also s 8.

[29.5]

Commentary

This section provides recognition for a secured party to perfect security interests over uncertificated negotiable instruments by control through the use of a clearing and settlement facility. Where the instrument is certificated, it will constitute an investment instrument (see s 10) and s 27 will thus apply. Section 29 is similar to the rules in relation to intermediated securities: see s 26. It is also common for security interests in negotiable instruments to be perfected by possession (see above at s 24). The reason why perfection by possession or control is critical in relation to negotiable instruments in particular is due to the effects of the taking free provisions pursuant to Pt 2.5 of the PPSA and the commercial reality that a ‘‘holder in due course’’ of such an instrument may be able to convey an interest higher than what they are legally be entitled to. This was discussed in the Saskatchewan Court of Appeal decision, Camco Inc v Frances Olson Realty (1979) Ltd (1986) 6 PPSAC 167; 50 Sask R 161, where it was held (at [18]) that ‘‘the secured party who permits a businessman to have possession of the goods runs the risk that the buyer taking from the businessman may qualify as a ‘buyer of goods sold in the ordinary course of business of the seller’’’. Negotiable instruments fall within the class of ‘‘current assets’’ for the purposes of ascertaining circulating assets under s 340(5). Note that s 340(2) will exclude a security interest in a negotiable instrument where the secured party has registered a financing statement in relation to the grantor that covers the collateral and discloses that it has control over the collateral — provided the secured party actually controls the relevant collateral. Section 341 provides rules for determining control for the purposes of s 340 (to ascertain circulating assets). Section 341 allows a secured party to control negotiable instruments by exercising control in the ordinary meaning of that term (s 341(1A)(a)) or under s 29 (s 341(1A)(b)).

[29.6] Further reading ● Explanatory Memorandum [2.39–2.48]. ● ALRC Report No 64 [2.17]. ● Whittaker Report [5.3], [9.1].

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SECTION 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. 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.

Annotated Personal Property Securities Act 2009 (Cth)

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Personal Property Securities Act 2009 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.

Division 2 — Proceeds and transfer ¶2-080 SECTION 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; (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. Note: In section 140 (distribution of proceeds received by secured party) proceeds has its ordinary meaning, so this definition does not apply.

Whether proceeds are traceable 31(2) 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.

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Restriction to proceeds in which grantor has a transferable interest 31(3) 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.

Crops and livestock 31(4) The proceeds of collateral that is crops include the harvested produce of the crops, if the produce is identifiable or traceable. 31(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. 31(6) However, livestock are not the proceeds of collateral merely because they are the unborn young, or the offspring, of livestock that are collateral.

[31.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[31.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 16 for the definition s 2(1)(hh), s 2(2)(4) s 1(1) § 9-102(64)

Outline

Section 31 defines ‘‘proceeds’’ for the purpose of the PPSA, above and beyond the ordinary definition of the term (which otherwise applies with respect to s 140). The Australian PPSA adopts the US Article 9 approach to proceeds by providing a separate provision for the definition of the term as opposed to incorporating the definition under s 10 of the PPSA. Substantively, the definition draws on elements found in the various foreign regimes outlined in the table above and s 31 prescribes an exhaustive list of circumstances where proceeds will arise under the PPSA. As will be discussed with respect to s 32, a security interest over particular collateral may extend to proceeds of such collateral and it is thus important to isolate the precise extent of such proceeds where they arise. In Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd (in liq) (recs and mgrs apptd) (2017) 320 FLR 259; [2017] WASC 152, Tottle J held (at [342]): ‘‘Sections 31 and 32 of the PPSA make it unnecessary to use the mechanism of a floating charge in order to permit a grantor to give a Annotated Personal Property Securities Act 2009 (Cth)

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Personal Property Securities Act 2009 creditor security over its collateral and to utilise the collateral in the ordinary course of its business.’’

[31.3] Cross-references ● The concept of proceeds of collateral is a fundamental one in the PPSA and is mentioned in over 40 sections of the Act.

[31.4]

Concepts

● Chattel paper This is defined by s 10. See further s 12. ● Identifiable or traceable See below. ● Intellectual property This is defined by s 10. See also s 105. ● Intermediated security This is defined by s 15. See further s 26. ● Investment instrument This is defined by s 10. See further s 27.

[31.5] Commentary [31.5.1] Introduction, requirements and rationale — s 31(1)(a) .............184 [31.5.2] ‘‘Traceable’’ ......................................................................................186 [31.5.3] Various applications of tracing principles ..................................187 [31.5.3.1] Re Hallet’s Estate presumption ..........................................188 [31.5.3.2] ‘‘Lowest Intermediate Balance’’ rule ...............................188 [31.5.3.3] Cases of ‘‘New’’ collateral .................................................190 [31.5.3.4] Equitable notions and concepts beyond the PPSA ........191 [31.5.3.5] Recourse for the original secured party ..........................192 [31.5.4] Insurance payments — s 31(1)(b) .................................................193 [31.5.5] Redemption of collateral — s 31(1)(c) ..........................................193 [31.5.6] Proceeds of intellectual property — s 31(1)(d) ...........................194 [31.5.7] Scope of proceeds — s 31(1)(e) .....................................................195 [31.5.8] Fiduciary relationships — s 31(2) .................................................195 [31.5.9] Interest in the proceeds — s 31(3) .................................................195 [31.5.10] Crops and livestock — s 31(4), (5), (6) .......................................195

[31.5.1] Introduction, requirements and rationale — s 31(1)(a) ‘‘Proceeds,’’ in the ordinary sense of the term, refers to a return, be it in cash or otherwise, derived through the utilisation of a particular asset or consideration flowing in relation to a transfer of the asset to a new party. A proceed is a by-product or derivative of a primary asset, it cannot exist without being tied to some primary source. Take the simple example of a motor vehicle. A motor vehicle can be driven to provide enjoyment or utility,

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it can be leased to someone else for a fee and it can also be sold. A motor vehicle can also be driven to a place of employment, however, note that in the first and final uses described here any consideration which may flow (such as wages) does not necessarily derive from the asset itself and should not therefore automatically be taken to constitute a proceed of the motor vehicle. Collateral can give rise to more than one set of proceeds: Bank of Nova Scotia v IPS Invoice Payment System Corporations (2010) 17 PPSAC (3d) 99; 101 OR (3d) 352 (Ont SCJ). Under the PPSA, in order for proceeds to follow the security interest they must first be ‘‘identifiable’’ or ‘‘traceable’’. Like a security interest taken over original collateral, the grantor must obtain rights in the collateral (for more information as to how this arises see s 12) and the proceeds themselves must not be excluded by the PPSA pursuant to s 8. The terms ‘‘identifiable’’ or ‘‘traceable’’ were subject to judicial consideration in the Ontario Court of Appeal case, Toronto Dominion Bank v Co-Pac Ltd (1999) 15 PPSAC (2d) 52; 178 DLR (4th) 149. The facts of the case involve a debtor who defaulted on a bank loan over which the bank held a valid security interest. The bank exercised what it believed was an ‘‘all assets and undertakings’’ security interest over the debtor’s property. Unbeknownst to the bank, a lawsuit was settled in favour of the debtor and the proceeds of this suit were initially placed in a principal deposit account and then transferred to the principal’s daughter’s account. Section 1(1) of the Ontario PPSA reads: ‘‘‘proceeds’ means identifiable or traceable personal property in any form derived directly or indirectly from any dealing with collateral or the proceeds therefrom, and includes any payment representing indemnity or compensation for loss of or damage to the collateral or proceeds therefrom’’. His Honour, Goudge JA, in dismissing the appellant’s argument (at [24]), found that the funds were clearly identifiable and traceable and that the bank was entitled to the proceeds under the PPSA. His Honour analysed and applied the reasoning of the Ontario Court of Appeal in General Motors Acceptance Corp of Canada v Bank of Nova Scotia (1986) 6 PPSAC 53; 55 OR (2d) 438 which held: ‘‘Proceeds are identifiable when they continue to exist in their original form. They are traceable if they are converted to a substituted form which can be located and determined to be the substitution of the original proceeds.’’ The Saskatchewan Court of Appeal decision in Transamerica Commercial Finance Corp Canada v Royal Bank (1990) 1 PPSAC (2d) 61; 70 DLR (4th) 627 at [25] provides an alternative view, that is: ‘‘‘identifiable’ refers to the ability to point to the particular property obtained by the debtor as a result of the dealing with the collateral, while ‘traceable’ refers to the situation where the collateral is commingled with other property so that its identity is lost’’. The Australian PPSA provisions lean toward the Saskatchewan interpretation, in the authors’ view, bypassing reference to the form of the collateral. This is Annotated Personal Property Securities Act 2009 (Cth)

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for two reasons, first, the statutory definition of proceeds pursuant to s 31(1) makes no reference to form and thus the latter interpretation better fits the statutory definition, and secondly (and more importantly), under the Ontario definition, only proceeds stemming directly from the collateral subject to a security interest appear to be caught. This is not so under the PPSA. Under s 31, proceeds of proceeds are also caught by a security interest provided that such proceeds of proceeds are sufficiently ‘‘identifiable’’ or ‘‘traceable’’. An example of this can again be seen in relation to a motor vehicle: Where one motor vehicle (Car A), subject to a security interest, is traded in for another motor vehicle (Car B), should the subsequent sale of the second motor vehicle (Car B) occur, the resulting proceeds of sale — provided they are sufficiently identifiable or traceable — would be encumbered by the security interest.

While the process of identification of proceeds is a relatively simple issue of fact, that is, where particular property or funds can be specifically pointed to as a derivation of collateral subject to a security interest, the security interest will extend to such proceeds, traceability on the other hand requires further consideration.

[31.5.2]

‘‘Traceable’’

The term ‘‘tracing’’ has jurisprudential roots in both common law and equity and is of relevance in relation to PPSA proceeds where funds are commingled in an account such that the specific identify of such funds is lost among the broader pool. With regards to tracing into a mixed fund, the relevant principles stem from the doctrine of tracing in equity discussed in Banque Belge pour L’Etranger v Hambrouck [1921] 1 KB 321 and further summarised and clarified in Re Diplock [1948] Ch 465. In Re Diplock, it was held that equitable tracing could occur where three elements were satisfied, first, that there is a fiduciary relationship between the claimant and the recipient of the funds in the first instance,16 secondly, the money must be identifiable, and thirdly, the making of the tracing order must not provide an injustice.17 Unfortunately, despite appearing in s 31, the term ‘‘tracing’’ is not otherwise defined by the PPSA and how it is to be applied is therefore uncertain. What is made clear however is that like its foreign counterparts, the Australian PPSA expressly removes the requirement that a fiduciary relationship exists. This interpretation can be attributed to the underlying rationale of the PPSA in presenting a consistent approach to priority disputes at law. The tracing principles under the PPSA are thus statutory and while guided by common law and equitable concepts are not bound by such precedent. This view has been endorsed by the Saskatchewan Court of Appeal in Agricultural Credit Corp of Saskatchewan v Pettyjohn (1991) 1 PPSAC (2d) 273; 79 DLR (4th) 22: 16

Although the stringency of this requirement was discussed in Chase Manhattan Bank NA v Israel British Bank (London) Ltd [1981] 1 Ch 105 (where a tracing order was made available where claimant had paid money by mistake) and, Bankers Trust Co v Shapira [1980] 3 All ER 353 (where the funds were obtained fraudulently).

17

The principles have been applied in Australia in the New South Wales Court of Appeal decision, Evans v European Bank Ltd [2004] NSWCA 82.

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In the same case (at [60]), the process for executing tracing principles under the PPSA was enunciated: ‘‘Tracing at common law and equity is a proprietary remedy. It involves following an item of property either as it is transformed into other forms of property, or as it passes into other hands, so that the rights of a person in the original property may extend to the new property. In establishing that one piece of property may be traced into another, it is necessary to establish a close and substantial connection between the two pieces of property, so that it is appropriate to allow the rights in the original property to flow through to the new property.’’ Going back to the concept of proceeds deriving from other proceeds, a security interest will continue where the proceeds can be traced and a close and substantial connection to the collateral is found on the given facts. Importantly, unlike equitable tracing, the underlying consideration here should not be one of fairness or equality rather primacy is given to effectuating the purpose of the PPSA, that is, providing a consistent and predictable application of the statute.

[31.5.3] Various applications of tracing principles Tracing has historically arisen in a number of different contexts now covered by the PPSA. Whether or not the PPSA alters the various applications of tracing principles at common law and in equity has not been tested in Australia. A common example of where tracing principles may be relevant is the consideration of retention of title arrangements. Stock subject to retention of title terms is sold and money paid for that stock from independent third parties is deposited in an account. As is commonly the case, upon payment for the stock, the independent third party takes free such that the secured party (the supplier) can only have recourse to the money proceeds of sale. The difficulty arises when the money is commingled with other monies concerning stock sold from other suppliers and the grantor’s general funds. The onus is on the secured party in such circumstances to identify or trace the relevant funds. The difficulty of the task, the likely cost of litigation and uncertain result has prevented s 31 of the PPSA from being tested in Australia. In the authors’ view, even sophisticated retention of title arrangements — including those which positively covenant that upon the sale of the personal property the monies are to be held on trust for the benefit of the secured party — are of limited utility for want of enforceability. A breach of such a condition might result in a claim for damages against the breaching party, namely the grantor, but this can do no better than the security interest itself and is a right in personam or a mere equity. Thus, should the grantor be insolvent, any such covenant would not prevent the secured party from having to trace proceeds. Annotated Personal Property Securities Act 2009 (Cth)

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‘‘[I]n defining the notion of tracing under the PPSA we must have reference to the notion of tracing in the common law and equity. However, certain changes in the concept of tracing will be required in the context of the PPSA.’’

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Ensuring that accounts receivable for such stock sold are collected regularly and monitored prudently for deviations in payment are some ways of mitigating this exposure. Additionally, should an insolvency practitioner/trustee be appointed to the grantor or the grantor’s estate, respectively, unlike above — there is some utility, in the authors’ view, in obtaining an undertaking from that practitioner that any relevant proceeds derived from the encumbered personal property are to be held on trust for the benefit of the secured party. A claim for damages against an insolvency practitioner/trustee for breach of their duty to account and undertakings enjoys better prospects of protecting one’s interest than as against the grantor itself/themselves. As the above highlights, the difficulties with tracing proceeds means it is often more commercially sensible to avoid commingling of funds such that identifying monies in an account is simple — namely, all the monies in the account are held on trust for the secured party. Notwithstanding its difficulties, the following methods provide guidance as to how the PPSA has affected tracing principles abroad.

[31.5.3.1] Re Hallet’s Estate presumption The presumption deriving from the case of Re Hallet’s Estate (1880) 13 Ch D 696 should continue in operation under the PPSA, in the authors’ view. The case holds that where a debtor mixes funds subject to a security interest (either as primary collateral or as proceeds of previously encumbered collateral) with funds the debtor possesses outside of the security interest (either in their own right or subject to a separate security interest) — and the debtor then proceeds to withdraw funds from the commingled account — a presumption exists that the debtor withdraws their own money first, that is, money free from the security interest. By way of example assume the following: Debtor A owns a motor vehicle subject to a security interest in favour of Bank B for the sum of $20,000 (assume that Bank B cannot pursue the collateral itself however has a validly perfected security interest in the motor vehicle). Debtor A holds $10,000 on account (ignoring the significance of the account as a distinct type of security for the time being). Debtor A sells the motor vehicle for $20,000 and deposits the funds into the existing account, totalling $30,000. Debtor A then withdraws $5,000. Under such circumstances, Bank B benefits from a presumption that the $5,000 withdrawn is sourced outside of the security interest and thus the security remains over the $20,000 on account.

There is no reason why a debtor should serve to deplete a secured party’s interest simply by drawing down an account and thus it is likely that the presumption will apply under the PPSA.

[31.5.3.2] ‘‘Lowest Intermediate Balance’’ rule Continuing with the presumption established in Re Hallet’s Estate where a debtor draws down the pooled amount beyond the value of the pre-existing security, the value of the interest secured is reduced even if the pool of funds is subsequently increased beyond the secured amount at a later stage. Such is

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Rather than withdrawing $5,000 from the account, Debtor A instead withdraws $25,000 from the account leaving a balance of $5,000. Later still, $50,000 is deposited into the account, bringing the balance up to $55,000. Bank B seeks to enforce its security against debtor A at this point.

Notwithstanding the $55,000 existing at the time the security interest is enforced, Bank B’s security interest has been reduced to $5,000 from its original $20,000 and the court should only recognise the interest as such. While it is true that Debtor A spends their own money before interfering with encumbered funds, it is also true that where the security amount falls below the level secured, that a subsequent credit entry on account will not automatically restore the secured party’s original interest. There are three interconnected reasons for this conclusion: ● first, and by way of iterating what has been previously stated, the principles of tracing under the PPSA operate to give efficacy to the underlying rationale of the Act itself and not to notions of fairness or good conscience which form the basis of the process in equity ● secondly, the tracing principles operate only with respect to proceeds which are traceable in the definitive sense. Once the origin of the funds (or their subsequent direction) is lost, so too is the recourse of the secured party whose rights attach only to the specific collateral (including its proceeds) ● thirdly, the PPSA does not render itself to speculation. Returning briefly to the above example, the source of the subsequent $50,000 in the example given is ultimately unknown and may also be the subject of an additional security interest held by a third party. While it may seem prima facie unfair that the secured party losses the benefit of their entire interest to the misappropriation on behalf of the debtor, it presents greater difficulty however to remove the consistency and predictability of the PPSA with respect to a subsequent secured party. Primacy in such circumstances must be given to the underlying objectives of the statute and as will be discussed below, Bank B’s recourse is not strictly limited to the traceability of proceeds against Debtor A. The lowest intermediate balance rule was applied by the Ontario Superior Court of Justice in New Solutions Financial Corp v 952339 Ontario Ltd (2007) 10 PPSAC (3d) 246; 29 CBR (5th) 222 where a priorities dispute had arisen between a putative trust claimant and a secured creditor, as opposed to competing trust claims: see also Re Graphicshoppe Ltd (2005) 78 OR (3d) 401 (Ont CA). Note also however the importance of the security interest itself and the nature of how the collateral has been appropriated when regarding how the rule will be interpreted and applied. Annotated Personal Property Securities Act 2009 (Cth)

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the doctrine of the ‘‘Lowest Intermediate Balance’’ rule deriving from the case of James Roscoe (Bolton) Ltd v Winder [1915] 1 Ch 62 and as applied in Australia: Re Laughton [1962] Tas SR 300; see also ASIC v Letten (No 7) (2010) 80 ACSR 401; [2010] FCA 1231 and Commonwealth Bank of Australia v Saleh [2007] NSWSC 903. Building on the previous example involving parties A and B:

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In General Motors Acceptance Corp of Canada v Bank of Nova Scotia (1986) 6 PPSAC 53; 55 OR (2d) 438 at [15], the Ontario Court of Appeal held (with respect to funds held in an account with the secured party): ‘‘The appellants submitted on the basis of various American authorities that we should apply the ‘lowest intermediate balance’ rule the effect of which is that where proceeds are co-mingled with other funds in a bank account, the proceeds are deemed to be the last out of the account for purposes of determining the whereabouts of the proceeds. We are of the view that the rule is not applicable where the deposits into an account and withdrawals are made in the ordinary course of business and where, as in this case, the amount withdrawn by the Bank from the dealer’s current account was done in the ordinary course of its business with the dealer.’’ Where the secured party is also the controller of the account over which the security is held, the provisions with respect to proceeds thus apply subject to the principles with respect to accounts and control over such accounts under the PPSA. How one rationalises the operation of the Act where multiple facets of it are raised will depend largely on what was acceptable commercial practice prior to the PPSA taking force: see further s 69. This perspective was put forward by the Saskatchewan Court of Appeal in Agricultural Credit Corp of Saskatchewan v Pettyjohn (at [52]): ‘‘The purpose of the P.P.S.A. as a whole is to simplify commercial transactions and to make the law governing them accord with practical commercial realities.’’ See further Flexi-coil Ltd v Kindersley District Credit Union Ltd (1993) 5 PPSAC (2d) 192; 107 DLR (4th) 12 (Sask CA).

[31.5.3.3] Cases of ‘‘New’’ collateral In the example above, the new $50,000 credit entry into Debtor A’s account appears to be immune from incorporation into Bank B’s security interest. In examining the tracing principles strictly speaking this is true, however, in the absence of the new collateral being otherwise encumbered upon which a priority dispute will arise (for priority disputes see Pt 2.6 below), it has been held that it is for the court to decide whether the new collateral possesses the requisite ‘‘closeness’’ and ‘‘substantial connection’’ to the original collateral. Where the new collateral is held to be equivalent to the old collateral based on its functionality the original security interest may continue over the new collateral. As the Saskatchewan Court of Appeal held in Agricultural Credit Corp of Saskatchewan v Pettyjohn (1991) 1 PPSAC (2d) 273; 79 DLR (4th) 22 at [75]: ‘‘The appropriate principle of tracing in such a case is that where a set of chattels is replaced by another of like function in the affairs of the debtor, it shall be open to the court to find that the proceeds from the first were used to acquire the second, whatever the formalities of the transactions in question. It should be noted in passing that the formalities of the

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Where the new collateral thus constitutes non-cash property, and a sufficient connection and closeness can be established, tracing principles should apply. The rationale is simply the application of the proceeds of a proceed principle and thus the secured party is entitled to the continuation of their security interest. Where the new collateral takes the form of cash however (the $50,000 credit entry in the above example for instance) the resulting ability to trace does not arise. It cannot be said that the new funds have a sufficient closeness and connection with the original collateral (particularly where the origin of the funds is largely unknown) and thus the security interest should not extend in the authors’ view. A similar result arises where new cash is used to fund the purchase of collateral which is functionally different to the original collateral. Under such circumstances, it can be equally held that a sufficient connection and closeness cannot be established and thus a security interest cannot extend. Despite the PPSA’s efforts at consistency and predictability, in some cases the answer will not be readily available and the court is relied on for its role of interpretation in this regard. Going back to the running example, if Debtor A went on to purchase a high performance computer system for $20,000 using part of the $55,000 held on account it cannot be said that the computer package was a direct proceed of the sale of the motor vehicle even where the consideration spent is identical. How far a court is required to go in evaluating a ‘‘substantial connection and closeness’’ is dependant largely on the given facts and circumstances of each independent case. If Debtor A, for instance, went on to purchase a subsequent motor vehicle of different make, model and type it is unclear whether this would satisfy the continuation of proceeds (in the author’s opinion it is likely to considering the same function of the new collateral). This analysis changes again if Debtor A purchases a truck or watercraft with the relevant funds. The circumstances are further complicated when the new collateral is subject to a security interest of its own. Priorities between competing security interest of this kind are discussed below at Pt 2.6.

[31.5.3.4] Equitable notions and concepts beyond the PPSA As has been discussed above, the appropriateness of equitable tracing in applying tracing principles under the PPSA is more conclusive in some circumstances as opposed to others. The existence of a trust presents one such circumstance where the associated equitable principles of tracing should not be employed under the PPSA. There are two reasons for this. First, a trust, in and of itself, is not a security interest dealt with under the PPSA and the Act operates exclusively with respect to security interests. Secondly, even where a trust contains elements dealing with a security interest or is established for the purpose of dealing with security interests, only the interests themselves are regulated by the PPSA and to the extent that there is an inconsistency between Annotated Personal Property Securities Act 2009 (Cth)

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transactions will have some bearing, however, on whether the transactions can be characterized as a ‘replacement’.’’

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trust principles and the operation of the PPSA — the PPSA should prevail. Recall that this was the outcome in the case of Agricultural Credit Corp of Saskatchewan v Pettyjohn (1991) 1 PPSAC (2d) 273; 79 DLR (4th) 22 — the secured party prevailing over the putative trust claimant. This is not to say that the utility of trusts in a commercial capacity is rendered obsolete. There are, and will continue to be, many uses of trust constructs in various capacities however the instrument should not be used to circumvent the overriding objectives of the PPSA where it applies. It should also be remembered that where the PPSA does not apply, the law as it stood prior to the operation of the PPSA is to continue in effect and is left unaltered by the PPSA.

[31.5.3.5] Recourse for the original secured party Independent of a priorities contest (which will be addressed below at Pt 2.6), it has been demonstrated by the rules of tracing under the PPSA that a security interest may be subsequently lost where a claim for proceeds is also lost. In such circumstances, it is important to note that security, by virtue, is a secondary source of recourse for the secured party and at no point does the PPSA seek to remove a secured party’s ability to pursue the debtor personally for the amount secured. In the running example between Grantor A and Bank B, even where Grantor A has moved to deal with the $50,000 beyond what a court is inclined to trace — Bank B can still bring an action against Grantor A personally for the recovery of $20,000 [Note: Grantor here has been used assuming the grantor is also the debtor, this need not be the case under the PPSA]. For more information see s 10 regarding ‘‘debtor’’ and ‘‘grantor’’. There are several reasons why this claim is weaker than pursuing the security interest however: ● first, Grantor A may be insolvent by the time Bank B seeks to bring its action in personam against Grantor A ● secondly, there is often considerable delay and expense combined with uncertainty of success in pursuing litigation. The pool of assets which Grantor A would need to use to resist such claims also serves to be reduced by the litigation process. While these issues may additionally arise should Bank B have a valid security interest and seek to enforce it against Grantor A — the security allows Bank B to point to particular property and thus better protect their interest ● thirdly, in accordance with the above point, the entire purpose of taking security is to avoid having to rely on a personal right against the Grantor ● fourthly, it has been assumed here that no subsequent security interests have arisen and thus there is no priority dispute, in commercial reality it is highly unlikely that new funds will become available to the Grantor in the absence of a subsequent security interest. With an effectively unsecured claim, Bank B is rendered vulnerable to the secured position of any subsequent interest — the result often being that the unsecured party is unable to recover their entitlement either in whole or in part.

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It has also been assumed up until this point that the secured party cannot pursue the original collateral (as opposed to proceeds of such collateral) for whatever reason. The PPSA does not force the secured party to elect whether to pursue an interest in the proceeds or attempt to assert a priority claim over the underlying collateral (subject to both the priority and the taking free provisions which are relevantly discussed under their associated parts). The PPSA will not however allow a secured party to recover more than the value secured. Recourse to the original collateral is typically available where the grantor converts the underlying collateral without authority. This was the case in the Saskatchewan Court of Appeal decision Lanson v Saskatchewan Valley Credit Union Limited (1998) 14 PPSAC (2d) 71; 172 Sask R 106 where the Court found that where the secured party has not authorised the dealing of the original collateral either expressly or by implication, then recourse to both the underlying collateral and its proceeds is recognised by the PPSA (for further discussion on this point see s 32).

[31.5.4] Insurance payments — s 31(1)(b) The Australian PPSA explicitly incorporates ‘‘insurance payments’’ as ‘‘proceeds’’ pursuant to s 31(1)(b). Insurance proceeds were discussed in the Alberta case of Agriculture Financial Services Corp v Bar XH Sales Inc (2009) 16 PPSAC (3d) 1; 20 Alta LR (5th) 43. In this case, a debtor leased an aircraft and the lease was not registered as a security interest. A subsequent creditor lent money to the debtor under an ‘‘all assets and undertakings’’ arrangement. The aircraft crashed. The subsequent creditor then brought an action with respect to the insurance proceeds against the lessor who asserted a priority claim to such payments. Master LA Smart, in analysing the relevant s 1(jj) provision of the Alberta PPSA, dealt with the exclusion of insurance payments from the PPSA under s 4 of the Alberta PPSA, which also arises under the Australian PPSA at s 8(1)(f)(v). The court found that insurance proceeds are ‘‘an exception to an exception’’. That is, insurance payments themselves are excluded from being subject to a security interest however as proceeds of the damage or destruction of underlying collateral they are expressly provided for by the PPSA. In a priority dispute between the unsecured lessor and the secured subsequent creditor, the subsequent creditor thus prevailed (see discussion under s 55 for more on priorities). Illustrating this point by extension of the running example, where Bank B is able to identify the location of the original motor vehicle — Bank B is able to enforce its security interest over the collateral in addition to the proceeds claim against Debtor A but not beyond the $20,000 originally secured. The authors are of the opinion that s 31(1)(b) expressly gives rise to this approach to insurance proceeds under the Australian PPSA.

[31.5.5] Redemption of collateral — s 31(1)(c) Redemption of collateral refers to payments made, in whole or in part, to the debtor in exchange for rights held under the instruments listed in s 31(1)(c). Each category is commercial in nature relating largely to documents of title, such as shares in a company. Consistent with the commercial reality of how Annotated Personal Property Securities Act 2009 (Cth)

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such instruments are transferred and exchanged, a security interest over such collateral will extend to its proceeds — noting that the principles of perfection with respect to such instruments are often distinct when compared to other collateral classes under the PPSA (see Pt 2.2).

[31.5.6] Proceeds of intellectual property — s 31(1)(d) Despite the incorporation of the ‘‘intangible property’’ class under s 31(1)(c) — of which intellectual property would be duly caught — s 31(1)(d) expressly includes the rights of a licensor under an intellectual property licence. One reason for this inclusion is the inherent complexity of defining intellectual property rights as distinct from proprietary rights to the underlying collateral — and then further defining the rights of the licence holder as opposed to the owner of the intellectual property itself. It is clear that a security interest may be granted over a licence to use intellectual property under the PPSA (see s 106 and its discussion). The proceeds of such a licence are thus also recognised by the Act through s 31(1)(d). See further, Royal Bank v Body Blue Inc (2008) 13 PPSAC (3d) 176; 42 CBR (5th) 125 (Ont SCJ). Note that when coming to a conclusion as to who should benefit from the purported proceeds, the underlying collateral itself must be examined in light of the facts and circumstances of each case. In the view of the authors, explicit reference to proceeds of an intellectual property licence under s 31(1)(d) grants the relevant licence the required propriety under the Act (read in conjunction with the power to grant a security interest over an intellectual property licence pursuant to section 106). Any proceeds of such should thus be apportioned to the licensor or a party secured to such an amount. This view is consistent with the Saskatchewan Court of Queen’s Bench decision, McWinn Air Filter Cleaning Systems Ltd v 604859 Saskatchewan Ltd (1999) 15 PPSAC (2d) 19; 181 Sask R 185, where Gunn J held that the holder of a security interest over a licence was entitled to recover the proceeds of such a licence. By way of example: Grantor A grants an exclusive licence to Producer B. The licence extends to a particular technique employed in producing special purpose widgets. The end product (the widgets themselves) is subject to a separate security interest in favour of Creditor C. Producer B agrees to pay Grantor A $10,000 per annum under the intellectual property licence agreement. Grantor A then borrows money from Bank D, which takes security over all of Grantor A’s assets and undertakings.

Bank D, in attempting to enforce its security, has an interest in the $10,000 licence fee (assuming both the security interest and the underlying intellectual property are effective at law). The end product is subject to a separate interest however beyond the scope of the security capable of being conferred by Grantor A.

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Section 31(1)(e) extends the definition of proceeds to ancillary rights arising from the collateral, where the underlying collateral constitutes an investment or intermediated security (for a discussion of what investment instruments or intermediated securities are see s 10). As discussed above, such rights can comprise intellectual property rights. The inclusion of this provision is to again seek to preserve commercial practices which were in operation prior to the commencement of the PPSA. An example of how the provision may operate is given in the explanatory memorandum to the Act (at [2.53]): ‘‘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.’’

The authors flag caution with relying exclusively on the underlying collateral to protect ancillary rights where the rights are of value to the secured party despite s 31(1)(e) however. Where such rights carry value independent of the collateral itself, consideration should be given either to incorporate such rights expressly when perfecting the security interest or to create a subsequent security interest for such rights. This avoids any complications arising and is a relatively simple task for secured parties. Including the words ‘‘and all intellectual property’’ after the collateral description of a discrete class of personal property, for instance, is a viable option (assuming also that registration is the appropriate mode of perfection — see s 153 for more information on registration particulars.

[31.5.8] Fiduciary relationships — s 31(2) As previously stated, there is no requirement under the PPSA that a fiduciary relationship between creditor and debtor exists before the statutory tracing principles can be invoked. This is clarified pursuant to s 31(2). There may still be a benefit in characterising the relationship as fiduciary in nature however in order to bring into play the range of equitable remedies which operate outside of the PPSA.

[31.5.9] Interest in the proceeds — s 31(3) Section 31(3) expressly incorporates the requirement that the grantor of the security interest holds a propriety interest in the proceeds before such rights can attach under the security interest. It is a common requirement of attachment under the PPSA that the grantor possesses a proprietary interest in the relevant personal property (see commentary at [12.5.1]ff, especially [12.5.1.3], and s 19).

[31.5.10] Crops and livestock — s 31(4), (5), (6) Sections 31(4), (5) and (6) deal with the unique category of agricultural property. The category is unique due to its reproductive nature, for instance, new wheat fields can be sewn and new sheep can be bred. A financing Annotated Personal Property Securities Act 2009 (Cth)

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statement specifying an interest in the grantor’s sheep or wheat fields is thus not entirely helpful. Security interests taken over agricultural property extend to products of the property such as wool, meat or harvested crops under the PPSA provisions. An automatic extension does not arise however with respect to unborn young. Where necessary, the authors recommend that secured parties provide for this by including in the description of the collateral data along the lines of ‘‘all after-acquired livestock’’ (which was the case in the Saskatchewan Court of Appeal case, Farm Credit Corp v Valley Beef Producers Co-operative Ltd (2002) 5 PPSAC (3d) 1; 218 DLR (4th) 86). The rationale for this additional requirement is that crops and livestock are not treated as fungibles under the PPSA, that is, a particular cow or sheep is recognised as an independent and unique class of property not merely replaceable with a different cow or sheep in the same way that a fifty-dollar note is replaceable for instance. In the absence of a provision dealing with the reproducibility of agricultural products a security interest may become lost when the original collateral ceases. This issue was considered in Agricultural Credit Corp of Saskatchewan v Pettyjohn (1991) 1 PPSAC (2d) 273; 79 DLR (4th) 22 (Sask CA) where the grantor sold all of their existing cattle and purchased new cattle. While caught by the proceeds provisions, this case illustrates the independent and uniquely identifiable nature of agricultural products under the PPSA.

[31.6] Further reading Explanatory Memorandum [2.50–2.54, 2.58]. ALRC Report [8.38–8.41]. Whittaker Report [7.2], [7.4]. Anthony Duggan, ‘‘Romalpa agreements post-PPSA’’ (2011) 33 Sydney Law Review 645. ● Nicholas Mirzai, ‘‘The persistence of equitable doctrines with respect to the law relating to personal property securities: Assessing the impact of the Personal Property Securities Act 2009 (Cth)’’ (2013) 24 Journal of Banking and Finance Law and Practice 3. ● ● ● ●

¶2-085 SECTION 32 PROCEEDS — ATTACHMENT Continuation of security interest in collateral, and attachment to proceeds 32(1) 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

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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).

Enforcement of security interest against collateral and proceeds 32(2) 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).

32(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. 32(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. Priority of proceeds 32(5) 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.

[32.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[32.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 45 s 28(1) s 1(1) § 9-315

Outline

Unlike its foreign counterparts, the Australian PPSA provides separate sections for attachment and perfection of proceeds. The effective terms and provisions which constitute s 31 are, however, substantively similar and despite a distinction in form, the Australian provisions more closely follow the New Zealand model than the Canadian or Article 9 equivalents. Section 31 focuses on how a security interest attaches to proceeds. Annotated Personal Property Securities Act 2009 (Cth)

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(b) attaches to the proceeds, unless the security agreement provides otherwise.

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In Warehouse Sales Pty Ltd (in liq) & Lewis and Templeton v LG Electronics Australia Pty Ltd [2014] VSC 644, Sifris J held (at [39]): ‘‘A buyer can also take free of a security interest given by a seller in circumstances where the ROT supplier’s security agreement (supply agreement) authorises the sale of inventory in the ordinary course of the buyer’s business: s 32(1) PPSA. This authorisation is equivalent to the concept of the floating charge whereby the chargor could, until crystallization, sell inventory in the ordinary course of business free of the charge.’’

[32.3] Cross-references ● Sections 18 and 20 set out rules for security agreements. ● Section 20(6) provides for enforceability of security interest in proceeds against third parties.

[32.4]

Concepts

● Attachment See s 19. ● Investment instruments This is defined by s 10. See further s 27. ● Intermediated securities This is defined by s 15. See further s 26. ● Knowledge See s 297. ● Proceeds See s 31.

[32.5] Commentary [32.5.1] ‘‘Continuous attachment’’ as opposed to ‘‘continuous perfection’’ — s 32(1) .........................................................................................................199 [32.5.1.1] Provision in the security agreement — s 32(1)(b) ..........200 [32.5.1.2] Express or implied authorisation — s 32(1)(a) ...............200 [32.5.1.3] Taking free provisions .......................................................202 [32.5.2] Enforcement with respect to both original collateral and proceeds — s 32(2) .........................................................................................................203 [32.5.2.1] Mutual enforcement ..........................................................203 [32.5.2.2] ‘‘Market value’’ ...................................................................203 [32.5.2.3] Investment and intermediated instruments ...................204 [32.5.3] Knowledge .......................................................................................204 [32.5.3.1] Actual knowledge ..............................................................204 [32.5.3.2] Constructive knowledge ...................................................204 [32.5.4] Persisting rights in personam — s 32(4) ......................................205 [32.5.5] Priority of proceeds — s 32(5) .......................................................205

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[32.5.6] Anomalies when considering priority of proceeds ...................205 [32.5.6.1] Proceeds of two competing security interests in a mixed account ..................................................................................................206

[32.5.6.3] PMSI proceeds on account — v — ADI perfection by control over account ...........................................................................207 [32.5.6.4] Recognising interests in proceeds — v — good faith purchaser for value .............................................................................207 [32.5.6.5] PMSI proceeds on account — v — purchaser of accounts receivable for new value ....................................................................208 [32.5.6.6] Proceeds on account — v — rights of set-off .................208

[32.5.1] ‘‘Continuous attachment’’ as opposed to ‘‘continuous perfection’’ — s 32(1) The concept or requirement of ‘‘continuous perfection’’ under the PPSA is of significance with respect to priority disputes, that is, where a party other than the original grantor and secured party asserts a claim to the underlying personal property. To be ‘‘continuously perfected’’ takes meaning from s 56 of the PPSA, which in essence holds that, the secured party must ensure they maintain perfection at all times. A failure to retain continuous perfection has the effect of resetting the date upon which the security interest takes priority from — an undesirable outcome in a priorities dispute (for more information on continuous perfection see s 56). Where a security interest is unperfected, however, all rights and obligations stipulated in the security agreement remain valid and effective as between the secured party and the grantor. The security agreement, put simply, is a contract and provided the security interest ‘‘attaches’’ to the underlying collateral its terms are recognised by the court as between the parties. Nothing in the PPSA operates to distort this position with respect to proceeds of original collateral and indeed where a security interest validly attaches to proceeds of the original collateral, the security agreement between the grantor and the secured party remains in force. Pursuant to s 32(1), a security interest over particular collateral automatically extends to proceeds of that collateral provided the proceeds meet the requirements of s 31 (discussed above). That is to say, the Act itself provides for ‘‘continuous attachment’’ of the security agreement even where the original collateral has been converted into proceeds subject to three existing exceptions: ● where the security agreement otherwise provides (s 32(1)(b)) ● where the secured party expressly or impliedly authorises a dealing giving rise to the proceeds (s 32(1)(a)) ● where the taking free provisions in Pt 2.5 operate to defeat the secured party’s interest. Annotated Personal Property Securities Act 2009 (Cth)

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[32.5.6.2] Proceeds on account — v — ADI perfection by control over account .........................................................................................207

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[32.5.1.1] Provision in the security agreement — s 32(1)(b) Where the security agreement expressly provides that proceeds will be dealt with in some fashion other than by way of automatically extending from the original collateral to the proceeds then pursuant to s 32(1)(b) the court will recognise and give effect to such a clause. There is little contention surrounding this provision and like the enforcement provisions pursuant to Ch 4 of the PPSA, there are areas that the PPSA expressly permits the contracting out of through the underlying security agreement.

[32.5.1.2] Express or implied authorisation — s 32(1)(a) The express authorisation to deal with collateral found within a security agreement in a way to remove the security interest will be effective according to its terms (see s 18(1)). In construing the terms of an express authorisation, principles of contract law apply: see Royal Bank v Sparrow Electric Corp (1997) 12 PPSAC (2d) 68; 143 DLR (4th) 385 (SCC). Both the grantor and the secured party thus ought to be mindful of the terms of the security agreement as even where this is not a true rendition of what is understood between the parties it is likely to apply. The case of Lanson v Saskatchewan Valley Credit Union Limited (1998) 14 PPSAC (2d) 71; 172 Sask R 106 (Sask CA) (discussed at [31.5.3]) illustrates the effect of express authority. The facts involved a lender (also the seller) who registered a security interest over a mobile home (the underlying collateral). The grantor (also the purchaser) signed a promissory note that on resale of the home the entire amount loaned became repayable to the lender. The resale occurred, without the grantor notifying the secured party, and the resale was financed by a subsequent creditor. The security agreement contained the following clause: ‘‘I will look after the property and keep it in good repair. I will not sell it nor grant another security interest in it, without repaying in full my indebtedness to the secured party.’’ The issue of whether the grantor had a right to sell the underlying collateral was not in issue, it was agreed that the grantor had a right to sell. At trial, it was held that knowledge of the potential sale of the collateral did not amount to authorisation, the result being that no authority was given by the presence of the above clause. On appeal, it was held that the lender knew that the grantor was purchasing the collateral for the purpose of sale or rent. Justice of Appeal Vancise concluded that the knowledge of the potential for sale was necessarily pre-empted by the authority to sell deriving from the lender. His Honour held (at [9]): ‘‘In our opinion, that interpretation [held by the trial judge] is incorrect. The authorization to sell must be given before the sale. Lanson [the secured party] clearly gave Nickel [the grantor] express authority to deal with the security. That dealing would include resale. The fact the debtor failed to pay the secured creditor does not invalidate the sale to the buyer.’’

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By way of extension, implied authority or authority to deal or dispose with the collateral by implication should also extend where the effect of the relationship between the secured party and the grantor is such that a disposition or dealing is postulated by the secured creditor and in the absence of an express provision to the contrary, authority would extend. The onus is duly on the secured party to ensure that either authority to deal with or dispose of collateral as to remove the underlying security interest is not given, or that the agreement itself is clear that the security interest over the proceeds is to continue. The authority to dispose of an asset free from an existing encumbrance is the first form of ‘‘taking free’’ or ‘‘extinguishment’’ provision, notwithstanding that s 32 does not appear in Pt 2.5 headed ‘‘Taking personal property free of security interests’’. This point was made by Sifris J in Warehouse Sales Pty Ltd (in liq) & Lewis and Templeton v LG Electronics Australia Pty Ltd (2014) 291 FLR 407; [2014] VSC 644, where his Honour held (at [43]) that s 32 is ‘‘the first relevant buyer protection provision’’. One issue that has arisen in foreign PPSA jurisdictions is whether the secured party may give actual or implied consent on a conditional basis, for example by allowing disposal of the collateral provided that the proceeds are paid into a controlled account and whether such consent is sufficient to extinguish the security interest in the collateral if the condition is not satisfied. The North American cases that have considered the issue have drawn a distinction between a condition precedent and a condition subsequent (with payment into a controlled account being an example of the latter). The authorities were reviewed in Lloydminster Credit Union Ltd v 324007 Alberta Ltd (2011) 18 PPSAC (3d) 267 (Sask CA), where it was held (in applying the Lanson case, discussed above) that approval subject to a post sale condition is sufficient authorisation to extinguish the security interest in the collateral even if the condition (such as paying into a controlled account) is not satisfied. The security interest would attach the proceeds. Recently the issue arose in the New Zealand case of Bank of New Zealand v Waewaepa Station 2002 Ltd [2013] NZHC 3321 where the court noted (in obiter at [79]–[81]) that conditional authorisations could impose an unfair liability on good faith purchasers, who would in effect be acting as insurers for acts outside of their knowledge and control. Such a position would run contrary to the taking free provisions (see particularly s 46). In that case, the purchaser designed the transaction with full knowledge of the secured party’s position and the scope of the security agreement in a deliberate attempt to circumvent the application of the security interest to the proceeds of the sale, and hence was not acting in good faith. The issue of authorisation was considered in the New Zealand case of Gibson v Stockco Ltd [2010] NZHC 2398, which concerned the sale of several thousand head of breeding cattle between related party companies. The security agreement contained a clause that limited asset disposals to the ordinary course of business. The court found that the sale did not give rise to the taking free provision dealing with sales in the ordinary course of business (see s 46 in Annotated Personal Property Securities Act 2009 (Cth)

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the Australian PPSA, and s 53 in the NZ PPSA).18 The relevant issue was whether the secured party authorised the sale so that the secured party’s security interest would not continue in the cattle owned by the purchaser (ie the related party). In the High Court of New Zealand, the following principles were set out (at [165]): ● The purpose of the provision is to enact the common law principle that no one can give a better title than he/she has (nemo dat quod non habet). ● The focus is on the dealings between the secured party and the grantor/debtor. ● In order to ‘‘authorise’’ a dealing, whether expressly or impliedly, the secured party would need to be aware of the specific ‘‘dealing’’ or, at least, previous dealings of the same type, and either have expressly authorised the dealing or by its conduct be taken as having done so impliedly. ● Whether in a particular case the secured party did ‘‘expressly or impliedly’’ authorise the dealing will be a question of fact in that case. ● As the use of the word ‘‘authorised’’ in NZ PPSA s 45(1)(a) [Aust PPSA s 32(1)(a)] indicates, the authorisation of the dealing needs to be given before the relevant dealing has taken place. The court held that as the secured party banks were not aware of the transaction they did not authorise it. The failure to prevent the debtor from disposing of the collateral when the secured party has actual knowledge of the proposed sale can amount to an implied authorisation: Re Maksteel Inc (2002) 4 PPSAC (3d) 77 (Ont SCJ). Describing collateral as inventory in a financing statement however is not of itself proof of an implied authority to deal with the collateral: GE Canada Equipment Financing GP v ING Insurance Company of Canada (2009) 14 PPSAC (3d) 49 (Ont CA). While the above result may appear harsh with respect to the secured party, only those parties to the security agreement have the freedom to determine the nature by which their rights and obligations arise at the time the agreement is created and thus a subsequent creditor is able to rely on the agreement (expressly and by implication) as they find it.

[32.5.1.3] Taking free provisions As referred to above, the taking free provisions under Pt 2.5 of the PPSA are not directly incorporated by way of express provision under s 32, however, it is noted that the application of the part applies. The taking free provisions serve to alter the default priority position under the PPSA and will thus be discussed in turn when analysing Pt 2.5 of the Act. 18

This was confirmed by the Court of Appeal in Stockco Ltd v Gibson [2012] NZCA 330, which is discussed below in relation to s 46. The discussion regarding authorisation under NZ PPSA s 45 was not discussed in detail in the Court of Appeal (appeal dismissed).

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As previously stated (see the discussion for s 31), an enforceable interest with respect to proceeds does not exclude a claim by the secured party against the original collateral and vice versa. The limitation on what can be recovered is dependent on three factors: ● first, the value of the security interest (whereby a secured party who lends $20,000 and takes security over a motor vehicle for instance, cannot go on to enforce their security beyond the $20,000 secured — assuming $20,000 is still owed by the debtor — with respect to both the original collateral an any subsequent proceeds) ● secondly, the amount secured is limited to the market value of the collateral immediately before the collateral gave rise to the proceeds. That is to say, the secured party cannot obtain a higher return with respect to proceeds than they would have originally had with respect to the underlying collateral had the grantor not disposed of it or otherwise dealt with it, and ● thirdly, in relation to investment or intermediated instruments, these provisions do not apply.

[32.5.2.1] Mutual enforcement An enforceable right over proceeds will additionally only extend where the security interest attaches to the proceeds (that is, where none of the defeating elements discussed under s 32(1) apply) and, in the instance of a priority dispute with an additional third party, the perfection and priority rules under the PPSA are relevantly read and recognised. Of benefit to the secured party with regards to perfection and priority is the application of s 20(6) which holds that an interest over proceeds is enforceable against a third party whether or not the underlying security agreement contains a description of the proceeds (for more information see s 20). For an example of a claim against both proceeds and the original collateral see: Transamerica Commercial Finance Corp Canada v Karpes (1994) 8 PPSAC (2d) 86 (BC SC).

[32.5.2.2] ‘‘Market value’’ The term ‘‘market value’’ is not defined under the PPSA, however, it appears at s 131 with regards to the disposal of security interest by way of the enforcement provisions under Ch 4. Put simply, ‘‘market value’’ refers to the consideration which is payable on property of like form and function. Where property is readily ascertainable or replaceable, determining the market value is not a difficult task. In the alternative, where property is of significant value (such as a piece of art or technical machinery) property valuations and specialists are likely to know the relevant market value of the underlying collateral. There will, nonetheless, be circumstances where the market value of particularly specific collateral will not be ascertainable. In such circumstances, s 131(b) provides that the ‘‘best price that is reasonably obtainable at the time of disposal, having regard to the circumstances at that time’’ will be the value Annotated Personal Property Securities Act 2009 (Cth)

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[32.5.2] Enforcement with respect to both original collateral and proceeds — s 32(2)

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taken. There appears to be little reason why this will not also be the case here. It should also be remembered that in the absence of any other information there is always the actual disposal price as an indicative factor as proceeds cannot arise without the disposition and thus this should also form part of the court’s consideration.

[32.5.2.3] Investment and intermediated instruments Investment and intermediated instruments enjoy separate treatment under the PPSA due to the commercial practices surrounding dealings and dispositions of such property. An investment instrument is defined under s 10 of the PPSA. Put simply, it refers to a financial product traded over the counter or on an exchange. Intermediated securities are defined under s 15 and in short they refer to a financial account which is maintained by an intermediary as a security account on behalf of another party. In understanding the necessity of the relevant exclusion from general treatment as proceeds of collateral (even where the instruments are disposed of and funds are obtained) the ordinary course of commercial business with respect to such instruments should be understood and this is best addressed as part of the taking free provisions under Pt 2.5 (see Pt 2.5).

[32.5.3]

Knowledge

Like many of the taking free provisions pursuant to Pt 2.5 of the PPSA, where a third party (termed the ‘‘transferee’’, which can be understood as the recipient of the encumbered collateral) takes their interest over the collateral with actual or constructive knowledge that the transfer was in breach of the underlying security agreement — the provisions under s 32(2), discussed above, no longer apply. The effect of this is to remove the market value restriction or qualification on the recovery potential of the secured party.

[32.5.3.1] Actual knowledge What constitutes ‘‘actual knowledge’’ is not defined by the PPSA. It is the authors’ opinion that the concept will apply pursuant to its pre-PPSA connotation, namely, that the relevant party knew on the facts that the security interest existed. The onus in such circumstances would inevitably fall on the secured party to prove that actual knowledge had arisen on the balance of probabilities in light of the facts and circumstances of each independent case.

[32.5.3.2] Constructive knowledge The term ‘‘constructive knowledge’’ is defined under the PPSA pursuant to s 297. Put simply, it refers to knowledge that the relevant party would have had at the time of dealing with the collateral had honest and prudent inquiries been made. There are differing views as to how constructive knowledge fits within the securities regime and what onus that then put on parties when dealing with personal property — the proper scope of which will be considered in commentary on s 297.

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As previously stated (see commentary for s 31) rights in personam (against the person) between the debtor and the secured party continue beyond the security interest. Taking security is, in all circumstances, an ancillary step providing an alternative source of recourse — a mechanism of managing exposure or risk. While it is often the stronger action as enforceable proprietary rights operate in rem (against a thing), (particularly where the debtor is in default or insolvent), a secured interest cannot be elevated beyond a secondary source of protection further to which exists a primary obligation. When discussing this primary obligation, it is necessary to speak of the party owing the obligation as the debtor and not the grantor. It is the debtor who is to satisfy the primary obligation owing to the secured party. The grantor is the party within which rights over collateral are possessed and thus a security interest can attach. While the debtor and grantor are often the same person this need not always be the case. The primary obligation itself arises out of principles of contract, namely, consideration for monies lent. Section 32(4) clarifies that the PPSA does not remove any right of enforcement outside the security interest.

[32.5.5] Priority of proceeds — s 32(5) Section 32(5) addresses the priority of proceeds where the security interest is perfected by registration or possession. Essentially, the provision clarifies that a disposition or dealing with underlying collateral does not remove the priority that is afforded to the original collateral at the time at which perfection of these two types is obtained. The following example helps illustrate the point: Secured Party A registers an interest over a sophisticated computer system for $10,000 lent to Debtor B on 1 July 2012. On 1 September 2010, Debtor B obtains funds from Bank C who registers an interest over Debtor B’s account on the same day. Debtor B sells the computer system and deposits the funds in the common account (over which Bank C holds an interest). In a priority dispute between Secured Party A and Bank C — Secured Party A would benefit from the earlier priority on 1 July 2012 to prevail over Bank C for $10,000 secured. All principles relating to proceeds on account would additionally apply, however the time of perfection for Secured Party A’s interest remains at 1 July 2012.

[32.5.6] Anomalies when considering priority of proceeds As proceeds operate by way of extension from original collateral there are particular circumstances addressed at various points throughout the PPSA which address who will prevail should a priority dispute arise. In addressing some of the following circumstances it is convenient to consider the full extent of the PPSA under the appropriate provision and such categories are raised here for completeness. Annotated Personal Property Securities Act 2009 (Cth)

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[32.5.4] Persisting rights in personam — s 32(4)

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[32.5.6.1] Proceeds of two competing security interests in a mixed account All previous rules regarding identity and tracing apply equally here as they do to proceeds where there is no priority dispute. A priority dispute adds complexity beyond whether or not priority exists and who holds the higher interest. When considering mixed accounts, the amount secured need also be considered and where the priorities are equal — how such funds are to be distributed, of which varying approaches have been enunciated in applying foreign PPSA regimes. The following example helps illustrate how these issues arise: Bank B holds a valid security interest over Debtor A for $10,000, which now constitute proceeds from the sale of a motor vehicle (the original collateral over which the security agreement arose). Creditor C holds a valid security interest over sophisticated machinery held by Debtor A for $40,000. The machinery is sold and $40,000 mixed in the common fund with the original $10,000 — no other money is held on account. Debtor A then spends $20,000 from the account and the direction of the funds is unidentifiable and untraceable. The existing balance on account is $42,000. Assume no other money is held by Debtor A and no other recourse is available to the secured parties. Both Bank B and Creditor C seek to fully recover the money owed to them (a combined $50,000).

The first way this dispute can be resolved is enunciated by the rule in Devaynes v Noble (1816) 1 Mer 772; 35 ER 781, commonly referred to as the rule in Clayton’s case. The rule can be stated simply as an application of the ‘‘first in, first out’’ principle, that is, the first funds to enter the fund are the first to be spent by the account holder (the debtor). Under this rule Bank B’s interest would be entirely subsumed by the actions of Debtor A and Creditor C would have the full benefit of the remaining $20,000. There is no objective or policy reason under the PPSA for favouring a subsequent secured party above a former secured party. The application of the rule in Clayton’s case in the opinions of Gedye M, Cuming R and Wood R19 continues where funds have not yet been commingled, that is, where a mixed fund does not yet exist. The authors support this conclusion. The second approach could simply follow the default priority rules pursuant to the PPSA pursuant to s 55. Assuming that both security interests are validly perfected, and nothing further in the Act operates to distort the default priority rule, then the first in time security prevails. From the above example, the first secured party perfected in time (Bank B) would prevail to the fullest extent of their interest. As applied to the example, Bank B would recover $10,000 and Creditor C (and any subsequent creditor for that matter) would recover the balance. What should be remembered in this example is that the amounts are arbitrary. Under the rule in Clayton’s case the first secured party prevails outright, under the default priority rules the second secured party enjoys the same outright benefit. Neither approach adequately reflects the 19

Gedye M, Cuming R and Wood R, Personal Property Securities in New Zealand, 2002 Thomson Brookers at 188–190.

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The third approach involves a ‘‘pro rata’’ distribution based on the applicable percentage value of recognised security held against the value of the funds in the mixed account. Several cases have endorsed this view but only to the extent that the funds are mixed and no efforts of either secured party to preserve their priority is able to prevent the debtor from misappropriating funds to the detriment of each of those parties secured: see Ontario Dairy Cow Leasing Ltd v Ontario (Milk Marketing Board) (1993) 4 PPSAC (2d) 269 (Ont CA); Re McKeown (Horseman’s Haven) (1984) 4 PPSAC 209; 35 Sask R 211 (Sask QB). In the above example, this would mean that Bank B would be entitled to 20% of the existing fund and Creditor C to the remaining 80%. Bank B should thus prevail to the extent of $4,000 — the remaining $16,000 extending to Creditor C. It should be stressed that these methods of apportionment only apply where the security interests are equal in a mixed account as an anomalous consequence to the PPSA’s application, as opposed to any general rule which should be followed. The following cases emphasise that ‘‘pro rata’’ distribution does not replace the PPSA priority rules in other instances, Re Winnipeg Motor Express Inc (2009) 15 PPSAC (3d) 242; 56 CBR (5th) 265 (MB CA); Unisource Canada Inc v Hongkong Bank of Canada (1998) 14 PPSAC (2d) 112; 43 BLR (2d) 226 (Ont Court of Justice — varied on appeal on matters not affecting this point — (2000) 15 PPSAC (2d) 95); General Electric Capital Canada Inc v Interlink Freight Systems Inc (1998) 14 PPSAC (2d) 198; 7 CBR (4th) 173.

[32.5.6.2] Proceeds on account — v — ADI perfection by control over account This circumstance can arise where an all assets and undertakings security interest exists including an account where proceeds enter the account. In such circumstances, the perfection by control principles are readily applicable (see s 25; see also s 75 pertaining to the priority of security interests held by an authorised deposit taking institution (ADI)).

[32.5.6.3] PMSI proceeds on account — v — ADI perfection by control over account Proceeds which benefit from purchase money security interest (PMSI) status are treated separately to ordinary proceeds arising from non-PMSI collateral. The rules pertaining to priority are at s 62 (see also s 64).

[32.5.6.4] Recognising interests in proceeds — v — good faith purchaser for value Regarding good faith purchasers for value, the PPSA incorporates the concept of the innocent third party purchaser through application of Pt 2.5. Absent rights under Pt 2.5 equitable principles preventing property being traced against a third party purchaser should not apply — the PPSA rules themselves should be referred to under such circumstances. Annotated Personal Property Securities Act 2009 (Cth)

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objectives and/or policy of the PPSA and thus a third preferred view is now discussed.

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[32.5.6.5] PMSI proceeds on account — v — purchaser of accounts receivable for new value Purchasers of accounts receivable may have competing claims against purchase money security interest (PMSI) proceeds. The relevant priority position is discussed at s 64.

[32.5.6.6] Proceeds on account — v — rights of set-off While rights of set-off are expressly excluded from the PPSA (see s 8(1)(d)) there is potential for priority disputes between inventory suppliers and proceeds deposited on account. What occurs in the instance of such disputes is subject to speculation, comment on set-off has been discussed under s 8, see also Pt 7.4 regarding conflicts of law.

[32.6] Further reading ● Explanatory Memorandum [2.49, 2.52, 2.55–2.57, 2.61]. ● ALRC Report No 64 [8.38–8.41]. ● Whittaker Report [6.10], [7.4], [7.6]. ● Anthony Duggan, ‘‘Romalpa agreements post-PPSA’’ (2011) 33 Sydney Law Review 645. ● Bruce Whittaker, ‘‘Dealings in collateral under the PPSA-in search of a harmonious whole’’ (2013) 24 Journal of Banking and Finance Law and Practice 203. ● Nicholas Mirzai, ‘‘The persistence of equitable doctrine with respect to the law relating to personal property securities: assessing the impact of the Personal Properties Securities Act 2009 (Cth)’’ (2013) 24 Journal of Banking and Finance Law and Practice 3. ● Sheelagh McCracken, ‘‘Personal Property Securities Legislation: Analysing the New Lexicon’’ (2014) 35 Adelaide Law Review 71.

¶2-090 SECTION 33 PROCEEDS — PERFECTION AND TEMPORARY PERFECTION Perfection by reference to perfection of security interest in original collateral 33(1) A security interest in proceeds is perfected if the security interest in the original collateral is perfected by a registration that: (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

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payment or any other payment as indemnity or compensation for loss or damage to the collateral or proceeds.

33(2) 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. 33(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.

[33.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[33.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 46 and 47 s 28(2), (3) s 25(2), (3), (4) § 9-315(c)–(e)

Outline

Section 33 is the final section of the PPSA which operates exclusively with respect to proceeds. It prescribes an automatic satisfaction or continuation of the Act’s perfection requirements (see s 20) under particular circumstances. Section 33 also provides temporary perfection for a period of five business days, allowing time for the secured party to recognise and amend existing registration particulars (or produce a new financing statement) in order to maintain continuous perfection. Perfection is important as perfected instruments take priority to unperfected instruments.

[33.3]

Cross-references

● Section 32 provides for the attachment of a security interest in proceeds of collateral. ● Section 153 provides for registration of a financing statement and a financing change statement.

[33.4] Concepts ● ADI account This is defined by s 10. See further s 25. ● Temporary perfection See s 34. Annotated Personal Property Securities Act 2009 (Cth)

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Temporary perfection in other situations

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[33.5] Commentary [33.5.1] Perfection by registration in original collateral extends to proceeds — s 33(1) ........................................................................................210 [33.5.2] Temporary perfection with respect to proceeds — s 33(2), (3) ..........................................................................................................................210

[33.5.1] Perfection by registration in original collateral extends to proceeds — s 33(1) Registering a financing statement is one approach the PPSA recognises as perfecting a security interest (provided that attachment has occurred and the security interest is enforceable against third parties: see s 19–21). The process for registering a financing statement is discussed in s 153. A financing statement is distinct from the underlying security agreement. The security agreement is the contract between the secured party and the debtor, while the financing statement is a form filed with the PPS Register giving notice of an existing security interest. Understanding the distinction is important in rationalising the relationship between s 33 and s 20(6). Pursuant to s 20(6) the security agreement need not contain a description of proceeds in order for the security interest to attach to such proceeds (see s 32 regarding attachment to proceeds). Where this is the case however the financing statement must describe the proceeds pursuant to s 33(1)(a) in compliance with any regulations operating with respect to paragraph (d) of item 4 of the table in s 153 — of which Sch 1 Pt 2 reg 2.4 applies. Where the security agreement expressly includes within the description of original collateral the extension of the interest to proceeds, the financing statement need not expressly describe the collateral pursuant to 33(1)(b). Like the above specifics in relation to investment securities, intermediated securities and negotiable instruments, s 33(1)(c) additionally provides that the security interest continues without the need to describe the proceeds in the financing statement if the proceeds take the form of currency, cheques, an authorised deposit-taking institution account (ADI account) or a right to an insurance payment or any other compensation for loss or damage to the underlying collateral. While this appears to work in favour of the secured party, all the relevant rules regarding mixed funds and tracing apply to proceeds which take the form of such collateral classes.

[33.5.2] Temporary perfection with respect to proceeds — s 33(2), (3) The term ‘‘temporary perfection’’ refers to a period of time after a security interest has arisen which the PPSA will recognise as validly perfected in the absence of perfection by registration, possession or control. The rationale behind temporary perfection is the preservation of commercial arrangements and allowing secured parties a window of time to amend the register reflecting the relevant change in their interest. Temporary perfection was

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Pursuant to s 33(2) a secured party with a validly perfected security interest over collateral benefits from temporary perfection in the proceeds of such collateral until the end of five business days after the interest attaches to the proceeds. Section 33(2) is only relevant where the security interest is not perfected by virtue of s 20(6) or 33(1). That is to say, if the proceeds are not a substitute form of collateral over which a security interest is taken (such as if the proceeds simply constitute money) then subsequent perfection need not be taken. The secured party benefiting from temporary perfection can, and indeed should, lodge a financial change statement (see Pt 5.3 and 5.6) within the five business days to maintain continual perfection and their priority. The following example illustrates where this provision applies and how. Secured Party A holds a perfected security interest (by registration) over Debtor B’s motor vehicle. Debtor B sells the motor vehicle to Party C. The security agreement between Secured Party A and Debtor B does not specify anything in relation to proceeds of the original collateral. Additionally, the relevant financing statement contains no description of the proceeds. Debtor B borrows money from Bank D and uses all of the funds (including the proceeds of sale from the motor vehicle) to purchase an expensive computer system. This all occurs two days after the motor vehicle was sold. Bank D registers an ‘‘all assets and undertakings’’ security interest over Debtor B’s property. Secured Party A becomes aware of all that has occurred and lodges a financial change statement to update their interest four days after the motor vehicle is sold. Bank D now claims priority to the entire computer system.

In the above scenario, Secured Party A would prevail over Bank D to the extent of the security over the original collateral. Section 33(2) would apply over the course of the five business days after which the motor vehicle was sold and the subsequent amendment of the register pursuant to s 33(3) would preserve the priority of Secured Party A assuming both Secured Party A and Bank D held equal security interests, that is, the first interest in time prevails (see s 55). It is clear that in the absence of an active step taken by the secured party to perfect their security interest, their interest will become unperfected at the end of the five-day grace period. Additionally, the use of five business days under the Australian PPSA appears to be arbitrarily selected by parliament based on an analysis of domestic commercial realities, with periods of 10–20 business days adopted in other PPSA jurisdictions.

[33.6] Further reading ● ● ● ●

Explanatory Memorandum [2.28, 2.58–2.60]. ALRC Report No 64 [8.38–8.41]. Whittaker Report [7.4], [7.5]. Anthony Duggan, ‘‘Romalpa agreements post-PPSA’’ (2011) 33 Sydney Law Review 645.

Annotated Personal Property Securities Act 2009 (Cth)

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particularly significant with respect to the Act’s transitional operation (see Ch 9) although its utility did not end with the cessation of the transitional period.

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¶2-095 SECTION 34 TRANSFERRED COLLATERAL — TEMPORARY PERFECTION AFTER TRANSFER Security interest is temporarily perfected 34(1) 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.

Security interest becomes unperfected 34(2) 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). Transfer free of security interest 34(3) This section does not apply in relation to a transfer of collateral if the transferee takes the collateral free of the security interest.

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New Zealand Saskatchewan Ontario USA

[34.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 47, 88, 89, 90, 91 s 28(3) s 25(2), (3), (4) § 9-315(d)

Outline

Section 34 sets a broad compass for the temporary perfection of collateral subject to a transfer under the PPSA. The term ‘‘transfer’’ is not defined under the PPSA, except where applied to the transferring of judicial proceedings when administering the PPSA (of which the definitions are unhelpful for interpretation of this provision). With respect to the New Zealand PPSA and US Article 9 — transferability is of particular importance when considering negotiable instruments and associated documents of title (including chattel paper, investment securities and some intermediated securities). No such limitation exists under the Australian provisions and perfection pursuant to s 34 offers temporary perfection in the absence of more specific rules for these collateral classes.

[34.3]

Cross-references

● Section 52 provides a taking free rule for temporarily perfected security interests. ● Section 153 provides for the registration of a financing statement.

[34.4] Concepts ● Actual or constructive knowledge See s 297. ● Transfer While central to s 34, the term ‘‘transfer’’ is not defined by the PPSA. Transferring, in the general sense, involves the movement from one status to another. The movement of funds from one account to another is commonly referred to as a transfer. The assignment of collateral from one secured party to another is also a transfer. The note accompanying s 34(1) aids in identifying the connotation within which the term applies, that is, the transfer of collateral from one grantor (the transferor) to another grantor (the transferee).

[34.5] Commentary [34.5.1] Scope of temporary perfection — s 34(1) ....................................214 [34.5.1.1] 24 months — maximum period of temporary perfection ................................................................................................................214 [34.5.1.2] Period of registration — between five days and 24 months ................................................................................................................214 [34.5.1.3] Five business days — challenges to priority ..................214 [34.5.2] Expiry of temporary perfection — s 34(2), (3) ............................215 Annotated Personal Property Securities Act 2009 (Cth)

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[34.5.1] Scope of temporary perfection — s 34(1) The Australian PPSA, prima facie, presents the least generous grant of time by way of temporary perfection to the secured party with respect to transferred collateral compared with other PPSA regimes overseas. Notwithstanding the transfer occurring at the request of the grantor (that is, it is the grantor that executes the transfer of the relevant collateral), it is the secured party who is vulnerable as they are the party that will ultimately need to update or amend the register to reflect the new grantor or will lose priority. Section 34(1) applies a shortest in time test granting temporary perfection from anywhere between five business days to 24 months depending on the facts and circumstances applicable to the parties involved.

[34.5.1.1] 24 months — maximum period of temporary perfection Section 34(1)(a) grants a secured party approximately 24 months temporary perfection (ending at the end of the 24th month) over the underlying collateral despite a transfer to the grantor. The length of this period is undoubtedly substantial. In understanding that perfection is only relevant in face of a priority dispute, however, a secured party who benefits from 24 months of temporary perfection, that is, no other rule under s 34(1) applies, would not require a perfected interest and thus being temporarily perfected offers no more comfort than being unperfected. The reason for this is straight-forward — as soon as a priority dispute arises, that is, another security interest attaches to the collateral, s 31(1)(c) applies removing the application of s 34(1)(b).

[34.5.1.2] Period of registration — between five days and 24 months Section 34(1)(b) grants temporary perfection up to the end time of registration where the security interest is perfected by registration. The ‘‘end time of registration’’ refers to a sunset clause included in security agreement which prescribes when the security interest will end. Where the prescribed date is shorter than 24 months, this will be the end date of the temporary perfection. Where the prescribed date is longer than 24 months, the 24-month rule will apply pursuant to s 34(1)(a) as this will be the shorter option between the two.

[34.5.1.3] Five business days — challenges to priority The most commonly used provision in the authors’ opinion will be s 34(1)(c). Section 34(1)(c) arises where another security interest attaches to the underlying collateral at or after the time of transfer. Where the original secured party consents to the transfer, the ‘‘end of 5 business days after the transfer’’ rule applies pursuant to s 34(1)(c)(i). Alternatively, where the original secured party acquires actual or constructive knowledge of the transfer (for commentary on what constitutes knowledge see s 297, see also s 31), the ‘‘end of 5 business days after the knowledge is acquired’’ rule will apply, provided five business days is shorter than 24 months after the collateral is transferred or the interest perfected by registration does not cease prior to the end of five business days.

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The ramifications with respect to priority was considered by the Saskatchewan Court of Queen’s Bench case Canadian Imperial Bank of Commerce v Tux & Tails Ltd (2006) 9 PPSAC (3d) 115; 20 CBR (5th) 316 where Rothery J noted (at [23]–[24]) that once the secured party has knowledge of the transfer they must register a financing change statement or risk having their security interest subordinated to an intervening secured party who perfects their security interest. In that case, it was held that the failure by the debtor to disclose the precise collateral transferred does not relieve the secured party of its obligation to register a financing change statement if it wishes to protect its position. Under the Australian PPSA, a secured party will thus benefit from temporary perfection for five business days after discovering a transfer of the underlying collateral, whether authorised or not. During this period, the secured party must perfect their security interest by some other means, typically by registering a financing statement or a financing change statement (if the security interest was perfected by registration prior to the transfer. For more on the priority of transferred collateral see s 66–68.

[34.5.2] Expiry of temporary perfection — s 34(2), (3) Section 34(2) holds that where the temporary perfection period ends and no other form of perfection has been obtained by the secured party, the secured party immediately losses their perfected interest. The secured party can regain a perfected interest by obtaining perfection (the PPSA does not prevent parties who lose perfection from registering a new financing statement for instance), however, the subsequent perfected interest takes priority at the time the subsequent perfection is achieved and will not benefit from the original time of perfection. Any interests perfected after the initial perfection of the original secured party but before the subsequent perfection will thus take priority over the original secured party’s interest. Section 34(3) provides that nothing in s 34 defeats the operation of the PPSA’s taking free provisions pursuant to Pt 2.5. This is consistent with the rationale of the Act as no perfected interest can defeat a valid interest arising from Pt 2.5 — there is no reason why temporary perfected interests would provide an exception to this rule.

[34.6] Further reading ● Explanatory Memorandum [2.28, 2.62–2.63]. ● ALRC [7.10–7.13]. ● Whittaker Report [7.2], [7.3], [7.4], [7.5], [7.6]. Annotated Personal Property Securities Act 2009 (Cth)

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Division 3 — Collateral returned to grantor or debtor ¶2-100 SECTION 35 RETURNED COLLATERAL — FROM BAILEE Security interest is temporarily perfected 35(1) 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; (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.

35(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. Security interest becomes unperfected after 5 business days 35(3) 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.

[35.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

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PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 49 s 26 s 24 § 9-312(f)

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Outline

This section allows for a five-business-day period of temporary perfection where a secured party that has perfected its security interest in goods or a document of title has allowed the grantor to have possession for the purposes of sale or exchange. This effectively limits the use of the goods by the grantor for inventory as the goods cannot be held for extended use. The security interest will become unperfected five business days after the transfer of the collateral unless it is perfected in another way (ie by registration or retaking possession).

[35.3]

Cross-references

● Section 22 provides for perfection of security interests in goods in the possession of a bailee. ● Section 52 provides a taking free rule for temporarily perfected security interests.

[35.4] Concepts ● Goods This is defined in s 10. See further Personal Property Securities Regulations 2010 (Cth) Sch 1 item 2.3 (which includes ‘‘other goods’’ as a collateral classification for the purposes of financing statements under s 153). ● Negotiable document of title Document of title is defined in s 10. ● Possession See s 24. ● Temporary perfection See s 34.

[35.5] Commentary Section 35 applies to collateral returned to the grantor or debtor in light of a bailment. It is important to characterise the nature of the relationship between the parties as different provisions under Pt 2.4, Div 3 apply depending on the underlying relationship. This is consistent with the Canadian position where the Alberta Court of Queen’s Bench in Discount Auto Sales v Cash Store Inc (2005) 7 PPSAC (3d) 356 at [22] declined to read the relevant agreement as a bailment but rather characterised it as a sales agreement (which had ramifications on how the PPSA applied). The ability to perfect a security interest by possession of the collateral is based on the underlying rationale of the PPSA that a third party would not believe that the grantor owns collateral that is in the possession of the secured party. Where possession or control of the collateral is impossible or not commercially feasible (such as with PPS Leases) perfection by registration can occur. The registration of a financing statement which provides public notice of a security interest in the grantor’s personal property is thus unnecessary as the act of perfecting by possession or control implicitly puts third parties on notice. Annotated Personal Property Securities Act 2009 (Cth)

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[35.2]

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However, if the secured party allows the grantor to retake possession (even if only temporarily) the need for public notice becomes important. Section 35 thus grants the secured party five business days (termed ‘‘temporary perfection’’; see s 21) to perfect their security interest over the collateral using another method recognised by the PPSA (see s 21), which will typically be the registration of a financing statement. The ability to enjoy temporary perfection is important as the priority rules require the secured party to have a continuously perfected status (see s 56). Where the secured party has only perfected by possession they would otherwise lose their perfected status if they allowed the grantor to retake possession of the goods for the purposes of sale. While the secured party might have a perfected security interest in any proceeds generated by the grantor retaking possession and selling the collateral, this protection might also only benefit from temporary perfection unless the secured party has registered a financing statement that covers the collateral: see further s 31. A failure of the secured party to perfect other than by possession when actual or apparent possession is in the hands of the grantor or debtor can render the interest unperfected. This situation arose in the Alberta Court of Queen’s Bench case, Stoke Resources & Consulting Inc v Auto Body Services Red Deer Ltd (2009) 15 PPSAC (3d) 329; 59 CBR (5th) 290, where the court held that leaving the collateral with the debtor without otherwise perfecting their security interest allowed a subsequent security interest taken over the collateral (two tanks) to take priority. On appeal, the court held that one of the tanks was not subject to a security interest because the purported lease was actually a license: (2011) 18 PPSAC (3d) 287 (Alta CA). It should be noted that a secured party who wishes to rely upon registration of a financing statement to ensure continuous perfection will also need to ensure that their security agreement complies with the requirements of s 20 (enforceability against third parties). The Official Comment to the equivalent UCC Article 9 provision states that ‘‘no useful purpose would be served by cluttering the files with records [for] short term transactions’’. Note that the UCC provision allows for temporary perfection for 20 days.

[35.6] Further reading ● Explanatory Memorandum [2.64]. ● ALRC Report No 64 [8.24–8.29]. ● Whittaker Report [5.3].

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SECTION 36 RETURNED COLLATERAL — NEGOTIABLE INSTRUMENTS AND INVESTMENT INSTRUMENTS

Security interest is temporarily perfected 36(1) 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. 36(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. Security interest becomes unperfected after 5 business days 36(3) 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.

[36.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[36.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 48 s 26 s 24 § 9-312(g)

Outline

This section provides a similar rule to s 35 for negotiable instruments and investment instruments.

[36.3]

Cross-references

● Section 31 provides rules for including investment instruments and negotiable instruments as proceeds of collateral. ● Sections 49 and 50 provide taking free rules for investment instruments. Annotated Personal Property Securities Act 2009 (Cth)

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● Sections 69 and 70 provide priority rules for transactions involving negotiable instruments.

[36.4] Concepts ● Negotiable instrument See s 8. See also the discussion regarding the characterisation of negotiable instruments as circulating assets under s 340 and 341 which is discussed in the annotations to s 29. ● Investment instrument See [27.5], which discusses the meaning of ‘‘investment instrument’’ as part of the commentary on s 27 (Control of Investment Instruments).

[36.5]

Commentary

From time-to-time a secured party (such as a bank) will need to release negotiable instruments or investment instruments (such as debentures) to the grantor or debtor for a particular purpose that is relevant to the security arrangement. This section allows the secured party to rely on possession as the means of temporary perfection for a period of five business days after possession is lost or forfeited or otherwise to register a financing statement or seek to take control over the collateral to ensure a continuously perfected security interest. For more information on temporary perfection see s 21. For information on registration under the PPSA see Pt 5.3.

[36.6] Further reading ● Explanatory Memorandum [2.65]. ● ALRC Report No 64 [8.24–8.29]. ● Whittaker Report [5.3].

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SECTION 37 RETURNED COLLATERAL — FOLLOWING SALE OR LEASE

Reattachment of security interest 37(1) 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;

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(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.

Perfection of security interest 37(2) 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.

[37.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[37.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

No equivalent s 29 s 27 No equivalent

Outline

This provision provides for the reattachment of a prior security interest where goods that had been leased or sold (and where the transferee takes free from existing security interests) are returned to the grantor or debtor. This section should be read together with s 38 which provides similar rules for sales or leases that create an account or chattel paper where the account or chattel paper is further transferred.

[37.3]

Cross-references

● The taking free provisions are discussed under Pt 2.5. ● Section 76 provides a priority rule in relation to returned goods.

[37.4] Concepts ● Chattel paper See [12.5.3]ff, especially [12.5.3.1]. ● Enforcing a security agreement Rules regarding the enforceability of security agreements are discussed under s 18–20 and in Ch 4. ● Registration is effective at the repossession time The effectiveness of registration of a financing statement is determined in accordance with s 163. Annotated Personal Property Securities Act 2009 (Cth)

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Note: Section 76 deals with the priority of a security interest that reattaches under this section.

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[37.5] Commentary This section applies to inventory financing arrangements where the transaction creates chattel paper that is transferred to an inventory financier. It is also possible for the transferee of the goods to grant a further security interest in the collateral which may be perfected either before or after the original grantor repossesses the goods. These issues require s 38 and 76 to be considered for determination of the priority position and will be discussed in the annotations to s 76. Where this section applies, the secured party has the benefit of having their security interest treated as if the goods were never leased or sold, provided that their security interest was perfected by the effective registration of a financing statement immediately before the sale or lease occurred (s 37(2)). See Discount Auto Sales v Cash Store Inc [2005] ABQB 212; (2005) 7 PPSAC (3d) 356 discussed above at s 35.

[37.6] Further reading ● ● ● ●

Explanatory Memorandum [2.66–2.67]. ALRC Report No 64 [8.24–8.29]. Whittaker Report [7.6], [7.7]. Antony Duggan, ‘‘Chattel paper’’ (2013) 41 Australian Business Law Review 214.

¶2-115 SECTION 38 RETURNED COLLATERAL — ACCOUNTS AND CHATTEL PAPER Deemed goods security interest 38(1) 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.

38(2) The deemed goods security interest attaches to the goods at the repossession time.

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38(3) 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. Deemed goods security interest becomes unperfected after 5 business days 38(4) 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.

[38.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[38.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

No parallel provision s 29(3) s 27(3) No parallel provision

Outline

This section provides for a security interest to arise in favour of the transferee of an account or chattel paper that is generated from a sale or lease of goods. It should be read with s 37 and 76.

[38.3]

Cross-references

● See s 37 and 76.

[38.4] Concepts ● Account This is defined in s 10. See further [12.5.3.1]. ● Chattel paper This is defined in s 10. See further [12.5.3.1].

[38.5] Commentary This section provides for a deemed security interest in goods that are returned to a grantor or debtor who obtained finance over the goods from an inventory financier by transferring an account or chattel paper to them. This could create a priority contest between the inventory financier and a secured party with an interest over the underlying collateral held by the original transferee or lessee of the goods. This is covered by s 76 and is discussed there. Annotated Personal Property Securities Act 2009 (Cth)

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Deemed goods security interest temporarily perfected for 5 business days

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Provisions of this kind additionally exist under the PPSA as the Act is not intended to be a coercive or punitive piece of legislation. Provided an innocent third party is not unduly prejudiced by the return of collateral, a security interest deemed to arise by statute preserves the relevant interests of the transferee.

[38.6] Further reading ● Explanatory Memorandum [2.68–2.69]. ● ALRC Report No 64 [8.24–8.29]. ● Whittaker Report [5.3], [7.6], [7.7].

Division 4 — Relocation of collateral or grantor to Australia etc. ¶2-120 SECTION 39 RELOCATION — MAIN RULE Continuous perfection prior to move to Australia 39(1) 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.

39(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.

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(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. Temporary perfection after move to Australia 39(3) 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. 39(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.

[39.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[39.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 27, 28 s 5–7 s 5–7 § 9-301, 9-316

Outline

This section provides for the recognition of security interests that are enforceable under laws operating outside of Australia for a limited period when the collateral is brought into Australia. Annotated Personal Property Securities Act 2009 (Cth)

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39(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:

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[39.3] Cross-references ● Sections 6 and 7 provide the necessary territorial connection with collateral and grantors to ground the application of the PPSA. ● PPS Regulations 2010 (Cth), reg 1.3 extends the operation of the PPSA to certain external territories. ● Section 40 provides a similar rule for intangible and financial property. ● Section 52 provides a taking free rule for temporarily perfected security interests. ● Section 77 provides a priority rule for certain categories of collateral where there is no foreign register or public notice system. ● Sections 238–241 provide rules regarding how to determine the governing law for different types of collateral.

[39.4]

Concepts

● Actual knowledge This is discussed under s 297. ● Continuously perfected See s 56. ● Located Section 235 provides the definition for the term ‘‘located’’ for PPS purposes, which essentially means where the personal property is situated. Special rules are then included for determining the location of different types of investment instruments, negotiable instruments and chattel paper and for different types of entities (a body corporate or individual — place of incorporation and principal place of residence respectively). For a corporation registered under the Corporations Act 2001 (Cth), the jurisdiction is the whole of Australia: Corporations Act 2001 (Cth) s 5. This was discussed in Re Maiden Civil (P&E) Pty Ltd (2013) APPSR ¶701-008; Albarran and Pleash v Queensland Excavation Services Pty Ltd (2013) 277 FLR 337; [2013] NSWSC 852 at [63] (rejecting an argument that the location of collateral should be the state where the lessor of the collateral was registered as a company — noting that the company’s jurisdiction was the whole of Australia). ● Security interest was effective As this provision is designed to recognise foreign security interests and allow for a quick transition to enforcement under the PPSA, once the collateral becomes located in Australia it is suggested that the instrument must be ‘‘effective’’ which refers to the requirement of the law of the foreign jurisdiction rather than the requirements of the PPSA: s 39(1)(a). Of course, if the collateral is located in Australia from the outset of the arrangement the requirements of the PPSA will apply (including enforceability against third parties and the required scope of security agreements). ● Temporary perfection See s 21 and 34.

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Commentary

This section serves two functions. Firstly, to recognise perfection rights over collateral situated in foreign jurisdictions under the law of that jurisdiction for the purposes of maintaining a ‘‘continuously perfected’’ status which is crucial in priority contests (see s 56). Secondly, to provide for a limited period of temporary perfection when the collateral is relocated to Australia; see s 21 for a discussion of temporary perfection. The length of the period of temporary perfection depends upon whether the secured party has actual knowledge that the collateral has become located in Australia. For a discussion on what constitutes actual knowledge under the PPSA see s 297. The maximum time for temporary perfection under this provision, irrespective of knowledge of the relocation of collateral, is five days (note, not business days). With actual knowledge, the secured party has five business days to otherwise perfect. The Saskatchewan regime is consistently more lenient in terms of time frames providing 60 days without knowledge and 15 business days with knowledge of the relocation. An issue that has consistently arisen in this domain is the conflict of laws between the location where the security interest is originally constituted and recognised and the location where the collateral is relocated to; see Gimli Auto Ltd v Canada Campers Inc (Trustee of) (1998) 13 PPSAC (2d) 378; (sub nom Gimli Auto Ltd v BDO Dunwoody Ltd) 160 DLR (4th) 373 (Ont CA); Northwest Equipment Inc v Daewoo Heavy Industries America Corp (2002) 3 PPSAC (3d) 101; 1 Alta LR (4th) 14 (Alta CA). The Australian PPSA addresses the operation of laws at Ch 7. A failure to perfect the security interest within the period of temporary perfection will cause the security interest to have never been perfected in Australia (s 39(4)). That is to say, not only will the relevant interest lose any benefit of perfection after the expiration of the temporary perfection people, but also it will be taken to be unperfected as at the start of the temporary perfection period; see [34.5.2]. In this regard, registration of a financing statement may be made prior to the collateral being relocated to Australia (s 161) in the authors’ view. It should also be noted that while this section applies to the relocation of collateral generally, s 40 applies to situations where either the grantor or the collateral becomes located in Australia. Section 40, however, only applies to intangible property, and financial property. This provision differs from the overseas PPSA legislation as it applies generally to ‘‘collateral’’ whereas the overseas statutes tend to focus mostly on the relocation of goods.

[39.6] Further reading ● Explanatory Memorandum [2.70–2.71]. ● ALRC Report No 64 [8.24–8.29]. ● Whittaker Report [5.3], [9.1]. Annotated Personal Property Securities Act 2009 (Cth)

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[39.5]

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¶2-125 SECTION 40 RELOCATION — INTANGIBLE PROPERTY AND FINANCIAL PROPERTY Continuous perfection prior to relocation event 40(1) 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 (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.

40(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.

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(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. Temporary perfection after relocation event 40(3) 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. 40(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. Exceptions 40(5)

This section does not apply to:

(a) intellectual property, an intellectual property licence or an ADI account; or (b) a negotiable instrument. Note: The property mentioned in paragraph (5)(a) is intangible property; negotiable instruments are financial property (see section 10).

[40.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

Annotated Personal Property Securities Act 2009 (Cth)

s 30 s 5, 7 7.1 s 5, 7, 7.1 § 9-301, 9-316

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40(2A) However, a security interest is not taken to have been continuously perfected under subsection (1) if, immediately before the relocation event:

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[40.2] Outline This section provides for the recognition of perfection under the law of a foreign jurisdiction and for temporary perfection of that security interest if the grantor or the collateral is relocated to Australia. This section only applies to intangible property and financial property. See s 39 for the general relocation rule.

[40.3] Cross-references ● Sections 6 and 7 provide the necessary territorial connection with collateral and grantors to ground the application of the PPSA. ● PPS Regulations 2010 (Cth), reg 1.3 extends the operation of the PPSA to certain external territories. ● Section 52 provides a taking free rule for temporarily perfected security interests. ● Section 77 provides a priority rule for certain categories of collateral where there is no foreign register or public notice system. ● Sections 238–241 provide rules regarding how to determine the governing law for different types of collateral.

[40.4]

Concepts

● Actual knowledge This is discussed under s 297. ● ADI account See s 25. ● Continuously perfected See s 56. ● Financial property This is defined by s 10 as chattel paper, currency, a document of title, an investment instrument or a negotiable instrument. It should be noted that s 40(5)(b) specifically carves out negotiable instruments. Investment instruments were discussed in [27.5] (s 27). ● Intangible property Intangible property is defined by s 10 as being personal property (including a license) that is not financial property, goods or an intermediated security. Intermediated securities were discussed in s 26. ● Intellectual property and intellectual property license See s 105–106. ● Located See s 235.

[40.5]

Commentary

See the commentary for s 39. In addition, it should be noted that this section does not apply to intellectual property, intellectual property licenses, authorised deposit-taking institution

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accounts (ADI accounts) or negotiable instruments. However, s 39 does not exclude these and so the general relocation rule under that section could apply. ● Explanatory Memorandum [2.72–2.73]. ● ALRC Report No 64 [8.24–8.29]. ● Whittaker Report [5.3], [9.1], [9.3].

PART 2.5 — TAKING PERSONAL PROPERTY FREE OF SECURITY INTERESTS ¶2-130

SECTION 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).

¶2-135 42

SECTION 42 APPLICATION OF THIS PART

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

Annotated Personal Property Securities Act 2009 (Cth)

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[40.6] Further reading

232

Personal Property Securities Act 2009 (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)). 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)).

¶2-140 SECTION 43 TAKING PERSONAL PROPERTY FREE OF UNPERFECTED SECURITY INTEREST Main rule 43(1) A buyer or lessee of personal property, for value, takes the personal property free of an unperfected security interest in the property. Exception 43(2) 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.

[43.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 52 s 20(3) s 20(1)(c), (d) § 9-317(b), (c), (d)

[43.2] Outline Section 43 marks the first substantive ‘‘taking free’’ provision of the PPSA under Pt 2.5 which, read collectively, prescribe the circumstances where a third party can take collateral free from a security interest. As stated in Intro IV, the taking free provisions should be read in light of two interconnected principles or rationales. First, the pragmatic consequences of the PPS register and whether or not it is reasonable to expect particular parties to consult the PPS register (and what would be found if the PPS register was, as a matter of fact, consulted), and secondly, with consumer protection motivations in mind. Section 43 itself provides the fundamental position from which the subsequent provisions of this part of the PPSA derive to varying degrees.

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[43.3]

233

Cross-references

● Sections 20 and 21 set out rules for perfecting security interests. ● Sections 33, 34, 39 and 40 deal with temporary perfection. ● Section 42 limits the operation of this section.

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[43.4] Concepts ● Buyer See [43.5.1]. ● Lessee See further s 13. ● Taking free See [43.5.1] and [43.5.2]. ● Value This is defined in s 10. See further [19.5.2.2].

[43.5] Commentary [43.5.1] Main rule — s 43(1) .........................................................................233 [43.5.2] Exceptions — s 43(2) .......................................................................235

[43.5.1] Main rule — s 43(1) This section allows buyers and lessees of collateral to take free from a preexisting security interest. This provision provides a further important motivation for secured parties to ensure that they perfect their security interest. The purpose of the provision is ‘‘to avoid disruption to commerce and injustice to unsuspecting ordinary course buyers which would otherwise result if such buyers were required in every case to conduct a search of the Personal Property Registry before buying goods’’: Northwest Equipment Inc v Daewoo Heavy Industries America Corp (2002) 3 PPSAC (3d) 101 at [14] (Alta CA). The term ‘‘buyer’’, while a recurring term under the PPSA, is not formally defined by the Act, nor does it comprise a defined term under the foreign PPS regimes. The term has, however, been the subject of judicial interpretation and should be read in light of the PPSA’s reference to lessees in the same capacity under Pt 2.5. See further Mike Gedye, ‘‘A Hoary Chestnut Resurrected: The Meaning of ‘Ordinary Course of Business’ in Secured Transactions Law’’ (2013) 37(1) Melbourne University Law Review 1. Should a dispute arise, there may be live questions of fact as to whether or not a third party constitutes a ‘‘buyer’’ and further, at what point do they become a buyer. Take the lay-by position as an example. Does taking out a lay-by make the party a ‘‘buyer’’ at the time the lay-by is taken out, at the time the final payment is made or at some interim point in time? No doubt such questions will be influenced by the specific terms of the particular lay-by (as the substance of the transaction takes precedent over its form): see Warehouse Sales Pty Ltd (in liq) & Lewis and Templeton v LG Electronics Australia Pty Ltd (2014) 291 FLR 407; [2014] VSC 644 at [60], [62]; see further s 46. Annotated Personal Property Securities Act 2009 (Cth)

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In the Saskatchewan Court of Appeal decision, Royal Bank of Canada v 216200 Alberta Ltd (1986) 6 PPSAC 277; 33 DLR (4th) 80, the Court applied the concept of a sale under the Sale of Goods legislation to determine who a buyer is. In particular, the Court recognised that a person may be a buyer even where the full purchase price has not been paid. Compare Spittlehouse v Northshore Manne Inc (1994) 7 PPSAC (2d) 67; 114 DLR (4th) 500 (Ont CA) where the Sale of Goods Act was held to be inapplicable (see also obiter comments in Willi v Don Shearer Ltd (1993) 5 PPSAC (2d) 179; 107 DLR (4th) 121 (BC CA). In the authors’ view, the Saskatchewan approach should be preferred on the basis that the Sale of Goods Act, and not the PPSA, should determine what a sale is. In the New Zealand case of Orix New Zealand Ltd v Milne [2007] 3 NZLR 637 it was held that the Sale of Goods legislation was relevant in determining who a seller was, but that was in the context of an argument based on s 53 of the NZ PPSA, on which s 46 of the Australian PPSA is based, although the New Zealand provision is limited to goods while the Australian provision extends to all personal property. Another important element of s 43 is the concept of taking free of the security interest. The term ‘‘taking free’’ is not defined by the PPSA, however, its meaning is readily ascertainable from the term itself. By way of context, a security interest is an encumbrance upon the free ownership or leasehold interest in particular property. While encumbered, property is held subject to conditions imposed by those parties benefiting from the imposition of such encumbrances to the extent that an underlying obligation or obligations are fulfilled in full. With respect to real property by way of illustration, an easement over an estate, such as a right of way, interferes with the free enjoyment of an estate. A similar burden exists where security is granted, although the burden is usually one of right and operates ethereally rather than by way of physical interference (unless perfected by possession). While the term ‘‘defeating’’ often suffices to describe the pragmatic outcome of a party taking free from existing security interests, it is not a technically correct way of describing the outcome of the taking free provisions under the PPSA (see particularly s 53). Taking free should be more accurately conceptualised as the avoidance of encumbrances, that is, once the agreement between the transferor (the party who sells or leases the relevant property) and the transferee (the buyer or lessee respectively) is completed in full (usually where the purchase price is paid in full) the secured party has no recourse against the transferee and thus the transferee duly ‘‘takes free’’ from the security interest. This reality makes it important for the secured party to consider taking a security interest over any proceeds to avoid losing all recourse to any underlying asset. Simply attempting to prevent misappropriation by providing contractual conditions preventing the sale or disposition of the underlying asset(s) is insufficient as such rights and responsibilities cannot extend beyond those parties to that specific contract (namely, between the grantor and the secured party). An independent third party who takes free is of course not so bound.

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235

Section 43(2) provides an exception to the general rule, the ambit of which is largely to prevent abuse of the PPSA provisions. The exception prevents buyers or lessees who are a party to the security interest from taking free from such an interest. While seeming like an implicit knowledge requirement, that is, the buyer or lessee cannot take their interest free from encumbrances where they have knowledge of the secured party, such an inference should not be drawn in light of subsequent provisions under Pt 2.5. Section 43 is written and is so aimed to be a broad taking free provision to further encourage parties who seek to benefit from holding a security interest to perfect such an interest. Failing to do so renders their interest vulnerable not only to subsequent perfected parties but also to those who seek to take free from the security interest entirely. At the time of writing there are no regulations prescribed for this provision.

[43.6] Further reading ● Explanatory Memorandum [2.80–2.81]. ● ALRC Report No 64 [9.1–9.12]. ● Whittaker Report [7.6], [7.10].

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SECTION 44 TAKING PERSONAL PROPERTY FREE OF SECURITY INTEREST IF SERIAL NUMBER INCORRECT OR MISSING

Main rule 44(1) 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. Exceptions 44(2) 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. Annotated Personal Property Securities Act 2009 (Cth)

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[43.5.2] Exceptions — s 43(2)

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Personal Property Securities Act 2009 44(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: (a) a migrated security interest in a motor vehicle; or (b) a migrated security interest in a watercraft within the meaning of the regulations.

[44.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 55 s 30(6), (7) s 28(5) no parallel provision

[44.2] Outline Section 44 demonstrates some of the rigidity of the PPSA with respect to inaccurate registration. The provision is one of several which aim to deter the negligent lodgement of financing statements. As such, even mere typographical errors can result in a buyer or lessee taking their interest free of existing security interests despite being duly perfected. It should be reiterated in this regard that the taking free provisions operate with consumer protection objectives in mind.

[44.3] Cross-references ● Section 42 limits the operation of this section. ● Section 153 provides for the registration of a financing statement. ● Part 5.5 provides rules for searching the Personal Property Securities Register (PPSR). ● Personal Property Securities Regulations 2010 (Cth), Sch 1, cl 2.2 prescribes what property may or must be described by serial number in a financing statement.

[44.4]

Concepts

● Buyer or lessee See further s 43. ● Inventory This is defined in s 10 as meaning: 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: 1. is held by the person for sale or lease, or has been leased by the person as lessor, or 2. is held by the person to be provided under a contract for services, or has been so provided, or

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● ●

● ●

237

3. is held by the person as raw materials or as work in progress, or 4. is held, used or consumed by the person, as materials. Migrated security interest See s 332. Serial number The term ‘‘serial number’’ has an important use and meaning under the PPSA. While defined by s 10 as an identifying series of numbers in relation to particular collateral, the PPS Regulations alter the definition based on the type of collateral in issue. Schedule 1, reg 2.2 of the PPS Regulations prescribes the types of collateral which may or must be described by serial number. Regulation 2.2(3) isolates the relevant number required in relation to each collateral type. While technical in essence, it is thus essential that where the collateral may or must be described by serial number — that such numbers are entered correctly. Failing to do so renders the interest vulnerable to the taking free provisions under Pt 2.5 of the Act and can also result in a loss of priority as against other perfected interests (see s 164). Taking free See further s 43. Transitional security interest See s 308.

[44.5]

Commentary

[44.5.1] Main rule — s 44(1) .........................................................................237 [44.5.2] Exceptions — s 44(2) .......................................................................238

[44.5.1] Main rule — s 44(1) Section 44(1) provides, in essence, that where a security interest may or must be described by serial number and a search of the register immediately before the time of sale or lease fails to reveal the perfected security interest (when searching by serial number) then the buyer or lessee takes the underlying personal property free from the security interest. This provision is in accordance with the rationale that Pt 2.5 relies on the primacy of the register, that is, parties are protected from buying or leasing encumbered property where the required information could not be found on the register. The implications of this rule are significant as the security, in a practical sense, is forfeited by the secured party’s error in providing an incorrect serial number or failing to provide a serial number at all. It is also important to note here that a distinction exists between the taking free provisions and the priority rules, that is, different rationales apply to bona fide third party purchasers or lessees from competing security interest holders. The taking free provisions benefit from consumer protection policy objectives while the priority rules do not. Thus, while it is readily accepted that an omission or error in a serial number collateral description will allow third party purchasers or lessees to take free of the security (with motor vehicles when described as consumer property comprising one common Annotated Personal Property Securities Act 2009 (Cth)

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example of collateral that must be described by serial number) — the same does not automatically apply for competing priority claims. Defects of this nature are inconclusive as between competing secured parties. This notion is discussed further when considering seriously misleading defects on the PPS Register — see s 164.

[44.5.2] Exceptions — s 44(2) Section 44(2) provides that if the buyer or lessee purchases or leases personal property which may or must be described by serial number as inventory, that the taking free provisions do not apply to such collateral. This exception exists to prevent parties who intend to on sell the collateral from extinguishing existing security interests. While the capacity by which the collateral is purchased or leased is somewhat arbitrary, the taking free provisions operate by way of consumer protection and holding the property as inventory indicates a commercial purpose. In addition, and similar to s 43(2), where the buyer or lessee is a party to the security interest (irrespective of the capacity with which they take an interest in the relevant property, be it consumer or otherwise) the taking free provisions do not apply. Again this exception is narrower than imposing a knowledge-based requirement which exists under subsequent taking free provisions. Section 44(3) provides that the taking free rule in s 44(1) does not apply to certain transitional security interests for 24 months after the registration commencement time. See further Ch 9 regarding the transitional provisions of the PPSA. Note: The transitional provisions pursuant to Ch 9 of the PPSA ceased operation at the expiration of two years after the registration commencement time, see s 306.

[44.6] Further reading ● Explanatory Memorandum [2.2.83–2.86]. ● ALRC Report No 64 [9.1–9.12]. ● Whittaker Report [6.2], [6.6] , [7.6], [9.3].

¶2-150 SECTION 45 TAKING MOTOR VEHICLES FREE OF SECURITY INTEREST Incorrect or missing serial number 45(1) 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

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the serial number of the motor vehicle) would not disclose a registration that perfected the security interest; and (c) the seller or lessor is:

45(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. Taking from prescribed persons 45(3) 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. 45(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 (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.

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(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.

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[45.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 58 no parallel provision no parallel provision no parallel provision

[45.2] Outline While motor vehicles are, by definition, a class of personal property which may or must be described by serial number, s 45 exists as a separate provision for the taking of motor vehicles free from encumbrances. The reason for this is not clear from the working of the PPSA itself, however, the explanatory memorandum explains the additional elements of s 45 that are relevant to motor vehicles, as distinct from other collateral which may or must be described by serial number, warranting a separate section. Section 45 derives from s 8(3)(b) of the Interest in Goods Act 1986 (NSW) and Chattel Securities Act 1987 (Vic), however, it should not be interpreted as an exact equivalent as elements of the PPSA s 45 differ in some respects.

[45.3]

Cross-references

● Section 42 limits the operation of this section. ● The Personal Property Securities Regulations 2010 (Cth), reg 1.7, 2.1 and 2.2 provide rules for this section. Note: The Personal Property Securities Regulations 2010 (Cth) have been amended by the Personal Property Securities Amendment (Motor Vehicles) Regulation 2014 which will commence on 1 July 2014.

[45.4]

Concepts

● Actual or constructive knowledge See s 297–299. ● Inventory This is defined in s 10. ● Execution creditor This is defined in s 10. See further s 74. ● New value This is defined in s 10 as meaning ‘‘means value other than value provided to reduce or discharge an earlier debt or liability owed to the person providing the value’’. ● Prescribed person This is prescribed by the Personal Property Securities Regulations 2010 (Cth, reg 2.2 as a seller or lessor of a motor vehicle who: (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.

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● Possession See s 24. ● Taking free

[45.5]

Commentary

[45.5.1] Main rule — s 45(1) .........................................................................241 [45.5.2] Exceptions — s 45(2) .......................................................................241 [45.5.3] Prescribed persons — s 45(3), (4) ..................................................242

[45.5.1] Main rule — s 45(1) Like s 44, a buyer or lessee, for new value, takes a motor vehicle free from existing security interests where it may or must be described by serial number and a search of the register using the serial number would not reveal an existing interest. Consideration of what constitutes a ‘‘motor vehicle’’ must be taken into account: see for example Saskatchewan Economic Development Corp v Pryor (1992) 3 PPSAC (2d) 235; 103 Sask R 55 (Sask CA). Additionally, unlike s 44, the time at which the search must be conducted extends back to the start of the previous day prior to the sale or lease (pursuant to s 45(1)). The seller or lessor must be the grantor or another person in possession of the motor vehicle — as possession to the ordinary purchaser/lessee presents the prima facie inference that property can be sold or leased. Like the above taking free provisions, primacy is given to protecting the consumer by this provision however the commercial process involved when dealing with a motor vehicle is also preserved by the PPSA. Under pre-PPSA law, a prudent purchaser or lessee of a motor vehicle would ensure the vehicle was not otherwise encumbered or stolen by conducting a search of the various state-based registers commonly known as the Register of Encumbered Vehicles or ‘‘REVS’’ service. Under the PPSA, instead of consulting the REVS database, the purchaser or lessee would search the PPS Register. In a practical sense, little changes with respect to dealings with motor vehicles.

[45.5.2] Exceptions — s 45(2) Due to the significant effect of s 45(1) of the Personal Property Securities Act 2009 (Cth) (PPSA), there are a series of exceptions to the taking free rule designed to prevent misuse of the section. The taking free provisions are not designed to present an arbitrary benefit to certain parties or to provide mechanisms to circumvent the perfection and priority regime. Where the secured party, and not the grantor, possesses the motor vehicle immediately before the sale or lease — the buyer or lessee should be put on notice that the vehicle is encumbered and thus they will not take the interest free. A similar exception applies where the vehicle is held by an execution creditor immediately before the sale or lease, for the same reasons and applying the same logic. Holding the motor vehicle as inventory after purchasing or leasing it additionally removes the application of s 45(1). Finally, knowledge of the security interest will also defeat the purchaser or lessee. Knowledge here Annotated Personal Property Securities Act 2009 (Cth)

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See [43.5.1].

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including ‘‘actual’’ or ‘‘constructive’’ knowledge however these terms carry a special meaning under the PPSA (see Pt 8.6; see in particular s 297). Peculiarly, constructive knowledge does not include knowledge of what would have been on the register had the purchaser or lessee inquired (see s 300). Pursuant to s 45(2) in particular, constructive knowledge is perhaps defined as such as the only active requirement of the purchaser/lessee is that the serial number of the motor vehicle is checked within the relevant time frame provided by the PPSA. It would be contradictory if this check was duly undertaken but the exception required more from the purchaser/lessee. In the New Zealand High Court decision, Nichibo Trading Company New Zealand Ltd v Lucich [2011] NZHC 722; (2011) 9 NZBLC 103,253, Toogood J held that just because the relevant party in that case was an employee of a business which carried on motor vehicle trading did not automatically make the employee a party excluded from taking free. The inquiry is one with respect to the knowledge of the relevant party, whereby certain types of employees may have knowledge of existing encumbrances. The question is one of fact to be determined on a case by case basis. In Nichibo it was held that the employee was not prevented from taking free.

[45.5.3] Prescribed persons — s 45(3), (4) Prescribed persons refer to a class of sellers or lessors prescribed by the PPS Regulations. A motor vehicle is defined for the purposes of the PPSA under reg 1.7 (pursuant to reg 2.1). Pursuant to s 45(3)(b), a ‘‘prescribed seller or lessor’’ constitutes a seller or lessor who holds a licence to deal or trade in the particular kind of motor vehicle (see reg 2.1) relevant to the security interest, and, the licence is issued by a licensing authority of the relevant state or territory. For transactions that do not fit within this section see also s 44.

[45.6] Further reading ● Explanatory Memorandum [2.87–2.95]. ● ALRC Report No 64 [9.1–9.12]. ● Whittaker Report [7.6].

¶2-155 SECTION 46 TAKING PERSONAL PROPERTY FREE OF SECURITY INTEREST IN ORDINARY COURSE OF BUSINESS Main rule 46(1) 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.

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Exceptions 46(2)

Subsection (1) does not apply if:

(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.

[46.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[46.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 53 s 30(2) s 28(1), (2) § 1-201(9), 9-320

Outline

Section 46 provides the taking free provision for personal property purchased or leased in the ‘‘ordinary course of business’’. In line with preserving commercial processes, as the taking free provisions as a whole are, the PPSA does not require purchasers’ lessees to continuously search the register for existing encumbrances where the seller or lessor sells or leases such property in the ordinary course of business. Like s 44 and 45, exceptions apply to prevent abuse of this provision.

[46.3]

Cross-references

● Section 42 limits the operation of this section.

[46.4] Concepts ● Actual or constructive knowledge See s 297–299. ● Buyer or lessee See s 43. ● Inventory See s 10. ● Ordinary course of business This central concept is discussed below in [46.5.2]. ● Taking free See [43.5.1]. Annotated Personal Property Securities Act 2009 (Cth)

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(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:

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[46.5] Commentary [46.5.1] Overview of s 46 — taking personal property free of security interest in ordinary course of business ......................................................244 [46.5.2] What is in the ordinary course of business? ...............................244 [46.5.3] Exceptions — s 46(2) .......................................................................248

[46.5.1] Overview of s 46 — taking personal property free of security interest in ordinary course of business Pursuant to s 46(1), where a buyer or lessee, buys/leases personal property from a seller/lessor who is engaged in the sale or leasing of such goods, the buyer/lessee takes the property free from security interests including those extending to proceeds. While the provision centres around the concept of what constitutes the ‘‘ordinary course of business’’ the term does not have a definite meaning and is highly fact specific. The phrase has also been differentiated from the phrase ‘‘regularly engaged in the business of’’ which arises with respect to PPS leases (see s 13). In Stockco Ltd v Gibson [2012] NZCA 330; (2012) 10 NZBLC 99-709 at [48], the New Zealand Court of Appeal said that while the purpose of this provision (NZ PPSA equivalent s 53) is ‘‘to provide protection for buyers in the ordinary course of business of the seller, the necessary corollary is that a secured party is protected against a purported sale of goods subject to a security interest in circumstances other than in the ordinary course of the seller’s business’’.

[46.5.2] What is in the ordinary course of business? The phrase ‘‘ordinary course of business’’ is not defined by the PPSA. In Warehouse Sales Pty Ltd (in liq) & Lewis and Templeton v LG Electronics Australia Pty Ltd (2014) 291 FLR 407; [2014] VSC 644, Sifris J considered this phrase along with other critical terms used in s 46 but not otherwise defined by the PPSA, such as ‘‘buyer’’, ‘‘seller’’ and ‘‘sold’’, and held (at [47], [72]–[73]): ". . . the PPSA is not a code. Accordingly, in my opinion, and for reasons referred to below, there is no reason why sale of goods legislation should not be considered in determining whether a person is a ‘buyer’ of personal property that has been ‘sold’ under PPSA s 46. The PPSA discloses no intention to displace the existing law relating to the sale of property (as opposed to the operation of security interests over property). When the PPSA refers to existing concepts such as the sale of property, and those concepts are not necessarily affected by the PPSA’s reconfiguration of personal property securities law, there is no reason to suppose that the Parliament intended anything other than a reference to the accepted meaning of familiar concepts. ... When the PPSA refers to existing concepts such as the sale of property, and those concepts are not necessarily affected by the PPSA’s reconfiguration of personal property securities law, there is no reason to

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That logic is consistent with orthodox principles of statutory construction. When used in legislation, words that have a well-known legal meaning are presumed to carry that meaning unless a contrary intention clearly appears. ‘Sale’, ‘seller’ and ‘buyer’ have longstanding meanings under the Goods Act and the substantially-uniform cognate legislation throughout Australia. No contrary intention being found in the PPSA, the question of whether a person is a ‘buyer’ of property that has been ‘sold’ should be determined by reference to the relevant sale of goods legislation.’’ (citations omitted). The phrase ‘‘ordinary course of business’’ is also a phrase that has been extensively considered in foreign PPSA statutes. In the bankruptcy case of Downs Distributing Company Pty Ltd v Associated Blue Star Stores Pty Ltd (1948) 76 CLR 463 at 477 Rich J said: ‘‘the transaction must fall into place as part of the undistinguished common flow of business done, that it should form part of the ordinary course of business as carried on, calling for no remark and arising out of no special or particular situation’’. However, the consideration of this phrase in the context of bankruptcy is centred on whether a transaction should be avoided because the transferee should have had notice of the transferor’s insolvency by reason of the unusual nature of the transaction. The phrase is also used in partnership law where it has been held that the court must ascertain the nature and scope of the individual business and then determine whether the conduct fits within the scope of that business: Walker v European Electronics Pty Ltd (in liq) (1990) 23 NSWLR 1. In the context of floating charges, the ordinary course of business refers to circumstances where chargors were able to deal with secured assets without the prior permission of the chargee. In the NSW Court of Appeal decision, Fire Nymph Products Pty Ltd v Heating Centre Pty Ltd (in liq) (1992) 7 ACSR 365 at 370, Gleeson CJ relied upon the following passage from Palmer’s Company Precedents: ‘‘What, then, is in the ‘ordinary course of business? The answer to this depends on the nature of the particular company’s business, but as a general rule the words include sales, leases, mortgages, charges, payment of debts, discharge of liabilities, and other transactions with a view to carrying on the concern’.’’ See also Reynolds Bros (Motors) Pty Ltd v Esanda Ltd (1983) 8 ACLR 422. In the leading Ontario case, Fairline Boats Ltd v Leger (1980) 1 PPSAC 218 at [12]–[17], Linden J listed a number of relevant factors to be used in determining whether the transaction was in the ordinary course of business (see also Alberta Pacific Leasing Inc v Petro Equipment Sales Ltd (1995) 10 PPSAC (2d) 69; 34 Alta LR (3d) 66). These included whether the transaction occurred Annotated Personal Property Securities Act 2009 (Cth)

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suppose that Parliament intended anything other than a reference to the accepted meaning of familiar concepts.

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in a commercial setting, the identity of the buyer, the price paid and the quantity of goods disposed of. His Honour also provided the following rationale for the provision (at [8]): ‘‘The objective of this section, as I understand it, is to permit commerce to proceed expeditiously without the need for purchasers of goods to check into the titles of sellers in the ordinary course of their business. Purchasers are allowed by our law to rely on sellers using the proceeds of sales to repay any liens on the property sold. In these days inventory is almost invariably financed, and as a result is almost invariably subject to liens of one kind or another. To require searches and other measures to protect lenders in every transaction would stultify commercial dealings, and so the Legislature exempts buyers in the ordinary course of business from these onerous provisions, even where they know that a lien is in existence. The risk is placed on lenders of an occasional dishonest dealer who may sell some of his goods in the ordinary course of business and then fail to repay the debt because ‘he is in a much better position than the buyer to weigh the risks’ . . . Some protection is given to security holders by denying reliance on this section to those who do not buy in the ordinary course of business.’’ The phrase should be interpreted liberally: Camco Inc v Frances Olson Realty (1979) Ltd (1986) 6 PPSAC 167; 50 Sask R 161 (Sask CA); Nichibo Trading Company New Zealand Ltd v Lucich [2011] NZHC 722. The New Zealand Court of Appeal has said in Stockco Ltd v Gibson [2012] NZCA 330; (2012) 10 NZBLC 99-709 at [49], that the provision: ‘‘must be interpreted in a way which meets the commercial objective of facilitating commerce without undermining the equally important commercial objective of ensuring that those who provide credit on the security of the debtor’s goods are not unfairly deprived of the benefit of that security’’. In Stockco, the Court of Appeal held (at [69]) that the equivalent New Zealand provision should not be interpreted to allow a sudden change of business strategy, as that would narrow the protection offered to secured parties by the provision and would expose them to undue risk. The court stated that a sudden change is ‘‘contrary to the concept of the ‘course’ of business’’. In Nichibo, the New Zealand High Court noted (at [58]) that the ‘‘adjective ‘ordinary’ qualifies the noun ‘course’, suggesting that the manner in which the transaction was conducted should be considered, as well its nature’’. See also Royal Bank of Canada v 216200 Alberta Ltd (1986) 6 PPSAC 277; 33 DLR (4th) 80 (Sask CA); 369413 Alberta Ltd. v Pocklington (2000) 194 DLR (4th) 109; 271 AR 280 (Alta CA); Northwest Equipment Inc v Daewoo Heavy Industries America Corp (2002) 3 PPSAC (3d) 101; 1 Alta LR (4th) 14 (Alta CA); GE Canada Equipment Financing GP v ING Insurance Co of Canada (2009) 14 PPSAC (3d) 49; 94 OR (3d) 321 (Ont CA). The Canadian cases were applied in ORIX New Zealand Ltd v Milne [2007] 3 NZLR 637 at [66] (NZ HC) where the court said that a two-step process can be

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used: ‘‘The first is to determine the business of the seller. The second is to inquire whether the sale was made in the ordinary course of that business’’. The fact that sales were made infrequently and were only a small part of the business does not mean they were not in the ordinary course of business: ORIX New Zealand Ltd v Milne [2007] 3 NZLR 637 at [70] (NZ HC). This was further developed by the New Zealand Court of Appeal in Stockco Ltd v Gibson [2012] NZCA 330; (2012) 10 NZBLC 99-709 at [51], which held that the first step should be reformulated to identifying the ‘‘ordinary course of the business of the seller’’. The decision in Fairline Boats Ltd v Leger (1980) 1 PPSAC 218 provides a range of factors that may be useful to determine whether the taking free provision applies: (a) where the agreement was made (b) parties to the sale (c) quantity of goods (d) price charged (e) the nature and significance of the transaction (f) the reason for the transaction (g) the frequency of the transaction, and (h) the arms-length nature of the transaction. These were applied by the New Zealand Court of Appeal in Stockco Ltd v Gibson [2012] NZCA 330; (2012) 10 NZBLC 99-709. Although it was noted in Bank of New Zealand v Waewaepa Station 2002 Ltd [2013] NZHC 3321 at [60] that the list of factors should not be interpreted as a mandatory checklist. The fact that the purchaser is buying for a business purpose does not render the sale or lease not in the ordinary course of business: see for example, Associates Discount Corp v Rattan Chevrolet Inc (1970) 462 SW 2d 546 (Texas SC) (sale to a wholesale car dealer); Tanbro Fabrics Corp v Deering Milliken Inc (1976) 350 NE 2d 590 (NY CA) (sale of excess fabric from one textile firm to another textile firm was common in the industry). The fact that the seller does not have legal title to the property does not limit the operation of this provision: ORIX New Zealand Ltd v Milne [2007] 3 NZLR 637 at [37] (NZ HC); Re Renovation Boys Pty Ltd (admins apptd) [2014] NSWSC 340 (sale of bathroom fittings to retail customers where goods subject to retention of title). The fact that the sale is in breach of the security agreement also does not affect the operation of this provision: Stockco Ltd v Gibson [2012] NZCA 330; (2012) 10 NZBLC 99-709 at [47]. Note also Re Renovation Boys Pty Ltd (admins apptd) [2014] NSWSC 340 at [28] where bathroom fittings were held to be sold to customers in the ordinary course of business based on affidavit evidence from staff from the voluntary administrator of a retailer. In the New Zealand Court of Appeal decision Tubbs v Ruby 2005 Ltd [2010] NZCA 353 at [58] it was noted that ‘‘it is difficult to see how a sale below market value could be in the ordinary course of business’’. In Bank of New Zealand v Waewaepa Station 2002 Ltd [2013] NZHC 3321, the failure to charge Annotated Personal Property Securities Act 2009 (Cth)

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GST on the sale to a related party was relevant in finding the sale to be outside the ordinary course of business. A sale to an associated party will attract further scrutiny from the courts but will not automatically render the sale outside of the ordinary course of business: Nichibo Trading Company New Zealand Ltd v Lucich [2011] NZHC 722; (2011) 9 NZBLC 103, 253; Swindle v Matakana Estate Limited (in liquidation) [2011] NZHC 1345. In David Morris Fine Cars Ltd v North Sky Trading Inc (Trustee of) (1996) 11 PPSAC (2d) 142; 39 CBR (3d) 284, the Alberta Court of Appeal compared the terms ‘‘ordinary course of business’’ with ‘‘regularly engaged in the course of business’’ to find that: ‘‘We agree that the clause ‘regularly engaged in business’ in s. l(1)(y) of the PPSA means something quite different than the clause ‘in the ordinary course of business’ found in s. 30(2). The former pertains to whether the lessor is in the business of leasing. The focus is the business practice of that lessor. The latter pertains to whether the particular transaction was made in the course of conducting that business. The focus is whether other persons in that type of business engage in similar transactions.’’ There is little reason why a departure from this approach would occur in Australia. While interpretation may derive from other domestic statutes, the approach presented by the various Canadian courts is not inconsistent with the Australian PPSA or how the phrase ‘‘ordinary course of business’’ applies. The fact that the purchaser is buying for a business purpose does not render the sale or lease not in the ordinary course of business: see for example, Associates Discount Corp v Rattan Chevrolet Inc (1970) 462 SW 2d 546 (Texas SC) (sale to a wholesale car dealer); Tanbro Fabrics Corp v Deering Milliken Inc (1976) 350 NE 2d 590 (NY CA) (sale of excess fabric from one textile firm to another textile firm was common in the industry). In Re Renovation Boys Pty Ltd [2014] NSWSC 340 (25 March 2014), the Court accepted that bathroom fittings that had been sold to customers who had paid in full were sold in the ordinary course of business based on affidavit evidence of the administrator and the fact that secured creditors had been notified about the court application and had not sought to dispute the contention: see at [28].

[46.5.3] Exceptions — s 46(2) Peculiarly, the first exception to the rule applies only to property which may or must be described by serial number. The exception applies where the property is held as inventory in a similar fashion to the exception discussed at s 44 and 45 above. Section 46(2)(b), however, applies to all collateral and imposes a knowledgebased element whereby knowledge removes the application of main operative provision under s 46(1). Again it is somewhat peculiar that the test for knowledge only comprises actual knowledge pursuant to s 46 however constructive knowledge is sufficient with respect to s 45. For more information on the particulars concerning knowledge under the PPSA see Pt 8.6.

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Explanatory Memorandum [2.96–2.98]. ALRC Report No 64 [9.1–9.12]. Whittaker Report [4.3], [7.6]. Mike Gedye, ‘‘A Hoary Chestnut Resurrected: The Meaning of ‘Ordinary Course of Business’ in Secured Transactions Law’’ (2013) 37(1) Melbourne University Law Review 1. ● Nicholas Mirzai, ‘‘The Consumer and the Personal Property Securities Act 2009: Does the Regime Protect Consumers?’’ — (2013) 87(1) Australian Law Journal 59. ● ● ● ●

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SECTION 47 TAKING PERSONAL, DOMESTIC OR HOUSEHOLD PROPERTY FREE OF SECURITY INTEREST

Main rule 47(1) 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. Exceptions 47(2) 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.

Annotated Personal Property Securities Act 2009 (Cth)

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[46.6] Further reading

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[47.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 54 s 30(3), (4) no parallel provision no parallel provision

[47.2] Outline Section 47 prescribes a broad taking free provision with respect to low value personal property. The scope of the provision excludes use of the property in a commercial capacity reiterating a consumer protection rationality underpinning Pt 2.5 generally. Despite this exclusion, it is likely that the majority of property purchased or leased by consumers on a daily basis will be governed by s 47. Further, while the phrase ‘‘predominately for personal, domestic or household use’’ is defined by the PPSA (see s 10), the interpretation of this definition will likely extend beyond the PPSA itself.

[47.3] Cross-references ● Section 42 limits the operation of this section.

[47.4]

Concepts

● Actual or constructive knowledge See s 297–299. ● New value This is defined in s 10. ● Predominately for personal, domestic or household use Section 10 defines the phrase ‘‘predominately for personal, domestic or household use.’’ In short, personal property will fall within this category where the property is not acquired for an investment purpose and where it is intended to be used mostly for personal, domestic or household purposes — if not always for such purposes. The definition thus incorporates a threshold question of what constitutes ‘‘mostly’’ personal, domestic or household use, and one which must be assessed in light of the facts and circumstances of each particular case. The phrase forms an integral part of the Competition and Consumer Act 2010 (Cth), formerly the Trade Practices Act 1974 (Cth). The cases decided under those statutes are likely to be influential in interpreting the scope of this provision: see Carpet Call Pty Ltd v Chan (1987) ATPR (Digest) ¶46-025; Crago v Multiquip (1998) ATPR ¶41-620; Bunnings Group Ltd v Laminex Group Ltd (2006) 153 FCR 479. Note also Re Renovation Boys Pty Ltd (admins apptd) [2014] NSWSC 340 at [28] where bathroom fittings were held to be sold to customers for personal, domestic or household use based on affidavit evidence from staff from the voluntary administrator of a retailer. The threshold test pursuant to this phrase is set at a low threshold. Such is the case that even where property has a commercial or business use it may still fit within the scope of the phrase. Reluctance should be placed

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on setting the threshold too highly and the capacity of both the purchaser/lessee and the potential uses for such property should be duly considered when assessing the purpose for which the property was acquired and how it has subsequently been used. Additionally, the concept of ‘‘consumer’’ under the Competition and Consumer Act 2010 (Cth) impacts on the way in which the phrase ‘‘personal, domestic or household use’’ is interpreted and applied. Consumers under the PPSA are identified in a fundamentally different fashion to the Competition and Consumer Act and it would thus be erroneous to treat the definitions of the terms between the statutes in an identical fashion. For more information on how the term ‘‘consumer’’ interacts with the concept of ‘‘personal, domestic and household use’’ see [14.5.3]ff, especially [14.5.3.3]. The threshold test pursuant to this phrase is set at a low threshold. Such is the case that even where property has a commercial or business use it may still fit within the scope of the phrase. Reluctance should be placed on setting the threshold too highly and the capacity of both the purchaser/lessee and the potential uses for such property should be duly considered when assessing the purpose for which the property was acquired and how it has subsequently been used. In Re Renovation Boys Pty Ltd [2014] NSWSC 340 the court accepted that bathroom fittings that had been sold to customers who were buying predominantly for personal domestic or household use based on affidavit evidence of the administrator and the fact that secured creditors had been notified about the court application and had not sought to dispute the contention: see at [28]. ● Serial number See [44.4]. ● Taking free See [43.5.1].

[47.5] Commentary [47.5.1] Main rule — s 47(1) .........................................................................251 [47.5.2] Exceptions — s 47(2) .......................................................................252 [47.5.3] Practical consequences ...................................................................252

[47.5.1] Main rule — s 47(1) Section 47(1) holds that a buyer or lessee who acquires for new value and for property predominately for personal, domestic or household use — where the property has a market value of less than $5,000 (or a greater amount as prescribed by the PPS Regulations — of which no such amount exists at the time of writing) takes such property free from existing security interests. The amount of $5,000 has been identified in Australia as the limit to which property can be defined as ‘‘low value’’. The figure is arbitrary, and like the ‘‘grace period’’ afforded by way of temporary perfection (see [21.5]ff), is based solely on the perspective of the legislature in light of the commercial realities in any given country. In New Zealand, by way of example, the equivalent Annotated Personal Property Securities Act 2009 (Cth)

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provision (s 54) prescribed a $2,000 limit, while under the Saskatchewan regime (s 30(4)) the limit is $1,000. Like all statutory provisions, this is subject to change if and where appropriate. As stated, the rationale here is predominately consumer protection however it also embodies the preservation of commercial consistency, that is, a consumer should not have to search the register for an existing interest over each item of property they purchase or lease. While this is so, a potential risk arises for suppliers who seek security over low-value, high turn-over stock (such as where goods are sold by way of consignment or on certain terms of sale). This issue is addressed at [47.5.3] below.

[47.5.2] Exceptions — s 47(2) Section 47(2) prescribes three exceptions to the operative provision under s 47(1). The first exception relates to property which may or must be described by serial number, over which separate taking free provisions exist (see s 44 and 45). The second exception provides for a ‘‘knowledge-based’’ exclusion, that is, s 47(1) does not apply where the buyer/lessee takes the personal property with actual or constructive knowledge (see Pt 8.6 regarding the concept of knowledge under the PPSA). The third and final exception concerns the concept of ‘‘market value’’, that is, where the buyer or lessee believes, and it is the case, that the personal property is worth more than $5,000 or an amount prescribed by the PPS Regulations — of which none exist at the time of writing. The concept of market value is discussed more fully at s 131.

[47.5.3] Practical consequences Notwithstanding several exceptions to the rule, there are potentially significant ramifications of such a broad taking free provision. Put simply, a secured party can never confidently have a protected interest where the property is worth less than $5,000 irrespective of their prudence in complying with the PPSA. This is because the PPSA facilitates security interests in two respects, firstly, against competing creditors — whether they are perfected or unperfected, secured or unsecured (governed by the priority rules pursuant to Pt 2.6 of the Act), and secondly, against third parties or parties who can take property free of existing security interests (governed by the taking free rules pursuant to Pt 2.5 of the Act). One practical solution, in the authors’ view, is to require retailers or on-sellers to inform the end purchaser or lessee that the property is subject to a security interest, where available. This relies on the prudence of the retailer however and may be undesirable. An alternative, is to mark the property itself to put a third party on notice of an existing security interest (by way of sticker or other adhesive). Whether these methods are ultimately necessary will become apparent as commercial participants become more familiar with the PPSA and its protocols. Parties should remember however that security agreements are mere contracts at their foundations and thus conditions should be imposed to help preserve security interests if and where available to the secured party.

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One should also remember the scope, ambit and effect of the PPSA as a commercial instrument. It is impractical and against the fundamental rationale of the regime to impose searching requirements on third party purchasers for ‘‘low value’’ personal property. Were this taking free rule not available, all personal property — including common groceries, would be the subject of the PPSA making any form of acquiring personal property the subject of PPS analysis (including one’s weekly shopping). It is clear, when reading the Act as a whole, that this is not the intended effect of the PPSA.

[47.6] Further reading ● ● ● ●

Explanatory Memorandum [2.99–2.101]. ALRC Report No 64 [9.1–9.12]. Whittaker Report [7.6]. Nicholas Mirzai, ‘‘The Consumer and the Personal Property Securities Act 2009: Does the Regime Protect Consumers?’’ — (2013) 87(1) Australian Law Journal 59.

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SECTION 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.

[48.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

No parallel provision No parallel provision No parallel provision No parallel provision

[48.2] Outline Section 48 is a new addition to the PPS regime with no direct foreign equivalent. As money or ‘‘currency’’ is a class of personal property recognised by the PPSA, a security interest in money can duly arise. Pursuant to the rule in this section, money should only form part of a security agreement where it is under the possession or control of the secured party.

[48.3] Cross-references ● Section 42 limits the scope of this section.

[48.4] Concepts ● Actual or constructive knowledge See s 297–299. ● Currency This is defined in s 10. Annotated Personal Property Securities Act 2009 (Cth)

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● Taking free See [43.5.1] and [43.5.2].

[48.5] Commentary Section 48 simply holds that a holder of currency takes the currency free from a security interest unless they have actual or constructive knowledge that a security interest exists (see Pt 8.6). This prevents the improper appropriation of encumbered funds from parties who are bound by the security agreement or any such related party, however, in a practical sense does little to protect the secured party beyond these persons or entities. The rationale here is one of commercial imperatives. Currency is meant to be freely exchangeable and common commercial practice is such that the holder of legal tender is assumed to have the capacity to deal with it as they choose subject to any information to the contrary (such as notice of a security interest).

[48.6] Further reading ● Explanatory Memorandum [2.102–2.103]. ● ALRC Report No 64 [9.1–9.12]. ● Whittaker Report [7.6].

¶2-170 SECTION 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.

[49.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

No parallel provision No parallel provision No parallel provision No parallel provision

[49.2] Outline Investment instruments and intermediated securities operate much like currency does under the PPSA, when dealt with in the ordinary course of trading. Section 49 thus establishes similar taking free provisions in this regard.

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Cross-references

● Section 42 limits the scope of this section.

● Intermediated security This is defined by s 15. See further s 26. ● Investment instrument This is defined by s 10 and reg 1.10. See [27.5], which discusses the meaning of ‘‘investment instrument’’ as part of the commentary on s 27 (Control of Investment Instruments). ● Ordinary course of trading in a prescribed financial market See s 46 regarding ‘‘ordinary course of business’’. In the authors’ view, similar principles apply here in accordance with the rules and protocols of the relevant financial market in issue. ● Taking free See [43.5.1] and [43.5.2].

[49.5] Commentary As investment instruments and intermediated securities comprise contractual terms in their own rights, the commerciality surrounding trade of such securities requires parties to take interests free from any existing security interest. Typically such instruments are perfected by possession or control and thus for the regime to require registration and a searching of the register would be inconsistent with the PPSA’s overriding policy objective to preserve existing commercial practices. Should a secured party wish to allow for the tradability of an investment instrument or intermediated security whilst still preserving their security over such instruments there are few options available under the PPSA. In the authors’ view, even where notice is given to the party acquiring the instrument, such that they have knowledge of the existing security, s 49 does not provide an exception based on a knowledge element unlike other provisions under Pt 2.5. While perfection by registration may provide protection against competing interests, the only adequate form of protection where investment instruments or intermediated securities form the underlying collateral is thus perfection by possession or control (see s 24–26).

[49.6] Further reading ● Explanatory Memorandum [2.104]. ● ALRC Report No 64 [9.1–9.12]. ● Whittaker Report [7.6]. Annotated Personal Property Securities Act 2009 (Cth)

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¶2-175 SECTION 50 TAKING INVESTMENT INSTRUMENT FREE OF SECURITY INTEREST Main rule 50(1) 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. Exception 50(2) 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. 50(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.

[50.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision s 20(4) s 28(4) no parallel provision

[50.2] Outline Section 50 applies where an investment instrument is acquired by a third party while not in the ordinary course of trading. In such circumstances, more protections are afforded to the secured party, however, the opinion expressed in the commentary to s 49 still stands by way of avoiding the issue of vulnerability to a party taking free from a security interest.

[50.3] Cross-references ● Sections 24 and 27 provide rules for the possession and control of investment instruments.

[50.4]

Concepts

● Actual or constructive knowledge See s 297–299.

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● Investment instrument This is defined in s 10 and reg 1.10. See [27.5], which discusses this term as part of the commentary on s 27 (Control of Investment Instruments). ● Possession

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See s 24. ● Taking free See [43.5.1] and [43.5.2]. ● Value This is defined by s 10. See also [19.5.2.2].

[50.5]

Commentary

[50.5.1] Main rule — s 50(1) .........................................................................257 [50.5.2] Exception — s 50(2) ........................................................................257 [50.5.3] Practical considerations .................................................................257

[50.5.1] Main rule — s 50(1) Section 50(1) holds that a purchaser (so defined by s 50(3)) takes an investment instrument free from a security interest where they provide value for the instrument and take possession or control. The section gives rise to the reality that possession or control defeats registration with regards to investment instruments.

[50.5.2] Exception — s 50(2) Section 50(2) provides that a purchaser will not take free if they have actual or constructive knowledge of the security interest (see Pt 8.6 regarding knowledge under the PPSA).

[50.5.3] Practical considerations Unlike s 49 above, a secured party can prevent the taking free provisions from applying to their security interest by attaching to the investment instrument a notice that a security interest exists over such property. The effectiveness of this method remains to be seen, however, presents a practical method of ensuring that a third party purchaser takes with actual knowledge of the security interest.

[50.6] Further reading ● Explanatory Memorandum [2.105]. ● ALRC Report No 64 [9.1–9.12]. ● Whittaker Report [7.6], [9.2]. Annotated Personal Property Securities Act 2009 (Cth)

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¶2-180 SECTION 51 TAKING INTERMEDIATED SECURITY FREE OF SECURITY INTEREST Main rule 51(1) 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. Exception 51(2) 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 product constitutes a breach of a security agreement that provides for a security interest in any intermediated security or financial product.

[51.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision s 20(4) s 28(6) no parallel provision

[51.2] Outline Section 51 relies on the definition of an intermediated security interest pursuant to s 15, however is, in substance and operative effect, very similar to s 50. As such it comes as little surprise that the exceptions to the rule are also identical to those available under s 50.

[51.3] Cross-references ● See s 15 regarding the definition of intermediated security.

[51.4]

Concepts

● Actual or constructive knowledge See s 297–299. ● Consensual transaction See [12.5.1] and [12.5.1.1]. ● Intermediated security This is defined in s 15. See further s 26.

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[51.5]

Commentary

[51.5.1] Main rule — s 51(1) .........................................................................259 [51.5.2] Exception — s 51(2) ........................................................................259

[51.5.1] Main rule — s 51(1) A transferee of an interest in an intermediated security (not itself constituting a security interest) who has provided value for the interest, takes that interest free of a prior security interest in the intermediated security where the credit of the interest in the financial product with which the interest arises is made by consent between the relevant parties. It should be noted that a purchaser in the ordinary course of business over a prescribed financial market will also take free of a prior security interest.

[51.5.2] Exception — s 51(2) The same exception applies with respect to intermediated securities as s 50(2) applies with respect to investment instruments (see s 50(2)).

[51.6] Further reading ● Explanatory Memorandum [2.106]. ● ALRC Report No 64 [9.1–9.12]. ● Whittaker Report [7.6].

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SECTION 52 TAKING PERSONAL PROPERTY FREE OF TEMPORARILY PERFECTED SECURITY INTEREST

Main rule 52(1) 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.

Exception 52(2) 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: Annotated Personal Property Securities Act 2009 (Cth)

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● Taking free See [43.5.1] and [43.5.2]. ● Value This is defined in s 10. See further [19.5.2.2].

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[52.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 56 s 30(5) no parallel provision no parallel provision

[52.2] Outline The previous taking free provisions pursuant to Pt 2.5 refer to specifics regarding the collateral itself or the nature of the security interest which arises — rather than the method of perfection adopted by the secured party. Section 52 is distinct in this regard as it applies irrespective of the interest or underlying collateral, where the security interest has been perfected by temporary perfection, that is, by operation of the statute.

[52.3] Cross-references ● Sections 33, 34, 39 and 40 deal with temporary perfection. ● Section 42 limits the scope of this section.

[52.4]

Concepts

● Actual knowledge See s 297. ● Buyer See s 43. ● New value This is defined by s 10. ● Negotiable document of title See s 8 and 72. ● Predominately for personal, domestic or household use See [14.5.3.3] and [47.5].

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[52.5]

Commentary

[52.5.1] Main rule — s 52(1) .........................................................................261

[52.5.1] Main rule — s 52(1) Temporary perfection operates by way of the statute itself and the security interest is treated as perfected, in the ordinary sense of the term under the PPSA (see s 21), within the temporary perfection period. Just as a perfected security interest in the traditional sense is vulnerable to the taking free provisions of Pt 2.5, so too are temporarily perfected security interests, such that a buyer or lessee takes their interest free where the interest is not otherwise perfected immediately before the sale or lease occurs (regardless of the class of collateral or security interest in question). While some protections are afforded to security interests perfected by temporary perfection, better protections exist for interests perfected by other means. The following hierarchy thus exists by way of the taking free provisions:

Secured party protections under Pt 2.5

TIER 3

TIER 2 TIER 1

UNPERFECTED SECURITY INTEREST – No knowledge based exception – Only a party to the security interest is excluded from taking free TEMPORARILY PERFECTED SECURITY INTEREST – Knowledge based exception (actual knowledge) PERFECTED SECURITY INTEREST – Specific exceptions – Broadest protections available depending on the class of collateral and/or the nature of the underlying instrument

s 43

s 52 s 44–51

This position reinforces the view that temporary perfection should only be relied on during the transitory stages of a security interest arising. Once a secured party is able to perfect by traditional means under the Act the authors’ are of the view that this should occur sooner rather than later.

[52.5.2] Exceptions — s 52(2) Actual knowledge defeats the buyer or lessee seeking to take free from a temporarily perfected security interest where: 1. if the property is acquired predominately for personal, domestic or household use — the time when new value is given, or 2. in a case other than where the property is acquired predominately for personal, domestic or household use — at the time of sale or entry (that is, at the time the contract was formed rather than when the contract was executed). Annotated Personal Property Securities Act 2009 (Cth)

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[52.5.2] Exceptions — s 52(2) .......................................................................261

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The extension of time for property acquired predominately for personal, domestic or household use again emphasises the consumer protection ambit of Pt 2.5.

[52.6] Further reading ● Explanatory Memorandum [2.107–2.109]. ● ALRC Report No 64 [9.1–9.12]. ● Whittaker Report [7.6], [8.7].

¶2-190 SECTION 53 RIGHTS OF SECURED PARTY AND TRANSFEREE ON TAKING PERSONAL PROPERTY FREE OF SECURITY INTEREST Scope 53(1) 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. Rights of secured party 53(2) 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). Rights of transferee 53(3) 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.

[53.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 65 no parallel provision no parallel provision no parallel provision

[53.2] Outline The rights of the secured party are not lost or forfeited by virtue of the Pt 2.5 taking free provisions of the PPSA. A secured party duly retains a personal right as against the debtor to enforce the underlying obligation. Section 53 additionally establishes some limited rights under the PPSA with respect to

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the security interest itself. It is not the intention of the PPSA that a secured party loses their interest however when faced with a third party purchaser or lessee who satisfies one of the taking free provisions, the third party’s gain is often the secured party’s loss.

Cross-references

Chapter 2

[53.3]

● Sections 42–52 provide taking free rules.

[53.4] Concepts ● Accession See s 10 and also Pt 3.3. ● Subrogated The right of subrogation operates by law and does not thus create a security interest in and of itself (see s 12 regarding security interests and how they arise for the purposes of the PPSA). Subrogation involves the secured party taking the shoes of the transferor by way of any right to receive payments still owing. While this offers some consolation to the secured party it will operate only when obligations remain outstanding as between transferor and transferee, which then expire if the transferee has paid the full purchase price, and only attach to the amount outstanding which could range anywhere between 0 and 100% of the security value.

[53.5] Commentary [53.5.1] Scope — s 53(1) ................................................................................263 [53.5.2] Rights and ramifications for the secured party — s 53(2) .........263 [53.5.3] Rights of the transferee — s 53(3) .................................................264

[53.5.1] Scope — s 53(1) Section 53(1) prescribes that s 53 applies in essence where one of the taking free provisions under Pt 2.5 has arisen to the benefit of the purchaser or lessee and to the detriment of a secured party.

[53.5.2] Rights and ramifications for the secured party — s 53(2) The secured party does not lose their security interest per se by virtue of the Pt 2.5 taking free provisions. The security interest remains valid in a technical sense, however, the rights the secured party holds are subrogated to the transferee’s interest. This includes the right to be paid the purchase price, where this has not occurred in full, noting that the secured party retains recourse against the debtor personally — noting that often the debtor will also be the grantor. Enforcement action to isolate such funds (if any) relies heavily on the prudence of the secured party and the ability to enforce or otherwise have the matter heard before the funds are misappropriated, become untraceable or are exhausted. The secured party has little claim over the third party buyer or lessee, however, and thus awareness of the taking free provisions and how to Annotated Personal Property Securities Act 2009 (Cth)

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duly protect one’s security is as essential to understanding the PPSA as the perfection and priority rules. Despite the existence of s 53, the practical effect of a party ‘‘taking free’’ is that the security interest is ‘‘extinguished’’. For this reason Pt 2.5 is often referred to synonymously as the ‘‘taking free’’ rules or the ‘‘extinguishment’’ rules under the PPSA despite the continued subsistence of a security interest pursuant to s 53.

[53.5.3] Rights of the transferee — s 53(3) Section 53(3) ensures that a secured party cannot, in essence, ‘‘double-dip’’ to coerce the transferee into satisfying the obligation owing twice, once to the transferor and then again to the secured party. Primacy is afforded to the transferee and while a right of subrogation may arise, once the obligations owing by the transferee are satisfied there will remain no outstanding duty. The dispute becomes one duly between the secured party and the transferor as to who may retain the funds paid. This must be so as any interference with the rights of the transferee would be contrary to taking free provisions and objectives of the PPSA under Pt 2.5.

[53.6] Further reading ● Explanatory Memorandum [2.110]. ● ALRC Report No 64 [9.1–9.12]. ● Whittaker Report [7.6].

PART 2.6 — PRIORITY BETWEEN SECURITY INTERESTS Division 1 — Introduction ¶2-195 SECTION 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

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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. 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.

Annotated Personal Property Securities Act 2009 (Cth)

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(b) priority between perfected interests amongst themselves, and unperfected interests amongst themselves, is determined on a first-in-time basis.

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Division 2 — Priority of security interests generally ¶2-200 SECTION 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).

Priority between unperfected security interests 55(2) Priority between unperfected security interests in the same collateral is to be determined by the order of attachment of the security interests. Perfected security interest has priority over unperfected security interest 55(3) A perfected security interest in collateral has priority over an unperfected security interest in the same collateral. Priority for perfection in other ways 55(4) 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. 55(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. 55(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. 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)).

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New Zealand Saskatchewan Ontario USA

[55.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 66, 68 s 35(1), (3) s 30(1), (5) § 9-322(a), (b)

Outline

The priority rules pursuant to Pt 2.6 of the PPSA prescribe the prevailing position where two or more security interests are competing for priority over the same underlying collateral. The term ‘‘priority’’ is not defined under the PPSA however it simply refers to the security interest which will have first right of enforcement against the underlying collateral — as against other security interests. Where multiple security interests exist, the priority rules thus determine the order in which such interests are satisfied should the debtor default in payment or performance of their obligation(s).

[55.3]

Cross-references

● This section is one of the central provisions of the PPSA and will be relevant in almost every type of priority dispute.

[55.4] Concepts ● Attachment See s 19. ● Continuous perfections See s 56. ● Control See s 25–29. ● Perfected and unperfected See s 21. ● Possession See s 24. ● Registration See Pt 5.3. ● Temporary perfection See [21.5]ff.

[55.5] Commentary [55.5.1] Default position — s 55(1) .............................................................268 [55.5.2] Priority between unperfected security interests — s 55(2) .......269 [55.5.3] Perfected security interests vs unperfected security interests — s 55(3) ................................................................................................................270 [55.5.4] Priority between two perfected security interests — s 55(4) ....273 [55.5.5] Priority time — s 55(5), (6) .............................................................274 Annotated Personal Property Securities Act 2009 (Cth)

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[55.5.1] Default position — s 55(1) Section 55(1) of the Personal Property Securities Act 2009 (Cth) (PPSA) expressly prescribes that the rules under s 55 operate only in default of other provisions under the PPSA. Of course, this does not mean that s 55 is to be regarded as subordinated to the wills of the parties pursuant to their security agreement. Rather that the remainder of Pt 2.6 is to be read for more specific priority rules regarding the particular underlying collateral and resulting interest/instrument — the absence of which will cause s 55 to apply. Conveniently the notes to s 55(1) identify other areas of the PPSA which are relevant to determining whether s 55 or some more specific provision applies. That said, whilst any number of security interest permutations are available under the PPSA, it is likely that many commercial priority disputes will be determined in accordance with s 55, particularly in the absence of perfection by control. When determining a priority dispute the relevant point in time at which the inquiry is conducted is the time of conflict between security interests. This is typically upon the occurrence of an event of default which entitles or empowers the secured party (subject to the express contractual stipulations governing the relationship between secured party and grantor) to enforce its security interest. Noting creditor indulgence in respect of late payment vis-a` -vis the cost and effort of enforcing a security interest, it is not uncommon, in a commercial sense, for security interests to remain unenforced by any one secured party. In this circumstance, the priority provisions become very important upon the grantor entering external control, that is, bankruptcy, in the case of the individual, and insolvency, in the case of the corporation. In Gibbston Downs Wines Ltd v Perpetual Trust Limited (2012) FPPSR ¶700-007; [2012] NZHC 1022, the event of default was the appointment of receivers. It is at this point in time that the two competing interests taken over the same collateral are compared in light of the following two examinations: 1) The nature of the interests (perfected, unperfected, transitional, purchase money security interest (PMSI) or otherwise). 2) The time at which the relevant nature of the interest first arose, that is, for perfected interests — the time when the interest was perfected, for unperfected interests — the time when the interest attached, etc. Importantly, it is only where the result of the first examination yields ‘‘like’’ interests, that is, perfected v perfected or unperfected v unperfected, that the second examination with respect to timing is required. This is because the default priority provisions and other more specific provisions with respect to priority pursuant to the remainder of Pt 2.6 (considering also Ch 9) of the PPSA stipulate a prevailing interest where the interests are not alike often irrespective of time. The order of the inquiry is thus important and should be conducted in the fashion outlined above: see also Sperry Inc v Canadian Imperial Bank of Commerce and Throne Riddle Inc (1985) 17 DLR (4th) 236.

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Where both secured parties hold an unperfected security interest over the same underlying collateral, s 55(2) of the Personal Property Securities Act 2009 (Cth) (PPSA) prescribes that the first interest to attach in time takes priority (see s 19). The failure to perfect does not affect the binding obligations as between the parties subject to the security agreement. A failure to comply with formal perfection requirements only effects priority between competing secured parties (unless the taking free provisions apply, particularly s 43). Section 55(2) is consistent with foreign PPS legislation in this regard: see generally Innovation Credit Union v Bank of Montreal (2009) 14 PPSAC (3d) 149; 306 DLR (4th) 407 at [59]; Radius Credit Union Ltd v Royal Bank (2009) 14 PPSAC (3d) 124; 306 DLR (4th) 444 at [33]; Re 1231640 Ontario Inc (2007) 13 PPSAC (3d) 57; 289 DLR (4th) 684 at [60]. While the above statements are true, they demonstrate the dangers with referring exclusively to s 55 when looking to determine priority under the PPSA. Section 55(1) makes it clear that the default rules are subject to the remainder of Pt 2.6. Worth mentioning are the more specific priority rules particularly with respect to perfection by control (dealt with under s 57) and temporary perfection (see Ch 9) which diverge significantly from the default position (although given the expiration of the transitional period, Ch 9 is of limited relevance going forward). The priority summary table, which is contained in the CCH Australian Personal Property Securities Law Reporter at ¶60-500, is a useful illustration of which rules prevail over which others and in what particular order. As always, there is no true substitute to a comprehensive reading of the statute itself (the rules of which are contained within Pt 2.6 and discussed in ¶60-500ff). It is worth noting that in a practical sense, a priority dispute between two unperfected security interests should rarely arise as there is no time limitation imposed by the PPSA as to when a secured party can perfect their interest. That said, there are time limitations imposed by other statutes (see Corporations Act 2001 (Cth), s 588FL). Absent such statutory limitations, it makes commercial sense that even where attachment of a security interest has occurred some time prior (even if this period is considerable) to any notice of a pending priority dispute, that upon the discovery of such a dispute, steps to perfect are taken. In the authors’ view, the prudent creditor should always take steps to perfect their security interest as soon as practicable after obtaining knowledge of taking a security interest, even if this is quite some after attachment has occurred or the security interest was formed. The flexibility of the PPSA perfection regime is useful in this regard. Time extensions pursuant to s 588FM of the Corporations Act 2001 (Cth) may be relevantly considered in circumstances where the secured party has fallen outside of the prescribed period. Failing to obtain an order pursuant to s 588FM in circumstances where s 588FL applies will mean that the security interest is unperfected for all practical purposes. Annotated Personal Property Securities Act 2009 (Cth)

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[55.5.2] Priority between unperfected security interests — s 55(2)

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[55.5.3] Perfected security interests vs unperfected security interests — s 55(3) It should come as little surprise that a perfected security interest takes priority over an unperfected security interest over the same collateral pursuant to s 55(3). This is the case even where the perfected security interest is created or attaches later in time than the unperfected interest. The rationale behind this Section is the primacy of the register where, in the absence of possession or control of the collateral to otherwise put creditors on notice of a security interest, new creditors would have no means of discovering the earlier in time unperfected interest. The timing of perfection (namely when perfection occurs) is irrelevant where a priority dispute arises between a perfected and an unperfected interest, provided the interest is duly perfected when the secured party seeks to enforce their interest (which also involves continuous perfection, see s 56). There are a multitude of foreign cases where an earlier unsecured party has failed in a priority dispute against a subsequent perfected interest, a select few have been included in this commentary to help isolate the central points of this provision. The first case is the well-known New Zealand decision, Graham v Portacom New Zealand Ltd [2004] 2 NZLR 528. In this case, a number of portable buildings became the subject of a leasing agreement over an indefinite period of time. The lessor failed to perfect their interest which, whilst potentially not a security interest in substance (see s 12), constituted a PPS lease or ‘‘deemed security interest’’ pursuant to the New Zealand equivalent of s 13(1)(b) (see s 13). Subsequent to entering the lease, the lessee proceeded to borrow money from a bank which took an ‘‘all present and after-acquired property’’ security interest over the lessee’s personal property, and duly registered its interest in accordance with the PPSA. Upon the default of the lessee, the bank sought to enforce its security interest including within the scope of its security the portable buildings. The lessor disputed this act holding that the lessee was not the owner of the property and thus a security interest could not be granted over it as freeholder of the property. As noted in the commentary to s 13, the court found that the interest was a deemed security interest and as it was unperfected it was subordinated to the perfected security interest. A similar outcome occurred in Waller v New Zealand Bloodstock Ltd [2005] 3 NZLR 629, where a ‘‘lease-to-purchase’’ type agreement was entered over a horse. The lessor did not register their interest or perfect by other means in accordance with the PPS regime. A bank subsequently lent funds to the lessee taking an ‘‘all present and after-acquired property’’ security interest over the lessee’s personal property. The lessee defaulted and again the bank took priority as against the lessor’s ownership interest. While in effect circumventing the ownership interest of the lessor, the PPSA operates by the founding principles that title is irrelevant and that primacy must be given to the register to promote consistent and predictable outcomes of priority. The New Zealand Court of Appeal embraced the authority stemming from the Canadian provinces to find this conclusion commenting that (at [75]):

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‘‘The result follows Parliament’s decision that the kind of leasehold interest retained by New Zealand Bloodstock should, as a matter of policy, be treated as a mere security interest which requires registration to be perfected. Since that did not occur, Lock’s competing security interest which was duly registered and so perfected took priority. The major lessons of the case are twofold: the statutory altering of the proprietary rights of a lessor; and the crucial importance of registration. These are policy choices which have been made and significantly alter what would otherwise have been the position.’’ It is thus a misconception that s 55(3) arises only where the unperfected party has been imprudent, often the underlying interest itself will not take the form of a traditional security interest and thus parties may erroneously assume that the PPSA does not apply. To facilitate the transitional phases of the PPSA, Ch 9 aimed to alleviate the impact of this priority rule (see Ch 9, particularly ss 323–324). The cessation of Ch 9 means that such protection does not exist going forward. Holders of transitional security interests received only temporary perfection under the transitional rules and will be unperfected if they failed to perfect their transitional security interest in another way prior to the end of the transition period. The New Zealand decisions in Portacom and Waller were applied in the first major Australian PPSA case: Re Maiden Civil (P&E) Pty Ltd (2013) APPSR ¶701-008; Albarran v Queensland Excavation Services Pty Ltd (2013) 277 FLR 337; [2013] NSWSC 852 (discussed in s 13). In that case, the lessor of several large construction vehicles (QES) failed to perfect its security interest in the vehicles leased to Maiden Civil and lost its priority interest in the vehicles when Maiden Civil obtained operating finance from another secured party (Fast Financial) who properly perfected its interest with an all present and after acquired property financing statement that was registered on the PPSR. QES had a transitional security agreement but had failed to properly perfect its interest under pre-PPSA law and hence was precluded from the protection offered by the deemed perfect in the transitional rules. It thus held an unperfected security interest that was subordinated in priority to that of the later created (but perfected) security interest of Fast Financial. Furthermore, QES lost its priority interest because of the operation of the vesting rule in s 267 when Maiden Civil entered voluntary administration. Furthermore, QES lost its priority interest because of the operation of the vesting rule in s 267 when Maiden Civil entered voluntary administration. See also White v Spiers Earthworks Pty Ltd [2014] WASC 139, where a failure to comply with pre-PPSA registration requirements meant that deemed perfection under s 322 did not apply because of the operation of PPS reg 9.2. In the recent decision in Central Cleaning Supplies (Aust) Pty Ltd v Elkerton [2014] VSC 61, a supplier with a retention of title arrangement failed to perfect its interest in supplied goods by registering a financing statement on the PPSR. It did so on the basis that it believed it was protected by transitional rules. However, the court held that although the credit agreement and standard terms pre-dated the commencement of the PPSA, each new supply was a separate contract and hence were not transitional security interests and Annotated Personal Property Securities Act 2009 (Cth)

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thus the supplier’s security interest was unperfected and vested in the company when it entered liquidation. The ROT clause was not included in the standard terms and conditions but rather operated as a condition on each invoice, which contributed to each order being a separate contract. It is worth noting that the decision of the Victorian Supreme Court in respect of the source of the security interest was reversed on appeal, see Central Cleaning Supplies (Aust) Pty Ltd v Elkerton (2015) 296 FLR 25; [2015] VSCA 92. While an unperfected security interest remains enforceable as against the grantor in respect of the underlying collateral, it is held to be ‘‘subordinated’’ to such an interest (consider the effect and practical implications of this provision in light of s 53 concerning parties who take free). Like with the effect of s 53, the practical reality is often that the unperfected secured party will be left with little to no collateral against which their security interest may be duly enforced. There is no overarching notice or knowledge based exception (which is unlike many of the taking free provisions pursuant to Pt 2.5), that is, a perfected security interest will not fail as against an unperfected security interest even where the subsequent perfected party takes with actual knowledge of the prior unperfected security interest. The rationale here is that primacy is given to the PPS register and parties seeking to preserve priority must conform with the provisions of the PPSA. This notion was reinforced in the New Brunswick Court of Appeal case, GMAC Leaseco Ltd v Moncton Motor Home & Sales Inc (Trustee of) (2003) 4 PPSAC (3d) 211; 227 DLR (4th) 154 at [22], where Robinson JA held that: ‘‘Knowledge of the existence of a competing security interest in collateral is far less relevant to establishing priority in a PPSA regime than it was under the prior law. The general scheme of the legislation is that the knowledge possessed by competing secured creditors and other third parties is irrelevant to establishing priority unless the NBPPSA states otherwise. For example, s. 35(1)(b) states that a perfected (registered) security interest has priority over an unperfected security interest. This remains true even if the creditor with the perfected security interest took with notice of the unperfected interest.’’ It should also be noted that in order for the PPSA to apply, the security interests which are in a priority dispute must both be governed by the PPSA. This is particularly important where interests arise or incorporate rights and responsibilities above and beyond the PPSA itself, such as those conferred by other statutes. See further s 8 and 73. An unperfected security interest does not become an interest perfected by possession if enforcement action is taken in accordance with the security interest, pursuant to s 21(2)(b). See for example Bank of Nova Scotia v Royal Bank (1987) 8 PPSAC 17; 42 DLR (4th) 636 (Sask CA).

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Section 55(4) of the Personal Property Securities Act 2009 (Cth) (PPSA) provides that the default priority rule between two perfected security interests is that the first in time will prevail. The Section refers to the concept of ‘‘priority time’’ discussed in s 55(5) and (6). While the Act, for the purposes of s 55, does not discriminate between the methods of perfection adopted by the secured party, certain of the more specific priority rules only operate with regard to particular modes of perfection and take primacy as against the default priority rules pursuant to s 55. See also Bulut v Brampton (City) (2000) 15 PPSAC (2d) 213; 185 DLR (4th) 278 at [74]–[80]. Section 55(4) also provides a valid reason why the pre-perfection steps permitted by the PPSA are beneficial to secured parties including the registration of a financing statement prior to a security interest attaching to particular collateral (see [21.4.4]). Where the ‘‘first in time’’ rule prevails it is important that secured parties prudently perfect their interest as soon as practicable. This feature of the PPSA was addressed in the British Columbia Court of Appeal case, 674921 BC Ltd v Advanced Wing Technologies Corp (2006) 9 PPSAC (3d) 43; 263 DLR (4th) 290 at [14], where Newbury JA noted that the: ‘‘‘Residual Priority Rules’, provide a set of ‘default’ rules to be applied in contests between security interests. Importantly for this case, priority between perfected security interests in the same collateral is generally determined according to the order of the registration of financing statements, ‘without regard to the date of attachment of the security interest’. Thus as Cuming and Wood observe, although the ‘perfection of a security interest is an essential feature of priority, priority is not based on the time of perfection. A security interest may have priority even though it was not the first security interest to be perfected. Time of attachment is also not a factor in determining priorities between two secured parties (except in the unlikely event that both secured parties have failed to perfect their security interests).’’’ The rationale behind the ‘‘first in time’’ rule is again predominately to give primacy to the register. See also The Healy Holmberg Trading Partnership v Grant [2012] NZCA 451 (discussion of the first to register rule). Where property is not in the possession or control of the secured party, the PPS Register provides the only other recognised method of putting subsequent secured parties on notice of a prior perfected security interest for Pt 2.6 purposes. As the Ontario case BMP & Daughters Investment Corp v 941242 Ontario Ltd (1992) 4 PPSAC (2d) 220; 96 DLR (4th) 741 at [19] (Ont Court of Justice) notes: ‘‘There is merit in having a clear-cut rule of priority. Parties will perfect promptly in order to ensure that the ‘greatest bundle of rights’ has been secured. Accordingly, where a secured party hesitates or fails to perfect, then he runs the risk of subordination to later and more diligent secured Annotated Personal Property Securities Act 2009 (Cth)

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Personal Property Securities Act 2009 interests. In short, the integrity of the P.P.S.A. must be maintained at the expense of the equitable doctrine of actual notice.’’

The requirements of perfection must be fully constituted in order for the priority rule pursuant to s 55(4) to apply. For example, certain property must be described by serial number in a financing statement (see s 153) and if this does not occur, the interest is unperfected and s 55(3) applies by default.

Pre-perfection The issue of ‘‘pre-perfection’’ (ie registering on the PPSR prior to the other steps of perfection being completed) was addressed in the New Zealand Court of Appeal decision, The Healy Holmberg Trading Partnership v Grant and Khov as liquidators of LBD Civil Limited (in liq) (2012) FPPSR ¶700-011; [2012] NZCA 451. In that case the Court of Appeal was required to ultimately consider whether a security interest perfected by registration later in time prevails over a security interest registered earlier in time where the interest did not actually become fully perfected until after the subsequent interest arose and was perfected. The Court of Appeal decided that the security interest registered earlier in time prevailed.

[55.5.5] Priority time — s 55(5), (6) Section 55(5) prescribes the time at which a period of priority commences, subject to s 55(6). As previously stated, the default priority provisions pursuant to s 55 do not discriminate between the methods of perfection. As such, the earliest of registration, possession, control or temporary perfection will take priority against subsequent interests, irrespective of the method of perfection adopted, in the absence of more specific priority rules, pursuant to s 55(4). Section 55(6) prescribes that the earliest of the four registration methods only prevails against subsequently perfected interests where the perfected interest is ‘‘continuously perfected’’. The concept of continuous perfection is discussed at s 56 below.

[55.6] Further reading ● Explanatory Memorandum [2.114–2.118]. ● ALRC Report No 64 [6.1–6.20]. ● Whittaker Report [7.4], [7.7]. ● Roderick Wood, ‘‘Circular priorities in secured transactions law’’ (2009) 47 Alberta Law Review 823. ● Nicholas Mirzai, ‘‘The Personal Property Securities Act 2009 — A personal property Torrens register? An analysis of the priority afforded to interests perfected by registration’’ (2012) 20 Australian Property Law Journal 102.

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SECTION 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. 56(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.

[56.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[56.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 42 s 23(1), 35(2) s 21(1) § 9-308(c)

Outline

Pursuant to s 55(6), a security interest must be ‘‘continuously perfected’’. Section 56 prescribes how a security interest can achieve continuous perfection.

[56.3] Cross-references ● The concept of continuous perfection is integral to the priority conferred on perfected security interests and appears in more than a dozen times in the PPSA.

[56.4]

Concepts

● Perfected See s 21. ● Perfected by possession See s 22 and 24. ● Perfected by registration See s 21 and 153.

[56.5] Commentary Pursuant to s 56(1) a security interest is continuously perfected where it is perfected under the PPSA at all times. The PPSA, pursuant to s 56(2), allows Annotated Personal Property Securities Act 2009 (Cth)

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for multiple forms of concurrent perfection, that is, a secured party is not prevented or excluded from registering a financing statement simply because they have possession or control of the underlying collateral — and the reverse applies. It is recommended that all secured parties (where possible) register a financing statement as a precaution against losing perfection by control or possession. It is clear that continuous perfection is not limited to perfection by the same method: see Adelaide Capital Corp v Integrated Transportation Finance Inc (1994) 6 PPSAC (2d) 267; 111 DLR (4th) 493 at [68] (Ont Court of Justice). In the authors’ view, where there is any risk of losing a perfected interest, perfection by registration should be sought in addition to other forms of perfection. While perfection by registration in and of itself renders the interest vulnerable to perfection by control under some of the more specific priority rules (see the balance of Pt 2.6 below — specifically s 57(1)) for the purposes of maintaining continuous perfection under the PPSA it is certainly an avenue worth considering (as exposure to perfection by control, where relevant, applies whether or not the underlying security interest is perfected by registration or not). In addition, perfecting by registration does not replace the method of perfection first relied on for the purposes of enforcement. This view was adopted in Lisec America Inc v Barber Suffolk Ltd (2012) FPPSR ¶700-128; [2012] ONCA 37; (2012) 18 PPSAC (3d) 252, where RA Blair J (HS LaForme JA and ML Benotto J agreeing) held (at [38]): ‘‘There is nothing in the PPSA that precludes a secured creditor from having a perfected security interest in collateral in more than one way or through registration against more than one entity.’’ The benefits of perfection by registration in light of the requirement for continuous perfection even where the secured party has possession of the underlying collateral can be demonstrated by way of example. Consider the following: Party A agrees to provide Party B with a short term loan of $10,000 repayable in three months time plus interest in return for a security interest over Party B’s truck. Party B agrees to surrender possession of the truck to Party A until the money is repaid. Two weeks later Party B requires a further advance of monies and approaches Party C. Party C agrees to provide $5,000 for three months and takes an ‘‘all present and afteracquired’’ security interest over Party B’s personal property for the duration of the loan. After one month, Party A losses possession of the truck for one week and then regains possession. Two weeks prior to the repayment owing to Party A, Party B enters bankruptcy. Party A and Party C enter a priority dispute over the truck.

The default priority rule pursuant to s 55 would be applicable in this case. The contest is one between like interests, namely, two perfected security interests. The prevailing party is the one perfected first in time pursuant to s 55(4) of the PPSA. Party A would have prevailed but for failing to maintain continuous perfection. Should Party C be aware of the one week loss of possession, Party C could rely on s 56 to prevail against Party A. Party A could have prevented the risk of misappropriation by additionally registering a financing statement at the time of entering the security interest.

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[56.6] Further reading ● Explanatory Memorandum [2.119]. ● ALRC Report No 64 [6.1–6.20]. ● Whittaker Report [5.3].

SECTION 57 PRIORITY OF SECURITY INTERESTS PERFECTED BY CONTROL

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Priority interests 57(1) 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).

57(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). 57(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: (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. Control priority takes precedence over any other priority rule 57(3) This section applies despite the application of any other provision of this Part.

[57.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[57.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision s 35.1(2) s 30.1 § 9-328

Outline

While the PPSA does not discriminate between methods of perfection pursuant to the default priority rules this can be deceptive as security interests perfected by way of control take priority over other security interests pursuant to s 57. In understanding s 57 and the rationale behind priority of collateral Annotated Personal Property Securities Act 2009 (Cth)

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perfected by control it is necessary to understand the commerciality of the instruments and interests which can be perfected by control under the Act (see s 21(2)(c)).

[57.3] Cross-references ● Sections 21 and 22 provide for perfection of security interests. ● The concept of control is central to the PPSA and is referred to over 30 times in the Act.

[57.4]

Concepts

● Continuous perfection See s 56. ● Control See s 25–29. ● Original collateral See s 31. ● Proceeds See s 31–34.

[57.5] Commentary [57.5.1] Control primacy — s 57(1) .............................................................278 [57.5.2] Perfection by control vs perfection by control — s 57(2) ..........278 [57.5.3] Perfection by control and proceeds — s 57(2A) .........................279 [57.5.4] Commercial realities — s 57(3) .....................................................279

[57.5.1] Control primacy — s 57(1) Section 57(1) prescribes that where a security interest perfected by control is in a priority dispute with a security interest perfected by some other means (irrespective of the time at which the security interest is taken) the interest perfected by control will prevail. This provision requires that the interest perfected by control be validly constituted at the time the secured party seeks to enforce their interest. The concept of perfection by control, while of critical importance where it is available, has not specifically formed the subject matter of case law amongst the Canadian provinces. This position is similar to that in New Zealand. The very nature of investment type personal property is that other legislation and financial market rules will often cater for priority disputes without requiring recourse to the PPSA. The Securities Transfer Act, R.S.O. 2006, c. 8 is one such example which operates in Ontario.

[57.5.2] Perfection by control vs perfection by control — s 57(2) Section 57(2) prescribes that where two or more security interests perfected by control are in a priority dispute, the first in time perfected by control prevails. A condition of this priority rule is that the interests are continuously perfected. For this purpose, the commentary at s 56 is equally relevant here.

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[57.5.3] Perfection by control and proceeds — s 57(2A) Section 57(2A) addresses who takes priority to proceeds which derive from original collateral over which security interests perfected by control are held. Proceeds under the PPSA take the meaning prescribed at s 31. Perfection by control provides no exception to the application of this definition and thus where proceeds are not identifiable or traceable, a security interest over the original collateral will not extend regardless of the method of perfection utilised. Section 57(2A) prescribes that a security interest over original collateral, which gives rise to proceeds and perfected by control, takes priority over such proceeds as against other security interests perfected by other means taken in the same collateral. A security interest can however also be granted over the subsequent proceeds as original collateral. Where this is the case, if the subsequent security interest in proceeds as original collateral is perfected by control but the proceeds are not and the security interest over the proceeds as original collateral are perfected by control — then the subsequent interest in the proceeds as original collateral will take priority. The following example illustrates this technical point: Debtor A borrows money from Secured Party B, granting a security interest over an investment instrument which Secured Party B perfects by control. Debtor A also grants a security interest over ‘‘all present and after-acquired personal property’’ in favour of Secured Party C, a bank who lends funds to Debtor A. The investment instrument falls into the hands of Debtor A who sells the instrument and deposits the proceeds in a general account which is jointly held by Secured Party C and which Secured Party C’s security interest extends to.

The proceeds of sale of the investment instrument can be classed as proceeds of Secured Party B’s interest however would constitute original collateral of Secured Party C’s interest. By virtue of s 57(2A), Secured Party C will prevail. This makes commercial sense as there is little reason why a party perfecting by control should not be exposed to the vulnerability of a secured party controlling the proceeds as original collateral.

[57.5.4] Commercial realities — s 57(3) Section 57(3) not only provides that s 57 is to be read in preference to s 56 but that s 57 is to prevail over any competing section pursuant to Pt 2.6. While s 57 is thus the most senior priority rule under the PPSA it should not be read out of context. The instruments and interests which s 57 operates with respect to are few and selectively prescribed in order to preserve commercial pragmatism and practices which have developed over time in Australia. The PPSA is designed deliberately to minimise unnecessary disturbance of existing market protocols. Annotated Personal Property Securities Act 2009 (Cth)

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This is somewhat of a misnomer as to perfect by control is to, in effect, remove control from other secured parties such that the true position will almost inevitably be that where one party has perfection by control — no other party can have perfection by control. This is similar to the mutual exclusivity which inherently follows perfection by possession (see s 24).

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While perfection by control should thus be a preferred choice of perfection where available, in light of the potential to lose control it is, in the authors’ view, wise to additionally perfect by registration to satisfy the continuous perfection requirements should a temporary break in control occur. This will not preserve status as perfected by control perpetually, however, where the break in control is temporary, registration will serve to continuously perfect the underlying interest. There is further little harm in the authors’ mind with putting the world on notice of an existing security interest.

[57.6] Further reading ● Explanatory Memorandum [2.120–2.125]. ● ALRC Report No 64 [6.1–6.20]. ● Whittaker Report [7.7].

¶2-215 SECTION 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).

[58.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 71, 72 s 14(1), 35(5) s 13, 30(3) § 9-323

[58.2] Outline Section 58 provides an express priority rule with respect to advances made under the PPSA. This includes provision for future advances under the PPSA pursuant to s 18(4) (see [18.5.4]). ‘‘Advances’’ is a term defined by the Act under s 10.

[58.3] Cross-references ● Section 18(4) allows for security agreements to include advances.

[58.4]

Concepts

● Advance This is defined in s 10 as: (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.

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Part 2.6 — Priority between security interests ● Security agreement This is defined by s 10. See further s 18 and 20.

Commentary

Priority of advances follows the priority afforded to funds lent at the commencement of a security agreement. See the discussion of s 18(4) in [18.5.4]. The note to the provision additionally prescribes that this section applies subject to s 68 (namely s 68(2) and (3)). See s 68 for further commentary.

[58.6] Further reading ● Explanatory Memorandum [2.138, 2.164]. ● ALRC Report No 64 [6.1–6.20]. ● Whittaker Report [7.7]. ● Roderick Wood, ‘‘Turning lead into gold: the uncertain alchemy of ‘all obligations’ clauses’’ (2003) 41 Alberta Law Review 801.

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SECTION 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

[59.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[59.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision no parallel provision

Outline

This section provides clarity regarding priority contests between three or more security interests. Annotated Personal Property Securities Act 2009 (Cth)

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[58.5]

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[59.3] Cross-references Nil.

[59.4] Concepts Nil.

[59.5] Commentary This section deals with the circularity problem that can possibly arise where a secured party has priority over a second security interest and the second interest has priority over a third security interest. This section ensures that the first security interest will have priority over the last security interest.

[59.6] Further reading ● Explanatory Memorandum [2.130]. ● ALRC Report No 64 [6.1–6.20]. ● Whittaker Report [7.7].

¶2-225 SECTION 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.

[60.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 60 s 35(5), (7) no parallel provision § 9-325

[60.2] Outline The transfer of collateral is discussed further at Pt 2.6, Div 4. Section 60 expressly prescribes the effect of a transfer of a security interest with respect to its priority.

[60.3] Cross-references ● Sections 68–70 provide rules for the transfer of collateral.

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[60.4]

283

Concepts

Nil.

Commentary

A security interest which is transferred maintains the same priority before the transfer as it does after the transfer, pursuant to s 60. The priority of a security interest is thus dependent on the instrument itself rather than on the capacity of the holder. There is a distinction however between the secured parties for the purposes of future advances. As discussed under s 18(4) (see [18.5.4]) the transfer of a security interest to a holder of a subsequent security interest does not, by definition, make the advance of funds pursuant to the subsequent interest a ‘‘future advance’’ of the earlier interest as to grant superior priority. See also Re Carpenter International Pty Ltd [2016] VSC 118 at [83]. By virtue of s 60 there is a sense of propriety in the security interest itself, that is, enforceability of the interest does not depend on the secured party rather on the security interest in its own right. See further Dixon Fuels Ltd v SWS Fuels Ltd (2011) FPPSR ¶700-127; (2011) 17 PPSAC (3d) 175; [2011] NSCA 35. The inherent limitation of s 60 is a plain operation of the nemo dat quod non habet rule, namely, the assignor of a security interest can only confer upon the assignee that which they hold. What is meant by this is that if the assignor holds a security interest perfected by registration be no more than an unperfected security interest due to some defect in the registration, the assignee cannot seek to benefit from the priority conferred upon the initial financing statement by making good the defect upon the transfer. The due diligence of a potential assignee of a security interest is therefore critical as it is often the case that the assignee cannot simply re-perfect or correct the anomaly to obtain a suitable position of priority.

[60.6] Further reading ● Explanatory Memorandum [2.133]. ● ALRC Report No 64 [6.1–6.20].

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SECTION 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. 61(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.

Annotated Personal Property Securities Act 2009 (Cth)

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[60.5]

284

Personal Property Securities Act 2009

[61.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 70 s 40 s 38 § 9-339

[61.2] Outline The concept of subordination, while recognised and facilitated by the PPSA, operates by way of agreement between the parties rather than by force of the statute. Section 61 provides for the priority of voluntary subordination agreements (see also [12.5.6] Subordination agreements excluded by the PPSA — s 12(6)).

[61.3] Cross-references ● Section 12(6) provides that a subordination agreement is not a security interest. ● Section 153 provides the option to indicate on a financing statement whether or not the security interest is subject to a subordination agreement, but this is not mandatory. The subordination agreement will operate according to its terms rather than according to the registration: Gibbston Downs Wines Ltd v Perpetual Trust Ltd [2013] NZCA 506.

[61.4]

Concepts

● Effective according to terms See s 18. ● Enforced by a third party See s 20.

[61.5] Commentary Section 61(1) expressly provides for the priority position of a particular secured party to be affected by a subordination agreement to which they are a party. It should be noted that a subordination agreement is not itself a security interest: s 12(6) but rather can effect the scope, priority and effect of a security interest. Furthermore, s 61 merely recognises that subordination agreements may operate, it does not of itself govern those agreements: Gibbston Downs Wines Ltd v Perpetual Trust Ltd [2013] NZCA 506 at [30]. Although no particular words are needed, the intention of the secured party to subordinate its interest must be clear from the agreement: Re Gauntlet Energy Corp (2003) 5 PPSAC (3d) 236; 20 Alta LR (4th) 314 (Alta QB). See also Re DCD Industries (1995) Ltd (2005) 7 PPSAC (3d) 251; 253 DLR (4th) 171 (sub nom Kubota Canada Ltd v Case Credit Ltd) (Alta CA). The statutory recognition that voluntary subordination may occur, and that this may occur expressly or on an implied basis does not mean that the parole evidence rule is circumvented: CFI Trust v Royal Bank of Canada [2013] BCSC 1715.

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Subordination may be established from the express words used in the security agreement, but they may also be implied from the terms of the agreement provided that later security interests are acknowledged in some way: Re DCD Industries (1995) Ltd (2005) 7 PPSAC (3d) 251; 253 DLR (4th) 171 (sub nom Kubota Canada Ltd v Case Credit Ltd). In that case, the Alberta Court of Appeal reviewed several Canadian appellate decisions and found that wording in a security agreement that prohibits the grantor from granting further security interests ‘‘other than a PMSI or equivalent’’ could give rise to an implication of subordination over an unperfected purchase money security interest (PMSI) (although in that case there was no such phrase and thus no implication). See also Flexi-Coil Ltd v Kindersley District Credit Union Ltd (1993) 5 PPSAC (2d) 192; 113 Sask R 298 (Sask CA); Engel Canada Inc v TCE Capital Corp (2002) 4 PPSAC (3d) 124; 34 CBR (4th) 169 (Ont SC). A letter from the senior secured party to the debtor directing them to pay the senior lender after paying a particular junior lender was found to be a subordination agreement in Toronto Dominion Bank v Royal Bank (1998) 15 PPSAC (2d) 16 (Ont CA). Subordination agreements may additionally be relied on by third parties who benefit from the agreement, pursuant to s 61(2). The beneficiary of the subordination need not have a perfected security interest: Chiips Inc v Skyview Hotels Ltd (1994) 7 PPSAC (2d) 23; 116 DLR (4th) 385 (Alta CA). See further Euroclean Canada Inc v Forest Glade Investments Ltd (1984) 4 PPSAC 271; 16 DLR (4th) 289 (Ont CA). Subordination by a secured party will be binding on successors of the subordinated interest: 1662254 Ontario Inc v Coby’s Cookies Inc (2008) 12 PPSAC (3d) 150; 40 CBR (5th) 134 (Ont SCJ). A secured party can thus provide funds to a debtor on the condition that certain property over which a security interest is already existing be the subject of a subordination agreement in favour of some other party (including themselves). In the absence of subordination agreements, alterations to the existing priority rules would be difficult to achieve however the authors’ would advise that caution is exercised when constructing subordination agreements to ensure the desired effect is plainly available from the language of the agreement (see further [62.5.4.2] below).

[61.6] Further reading ● Explanatory Memorandum [2.134–2.135]. ● ALRC Report No 64 [6.1–6.20]. ● Whittaker Report [7.7], [8.3]. Annotated Personal Property Securities Act 2009 (Cth)

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Division 3 — Priority of purchase money security interests ¶2-235 SECTION 62 WHEN PURCHASE MONEY SECURITY INTERESTS TAKE PRIORITY OVER OTHER SECURITY INTERESTS Scope 62(1) 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).

Inventory 62(2)

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).

Personal property other than inventory 62(3)

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

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Note: The period mentioned in paragraph (b) may be extended by a court under section 293. S 62(3) amended by No 96 of 2010, s 3, Sch 2, Pt 1, item 51, effective 6 July 2010.

[62.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[62.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 73, 74, 75 s 34(2) s 33(1), (2) § 9-324

Outline

Section 62 provides the mechanics by which a purchase money security interest (PMSI) achieves a ‘‘super priority’’ class over and above ordinary security interests under the PPSA: Greenlight Asset Pty Ltd v WBK Ricetti Pty Ltd [2017] WASC 278 at [9]. PMSIs are defined under s 14 (see s 14) and arise, in essence, to alleviate the strict nature of the default priority rules pursuant to s 55 — which fail to cater for the commercial nature of the particular interests identified (see [14.5] and [14.5.2.1]ff).

[62.3]

Cross-references

● Sections 63–64, 86 and 103 provide further priority rules affecting PMSIs. ● Section 153 requires that a PMSI security interest be indicated on the financing statement. ● Section 165 specifies that indicating that a security interest is a PMSI on a financing statement when it is not will render the financing statement ineffective with respect to the collateral described as being subject to a PMSI. ● Section 293 allows for an extension of time to register in order to obtain super priority under s 62.

[62.4] Concepts ● Attachment See s 19. ● Inventory This is defined in s 10 as meaning 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: – is held by the person for sale or lease, or has been leased by the person as lessor, or – is held by the person to be provided under a contract for services, or has been so provided, or Annotated Personal Property Securities Act 2009 (Cth)

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(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.

288

●

● ● ●

Personal Property Securities Act 2009 – is held by the person as raw materials or as work in progress, or – is held, used or consumed by the person, as materials. Possession See s 24. In the context of PMSI super-priority, the term ‘‘obtains possession’’ used in s 62 is to be contrasted with merely having possession. Section 62 imposes timing rules on when possession is obtained, rather than a mere continuation of possession: C Dixon Fuels Ltd v SWS Fuels Ltd (2011) 17 PPSAC (3d) 175; [2011] NSCA 35 (Nova Scotia CA). A similar wording is used in s 19(5). Proceeds See s 31. Purchase money security interests This is defined in s 14. Registration This refers to registering a financing statement under s 153.

[62.5]

Commentary

[62.5.1] Scope — s 62(1) ................................................................................288 [62.5.2] PMSIs taken over inventory — s 62(2) .........................................289 [62.5.3] PMSIs taken over non-inventory ..................................................289 [62.5.4] Application of the PMSI priority as against ordinary security interests — foreign case analysis ................................................................290 [62.5.4.1] Scope of PMSIs limited to s 14 purpose ..........................290 [62.5.4.2] Perfection necessary or express subordination required ................................................................................................................291 [62.5.4.3] Formal requirements apply to PMSIs such that a substantial defect may render the interest ineffective ...................291 [62.5.4.4] PMSIs are a discrete class of interest and cannot be held in a capacity beyond what the PPSA prescribes — ‘‘no abuse of process’’ ................................................................................................292 [62.5.4.5] PMSI arises as soon as elements of the PPSA are satisfied and ceases when the obligations owing are fulfilled .....................292 [62.5.5] Time limitations ..............................................................................292 [62.5.5.1] Erroneous mischaracterisations .......................................292 [62.5.5.2] Changes in circumstance ...................................................293 [62.5.6] Failing to tick the ‘‘PMSI box’’ ......................................................293

[62.5.1] Scope — s 62(1) Section 62(1) prescribes that a purchase money security interest (PMSI) takes priority over other security interests (termed ‘‘ordinary’’ or ‘‘general’’ security interests for the purposes of this commentary) taken over the same collateral. The rules apply differently depending on whether the collateral is held as inventory or not. The following table, by way of summary, isolates which provisions apply in what circumstances and the resulting outcome:

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Goods

Property other than goods

By the time the grantor, or a person at the grantor’s request, takes possession (possession time). By the time the security interest attaches to the collateral.

Property that is not Inventory By the end of 15 business days after the time possession is taken. By the end of 15 business days after the time attachment occurs.

[62.5.2] PMSIs taken over inventory — s 62(2) Section 62(2) prescribes that a purchase money security interest (PMSI) will arise if the underlying collateral, or proceeds of such collateral (where the finance statement which gives rise to the PMSI encompasses proceeds) is being held as inventory and the PMSI is perfected by registration. Inventory is defined by s 10 of the PPSA and carries this meaning for the purposes of s 62. The financing statement must further indicate that the interest is a PMSI (upon registration, see s 153). Perfection must occur when the grantor obtains possession of the property (where the collateral is goods), or when a security interest attaches to the property (where the collateral is not goods). The rules with respect to collateral held as inventory requires prompt perfection as the very capacity with which the property is held indicates further dealings and transfers. Primacy is to be given to the PPS Register. It is unclear what the status of a PMSI perfected outside of the time requirements provided by s 62 would be as the position has not been tested in Australia. In the authors’ view, such an interest would constitute a general security interest and would have recognised priority status as a perfected security interest, but would go no further. Priority conferred by the PPSA is conditional upon the active step of the secured party (typically perfection, although in this case, perfection by registration within an allotted time period). Exceptions to the general priority of the PMSI in this regard are made as against non-purchase money security interests in accounts (see s 64) and as against chattel paper (see s 71). Note also that the exceptions apply only where the collateral is held as inventory and not for other purposes.

[62.5.3] PMSIs taken over non-inventory Section 62(3) prescribes that a purchase money security interest (PMSI) arises where the interest is held over original collateral, other than as inventory, and the interest is perfected by registration. The financing statement must also indicate that the interest is a PMSI. The perfection must occur before the end of 15 business days after the grantor possesses the property (for goods), or a security interest attaches to the property (for non-goods). The concept of possession is addressed by the PPSA (albeit in the context of perfection) at s 24. Annotated Personal Property Securities Act 2009 (Cth)

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Inventory

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The use of 15 business days is an arbitrary figure selected by the legislature to reflect commercial practices. Whilst subject to change, specific provision is made for a court to extend this period pursuant to s 293 (see s 293).

[62.5.4] Application of the PMSI priority as against ordinary security interests — foreign case analysis The effect of purchase money security interest (PMSI) priority is such that, as a general rule, a PMSI over particular collateral will take priority to an ordinary security interest taken over the same collateral. However, importantly, the PMSI does not prevent the application of the taking free provisions pursuant to Pt 2.5 of the PPSA nor does it take preference to the application of s 57 for interests perfected by control. The following issues have arisen abroad regarding the use and misuse of PMSIs.

[62.5.4.1] Scope of PMSIs limited to s 14 purpose This rule is best understood by reference to the leading Canadian decision in Chrysler Credit Canada Ltd v Royal Bank (1986) 6 PPSAC 153; 30 DLR (4th) 616 (Sask CA). In that case, a car dealer sought a line of credit from the respondent secured by a general security agreement giving rise to an ‘‘all present and after-acquired property’’ security interest. The car dealer also borrowed funds from the applicant for the roll-over purchase of inventory, including new and traded-in vehicles. Five days after the bank registered its security interest, the applicant registered a purchase money security interest (PMSI). The car dealer went into receivership and the applicant sought to enforce its purported PMSI as against the vehicles. The receiver agreed that the new vehicles were bound, however, would not transfer the used vehicles. The collateral fell into three categories: ● trades on the sale of new cars, the loan for which was repaid to the applicant ● trades on the sale of new cars, the loan for which was not repaid to the applicant, and ● used cars which could not be linked to the new cars. At trial, only the first collateral class fell within the scope of the PMSI. The applicant appealed. On appeal, Cameron JA held (at [20]): ‘‘Having regard generally for the breadth of the security agreement in issue, and more specifically to the highlighted portions of it, I believe both parties to the agreement intended Chrysler Credit’s security interest to attach to the whole of the new and used car inventory, as well as to the component parts thereof . . . As between Chrysler Credit and White, then, each of the trades in the second category secured not only one advance — the one relating to the new car to which that trade was traceable — but all of the advances, or, in other words, the whole of the indebtedness from time to time outstanding. The trades must be seen as forming part of a class of property, namely, inventory; and it was that class which was used to secure the grant of credit on an ongoing or revolving basis.’’

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‘‘There are two things here which I think merit particular emphasis. The first is the primacy, under the new regime proposed by the commission, of function over form — a purchase money security interest, whether or not it arises out of conventional forms of contract (conditional sale, chattel mortgage, or whatever) enjoys special priority status. The second is the nature of the security interest in property such as inventory: the secured party enjoys a continuing general lien, fixed rather than floating.’’

[62.5.4.2] Perfection necessary or express subordination required A purchase money security interest (PMSI) operates much like a subordination agreement and in this regard parties may choose to subordinate rather than rely on a PMSI. That said, an unperfected PMSI does not take priority to a perfected security interest, irrespective of whether or not the holder of the ordinary security interest knew of the PMSI. A subordination agreement will be required in the absence of a perfected interest. While theoretically there should be no difference between methods of perfecting a PMSI as opposed to an ordinary security interest however in practice only perfection by registration is available to the PMSI holder (see s 21; see also Pt 5.3). The issue arose in the Alberta Court of Appeal decision, Re DCD Industries (1995) Ltd (2005) 7 PPSAC (3d) 251, 253 DLR (4th) 171 where the court held: ‘‘The Appellant argued against this statement, maintaining that commercial reality dictates that whenever a PMSI is granted, that PMSI should, perfected or not, have an implied priority over any general security . . . If these PMSIs did not have priority over the general security vendors would not sell on credit, no such further acquisitions could be made, businesses would struggle, and general loans would then go into default . . . However [in his Honour’s view] commercial reality stops short of requiring that these PMSIs should have priority in all circumstances. There is no commercial reality which would dictate against requiring the subsequent PMSIs to be registered or otherwise perfected for the priority to arise or continue.’’

[62.5.4.3] Formal requirements apply to PMSIs such that a substantial defect may render the interest ineffective Formal requirements for the purposes of a purchase money security interest (PMSI) relate not only to accurate collateral descriptions and indicating that the interest is a PMSI on a financing statement — but also as to the promptness of registration depending on the capacity with which the collateral is held: see Business Development Bank of Canada v ABN Amro Leasing (2003) 5 PPSAC (3d) 76 (PEI SC (Appeal Div)). Annotated Personal Property Securities Act 2009 (Cth)

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With regards to the rationale of the PMSI, his Honour continued (at [24]):

292

Personal Property Securities Act 2009

[62.5.4.4] PMSIs are a discrete class of interest and cannot be held in a capacity beyond what the PPSA prescribes — ‘‘no abuse of process’’ This point was discussed in the commentary for s 14.

[62.5.4.5] PMSI arises as soon as elements of the PPSA are satisfied and ceases when the obligations owing are fulfilled This point was raised at the commentary to s 14. The implications for the purposes of a priority dispute are that the purchase money security interest (PMSI) may arise earlier than where registration occurs and may cease prior to the satisfaction of ancillary obligations: see Agricultural Credit Corporation of Saskatchewan v Pettyjohn (1991) 1 PPSAC (2d) 273; 79 DLR (4th) 22 (Sask CA). Any ancillary obligations, such as maintaining proper use and repair, will form part of an ordinary security interest and not a PMSI where the PMSI obligations have been met.

[62.5.5] Time limitations It is important to note that both the inventory PMSI and the non-inventory PMSI depend on compliance with the relevant part of s 62 to obtain their position of priority vis-a` -vis perfected general security interests. The point here is that an interest may constitute a PMSI, within the meaning of s 14 of the PPSA, but may, nonetheless, hold a position of priority no greater than that of a perfected general security interest if s 62 has not been complied with. Thus, for abundant caution, if a secured party is not able to discern whether or not a PMSI taken by them is in relation to inventory or non-inventory collateral, a finance statement should be lodged on the PPS Register indicating the PMSI status of the security interest prior to the secured party relinquishing possession of the underlying collateral.

[62.5.5.1] Erroneous mischaracterisations An issue may arise where a secured party erroneously misconceives the interest held by it as a non-PMSI when in fact the security interest is a PMSI (or erroneously fails to indicate that the interest is a PMSI on a financing statement lodged on the PPS Register). Upon becoming aware of the error, it is likely that the secured party will be out of time to perfect or re-perfect the relevant PMSI in accordance with the timings imposed by s 62(2)(b) and 62(3)(b) (where relevant). If the PMSI relates to non-inventory collateral then the PMSI holder may apply for relief pursuant to s 293(1)(a) of the PPSA: see s 293; see also Re Accolade Wines Australia Ltd [2016] NSWSC 1023. Please note, s 293 of the PPSA, on a plain reading of the provision, does not appear to be applicable to inventory PMSIs. Further, at a practical level, assuming that the grantor either consents to or the agreement between the parties otherwise permits, the PMSI holder could repossess the relevant collateral and resupply it with a view to resetting the timing requirement for the purposes of s 62. However, in the authors’ view,

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the resulting security interest, while potentially compliant with s 62 of the PPSA, could no longer be said to fall squarely within the definition of a PMSI as set out by s 14. This is because ‘‘resupplying’’ collateral does not constitute or represent the provision of ‘‘new value’’ to the grantor. Indeed, any existing ‘‘all present and after-acquired personal property’’ (AllPAP) security interest would have attached to the collateral at the time of the initial supply (see s 19(5) and not upon the resupply. A counter-argument may be that at the time the collateral was repossessed any security interest in the collateral was extinguished on the basis that the PMSI holder had a first ranking right to the collateral — however, this is fundamentally flawed as the holder of the PMSI, having failed to meet the requirements of s 62 in the first instance, would not be able to repossess ahead of an existing competing security interest which was properly perfected in any event. Thus, there is a real risk a PMSI holder who elects to repossess and resupply the relevant collateral will entrench themselves in a difficult legal position.

[62.5.5.2] Changes in circumstance A similar difficulty arises not only when the secured party has erred in respect of their relevant rights but also where the character of the arrangement changes from a non-security interest to a PMSI without the bailee relinquishing possession of the underlying collateral. Consider the circumstance where Party A leases a motor vehicle to Party B for three months such that the resulting lease, on proper analysis, does not satisfy s 12(1) of the PPSA and is not otherwise a ‘‘security interest’’. Towards the end of the three-month period, Party B informs Party A that it wishes to purchase the motor vehicle and Party A agrees to vendor finance it over a period of one year. Party A and Party B enter a written agreement to that effect. Noting that the timing requirements in s 62(2)(b) and 62(3)(b) turn on the time the grantor (ie Party B) obtains actual possession of the underlying collateral, and not when the new agreement was entered into, it would appear that Part A could not perfect the resulting interest taken pursuant to the new agreement as a PMSI capable of attracting the priority conferred by s 62 absent also seeking an order pursuant to s 293 (in the case of a non-inventory PMSI). Alternatively, the PMSI holder should refrain from entering into such an arrangement unless any conflicting security interest holder (such as an AllPAP security interest holder) provides an express subordination deed or letter in respect of the relevant collateral in favour of the PMSI holder.

[62.5.6] Failing to tick the ‘‘PMSI box’’ Sections 62(2)(c) and 62(3)(c) require, in addition to the timing requirements, that the PMSI holder to indicate that the interest taken by it is a PMSI on the PPS Register. A generally accepted method of so indicating this has been to ‘‘tick’’ the ‘‘PMSI box’’ on the PPS Register (or to otherwise indicate ‘‘yes’’ when asked if the interest taken is a purchase money security interest). Item 7 of s 153(1) of Annotated Personal Property Securities Act 2009 (Cth)

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the PPSA (which deals with the required particulars to be included in a financing statement) provides that a financing statement must indicate whether it is a PMSI or not. The onus is therefore on the secured party to ensure that the PPS Register accurately reflects the actual position between the parties to the security agreement. The significance of the colloquially described ‘‘PMSI box’’ has not been the subject of any judicial analysis in Australia on the authors’ research. The issue is important when considering whether PMSI priority pursuant to s 62 is contingent on, among other things, the PMSI box being ticked or responded to in the affirmative. Conversely, if a financing statement does not respond to the PMSI inquiry in the affirmative, does this mean that the resulting registration does not and cannot have the benefit of s 62 priority? As is discussed further at s 153, there is some danger with ascribing too high a value to certain data contained in a financing statement. The PMSI box or query is one such area. As a matter of statutory construction, there is no legislative requirement that a secured party must make an indication that the interest is a PMSI through the PMSI box or query. The only legislative requirement is that a secured party indicate that the interest is a PMSI with no mention as to how to effect this requirement. While the PMSI box or query is convenient, to treat it as prescribed or mandatory would be to allow the computer database behind the PPS Register to dictate the legislative requirements of the PPSA. In the authors’ view, a common sense approach to the PPS Register is required. For instance, if the PMSI box is not ticked or the PMSI inquiry is answered ‘‘no’’ but the collateral description on the financing statement includes words to the effect that the interest behind the financing statement is a PMSI then it may be that the requirement of s 62(2)(c) or 62(3)(c) (as relevant) are met in that specific instance. Similar arguments could be raised in respect of collateral descriptions which make clear that the security agreement is a PPS lease — given that a PPS lease is a prescribed class of PMSI pursuant to s 14(1)(c). The above construction is consistent with the ‘‘notice based’’ system of registration which underpins the PPSA. However, if the PMSI box or query is not ultimately determinative of a PMSI then difficult questions will need to be addressed as to whether one is to draw the line with how defective a registration can be without being fatal to the secured party’s priority position. An alternative policy behind the PPSA is that primacy should be afforded to the PPS Register. Given the above circumstances, if a secured party has failed to indicate on the PPS Register that a security interest is a PMSI in circumstances where the interest held may constitute a PMSI, then the secured party should seek legal advice on how best to put itself in the position it sought to be in at the time the security interest was taken in the first instance.

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[62.6] Further reading ● Explanatory Memorandum [2.140–2.144, 2.160]. ● ALRC Report No 64 [6.1–6.20]. ● Bruce Whittaker, ‘‘Retention of title clauses under the PPSA’’ (2010) 21 Journal of Banking and Finance Law and Practice 273. ● Anthony Duggan, ‘‘Romalpa agreements post-PPSA’’ (2011) 33 Sydney Law Review 645. ● Nicholas Mirzai, ‘‘The PMSI predicament’’ (2016) 25 APLJ 76.

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SECTION 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.

[63.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

Annotated Personal Property Securities Act 2009 (Cth)

s 76, 77 s 34(5) s 33(3) § 9-324(g)

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● Whittaker Report [4.3], [6.2], [7.7], [7.10].

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[63.2] Outline Section 63 provides the priority position under the PPSA for competing PMSIs.

[63.3] Cross-references ● Sections 62, 64, 86 and 103 provide further priority rules affecting PMSIs. ● Section 153 requires that a purchase money security interest (PMSI) be indicated on the financing statement. ● Section 165 specifies that indicating that a security interest is a PMSI on a financing statement when it is not will render the financing statement ineffective with respect to the collateral described as being subject to a PMSI.

[63.4]

Concepts

● Attachment See s 19. ● Goods This is defined by s 10. ● Inventory See s 10. ● Possession See s 24. For a discussion of ‘‘obtains possession’’ see s 62. ● Proceeds See s 31. ● Purchase money security interests This is defined in s 14. ● Registration This refers to registering a financing statement under s 153. ● Seller, lessor or consignor See the discussion in s 12, 13.

[63.5] Commentary While the default ‘‘first in time’’ priority position applies to competing purchase money security interests (PMSIs), it is the prevailing approach only after considering the capacity with which the PMSI arises. Where one secured party is a seller, lessor or consignor and the other PMSI holder is not — the seller, lessor or consignor prevails should a priority dispute arise between two such parties. Money advanced to lease collateral for instance (satisfying the PMSI requirements pursuant to s 14) takes PMSI status subject to a lessor who actually leases the property to the grantor. Sections (a) through (d) of s 63 reiterate the time periods relevant for registering collateral held in different capacities.

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[63.6] Further reading ● Explanatory Memorandum [2.156, 2.158]. ● ALRC Report No 64 [6.1–6.20].

● Bruce Whittaker, ‘‘Retention of title clauses under the PPSA’’ (2010) 21 Journal of Banking and Finance Law and Practice 273. ● Anthony Duggan, ‘‘Romalpa agreements post-PPSA’’ (2011) 33 Sydney Law Review 645.

¶2-245 SECTION 64 NON-PURCHASE MONEY SECURITY INTERESTS IN ACCOUNTS Non-purchase money security interest in account as original collateral has priority over purchase money security interest in account as proceeds of inventory 64(1) 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: (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.

Annotated Personal Property Securities Act 2009 (Cth)

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● Whittaker Report [7.7], [7.10].

298

Personal Property Securities Act 2009 64(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). Perfected purchase money security interest in both proceeds and new value 64(3) If a person has a purchase money security interest in an account as proceeds of inventory that is subordinate to a nonpurchase 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)). 64(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).

[64.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision s 19.1 s 33(1)(b) § 9-327

[64.2] Outline Section 64 applies specifically to accounts as a class of collateral. While some accounts are capable of being perfected by control (and as such s 57 would apply — see s 25) this is not always commercially available and does not arise until actual control occurs. Section 64 thus applies subject to s 57.

[64.3]

Cross-references

● Sections 62, 63, 86 and 103 provide further priority rules affecting PMSIs. ● Section 153 requires that a purchase money security interest (PMSI) be indicated on the financing statement.

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[64.4]

Concepts

● Accounts This is defined by s 10 as 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 disposing of property or granting a right or providing services in the ordinary course of granting rights or providing services of that kind. Authorised deposit taking institution accounts (ADI accounts), chattel paper, intermediated securities, investment instruments and negotiable instruments are all excluded from the term accounts. ● Approved form See s 302. ● Attachment See s 19. ● Inventory See s 10. ● New value This is defined by s 10. ● Proceeds See s 31. ● Purchase money security interests This is defined in s 14. ● Registration This refers to registering a financing statement under s 153.

[64.5] Commentary [64.5.1] Non-PMSI trumps PMSI — s 64(1) ..............................................299 [64.5.2] Notice — s 64(2) ..............................................................................301 [64.5.3] Proceeds and new value — s 64(3) ...............................................301

[64.5.1] Non-PMSI trumps PMSI — s 64(1) Pursuant to s 64(1) of the Personal Property Securities Act 2009 (Cth) (PPSA), a non-purchase money security interest (PMSI) over an account, irrespective of the method of perfection, takes priority as against a PMSI where the non-PMSI is perfected before the PMSI and the collateral over which the non-PMSI arises is proceeds from the sale of inventory as original collateral. In the absence of notice before the PMSI is perfected, the holder of the security interest in the account also prevails where notice is given to the PMSI holder Annotated Personal Property Securities Act 2009 (Cth)

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● Section 165 specifies that indicating that a security interest is a PMSI on a financing statement when it is not will render the financing statement ineffective with respect to the collateral described as being subject to a PMSI. ● Section 293 allows for an extension of time for the purposes of this section.

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at least 15 business days prior to the registering of the interest over the account or the time at which the interest attaches to the underlying collateral (that is, the proceeds of the inventory) — whichever is earlier. The concept of notice under the PPSA is discussed at Pt 8.6 and arises frequently for the purposes of the enforcement provisions under Ch 4. The priority issue addressed by s 64 and the relevant definition of account upon which the application of the provision relies was dealt with in Transamerica Commercial Finance Corp Canada v Royal Bank (1990) 1 PPSAC (2d) 61; (1990) FPPSR ¶700-104, at 420,508: ‘‘In my opinion, s. 34(4) is intended to preserve the priority of an account financer over that of a purchase money financer. The rationale is that accounts financing ought not to be jeopardized by the creation of purchase money financing. . . . The Bank is asserting a priority with respect to a deposit account in its bank which is not an account given to secure the financing provided by the Bank. In this case, the money from the sale of the goods subject to the purchase money security interest was ‘identifiable or traceable personal property . . . derived directly from any dealing with the collateral . . .’ which includes a deposit account in a bank which is in turn defined as a cash proceed. Thus it is a ‘cash proceed’ and not an ‘account’ as defined in the Act, given for new value. There is no evidence that the moneys were deposited in the Bank in other than the ordinary course of business. There was no ‘new value’ given to the debtor in relation to the deposits and s 34(4) does not take away the priority of the purchase money security interest of Transamerica to the proceeds realizable from the sale of the inventory.’’ The commercial effect of this provision is to limit the ability of the accounts financier to take an auxiliary interest in all proceeds of inventory sales with the effect of taking priority against an inventory financier without express notice and due registration. The debtor, upon receiving new value, has created an interest in the account as original collateral which takes priority to the PMSI proceeds. While s 64 prima facie appears to operate to the detriment of the PMSI holder, the notice requirements therefore serve to provide time for the holder to take steps to preserve their interest. What is achieved by s 64 is statutory recognition and the affordance of priority to debt financiers, an affordance that pre-dates the implementation of the PPSA in Australia. This is because the commercial reality is that many businesses rely on debt financing and the ability to factor debt. Factoring effectively transfers the risk of bad debt to the funding financier. The financier is then the party who benefits from the recovery of otherwise bad debt. If the process of recovering accounts receivable would permit the purchase money financiers to obtain a position of priority over the recovered funds, the entire process of factoring would be unfeasible and that avenue of debt financing would decline if not cease. This is inconsistent with the preservation of preexisting commercial realities upon which the PPSA is based. This provision thus retains the pre-existing practice in Australia.

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301

Notice under the PPSA is discussed at Pt 8.5 (see Pt 8.5). Section 64(2) (a) requires the notice provided by the purported secured party with respect to an account to the purchase money security interest (PMSI) holder to be in the approved form pursuant to this part of the PPSA (where the term ‘‘approved form’’ is defined by s 302). Additionally, the onus is on the non-PMSI holder to ensure that the notice is specific as to the particular items of inventory covered by the non-PMSI. PMSI holders who receive notices of the kind provided for by s 64(2)(a) should consider whether or not the notice goes to or affects the priority position of the underlying collateral or is looking to attach to some other kind of collateral. That is to say, it is not uncommon in debt factoring arrangements that the ‘‘account’’ over which the non-PMSI is taken will seek to attach to proceeds from the underlying collateral (such as rent) and not the underlying collateral itself. The exposure of the PMSI holder in such circumstances is limited to such proceeds and not the underlying collateral itself. If the underlying collateral is misappropriated (namely, sold) then the party who purchases the collateral takes subject to the security interest. Misappropriation where the collateral and purchasing party go missing is a different scenario although misappropriation (for instance, by way of theft) is an exposure relevant to all security interests, and indeed all owners, and not only those the subject of a PMSI.

[64.5.3] Proceeds and new value — s 64(3) Where s 64(1) applies, s 64(3) prescribes that the new value provided by the non-purchase money security interest (PMSI) holder is also subject to the PMSI. No additional steps need to be taken by the PMSI holder and the new value is to be characterised as an account — unless it would be an account by virtue of how the new value is held on its own, in which case s 12(3)(a) applies. The PMSI holder thus benefits from the introduction of new value to potentially alleviate the effects of subordination pursuant to s 64(1).

[64.6] Further reading ● Explanatory Memorandum [2.144]. ● ALRC Report No 64 [6.1–6.20]. ● Whittaker Report [4.3], [7.7]. Annotated Personal Property Securities Act 2009 (Cth)

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[64.5.2] Notice — s 64(2)

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¶2-250 SECTION 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.

[65.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision s 22(2) no parallel provision no parallel provision

[65.2] Outline Section 65 provides a qualification to the concept of possession for goods shipped by common carrier for the purposes of Pt 2.6, Div 3.

[65.3] Cross-references ● Sections 62–64 provide priority rules that are relevant for this section.

[65.4]

Concepts

● Common carrier See s 24. ● Document of title This is defined by s 10. See also s 22. ● Possession See s 24.

[65.5] Commentary With respect to the priority provisions of the PPSA relevant to purchase money security interests (PMSIs), a grantor does not obtain possession (for the purposes of attachment and perfection pursuant to s 24) until they have actual possession of the underlying collateral or a document of title. While s 24(3) provides that another person at the request of the debtor/grantor can take possession, no such extension exists under s 65 and thus for the purposes of PMSIs, the grantor/debtor must themselves take actual possession of the collateral or document of title.

[65.6] Further reading ● Explanatory Memorandum [2.142]. ● ALRC Report No 64 [6.1–6.20].

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Division 4 — Priority of security interests in transferred collateral SECTION 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 transferor-granted 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 transfereegranted 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 transfereegranted 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.

66(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.

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67

SECTION 67 PRIORITY WHEN TRANSFERORGRANTED INTEREST HAS BEEN CONTINUOUSLY PERFECTED

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.

[67.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

Annotated Personal Property Securities Act 2009 (Cth)

s 12(1)(k), 87 s 33 s 39 § 9-101

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[67.2] Outline Section 67 provides the priority rules where collateral has been transferred. The provision applies where immediately before the transfer, a security interest existed with respect to the underlying collateral and the transferee purports to create a security interest over the collateral (see s 66).

[67.3] Cross-references ● Section 66 limits the scope of this section.

[67.4]

Concepts

● Continuous perfection See s 56. ● Perfected See s 21. ● Transferor-granted interest This refers to a security interest attaching to collateral which is subsequently transferred to a new grantor: see s 66. ● Transferee-granted interest This refers to an interest created by the new grantor with respect to collateral subject to a transfer: see s 66.

[67.5] Commentary Where a transferor-granted interest is in a priority dispute with a transfereegranted interest, the transferor-granted interest prevails if it has been continuously perfected after the transfer and was valid immediately before the transfer. Transferring title thus does not affect the enforceability of the underlying security interest although a transfer of an account or of chattel paper creates a deemed security interest (see s 12(3)). Like s 60, s 67 envisages a sense of propriety in enforcing the transferor-granted interest itself, that is, the interest does not rely on the grantor. For more on transferred collateral and periods of temporary perfection which extend see s 34.

[67.6] Further reading ● Explanatory Memorandum [2.161–2.162]. ● ALRC Report No 64 [7.10–7.13].

¶2-265 SECTION 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

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(b) the interest was perfected by registration immediately before the transfer; 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 reperfected 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 reperfected as mentioned in paragraph (d). 68(2)

However, the transferee-granted interest has priority if:

(a) subsection (1) applies in relation to the transferor-granted interest; and (b) the collateral is perfected immediately before the transferorgranted 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: (i) the transferor-granted interest is mentioned in paragraph (1)(d); and

re-perfected

as

(ii) the notice is given under paragraph (1)(e); but only to the extent of the advance or obligation. 68(3) Subsection (2) applies despite section 58 (priority of advances). 68(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.

Annotated Personal Property Securities Act 2009 (Cth)

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(c) the interest becomes unperfected; and

306

Personal Property Securities Act 2009 68(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).

[68.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 88, 89, 90, 91 s 35(8), (9), 51 s 48 § 9-325, 9-507, 9-508

[68.2] Outline Section 68 prescribes the priority rules where there has been a break in the perfection of a transferor-granted security interest. The rules are somewhat complex, however, in essence a break in continuous perfection such that other security interests arise without knowledge of the transferor’s interest is often fatal to the earlier priority of such an interest — although not necessarily fatal to priority overall.

[68.3] Cross-references ● Section 66 limits the scope of this section. ● Section 67 provides a further priority rule for transferred collateral.

[68.4]

Concepts

● Actual or constructive knowledge See s 297. ● Continuous perfection See s 56. ● Perfected See s 21. See also s 153. ● Serial number This refers to collateral that may or must be described by serial number. See further s 153. ● Transferor-granted interest This refers to a security interest attaching to collateral which is subsequently transferred to a new grantor: see s 66. ● Transferee-granted interest This refers to an interest created by the new grantor with respect to collateral subject to a transfer: see s 66.

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[68.5]

307

Commentary

[68.5.1] Transferor-granted interest prevails — s 68(1) ...........................307 [68.5.2] Transferee-granted interest prevails — s 68(2) ...........................307

[68.5.1] Transferor-granted interest prevails — s 68(1) A transferor-granted interest prevails against subsequent security interests even where a break in perfection occurs if the interest has since been reperfected (and is continuously perfected) and notice is given to all other secured parties in accordance with s 68(5). This interest, however, is subject to s 68(2).

[68.5.2] Transferee-granted interest prevails — s 68(2) Despite what is set out at s 68(1), the transferee-granted interest will prevail where it is perfected prior to the re-perfection of the original interest and the transferee takes their interest without actual or constructive knowledge of the former interest. The notice given by the transferor thus prevents the transferee from taking an interest in priority even where the transferor-granted interest is, at the time the notice is received, unperfected. This issue arose in the Saskatchewan Court of Queen’s Bench case, Canadian Imperial Bank of Commerce v Tux & Tails Ltd (2006) 9 PPSAC (3d) 115; 20 CBR (5th) 316. In this case, assets (comprising the underlying collateral) were transferred between grantors and the respondent, who held a security interest against the assets, failed to update the register to give rise to the new grantor. A subsequent interest arose without knowledge of the original interest and the court held the transferee’s interest prevailed as against the respondent. See also Re Hickman Equipment (1985) Ltd (2003) 4 PPSAC (3d) 252; 40 CBR (4th) 58 at [23]–[27] (Newfoundland and Labrador SC).

[68.5.3] Particulars — s 68(3), (4), (5) Sections 68(1) and 68(2) apply irrespective of s 58 (regarding the priority of notices). The rationale behind the provisions again goes towards the primacy of the PPS register. Section 34 also applies to transferred collateral and offers further protections to the transferor. It is thus commercially reasonable that s 68(2) creates a priority position in favour of the transferee. In addition, collateral secured by serial number description only refers to collateral which would reveal a security interest by searching for the serial number. Defects on the register thus expose the transferor to s 68 among other provisions of the PPSA. Regarding notice requirements, the expectancy of a security interest in the relevant collateral and a description of the specific collateral itself is required by s 68(5). Full notice requirements and particulars can be found at Pt 8.5. Annotated Personal Property Securities Act 2009 (Cth)

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[68.5.3] Particulars — s 68(3), (4), (5) .........................................................307

308

Personal Property Securities Act 2009

[68.6] Further reading ● Explanatory Memorandum [2.163–2.164]. ● ALRC Report No 64 [7.10–7.13]. ● Whittaker Report [7.3].

Division 5 — Priority of creditors, and purchasers of negotiable instruments, chattel paper and negotiable documents of title ¶2-270 SECTION 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.

69(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. 69(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.

[69.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

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PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 95 s 31 No parallel provision § 9-332

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[69.2]

309

Outline

[69.3]

Cross-references

Section 48 provides a taking free rule for certain holders of currency although it is narrower than this section.

[69.4]

Concepts

● Actual knowledge This is discussed under s 297. Mere knowledge by the recipient of the payment that there was one or more secured parties with claims over the funds is not actual knowledge that the payment is in breach of the security agreement(s): Stiassny v Commissioner of Inland Revenue [2013] 1 NZLR 453; [2012] NZSC 106 at [57]–[58]. ● Debt A debt is a legal obligation to pay a sum of money, either presently or in the future. Debts may be due and payable, contingent on a future event (may arise in the future) or prospective (will arise in the future). See The King v Brown (1912) 14 CLR 17; Community Development Pty Ltd v Engwirda Construction Co (1969) 120 CLR 455. ● Debtor The term ‘‘debtor’’ under the PPSA has a very important meaning. It defines the party who must pay or perform the primary obligation(s) owing to the creditor or party making the relevant advances. While a security interest is not enforced (where enforcement only occurs if the debtor defaults), it is the debtor and the secured party who are bound to one another by the security agreement. That said, the debtor need not be the party who provides collateral for the purposes of creating a security interest under the PPSA (although this is often the case). Only when a security interest is enforced does the focus shift from the secured party and the debtor to the secured party and the grantor. The term grantor is defined later under s 10. ● Negotiable instrument This is defined in s 10. See further s 8 and 29.

[69.5]

Commentary

This section provides priority to creditors who receive payment of a debt (not a claim). Note that the wording states that the creditor must actually receive the payment. Thus, even though s 69(1)(b) mentions the intangible that was the source of the payment (such as a bank account), if the payment is not received by the creditor then this rule will not apply. The policy underpinning this provision is that creditors should be able to receive ordinary payments without having to check if there is a security interest attached to the funds Annotated Personal Property Securities Act 2009 (Cth)

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This section provides creditors who receive payment from their debtors by way of a written or electronic payment mechanism certainty that the funds will not be claimed by a secured party of the debtor.

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used to make such payments. In line with the Canadian regimes, the purpose of this section is ‘‘to leave money and cheques largely free from security interests to preserve the integrity of the payment system’’: Flexi-Coil Ltd v Kindersley District Credit Union Ltd (1993) 5 PPSAC (2d) 192; 107 DLR (4th) 129 at [50] (Sask CA). The equivalent provision in New Zealand was considered in Stiassny v Commissioner of Inland Revenue [2013] 1 NZLR 453; [2012] NZSC 106. In that case, GST payments were made by receivers based on advice that they had personal liability to make the payments. The secured party sought to recover the amounts (which were in excess of $120m) and the Commissioner claimed priority under s 95 of the Personal Property Securities Act 1999 (NZ) (equivalent to s 69 of the PPSA). It should be noted that the NZ provision requires that the payment be ‘‘debtor initiated’’ which is not an element of the Australian PPSA, although it defines that term by reference (in NZ PPSA s 95(3)) to the same terms listed in the Australian PPSA s 69(3). The court stated (at [53]) that the provision is necessary ‘‘so as to ensure that a person who has given a charge over their assets is able to carry on business and pay the creditors of the business . . . if this were not the case . . . many debtors would be unable to pay their creditors and it would cause security interests in all present and after-acquired property to have a suffocating effect on the ability of a debtor to conduct its business’’. The court held that the Commission was entitled to priority over the funds paid. As noted by Lowden,20 while this rule is stated to be a priority rule it is more accurately characterised as one of the taking free rules although one which is only open to creditors. This section does not apply to exchanges of physical currency and is likely to encourage creditors to seek payment by electronic transfer. This is because the section provides a more flexible rule than the taking free provisions which applies under s 48 as that rule has a carve out for actual or constructive knowledge whereas this provision only carves out actual knowledge. For a discussion of actual and constructive knowledge see s 297–299.

[69.6] Further reading ● Explanatory Memorandum [2.159–2.160]. ● ALRC Report No 64 [–]. ● Whittaker Report [7.6]. 20

Wappett C, Whittaker B and Edwards S, Personal Property Securities in Australia, LexisNexis (looseleaf) at [4.10.2650].

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SECTION 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. 70(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.

[70.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[70.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 96 s 31 s 28 § 9-331

Outline

This section provides persons who acquire negotiable instruments with certainty regarding their rights over the instruments against competing security interests.

[70.3]

Cross-references

● Section 24 defines possession of a negotiable instrument. ● Section 29 defines control of a negotiable instrument. ● Section 256 provides that the Bills of Exchange Act 1909 (Cth) and Cheques Act 1986 (Cth) prevail over the PPSA to the extent of any inconsistency. Annotated Personal Property Securities Act 2009 (Cth)

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[70.4] Concepts ● Actual or constructive knowledge This is discussed under s 297. For a Canadian case on knowledge in the context of s 70 see Belarus Equipment of Canada Ltd v C & M Equipment (Brooks) Ltd (Receiver of) (1994) 8 PPSAC (2d) 32 (Alta QB), where mere knowledge of the security interest by a finance company was not sufficient knowledge to prevent the operation of this rule. Knowledge that the transaction was a breach of a non-security agreement is also not sufficient, although it could take the transaction outside of the scope of the ordinary course of business: OM Scott Credit Corp v Apex Inc (1964) 198 A 2d 673 (RI Supreme Court). ● Negotiable instrument This is defined in s 10. See further s 8 and 29. ● Ordinary course of business See [46.5.2]. ● Value This is defined in s 10. The Saskatchewan Court of Appeal considered the equivalent Saskatchewan provision in Flexi-Coil Ltd v Kindersley District Credit Union Ltd (1993) 5 PPSAC (2d) 192 where a debtor deposited cheques in an account with the credit union which reduced an overdraft facility with the creditor union and allowed the debtor to draw further funds. The debtor had previously granted a security interest to an inventory supplier which extended to proceeds. The Court of Appeal found that by reducing the overdraft balance after receiving the deposited cheques the credit union had given value and had ‘‘purchased’’ the cheques so as to come within the rule and defeat the inventory financier’s security interest. Although the Saskatchewan provision requires the acquirer to ‘‘purchase’’ the instrument it is suggested that this reasoning is applicable to the Australian PPSA because to acquire rights in negotiable instruments is broader than the requirement to purchase in Saskatchewan; see also GE Capital Canada Equipment Financing Inc v HSBC Bank Canada, (2002) 4 PPSAC (3d) 145 (Sask QB) (which applied the Flexi-Coil decision). See further [19.5.2.2].

[70.5]

Commentary

This section applies to consensual transactions that allow a person (compare s 69 which only applies to payment transactions involving creditors) to acquire an interest that is either a negotiable instrument or is an interest in a negotiable instrument. This may be contrasted with s 12 which defines a security interest over personal property by reference to consensual transactions. A non-consensual interest (such as one which arises automatically under general law or statute) would be excluded from the operation of the PPSA under s 8. The rationale underpinning this provision is that commercial transactions require certainty regarding the negotiability of negotiable instruments which

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could be reduced if this rule did not exist, although, as noted above, s 256 provides that legislation giving rise to the negotiable instrument directly will prevail over PPSA security interests to the extent of any inconsistency. With reference particularly to large commercial financiers (such as banks), it goes against commercial practicality to require such parties to conduct a Personal Property Securities Register (PPSR) search before accepting negotiable instruments such as cheques for payment. That said, the PPSA does not fail to recognise and provide an opportunity for the holder of a security interest in a negotiable instrument or associated interest to protect their entitlements. A secured party of this nature can, and in the authors’ view should, perfect their interest by possession of the instrument or by maintaining control over its transferability to prevent the debtor from negotiating the instrument to a third party who can take the benefit of this rule. The primacy of commercial certainty in payment systems was emphasised in the Alberta decision in Belarus Equipment of Canada Ltd v C & M Equipment (Brooks) Ltd (Receiver of) (1994) 8 PPSAC (2d) 32 (Alta QB). Note that s 70 imposes a less stringent knowledge test for persons engaged in the ordinary business of acquiring negotiable instruments which is triggered only if they have actual or constructive knowledge that the acquisition constitutes a breach of the security agreement compared with others (which derives from actual or constructive knowledge of the security interest itself). Perhaps this is recognition that other parties may have difficulty getting access to the security agreement or (in the case of the consumer for example) may typically be unaware of the existence of security interests over negotiable instruments in such circumstances whereas parties ordinarily engaged in the business of acquiring negotiable instruments presumably have the commercial knowledge and leverage to not only be aware of the existence of relevant security agreements but also to access the relevant security agreements before acquisition and hence knowledge of a breach is the threshold for the carve out. In relation to the nemo dat quod non habet (‘‘no one [can] give what one does not have’’) rule, the Canadian courts have held that the equivalent to s 70 governs negotiable instruments and that the rule has no place in the application or interpretation of this provision: see Alberta (Minister of Justice) v Letawsky (2009) 15 PPSAC (3d) 303; 13 Alta LR (5th) 234 at [47]–[50] (Alta QB); see also Camco Inc v Frances Olson Realty (1979) Ltd (1986) 6 PPSAC 167; 50 Sask R 161 at [18] (Sask CA). The authors are of the view that this interpretation is consistent with the Australian PPSA.

[70.6] Further reading ● Explanatory Memorandum [2.161]. ● ALRC Report No 64 [–]. ● Whittaker Report [7.6]. Annotated Personal Property Securities Act 2009 (Cth)

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¶2-280 SECTION 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. S 71(1) amended by No 96 of 2010, s 3, Sch 2, Pt 1, item 57, effective 6 July 2010.

71(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. 71(3)

This section applies despite sections 62 and 64.

[71.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 98 s 31(7) s 28(3) § 9-330

[71.2] Outline This section provides certainty for particular acquirers of chattel paper or interests in chattel paper for value.

[71.3] Cross-references There are more than 25 references to chattel paper in the PPSA. Two that are particularly relevant for this section are s 80 and 81 which provide priority rules for transfers of chattel paper.

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[71.4]

315

Concepts

● Chattel paper This is defined by s 10. See also [12.5.3.1]. ● New value

Chapter 2

This is defined in s 10. ● Ordinary course of business See [46.5.2]. ● Possession See s 24.

[71.5] Commentary Section 71 importantly presents a priority rule which usurps the purchase money security interest (PMSI) priority status against perfected security interests pursuant to s 62–64. In order to understand why the holder of chattel paper prevails as against secured parties with an interest in the underlying collateral itself, the concept of chattel paper must first be understood (see [12.5.3.1]). Section 71 only applies where the secured party perfects their interest in the chattel paper by possession — unlike the application of the PPSA to the majority of collateral classes (where the choice between possession or registration is irrelevant) for chattel paper, possession trumps registration. The case of In re the Bennet Funding Group Inc (1996) 230 BR 30 (US Bankruptcy Court, ND New York), the Court required the secured party to possess an ‘‘ink-signed’’ original of the chattel paper. This is difficult to reconcile with the Australian PPSA considering the definition of writing pursuant to s 10 and growing recognition of electronic instruments in Australia. In Glosser v Colonial Pacific Leasing Co (in re Equitable Financial Management Inc) (1994) 164 BR 53 (Bankr WD Pa), the Court held that the holder of chattel paper must exercise absolute dominion and control over the instrument. For the purposes of the Australian PPSA, in the authors’ view, it is consistent with the significant level of priority enjoyed by a party with a security interest over chattel paper to possess, and to readily appear to possess, the relevant chattel paper. As a practical step, where possession of the chattel paper is impossible or against the commercial realities of the relevant transaction, secured parties seeking to benefit from s 71 should stamp the chattel paper with the relevant details describing their security interest. In such circumstances, even if the chattel paper is subsequently misappropriated, the party in receipt of the chattel paper will not take without notice of the former interest. It should also be noted that while s 70 and 72 only require value to be given by the acquirer (which can include past consideration), this section requires new value to be given. Annotated Personal Property Securities Act 2009 (Cth)

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[71.6] Further reading ● Explanatory Memorandum [2.162]. ● ALRC Report No 64 [–]. ● Whittaker Report [4.3], [7.6]. ● Antony Duggan, ‘‘Chattel paper’’ (2013) 41 Australian Business Law Review 214.

¶2-285 SECTION 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 (ii) otherwise — acquired the document of title without actual or constructive knowledge of the security interest.

[72.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 99 s 31 s 28 § 9-331

[72.2] Outline This provision provides certainty for holders of negotiable documents to accept the instruments without having to search the Personal Property Securities Register (PPSR) beforehand.

[72.3] Cross-references ● Section 22 provides a rule for perfection by a bailee who issues a negotiable document of title. ● Section 52 provides a taking free rule that applies to temporarily perfect security interests in negotiable documents of title.

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[72.4]

Concepts

● Actual or constructive knowledge This is discussed under s 297. Document of title is defined by s 10. See also the discussion in s 8. ● Ordinary course of business See [46.5.2]. ● Value This is defined in s 10. See further [19.5.2.2].

[72.5] Commentary This section provides a similar rule to s 70 and reference should be made to that section.

[72.6] Further reading ● Explanatory Memorandum [2.163]. ● ALRC Report No 64 [–]. ● Whittaker Report [7.6].

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SECTION 73 PRIORITY BETWEEN SECURITY INTERESTS AND DECLARED STATUTORY INTERESTS

Interests arising under a law etc. in the ordinary course of business 73(1) 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 Annotated Personal Property Securities Act 2009 (Cth)

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● Negotiable document of title

318

Personal Property Securities Act 2009 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)).

Statutory interests declared by law 73(2) 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 (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)).

73(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. 73(4) The Minister may make a legislative instrument containing a declaration, or determining priority, or both, for the purposes of subsection (3). 73(5)

Subsection (2) is subject to subsection (1).

Rights to payment in connection with specifically identified land 73(6) 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).

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Interests arising under the general law 73(7) 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. 73(8) The Minister may make a legislative instrument for the purposes of subsection (7). 73(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).

[73.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[73.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 93 s 32 s 31 § 9-333

Outline

This section provides a priority rule for competitions between interests that would otherwise fall outside of the PPSA and security interests under the PPSA.

[73.3]

Cross-references

● Section 8 excludes interests arising under law from the PPSA. ● Section 312 provides for the commencement of the operation of this section.

[73.4] Concepts ● Actual knowledge This is discussed under s 297. ● Ordinary course of business See [46.5.2]. In relation to s 73, see for example Stockco Ltd v Walker [2011] NZHC 601. ● Registration commencement time See s 306. Annotated Personal Property Securities Act 2009 (Cth)

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[73.5] Commentary This section provides priority rules for competitions between PPSA security interests and interests that sit outside the scope of the PPSA. While the foreign PPSA statutes do not have directly equivalent provisions to s 73 there are rules in those jurisdictions that address priority issues for similar competitions involving liens arising by operation of the law and PPSA security interests. The foreign provisions all require the lien to arise in relation to goods, whereas s 73 contains no such limitation (the concept of ‘‘goods’’ as opposed to other tangible personal property will no doubt carry a nuanced meaning in each respective jurisdiction). In addition to s 73, the interaction between the PPSA and foreign laws and the PPSA and other Australian laws is discussed at Pt 7.2 and 7.4 respectively In the New Zealand case of Toll Logistics (NZ) Limited v McKay [2011] NZCA 188, the Court of Appeal interpreted the equivalent New Zealand provision narrowly, holding that (at [60]): ‘‘Section 93 of the PPSA may be viewed as a limited exception to the broad intention to codify the law of security interests in personal property. While the existence of common law liens was accepted by s 93 as an exception to this general intention, anything other than a cautious approach to the recognition of common law liens is not justified.’’ The Court was considering arguments to support a general packer’s lien. The Canadian courts have ruled that a competition between a statutory security device and a PPSA security interest is to be determined in accordance with the rules of the statute that gave rise to the security interest, or otherwise to the common law rules (including the first in time rule): see generally Leavere v Port Colborne (City) (1995) 122 DLR (4th) 200 (Ont CA). See also Bank of Montreal v Innovation Credit Union [2010] SCC 47; (2010) 17 PPSAC (3d) 1. This section only applies to interests arising under law that are created, arise or are provided for under law after the registration commencement time (s 312). For a list of statutory provisions that have declared s 73(2) to apply see the Australian Personal Property Securities Law Reporter (CCH). For a discussion of the application of s 73 to maritime liens see: The Ship ‘‘Sam Hawk’’ v Reiter Petroleum Inc [2016] FCAFC 26.

[73.6] Further reading ● Explanatory Memorandum [2.164–2.166]. ● ALRC Report No 64 [–]. ● Whittaker Report [7.7], [7.8].

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SECTION 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). 74(2) To avoid doubt, an execution creditor does not include a landlord who exercises a right of distress. 74(3)

This section applies despite any other section in this Part.

Time of seizure or execution 74(4)

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.

[74.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[74.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 103 s 20(1) s 20(1)(a)(ii) § 9-317

Outline

This section provides execution creditors who seize the underlying collateral with priority over unperfected security interests over such collateral.

[74.3]

Cross-references

● Section 45 contains a taking free rule for motor vehicles which contains an exception for sales by or on behalf of an execution creditor. ● Section 275 includes execution creditors in the class of interested persons who may request information regarding the security agreement from the secured party. Annotated Personal Property Securities Act 2009 (Cth)

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[74.4] Concepts ● Collateral This is defined in s 10 as meaning personal property to which a security interest has attached (see s 19) including personal property described by a financing statement. ● Execution creditor This is defined in s 10 as meaning a creditor who has recovered judgment and issued execution against a grantor. This refers to the creditor who has obtained judgment obtaining a writ of execution. ● Execution order The court rules provide for orders to enforce judgments. In NSW, see Uniform Civil Procedure Rules 2005 (NSW), Pt 39 (‘‘UCPR’’). ● Garnishee order A garnishee order allows a judgment creditor to recover funds owed to them under the judgment directly from the grantor’s bank account. The court rules provide for garnishee orders. In NSW, see UCPR, Pt 39 Div 4. ● Landlord’s right of distress See s 8. ● Seizure It is likely that s 74 only applies to personal property that can properly be seized, and would not therefore apply to a chose in action held by the debtor. Furthermore, the use of the term ‘‘execution creditor’’ suggests that seizure should be read as resulting from a court action and not merely seizure pursuant to a security agreement.

[74.5]

Commentary

This section provides an execution creditor with priority over an unperfected security interest from the time of seizure by or on behalf of the execution creditor or from the time when the court makes an order in respect of a judgment in relation to the execution creditor or from the time that a garnishee order is made. In the Saskatchewan Court of Appeal case, Erjo Investments Ltd v Michener Allen Auctioneering Ltd (2004) 6 PPSAC (3d) 220; 238 DLR (4th) 32, the scope of the execution creditor’s priority was examined. The Court held (at [21]–[24]) that where an execution creditor does not have a perfected security interest, the judgment writ enables them to take priority only as against other unperfected security interests at the time of seizure. An unperfected secured party can thus perfect prior to seizure and prevail as against the execution creditor: See also, SM Construction v Folmar Electric Ltd (2000) 1 PPSAC (3d) 150; 188 DLR (4th) 494 (Newfoundland CA). Section 74 was recommended by the ALRC Report No 64 which stated (at [10.10]) that this priority rule would further encourage secured parties to perfect their security interests. It is also justifiable on the basis of the time and expense incurred by the execution creditor obtaining the order during a time when they could not have ascertained the existence of the security interest

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because it was unperfected — remembering that primacy is given to what can be found on the PPS Register. Furthermore, an execution creditor who searched the PPS Register could be encouraged to obtain the order or seek seizure based on the absence of a recorded interest against the grantor’s collateral.

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[74.6] Further reading ● Explanatory Memorandum [2.168]. ● ALRC Report No 64 [–]. ● Whittaker Report [7.8].

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SECTION 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)).

[75.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[75.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision § 9-327

Outline

This section provides for authorised deposit taking institutions (ADIs) holding security interests in ADI accounts to have the highest priority over such accounts.

[75.3]

Cross-references

● Section 21 provides for perfection by control. ● Section 25 defines control of an ADI account. ● Section 341A defines control of an ADI account for the purposes of s 340 only.

[75.4] Concepts ● ADI See s 10. ● ADI account See s 10. See further s 25. Annotated Personal Property Securities Act 2009 (Cth)

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[75.5] Commentary The ability of an authorised deposit taking institution (ADI) to have the highest priority over security interests taken over ADI accounts held by them through perfecting by control (see s 25) is consistent with rights held by banks at general law to exercise set-off, netting and combination of accounts (see s 8). Perfection by control occurs where an ADI takes a security interest over an account held with it despite the fact that money in a general ADI account (from the perspective of the ADI) is a liability to pay the account holder rather than an asset (which gives rise to the commonly referred to ‘‘conceptual impossibility’’ doctrine): see SM Construction v Folmar Electric Ltd (2000) 1 PPSAC (3d) 150; 188 DLR (4th) 494 (Newfoundland CA). See generally Peter Ward, ‘‘Personal property securities reform and the Conceptual Impossibility Doctrine’’ (2009) 20 Journal of Banking and Finance Law and Practice 106. This section was amended in 2011 to clarify that perfection by control of an ADI account is only possible if the secured party is the ADI with which the account is held: See Personal Property Securities (Corporations and Other Amendments) Act 2011 (Cth), Sch 2, s 17–19; see also Explanatory Memorandum to the amending statute at [79]. This section should be read in conjunction with s 25.

[75.6] Further reading ● Explanatory Memorandum [2.120]. ● ALRC Report No 64 [–].

¶2-305 SECTION 76 PRIORITY OF SECURITY INTERESTS IN RETURNED GOODS Security interest held by account transferee 76(1) 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.

76(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;

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(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). Security interest granted by buyer or lessee 76(3) 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.

[76.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[76.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision s 29(5)–(7) s 27(6) no parallel provision

Outline

This section provides priority rules where security interests are competing over collateral that was taken free under a sale or lease from the grantor but have since been returned (for example because of rescission of contract).

[76.3]

Cross-references

● This section should be read in conjunction with s 37 and 38.

[76.4] Concepts ● Goods These are defined in s 10. ● Possession This is defined by s 24. ● Transfer of an account This is discussed in [12.5.3.1]. ● Transfer of chattel paper This is discussed in [12.5.3.1]. Annotated Personal Property Securities Act 2009 (Cth)

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325

Part 2.6 — Priority between security interests

326

Personal Property Securities Act 2009

[76.5] Commentary This section contains three priority rules that address situations where there are competing security interests over goods that were subject to a security interest but nonetheless were sold or leased by the original grantor (that is, the debtor who obtained secured finance to acquire the goods prior to on-selling or leasing them to a third party) in a manner that allowed the transferee to take free of the prior security interest. It is easiest to consider the section in reverse. Section 76(3) provides that a person who acquires an interest in goods free from a prior security interest because of a sale or lease that they took from the original grantor/debtor will take priority over the original security interest (that is, the security interest that was taken free by the person prior to repossession) or over a security interest recognised by s 38 (for transferees of accounts or chattel paper generated by the sale or lease transaction) provided: ● that the person’s security interest attaches while the goods were in their possession (see s 24), and ● they perfected their security interest (for example by possession or registration of a financing statement) before the goods were repossessed. Sections 76(1) and (2) provide priority rules for persons who received a transfer of an account or chattel paper. Section 76(1) grants priority to a perfected security interest that has reattached under s 37 over a security interest that is recognised by s 38 as being held by a transferee of an account that was generated by the original sale or lease of goods that allowed a person to take free of the original security interest. That is, the original secured party’s perfected interest trumps a subsequent security interest held by the transferee of an account generated through the sale or lease that originally broke free of the first security interest. The following example illustrates the point: Secured Party A supplies equipment to Debtor B and perfects their security interest. Debtor B then sells the equipment to Party C who takes free by reason of Pt 2.5. The sale from Debtor B to Party C generates an account which Debtor B transfers to Secured Party D. The sale contract is then rescinded (perhaps because Party C fails to pay the full purchase price) and the equipment is returned to Debtor B. Assuming the elements of s 38 are satisfied Secured Party D would have a security interest in the equipment which creates a priority contest with Secured Party A. Section 76(1) gives priority to Secured Party A.

While the position is difficult, as both S1 and S2 have seemingly done all they could pursuant to the PPSA, the reality of securities law is such that a security interest is only as strong as the collateral securing the relevant obligation(s). In the above example, upon rescission, the account becomes essentially worthless. It should be noted that the security interest of S2 is not lost, but is subordinated to the complete fulfilment of the interest held by S1. In the

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Section 76(2) provides priority to the security interest in goods held by a transferee of chattel paper who has received the security interest by reason of s 38(2) once the goods were repossessed by the original debtor/grantor (who subsequently sold or leased them which generated the chattel paper which was then transferred to the relevant transferee who takes priority under this rule). The chattel paper transferee’s priority trumps a security interest held by an account transferee whose interest was also created by the sale or lease transaction. This contemplates that the sale or lease of goods by the original grantor/debtor produced two forms of collateral — one an account (see s 10) and another being chattel paper (see s 10). This is interesting given that these categories of collateral are mutually exclusive (see s 10 definition of account). Chattel paper comprises both a debt obligation as well as a security interest, while an account is merely a monetary obligation. The chattel paper transferee also has priority under s 76(2) where: ● they took possession of the chattel paper in the ordinary course of business of acquiring chattel paper of that kind, and ● they provided new value for the transfer of chattel paper. This priority exists over a security interest in goods that has reattached on the goods being returned to the original grantor/debtor under s 37(1) and over a secured party who has a perfected security interest over the returned goods as after-acquired property.

[76.6] Further reading ● Explanatory Memorandum [2.171]. ● ALRC Report No 64 [8.24–8.29]. ● Whittaker Report [7.7]. ● Antony Duggan, ‘‘Chattel paper’’ (2013) 41 Australian Business Law Review 214.

¶2-310 SECTION 77 PRIORITY OF CERTAIN SECURITY INTERESTS IF THERE IS NO FOREIGN REGISTER Scope 77(1) 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 non-perfection, 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. Annotated Personal Property Securities Act 2009 (Cth)

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authors’ view, all secured parties or potential secured parties should thus search the PPS Register to reveal the credit history of particular collateral (where available) in addition to prior security interests engaged by particular grantors.

328

Personal Property Securities Act 2009 Note: For when laws of other jurisdictions govern a security interest, see Part 7.2.

Security interests in accounts 77(2) 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. Security interests in financial property and intermediated securities 77(3) 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: (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.

Relationship with sections 239 and 240 77(4) 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).

[77.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision no parallel provision

[77.2] Outline This section provides a priority rule where certain types of collateral are perfected under the law of a foreign jurisdiction that does not provide for a public notice or registration system.

[77.3] Cross-references ● Section 235 determines when personal property is located in a particular jurisdiction. ● Sections 239 and 240 determine what governing law applies. However, s 77(4) provides that the priority rules apply to Australian court proceedings even if foreign law applies in the proceedings.

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Part 2.7 — Transfer of interests in collateral

Concepts

● Account This is defined by s 10. See further [12.5.3.1]. ● Financial property This is defined by s 10. See further s 27. ● Intermediated security This is defined by s 10. See further s 26.

[77.5] Commentary This section provides two priority rules where there is a competition involving security interests in accounts, financial property or an intermediated security and where the law of a foreign jurisdiction covers perfection, non-perfection or the effect of perfection but does not provide for public notice or public registration. Both priority rules require the secured party to register their security interest in Australia before the competing interest (whether a security interest or not) attaches to the collateral. Both priority rules are expressed to apply only to proceedings in an Australian court and would not therefore apply to a case in a foreign court applying Australian law. This provision is unique to the Australian PPSA and seeks to minimise the complexities between foreign security regimes and the PPSA.

[77.6] Further reading ● Explanatory Memorandum [2.172–2.174]. ● ALRC Report No 64 [–].

PART 2.7 — TRANSFER OF INTERESTS IN COLLATERAL ¶2-315

SECTION 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. Annotated Personal Property Securities Act 2009 (Cth)

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[77.4]

330

Personal Property Securities Act 2009 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.

¶2-320 SECTION 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.

79(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.

[79.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 87 s 33 s 39 § 9-401

[79.2] Outline This section clarifies that a grantor may transfer collateral despite a contrary provision in the security agreement.

[79.3] Cross-references ● Section 12(3) deems transfers of certain types of collateral (accounts and chattel paper) as security interests.

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Part 2.7 — Transfer of interests in collateral

[79.4]

331

Concepts

● Security agreement This is defined in s 10. See further s 18 and 20.

This provision provides an example of the PPSA moving away from the general law concepts of priority based on legal title recognising that the grantor may transfer the collateral with the agreement of the transferee or by operation of law — even if this transfer amounts to a misappropriation of the underlying property. The ability to transfer is also not dependant on whether the transferee had knowledge of the prohibition in the security agreement, although this may be relevant pursuant to the taking free rules in Pt 2.5. While the PPSA includes several protections to prevent fraudulent behaviour, the validity of a security interest is largely independent of this: see iTrade Finance Inc v Bank of Montreal (2011) FPPSR ¶700-125; [2011] 2 SCR 360. If the transfer generates proceeds they will automatically attach to the secured party’s security interest and come within the perfected security interest at least on a temporary basis, where time is granted for the secured party to perfect their interest by the registration of a financing statement that sufficiently describes the proceeds (see s 31–33). As noted by Professor Grant Gilmore in his classic treatise on the UCC Article 9 (Security Interests in Personal Property, 1965, Lawbook Exchange at 936), this provision allows a debtor to obtain further finance by granting subsequent security interests in their personal property. The Official Comment to the pre 1999 UCC provision notes that the purpose of the provision is ‘‘To make clear that in all security transactions under this Article, the debtor has an interest (whether legal title or an equity) which he can dispose of and which his creditors can reach’’. Upon the original secured party obtaining knowledge of the transfer (irrespective of whether they consent to it or not), the original secured party should be mindful of the requirements imposed by s 34 of the PPSA (see s 34) whereby the onus appears to remain with the original secured party to amend an existing financing statement or lodge a new financing statement to ensure the PPS Register reflects that the original secured party continues to have an interest in the underlying collateral. Section 79(2) notes that the ability to transfer does not affect the secured party’s rights, including the ability to treat the transfer as a default which could give rise to enforcement powers under Ch 4. Additionally, nothing in the PPSA purports to prevent the enforcement of the primary obligation between the secured party and the debtor, that is, the enforcement of rights in personam (against the person) which survives even an improper transfer of collateral or loss of security interest; see [14.5.9]. For an example where the New Zealand equivalent provision to s 79 was applied see: Alf No 9 Pty Ltd v Ellis [2009] NZHC 1416. Annotated Personal Property Securities Act 2009 (Cth)

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[79.5] Commentary

332

Personal Property Securities Act 2009

[79.6] Further reading ● Explanatory Memorandum [2.175–2.176]. ● ALRC Report No 64 [7.10–7.13]. ● Whittaker Report [7.11].

¶2-325 SECTION 80 RIGHTS ON TRANSFER OF ACCOUNT OR CHATTEL PAPER — RIGHTS OF TRANSFEREE AND ACCOUNT DEBTOR Rights of transferee subject to contractual terms and defences 80(1) 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. 80(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. Effect of modification or substitution of contract on transferee 80(3) 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 (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.

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333

Part 2.7 — Transfer of interests in collateral 80(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

80(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. 80(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. Payment by account debtor after transfer 80(7) 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. 80(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.

[80.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

Annotated Personal Property Securities Act 2009 (Cth)

s 102 s 41 s 40 § 9-404–9-406

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(b) even if there has been notice of the transfer to the account debtor.

334

Personal Property Securities Act 2009

[80.2] Outline This section clarifies what rights the transferee of an account or chattel may exercise against the account debtor.

[80.3] Cross-references ● Section 12(3) deems the transfer of an account or chattel paper to be security interests. See further [12.5.3.1].

[80.4]

Concepts

● Account This is defined in s 10. See further [12.5.3.1]. ● Account debtor This is defined in s 10 as a person who is obligated under an account or chattel paper. See also In re Doctors Hospital of Hyde Park Inc (2003) 337 F.3d 951 (US CA 7th Circ). ● Chattel paper This is defined in s 10. See further [12.5.3.1]. ● Modification This is defined in s 10 as including an addition, omission and substitution. ● Transferee The equivalent term used in the US under UCC Article 9 (assignee) was discussed in In re Printz (2012) 478 BR 876 (US Bankr Court for CD Ill).

[80.5] Commentary Section 80 ensures that an account debtor is in no worse a position by reason of the account or chattel paper being transferred: see, Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd (in liq) (recs and mgrs apptd) (2017) 320 FLR 259; [2017] WASC 152 at [221]. In that case, it was held that s 80 does not limit the operation of statutory set off in Corporations Act s 553C. The provision allows the account debtor to limit what rights they can set up against the transferee of the account or chattel paper (s 80(2)). In Systran Financial Services Corp v Giant Cement Holding (2003) 252 F Supp 2d 500 (USDC, Nth Dist of Ohio), the court held that the equivalent provision in UCC Article 9 bound an assignee to an arbitration clause in the contract between the transferor and the account debtor. This is consistent with s 18(1) of the Australian PPSA. Section 80(3) allows for the contract between the account debtor and the transferor of the account or chattel paper to be varied or substituted (prior to complete performance) provided that it does not have a material adverse effect on the transferee’s rights under the contract or the transferor’s ability to perform the contract. This rule applies even if there has been notice of the

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transfer to the account debtor (s 80(4)) although the account debtor could limit this by prior agreement (see s 18(1). Such conduct could still constitute a breach of the contractual obligations of the transferor (s 80(6)). The ability to modify the contract could pose problems to securitisation programs although these concerns could be addressed by the limitations imposed on the power to modify. The transferor and the account debtor can only make a variation to or a substitution of the contract honestly and in a manner that is commercially reasonable (s 80(3)). The Explanatory Memorandum to the Personal Property Securities Bill 2009 (Cth) states (at [2.180]) that: ‘‘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.’’ There have been very few cases that have considered the equivalent power in the US (and none in Canada). In Re Sycom Enterprises LP (2004) 310 BR 669 (US Bankr Court NJ) the court held that a failure by the transferor to include the assignee in negotiations to vary the contract did not amount to bad faith. Bad faith was found in Producers Cotton Oil Co v Amstar Corp (1988) 197 Cal App 3d 638 (Cal CA) (deliberate breach of contract). Section 80(7) provides circumstances when the account debtor will be permitted to continue making payments to the transferor. Payments made by an account debtor prior to receiving notice of the transfer will discharge the obligation of the account debtor to the extent of the payment (s 80(8)). The US courts have held that until the account debtor receives notice of the assignment the assignee remains subject to any set-off rights that accrue to the third party debtor: Timothy Dean’s Inc v White (2006) 342 BR 1 (US Bankr Court for DC). See also Puritan Finance Corp v Bechstein Construction Corp (2012) 980 NE 2d 135 (Illinois Ap Ct). As to setoff rights and UCC Art 9 § 9-404 see US Aeroteam Inc v Delphi Automotive Systems LLC (2005) 327 BR 852 (US Bankr Court for Sth Dist of Ohio); In re Printz (2012) 478 BR 876 (US Bankr Court for CD Ill). As to the detail required for notice under the UCC equivalent provision see: In re Communication Dynamics Inc (2003) 300 BR 220 (US Bankr Court for Dist of Delaware).

[80.6] Further reading ● Explanatory Memorandum [2.177–2.182]. ● ALRC Report No 64 [5.14–5.17]. ● Whittaker Report [4.3], [7.11], [8.2]. Annotated Personal Property Securities Act 2009 (Cth)

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Part 2.7 — Transfer of interests in collateral

336

Personal Property Securities Act 2009

¶2-330 SECTION 81 RIGHTS ON TRANSFER OF ACCOUNT OR CHATTEL PAPER — CONTRACTUAL RESTRICTIONS AND PROHIBITIONS ON TRANSFER Scope 81(1)

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. Statutory restriction on contracts 81(2)

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.

[81.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision s 41(9) s 40(4) § 9-406

[81.2] Outline This provision limits the ability of contractual clauses to prohibit assignments of accounts or chattel paper.

[81.3] Cross-references ● Sections 31–33 provide rules relating to proceeds.

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Part 2.7 — Transfer of interests in collateral

Concepts

● Account This is defined by s 10. See [12.5.3.1]. ● Chattel paper This is defined by s 10. See [12.5.3.1]. ● Currency This is defined by s 10 to include both Australian and foreign currency. ● Ordinary course of business See [46.5.2]. ● Proceeds This is defined by s 31, see also s 32–33.

[81.5] Commentary This section promotes the assignability of accounts and chattel paper by rendering certain clauses that restrict assignability unenforceable (though not void). Although the section restricts absolute prohibitions it does not prevent clauses that limit an assignment of less than the whole of an account. The general law with respect to the assignment of part of a debt will continue to be relevant here: see s 254. Ziegel J and Dennome D have commented that in Canada, this provision can be easily avoided through the use of powers of attorney conferred on the assignee, trust arrangements for the benefit of the assignee or (somewhat more left field) to require the obligor to make payment to the assignor at a designated post office box which is in fact an alias of the assignee.21 Whether or not Australian courts are equally inclined to give effect to the deviations mentioned remains to be seen.

[81.6] Further reading ● Explanatory Memorandum [2.183–2.184]. ● ALRC Report No 64 [5.15–5.17]. ● Whittaker Report [7.11].

21

Ziegel J and Dennome D, The Ontario Personal Property Security Act Commentary and Materials, 2nd ed 2000 Butterworths at 334–335.

Annotated Personal Property Securities Act 2009 (Cth)

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[81.4]

337

339

Part 3.2 — Agricultural interests

CHAPTER 3 — SPECIFIC RULES FOR CERTAIN SECURITY INTERESTS PART 3.1 — GUIDE TO THIS CHAPTER ¶3-005

SECTION 82 GUIDE TO THIS CHAPTER

82

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 ¶3-010

SECTION 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).

Annotated Personal Property Securities Act 2009 (Cth)

¶3-010

Chapter 3

This Chapter contains specific rules for certain security interests.

340

Personal Property Securities Act 2009

¶3-015 SECTION 84 RELATIONSHIP BETWEEN SECURITY INTEREST IN CROPS AND INTEREST IN LAND Effect of security interest in crops on lessor or mortgagee of land 84(1) 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 (b) the lessor or mortgagee has not consented in writing to the creation of the security interest. Effect of sale etc. of land on perfected security interest in crops 84(2) 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.

[84.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 100, 101 s 37 no parallel provision § 9-334(i)

[84.2] Outline This section provides that perfected security interests in crops are not prejudicially affected by the sale, lease or mortgage of land on which the crops are growing.

[84.3] Cross-references ● Section 8 excludes interests in land from the PPSA. ● Section 31(4) provides for proceeds for collateral that is crops. ● Section 84A clarifies when security interests attach to crops. ● Section 85 provides priority rules for security interests in crops. ● Section 115 allows the enforcement provisions relating to crops to be contracted out of where the crops are not used predominantly for personal, domestic or household purposes. ● Section 117 provides an enforcement rule for obligations that are secured by interests in personal property and land. ● Section 138B provides a specific rule for seizure and retention of crops.

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Part 3.2 — Agricultural interests

[84.4]

Concepts

● Crops This is defined in s 10 as meaning: ‘‘crops (whether matured or not and whether naturally grown or planted) that have not been harvested, including: (a) the products of agriculture or aquaculture, if the products have not been harvested and

[84.5] Commentary This section clarifies the relationship between security interests in crops which are growing on land and security interests in the land itself. Once the crops are harvested they may become proceeds (s 31). Interests in land are generally excluded from the PPSA (see s 8) but crops are connected to the land. Section 84(1) provides that a security interest in crops will only prejudicially affect the rights of a lessor or mortgagee of land on which the crops are growing if the lessor or mortgagee’s rights arose after the time the security interest in the crops was created or the lessor or mortgagee consented to the creation of the security interest in the crops. Section 84(2) provides that perfected interests are not prejudicially affected by the sale, lease or mortgage of land on which the crops are growing. This provision largely reflects the recommendations of the ALRC Report No 64 at [5.49] which stated that crops should be classified as personal property ‘‘independently of the land on which they are growing.’’

[84.6] Further reading ● Explanatory Memorandum [3.1–3.4, 4.32]. ● ALRC Report No 64 [5.46–5.49].

¶3-020

SECTION 84A ATTACHMENT OF SECURITY INTERESTS TO CROPS WHILE THEY ARE GROWING AND TO THE PRODUCTS OF LIVESTOCK

Security interest in crops while they are growing 84A(1) To avoid doubt, a security interest may attach to crops while they are growing. Security interest in the products of livestock 84A(2) 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). Annotated Personal Property Securities Act 2009 (Cth)

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(b) trees (but only if they are personal property), if the trees have not been harvested.’’

342

Personal Property Securities Act 2009 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).

[84A.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[84A.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 51 s 12(3) no parallel provision no parallel provision

Outline

This section clarifies when security interests in crops and livestock attach.

[84A.3]

Cross-references

● Section 8 excludes interests in land from the PPSA. ● Section 31(4) provides for proceeds for collateral that is crops or livestock. ● Section 84 clarifies the relationship between security interests in crops and the land on which they are growing. ● Section 85 provides priority rules for security interests in crops or livestock. ● Section 115 allows the enforcement provisions relating to crops and livestock to be contracted out of where the collateral is not used predominantly for personal, domestic or household purposes. ● Section 117 provides an enforcement rule for obligations that are secured by interests in personal property and land. ● Sections 138B and 138C provide a specific rule for seizure and retention of crops and livestock.

[84A.4]

Concepts

● Attachment See s 19. ● Crops This is defined by s 10, see also s 84. ● Livestock This is defined by s 10 as including alpacas, cattle, fish, goats, horses, llamas, ostriches, poultry, sheep, swine and other animals while they are alive. The s 10 definition also include the unborn young of those animals and the products of livestock before they become proceeds (eg the wool on a sheep’s back before the sheep is shorn). Fish also have a specific meaning under s 10. ● Proceeds See s 31.

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Part 3.2 — Agricultural interests

[84A.5]

Commentary

This section was inserted by amendments in 2010 for the purposes of clarifying that security interests in crops can attach while they are growing and to the products of livestock before they become proceeds. This amendment was included to allow financiers to take security interests over the products which derive from agricultural affairs, such as wool, without the need to take an interest in the product from which the collateral derived (which would be livestock in the case of wool): see Personal Property Securities (Corporations and Other Amendments) Act 2010 (Cth), Sch 2, s 66; see also Explanatory Memorandum to the amending legislation at [9.100]–[9.103].

[84A.6] Further reading ● Explanatory Memorandum to the Personal Property Securities (Corporations and Other Amendments) 2010 Bill (Cth) [100]–[103]. ● ALRC Report No 64 [5.46]–[5.49].

¶3-025

SECTION 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.

[85.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[85.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision s 34(11) s 32 no parallel provision

Outline

This section provides a priority rule for assessing security interests in crops and the proceeds of crops. Annotated Personal Property Securities Act 2009 (Cth)

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It should be noted that crops, livestock and wool are all expressly designated as goods under s 10.

344

Personal Property Securities Act 2009

[85.3] Cross-references ● Section 31(4) provides for proceeds for collateral that is crops or livestock. ● Section 84 clarifies the relationship between security interests in crops and the land on which they are growing. ● Section 84A provides rules relating to the attachment of security interests in crops or livestock. ● Section 115 allows the enforcement provisions relating to crops and livestock to be contracted out of where the collateral is not used predominantly for personal, domestic or household purposes. ● Section 117 provides an enforcement rule for obligations that are secured by interests in personal property and land. ● Sections 138B and 138C provide a specific rule for seizure and retention of crops and livestock.

[85.4]

Concepts

● Crops This is defined in s 10. Seeds are used to grow crops and so are not crops themselves until they are planted in the ground and germinate. Prior to becoming crops seeds would be classified as goods as the definition in s 10 is non-exclusive. ● Proceeds of crops See s 31, [31.5.10] in particular. ● Security agreement See s 18 and 20. ● To enable the crops to be produced This would include fertilizer and equipment used in growing the crops: see Leu v NM Paterson & Sons Ltd (1997) 13 PPSAC (2d) 27 156 Sask R 36; (Sask QB). In that case, the security interest was expressed to cover ‘‘all crops and proceeds product with seed and/or chemical purchased by the Farmer using financing from the secured party’’. ● Value This is defined in s 10. See further [19.5.2.2].

[85.5]

Commentary

This section (and s 86 for livestock) were intended to provide an ‘‘agricultural PMSI’’ as stated in the Explanatory Memorandum at [3.2]. However, these two sections do not work in the same way as the purchase money security interest (PMSI) provision in the general sense and are not PMSIs simply because of this section (see s 14 for the definition of a PMSI). Nor do they clearly convey the same super priority that PMSIs have (see s 62). What both s 85 and 86 do is attempt to clarify the priority rules that apply where security interests are taken in crops and livestock (respectively). Unfortunately, the rules are not as clear as they could be.

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However, to take advantage of the priority conferred on general PMSIs under s 62, the secured party would need to register a financing statement which covers the collateral and indicates that the security interest is a PMSI within the specified time (s 62(2)). Section 85 does not have similar requirements (thus perfection may be obtained by possession, although this is unlikely given the nature and uses of agricultural products). The Explanatory Memorandum also expressly notes (what it calls an agricultural PMSI) that security interests covered by s 85 would have lower priority than a general PMSI over the same collateral: at [3.2]. It is suggested that s 85 does not render a security interest in crops a PMSI and its terms allow for a security interest in crops to take priority over a PMSI (provided the requirements under s 85 are satisfied). It is notable that s 86 provides a similar rule for security interests in livestock and makes an express statement that priority under s 86 does not give priority over a PMSI. Furthermore, s 85 also does not provide rules for competing priorities for multiple security interests that comply with the section, in which case the default priority rules pursuant to s 55 should operate (ie because compliance with s 85 will not of itself confer PMSI super-priority). In such a case, the registration time will be the appropriate rule under s 55(5) unless the rules for temporary perfection may apply. As noted above, possession is unlikely to be commonly used for perfection of security interests in crops given the need for the grantor to use the collateral. Like any finding of fact, there may be cases where one agricultural security interest over goods or finance will be classified as a PMSI despite both potentially satisfying the requirements of s 85. This may arise simply where one secured party does not indicate the PMSI status on a registered financing statement. In such a case, the PMSI super priority rule in s 62 will apply. In cases where multiple suppliers have perfected PMSIs, the competing PMSI priority rule in s 63 will apply. As noted by Lhuede and Dewhurst,22 it will be beneficial for supplier and financiers to enter into subordination agreements with other suppliers and financiers to protect themselves against the uncertainties of s 85. For a discussion as to the validity of express subordination in lieu of taking a PMSI interest under the PPSA see [14.5.1]. 22

Wappett C, Whittaker B and Edwards S, Personal Property Securities in Australia, LexisNexis (looseleaf) at [4.7.1050].

Annotated Personal Property Securities Act 2009 (Cth)

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The wording of s 85 states that a perfected security interest that complies with the section ‘‘has priority over any other security interest that is granted by the same grantor in the same crops or proceeds’’. This would seem to confer priority over a general PMSI. One complicating factor is that a security interest in crops that complies with s 85 could also be a general PMSI under the terms of s 14 where the agricultural supplier or financier’s security interest secured all or part of the purchase price of the materials that will enable the crops to grow (such as fertilizer or farm equipment) or where the value provided by the supplier or financier enables the grantor to acquire the rights in the collateral (see s 14 and Poss v Melfort Credit Union Ltd (1993) 5 PPSAC (2d) 72 (Sask QB) where a loan was used for general farming operations rather than to buy seeds which prevented security interest being a PMSI).

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[85.6] Further reading ● Explanatory Memorandum [3.5–3.6]. ● ALRC Report No 64 [5.46–5.49]. ● Whittaker Report [7.7].

¶3-030 SECTION 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.

[86.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision s 34(12) no parallel provision no parallel provision

[86.2] Outline This section provides a priority rule for security interests in livestock.

[86.3] Cross-references ● Subsection 31(4) provides for proceeds for collateral that is crops or livestock. ● Section 115 allows the enforcement provisions relating to crops and livestock to be contracted out of where the collateral is not used predominantly for personal, domestic or household purposes.

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● Section 117 provides an enforcement rule for obligations that are secured by interests in personal property and land. ● Sections 138B and 138C provides a specific rule for seizure and retention of crops and livestock.

[86.4]

Concepts

This is defined in s 10 as including alpacas, cattle, fish, goats, horses, llamas, ostriches, poultry, sheep, swine and other animals while they are alive. The s 10 definition also includes the unborn young of those animals and the products of livestock before they become proceeds (eg the wool on a sheep’s back before the sheep is shorn). Fish also have a specific meaning in s 10. ● Security agreement See s 18 and 20. ● Value This is defined in s 10. See further [19.5.2.2].

[86.5] Commentary This section provides a similar position to that under s 85 (which applies to crops) and reference should be made to the commentary for that section. It should again be noted that s 86 expressly provides that security interests with priority under this section do not have priority over a purchase money security interest (PMSI).

[86.6] Further reading ● Explanatory Memorandum [3.7]. ● ALRC Report No 64 [–]. ● Whittaker Report [7.7].

PART 3.3 — ACCESSIONS ¶3-035

SECTION 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. Annotated Personal Property Securities Act 2009 (Cth)

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● Livestock

348

Personal Property Securities Act 2009 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 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.

¶3-040 SECTION 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.

[88.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 78 s 38(2) s 35(1)(a) § 9-335(a)

[88.2] Outline Section 88 provides for security interests in accessions. An accession is defined for the purposes of the PPSA pursuant to s 10, however, the term is also discussed in detail below.

[88.3] Cross-references ● Part 3.3 provides rules for assessing the priority (s 89–91) of security interests in accessions. Sections 92–95 and 97 deal with the removal of accessions. Section 96 provides where a person may retain an accession.

[88.4]

Concepts

● Accession The term ‘‘accession’’ is defined by s 10 as meaning goods that are installed or affixed to other goods which are readily identifiable and can be removed from the goods which they are installed or affixed to.

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Security interests can thus be taken in: – the original collateral or collateral without a particular accession attached – the accession itself as an independent piece of personal property – the amalgamation of the two or more goods, otherwise referred to as the ‘‘whole’’ throughout Pt 3.3. The term ‘‘accessions’’ in the PPSA is clearly not confined to its common law meaning: Kulchyski v Shuswap Ventures Corp (1994) 7 PPSAC (2d) 216 (BC SC). In Roy Foss Motors Ltd v Auto Service Finance Centre [2005] CarswellOnt 4074 (Ont SCJ), it was held that tires and wheel rims were essential for the operation of the car and hence their installation constituted a repair, despite their high cost, while an alarm system was not essential and its installation was of an accession. The Ontario Superior Court of Justice case, GMAC Leaseco Ltd v Tomax Credit Corp (2001) 3 PPSAC (3d) 15 provides a good example of what constitutes an accession under the PPSA. In that case, the issue arose as to what constituted an accession to goods as distinct from ordinary repairs and maintenance of the underlying collateral. The radio and speakers of a motor vehicle were the subject of a priority dispute between a lien holder with an interest in the radio and speakers and a financier with an interest in the vehicle as a whole. Cameron J held (at [9]–[12]): ‘‘A radio is not an integral part of a vehicle. Many new vehicles do not contain a radio. A radio installed in a vehicle is not a repair under the RSLA [Ontario repair statute]. It does not alter, improve or restore the properties of the vehicle. It is different from tires, windows, brakes, transmission, exhaust system, dented fenders, scraped paint, etc. A vehicle continues to operate as a vehicle, a safe, efficient and presentable means of transportation when the radio is removed. A radio merely increases the user’s pleasure while occupying the vehicle. A radio can exist and operate separate from the vehicle. It is an addition to the vehicle, not an alteration, improvement or restoration of the properties of the vehicle. On the other hand I find the electronic door locking system and security system to be an improvement to the properties of the vehicle. A locking system is a part of every new vehicle and is useless except as part of a vehicle. These costs are secured by the RSLA lien in priority to GMAC’s claim I find this amount, including GST and PST, to be 31.5% of the total conditional sales amount of $5,988.52 or $1,886.00. As a matter of commercial expediency, vehicle owners benefit from repairs. However they cannot protect their interests from the addition and removal of accessions. Those who deal in accessions and seek a non-possessory security interest therein must accept the priorities of PPSA s.35 or search title and security interests to ensure they obtain the priority they seek in the asset to which the accession is attached.’’ The lien holder thus prevailed in relation to the radio and speakers. Annotated Personal Property Securities Act 2009 (Cth)

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Part 3.3 — Accessions

350

Personal Property Securities Act 2009 Each case concerning a purported accession must be decided on a caseby-case basis whereby the relevant question is whether the accession has value and utility as a separate component from the whole (in light of the underlying collateral, facts and surrounding circumstances): NAV Canada v Wilmington Trust Co (2006) 10 PPSAC (3d) 66; 269 DLR (4th) 79 (SCC); GMAC Leaseco Ltd v Best Audio Design Inc (2004) 6 PPSAC (3d) 385 (Ont SCJ).

[88.5]

Commentary

Section 88 provides that a security interest over goods which become accessions to other goods continues in the goods acceded to the extent that payment or performance of an obligation remains outstanding. The priority afforded to the security interest over the accession as against any subsequent security interest taken over the amalgamated product (or whole) will depend on whether or not the security interest in the accession was perfected, attached or otherwise at the time the goods become an accession (discussed over the balance of Pt 3.3).

[88.6] Further reading ● Explanatory Memorandum [3.8–3.10]. ● ALRC Report No 64 [8.11–8.23].

¶3-045 SECTION 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.

[89.1] Comparable provisions in foreign regimes Note: The New Zealand PPSA appears to be the only jurisdiction where the provisions regarding accessions have been separated in the Act. Among the US, Canadian provinces and Australian regime, accessions and commingled goods are addressed in consolidated parts.

New Zealand Saskatchewan Ontario USA

[89.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 79 s 38(2) s 35(1)(a) § 9-335(c)

Outline

Section 89 provides the default priority rule regarding perfected security interests in accessions.

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[89.3]

351

Cross-references

● Sections 90–91 provide further priority rules for accessions.

[89.4] Concepts

[89.5] Commentary Section 89 provides that the default priority position between a perfected security interest in an accession (perfected prior to the goods becoming an accession) and a perfected security interest in the whole is that the security interest over the accession is to prevail (subject to s 90). The principle being that the perfected security interest over the original goods puts the party taking a security interest over the whole on notice of the existing security interest with respect to the accession, and where such an interest is registered (as will often be the case) primacy is to be given to the PPS register under the PPSA. Section 89 may not, however, prevent the operation of the taking free provisions (see Pt 2.5) or purchase money security interest (PMSI) priority rules (see Pt 2.6, Div 3). On a practical note, parties dealing with complex goods made up of many component parts should be on notice of the potential for existing security interests in each individual component.

[89.6] Further reading ● Explanatory Memorandum [3.12]. ● ALRC Report No 64 [8.11–8.23].

¶3-050

SECTION 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; Annotated Personal Property Securities Act 2009 (Cth)

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● Accession This is defined in s 10. See further s 88. ● Attachment See s 19. ● Goods This is defined in s 10.

352

Personal Property Securities Act 2009 (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; (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.

[90.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 80 s 38(3) s 35(2) § 9-335(c)

[90.2] Outline Section 90 applies where the secured party with an interest in the accession has failed to perfect prior to the goods becoming an accession at the time when a security interest in over the whole has attached.

[90.3] Cross-references ● Sections 89 and 91 provide further priority rules for accessions.

[90.4]

Concepts

● Accession This is defined by s 10. See further s 88. ● Advance This is defined by s 10. See further s 58. ● Perfected See s 21. ● Value This is defined in s 10. See further [19.5.2.2].

[90.5] Commentary Pursuant to s 90, priority is afforded to a perfected interest over the whole as against an interest which has attached to an accession where the interest in the accession is not perfected at the time the goods were acceded. This applies to perfected interests for value, assignees for value, perfected interest over advances made and perfected interest providing rights to retain the whole. In the British Columbia Supreme Court case, Pratt & Whitney Canada Leasing Inc v Ellis Air Inc (2002) 6 PPSAC (3d) 84; 3 CBR (5th) 81, the issue of whether the secured party with an interest in the whole prevailed over the holder of an unperfected security interest in the accession came under judicial

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‘‘Although the December 20, 2000 order states that the respondents may repossess the helicopters together with the engines, it is silent on the subject of priorities among competing security interests. It does not state that the respondents will take the helicopters and engines free of all encumbrances. It does not use the language of vesting regarding the helicopters or engines. It does not use the wording of s. 38(3)(b)(ii) and state that the respondents are to retain the whole in satisfaction of the obligation secured by their lease, nor does it use words to that effect. The wording of the order is consistent with the contention of the petitioner, that the order gave the respondents permission to retake possession of the helicopter as their contract permitted, but only in the place of Northern Mountain. Their priority vis-a` -vis Pratt & Whitney was not advanced by the December 20, 2000 order.’’ This position highlights an important difference with the Australian PPSA pursuant to s 90. The British Columbian PPSA requires that the secured party with an interest over the whole take their interest without knowledge (a more onerous requirement) of the interest in the accession in order to prevail.23 In the authors’ view, the Australian PPSA requires perfection and nothing less than perfection of the security interest in the goods prior to the process of accession, which will protect the secured party with an interest in the accession from prevailing against a perfected security interest over the whole. That is to say, unless a knowledge-based requirement forms part of the express language of the PPSA, a court should be reluctant to imply such a requirement.

[90.6] Further reading ● Explanatory Memorandum [3.13–3.18]. ● ALRC Report No 64 [8.11–8.23]. ● Whittaker Report [9.9]. 23

Personal Property Security Act RSBC 1996, c 569, 38(2)(b)(ii).

Annotated Personal Property Securities Act 2009 (Cth)

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consideration. The amalgamated property comprised a helicopter, the accession being the engine to it. The engine formed part of a lease arrangement such that a security interest had arisen, however, the lessor failed to perfect this interest. Nonetheless, the secured party over the whole knew at all material times of the interest existing with respect to the accession. The secured party with an interest in the whole obtained an order from the court granting the retaking of possession of the helicopter. Regarding whether or not this order encompassed the taking of the helicopter including the engine, Smith J held (at [21]):

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¶3-055 SECTION 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.

[91.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 81 s 38(4) s 35(1)(b), 35(2) § 9-335(e), (f)

[91.2] Outline Section 91 applies where attachment of the security interest in the accession has not occurred at the time the goods become accessions. The position of the purported creditor in relation to the accession is thus two stages removed from the point of priority as neither perfection nor attachment has occurred.

[91.3] Cross-references ● Sections 89 and 90 provide further priority rules for accessions.

[91.4]

Concepts

● Accession This is defined by s 10. See further s 88. ● Attaches See s 19. ● Consent See s 12.

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[91.5]

Commentary

Section 91 applies where a creditor derives an interest in the accession after the accession becomes part of the whole. By virtue of the PPSA, a security interest arising in the accession must therefore take with notice of the perfected security interest existing over the whole and is thus rendered subject to any such interests. Of course, taking an interest in property already encumbered is ill-advised in the absence of an express subordination agreement (see [12.4.6]) in favour of the creditor seeking an interest in the accession from the secured party with an interest over the whole.

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[91.6] Further reading ● Explanatory Memorandum [3.17–3.18]. ● ALRC Report No 64 [8.11–8.23]. ● Whittaker Report [7.7].

¶3-060

SECTION 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.

[92.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[92.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 125 s 38(7) s 35(4) § 9-335(e), (f)

Outline

Accessions may be removed where the security interest over the accessions prevails as against the security interest over the whole, however, the party removing the accessions must not damage the whole or provide an inconvenience greater than is necessary pursuant to s 92 (see also s 123). Annotated Personal Property Securities Act 2009 (Cth)

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[92.3] Cross-references ● Sections 93–95 and 97 provide further rules relating to removal of accessions. ● Section 123 provides rules related to the seizure of collateral by a secured party. See also s 111 for the obligation to act honestly and in a commercially reasonable manner.

[92.4]

Concepts

● Accessions This is defined by s 10. See further s 88. ● Goods This is defined by s 10. ● Possession See s 24.

[92.5] Commentary Section 92 should be read in conjunction with the provision for compensation or reimbursement pursuant to s 93. This section highlights the commercial perspective of the PPSA, whereby enforcing a security interest does not grant the prevailing secured party the right to interfere with any other existing interests.

[92.6] Further reading ● Explanatory Memorandum [3.19]. ● ALRC Report No 64 [8.11–8.23]. ● Whittaker Report [8.3].

¶3-065 SECTION 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. 93(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.

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[93.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[93.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 126 s 38(8) s 35(4) § 9-335(e), (f)

Outline

Section 93 applies where a secured party fails to comply with s 92 regarding the removal of accessions.

Cross-references

● Sections 92–95 and 97 provide further rules relating to removal of accessions. ● Section 123 provides rules related to the seizure of collateral by a secured party. See also s 111 for the obligation to act honestly and in a commercially reasonable manner.

[93.4] Concepts ● Accessions This is defined by s 10. See further s 88. ● Goods This is defined by s 10.

[93.5] Commentary While s 93 does not define how reimbursement for damage to the whole or other accessions is to be assessed, it is, in the authors’ view, readily inferable that a reasonable standard would follow in line with the principles of tort law, that is, to put the aggrieved party in the position they would have been in had s 92 been complied with.

[93.6] Further reading ● Explanatory Memorandum [3.19–3.22]. ● ALRC Report No 64 [8.11–8.23].

¶3-070 SECTION 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.

Annotated Personal Property Securities Act 2009 (Cth)

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[93.3]

358

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[94.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 127 s 38(9) s 35(5) § 9-335(f)

[94.2] Outline Section 94 provides rights to the secured party with an interest in the whole to ensure the diligence of the security party over the accession in removing the relevant accession.

[94.3] Cross-references ● Sections 92, 93, 95 and 97 provide further rules relating to removal of accessions. ● Section 111 obliges secured parties exercising powers under Ch 4 (enforcement) to act honestly and in a commercially reasonable manner.

[94.4]

Concepts

● Accession This is defined by s 10. See further s 88.

[94.5] Commentary All secured parties with an interest over the whole should, in the authors’ view, utilise s 94 whenever the circumstance arises. Much like requiring an undertaking as to damages with respect to seeking an injunction in equity — a secured party with an interest over the whole (or other interested party capable of receiving s 93 reimbursement) should not allow the removal of the accession until security is provided: See, Beecham Group Ltd v Bristol Laboratories (1968) 118 CLR 618 at 623; Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd (1981) 146 CLR 249 at 318–19. This ensures that even if the removal causes damage to the whole or other accessions that the relevant compensation can be duly paid.

[94.6] Further reading ● Explanatory Memorandum [3.19–3.22]. ● ALRC Report No 64 [8.11–8.23].

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¶3-075

SECTION 95 SECURED PARTY MUST GIVE NOTICE OF REMOVAL OF ACCESSION

Notice required to be given by secured party 95(1) 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;

95(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. 95(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. 95(4)

The notice may be given in the approved form.

When notice is not required 95(5) 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. 95(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. Annotated Personal Property Securities Act 2009 (Cth)

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(b) a secured party with a security interest in the accession that has a higher priority.

360

Personal Property Securities Act 2009 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).

95(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.

[95.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 129 s 38(12), (13) s 35(6), (7) § 9-335(b)

[95.2] Outline The concept of providing notice when seeking to enforce a security interest is important under the PPSA and is provided for under Pt 8.5. Section 95 includes provisions as to when notice is required and when it is not required with regards to removing accessions. This provision should be read in conjunction with Pt 8.5.

[95.3] Cross-references ● Sections 92–94 and 97 provide further rules relating to removal of accessions. ● Section 111 obliges secured parties exercising powers under Ch 4 (enforcement) to act honestly and in a commercially reasonable manner. ● Section 302 provides rules for approved forms.

[95.4]

Concepts

● Accessions This is defined by s 10. See further s 88. ● Collateral description See Pt 5.3. ● Notice See further Pt 8.5. ● Value This is defined in s 10. See further [19.5.2.2].

[95.5] Commentary A secured party with an interest in an accession must provide notice to interested parties, pursuant to s 95(1), as to the intention to remove the relevant accession from the whole. The policy objective behind this requirement is to grant the secured party with an interest over the whole, time to invoke s 94 or s 96 where relevant. As a commercial point, a party seeking to remove the accession should always be prepared to provide security for

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damage caused by the removal process even where notice is not required pursuant to s 95(5), (6) and (7). Unlike the notice requirements with respect to purchase money security interests (PMSIs) (see Pt 2.6, Div 3), the notice under s 95 need not be in the approved form (pursuant to s 302) and the time prior to the removal is a mandatory 10 business days (subject to the security agreement specifying a smaller amount of days) as opposed to 15 business days (as relevant to PMSIs; see Pt 2.6). The enforcement of formality is hence dispensed with to some degree illustrating the sense of urgency which may often attach to the removal of accessions and the flexibility of the PPSA in this regard.

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Additionally, pursuant to s 115, parties to a security agreement can contract out of the right to receive notice of the removal of an accession (see s 115).

[95.6] Further reading ● Explanatory Memorandum [3.19–3.22]. ● ALRC Report No 64 [8.11–8.23]. ● Whittaker Report [8.1].

¶3-080 SECTION 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.

[96.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 130 s 38(11) s 35(8) No parallel provision

[96.2] Outline Section 96 provides recourse for the secured party with an interest over the whole to retain the accession where the elements of the provision are satisfied. Annotated Personal Property Securities Act 2009 (Cth)

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[96.3] Cross-references ● Sections 92–95, and 97 provide rules relating to removal of accessions. ● Section 111 obliges secured parties exercising powers under Ch 4 (enforcement) to act honestly and in a commercially reasonable manner.

[96.4]

Concepts

● Accessions This is defined by s 10. See further s 88. ● Value This is defined by s 10. See further [19.5.2.2].

[96.5] Commentary Section 96 provides secured parties with an interest over the whole with a commercial option to preserve the collateral, the subject of their security interest. Assuming the security interest over the accession was perfected prior to the goods becoming an accession, such that s 88 applies in a priority dispute, in the absence of s 96 a secured party would have little recourse beyond an entitlement to notice and security for the proper removal of the accession — irrespective of how this removal may affect the remaining value of the whole. While the default priority position must, from a policy perspective, prescribe that the secured party with an interest in the accession prevails in such circumstances, the outcome is against commercial imperatives in circumstances where the value of the accession and the value of the whole both decline after the removal of the accession. Section 96 provides that a secured party with an interest in the whole may retain the accession where the obligation owing to the secured party with an interest in the accession is met in full (in essence, the secured party with a security interest in the accession can be bought out) — or, the value of the accession is paid at the time the removal of the accession is sought. The onus lies with the secured party with an interest over the whole and does not rely on the consent of the secured party with an interest in the accession. Where the value of the whole (comprising the original collateral and the accession) is worth more than the value of the accession, the secured party with an interest in the whole should move to pay the value to the secured party with an interest in the accession. There are no doubt commercial considerations which need to be considered however the importance of s 96 is that the option rests with the secured party with an interest over the whole irrespective of the intention of the secured party with an interest in the accession. If there is a dispute about the value payable to the party who holds the benefit of a security interest in the accession then an application can be made to the court pursuant to s 97. Due to the potential consequences of this provision, the secured party with an interest in the accession can, pursuant to s 115, contract out of s 96 applying.

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[96.6] Further reading ● Explanatory Memorandum [3.19–3.22]. ● ALRC Report No 64 [8.11–8.23].

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SECTION 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: (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.

[97.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[97.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 131, note also s 128 s 38(10), (15) s 67 § 9-625

Outline

Section 97 expressly includes provision for court orders in relation to notices and the removal of accessions.

[97.3]

Cross-references

● Sections 92–96 provide rules relating to removal of accessions.

[97.4] Concepts ● Accessions This is defined by s 10. See further s 88.

[97.5] Commentary As discussed in the commentary to the previous sections of Pt 3.3, the removal of accessions and their value at the time of removal is to be determined on a case-by-case basis and may require independent expert assessment depending on the nature of the underlying collateral. Section 97 expressly grants the court jurisdiction to make orders in relation to these provisions.

[97.6] Further reading ● Explanatory Memorandum [3.21–3.22]. ● ALRC Report No 64 [8.11–8.23]. Annotated Personal Property Securities Act 2009 (Cth)

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(a) postponing the removal of the accession; or

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PART 3.4 — PROCESSED OR COMMINGLED GOODS ¶3-090 SECTION 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.

¶3-095 SECTION 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.

99(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.

[99.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 82 s 39(1) s 37 § 9-336(a), (b), (c)

[99.2] Outline The concept of ‘‘commingling’’ under Pt 3.4 of the PPSA is defined by s 10 and discussed below. Section 99 operates with respect to commingled goods in a similar fashion to s 88 with respect to accessions.

[99.3]

Cross-references

● Section 100 provides for the perfection of a security interest in goods that have been processed or commingled.

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● Section 101 imposes a limit on the value of the priority of a security interest in goods that have been processed or commingled. ● Section 102 deals with multiple security interests in goods that have become processed or commingled. ● Section 103 deals with purchase money security interests (PMSIs) in processed or commingled goods.

Concepts

● Commercially practical The concept of commercial practicality is largely to be determined on a ‘‘cost v benefit’’ basis, in the authors’ view, in light of the facts and circumstances in each individual case. The example of a chemical compound derived from mixing two discrete substances illustrates the point. That is, where the process of separation would cost more by way of time, effort and monetary expense than the combined value of the security interest over the independent substances, it would not be commercially practical to require the parties to restore the goods to their original state. Where the line is drawn as to commercial practicality is a matter for the court to decide on a case-by-case basis. ● Commingled The term ‘‘commingled’’ is related to the concept of an accession by way of combining discrete items of property to make an amalgamated whole, however, where goods are commingled their original form is irretrievable either through physical impossibility or where it is commercially impractical to do so. The extension for commercial impracticality is a concept expressly included in the Australian PPSA which does not arise among the foreign regimes. See further Swindle v Matakana Estate Ltd (in liq) [2011] NZHC 1345; [2012] 1 NZLR 806 (grape juice blended from different producers). Commingling and accessions can also be understood in relation to proceeds, as the terms often arise in this context under the PPSA. Where proceeds can be readily identified, they metaphorically take the form of an accession, conversely the need to invoke tracing principles means the property has been commingled (see Pt 2.4, Div 2). See generally, New Zealand Associated Refrigerated Food Distributors Ltd v Simpson [2008] NZHC 951 (goods supplied were not used to make anything further — held, not commingled as it was possible to identify individual product lines); and the comments in Massey-Ferguson Industries Ltd v Melfort Credit Union Ltd (1987) 8 PPSAC 1; 62 Sask R 293 (Sask CA) ‘‘This section implies . . . that it applies to a commingling of inventory of this type, a mixing of at least two separate types of goods’’. For similar comments on the US position see In re Jamail (1980) 609 F.2d 1387 (USCA 5th Circ). This may be contrasted with the statements by the New Zealand Court of Appeal (in obiter) that it is possible to have goods of the same kinds commingled: Stockco Ltd v Gibson [2012] NZCA 330 at [142]–[144] (in that case cattle). Additionally, property used in the course of maintenance or repair, or consumables, like food or fuels, generally do not create subsisting Annotated Personal Property Securities Act 2009 (Cth)

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[99.4]

366

Personal Property Securities Act 2009 interests in the collateral they are consumed by (such as vehicles and agricultural goods): see for example First National Bank of Brush v Bostron (1977) 564 P.2d 964 (Colo CA) (feed supplied to cattle).

[99.5] Commentary Section 99 prescribes that, like s 88, a security interest over discrete goods continues in any commingled product of the goods with other goods, provided it is physically impossible or commercially impractical to restore the goods to their original state.

[99.6] Further reading ● Andrew Boxall and Diccon Loxton, ‘‘Commodity transactions and Pt 3.4 of the Personal Property Securities Act 2009: an anomalous outcome’’ (2013) 27 Commercial Law Quarterly 3. ● Explanatory Memorandum [3.23–3.25]. ● ALRC Report No 64 [8.11–8.23]. ● Whittaker Report [7.10].

¶3-100 SECTION 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.

[100.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[100.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 83 s 39(3) s 37 § 9-336(d)

Outline

Section 100 prescribes the default priority position with respect to commingled goods.

[100.3]

Cross-references

● Section 99 provides for the continuation of a security interest in goods that have been processed or commingled. ● Section 101 imposes a limit on the value of the priority of a security interest in goods that have been processed or commingled.

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● Section 102 deals with multiple security interests in goods that have become processed or commingled. ● Section 103 deals with purchase money security interests (PMSIs) in processed or commingled goods.

[100.4]

Concepts

● Perfection See s 21.

Section 100 applies, as a default rule, where a security interest is perfected prior to the commingling process. Pursuant to s 100, a security interest in goods which subsequently become commingled, continues in the combined product and priority is granted to such interests as against security interests taken in the combined collateral (as original collateral) — subject, however, to the provisions of s 101. In the Ontario Court of Justice case, Unisource Canada Inc v Hongkong Bank of Canada (1998) 14 PPSAC (2d) 112 (varied in part, though not affecting this point: Unisource Canada Inc v Hongkong Bank of Canada (2000) 15 PPSAC (2d) 95), the nature of the continuing interest formed the subject of judicial analysis. On the facts of the case, a common sense approach to commingling was taken by Reilly J who held (at [169]): ‘‘I conclude first that the paper supplied by Unisource to Johanns did indeed become ‘part of a product’ (commingled goods). In my view, the goods were ‘so processed . . . that their identity was lost in the product’. I come to this conclusion as a matter of common sense. Unisource supplied blank paper to Johanns. Putting aside any ‘change’ in identity as a result of cutting, Johanns then ‘processed’ the paper by printing on it, adding graphics, et cetera, and then binding it into an advertising brochure, a pamphlet, or whatever. It had lost its identity as blank paper stock. If one holds up a magazine and asks a friend, ‘What is this?’, the answer will be, ‘It’s a magazine’, or, upon closer inspection, ‘It’s a copy of MacLeans’. The answer will not be, ‘It’s a number of blank pieces of paper on which words and pictures have been printed and then the pages were stapled together’. Such an answer would be completely ridiculous, because the original identity (blank paper) has been lost forever (subject to recycling).’’

[100.6] Further reading ● Explanatory Memorandum [3.25–3.26]. ● ALRC Report No 64 [8.11–8.23]. ● Whittaker Report [7.10]. ● Andrew Boxall and Diccon Loxton, ‘‘Commodity transactions and Part 3.4 of the Personal Property Securities Act 2009: an anomalous outcome’’ (2013) 27 Commercial Law Quarterly 3. Annotated Personal Property Securities Act 2009 (Cth)

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[100.5] Commentary

368

Personal Property Securities Act 2009

¶3-105 SECTION 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.

[101.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[101.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 84 s 39(5) No parallel position No parallel position

Outline

Section 101 is not a rule of priorities in relation to commingled goods. It instead imposes value limitations on the security interest the ambit of which is to prevent arbitrarily increasing the value of a security interest simply by virtue of the commingling process.

[101.3]

Cross-references

● Section 99 provides for the continuation of a security interest in goods that have been processed or commingled. ● Section 100 provides for the perfection of a security interest in goods that have been processed or commingled. ● Section 102 deals with multiple security interests in goods that have become processed or commingled. ● Section 103 deals with purchase money security interests (PMSIs) in processed or commingled goods.

[101.4]

Concepts

● Value This is defined in s 10. See further [19.5.2.2].

[101.5]

Commentary

Section 101 is premised on the fact that the commingling of different goods will more likely than not improve the value of the sum of the constituent parts. Were this not the case it would be most unlikely that the parts would have been aggregated in the first instance. Section 101 provides that a secured party’s claim in the finished goods, while recognised as continuing in accordance with s 99 of the PPSA, is limited to the value of the goods as supplied on the day that they are commingled.

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The following example illustrates the restriction imposed by s 101 of the PPSA:

While a useful rule in theory, the inherent difficulty with the applicability and enforceability of s 101 of the PPSA is that it will often be challenging (if possible at all) to ascertain the value of the goods on the day they became a part of the product or mass. This is due to a number of factors, the main one of which is that control of the grantor (who is responsible for the commingling of the parts in the first instance) is likely to have changed from the directors of the grantor company (or the grantor themselves in the case of the individual) to some external controller such as a liquidator, administrator or trustee. The external controller, absent assistance from the grantor entity or individual (which might not be forthcoming if proper books and records have not been kept) will likely not be able to ascertain the value of the parts that have been used to produce the finished goods in the hand of the grantor at the time of their appointment. The difficulty is exacerbated where there are multiple different types of commingled goods which have been used to create a variety of finished products the sales of which have been pooled together in a trading account in the name of the grantor. In such circumstances, the external controller has little more information absent proper books and records in respect of the contents of the proceeds sitting in a mixed monies account. It is not clear, on the face of the legislation or case law, how the external controller is to apply s 101 and to what extent (if any) the secured parties are bound by the determination of any external controller in respect of determinations in respect of value. It is peculiar that s 97 of the PPSA is not reiterated in respect of determining the value of the secured party with an interest in commingled goods — nevertheless the lack of an express provision is not likely determinative of a secured party’s ability to challenge any decision of an external controller in respect of the value of the interest.

[101.6] Further reading ● Explanatory Memorandum [3.27]. ● ALRC Report No 64 [8.11–8.23]. ● Whittaker Report [7.10]. ● Andrew Boxall and Diccon Loxton, ‘‘Commodity transactions and Part 3.4 of the Personal Property Securities Act 2009: an anomalous outcome’’ (2013) 27 Commercial Law Quarterly 3. Annotated Personal Property Securities Act 2009 (Cth)

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Debtor A owes $200 to Secured Party B who holds an interest in goods worth $100 at the time the goods are commingled to form a product worth $1,000 (with the other $100 worth of goods not forming part of that which went into the final goods). Secured Party B can only enforce their security interests against the commingled product to the sum of $100. This does not, however, prevent Secured Party B from pursuing Debtor A personally for the remaining $100 as an unsecured creditor.

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Personal Property Securities Act 2009

¶3-110 SECTION 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. 102(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. 102(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 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. 102(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.

[102.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[102.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 85 s 39(2), (4) s 37 § 9-1336(f)

Outline

Section 102 addresses priority disputes which may arise in relation to multiple security interests perfected over different property items which become components of one commingled product or mass. It should also be noted that s 101 applies to each individual secured party by virtue of s 102(4).

[102.3]

Cross-references

● Section 99 provides for the continuation of a security interest in goods that have been processed or commingled. ● Section 100 provides for the perfection of a security interest in goods that have been processed or commingled.

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● Section 101 limits the value given to the priority of a security interest in goods that have become processed or commingled. ● Section 103 deals with purchase money security interests (PMSIs) in processed or commingled goods.

[102.4]

Concepts

● Perfected and unperfected security interest See s 21. ● Security interests continuing in a product or mass See s 99.

Like s 55(2) and 55(4) respectively, the priority rule between two or more unperfected security interests and two or more perfected security interests as components of the same commingled whole is the same. The difficulty with commingled goods is that the primacy of the register by way of putting external parties on notice of existing security interests does not aid the creation of a commercially acceptable outcome where the security interests in question have arisen over discrete items of collateral. The ‘‘first in time’’ default position is thus largely ineffective. Section 102(3) therefore prescribes that where priority disputes of this nature arise — each perfected interests is entitled to priority with respect to the ratio of the obligation secured relative to the combined pool of obligations secured by the commingled product. Unlike s 101, the value of the individual collateral at the time the commingling occurs is not used here rather the contributing value is assessed. The following example illustrates the point: A commingled product comprises the combination of components over which a security interest is held by Secured Parties A, B and C. Secured Party A is secured for $1,000, Secured Party B for $2,000 and Secured Party C for $8,000. The resulting priority between the parties should a priority dispute arise is that 10% of the commingled product should flow in favour of Secured Party A, 20% in favour of Secured Party B and 80% in favour of Secured Party C.

If all parties were unperfected, the same priority split would arise pursuant to s 102(3). However, if only Secured Party C was unperfected, Secured Party A would hold priority over 33.3% of the commingled product and Secured Party B would hold priority over 66.7% pursuant to s 102(1). The issue of priority in accordance with a ratio distribution arose in Massey-Ferguson Industries Ltd v Melfort Credit Union Ltd (1987) 8 PPSAC 1; 62 Sask R 293 (Sask CA), however, the applicant failed to establish a commingling and thus the matter was left undecided.

[102.6] Further reading ● Explanatory Memorandum [3.28]. ● ALRC Report No 64 [8.11–8.23]. ● Whittaker Report [7.10]. Annotated Personal Property Securities Act 2009 (Cth)

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[102.5] Commentary

372

Personal Property Securities Act 2009

● Andrew Boxall and Diccon Loxton, ‘‘Commodity transactions and Part 3.4 of the Personal Property Securities Act 2009: an anomalous outcome’’ (2013) 27 Commercial Law Quarterly 3.

¶3-115 SECTION 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.

[103.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[103.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 86 s 39(6) s 37 § 9-336

Outline

Section 103 addresses the concept of a purchase money security interest (PMSI) in relation to goods which subsequently become commingled.

[103.3]

Cross-references

● Section 99 provides for the continuation of a security interest in goods that have been processed or commingled. ● Section 100 provides for the perfection of a security interest in goods that have been processed or commingled. ● Section 101 limits the value given to the priority of a security interest in goods that have become processed or commingled. ● Section 102 deals with multiple security interests in processed or commingled goods.

[103.4]

Concepts

● PMSIs See s 14. See also Pt 2.6. ● Security interests continuing in a product or mass See s 99.

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[103.5]

373

Commentary

Section 103 holds that, as would be expected in light of Pt 2.6, a purchase money security interest (PMSI) over commingled goods takes priority to a non-PMSI, similar to the way a perfected interest takes priority over an unperfected one. See also Unisource Canada Inc v Hongkong Bank of Canada (1998) 14 PPSAC (2d) 112 (largely affirmed on appeal (2000) 15 PPSAC (2d) 95).

[103.6] Further reading ● Explanatory Memorandum [3.26–3.28]. ● ALRC Report No 64 [8.11–8.23]. ● Andrew Boxall and Diccon Loxton, ‘‘Commodity transactions and Part 3.4 of the Personal Property Securities Act 2009: an anomalous outcome’’ (2013) 27 Commercial Law Quarterly 3.

PART 3.5 — INTELLECTUAL PROPERTY ¶3-120 SECTION 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.

¶3-125 SECTION 105 IMPLIED REFERENCES TO INTELLECTUAL PROPERTY RIGHTS Act applies to intellectual property rights etc. 105(1) 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 Annotated Personal Property Securities Act 2009 (Cth)

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● Whittaker Report [7.7], [7.10].

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Personal Property Securities Act 2009 (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. Description of goods taken to include a description of intellectual property rights 105(2) 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. 105(3) Subsection (2) applies subject to a contrary intention in the security agreement, registration or notice.

[105.1] Comparable provisions in foreign regimes Note: Intellectual property does not attract specific provisions under the foreign regimes, however, the following provisions provide consideration of the concept (under the head ‘‘intangible’’ property):

New Zealand Saskatchewan Ontario USA

[105.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 17 s2 s1 No parallel provision

Outline

Part 5.3 expressly prescribes particular PPS rules with respect to intellectual property (IP). Under the equivalent foreign regimes, IP is treated as a class of intangible personal property with little to no direct provisions for IP as a discrete class of property. Section 105 is therefore unique in recognising implied IP rights over collateral which form part of a security interest.

[105.3]

Cross-references

● Section 106 provides for the transfer of intellectual property and its effect on a security interest in a licence of that intellectual property.

[105.4]

Concepts

● Description This refers to the collateral description contained in a financing statement included on the PPS Register: see s 153. ● Intellectual property This is defined by s 10.

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● Intellectual property licence This is defined by s 10. See also [12.5.3.5] regarding licences generally under the PPSA. ● Intellectual property rights See [12.5.3.5]. ● Security agreement This is defined by s 10. See further s 18 and 20.

Commentary

Section 105 prescribes how implied rights to intellectual property may subsist in tangible personal property such that a security interest over the tangible property will also attach to the relevant IP. The provision addresses the general rule at common law — that the acquisition of a chattel does not automatically give rise to the acquisition of IP in relation to that chattel in the absence of an express intention between the parties.24 The Australian courts have generally been reluctant to imply a licence to deal with the IP associated with tangible property, enforcing the view that such rights are separate and distinctive: see R and A Bailey and Co v Boccaccio Pty Ltd (1986) 77 ALR 117; Interstate Parcel Express Co Pty Ltd v Time-Life International (Nederlands) BV (1977) 138 CLR 534. Pursuant to s 105, the PPSA, for the purposes of a security interest, recognises the attachment of IP rights to underlying collateral where the security agreement ‘‘necessarily involves an exercise of the intellectual property rights’’ — unless a contrary intention arises on the face of the security agreement. To attract an interest over such rights, a secured party must include a collateral description encompassing the relevant IP rights, including the serial number of such IP, where relevant: see s 153 and Personal Property Securities Regulations 2010 (Cth), Sch 1, Pt 3, s 3.1(1)(c)(b), 3.2(2)(e)–(h). The validity of such instruments will turn on the judicial interpretation of the term ‘‘necessarily involves’’ which effectively reverses the evidential onus from the position at common law, that is, a secured party need not include an express intention to take an interest over the IP rather the grantor must expressly exclude intellectual property from the security agreement. In the authors’ view, the PPSA thus relaxes the previous common law requirements and therefore better facilitates the taking of security over IP.

[105.6] Further reading ● ● ● ●

24

Explanatory Memorandum [3.30]. ALRC Report No 64 [–]. Whittaker Report [9.3]. John Swinson and Patrick Gunning, ‘‘The Personal Property Securities Act 2009 (Cth) and its impact on intellectual property’’ (2012) 91 Intellectual Property Forum 37. See, Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 347 per Mason J; Moorhead v Brennan (1991) 20 IPR 161 at 165; Beck v Montana Constructions Pty Ltd (1963) 5 FLR 298; Kervan Trading Pty Ltd v Aktas (1987) 8 IPR 583.

Annotated Personal Property Securities Act 2009 (Cth)

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[105.5]

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¶3-130 SECTION 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. 106(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.

[106.1] Comparable provisions in foreign regimes Note: As discussed under s 105, intellectual property does not attract specific provisions under the foreign regime, however, the following provisions provide consideration of the concept:

New Zealand Saskatchewan Ontario USA

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s 17 s2 s1 No parallel provision

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[106.2]

377

Outline

Section 106 operates with respect to the transfer of intellectual property (IP).

[106.3]

Cross-references

● Section 105 deals with security interests in intellectual property rights.

[106.4] Concepts ● Intellectual property This is defined in s 10. This is defined in s 10. See also [12.5.3.5] regarding licences generally under the PPSA. ● Security agreement This is defined by s 10. See further s 18 and 20. ● Transfer See s 34.

[106.5]

Commentary

Section 106 significantly improves the legal recognition of security interests taken over IP licences and transfers of IP. Under the common law approach to securities law, securing credit advances with IP presented considerable risk for the lender due to the degree of uncertainty involved and the potential to circumvent the existing interest. The following example illustrates this point: Party A transfers intellectual property to Party B, Party A then creates a security interest over that same IP in favour of Party C. In a priority dispute between Party A and Party C, Party A prevails at common law despite Party C having no way of knowing about Party A’s prior interest. Similarly, where Party A grants a licence to Party B and then creates a security interest in favour of Party C, Party C takes their interest subject to Party B’s licence. If the licence is an exclusive licence, Party C would effectively receive a security interest over nothing despite the absence of any notice of Party B’s interest.25

Under the PPSA, interests of this kind would constitute security interests pursuant to s 12. Perfection by registration (which presents the only commercially viable avenue of perfecting an interest in IP in the authors’ view) ensures that parties searching the register become aware of particular transfers of the interest. Section 106 operates in a similar fashion with respect to sub-licencing. Primacy of the register and a consistent priority regime substantially improves the legal framework in recognising and enforcing security interests taken over intellectual property. 25

See, John Swinson, ‘‘Security Investments in Intellectual Property in Australia’’ (2002) 14(1) Bond Law Review 9.

Annotated Personal Property Securities Act 2009 (Cth)

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● Intellectual property licence

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[106.6] Further reading ● ● ● ●

Explanatory Memorandum [3.31]. ALRC Report No 64 [–]. Whittaker Report [9.3]. John Swinson and Patrick Gunning, ‘‘The Personal Property Securities Act 2009 (Cth) and its impact on intellectual property’’ (2012) 91 Intellectual Property Forum 37.

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CHAPTER 4 — ENFORCEMENT OF SECURITY INTERESTS PART 4.1 — GUIDE TO THIS CHAPTER ¶4-005

SECTION 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.

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.

PART 4.2 — GENERAL RULES ¶4-010

SECTION 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;

Annotated Personal Property Securities Act 2009 (Cth)

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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.

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Personal Property Securities Act 2009 (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.

¶4-015 SECTION 109 APPLICATION OF THIS CHAPTER Security interests to which this Chapter does not apply 109(1) This Chapter does not apply to security interests that are provided for by the following: (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. 109(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.

Security interests in investment instruments or intermediated securities that are perfected by possession or control 109(3) 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. 109(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. Sections that do not apply to household property 109(5) 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);

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(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).

[109.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[109.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 105 s 55(2)(a) s 57.1 no parallel provision

Outline

This section sets out the scope for the application of the enforcement provisions in Ch 4.

Cross-references

● This section provides a gateway between the enforcement provisions in Ch 4 and the rest of the PPSA. It contains references to many other provisions of the Act.

[109.4] Concepts ● Commercial consignment This is defined by s 10. See further [12.5.3.2]. ● Intermediated securities This is defined by s 10. See further s 15 and 26. ● Investment instruments This is defined by s 10. See further s 27. ● Location of goods This is defined by s 235. ● Perfection by possession or control Perfection for possession or control is discussed under s 21. See also s 24 for a discussion of possession and s 25–29 for definitions of control over different types of collateral. ● PPS lease This is defined by s 13. See further s 12 and 13 regarding ‘‘deemed’’ security interests. ● Predominantly for personal, domestic or household purposes This is defined by s 10. See further [47.5]. ● Transfer of account or chattel paper See definitions of ‘‘account’’ and ‘‘chattel paper’’ in s 10. See further [12.5.3.1]. Annotated Personal Property Securities Act 2009 (Cth)

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[109.3]

382

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[109.5]

Commentary

This section sets out when the enforcement provisions in Ch 4 will not apply. Deemed security interests (PPS leases, transfers of accounts and chattel paper and commercial consignments) are not enforced through Ch 4 at all (s 109(1)). Where a deemed security interest satisfied s 12, however, (by way of securing payment or performance of an obligation) Ch 4 will apply regardless of the fact that the interest is also a deemed security interest. The same exclusion applies for security interests in goods located outside of Australia (s 109(2)). The section provides a limited application of Ch 4 to intermediated securities and investment instruments that are perfected by possession or control, with s 110, 111, 113 and 140 applying. Other provisions (as listed in s 109(5)) do not apply where the collateral is used by a grantor predominantly for personal, domestic or household purposes. The enforcement provisions pursuant to Ch 4 should thus be read with a consumer protection objective (like Pt 2.5) where the underlying property is used predominately for personal, domestic or household use. Additionally, nothing in the PPSA operates to prevent the operation of any contractual provisions provided by the underlying security agreement as the PPSA will give effect to the terms of the security agreement (see s 18(1)). While the Ch 4 provisions prevail to the extent of any inconsistency between a security agreement and Ch 4 (such that parties cannot contract out of the general honesty and commercially reasonable standards — see s 111), the security agreement itself is often more prescriptive in terms of how the secured party can enforce than the base provisions of the PPSA. The Ontario Supreme Court case, GATX Corporate Leasing Inc v William Day Constructions Ltd (1986) 6 PPSAC 118; 60 CBR (NS) 319, highlights (at [117]) the integral importance of the security agreement itself when considering the validity of enforcement under the PPSA.

[109.6] Further reading ● Explanatory Memorandum [2.9, 4.4–4.5, 4.79]. ● ALRC Report No 64 [10.1–10.19]. ● Whittaker Report [4.2.3], [8.1].

¶4-020 SECTION 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.

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[110.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[110.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 1

no parallel provision s 65(2) s 72 § 1-103(b)

Outline

This section clarifies that the PPSA is not intended to take away any rights or remedies that the parties may otherwise have arising from a default of the debtor.

[110.3]

Cross-references

● Section 114 notes that rights and remedies under Ch 4 are cumulative. ● Section 254 provides for the concurrent operation of other laws with the PPSA.

Chapter 4

[110.4] Concepts ● Debtor This is defined by s 10. ● Grantor This is defined by s 10. ● Secured party This is defined by s 10.

[110.5]

Commentary

Nil.

[110.6] Further reading ● Explanatory Memorandum [4.6]. ● ALRC Report No 64 [10.1–10.19]. ● Whittaker Report [8.1.1], [8.1.5].

¶4-025

SECTION 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. Annotated Personal Property Securities Act 2009 (Cth)

¶4-025

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Personal Property Securities Act 2009 111(2) A person does not act dishonestly merely because the person acts with actual knowledge of the interest of some other person.

[111.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[111.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 25 s 65(3), (4) s 16, 61(2), 63 § 9-607(c), 9-610, 9-627

Outline

This section imposes an overarching obligation on parties exercising rights, duties and obligations under Ch 4 to do so in an honest and commercially reasonable manner.

[111.3]

Cross-references

● Section 80 provides that the concept of honesty is also relevant for variations of the contract between an account debtor and the transferor of the account or chattel paper. ● Section 140 provides that a secured party who acts honestly in distributing proceeds and in a commercially reasonable manner is not liable to an action, suit or proceeding. ● Section 271 provides a right to damages for breaches of obligations under the Act.

[111.4]

Concepts

● Actual knowledge This is discussed under s 297.

[111.5]

Commentary

This section imposes an obligation to exercise powers, comply with duties and fulfil obligations under Ch 4 in a manner that is honest and commercially reasonable. These are amorphous terms that are shaped by the facts and circumstances in each case. The learned authors Cuming R and Wood R note that the use of the word ‘‘and’’ between (1)(a) and (b) means that commercially reasonable conduct must be something more than mere honesty, ‘‘It demands a standard of conduct that rises above a mere absence of fraud or lack of wilful and reckless conduct.’’26 This is also consistent with what the Alberta Court of Appeal said in Northwest Equipment Inc v Daewoo Heavy Industries America Corp (2002) 3 PPSAC (3d) 101; 1 Alta LR (4th) 14 at [56] (technical compliance will not suffice if the result is not commercially reasonable, judged by what can reasonably be expected of participants in the market in which the particular transaction took place). 26

Cuming R and Wood R, Saskatchewan and Manitoba Personal Property Security Acts Handbook, 1994 Carswell at p 427.

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‘‘Honesty’’ is a term frequently used in the law. One of the frequently cited definitions is that it means to act without moral turpitude (Commercial Bank of Australia v Friedrich (1991) 5 ACSR 115). See also Hall v Poolman (2007) 65 ACSR 123.

‘‘bad faith requires some form of positive action such as a representation amounting to a waiver or leading to an estoppel, and mere action with knowledge will not suffice’’. The appeal decision in this case did not address this point: see [2012] NZCA 330. The obligation to act in a commercially reasonable manner has received extensive consideration in Canada and the United States. These cases are discussed in respect of each of the powers, duties and obligations below. However, the concept has been discussed generally as follows. In Northwest Equipment Inc v Daewoo Heavy Industries America Corp (2002) 3 PPSAC (3d) 101; 1 Alta LR (4th) 14, the Alberta Court of Appeal said (at [56], quoting Cuming R, Walsh C and Wood R, Personal Property Securities Law, 2005 Irwin Law) that technical compliance with the enforcement provisions of the PPSA will not suffice if the result is not what is commercially reasonable ‘‘judged by what can reasonably be expected of participants in the market in which the particular transaction took place’’. A secured party is not a trustee for the grantor, and what might be commercially reasonable for the secured party is not necessarily synonymous with what might be commercially optimal for the grantor. The secured party has its own interests to look after and these come first. This of course is supplemented by the express statutory duties that the secured party is under, such as the duty relating to sale under s 131. Additionally, what constitutes commercially reasonable behaviour does not always necessitate positive acts to be undertaken. In Andrews v Mack Financial (Can) Ltd (1987) 8 PPSAC 110; 46 DLR (4th) 731, the Saskatchewan Court of 27

See the discussion in Gedye M, Cuming R and Wood R, Personal Property Securities in New Zealand, 2002 Thomson Brookers at [25.1].

Annotated Personal Property Securities Act 2009 (Cth)

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While the North American cases on equivalent provisions have focused on a subjective assessment of the defendant’s conduct.27Australian courts have interpreted requirements to act honestly (for example in assessing conduct of company directors) as involving an objective assessment of the circumstances. This is not a test of what a reasonable person would have done, but rather whether a reasonable observer would believe that the defendant was acting honestly. There is no need to establish that the defendant acted in a deliberately dishonest or misleading way. The statement in s 111(2) makes it clear that mere knowledge of a prior interest will not establish a lack of honesty, rather some positive conduct is required: see 518718 Alberta Ltd v Canadian Forest Products Ltd [1999] 3 WWR 672; 63 Alta LR (3d) 371 (Alta QB). This was applied in the New Zealand decision of Gibson v Stockco Ltd [2010] NZHC 2398, where the Court considered the application of s 25 of the Personal Property Securities Act 1999 (NZ) which uses the term good faith rather than honesty, and said (at [203]):

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Personal Property Securities Act 2009

Appeal stated that the underlying purpose of the enforcement provisions is to provide a regime that is fair to both sides of the transaction. The obligation to act in a commercially reasonable manner does not require that a secured party void its security rights merely because a term of the contract is void: Alberta (Minister of Justice) v Letawsky (2009) 13 Alta LR (5th) 234; 15 PPSAC (3d) 303 (in that case an illegally high rate of interest was charged) (Alta QB). Refraining from appointing a receiver can for instance be commercially reasonable: Canadian Imperial Bank of Commerce v McGhie (2005) 9 PPSAC (3d) 108 (Ont SCJ). The onus of proving a breach of s 111 lies on the party seeking to impugn the conduct due to the breach: Powers v Mesaros (2007) 12 PPSAC (3d) 128 (BC SC). In New Zealand the courts have held that the decision of a secured party to appoint a receiver comes under the scope of this section, even though once appointed the enforcement provisions do not apply (see s 116): Taylor v Bank of New Zealand [2010] NZHC 2256 at [34]; Compass Capital Ltd v The New Zealand Guardian Trust Co Ltd [2009] NZHC 344. However, in the authors’ view, these authorities are not persuasive regarding the operation of the Australian provision as s 111 imposes the obligation on rights, duties and obligations that arise under Ch 4, whereas the New Zealand provision (s 25) imposes the duty on rights, duties and obligations that arise ‘‘under a security agreement or this Act’’. The court cannot simply rewrite contractual clauses even where it would generate a more commercially reasonable result, nor does the PPSA suggest that this should occur: PricewaterhouseCoopers LLP v Cranewood Financial Corp (2000) 5 PPSAC (3d) 47 (BC SC).

[111.6] Further reading ● ● ● ●

Explanatory Memorandum [4.7]. ALRC Report No 64 [10.1–10.19]. Whittaker Report [8.1], [8.4.2]. Susan Colley, ‘‘Enforcing rights under the PPSA: Honestly and in a commercially reasonable manner’’ (2013) 21 Insolvency Law Journal 109.

¶4-030 SECTION 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. 112(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

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(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).

112(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.

[112.1] Comparable provisions in foreign regimes

[112.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision no parallel provision

Outline

This section clarifies the scope of a secured party’s powers in enforcing a security interest under the PPSA by generally limiting such powers to those available to the grantor in relation to the underlying collateral.

[112.3]

Cross-references

● Section 79 recognises that collateral may be transferred despite a provision in a security agreement that prohibits transfer as a default.

[112.4] Concepts ● License This is defined in s 10.

[112.5]

Commentary

This section limits the ability of a secured party to deal with collateral to the same extent as the grantor would be entitled to do so, unless the secured party had title immediately prior to exercising rights or remedies under Ch 4. A secured party is also able to deal with the collateral to a greater extent than the grantor would have been able to where the grantor dealing with the collateral would have defaulted under the security agreement (s 112(2)(b)). Section 112 also qualifies the ability of a secured party to deal with a license (s 112(3)). This section seems to be concerned with the effect of the PPSA moving away from (but not removing) the nemo dat (‘‘no one [can] give what one does not have’’) rule (see Intro.IVff). While the PPSA ignores title for the purposes of recognising security interests and dealing with priority disputes (for example deeming long term leases as security interests), this provision aims to ensure Annotated Personal Property Securities Act 2009 (Cth)

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New Zealand Saskatchewan Ontario USA

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that this does not mean that the enforcement rules of the PPSA will enlarge the rights conferred on secured parties. The PPSA is aimed at managing priority disputes involving security interests, not with altering or enlarging the rights that parties have in relation to the collateral itself. Parties are free to bargain for as many or as little rights as they wish, as evidenced by the underlying security agreement and these are largely respected by the PPSA, unless such provisions would hinder enforcement following default: see further s 18(1). The distinction between the application of the PPSA in determining rights and the consequential enforcement of such rights should not be confused. The position was made clear in Re Maiden Civil (P&E) Pty Ltd (2013) APPSR ¶701-008; Albarran and Pleash (as receivers and managers of Maiden Civil (P&E) Pty Ltd v Queensland Excavation Services Pty Ltd (2013) APPSR ¶701-008; [2013] NSWSC 852 at [78] per Brereton J: ‘‘In my view, the purpose of s 112 is illuminated by sub-section (3). While expressed to be ‘without limiting subsection (1)’, it provides illustrations of what the draftsperson had in mind. The concern was not with the nemo dat 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 pre-conditions 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 Chapter 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 Chapter 4, and not otherwise, indicating that it is no more than a restriction on the remedies given by Chapter 4, rather than a general limitation on the rights of a party holding a perfected security interest.’’ In short, s 112 cannot otherwise make good that which would not flow from the proper application of provisions external to Ch 4. To do so would put an artificial gloss on the regime inconsistent with the intention of the legislature. However, as the Re Maiden Civil case demonstrates, many enforcement situations will be regulated under the terms of the security agreement and under the supervision of a receiver where Ch 4 will not apply.

[112.6] Further reading ● Explanatory Memorandum [4.8]. ● ALRC Report No 64 [10.1–10.19]. ● Whittaker Report [8.1.8].

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SECTION 113 RECOVERING JUDGMENT OR ISSUING EXECUTION DOES NOT EXTINGUISH A SECURITY INTEREST IN COLLATERAL

¶4-035

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.

[113.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

no parallel provision s 55(7) s 59(7) § 9-601, 9-615(d)

Outline

This section clarifies the effect of taking enforcement action on the underlying security interest.

[113.3]

Cross-references

● Section 74 provides a priority rule concerning execution creditors.

[113.4] Concepts ● Grantor This is defined in s 10. ● Secured party This is defined in s 10.

[113.5]

Commentary

This section clarifies that the doctrine of merger does not apply to enforcement action taken by a secured party, thus a secured party may seek to enforce a judgment (that is, to exercise a right in personam) (against the person) and still take action against the secured collateral (that is, to exercise a right in rem (against a thing)).

[113.6] Further reading ● Explanatory Memorandum [4.9]. ● ALRC Report No 64 [10.1–10.19]. ● Whittaker Report [8.1.5]. Annotated Personal Property Securities Act 2009 (Cth)

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[113.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

390

Personal Property Securities Act 2009

¶4-040 SECTION 114 RIGHTS AND REMEDIES UNDER THIS CHAPTER ARE CUMULATIVE 114 The rights and remedies provided by this Chapter are cumulative.

[114.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[114.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision s 55(3) s 58 § 9-601(c)

Outline

This section makes it clear that rights and remedies under Ch 4 are cumulative to those existing at general law, rather than a substitution of legal and equitable enforcement principles.

[114.3]

Cross-references

Nil.

[114.4]

Concepts

Nil.

[114.5]

Commentary

The New Zealand High Court decision, Thorn v RFD Finance Ltd (2012) FPPSR ¶700-010; [2012] NZHC 1959, addressed the perceived conflict between the enforcement regime under the Property Law Act 2007 (NZ) and the Personal Property Securities Act 1999 (NZ) (NZ PPSA). The court held that the plaintiffs were not prevented from enforcing their redemption of a mortgage under the Property Law Act by virtue of s 132 of the NZ PPSA — which, according to the applicant, stipulated the codification of the enforcement mechanisms with respect to the NZ PPSA (an argument which was rejected by his Honour). Section 114 of the Personal Property Securities Act 2009 (Cth) (PPSA) in Australia makes clear that the rights and remedies provided by Ch 4 are to work in conjunction with, as opposed to in lieu of, other available rights and remedies. As s 115, and the commentary in [115.5], highlight — the Ch 4 enforcement provisions are intended to have a consumer protection focus and not to subvert the rights of secured parties opting to utilise regimes beyond the PPSA. Further, and most importantly, the rights and remedies contained within Ch 4 of the PPSA are unlikely to be appropriate in many cases and should thus not be the first point of call when ascertaining available enforcement mechanisms in a number of commercial circumstances. What constitutes ‘‘default’’ and how one might enforce is inherently subject to the relevant arrangement and

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391

hence a question to be answered by each individual contract or security agreement and the freedom of election between the parties in that regard.

[114.6] Further reading ● Explanatory Memorandum [4.6]. ● ALRC Report No 64 [10.1–10.19].

SECTION 115 CONTRACTING OUT OF ENFORCEMENT PROVISIONS

Collateral not used predominantly for personal, domestic or household purposes 115(1) 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 secured party to give a notice to the grantor; (m) paragraph 132(3)(d) (contents of statement of account after disposal); (n) subsection 132(4) (statement of account if no disposal); (o) subsection 134(1) (retention of collateral); (p) section 135 (notice of retention); (pa) Division 6 of Part 4.3 (seizure and disposal or retention of crops and livestock), or any particular provision of that Division; Annotated Personal Property Securities Act 2009 (Cth)

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392

Personal Property Securities Act 2009 (q) section 142 (redemption of collateral); (r) section 143 (reinstatement of security agreement). 115(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.

115(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. 115(4)

(Repealed by No 96 of 2010)

Contracts between persons other than the grantor 115(5) 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. 115(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. Contracting out in relation to controllers (other than receivers etc.) 115(7) 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.

[115.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[115.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 107 s 56(3) no parallel provision § 9-602

Outline

This section allows parties to a security agreement to contract out of a number of enforcement rules under the PPSA.

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[115.3]

393

Cross-references

● Section 109 provides when Ch 4 does not apply. ● Controllers This is defined in the Corporations Act 2001 (Cth) s 9 as meaning in relation to property of a corporation: (a) a receiver, or receiver and manager, of that property; or (b) anyone else who (whether or not as agent for the corporation) is in possession, or has control, of that property for the purpose of enforcing a security interest. Section 115 was amended in 2011 to allow s 116(2) to be contracted out of: see Personal Property Securities (Corporations and Other Amendments) Act 2011 (Cth) Sch 2, s 22. See also s 116 for further details. ● Predominantly for personal, domestic or household purposes This is defined by s 10. See further [47.5]. The use of this phrase rather than consumer property was intended to bring the enforcement provisions in line with the National Credit Code (NCC). ● Security agreement This is defined in s 10. See further s 18 and 20.

[115.5]

Commentary

This section allows parties to a security agreement to contract out of one or more of a number of provisions in Ch 4 (and also s 95 and 96). Parties may wish to craft their own enforcement processes and, at least where the collateral is not property used predominantly for personal, household or domestic purposes, may do so by excluding the provisions listed in this section. The prohibition on allowing contracting out for collateral used for personal, household or domestic purposes is justified on the basis that credit arrangements involving such collateral would be likely to fall within the National Credit Code (NCC) which provides similar rights and obligations and would apply even if contracting out of Ch 4 were permitted. In Andrews v Mack Financial (Can) Ltd (1987) 8 PPSAC 110; 46 DLR (4th) 731, the Saskatchewan Court of Appeal considered the question of what is needed in a contract to effectively waive rights arising under the PPSA (to the extent permitted). The court said: ‘‘To the extent that the contractual right of possession does not coincide with the statutory right of possession, the former must be read and treated as varying the statutory right . . . Unless the two rights are read this way, [the statutory right], in an important respect, would be waived by the simple device of including a separate right of possession in the contract, thus enabling the security holder to rely upon the contractual right to the exclusion of the statutory right.’’ It is important to note that the ability to contract out of the enforcement provisions in Ch 4 does not apply where the collateral is used predominantly for personal, domestic or household purposes. The rationale here is that a Annotated Personal Property Securities Act 2009 (Cth)

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[115.4] Concepts

394

Personal Property Securities Act 2009

standard of commercial good faith and diligence should be recognised as part of the consumer protection imperatives of the PPSA (where applicable). Furthermore, the variation or exclusion of the statutory enforcement regime does not affect rights given to, or obligations imposed on, third parties (s 115(2)) with the exception of the ability to contract out of the redemption of collateral provision (s 142). Although security arrangements do not generally require a written security agreement, as many security interests can be perfected by possession (and some by control), this section provides an incentive to have a written agreement so that the enforcement provisions can be more clearly shaped to suit the needs of the parties. See further the commentary to s 110 regarding the importance of the security agreement itself when interpreting rights and responsibilities of enforcement.

[115.6] Further reading ● Explanatory Memorandum [4.14–4.17, 4.94]. ● ALRC Report No 64 [10.1–10.19]. ● Whittaker Report [8.1.1], [8.1.6], [8.1.9].

¶4-050 SECTION 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.

116(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.

116(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.

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116(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.

[116.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[116.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 106 no parallel provision no parallel provision no parallel provision

Outline

This section provides that Ch 4 does not apply to receiverships.

Cross-references

Nil.

[116.4]

Concepts

● Controllers This is defined in the Corporations Act 2001 (Cth) s 9 as meaning in relation to property of a corporation: (a) a receiver, or receiver and manager, of that property; or (b) anyone else who (whether or not as agent for the corporation) is in possession, or has control, of that property for the purpose of enforcing a security interest. ● Receiver A receiver includes a receiver and manager: Corporations Act 2001 (Cth) s 416. A receiver and manager is defined as ‘‘A receiver of property of a body corporate is also a manager if the receiver manages, or has under the terms of the receiver’s appointment power to manage, affairs of the body’’: Corporations Act 2001 (Cth) s 90.

[116.5]

Commentary

This provision is based on the view that the law of corporate receiverships works reasonably well and the enforcement provisions in the PPSA are not necessary where a corporate receiver is in place: Agnew v Pardington [2006] 2 NZLR 520. This section was replaced in whole in 2011 to make it clear that the enforcement provisions in Ch 4 do not apply to receiverships but do apply to controllers who are not receivers: See Personal Property Securities (Corporations and Other Amendments) Act 2011 (Cth) Sch 2, s 23. The intention of the original provision was that Pt 5.2 of the Corporations Act 2001 (Cth) would provide Annotated Personal Property Securities Act 2009 (Cth)

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Chapter 4

[116.3]

396

Personal Property Securities Act 2009

enforcement provisions, however, not all of the provisions of that Part apply to controllers who are not receivers. Therefore, the 2011 replacement of this section allows receivers to work through the Corporations Act provisions while non-receiver controllers will work under Ch 4 of the PPSA. The Explanatory Memorandum to the Personal Property Securities (Corporations and Other Amendments) Bill 2011 (Cth) suggests that this may benefit small businesses by allowing their security agreements to rely upon the provisions of Ch 4 rather than drafting their own enforcement provisions by contracting out of the provisions listed in s 115. This again evidences the distinction in commercial sophistication the PPSA recognises through such provisions. In Canada, the operation of the insolvency provisions are subject to the Bankruptcy and Insolvency Act RSC 1985, c B-3, s 2 (BIA). The Supreme Court of Canada in Saulnier (Receiver of) v Saulnier [2008] SCC 58; (2008) 3 SCR 166 (SCC), held that the BIA and PPSA should be interpreted in a way best suited to enable them to accomplish their respective commercial purposes. This view was endorsed in Kasten Energy Inc v Shamrock Oil & Gas Ltd (2013) 20 PPSAC (3d) 128; 2013 ABQB 63 at [29]–[30]. This view is consistent with the Australian regime, namely, the Corporations Act 2001 (Cth) and the PPSA should be interpreted and applied as to best enable each statutory regime to have its intended effect (the intended effect often being a commercially sensible outcome). Receivers appointed over the assets of an individual do fall within the Ch 4 enforcement provisions (s 116(3)).

[116.6] Further reading ● Explanatory Memorandum [4.18–4.19]. ● ALRC Report No 64 [10.1–10.19]. ● Whittaker Report [8.1.10]. ● Amanda-Jayne Bull, ‘‘Receivership and the PPSA: why distinctions remain relevant’’ (2013) 21 Insolvency Law Journal 5.

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SECTION 117 OBLIGATIONS SECURED BY INTERESTS IN PERSONAL PROPERTY AND LAND

Scope 117(1)

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

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Part 4.2 — General rules

(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)).

Decision by secured party 117(2)

The secured party may:

(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. 117(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; (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. Decision to enforce the security interest under this Chapter 117(4) 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. Meaning of land law 117(5)

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.

Annotated Personal Property Securities Act 2009 (Cth)

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Chapter 4

(a) make a decision to enforce the security interest in the personal property under this Chapter; or

398

Personal Property Securities Act 2009

[117.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[117.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision s 55(4) s 59(6) § 9-604(a)

Outline

This section allows a secured party with a security interest covering both real and personal property securing the same obligation to elect to use either land law or the PPSA enforcement provisions against the personal property.

[117.3]

Cross-references

● Section 8 excludes interests in land and fixtures from the PPSA. ● Section 109(5) provides that this section does not apply where the collateral is used predominantly for personal, domestic or household purposes. ● Section 118 sets out how a secured party may enforce their security interest against personal property under this section under land law. In particular s 118(6) provides that enforcement action under land law by a secured party under this section and s 118 will render Ch 4 inoperative to the enforcement of the security interest (s 118(6)).

[117.4]

Concepts

● Land This is defined by s 10. ● Personal property This is defined by s 10 as meaning property (including a license) other than land or a right, entitlement or authority granted under statute and declared by that statute not to be personal property for the purposes of the PPSA.

[117.5]

Commentary

This section is designed to streamline the enforcement process for security interests that cover both land and personal property. Under pre-PPSA law security interests that covered both land and personal property had to be enforced under different legal regimes. This section aims to reduce the time and cost of enforcement by treating the land law enforcement processes as if they were part of the PPSA. In the Ontario decision Re 1153496 Ontario Ltd (1996) 11 PPSAC (2d) 149 (sub nom. Re Dor-O-Matic of Canada Inc (1996) 28 OR (3d) 125), Blair J stated (at [11]) that the equivalent Ontario provision: ‘‘provides for what, in my view, is tantamount to a statutory fusion of the personal property and the real property in question, permitting the

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secured party to proceed against both as if they formed a single piece of property and as if that single property were realty’’. The options of the secured party are limited if they are not the highest ranking secured party in relation to the personal property as they will need to obtain the permission of higher ranking secured parties (which also implicitly gives notice) before they take action (s 117(1)(b)(ii)). Of course, the secured party’s election under this provision must be made honestly and in a commercially reasonable manner as required by s 111.

[117.6] Further reading ● Explanatory Memorandum [4.12, 4.20, 4.22]. ● ALRC Report No 64 [10.1–10.19].

¶4-060

SECTION 118 ENFORCING SECURITY INTERESTS IN ACCORDANCE WITH LAND LAW DECISIONS

118(1)

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. 118(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. How security interest is to be enforced 118(3) 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. Annotated Personal Property Securities Act 2009 (Cth)

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Scope

400

Personal Property Securities Act 2009 118(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. 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).

118(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.

Additional law that applies 118(6) 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. 118(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.

Exercise of powers etc. under applied law 118(8) 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). 118(9) If such an agreement is in force, the power, duty or function may or must be exercised or performed accordingly.

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118(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. 118(11) An agreement made under subsection (8) or (10) is not a legislative instrument. This section does not affect land laws 118(12) To avoid doubt, nothing in this section is intended to modify a land law, or to affect its operation.

[118.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

No parallel provision s 55(5), (6) No parallel provision No parallel provision

Outline

This section sets out the procedure for enforcing security interests against personal property using land law as permitted by s 117.

[118.3]

Cross-references

● Section 140 sets out the rules for distributing proceeds obtained by taking enforcement action under s 117 and 118 (see s 118(6)). ● Section 144 sets out when notices are not required to be sent by a secured party. ● Pt 8.5 provides rules regarding notices under the PPSA.

[118.4]

Concepts

● Approved form See s 302. ● Courts See s 207. ● Land law This is defined in s 117(5). ● With any necessary modification The term ‘‘modification’’ is defined by s 10 as including addition, omission and substitution. The Ontario decision in Re 1153496 Ontario Ltd (1996) 11 PPSAC (2d) 149 (sub nom. Re Dor-O-Matic of Canada Inc (1996) 28 OR (3d) 125) discussed the relationship between the PPSA and land law enforcement procedures and how modifications may be appropriate (at [24]): ‘‘In the commercial world, creditors commonly advance credit against the pledge of both real and personal property . . . as security for that Annotated Personal Property Securities Act 2009 (Cth)

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[118.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

402

Personal Property Securities Act 2009 credit. Debtors willingly provide such security in exchange for the granting of the credit. It is a reasonable expectation, in such circumstances (absent some form of agreement to the contrary), that the creditor will be able, in the event of default, to exercise its remedies against both types of property in order to recover on the debt. In attempting to harmonize the statutory regime relating to personal property security and the land regime relating to real property, the court should strive to give effect to these reasonable expectations, to the extent that the language of the statute in question will reasonably permit.’’

[118.5]

Commentary

This provision provides the administrative machinery to allow for a secured party to take a security interest covering both land and personal property as security for the same obligation(s). The section allows for regulations to be made to modify land law to facilitate the enforcement process and for the Minister to make agreements with State and Territory ministers regarding the role of state authorities to further facilitate enforcement under s 117 and 118. At the time of writing there were no such agreements or regulations in place. It should be noted that notice under this section is required to be given to more than simply the grantor and other secured parties with a perfected security interest immediately before the decision to enforce is made. Any person claiming an interest in the personal property may notify the secured party of their interest and will then be entitled to notice under s 118(1)(b)(iii). The concept of notice under the PPSA is discussed in more detail at Pt 8.5.

[118.6] Further reading ● Explanatory Memorandum [4.12, 4.20, 4.23, 4.34, 8.14]. ● ALRC Report No 64 [10.1–10.19].

¶4-065 SECTION 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. 119(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.

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[119.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[119.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision no parallel provision

Outline

This section seeks to harmonise the enforcement and notification requirements between the National Credit Code (NCC) and the PPSA.

[119.3]

Cross-references

● Sections 117 and 118 allow for security interests covering both land and personal property to be enforced (against the personal property) under either land law or under Ch 4 of the PPSA.

[119.4] Concepts ● National Credit Code The NCC is contained in Sch 1 of the National Consumer Credit Protection Act 2009 (Cth) (NCCPA) which replaced the previously state-based uniform consumer credit legislation. For a detailed discussion of the NCC see Pearson and Batten, Understanding Australian Consumer Credit Law, 2010, CCH and the Australian Consumer Credit Law Reporter, CCH.

[119.5] Commentary This section seeks to harmonise the enforcement provisions between the National Credit Code (NCC) and the PPSA by providing that Ch 4 of the PPSA applies in relation to security interests in collateral to which the NCC applies. Section 5 of the NCC sets out what credit arrangements fit under the NCC (generally speaking credit provided to individuals or strata corporations for personal, domestic or household purposes or in relation to residential property for investment purposes). Note the excluded forms of credit under s 6 of the NCC. Mortgages over real or personal property are defined under Pt 13 of the NCC as including any interest in, or power over, property (further defined as any legal or equitable estate or interest in real or personal property of any description) securing obligations of a debtor or guarantor. Mortgages are subject to the NCC where they secure obligations under a credit contract and the mortgagor is a natural person or a strata corporation (s 7 of the NCC). Section 119(2) facilitates the relationship between the two regimes by allowing compliance with the NCC enforcement provisions to be deemed as compliance with the requirements of Ch 4 of the PPSA. This is specified in the Personal Property Securities Regulations 2010 (Cth) reg 4.1 as follows: Annotated Personal Property Securities Act 2009 (Cth)

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● PPS Regulations 2010 (Cth) reg 4.1 sets out what provisions of the NCC are incorporated into the compliance regime for Ch 4 of the PPSA.

404

Personal Property Securities Act 2009 ‘‘4.1 Relationship with consumer credit legislation For section 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 1

Provision of Act Section 130

Circumstances for Act 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

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

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:

Section 104(3)

(a)

(b)

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the total amount received from the sale; the enforcement expenses, amounts paid to other secured parties;

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 s 102 of the National Credit Code and the secured party sells the goods, in accordance with s 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 sale; (c) the amount required to pay out the credit contract;

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Item

Provision of Act

Circumstances for Act (c)

Provision of NCC

amounts paid to other secured parties;

(d)

4

Section 140

Personal Property Memorandum

the balance owing to the grantor or by the debtor to the secured party A secured party distributes 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

Securities

Bill

Section 105

2009

Circumstances for NCC (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’’

Replacement

Explanatory

‘‘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.

Annotated Personal Property Securities Act 2009 (Cth)

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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).

A secured party cannot enforce a security interest against a guarantor (a person who executed the security agreement but is not the debtor) unless: ● judgment has been obtained against the debtor and remains unsatisfied; or ● 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 of a court to seize goods where the amount outstanding is less than 25% of the credit provided or $10,000 whichever is the lesser amount (s 83). An acceleration clause in a contract or mortgage may only be applied in certain circumstances (s 84–85). Postponement of enforcement action could be negotiated between the parties or ordered by a court (s 86–89).

A secured party may seek details of the whereabouts of collateral from a debtor (s 90). The concurrent application of the Code and the Bill means that a secured party may, under the Bill seize collateral used predominantly for personal, domestic or household purposes if any applicable preconditions in the Code have been complied with.

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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). The Bill does not provide any pre-seizure conditions where the grantor is not the debtor. Accordingly, the requirements in s 82 of the Code would have to be satisfied before a secured party could enforce against a guarantor.

The Bill does not contain any minimum amount that would have to be outstanding before enforcement action could take place. The restrictions in s 83 of the Code would apply.

The Bill is silent on the issue of postponement of enforcement action and where a debtor, mortgagor or grantor sought a postponement, the provisions in the Code relating to postponement would apply. Nothing would prevent a secured party from seeking information under s 90 of the Code. ● A secured party could seize collateral if the debtor is in default (clause 123). ● A secured party with possession or control could seize the collateral by serving a notice on the grantor, or where the collateral is a licence, the licensor (clause 124).

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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 ● A secured party with a higher ranking could seize the collateral from the possession of a lower ranking party (clause 127A). 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). 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).

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). 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 After seizing collateral, a secured party been paid within 21 days after receiving would have to dispose of the collateral by the notice under section 94 the secured sale and must obtain the market value or, party must sell the goods, either for the if the collateral does not have a market estimated value or a higher price to a value, the best price reasonably nominated buyer or to another person obtainable (Clause 128). for the best price reasonably obtainable (s 96). 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 A secured party would have to give the secured party must give the mortgagor grantor, higher secured parties and the a notice stating the gross amount debtor a notice with the total amount realised, the net proceeds of the sale, the received from the sale, the enforcement amount required to pay out the credit expenses, amounts paid to other secured contract and any further action the parties and the balance owing to the secured party intends on taking (s grantor or by the debtor to the secured 96(3)). party (Clause 132).

Annotated Personal Property Securities Act 2009 (Cth)

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The Code

408

Personal Property Securities Act 2009

The Code The Bill 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 distribute following amounts from the money funds received in the following order: received from the sale: ● the secured amount outstanding; ● interests with a higher priority; ● the amount payable to discharge ● enforcement costs; any prior mortgage; ● the amounts payable to discharge ● higher ranking security interests; subsequent mortgages of which the secured party had notice (s 97). ● 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.’’

[119.6] Further reading ● Explanatory Memorandum [4.29–4.32]. ● ALRC Report No 64 [10.1–10.19]. ● Whittaker Report [8.1.11].

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SECTION 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)).

Rights of secured party 120(2) 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:

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(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)).

120(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.

120(4) The secured party must apply any amount received under paragraph (2)(b) or subsection (3) towards the secured obligation. 120(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.

[120.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[120.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision no parallel provision

Outline

This section allows a secured party with a security interest in collateral consisting of an account, chattel paper or a negotiable instrument to serve a garnishee notice on a third party who owes money to the grantor on the collateral once the grantor defaults on its obligation to the secured party. This does not apply where the collateral is used predominantly for personal, domestic or household purposes.

[120.3]

Cross-references

● Section 109(5) excludes the operation of this section for collateral used predominantly for personal, domestic or household use. ● Section 121 sets out the procedure for implementing action under this section. ● Section 140 provides rules for distributing funds where payment under this section is made in currency. ● Part 8.5 provides rules regarding notices under the PPSA. ● Section 293 allows the court to extend the time within which payment must be made under this section. Annotated Personal Property Securities Act 2009 (Cth)

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Note: The period mentioned in this subsection may be extended by a court under section 293.

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Personal Property Securities Act 2009

[120.4]

Concepts

● Approved form See s 302. ● Predominantly for personal, domestic or household purposes This is defined by s 10. See further [47.5]. ● Proceeds This is defined by s 31. ● Seize collateral See Pt 4.3, Div 2 (particularly s 123–127).

[120.5]

Commentary

This section allows the secured party to serve a garnishee notice and/or to seize proceeds of the collateral to which the secured party is entitled (see s 32). The section requires that payment by currency must be applied in accordance with the distribution rules in s 140 (s 120(5)), but makes no similar requirement for electronic transfers which seems anomalous, although is consistent with other provisions that confer advantages on electronic transfers rather than payments of physical currency (see s 69). The procedure for implementing the garnishee power in this section is set out in s 121 and this section should be read with that provision.

[120.6] Further reading ● Explanatory Memorandum [4.12, 4.39, 4.88, 8.28]. ● ALRC Report No 64 [10.1–10.19]. ● Whittaker Report [8.2], [8.4.5].

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SECTION 121 ENFORCEMENT OF SECURITY INTERESTS IN LIQUID ASSETS — NOTICE TO HIGHER PRIORITY PARTIES AND GRANTOR

Notice to higher priority parties 121(1) 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. 121(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

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(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.

Notice to grantor 121(4) A secured party must give a written notice to the grantor of any action the secured party takes in accordance with subsection 120(2). 121(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.

[121.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[121.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision no parallel provision

Outline

This section provides the machinery that allows the garnishee notice under s 120 to be implemented. It also allows a secured party with higher priority than the enforcing party to take action before the enforcing party. Annotated Personal Property Securities Act 2009 (Cth)

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Chapter 4

121(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.

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Personal Property Securities Act 2009

[121.3]

Cross-references

● Section 120 allows a secured party to serve a garnishee notice in respect of a default of a security interest over a liquid asset. ● Section 293 allows the court to extend the time within notice must be given under this section. ● Part 8.5 provides rules regarding notices under the PPSA.

[121.4]

Concepts

Nil.

[121.5]

Commentary

This section sets out how a garnishee notice may be served by a secured party with a security interest in liquid assets (accounts, chattel paper and negotiable instruments). The section details what information must be provided in the relevant notice and when the notice must be served. Notice must also be given to the grantor (s 121(4),(5)).

[121.6] Further reading ● Explanatory Memorandum [4.34, 4.39, 8.28]. ● ALRC Report No 64 [10.1–10.19]. ● Whittaker Report [8.2].

PART 4.3 — SEIZURE AND DISPOSAL OR RETENTION OF COLLATERAL Division 1 — Introduction ¶4-080 SECTION 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.

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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).

Division 2 — Seizing collateral ¶4-085

SECTION 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.

123(2) 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. 123(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. No perfection by seizure 123(4) A secured party who seizes collateral under this section does not perfect the secured party’s security interest in the collateral.

[123.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

Annotated Personal Property Securities Act 2009 (Cth)

s 109 s 58 s 62 § 9-609

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Chapter 4

Seizing intangible property

414

Personal Property Securities Act 2009

[123.2]

Outline

Section 123 sets out the rules under the PPSA with respect to seizure of collateral. The provision applies to security interests perfected by registration. For interests perfected by possession or control, s 124 applies.

[123.3]

Cross-references

● The concept of a secured party seizing collateral is central to the enforcement of a security interest and is discussed in over 25 sections of the PPSA. ● Section 111 requires the secured party to act honestly and in a commercially reasonable manner. ● Section 115 allows the parties to contract out of this provision where the collateral is not used predominantly for personal, domestic or household purposes. ● Section 125 obliges a secured party who seizes collateral to take action as specified in that section.

[123.4]

Concepts

● Default The term ‘‘default’’ is not defined by the PPSA however it is central to Ch 4 of the Act as enforcement only arises where the debtor is in default on the payment or performance of an obligation as stipulated by the security agreement. Default, in the general sense, refers to a circumstance whereby the debtor fails to meet obligations (usually financial) owing to the secured party. The nature of commercial affairs in contemporary times has however lead to the development of the practice of including many other contingencies within the default provisions of a security agreement. Where the debtor enters bankruptcy/insolvency for instance, this will usually trigger a default clause. The parties can largely agree on any number of default contingencies, pursuant to freedom of contract principles, and the role of the court is to interpret and give effect to the underlying security agreement in this regard (and in accordance with s 18(1)). ● Intangible property This is defined in s 10. ● Licence This is defined by s 10. See further s 105 and the commentary at [12.5.3.5]. ● Notice See Pt 8.5. ● Security agreement This is defined by s 10. See further s 18 and 20. ● Perfect See s 21.

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415

● Seize The terms ‘‘seize’’ or ‘‘seizure’’ are not defined by the PPSA, but are essential to the enforcement of a security interest irrespective of whether the collateral is eventually retained or disposed of. In the general sense, the term means to take possession of the underlying collateral or to remove control of the collateral from the hands of the grantor (or a party acting on behalf of the grantor, such as a licensee or sub-licensee). See also Knauf Plasterboard Pty Ltd v Plasterboard West Pty Ltd (In Liq) (Rec and Man Apptd) [2017] FCA 866; Fin One Pty Ltd v Kucharski [2017] QMC 17.

[123.5] Commentary

The Canadian cases on the point of seizure and enforcement of security interests refer to various ‘‘Execution Acts’’ among the provinces, which do not arise under Australian law. The value of the decisions is therefore limited, however, certain points remain relevant with respect to the PPSA. One such point is the analysis of the time at which perfected interests are considered. Perfected interests, for the purposes of enforcement, are analysed at the time the enforcement action commences and not earlier or later than this point: Erjo Investments Ltd v Michener Allen Auctioneering Ltd (2004) 6 PPSAC (3d) 220; 238 DLR (4th) 32 (Sask CA). See also Gibbston Downs Wines Ltd v Perpetual Trust Ltd [2013] NZCA 506 at [66]–[70] (discussing the date of receivership as being the relevant date, but not specifically deciding that point). The power to seize must not be used in order to incur costs to punish the debtor: Poplar Properties Ltd v Cranewood Financial Corp (2002) 5 PPSAC (3d) 53; 38 CBR (4th) 43 (BC SC). Such conduct would be likely to infringe s 111. Another important point is the utility of the underlying security agreement in prescribing its own enforcement provisions. Pursuant to section 18(1), the court is to give effect to the terms of the security agreement where they are not inconsistent with the enforcement provisions of the PPSA. Chapter 4 does not seek to codify the rules of enforcement as between the secured party and the grantor and the terms of the security agreement should be read and given effect in addition to the PPSA provisions: see s 18(1). See further: Re Maiden Civil (P&E) Pty Ltd (2013) APPSR ¶701-008; Albarran and Pleash (as receivers and managers of Maiden Civil (P&E) Pty Ltd v Queensland Excavation Services Pty Ltd (2013) APPSR ¶701-008; [2013] NSWSC 852 at [80]; Royal Bank v Moosomin Credit Union (2003) 7 PPSAC (3d) 118; 241 Sask R 1 at [69] (Sask CA). Where the security agreement and the enforcement provisions conflict, primacy must be given to the enforcement provisions unless the PPSA explicitly specifies that such provisions may be contracted out of pursuant to s 115. This issue arose in the Saskatchewan Court of Appeal case, Andrews v Annotated Personal Property Securities Act 2009 (Cth)

¶4-085

Chapter 4

The enforcement provisions pursuant to Ch 4 of the PPSA look beyond the Act itself, operating in addition to rather than in lieu of the existing principles of enforcement at law. Section 123 expressly gives rise to this, providing for the seizure of collateral subject to a security interest by any method permitted by law. For intangible property, the giving of a notice containing words to the effect that the property is being seized suffices (see s 123(2) and (3)).

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Personal Property Securities Act 2009

Mack Financial (Can) Ltd (1987) 8 PPSAC 110; 46 DLR (4th) 731 at [69], where it was held: ‘‘In my view, to the extent that any contractual right of possession coincides with the statutory right of possession under s. 58, the two rights must be read and treated as one and the same right. The contractual right must be read and treated as an affirmation of the statutory right and not as an independent and separate right. To the extent that the contractual right of possession does not coincide with the statutory right of possession, the former must be read and treated as varying the statutory right (given the words ‘unless otherwise agreed’ contained in s. 58(a), a variation is permissible). The statutory right so varied persists. Unless the two rights are read this way, s. 63, in an important respect, would be waived by the simple device of including a separate right of possession in the contract, thus enabling the security holder to rely upon the contractual right to the exclusion of the statutory right.’’

[123.6] Further reading ● Explanatory Memorandum [4.32]. ● ALRC Report No 64 [10.1–10.19]. ● Whittaker Report [8.3].

¶4-090 SECTION 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. 124(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. 124(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.

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417

[124.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[124.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 109 s 58 s 62 § 9-609

Outline

Section 124 prescribes how a secured party with an interest perfected by possession or control can seize the underlying collateral for the purposes of enforcing their interest under Ch 4 of the PPSA. For seizure of interests perfected by registration, see above at s 123. See further Knauf Plasterboard Pty Ltd v Plasterboard West Pty Ltd (In Liq) (Rec and Man Apptd) [2017] FCA 866.

Cross-references

● Section 111 requires the secured party to act honestly and in a commercially reasonable manner. ● Section 115 does not allow for this provision to be contracted out of by the parties. ● Section 123 provides for the seizure of collateral.

[124.4] Concepts ● Control See s 25–29. ● Licence This is defined in s 10. See further s 105 and the commentary at [12.5.3.5]. ● Notice See Pt 8.5. ● Security agreement This is defined by s 10. See further s 18 and 20. ● Perfect See s 21. ● Possession See s 24. ● Seize See s 123.

[124.5]

Commentary

Like intangible property, seizure of collateral perfected by possession or control does not involve the physical taking of possession of the collateral either because possession of the collateral is already in the hands of the secured party, or, the collateral is intangible and cannot be physically possessed. Section 124 operates to change the capacity with which the property is held when notice is given to the grantor (or a person who holds Annotated Personal Property Securities Act 2009 (Cth)

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[124.3]

418

Personal Property Securities Act 2009

the property on behalf on the grantor such as a licensee or sub-licensee). The notice requirements under the PPSA are discussed at Pt 8.5. The secured party, after giving the notice, becomes the enforcing party.

[124.6] Further reading ● Explanatory Memorandum [4.32]. ● ALRC Report No 64 [10.1–10.19]. ● Whittaker Report [8.3.1], [8.3.2].

¶4-095 SECTION 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. 125(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. 125(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: (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.

[125.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[125.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 109 s 59 s 63 § 9-610

Outline

Section 125 prescribes the responsibilities imposed on a secured party who seizes collateral pursuant to s 123.

[125.3]

Cross-references

● Section 111 requires the secured party to act honestly and in a commercially reasonable manner.

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419

● Section 115 allows the parties to contract out of this provision where the collateral is not used predominantly for personal, domestic or household purposes. ● Section 123 provides the power to seize collateral.

[125.4]

Concepts

● Dispose of collateral See Pt 4.3 Div 3. ● Reasonable period The term ‘‘reasonable period’’ is not defined by the PPSA, however, in accordance with general principles of law, it implies an objective assessment of time. A ‘‘reasonable period’’ to secure, store and value collateral will depend on the perishability of the underlying collateral and the relevant market on which it trades. A court is to make an assessment of a reasonable period objectively in light of the facts and circumstances of each case. ● Retain the collateral See Pt 4.3, Div 4.

Chapter 4

● Security agreement This is defined by s 10. See further s 18 and 20. ● Seize See s 123.

[125.5] Commentary Section 125 requires the seizing secured party to secure, store and value the collateral (whereby valuation occurs at the time the property is seized and not at the commencement time of the security agreement). The purpose of seizing collateral is not to punish the debtor/grantor for failing to meet their obligations, nor is it to remove the use and enjoyment of such property from the grantor. The purpose of seizure is to allow the enforcing secured party to recover, as much as possible, the outstanding obligation still owing by the debtor. In this regard, any delay postulated between the parties with respect to the retention or disposal of the underlying collateral should form part of the security agreement. A failure of the secured party to account for such circumstances may reduce the amount recoverable. In addition, the secured party is essentially indemnified against the reasonable expenses incurred in enforcing their security interest (see 18(5)), however, all unreasonably incurred expenses (to be determined objectively) will be the responsibility of the secured party.

[125.6] Further reading ● Explanatory Memorandum [4.34]. ● ALRC Report No 64 [10.1–10.19]. Annotated Personal Property Securities Act 2009 (Cth)

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Personal Property Securities Act 2009

¶4-100 SECTION 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)).

126(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. 126(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.

[126.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[126.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 111 s 58(2)(b), (c) s 62(b), (c) § 9-609

Outline

Section 126 aids an enforcing secured party where compliance with s 125 cannot be achieved.

[126.3]

Cross-references

● Section 109 provides that this section does not apply where the collateral is used by a grantor predominantly for personal, domestic or household purposes. ● Section 115 allows the parties to contract out of this provision.

[126.4]

Concepts

● Apparent possession See s 24. ● Dispose of collateral See Pt 4.3 Div 3.

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421

● Perfect See s 21. ● Seize See s 123.

[126.5]

Commentary

Section 126 provides that where the taking of actual possession cannot be readily achieved, a secured party can take apparent possession to satisfy the seizure requirements pursuant to s 123. The concept of actual possession is discussed at s 24. With regards to consumer protection imperatives, while actual possession clearly demonstrates a change in the control of collateral, individuals are less likely to recognise enforcement through apparent possession and thus the PPSA does not permit secured parties to capitalise on this vulnerability.

[126.6] Further reading ● Explanatory Memorandum [4.32, 4.46, 4.48]. ● ALRC Report No 64 [10.1–10.19]. ● Whittaker Report [8.3.4].

¶4-105

SECTION 127 SEIZURE BY HIGHER PRIORITY PARTIES — NOTICE

Scope 127(1) 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. Notice requiring enforcing party to give possession of collateral to higher priority party 127(2) 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.

127(3) However, the higher priority party must not give a notice to the enforcing party under subsection (2) unless the higher priority Annotated Personal Property Securities Act 2009 (Cth)

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Section 126 only applies where the underlying collateral is not used predominately for personal, domestic or household purposes (see s 109(5)). A number of the enforcement provisions under the PPSA are of a similar fashion. The enforcement provisions under the PPSA make a distinction between property used in a commercial as opposed to a personal, domestic or household capacity on grounds of consumer protection.

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Personal Property Securities Act 2009 party would be entitled to seize the collateral (in the higher priority party’s own right) in accordance with section 123, had the enforcing party not first seized the collateral. 127(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.

127(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. Payment of enforcing party’s expenses 127(6) 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)).

127(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. 127(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. 127(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.

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127(10) The amount under subsection (6) is a debt due to the enforcing party. 127(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.

[127.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[127.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 109 s 58 s 62 § 9-611, 9-612, 9-624

Outline

[127.3]

Cross-references

● Section 115 allows secured parties to contract out of their rights under this section. ● Section 123 provides for the seizure of collateral.

[127.4] Concepts ● Dispose of collateral See Pt 4.3 Div 3. ● Notice See Pt 8.5. ● Possession See s 24. ● Reasonable period See s 125. ● Reasonable expenses The term ‘‘reasonable expenses’’ incorporates an objective standard in determining the costs incurred when enforcing a security interest. The term is not defined by the PPSA and will depend on a number of factors including the nature of the encumbered collateral, the market rate for storage and transportation costs (among other collateral-specific costs). A secured party who seizes and deals with the collateral by way of enforcement should keep all documentation in relation to enforcement should a dispute arise as to the reasonableness of such expenses (see also s 132): see Aurora Mines Inc v Mariah Mining Corp (2004) 7 PPSAC (3d) 185; 5 CBR (5th) 163 (Yukon SC). Annotated Personal Property Securities Act 2009 (Cth)

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This section requires a secured party who seizes collateral to notify secured parties with a higher priority. This allows the higher ranking secured party to take possession of the collateral (if they choose), in which case they must compensate the seizing party for reasonable expenses.

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Personal Property Securities Act 2009 In Aurora Mines Inc, the court stated that in assessing whether the secured party had acted in a commercially reasonable manner, the secured party was not required to assess every possible course of conduct to find the cheapest method of seizure. In that case, the court said that the mere fact that seizure costs were almost as high as the debt in default did not automatically render the secured party’s conduct commercially unreasonable. However, transporting the collateral more than 250 miles rather than the closest town was commercially unreasonable and the transport costs were disallowed.

● Seize See s 123. Note, however, that this provision applies, however, the seizure occurs.

[127.5]

Commentary

The general notice requirements under the PPSA are discussed at Pt 8.5. Providing notice pursuant to s 127 must comply with s 127 in addition to Pt 8.5. Section 127 provides recourse for the holder of a higher priority security interest to take possession of collateral seized by a lower ranking security interest. The lower ranking security interest holder is to be reimbursed for reasonable expenses incurred (the amount constituting a debt pursuant to s 127(10) and (11)). Section 127 is not mandatory and a higher priority security interest does not lose their priority interest by virtue of enforcement action taken by a lower priority security interest (see s 133).

[127.6] Further reading ● Explanatory Memorandum [4.49, 8.28]. ● ALRC Report No 64 [10.1–10.19]. ● Whittaker Report [8.3].

Division 3 — Disposing of collateral (including by purchasing collateral) ¶4-110 SECTION 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). 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).

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Method of disposal 128(2) 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.

128(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. 128(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. 128(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.

Disposal of licences 128(6) 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.

[128.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[128.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 109 s 59 s 63 § 9-610

Outline

Section 128 prescribes the methods of disposing of collateral which has been seized pursuant to Pt 4.3, Div 2.

[128.3]

Cross-references

● Section 115 allows the parties to contract out of this provision provided that the collateral is not used predominantly for personal, domestic or household purposes. ● Section 123 provides for the seizure of collateral. Annotated Personal Property Securities Act 2009 (Cth)

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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)).

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Personal Property Securities Act 2009

● Section 129 provides for disposal by purchase. ● Sections 130–132 impose obligations on the secured party who disposes of the collateral. ● Section 133 provides for the purchaser to take free of security interests in certain circumstances. ● Section 137 allows for a notice of objection to be served. ● Section 140 provides for the distribution of proceeds received by a secured party.

[128.4]

Concepts

● Dispose of collateral The term ‘‘dispose of collateral’’ is not defined by the PPSA. Disposal of collateral, in the ordinary sense of the words, implies a process of discarding without care — this is not how the phrase is used for PPS purposes. Under the PPSA, disposal refers to the process of exchanging the collateral in order to recover, as much as possible, the underlying obligation still outstanding. Section 128 prescribes the various ways in which this can occur. ● Intellectual property This is defined in s 10. See also Pt 3.5.

[128.5]

Commentary

The disposal processes pursuant to s 128 are broad and do not require much beyond what is commercially practicable. Any disposal must occur in accordance with the general enforcement provision to act honestly and in a commercially reasonable manner (see particularly s 111). This is discussed further in s 131. In addition, the secured party must obtain the market value or best price reasonably obtainable for the collateral (see s 131). Section 140 imposes an obligation on secured parties to distribute the proceeds of an enforcement action in a particular order.

[128.6] Further reading ● Explanatory Memorandum [4.12, 4.32, 4.55, 4.57–4.59]. ● ALRC Report No 64 [10.1–10.19]. ● Whittaker Report [8.1.2], [8.4], [9.3.4].

¶4-115 SECTION 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)).

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129(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). 129(3) Despite subsection 128(2) and section 131, a secured party may purchase collateral only: (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.

New Zealand Saskatchewan Ontario USA

[129.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 109 s 59 s 63 § 9-610

Outline

Section 129 prescribes the mechanics for the disposal of collateral by purchase from the party who has seized the collateral. Note, this process is different to retaining collateral which is discussed at Pt 4.3, Div 4.

[129.3]

Cross-references

● Section 109 excludes this section where the collateral is used by the grantor predominantly for personal, domestic or household purposes. ● Section 111 requires a secured party to act honestly and in a commercially reasonable manner. ● Section 115 allows the parties to contract out of this provision provided that the collateral is not used by the grantor for a personal, domestic or household purpose. ● Section 128 allows a secured party to dispose of collateral. ● Section 131 imposes a duty on the secured party when disposing of collateral.

[129.4] Concepts ● Disposal of collateral See s 128. ● Market value See s 131. Annotated Personal Property Securities Act 2009 (Cth)

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[129.1] Comparable provisions in foreign regimes

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Personal Property Securities Act 2009

● Public sale This is not defined in the PPSA. The term public auction was considered in the Canadian PPSA case of CNH Capital Canada Ltd v Diamond4 Holdings Ltd (2012) 19 PPSAC (3d) 262; 92 CBR (5th) 167 (BC SC), which held that a sale using an online auction website was a public sale, although it was noted that some online auction websites may have characteristics that would make them a private not a public sale. In Bayview Credit Union v Doucette (2012) 19 PPSAC (3d) 224; [2012] NBQB 200, the court held the secured party should have listed the collateral (a car) on a popular online auction website which did not charge a fee rather than leaving a car on the street with a for sale sign.

[129.5]

Commentary

Secured parties who seek to dispose of collateral by purchasing it must provide notice to the grantor and any other security interest with a higher priority to the collateral. The rationale behind this provision being the prevention of improper sales. The PPSA achieves this purpose by requiring, firstly, that the sale is a public sale with an opportunity for other interested parties to purchase the collateral, and secondly, that the market value for the collateral is obtained. The ability of the secured party to dispose of the collateral in favour of itself by purchasing the property is of course an inherent conflict of interest which warrants the greatest caution. It may be that this provision is rarely used given that s 116 excludes Ch 4 where a corporate receiver is appointed. Additional protections exist for property used predominately for personal, domestic or household purposes as s 129 is unavailable in such instances (see 109(5); see also s 126). In a practical sense, it is recommended that where an enforcing secured party seeks to purchase the collateral that the following steps be taken: ● the collateral be valued by more than one independent valuer (depending on the commerciality of obtaining more than one valuation) ● the reasonable expenses incurred in enforcing the security interest are accurately documented ● that any impropriety or conflicts of interest are sufficiently disclosed in accordance with the s 130 notice requirements (see below).

[129.6] Further reading ● Explanatory Memorandum [4.61–4.67]. ● ALRC Report No 64 [10.1–10.19]. ● Whittaker Report [8.4.2].

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SECTION 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. 130(2)

A notice must:

(a) contain the name of the secured party giving the notice; 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.

130(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. 130(4) The notice may be given in the approved form. When notice is not required 130(5) 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 Annotated Personal Property Securities Act 2009 (Cth)

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(b) contain a description of the collateral; and

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Personal Property Securities Act 2009 (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 (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.

[130.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[130.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 114 s 59(6), (7), (16) s 63 § 9-611, 9-612, 9-624

Outline

Section 130 prescribes the notice requirements in relation to secured parties who seek to dispose of collateral by purchasing it.

[130.3]

Cross-references

● Section 111 requires a secured party to act honestly and in a commercially reasonable manner. ● Section 115 allows the parties to contract out of this provision provided that the collateral is not used by the grantor for a personal, domestic or household purpose. ● Section 128 allows a secured party to dispose of collateral. ● Section 131 imposes a duty on the secured party when disposing of collateral. ● Section 144 provides for notices not to be served in certain circumstances.

[130.4]

Concepts

● Approved form See s 302. ● Description of the collateral See s 20 and 153. ● Dispose of collateral See s 128. ● Notice See Pt 8.5.

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[130.5]

Commentary

The formal notice requirements which form part of s 130 operate in addition to the general requirements of notice under the PPSA pursuant to Pt 8.5. The elements to be included pursuant to s 130 are extensive and seek to disclose the potential for a conflict of interest discussed under s 129. A secured party must additionally be mindful of any objections arising pursuant to s 137. An issue regarding the adequacy of notice arose in the British Columbia Supreme Court case, Inland Kenworth Inc v Laboucane (2004) 11 PPSAC (3d) 50; 26 BCLR (4th) 108 at [44]. Melnick J held:

A failure to comply with the notice requirements with regards to disposing of collateral has also been held to be more than mere ‘‘technical non-compliance’’ with the statute: 241301 Alberta Ltd v 482176 BC Ltd (2003) 6 PPSAC (3d) 32; 46 CBR (4th) 156 at [18]. A contravention of this section may give rise to an action for damages under s 271: Bank of Montreal v Featherstone (1989) 9 PPSAC 139; 58 DLR (4th) 567 (Ont CA). Note that the giving of notice may be avoided if s 144 applies.

[130.6] Further reading ● Explanatory Memorandum [4.32, 4.62, 8.28]. ● ALRC Report No 64 [10.1–10.19]. ● Whittaker Report [8.4].

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SECTION 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)).

Annotated Personal Property Securities Act 2009 (Cth)

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‘‘I do not agree that where the secured party uses a different name this affects the validity of the notice. The purpose of the notice is to inform the debtor and others entitled to receive notice that the secured party intends to dispose of the collateral; it is not to notify the debtor of the secured party’s identity. The notice clearly fulfils its primary purpose here.’’

432

Personal Property Securities Act 2009

[131.1] Comparable provisions in foreign regimes New Zealand Saskatchewan

PPSA 1999 PPSA 1993

Ontario USA

PPSA 1990 UCC Article 9 (rev)

[131.2]

s 110 no direct parallel but see s 65(3) s 63(2) § 9-610(b), 6-627

Outline

Section 131 prescribes an additional requirement imposed on secured parties over and above the general requirement to act honestly and in a commercially reasonable manner when enforcing a security interest pursuant to s 111. This obligation is similar to the duty imposed on receivers when exercising a power of sale under the Corporations Act 2001 (Cth) s 420A.

[131.3]

Cross-references

● Section 111 requires a secured party to act honestly and in a commercially reasonable manner. ● Section 128 allows a secured party to dispose of collateral. ● Sections 130 and 132 impose duties of disclosure on the secured party when disposing of collateral.

[131.4]

Concepts

● Best price reasonable obtainable The term ‘‘best price reasonable obtainable’’ is not defined by the PPSA, however, the term refers to an objective standard of effort required by the PPSA, in the authors’ view, and imposes on the secured party a requirement to achieve the best or highest sale price for collateral where there is no readily available market value. At a practical level, the evidential burden rests with the enforcing secured party in order to prove reasonable steps were taken to obtain the best price. All documentation regarding efforts invested in satisfying this requirement should be retained for such purposes. ● Disposes of collateral See s 28. ● Market value The concept of ‘‘market value’’ is not defined by the PPSA, however, in essence, it refers to the rate or price at which comparable collateral is readily obtainable from the market: see Spencer v Cth (1907) 5 CLR 418. There is a distinction between the market value of an asset and the best price that could be obtained if an optimal sales process had been used: Fortson Pty Ltd v Commonwealth Bank of Australia (2008) 100 SASR 162 (SASC Full Ct). The market value is a fluctuating figure which should be ascertained independently should the secured party wish to instigate a private sale,

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and can also serve as a reserve price for public auctions or closed tenders. While the market value is a significant indicator, it relies on the uniformity, transferability and liquidity of the market within which the collateral trades or is otherwise dealt with. Unique collateral such as custom-made property thus may not have a readily obtainable market value. In such circumstances, the best price reasonably obtainable must be sought.

[131.5]

Commentary

Section 131 seeks to prevent, as far as possible, the deterioration of value of the underlying collateral in the hands of the seizing secured party. The secured party, in disposing of collateral, must take reasonable steps to obtain the value that the underlying collateral is worth. Where there is an ascertainable value, the task is to act reasonably to achieve this value or greater. Where there is no ascertainable value, the best price reasonably obtainable should be obtained. The duty under s 111 to act in an honest and commercially reasonable manner has been interpreted in Canada as requiring the secured party selling the collateral to obtain the best price reasonable obtainable: Inland Kenworth Inc v Laboucane (2004) 11 PPSAC (3d) 50; 26 BCLR (4th) 108 (BC SC). There is no obligation on a secured party to dispose of the collateral to a junior secured party: Loeb Canada Inc v Caisse Populaire Alexandria Lte´e (2004) 7 PPSAC (3d) 194 (Ont SCJ). As to the relationship between secured parties see generally Downsview Nominees Ltd v First City Corporation Ltd [1993] AC 295. What constitutes the ‘‘reasonableness’’ of the secured party’s efforts in obtaining the best price is to be determined on a case-by-case basis in light of the surrounding facts and circumstances. It is likely that judicial consideration of s 420A of the Corporations Act 2001 (Cth) (which imposes a similar duty on receivers when exercising a power of sale) will be instructive. In the leading decision on that provision Florgale Uniforms Pty Ltd v Orders (2004) 11 VR 54 at [443], Dodds-Streeton J explained: ‘‘[T]he process of evaluating and balancing the competing costs and benefits and associated risks of various methods of sale will not, in every case, require a formal comparative analysis or documented calculations. All will depend on the circumstances of the individual case, including Annotated Personal Property Securities Act 2009 (Cth)

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The failure to obtain a particular value (such as a prior market valuation) as a result of a sale process does not necessarily mean that the secured party has failed to exercise all reasonable care to obtain at least the market value. However, a defective sale process may be indicated by failing to obtain an appropriate sale value: see Investec Bank (Australia) Ltd v Glodale Pty Ltd (2009) 24 VR 617 (VSCA). In Copp v Medi-Dent Services (1991) 2 PPSAC (2d) 114; 30 OR (3d) 370 (Ont Court of Justice), it was held that an assessment of whether disposal of the collateral is commercially reasonable is a question of fact. In that case, the court held that a sale to a party in dispute with the debtor at an amount calculated by reference to the debt owed without an independent valuation or advertisement offering the collateral for sale was not commercially reasonable.

434

Personal Property Securities Act 2009 the scale of the receivership, the value and nature of the property involved, the receiver’s expertise in relation to the type of property, relevant expert advice, the advice or input of proprietors and staff, the trading history and marketing of the company, including during the receivership, and other relevant variables in a realistic commercial context.’’

These comments should apply equally to the interpretation of s 131 of the PPSA. See also Investec Bank (Australia) Ltd v Glodale Pty Ltd (2009) 24 VR 617 (VSCA). See similar comments in Case Credit Ltd v Rhodan Contracting Ltd (2004) 7 PPSAC (3d) 346 at [12] (BCSC). In the US case of Thomas v Price (1992) 975 F.2d 231 (USCA 5th Cir) it was held that a private sale by a secured party will be more closely scrutinised using the commercial reasonableness standard than a public sale. Where the collateral is of a highly specialised nature it is reasonable to expect the secured party to advertise in specialist publications: Liberty National Bank & Trust Co of Oklahoma City v Acme Tool Division of the Rucker Co (1976) 540 F2d 1375 (USCA 10th Circ). That case also held that dishonesty is not required to be shown in cases involving allegations that the sale process adopted by the secured party was not commercially reasonable. In Bank of Montreal v Judges (1991) 1 PPSAC (2d) 240 (Ont Court of Justice), it was held that a public auction for highly specialised scientific equipment was not commercially reasonable. Section 420A of the Corporations Act 2001 (Cth) also has the disjunctive ‘‘or’’ between paragraph (a) and (b) of its provision (s 420A(1)) as well as having ‘‘otherwise’’ at the start of s 420A(1)(b). The courts have held that paragraphs (a) and (b) are mutually exclusive-either collateral has market value (in which case (a) applies) or it does not (in which case (b) applies): Skinner v Jeogla Pty Ltd (2001) 19 ACLC 1,163 (NSWCA). The onus is on the party seeking to challenge the secured party’s sale to prove a breach of this provision: HSBC Bank Canada v Kupritz [2011] BCSC 788. It should be noted that where the grantor is a corporation and the secured party has appointed a receiver this section (and indeed Ch 4 as a whole) will not apply and the Corporations Act 2001 (Cth) Pt 5.3 will apply: s 116.

[131.6] Further reading ● Explanatory Memorandum [4.68–4.72]. ● ALRC Report No 64 [10.1–10.19]. ● Whittaker Report [8.1.10], [8.4.2].

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SECTION 132 SECURED PARTY TO GIVE STATEMENT OF ACCOUNT

Statement of account following disposal 132(1) 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). 132(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.

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. Statement of account if no disposal 132(4) 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. 132(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. Annotated Personal Property Securities Act 2009 (Cth)

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132(3)

436

Personal Property Securities Act 2009 132(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.

132(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.

[132.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[132.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 116 s 60(3) s 64(1) § 9-615(d)

Outline

Section 132 prescribes disclosure requirements in relation to the disposal of collateral.

[132.3]

Cross-references

● Section 111 requires a secured party to act honestly and in a commercially reasonable manner. ● Section 115 allows the parties to contract out of some aspects of this provision provided that the collateral is not used by the grantor for a personal, domestic or household purpose. ● Section 128 allows a secured party to dispose of collateral. ● Sections 130 and 131 impose duties on the secured party when disposing of collateral. ● Section 144 allows for notice under this section not to be given in certain circumstances.

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[132.4]

Concepts

● Disposes of collateral See s 28. ● Seize See s 123.

[132.5] Commentary While the term ‘‘statement of accounts’’ is not explicitly defined by the PPSA, what must be included in such a statement is discussed in detail under s 132. The purpose of a written statement of accounts is to ascertain the reasonableness of expenses incurred, the reasonableness of the value raised upon disposal and the conditions upon which the collateral was disposed of. A statement of accounts is to be prepared at the request of the grantor or a secured party and in the absence of such request is not required.

[132.6] Further reading ● ALRC Report No 64 [10.1–10.19]. ● Whittaker Report [8.4.4].

¶4-135

SECTION 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.

133(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.

Annotated Personal Property Securities Act 2009 (Cth)

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Chapter 4

● Explanatory Memorandum [4.73–4.75].

438

Personal Property Securities Act 2009

[133.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[133.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 115 s 59(14) s 63(9), (10) § 9-620, 9-621

Outline

Section 133 prescribes the legal position in relation to existing security interests over disposed collateral.

[133.3]

Cross-references

● Section 123 provides for the seizure of collateral by a secured party. ● Section 128 provides for the disposal of collateral by a secured party.

[133.4]

Concepts

● Disposing of collateral See s 128. ● Interests of the grantor See s 19. ● Taking free See further Pt 2.5.

[133.5]

Commentary

Disposing of collateral pursuant to s 128 will allow the purchasing party to take the collateral free from all existing security interests which the enforcing secured party ranks in priority to. Interests which hold a higher priority, however, remain as against the collateral on the grounds of primacy of the register. Failure of the secured party to lodge a s 127 notice does not affect their underlying security interest. A disposal of collateral in such circumstances operates much like an assignment or transfer of an interest to oneself (see s 12(2)(j), (k) respectively). See generally Inland Contracting Ltd v Bakken (2010) 16 PPSAC (3d) 282; 354 Sask R 54 (Sask QB).

[133.6] Further reading ● Explanatory Memorandum [4.77–4.78]. ● ALRC Report No 64 [10.1–10.19]. ● Whittaker Report [8.4.4], [8.5].

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439

Division 4 — Retaining collateral ¶4-140 SECTION 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).

134(2) if:

However, the secured party may retain the collateral only

(b) no notice of objection is given to the secured party in accordance with subsection 137(2).

[134.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[134.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 120 s 61(1) s 65(2) § 9-617

Outline

Section 134 applies in relation to retaining collateral as distinct from purchasing it.

[134.3]

Cross-references

● Section 125 requires the secured party to either dispose or retain the collateral. ● Section 109 provides that this section does not apply if the collateral is used by the grantor predominantly for personal, domestic or houshold purposes. ● Section 115 allows the parties to contract out of this section provided that the collateral is not used by the grantor predominantly for personal, domestic or houshold purposes. ● Section 135 requires notice for a proposed retention of collateral. ● Section 137 allows for a notice of objection to be served. Annotated Personal Property Securities Act 2009 (Cth)

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Chapter 4

(a) the secured party gives a notice under section 135 to retain the collateral; and

440

Personal Property Securities Act 2009

[134.4]

Concepts

● Notice See Pt 8.5. See also s 135. ● Notice of objection See s 137. ● Seize See s 123. Note, however, that this provision applies regardless of whether the seizure has taken place through s 123.

[134.5]

Commentary

Retention of collateral, on the face of the legislation, appears to present a remedy of little practical difference to the disposal of collateral to the secured party as purchaser. Retention of collateral, however, operates to effectively provide a statutory rendition of the remedy of foreclosure. The practical result is that a secured party retains the collateral, however, all rights to recourse against the debtor in personam (against the person) are removed. The decision between disposing of collateral by purchasing it or retaining the collateral is largely a commercial one, take the following example: Debtor A borrows $10,000 from Secured Party B and a perfected security interest over the debtor’s computer system (worth $6,000) secures the loan. Debtor A makes repayments over the term of the loan, however, defaults with $3,000 outstanding. Secured Party B values the computer system independently, and the valuation records the value of the computer at approximately $4,000.

In such circumstances, it is in Secured Party B’s interest to retain the collateral. In doing so, Secured Party B must, however, comply with the notice requirements pursuant to s 134 and any objections arising pursuant to s 137.

[134.6] Further reading ● Explanatory Memorandum [4.12, 4.79]. ● ALRC Report No 64 [10.1–10.19]. ● Whittaker Report [8.5.1].

¶4-145 SECTION 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: (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

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(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. 135(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.

135(3)

A notice must:

(a) contain the name of the secured party giving the notice; 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. 135(4)

The notice must be given in the approved form.

[135.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[135.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 120, note also s 114 s 61 s 66 § 9-621

Outline

Section 135 provides the particulars of notice operating in conjunction with the general notice provisions of Pt 8.5 for the purposes of collateral retention by an enforcing secured party. Annotated Personal Property Securities Act 2009 (Cth)

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(b) contain a description of the collateral; and

442

Personal Property Securities Act 2009

[135.3]

Cross-references

● Sections 130 and 135 require a secured party to give notice of its proposed disposal or retention of seized collateral. ● Section 137 allows for a notice of objection to be served. ● Section 144 allows for notices under this section not to be given in certain circumstances.

[135.4]

Concepts

● Notice See Pt 8.5.

[135.5]

Commentary

Due to the potential for a windfall gain made by retention of collateral, as illustrated in the example at s 134, any defect in the notice may limit the rights available to the secured party if there is a deficiency in recovery: Yuan v Mah Investments Ltd (2001) 2 PPSAC (3d) 159; 205 Sask R 22 (Sask QB). The notice must be clear and unequivocal: Klein v Lemore Investments Ltd (1983) 2 PPSAC 252 (Ont HC); Angelkovski v Trans-Canada Foods Ltd (1986) 6 PPSAC 1 (Man QB). As stated in the commentary to s 134, a failure to comply with the notice requirements with regards to disposing of collateral has also been held to be more than mere ‘‘technical non-compliance’’ with the statute which can be remedied by court order: 241301 Alberta Ltd v 482176 BC Ltd (2003) 6 PPSAC (3d) 32; 46 CBR (4th) 156 at [18] (Alta QB). Additionally, while time limitations may be extended by the court pursuant to s 293, such extension operates by way of judicial discretion and not by way of right.

[135.6] Further reading ● Explanatory Memorandum [4.84]. ● ALRC Report No 64 [10.1–10.19]. ● Whittaker Report [8.5.1], [8.5.2].

¶4-150 SECTION 136 RETAINING COLLATERAL FREE OF INTERESTS Retaining collateral free of interests if notices have been given in accordance with section 135 136(1)

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);

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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. 136(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. Acquiring collateral that has been retained free of interests if notices have not been given in accordance with section 135 136(3) 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 (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. 136(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. Extinguishment of obligation owed to the secured party 136(5) 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.

[136.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

Annotated Personal Property Securities Act 2009 (Cth)

s 123 s 61(3) s 65(6.1) § 9-620, 9-622

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(b) the secured party has not done so; and

444

Personal Property Securities Act 2009

[136.2]

Outline

This section provides for collateral retained under s 134 to be taken free of the security interests of the secured party who retains the collateral and all junior secured parties. The ability to take free of security interests depends upon providing notice of proposed retention under s 135 and the absence of an objection to the proposed retention.

[136.3]

Cross-references

● Section 134 allows for the enforcing secured party to dispose of the collateral by retaining it. ● Section 135 requires notice of a proposed retention to be given by the secured party. ● Section 137 allows for an objection to the proposed retention.

[136.4]

Concepts

● Actual knowledge See s 297. ● New value This is defined by s 10. ● Notice See s 135. See further Pt 8.5. ● Registration that is effective See s 163. ● Taking free See Pt 2.5.

[136.5]

Commentary

Similar to s 133, s 136 holds that the interest of the grantor, the enforcing secured party and any lower ranking secured parties cease to encumber the retained collateral. Interestingly, where the notice requirements pursuant to s 135 are not complied with, a secured party can still convey an interest that takes the retained collateral free where the acquiring party takes such an interest without actual knowledge of the security interest. For more information on elements of knowledge under the PPSA see Pt 8.6.

[136.6] Further reading ● Explanatory Memorandum [4.85–4.87]. ● ALRC Report No 64 [10.1–10.19]. ● Whittaker Report [8.5.1], [8.5.3].

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Division 5 — Objection to purchase or retention SECTION 137 PERSONS ENTITLED TO NOTICE MAY OBJECT TO PROPOSAL

¶4-155 137(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. 137(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.

137(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).

[137.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[137.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 121 s 61(2) s 65(3) § 9-620(a)–(d)

Outline

Due to the ability of an enforcing secured party to dispose of collateral by way of purchasing it or by retaining the collateral under Ch 4, any of the parties entitled to notice pursuant to s 130 and 135 are also entitled to invoke s 137 in objecting to the intended actions of the enforcing secured party.

[137.3] Cross-references ● Section 128 provides for the disposal of seized collateral. ● Section 130 requires a secured party who proposes to dispose of seized collateral to give notice to certain persons. ● Section 134 allows the secured party to dispose of seized collateral by retaining it. ● Section 135 requires a secured party who proposes to retain seized collateral to give notice to certain persons. Annotated Personal Property Securities Act 2009 (Cth)

¶4-155

Chapter 4

Note: The secured party may request the person to provide proof of the person’s interest under section 138.

446

Personal Property Securities Act 2009

[137.4]

Concepts

● Notice of objection The term ‘‘notice of objection’’ has the meaning given to it pursuant to s 137. Section 137 does not prescribe an exhaustive definition and a notice of objection thus presumably adopts the general form requirements of Pt 8.5. A notice of objection must simply describe disagreement with the enforcing secured party’s intention to purchase the collateral or retain it after seizure.

[137.5]

Commentary

The effect of a notice of objection, pursuant to s 137, is that the enforcing secured party is prevented from purchasing or retaining the collateral. The enforcing secured party may request the legitimacy of the objecting party’s claim to the underlying collateral pursuant to s 138, however, where this provision is satisfied (and the notice does not constitute a ‘‘nuisance notice’’ or an abuse of process), the objection should be upheld: 101056998 Saskatchewan Ltd v Kipp & Zonen Inc (2004) 7 PPSAC (3d) 365; 265 Sask R 153 (Sask QB — appeal dimissed: 101056998 Saskatchewan Ltd v Kipp & Zonen Inc (2005) 8 PPSAC (3d) 25). While strict, the PPSA validly provides recourse for interested parties in light of the potential conflicts of interest. The obligations of a party opposing the retention to act honestly and in a commercially reasonable manner were discussed in the Canadian case of 101056998 Saskatchewan Ltd v Kipp & Zonen Inc (2004) 7 PPSAC (3d) 365; 265 Sask R 153 (Sask QB — appeal dimissed: 101056998 Saskatchewan Ltd v Kipp & Zonen Inc (2005) 8 PPSAC (3d) 25). In that case, the court said (at [21]) that a person objecting to a proposed retention of the collateral as opposed to a sale must have: ‘‘more than a suspicion that a sale of the collateral might yield more than the amount owing to the proposing party by the debtor after reasonable expenses, or, that under the guidance and management of the proposing party the value of the collateral may materially increase. The objecting party’s evidence should also provide some guidance regarding the manner in which the collateral should be sold, the anticipated costs of conducting the proposed sale and the time span involved in consummating a sale in order that the court may determine whether it would be commercially reasonable and practical to expose the proposing party to the cost of a sale and the risk of losing its capital pending a sale. Factors such as the nature of the assets comprising the collateral, and the possibility that they may diminish in value with the passage of time must be taken into account. An inventory of conventional durable goods, e.g. conventional passenger cars may be readily appraised and quickly sold, but it may take considerable time and expertise to dispose of shares in foreign corporations whose technology may become obsolete or noncompetitive’’.

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The court went on to hold that the failure of the opposing party to purchase the collateral from the secured party or to fund a market evaluation did not (of themselves) constitute bad faith. The failure of an interested party to provide a notice of objection can be fatal to any claim subsequently raised.

[137.6] Further reading ● Explanatory Memorandum [4.81–4.82]. ● ALRC Report No 64 [10.1–10.19]. ● Whittaker Report [8.4.2], [8.5.4].

SECTION 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. 138(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.

[138.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 122 s 61(5) s 65(4) No parallel provision

[138.2] Outline Section 138 outlines the requirements on a party who produces a notice of objection under s 137.

[138.3] Cross-references ● Section 130 requires a secured party who proposes to dispose of seized collateral to give notice to certain persons. ● Section 135 requires a secured party who proposes to retain seized collateral to give notice to certain persons. ● Section 137 allows a person who receives notice under s 130 or s 135 to object to the proposed action. Annotated Personal Property Securities Act 2009 (Cth)

¶4-160

Chapter 4

¶4-160

448

Personal Property Securities Act 2009

[138.4]

Concepts

● Notice of objection This refers to a notice under s 137 objecting to the proposed disposal or retention (foreclosure) of the collateral by a secured party who has seized collateral.

[138.5]

Commentary

Section 138 does not present an onerous requirement, a party seeking to rely on a notice of objection simply has to establish that they are an interested party, that is, a party who must be given a notice under s 130 or s 135 (depending on whether the collateral is purchased by the enforcing secured party or retained).

[138.6] Further reading ● Explanatory Memorandum [4.81, 8.28]. ● ALRC Report No 64 [10.1–10.19]. ● Whittaker Report [8.5].

Division 6 — Seizure and disposal or retention of crops and livestock ¶4-165 SECTION 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.

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[138A.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[138A.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

No parallel provision No parallel provision No parallel provision No parallel provision

Outline

Section 138A is a definitional provision.

[138A.3]

Cross-references

● Section 138C provides for the seizure and disposal or retention of livestock.

[138A.4] Concepts

[138A.5] Commentary This section provides the definitions of the terms ‘‘take’’ and ‘‘water source’’ with respect to the enforcement provisions which are used in s 138C.

[138A.6] Further reading ● Explanatory Memorandum [3.6–3.7]. ● ALRC Report No 64 [10.1–10.19].

¶4-170 SECTION 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. 138B(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). 138B(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. 138B(4) However, the secured party may exercise the power to enter land or a water source under subsection (3) for a purpose Annotated Personal Property Securities Act 2009 (Cth)

¶4-170

Chapter 4

● Fish This is defined by s 10. Fish are included as a subcategory of livestock also defined by s 10.

450

Personal Property Securities Act 2009 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.

[138B.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[138B.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 101 s 37 s 32 No parallel provision

Outline

Section 138B provides additional particulars in relation to the seizure, disposal and retention of crops.

[138B.3]

Cross-references

● Sections 84, 84A and 85 provide rules relating to security interests in crops. ● Section 123 provides for the seizure of collateral by a secured party. ● Section 128 provides for the disposal of seized collateral. ● Section 134 provides for the retention of the collateral.

[138B.4]

Concepts

● Crops This is defined in s 10. ● Dispose of collateral See s 128. ● Possession See s 24. ● Proceeds See s 31. ● Retain collateral See s 134. ● Water source See s 138A.

[138B.5]

Commentary

This provision was inserted by the Personal Property Securities (Corporations and Other Amendments) Act 2010 (Cth) for the purpose of ensuring that secured parties have the power to take necessary action to enforce their security rights against agricultural products.

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[138B.6] Further reading ● Explanatory Memorandum [3.6–3.7]. ● ALRC Report No 64 [10.1–10.19].

¶4-175

SECTION 138C SEIZURE AND DISPOSAL OR RETENTION OF LIVESTOCK

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.

138C(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). 138C(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.

[138C.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 101 s 37 s 32 § 9-334

[138C.2] Outline Section 138C provides additional particulars in relation to the seizure, disposal and retention of livestock.

[138C.3] Cross-references ● ● ● ●

Section 86 provides rules relating to security interests in livestock. Section 123 provides for the seizure of collateral by a secured party. Section 128 provides for the disposal of seized collateral. Section 134 provides for the retention of the collateral.

Annotated Personal Property Securities Act 2009 (Cth)

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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).

452

Personal Property Securities Act 2009

[138C.4]

Concepts

● Dispose of collateral See s 128. ● Fish This is defined by s 10. ● Livestock This is defined by s 10 (and includes fish). ● Possession See s 24. ● Proceeds See s 31. ● Retain collateral See s 134. ● Water source See s 138A.

[138C.5]

Commentary

This provision was inserted by the Personal Property Securities (Corporations and Other Amendments) Act 2010 (Cth) for the purpose of ensuring that secured parties have the power to take necessary action to enforce their security rights against agricultural products.

[138C.6] Further reading ● Explanatory Memorandum [3.6–3.7]. ● ALRC Report No 64 [10.1–10.19].

PART 4.4 — RULES APPLYING AFTER ENFORCEMENT ¶4-180 SECTION 139 GUIDE TO THIS PART 139 This Part contains rules about steps to be taken after a security interest in collateral has been enforced. 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.

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453

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).

¶4-185

SECTION 140 DISTRIBUTION OF PROCEEDS RECEIVED BY SECURED PARTY

Scope

140(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.

Order of application 140(2) 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; Annotated Personal Property Securities Act 2009 (Cth)

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140(1) 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).

454

Personal Property Securities Act 2009 (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. Note: Sections 102 and 103 affect the operation of this section in relation to commingled property.

140(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). 140(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. 140(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. 140(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. 140(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.

[140.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[140.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 116A, 117 s 60 s 64 § 9-615, 9-616

Outline

This section sets out how funds generated from enforcement activity by a secured party are to be distributed between competing interests.

[140.3]

Cross-references

● Section 115 allows for contracting out of the enforcement provisions for collateral not used predominantly for personal, domestic or household purposes. Section 140 is not one of the provisions that may be contracted out of.

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Part 4.4 — Rules applying after enforcement

[140.4]

Concepts

● Enforcing a security interest Section 140(1) makes it clear that this phrase is not limited to enforcement under Ch 4. This raises a question as to when funds received by a secured party will constitute enforcement action. For example, would funds received by a secured party in settlement of a dispute with the debtor constitute proceeds of enforcement action? The concept of taking steps in the enforcement of a security interest is something that has received judicial consideration under s 267 of the Corporations Act 2001 (Cth) (related party charges), which is to be repealed on the commencement of the PPSA and replaced with a new s 588FP which also contains the phrase ‘‘step in the enforcement of a security interest’’. Judicial consideration of s 267 has found that serving notices of proposed action does not constitute a step in the enforcement of a charge: Re Scandees Danish Home Ice Creem Pty Ltd [1995] 2 Qd R 678. Secured parties will need to clarify what will constitute enforcement action in their security agreements.

This would include statutory and equitable liens. As these liens arise under general law and under statute they are excluded from the operation of the PPSA, that is, they are not consensual and therefore would not satisfy the definition of a security interest under s 12. For the purposes of clarity, this is also noted in s 8(2). ● Proceeds Note that s 140(1) states that this term should have its ordinary or general meaning as opposed to the defined meaning under s 31 (see s 31). ● Reasonable expenses These are automatically included in security interests under s 18(5).

[140.5] Commentary This section imposes mandatory rules for distributing the proceeds of enforcement action. These rules apply to all secured parties (subject to the exclusions in s 109) and may surprise some parties such as suppliers with retention of title arrangements who will need to comply with the distribution waterfall (subject to being able to retain the collateral: see s 134). One of the reasons that this section requires the payment of any surplus to junior secured parties is that their security interests are discharged by the sale of the collateral: s 133. The section makes it clear that the rules for distribution set out in this section are subject to other laws that provide for priority distributions. See for example, Corporations Act 2001 (Cth) s 561 which gives certain employee entitlements priority over secured parties with a security interest over circulating assets. Annotated Personal Property Securities Act 2009 (Cth)

¶4-185

Chapter 4

● Persons holding interests (other than security interests) in the collateral that have a higher priority

456

Personal Property Securities Act 2009

Section 140(7) provides the enforcing party with protection from liability where they distribute proceeds under this section honestly and in a commercially reasonable manner (see further s 111).

[140.6] Further reading ● Explanatory Memorandum [2.105, 4.23, 4.32, 4.40, 4.55, 4.88]. ● ALRC Report No 64 [10.1–10.19]. ● Whittaker Report Ch 8.

¶4-190 SECTION 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.

[141.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[141.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision no parallel provision

Outline

This section allows a secured party to take steps to reflect the transfer in title that has resulted from a disposition or retention of collateral under Ch 4.

[141.3]

Cross-references

● Section 128 allows for the sale of collateral. ● Section 134 allows the secured party to retain collateral in certain circumstances.

[141.4]

Concepts

Nil.

[141.5]

Commentary

Nil.

[141.6] Further reading ● Explanatory Memorandum [–]. ● ALRC Report No 64 [10.1–10.19]. ● Whittaker Report [8.5.3].

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¶4-195

SECTION 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.

142(2) However, a person must not redeem collateral under subsection (1) if the person agrees in writing after the default not to do so. 142(3) The grantor’s right to redeem the collateral has priority over any other person’s right to redeem the collateral.

[142.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[142.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 132 s 62(1)(a) s 66(1) § 9-623, 9-624(c)

Outline

This section allows a secured party or the grantor to redeem the collateral from a secured party who has seized the collateral after default but has not yet disposed of it under s 128.

[142.3]

Cross-references

● Section 115 allows for the redemption power to be contracted out of in cases where the collateral is not used predominantly for personal, domestic or household purposes. ● Section 128 provides for a secured party to dispose of the collateral after seizing it due to default. ● Section 143 provides for the reinstatement of the security agreement. Annotated Personal Property Securities Act 2009 (Cth)

¶4-195

Chapter 4

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)).

458

Personal Property Securities Act 2009

[142.4]

Concepts

● Default See [123.4]. ● Secured party This is defined by s 10.

[142.5]

Commentary

This section provides both the grantor and any other secured party the right to redeem the encumbered collateral by either paying out or performing the obligations owed to the secured party who seized the collateral in full. The grantor retains its right of redemption until disposal, mere repossession by the secured party is not sufficient to extinguish this right: McMillen v Drive Financial Services LP (2005) 57 UCC Rep Serv 2d (Callaghan) 517 (US DC Kansas). Additionally, the right to redemption does not depend upon the ownership of the collateral: In re Moffett (2004) 356 F 3d 518 (US CA 4th Cir). The grantor generally retains the highest priority to redeem the collateral (s 142(3)). The PPSA gives flexibility in relation to the redemption right by allowing the redemption right to be contracted out of either before (s 115 — for collateral not used predominantly for personal, domestic or household purposes) or after default (s 142(2) — for any collateral). In the Canadian case of Wawanesa Mutual Insurance Co v Rosario Enterprises Ltd (2000) 15 PPSAC (2d) 270; 146 Man R (2d) 236 (MB QB), the court cautioned that the notice waiving the right of redemption should be given as close to default as possible. An agreement by the grantor not to interfere with foreclosure rights cannot be a waiver of the right of redemption under this provision if it pre-dates default: see the decision of the Southern District court of New York in: Royal Palm Senior Investors LLC v Carbon Capital II Inc 2009 U.S. Dist. LEXIS 57452. The right to redeem under this provision is the exercise of a statutory right rather than being based on the equity of redemption: Ford v Petford (1996) 11 PPSAC (2d) 227 (BC SC) — compare G Slocombe & Associates Inc v Gold River Lodges Ltd (2001) 2 PPSAC (3d) 324; 24 CBR (4th) 32 (where Edwards J noted that the court had an equitable discretion to refuse the right of redemption) (BC SC). It should be noted that the right to redeem exists prior to the exercise of the secured party’s right of disposal specifically under s 128. A failure to comply with s 128 could mean that the right of redemption remains on foot until compliance with s 128 occurs. Secured parties may wish to contract out of s 128 and 142 to limit redemption rights when the secured party wishes to sell under a power of sale rather than following the procedure in Ch 4.

[142.6] Further reading ● Explanatory Memorandum [4.90–4.94]. ● ALRC Report No 64 [10.1–10.19]. ● Whittaker Report [8.1.9], [8.6.2].

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SECTION 143 ENTITLED PERSONS MAY REINSTATE SECURITY AGREEMENT

¶4-200

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)).

143(2) A security agreement may be reinstated only once during the period in which the security agreement is in force.

[143.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[143.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 133 s 62(1)(b) s 66(2) No parallel provision

Outline

This section provides for the reinstatement of the security agreement.

[143.3]

Cross-references

● Section 115 allows for the redemption power to be contracted out of in cases where the collateral is not used predominantly for personal, domestic or household purposes. ● Section 128 allows a secured party to dispose of seized collateral. ● Section 134 allows a secured party to dispose of seized collateral by retaining it. ● Section 142 allows for the redemption of the collateral.

[143.4] Concepts ● Default See [123.4]. Annotated Personal Property Securities Act 2009 (Cth)

¶4-200

Chapter 4

(b) remedying any other default as a result of which the secured party proposes to dispose of, or retain, the collateral.

460

Personal Property Securities Act 2009

[143.5]

Commentary

The Explanatory Memorandum to the Personal Property Securities Bill 2009 (Cth) states (at [4.96]) that the purpose of this section is to ‘‘protect grantors and debtors where their default is minor, temporary and atypical’’. This power is similar to s 142 which allows for the redemption of the collateral. One difference is that s 143 allows for disposal by the secured party under any means rather than only through the use of s 128. This section also allows any person to reinstate the security agreement by complying with the terms of s 143 whereas s 142 only applies to secured parties and the grantor. There are several protection measures available against the abuse of this provision. Firstly, the party seeking to reinstate the agreement must remedy defaults which would allow the secured party to dispose of or retain the collateral (s 143(1)(b)). This will make identification of the events of default which will allow enforcement by disposal or retention of the collateral in security agreements particularly important. Secondly, this section imposes a limit of one reinstatement during the life of the agreement.

[143.6] Further reading ● Explanatory Memorandum [4.95–4.97]. ● ALRC Report No 64 [10.1–10.19]. ● Whittaker Report [8.6.3].

¶4-205 SECTION 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 (d) in any case — on an ex parte application in relation to the person, a 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.

¶4-205

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[144.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[144.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

No parallel provision No parallel provision No parallel provision No parallel provision

Outline

This section outlines when certain notices are not required.

Cross-references

● Section 95 requires a secured party to give notice prior to removing an accession. ● Section 118 requires notice where enforcement taken against personal property will apply under land law. ● Section 121 requires notice for disposition of liquid assets (accounts, chattel paper or negotiable instruments). ● Section 130 requires notice where a secured party wishes to dispose of the collateral. ● Section 132 requires a secured party who has disposed of the collateral to provide an account where requested to do so by another secured party or the grantor. ● Section 135 requires notice where a secured party wishes to retain collateral. ● Section 207 sets out which courts have jurisdiction. ● See also Pt 8.5 which outlines further rules regarding the giving of notices under the PPSA.

[144.4] Concepts ● Default See [123.4].

[144.5]

Commentary

Nil.

[144.6] Further reading ● Explanatory Memorandum [–]. ● ALRC Report No 64 [10.1–10.19]. ● Whittaker Report [8.4.3], [8.6.4].

Annotated Personal Property Securities Act 2009 (Cth)

¶4-205

Chapter 4

[144.3]

Part 5.1 — Guide to this Chapter

463

CHAPTER 5 — PERSONAL PROPERTY SECURITIES REGISTER PART 5.1 — GUIDE TO THIS CHAPTER ¶5-005

SECTION 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 5.5 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.

Annotated Personal Property Securities Act 2009 (Cth)

¶5-005

Chapter 5

Part 5.4 contains rules about the timing of registrations and when a registration becomes ineffective, including the defects that make a registration ineffective.

464

Personal Property Securities Act 2009

PART 5.2 — ESTABLISHMENT OF THE REGISTER ¶5-010 SECTION 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.

¶5-015 SECTION 147 PERSONAL PROPERTY SECURITIES REGISTER 147(1) The Registrar must establish and maintain a register to be known as the Personal Property Securities Register. 147(2)

Data in the register is the property of the Commonwealth.

147(3) The Registrar may keep the register in any form that he or she considers appropriate. 147(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. 147(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. 147(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

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Part 5.2 — Establishment of the register

(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.

[147.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[147.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 139 s 42, 42.1 s 42 § 9-501

Outline

This section requires the establishment of the Personal Property Securities Register (PPSR).

[147.3]

Cross-references

● Part 5.9 sets out the role and powers of the PPS Registrar. ● Personal Property Securities Regulations 2010 (Cth) reg 5.1 and 5.2 outline how the Registrar may suspend access to the PPSR. Regulation 5.7 sets out when access to the register is prohibited.

Nil.

[147.5] Commentary This section mandates the establishment of the Personal Property Securities Register (PPSR). It provides for the PPSR to be kept in any form appropriate, as such the register has been established in an electronic form (see www.ppsr.gov.au). The PPSR was designed to be technology neutral so that the Registrar would have the flexibility to accept registrations in any appropriate form. The PPSR is the responsibility of the Registrar (at the time of writing the Registrar was Mr David Bergman) with operational responsibility, including the customer service function, undertaken by the Australian Financial Security Authority (AFSA) (formerly the Insolvency Trustee Service Australia (ITSA)). The PPSR will operate on a continuous basis, although the Registrar has the option to refuse access if needed.

[147.6] Further reading ● Explanatory Memorandum [5.9–5.11]. ● ALRC Report No 64 [–]. Annotated Personal Property Securities Act 2009 (Cth)

¶5-015

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[147.4] Concepts

466

Personal Property Securities Act 2009

¶5-020 SECTION 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; (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).

[148.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[148.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 140 no parallel provision no parallel provision no parallel provision

Outline

This section sets out what information may be placed on the register.

[148.3]

Cross-references

● Personal Property Securities Regulations 2010 (Cth) reg 5.3 sets out the prescribed property for the purposes of this section.

[148.4]

Concepts

● Data (if any) prescribed by regulations At the time of writing no data had been prescribed for the purposes of s 148(b). ● Personal property prescribed by the regulations The Personal Property Securities Regulations 2010 (Cth) reg 5.3 prescribes the following types of personal property for the purposes of this section: ‘‘(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

¶5-020

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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.’’ The list of transitional registers (see s 330) is contained on the Personal Property Securities Register (PPSR) website and includes the Australian Securities and Investments Commission’s (ASIC’s) Register of Company Charges, the vehicle securities registers (such as the Registry of Encumbered Vehicles in NSW, Qld, ACT and NT) and the bills of sale registries in each state and territory. ● Registered financing statement A financing statement (see s 153 or s 154 for the content of financing statements) may be registered under s 150. ● Registered financing change statement A financing change statement is a registered statement that changes an existing registered financing statement. A financing change statement is also registered under s 150.

[148.5]

Commentary

This section sets out what information may be contained on the Personal Property Securities Register (PPSR) established under s 147 of the PPSA. The data referred to in s 148 is put into context when read with s 153 or s 154 (depending on the type of property involved) and the Personal Property Securities Regulations 2010 (Cth), Sch 1 or Sch 2 (depending on whether s 153 or s 154 applies). Interestingly, while the Personal Property Securities Register must contain the data set out in s 148 and must, in accordance with s 147(4) of the PPSA, be operational and (when read with s 147(5)–(6)) accessible — the form of access to the PPSR is not prescribed by the PPSA. The PPS Register contains data included in financing statements and financing change statements registered with the PPSR, ‘‘As a matter of logic and ordinary English, data that has been replaced, and which no longer appears Annotated Personal Property Securities Act 2009 (Cth)

¶5-020

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Part 5.2 — Establishment of the register

468

Personal Property Securities Act 2009

on the register, has been removed from the register’’: SFS Projects Australia Pty Ltd v Registrar of Personal Property Securities [2014] FCA 846 at [61]. For more information regarding accessing and searching the PPSR see s 170–174.

[148.6] Further reading ● Explanatory Memorandum [5.12–5.13]. ● ALRC Report No 64 [10.1–10.19].

PART 5.3 — REGISTRATION ¶5-025 SECTION 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.

¶5-030 SECTION 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 (b) personal property prescribed by regulations made for the purposes of paragraph 148(c). 150(2) A person may apply to the Registrar to register a financing change statement to amend a registered financing statement.

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Part 5.3 — Registration

150(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).

[150.1] Comparable provisions in foreign regimes

[150.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 141 s 43 s 45 § 9-509

Chapter 5

New Zealand Saskatchewan Ontario USA

Outline

This section allows for an application to register a financing statement or a financing change statement to be made.

[150.3]

Cross-references

● Section 21 provides for the perfection of security interests by registration of a financing statement. ● Section 55 directs attention to the time of registration of a financing statement as one method of determining priority between competing perfected security interests. ● Section 151 imposes obligations on persons who seek to register financing statements or financing change statements. ● Section 161 authorises the registration of a financing statement before or after a security agreement is made covering the property described in the financing statement or before or after the security interest attaches to the property covered by the financing statement. Annotated Personal Property Securities Act 2009 (Cth)

¶5-030

470

Personal Property Securities Act 2009

● Section 163 sets out the duration of the effectiveness of the registration for financing statements and financing change statements. ● Section 190 allows the Minister to determine registration fees. ● Section 191 allows the Administrative Appeals Tribunal (AAT) to review a decision of the Register to refuse to register a financing statement or a financing change statement, or to register a financing change statement to end the effect of a prior registration. ● Personal Property Securities Regulations 2010 (Cth) reg 5.4 prohibits financing statements from being registered in particular circumstances.

[150.4]

Concepts

● Approved form See s 302. ● Financing statement This is defined by s 10 as meaning data registered (or that is to be registered) pursuant to an application for registration under s 150(1). ● Financing change statement This is defined by s 10 as meaning data amending a registered financing statement. ● Personal property prescribed by the regulations See [148.4]. ● Prohibited registrations This is covered by Personal Property Securities Regulations 2010 (Cth) reg 5.4.

[150.5]

Commentary

[150.5.1] The role of registration ..................................................................470 [150.5.2] Timing of registration ...................................................................472 [150.5.3] Registration of pre-PPSA security interests ...............................472 [150.5.4] Access to information on the PPSR .............................................473

[150.5.1] The role of registration This section allows for the registration of financing statements and financing change statements. A financing statement is the required form that (when registered on the Personal Property Securities Register (PPSR)) provides notice of a security interest in the grantor’s collateral as described in the statement (in a manner prescribed by the Act and the Regulations). A financing change statement is a registered statement that changes an existing registered financing statement. Both statements may be registered at any time. It should be noted that s 151 imposes duties on secured parties in relation to financing statements and financing change statements and this section should thus be read together with s 151. A security interest that is non-consensual and/or does not secure the payment or performance of an obligation is not registrable under s 150: Sandhurst Golf Estates Pty Ltd v Coppersmith Pty Ltd [2014] VSC 217 at [106]. The court may grant an injunction to stop a person from registering a

¶5-030

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471

financing statement in respect of an interest that is not registrable: Sandhurst at [108], [117].

In the Saskatchewan Court of Appeal decision, Royal Bank v Touche Ross (1984) 31 Sask R 131, the Court held (at [135]): ‘‘a search of the registry would disclose sufficient information to permit the person searching to determine the existence and basic nature of the underlying agreement . . . Thereafter, additional detailed information can be obtained directly from the secured party who is under a legal obligation to respond to the inquiry’’. A later decision of the same court in Agricultural Credit Corporation of Saskatchewan v Royal Bank of Canada (1994) 7 PPSAC (2d) 1; 115 DLR (4th) 569 held that (at [35]): ‘‘Functionality, practicality and versatility are the foundation stones of a notice filing system.’’ The content of financing statements, including the description of collateral covered by the security interest, is covered by either s 153 or s 154 and Sch 1 or Sch 2 (respectively) of the Personal Property Securities Regulations 2010 (Cth) depending upon the type of property covered. The registration of financing statements and financing change statements is of paramount importance as they comprise one of the three available methods that may be used to perfect security interests. The other two methods are possession of the collateral (see s 24) or (for some forms of collateral only) control of the collateral (see s 25–29). A financing statement may be registered Annotated Personal Property Securities Act 2009 (Cth)

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The PPSR relies upon ‘‘notice-based filing’’ (through financing statements) rather than requiring the lodgement of entire security agreements. That is to say, the purpose of registering a financing statement is merely to provide notice of the existence of a security interest over the grantor’s collateral. It is not intended that the financing statement provide complete details regarding the nature and extent of the security interest(s) held in the grantor’s personal property (see s 20 for more information on the distinction between a security agreement and a financing statement). An interested person may seek further information from the grantor regarding the nature of the security interests over the grantor’s property. It should be noted that a potential creditor is not given the statutory authority to request a copy of the relevant security agreement from a secured party with a security interest in the grantor’s collateral (see s 275(9)), although the grantor may request such information (and indeed would be likely to have a copy of the security agreement themselves) so an interested party may pursue further information from the grantor. Professor McLaren notes in his treatise (Secured Transactions in Personal Property in Canada, 2d ed, looseleaf (Carswell, 1989) at 30.01) that: ‘‘The purpose of the registration system is to provide enough information to enable a person searching the system to know who to contact to obtain information regarding a secured transaction.’’ This has been discussed in many cases in Canada, see for example Re Lambert (1994) 7 PPSAC (2d) 240; 119 DLR (4th) 93 (Ont CA). See similar comments in relation to the US UCC Article 9 procedures: ProGrowth Bank Inc v Wells Fargo Bank NA (2009) 558 F 3d 809, 812 (US CA 8th Cir).

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either before or after a security agreement has been finalised and before or after the security interest has attached to collateral covered by the financing statement. Although the registration time can confer priority when a competition arises between two or more perfected security interests (see s 55), the mere registration of a further financing statement does not perfect the security interest, as perfected status requires attachment and enforceability of the security interest against third parties (see s 21). A single registered financing statement may cover one or more security interests: s 21(4). However, note the commentary to s 21 in this regard.

[150.5.2] Timing of registration Registration of a financing statement or a financing change statement may only be made at or after the registration commencement time (see s 315). The registration commencement time was 30 January 2012 (s 5 of the Personal Property Securities (Migration Time and Registration Commencement Time) Determination, see [306.5.2]). The effective registration time for a financing statement or a financing change statement is the time when the description of collateral is available for search on the Personal Property Securities Register (PPSR) (s 160). The registration time will end as specified in the financing statement (no longer than seven years for consumer property or property described by serial number or 25 years for commercial property that is not described by serial number — see s 153(5)). The Registrar issues a verification statement to the secured parties involved in the registration of a financing statement and financing change statement (s 156). The secured party who receives a verification statement must then notify the grantor of the verification (s 157). The Registrar has the option of publishing a single verification statement in relation to a number of registrations in which case the individual notifications to the secured party and the grantor do not apply (s 158). The Registrar may require a registered secured party to pay a maintenance fee as determined by the Minister under s 190 (see s 168). On 20 June 2013, the Personal Property Securities (Fees) Determination 2013 was made under s 190(1) of the Personal Property Securities Act 2009 by the Attorney-General and registered on the Federal Register of Legislative Instruments. At the time of writing this book the fee to register a financing statement was $140 where there is no stated end time and $40 where the duration is more than seven years but less than or equal to 25 years. The fees are available on the PPSR at www.ppsr.gov.au/AbouttheRegister/AboutFees/Pages/default.aspx. To date the Registrar has not imposed a maintenance fee, however, a failure to pay the maintenance fee within 28 days allows the Registrar to register a financing change statement to end the effect of the registration (s 168).

[150.5.3] Registration of pre-PPSA security interests Chapter 9 sets out detailed rules for dealing with transitional security interests which are essentially security interests that arise under pre-PPSA security agreements (see s 308). Not all security interests arising under the pre-PPSA laws are automatically included on the Personal Property Securities Register

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(PPSR) at the registration commencement date. Security interests that are automatically included on the PPSR at commencement date are called ‘‘migrated security interests’’ (see s 332). While the PPSA reforms initially considered migration information from some 70 registers across Australia, the actual registers to be migrated (at the time of writing) were fewer, with the most important being the Australian Securities and Investments Commission (ASIC) Register of Company Charges, registries for security interests in motor vehicles, ship mortgages and bills of sale (see the full list on www.ppsr.gov.au). Non-migrated security interests had a two-year transitional period in which to achieve perfected status which ended at the end of January 2014. The transitional provisions are discussed further in the annotations to Ch 9.

[150.5.4] Access to information on the PPSR

It should also be noted that Pt 8.4 provides rights for certain parties to request information from a secured party with a security interest in collateral. Those parties are (s 275(9)): ● the grantor (or their auditor if the grantor is a body corporate) ● another secured party with a security interest in the same collateral ● an execution creditor with an interest in the collateral, or ● an authorised representative of any of the above.

[150.6] Further reading ● Explanatory Memorandum [5.14–5.16, 5.142]. ● ALRC Report No 64 [13.1–13.24]. ● Whittaker Report [6.10.1], [6.12.1].

¶5-035 SECTION 151 REGISTRATION — BELIEF ABOUT SECURITY INTEREST Requirements for collateral to secure obligation etc. 151(1) 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).

Annotated Personal Property Securities Act 2009 (Cth)

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The provisions relating to searches of the Personal Property Securities Register (PPSR) are covered in Pt 5.5. See in particular s 175 which allows for copies of financing statements to be obtained. The form for access to information on the PPSR may contain conditions of use (see s 176B). Access to the information contained on the PPSR may be restricted by the court or by the Registrar (in the public interest): s 170, Personal Property Securities Regulations 2010 (Cth) Pt 5.7.

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Personal Property Securities Act 2009 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 after-acquired 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).

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).

151(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).

151(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.

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Note: The period of 5 business days may be extended by a court under section 293.

151(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.

Damages for contravention of requirements 151(5) 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.

Registration unaffected by contravention 151(6) 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. Registrations with respect to security interests only 151(7) This section only applies in relation to a registration with respect to a security interest.

[151.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[151.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision no parallel provision

Outline

This section prohibits a person from applying for registration of a financing statement or a financing change statement unless the person reasonably believes that they are, or will become, a secured party in relation to the collateral. Furthermore, this section requires the registered secured party to register a financing change statement to end the registration in limited circumstances. Annotated Personal Property Securities Act 2009 (Cth)

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Note: Section 271 gives a right to recover damages for any loss or damage in relation to such a failure.

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[151.3]

Cross-references

● Section 150 provides for the registration of financing statements and financing change statements. ● Part 6.3 sets out the civil penalty regime for contraventions of the PPSA (including this provision). ● Section 271 provides a right to recover reasonably foreseeable damages where there is a failure to comply with the obligations of this section.

[151.4]

Concepts

● Financing statement and financing change statement These are both defined in s 10 and are discussed in s 150 and 153.

[151.5]

Commentary

This section is designed to discourage frivolous registrations by prohibiting a person from registering a financing statement unless the person reasonably believes that the person described in the financing statement as the secured party is or will become a secured party in relation to the collateral. A contravention of this provision may give rise to a civil penalty order being imposed (see Pt 6.3). This provision is needed because a financing statement or financing change statement can be registered before the relevant security agreement is finalised. Frivolous registrations could make it more difficult for the grantor to obtain genuine finance. Erroneous registrations are also misleading and detract from the predictability which is sought to derive from the PPS regime. If a person does register a financing statement or financing change statement and they fail to become a secured party in relation to the collateral described in the statement such a person has an obligation to register a financing change statement to end the registration with respect to the collateral as soon as practicable, or at least five business days after becoming aware that there were no reasonable grounds to believe that they would become a secured party in relation to the collateral. These provisions were amended in 2011 to clarify that they apply both to ‘‘in substance’’ security interests and also to deemed security interests (pursuant to s 12 and 13), which is why s 151(2)(a) focuses the belief of the status as a secured party rather than on the security interest actually securing an obligation (as deemed security interests do not secure obligations): See Personal Property Securities (Corporations and Other Amendments) Act 2011 (Cth) Sch 2, s 31–33. There have been several examples of the Court finding that a financing statement failed to meet the threshold requirement of a belief on reasonable grounds that a security interest had either arisen or would arise in accordance with s 151(1) and making consequential orders for the removal of the registration and granting injunctive relief restraining the purported secured party from lodging a new registration on the same grounds.

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In Sandhurst Golf Estates Pty Ltd v Coppersmith Pty Ltd [2014] VSC 217, Robson J held: ‘‘There is a line of authority relating to the lodging of caveats in which the court has enjoined a party from lodging a caveat where such restraint is necessary to protect the rights of another party, despite the caveator’s conduct otherwise being lawful: Halaga Developments Pty Ltd v Grime; Milne Feeds Pty Ltd v Bride; and Gangemi v Gangemi. In Halaga, the defendant had lodged a caveat over the plaintiff’s land. The Real Property Act 1900 (NSW) provided that such a caveat would lapse after the expiration of three months unless certain steps were taken. The steps were not taken. The defendant lodged a further caveat one day before the date on which the first caveat lapsed. The defendant lodged a third and then a fourth caveat claiming the same interest similarly just before the prior caveat lapsed. The plaintiff applied for an order that the defendant be restrained from lodging further caveats.

His Honour held that by virtue of the ordinary consideration of the court to protect rights of property and s 23 of the Supreme Court Act 1970 (NSW) which provided: ‘The Court shall have all jurisdiction which may be necessary for the administration of justice in New South Wales’, the Court had jurisdiction to grant an injunction to restrain a party where such restraint was necessary to protect the rights of another party, even though the restrained conduct was lawful. Also, in Gangemi Murphy J of the Supreme Court of Western Australia enjoined the defendant from lodging further caveats over certain properties owned by the plaintiff where the defendant had previously lodged caveats and it had been found that he had no caveatable interest over the properties. Murphy J cited the decision of Murray J in Milne Feeds as authority for the court making such a restraining order. Murray J said: ‘It is clear that it lies within the jurisdiction of the court effectively to grant an injunction restraining a party from conduct which is lawful, such as the lodgement of the caveat, upon the ground that such restraint is necessary in the interests of justice to protect a particular litigant from a multiplicity of actions and to order the business of the court.’ In my opinion, the statutory procedure that enables a person to register a financing statement claiming a security interest over personal property under the PPSR is for relevant purposes not dissimilar to the statutory procedure for lodging caveats over Torrens land. Annotated Personal Property Securities Act 2009 (Cth)

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Waddell CJ in Equity said that it was an abuse of the caveat provisions of the Real Property Act to lodge a series of identical caveats which would indefinitely prevent consideration of the initial objection raised by the first caveat.

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Personal Property Securities Act 2009 Under s 37(1) of the Supreme Court Act 1986 (Vic) the Court may by order, whether interlocutory of final, grant an injunction or appoint a receiver if it is just and convenient to do so. In my opinion, the same considerations that led the court in Helga and Gangemi to issue an injunction, lead me to conclude that the court does have jurisdiction to restrain the Popplestones from seeking to register a financing statement claiming a security interest in the plaintiffs’ personal property in circumstances where the Popplestones have been found to have no such interest but nevertheless threaten to seek to register a security interest that would inconvenience and damage the plaintiffs.’’ (citations omitted).

In Macquarie Leasing Proprietary Ltd v DEQMO Proprietary Ltd [2014] NSWSC 1466, Rein J applied the Sandhurst decision in the context of financing statement lodged by a lessee of a motor vehicle against that vehicle in circumstances where the lessee included his details as grantor and as secured party. In this regard, Rein J held: ‘‘There are a number of reasons why DEQMO’s claimed interest can be seen not to be a valid claim: (1) The claimed interest is one given by DEQMO to DEQMO. A person or company cannot give a security interest to itself: s 12 which defines security interest as means an interest for personal property provided for by a transaction that in substance secures payment or performance of an obligation. (With regard to the former transaction or the identity or person who has title to the property); also subsection 3 which provides: (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. None of these requirements can be satisfied by a claimed interest by DEQMO given to itself. (2) There is no evidence before the court of any agreement by which Elite gave a charge to DEQMO. There is no evidence of any value having been given by DEQMO to Elite for a security interest nor how DEQMO might have any other interest in the truck. Once the liquidator was appointed Mr Culleton had no authority to act on behalf of Elite: see s 417A of the Corporations Act 2001 and he could not grant an interest to DEQMO on behalf of Elite.

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(3) Also for a security interest to be enforceable against a third party s 20 of the PPSA provides that either the secured party possesses or controls the collateral or there is a security agreement governing the collateral. Any agreement governing the collateral must be evidenced in writing and signed by the grantor. Again, there is no evidence of such an agreement. (4) Pursuant to the charge Elite could not encumber the truck or lease or transfer (see Clauses 6.4 and 6.5 at p 40 of Exhibit A, and also see pp 13 and 14 of the charge which indicate the powers given to Macquarie on default). In addition to the above not only has DEQMO not provided any evidence in support of its claim by filing evidence in these proceedings, it did not respond to the amendment demand given by Macquarie pursuant to 178 of the PPSA.’’

Part of the difficulty with s 151 of the PPSA in the authors’ view is that there does not appear to be sufficient resources to police the financing statement which are making their way onto the PPSR in the first instance. What is meant by this is that notwithstanding that s 151(1) is itself a civil penalty provision, there have been no impositions of any civil penalties under the PPSA at the time of writing. This may be because civil penalties, dealt with by Pt 6.3 of the PPSA, can only be pursued by the Registrar of Personal Property Securities on application to the Federal Court of Australia — see s 222(1) — in circumstances where any pecuniary penalty is payable to the Commonwealth — see s 225. Thus, it appears as though the interested party is limited to the making of a cost order against the registered party if that party has failed to meet the requirements of s 151 of the PPSA. A contravention of this provision does not affect the validity of the registration (s 151(6)).

[151.6] Further reading ● Explanatory Memorandum [5.18–5.22]. ● ALRC Report No 64 [13.1–13.24]. ● Whittaker Report [4.3.5], [6.4.3], [6.10.4]. Annotated Personal Property Securities Act 2009 (Cth)

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See also, Macquarie Leasing Pty Ltd v The Registrar of the Personal Property Securities Register [2014] NSWSC 1677 per Stevenson J; Macquarie Leasing v The Registrar of the Personal Property Securities Register [2015] NSWSC 94 per McDougall J; National Australia Bank Ltd v Garrett [2016] FCA 714 per Beach J. For a decision where the court endorsed the approach of registering before the agreement was concluded (based on the nature and history of the contracts between the parties): see Re Carpenter International Pty Ltd (2016) 111 ACSR 477; [2016] VSC 118.

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¶5-040 SECTION 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.

[152.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[152.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision no parallel provision

Outline

This section clarifies that financing statements may be registered even where the collateral or the grantor are not located in Australia.

[152.3]

Cross-references

● Sections 39 and 40 provide rules for the temporary perfection of collateral that is relocated to Australia. ● Section 235 sets out the rules for identifying location.

[152.4]

Concepts

● Financing statement and financing change statement These are both defined by s 10 and are discussed in the commentary to s 150, 153.

[152.5]

Commentary

This section provides that the ability to register a financing statement is not limited to circumstances where the collateral or the grantor is located in Australia. Despite this, s 6 requires a territorial connection with Australia in order for the PPSA to apply. This may take the form of the collateral being

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located in Australia or the grantor being an Australian entity. An Australian entity is defined in s 10 as being either: ● an individual located in Australia (see s 235), or ● a company or registrable body under the Corporations Act 2001 (Cth), or ● a corporation solely established under a Commonwealth, State or Territory law, or ● a public authority, agency or instrumentality of the Crown in right of the Commonwealth, or ● one of the states or territories. This means that s 152 would allow a financing statement to be registered in respect of collateral that was located outside of Australia as long as the grantor was an Australian entity.

[152.6] Further reading ● Explanatory Memorandum [5.23]. ● ALRC Report No 64 [13.1–13.24].

SECTION 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 The details prescribed by the regulations, in party 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; (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.

Annotated Personal Property Securities Act 2009 (Cth)

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Personal Property Securities Act 2009 Financing statements with respect to security interests Item Data about: Details of data 3 Giving of The following: notices (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). Note: For identifiers, see section 289.

4

The collateral and proceeds

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

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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 (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.

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Financing statements with respect to security interests Item Data about: Details of data 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 Details of the matter prescribed by the prescribed by regulations, whether or not the matter also comes the regulations under any of the other items in this table.

153(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. 153(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.

New Zealand Saskatchewan Ontario USA

[153.2]

PPSA 1999 PPS Regulations 2001 PPS Regulations 1995 Minister’s Order under the PPSA UCC Article 9 (rev)

Chapter 5

[153.1] Comparable provisions in foreign regimes s 142 Sch 1 reg 6–19 s3 § 9-502

Outline

This section sets out what information must be included in a financing statement and a financing change statement. This section should be read in conjunction with Sch 1 of the PPS Regulations 2010 (Cth).

[153.3]

Cross-references

● Section 150 provides for the registration of a financing statement. ● The Personal Property Securities Regulations 2010 (Cth) reg 5.5(1) and Sch 1 prescribe information that must be included for each item in the table of this section. Annotated Personal Property Securities Act 2009 (Cth)

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[153.4]

Concepts

● Commercial property This is defined by s 10 as meaning personal property other than consumer property. ● Consumer property This is defined by s 10 as meaning ‘‘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’’. ● Description of proceeds Proceeds are defined by s 31.

[153.5]

Commentary

[153.5.1] Item 1 of s 153(1) — the secured party .......................................484 [153.5.2] Item 2 of s 153(1) — the grantor ...................................................485 [153.5.3] Item 3 of s 153(1) — giving of notices .........................................487 [153.5.4] Item 4 of s 153(1) — the collateral and proceeds .......................487 [153.5.5] Item 5 of s 153(1) — the end time for registration .....................488 [153.5.6] Item 6 of s 153(1) — subordination .............................................488 [153.5.7]Item 7 of s 153(1) — security interest (whether it is a PMSI) ....488 [153.5.8] Item 8 of s 153(1) — any matter prescribed by the regulations ......................................................................................................489 This section details what information is required to be included on a financing statement (including one amended by a financing change statement). The table included in s 153(1) will be discussed with respect to each item and each item should thus be duly considered when seeking to register a financing statement. It should be noted that a defective description of collateral in a financing statement or financing change statement may render the registration ineffective depending upon the nature and seriousness of the defect: see s 164–166.

[153.5.1] Item 1 of s 153(1) — the secured party Schedule 1 of the PPS Regulations prescribes the inclusion of various pieces of information for the secured party depending upon what type of entity the secured party is. For individuals, Sch 1 cl 1.2 contains a table that sets out information required (the individual’s surname and given names) and the source of that information. Subclause 1.2(3) provides that the lowest item number applicable to the individual is the relevant item that sets out the required personal information. An individual defined for this purpose excludes a partner in a partnership that has an ABN for which the security interest is held, or a trustee of a trust that has an ABN for which the security interest is held (for these entities, see below). The term individual does, however, include a sole

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trader with an ABN for the enterprise for which the security interest is held (see Sch 1 cl 1.1). For a body corporate, Sch 1 cl 1.3 requires either the name of the body corporate, or the registered number (Australian Registered Scheme Number (ARSN), Australian Company Number (ACN) or Australian Registered Business Number (ARBN)), depending upon what type of body corporate is involved and whether that body corporate’s details were recorded on a transitional register for a migrated security interest (such as the Australian Securities and Investments Commission’s (ASIC’s) Register of Company Charges). The term body corporate includes a trustee that has an ARSN. See further Future Revelation Ltd v Medica Radiology & Nuclear Medicine Pty Ltd [2013] NSWSC 1741. For a partner, Sch 1 cl 1.4 requires the ABN unless the partner’s details were recorded on a transitional register for a migrated security interest. If the partnership does not have an ABN, then the partner’s details are as required for individuals (see above).

Where a body politic is a secured party, the details that are prescribed are either the ABN (where it holds the interest in the course of an enterprise that has an ABN) or the name of the body politic in accordance with its constitution. Where the security interest was included in a transitional register for migrated security interests, then the details recorded on the transitional register are prescribed (Sch 1 cl 1.6).

[153.5.2] Item 2 of s 153(1) — the grantor Item 2 does not require the grantor’s details to be recorded if the collateral is consumer property and is required by the regulations to be described by serial number. Sch 1 cl 2.2 of the Regulations requires aircraft, intellectual property rights, watercraft and most importantly motor vehicles to be described by serial number when described as consumer property on a financing statement or financing change statement. Where the collateral is consumer property but is not required by the regulations to be described by serial number then the grantor’s name and date of birth is required but no other details. For commercial property, the regulations prescribe information as follows: ● Schedule 1 of the PPS Regulations prescribes a similar range of information for grantors as it does for secured parties (see Item 1). ● For individual grantors, Sch 1 also prescribes their date of birth. Note that the term individual for the purposes of this item includes a sole trader with an ABN for the enterprise for which the security interest is held but not a partner or a trustee which has an ABN for an enterprise for which the security interest is granted (see Sch 1 cl 1.1). For a body Annotated Personal Property Securities Act 2009 (Cth)

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For trustees which do not have an ARSN and are included on a transitional register for a migrated security interest, the trustee’s details (ABN, ACN or ARBN, or the name of the trust or the trustee) must be included. For trustees that do not have an ARSN and hold the interest in collateral as part of a enterprise that has been granted an ABN, the ABN is prescribed as required information. For any other trustee (provided it does not have an ARSN) the same details that are required for individuals must be provided (Sch 1 cl 1.5).

486

Personal Property Securities Act 2009 corporate grantor, Sch 1 cl 1.3 requires the same information as is discussed above for Item 1. The same applies for partners (Sch 1 cl 1.4), trustees (Sch 1 cl 1.5) and a body politic (Sch 1 cl 1.6).

The need to correctly identify the grantor of a security interest cannot be emphasised enough as it is likely to be the one element of a financing statement that is searched for in circumstances of a priority dispute or upon the appointment of an external administrator to the grantor (such as a trustee or liquidator). In this regard, the PPS Regulations provide that when dealing with a body corporate, for example, a specific identifier needs to be used and it will not likely be sufficient to include a different identifier to that prescribed. What might not be appreciated at first blush is that cl 1.3 of Sch 1 of the PPS Regulations does not provide an inclusive list of identifiers — that is to say, it is an error to assume that a secured party can choose any of the identifiers set out in the table which appears at cl 1.3(4) of the PPS Regulations. Instead, the secured party must include the first identifier which appears, ie the list is hierarchical. Consequentially, it is often the Australian Company Number or ACN which will need to be provided in the case of a body corporate grantor — however, if that body corporate is also the trustee of a trust, then the ABN of the trust will need to be used to comply with cl 1.3(1) of Sch 1 of the PPS Regulations. The consequences of making an error when identifying the grantor of a security interest can be that a reasonable third party searcher will not be able to find the relevant financing statement upon conducting a reasonable search of the PPS Register. To prevent any prejudice to a reasonable third party searcher, the PPSA provides that a registration which is not disclosed upon a search of the grantor’s identifier (in accordance with this s 153 and the PPS Regulations) is ineffective: See, s 165(b). If, for whatever reason, s 165(b) does not apply, then s 164(1)(a) may nevertheless apply if the defect is one which is ‘‘seriously misleading’’. An ineffective registration is taken to be unperfected: see, s 163. As a consequence of the interaction of the provisions set out about, had the grantor’s details (and not the secured party’s details) been incorrect in Future Revelation Ltd v Medica Radiology & Nuclear Medicine Pty Ltd [2013] NSWSC 1741, a different outcome may have been reached. As Brereton J said in Re OneSteel Manufacturing Pty Ltd (admin apptd) [2017] NSWSC 21 at [6]: ‘‘where the grantor’s details required by s 153 are its ACN, if the financing statement does not include the ACN, a search of the register by reference only to the grantor’s ACN would not disclose the registration, and accordingly the registration would be ineffective’’. In that case, it was held that the mere fact that the ACN was included in the 11-digit ABN did not meet the requirements of s 153. For cases involving ACN issues see for example, Re Production Printing (Aust) Pty Ltd (in liq) [2017] NSWSC 505; Re 4 in 1 Wyoming Pty Ltd [2017] NSWSC

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487

407; Re OneSteel Manufacturing Pty Ltd (admin apptd) [2017] NSWSC 21; Re Accolade Wines Australia Ltd [2016] NSWSC 1023.

[153.5.3] Item 3 of s 153(1) — giving of notices This item requires contact details and an identifier (if one has been approved by the Registrar for that type of notice or document: see s 289).

[153.5.4] Item 4 of s 153(1) — the collateral and proceeds This item contains four rules. Firstly, that all collateral be described as either consumer property or commercial property. The collateral may fall into one of the categories that is required to be described by serial number (depending upon whether it is described as consumer or commercial property) or one of the categories that may be described by serial number (also depending upon whether it is described as consumer or commercial property): see PPS Regulations Sch 1 cl 2.2.

Thirdly, all collateral must belong to a single class of collateral as prescribed by the regulations. Schedule 1 cl 2.3 prescribes the following classes of collateral: (a) agriculture (b) aircraft (defined in reg 1.6) (c) all present and after-acquired property (d) all present and after-acquired property, except (e) financial property (f) intangible property (g) motor vehicles (defined in reg 1.7) (h) other goods (which are defined as personal property that is goods, other than agriculture, aircraft, motor vehicles and watercraft); (i) watercraft (defined in reg 1.6). Fourthly, where the security interest includes proceeds, the proceeds must be described as (under Sch 1 item 2.4): (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. The equivalent US provision was discussed in In re Payless Cashways Inc (2002) 273 BR 789 (US Bankr Ct for WD Missouri) as follows (referring to the UCC Article 9 Official Comments): Annotated Personal Property Securities Act 2009 (Cth)

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Secondly, Sch 1 cl 2.2(3) provides the serial number details that are needed where collateral is to be described by serial number (eg VIN for motor vehicles).

488

Personal Property Securities Act 2009 ‘‘the financing statement is effective to encompass transactions under a security agreement not in existence and not contemplated at the time the notice was filed, if the description of collateral in the financing statement is broad enough to encompass them’’.

See also Frank v James Talcott Inc (1982) 692 F 2d 734 (US CA 11th Cir).

[153.5.5] Item 5 of s 153(1) — the end time for registration This item requires the end time for the registration to be specified. The permitted length of the registration differs between consumer property and serial numbered property on the one hand and commercial property on the other. Financing statements registering security interests taken over commercial property that is not described by serial number may be registered for up to 25 years. An amendment may extend the registration for up to a further 25 years. Where no end time is stated then the default period of 25 years will apply as the registration end time (s 153(2)). Where a specified end time does not comply with s 153 (such as when it is earlier than the registration or amendment time) the default period will apply (s 153(3)). For consumer property and property that is described by serial number, the maximum registration period is seven years. An amendment may similarly not extend the registration by more than a further seven years. Where no end time is stated or the stated end time does not comply then the default period of seven years will apply (s 153(2), (3)). The registration period begins when the information is capable of being found by a search on the Personal Property Securities Register (PPSR) (s 160).

[153.5.6] Item 6 of s 153(1) — subordination Item 6 allows the choice of indicating whether the security interest is (or will be) subject to subordination. Voluntary subordination is recognised under s 61. This item is thus optional.

[153.5.7] Item 7 of s 153(1) — security interest (whether it is a PMSI) The Personal Property Securities Regulations 2010 (Cth) Sch 1 cl 3.1 prescribes all collateral which is capable of being subject to a purchase money security interest (PMSI) under s 14. The importance of indicating that a security interest is a PMSI is imperative (where appropriate) in order to attract the priority status conferred by the PPSA: See s 14, 62–65. It is worth noting that erroneously indicating that a security interest is a PMSI when it does not constitute a prescribed defect pursuant to s 165(c) of the PPSA, the consequence of which is that s 164(1)(b) renders the relevant registration ineffective (that is to say, as though the security interest is unperfected). In the above circumstances, if a secured party is unsure about whether the underlying interest constitutes a PMSI or not the secured party should seek legal advice. While the secured party may also remove the risk of s 165(c) by lodging two financing statements in respect of the same security interest (one

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indicating that the interest is a PMSI and the other indicating that the interest is not a PMSI), this approach runs the risk of falling foul of s 151 of the PPSA on the basis that the secured party cannot have a belief on reasonable grounds that the interest is both a PMSI and not a PMSI.

[153.5.8] Item 8 of s 153(1) — any matter prescribed by the regulations The following matters are prescribed for item 8.

PART 4 — MATTERS FOR ITEM 8 4.1 PRESCRIBED MATTERS — FINANCING STATEMENT

Item 1

Subject Inventory

2

Control

3

Transitional security interest

4

Migrated security interest

Purpose Determining whether collateral may include inventory, for Part 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

Indicating whether a registration is a migrated registration

Details For collateral that is commercial property — whether or not the 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 If collateral is subject to a migrated security interest: (a)

Annotated Personal Property Securities Act 2009 (Cth)

a statement that the security interest is a migrated security interest; and

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For item 8 of the table in s 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.

490

Personal Property Securities Act 2009

Item

Subject

Purpose

5

Data from Australian Business Register or National Names Index

Recording details from Australian Business Register or National Names Index

Details (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

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

[153.6] Further reading ● Explanatory Memorandum [5.25–5.72, 8.25–8.26, 9.50]. ● ALRC Report No 64 [13.1–13.24]. ● Whittaker Report Ch 6 (s 153 is referred to extensively in this chapter).

¶5-050 SECTION 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:

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Financing statements with respect to prescribed property Item Data about: Details of data 1 The person who owns Details of the person, as prescribed by the or has an interest in regulations. 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 is registered. 3 Any matter Details of the matter prescribed by the prescribed by the regulations, whether or not the matter also regulations comes under any of the other items in this table.

[154.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[154.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision no parallel provision

Outline

[154.3]

Cross-references

● Section 148 provides for the Personal Property Securities Register (PPSR) to contain data in registered financing statements in respect of personal property prescribed by the regulations. ● Section 150 provides for the registration of financing statements and financing change statements. ● Personal Property Securities Regulations 2010 (Cth) reg 5.3 sets out the prescribed property for the purposes of s 148.

[154.4]

Concepts

● Attachment See s 19. ● Security agreement This is defined in s 10. See further s 18 and 20.

[154.5] Commentary This section imposes specific rules for financing statements that relate to collateral that is prescribed by the regulations. Regulation 5.3 specifies the list of prescribed personal property which includes impounded motor vehicles, personal property confiscated under proceeds of crime laws and dealings in Annotated Personal Property Securities Act 2009 (Cth)

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Chapter 5

This section sets out the required content for financing statements made in respect of prescribed property.

492

Personal Property Securities Act 2009

personal property limited by court order. Regulation 5.3 also prescribes personal property that could have been included on a transitional register. The information required to be included on financing statements in respect of prescribed property includes the details of the person who owns or has an interest in the property, which is the same identification information required for financing statements under s 153 and reference should be made to that section. The description of property is made up of a statement regarding the class of collateral (see [153.5.4]) and a statement as to why the property is subject to the registration of a financing statement. Prescribed information must also be included, however, at the time of writing no further information had been included in the PPS Regulations.

[154.6] Further reading ● Explanatory Memorandum [5.31, 5.52]. ● ALRC Report No 64 [13.1–13.24].

¶5-055 SECTION 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 (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.

[155.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

¶5-055

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision no parallel provision

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[155.2]

Outline

This section defines what a verification statement is.

[155.3]

Cross-references

● Section 150 provides for the registration of financing statements and financing change statements. ● Sections 156 and 157 provide for verification statements to be given. ● Section 176C allows for the Registrar to include third party data in verification statements.

[155.4] Concepts ● Approved forms See s 302. ● Financing statement and financing change statement These are both defined by s 10 and are discussed under s 150, 153.

[155.5]

Commentary

This section defines what a verification statement is. Verification statements are given by the Registrar to the person registered as a secured party in the financing statement or financing statement both before and after the registration occurs (see s 156). ● Explanatory Memorandum [5.54, 5.83]. ● ALRC Report No. 64 [13.1–13.24]. ● Whittaker Report [6.11.10].

¶5-060

SECTION 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.

156(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. Annotated Personal Property Securities Act 2009 (Cth)

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[155.6] Further reading

494

Personal Property Securities Act 2009 156(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.

[156.1] Comparable provisions in foreign regimes New Zealand PPS Regulations 1995 Ontario USA

[156.2]

PPSA 1999 PPS Regulations 1995 Minister’s Order under the PPSA UCC Article 9 (rev)

s 145 reg 20, 20.1, 20.3 s 22 § 9-523

Outline

This section provides for a verification statement to be given by the Registrar once a financing statement or financing change statement is registered.

[156.3]

Cross-references

● Section 158 allows the Registrar to publish a public notice rather than giving an individual verification statement. ● Sections 160–162 provide rules for determining the registration time.

[156.4]

Concepts

● Financing statement and financing change statement These are both defined in s 10 and are discussed in s 150. ● Verification statement This is defined in s 155.

[156.5]

Commentary

This section requires the Registrar to issue a verification statement to the person(s) registered as a secured party in a registered financing statement both before and after the registration takes place. The secured party then has an obligation under s 157 to give a notice of the verification statement to the grantor(s) both before and after the registration. For the consequences of failing to discharge this obligation see s 271.

[156.6] Further reading ● Explanatory Memorandum [5.55, 5.83, 5.123, 5.133]. ● ALRC Report No 64 [13.1–13.24]. ● Whittaker Report [6.11.10].

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¶5-065

495

SECTION 157 VERIFICATION STATEMENTS — SECURED PARTIES TO GIVE NOTICE TO GRANTORS

Requirement to provide verification statement 157(1) 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.

157(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. 157(3) 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. Contravention of requirement 157(4) 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.

Annotated Personal Property Securities Act 2009 (Cth)

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Exception — waiver by interested person of right to receive notice

496

Personal Property Securities Act 2009

[157.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[157.2]

PPS Regulations 2001 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

reg 9 and 12 s 43(12) s 46(6) no parallel provision

Outline

This section requires a person who receives a verification statement to provide notice to the grantor(s) of the security interest of that verification statement.

[157.3]

Cross-references

● Section 150 provides for the registration of financing statements and financing change statements. ● Section 178 allows for a person with an interest in collateral described in a registration with respect to a security interest to serve an amendment demand on a secured party that requires a financing change statement to be registered to amend the registration to end the registration or omit particular collateral from the registration.

[157.4]

Concepts

● Verification statement This is defined by s 155.

[157.5]

Commentary

This section gives the grantor a right to receive notification of a verification statement with regard to the registration of a financing statement or financing change statement in respect of their personal property. The grantor entitled to receive notice of the verification statement under this section may waive that right under s 157(3). Contravention of s 157 may constitute an interference with the privacy of an individual for the purposes of s 13 of the Privacy Act 1988 (Cth): TLK Transport Pty Ltd v Thornthwaite Pty Ltd t/as Yass Valley Mobile Mechanic [2014] NSWCATCD 147.

[157.6] Further reading ● Explanatory Memorandum [5.58–5.61, 5.83]. ● ALRC Report No 64 [13.1–13.24]. ● Whittaker Report [6.2.1], [6.11.10].

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¶5-070

SECTION 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: (a) 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. 158(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.

[158.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

no parallel provision reg 20–20.3 no parallel provision no parallel provision

Outline

This section gives the Registrar the option to publish a verification statement that covers a number of registrations rather than giving individual verification statements to each secured party.

[158.3]

Cross-references

● Sections 156 and 157 set out the obligations of the Registrar and secured parties in relation to verification statements.

[158.4] Concepts ● Registration event A registration event refers to the registration of a financing statement or a financing change statement under s 150. ● Verification statement A verification statement is defined in s 155.

[158.5]

Commentary

This section allows for the Registrar to publish a verification statement covering a number of registrations where the registrations affect a number of persons registered as secured parties (either before or after the registration events). Where the Registrar publishes a verification statement in this way there is no requirement to give an individual verification statement to each of the secured parties and also no requirement for the secured parties to pass on Annotated Personal Property Securities Act 2009 (Cth)

¶5-070

Chapter 5

[158.2]

PPSA 1999 PPS Regulations 1995 PPSA 1990 UCC Article 9 (rev)

498

Personal Property Securities Act 2009

the verification statement to the grantor(s). This section provides flexibility particularly during the migration process when large numbers of existing registrations were being transferred onto the Personal Property Securities Register (PPSR). The Personal Property Securities Regulations 2010 (Cth) reg 5.6 allows the Registrar to make a group verification statement under this section by publishing a statement on a website maintained by the Registrar (which, at the time of writing, is accessible at: www.ppsr.gov.au).

[158.6] Further reading ● Explanatory Memorandum [5.60]. ● ALRC Report No 64 [13.1–13.24].

PART 5.4 — WHEN A REGISTRATION IS EFFECTIVE ¶5-075 SECTION 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.

¶5-075

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¶5-080

SECTION 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.

160(2) The amendment time for an amendment to a registration is the moment when the amended registration becomes available for search in the register.

[160.1] Comparable provisions in foreign regimes

USA

[160.2]

PPSA 1999 PPSA 1993 Minister’s Order under the PPSA UCC Article 9 (rev)

s 144 s 43(2) s 24 no parallel provision

Outline

This section sets out the commencement time for registrations of financing statements and financing change statements.

[160.3]

Cross-references

● Section 150 provides for the registration of financing statements and financing change statements. ● Section 163 sets out when registration ends with respect to a description of collateral in a financing statement. ● Sections 164–166 provide for a registration to become ineffective due to a defect. ● Sections 170–175 provide for searching the Personal Property Securities Register (PPSR).

[160.4] Concepts ● Description of collateral See s 153 or s 154 and PPS Regulations Sch 1 or Sch 2 (depending upon the type of property covered by the financing statement). Annotated Personal Property Securities Act 2009 (Cth)

¶5-080

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New Zealand Saskatchewan Ontario

500

Personal Property Securities Act 2009

[160.5]

Commentary

This section provides for the effective registration time for financing statements and financing change statements. The registration time is important because of the priority given to perfection by registration (see s 55). It is important to note that this provision covers both an original registration of a financing statement and an amendment made to a financing statement through the registration of a financing change statement. Note that s 160(2) provides that the registration commencement of an amendment occurs from the time when the information contained in the amendment can be searched on the Personal Property Securities Register (PPSR).

[160.6] Further reading ● Explanatory Memorandum [5.45, 5.62–5.63]. ● ALRC Report No 64 [13.1–13.24]. ● Whittaker Report [6.11.12].

¶5-085 SECTION 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.

[161.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[161.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 146 s 43(4) s 45(3) § 9-502(d)

Outline

This section provides that a financing statement may be registered before or after a security agreement is finalised or the security interest has attached.

[161.3]

Cross-references

● Sections 18 and 20 provide rules for security agreements. ● Section 150 provides for the registration of financing statements and financing change statements.

[161.4]

Concepts

● Attachment This is covered by s 19.

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Part 5.4 — When a registration is effective

[161.5]

Commentary

This section is designed to encourage secured parties to register financing statements as soon as possible in order to protect their priority. While perfection through registration will not always take priority (particularly against perfected purchase money security interest (PMSI) interests (s 62), and an earlier perfection by possession or control — see s 55, or by control over an authorised deposit taking institution account (ADI account) — see s 75) the time of registration is one of the events that may confer priority (see s 55(4),(5)) provided that all of the steps of perfection are also followed (ie attachment and enforceability against third parties — see s 21). Allowing the secured party to register a financing statement before the security agreement is finalised or the security interest has attached also promotes efficiency in financing transactions as there is no delay after completion of the agreement while waiting for registration to occur. The Supplementary Explanatory Memorandum to the 2009 Bill noted (at [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.’’ The ability to register a financing statement can open the door to oppressive or frivolous registrations, but these issues are addressed by s 150(3) and 151.

[161.6] Further reading

¶5-090

Chapter 5

● Explanatory Memorandum [5.61]. ● ALRC Report No 64 [13.1–13.24].

SECTION 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.

[162.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision no parallel provision

[162.2] Outline This section provides that a financing statement may be registered before or after the transfer of a security interest or of collateral. Annotated Personal Property Securities Act 2009 (Cth)

¶5-090

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Personal Property Securities Act 2009

[162.3]

Cross-references

● Section 150 allows for the registration of a financing statement or a financing change statement.

[162.4]

Concepts

● Financing statement and financing change statement See s 150.

[162.5]

Commentary

This section provides a rule to clarify that the registration may occur prior to the transfer of a security interest or collateral; see also [20.5.2] and [21.5.3]. This would seem implicit in s 161, however, this rule provides certainty for that outcome. See also Re Carpenter International Pty Ltd [2016] VSC 118.

[162.6] Further reading ● Explanatory Memorandum [5.64]. ● ALRC Report No 64 [13.1–13.24].

¶5-095 SECTION 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.

163(2) This section is subject to sections 164, 165 and 166 (defects in registration).

[163.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

¶5-095

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 153 s 44(1) s 51 § 9-515

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[163.2]

503

Outline

This section provides for the duration of the effectiveness of a registered financing statement.

[163.3]

Cross-references

● Section 153 requires a financing statement to state an end time. ● Section 160(2) provides for the commencement of an amendment to a financing statement. ● Sections 164–166 provide for registration to become ineffective if there is a defect in the financing statement.

[163.4] Concepts ● Description of collateral See s 153 or s 154 and PPS Regulations Sch 1 or Sch 2 (depending upon the type of property covered by the financing statement).

Commentary

This section establishes the duration of the effectiveness of a registration of a financing statement. This is important as priority is determined by the period in which the security interest is continuously perfected (see s 56). If the description of collateral in a financing statement becomes ineffective for some reason then the security interest will not be perfected by registration for that period and may lose priority (unless perfected by some other means such as by possession or control of the collateral). It is clear that a registration can become irregular after its initial registration: Re Production Printing (Aust) Pty Ltd (in liq) [2017] NSWSC 505 at [23]. Of course, the registration end time may be amended by changing the end time stated on the financing statement by registration of a financing change statement (see s 150).

[163.6] Further reading ● Explanatory Memorandum [5.45, 5.68]. ● ALRC Report No 64 [13.1–13.24].

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SECTION 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. Annotated Personal Property Securities Act 2009 (Cth)

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[163.5]

504

Personal Property Securities Act 2009 164(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. 164(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.

[164.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[164.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 149, 151, 152 s 43(6), (8), (9) s 46(4) § 9-506(a)

Outline

This section sets out a general rule to render the registration of defective financing statements ineffective. This section should be read in conjunction with s 165 and 166.

[164.3]

Cross-references

● Section 150 provides for the registration of financing statements and financing change statements. ● Sections 153 and 154 and PPS Regulations Sch 1 and 2 (respectively) set out the content required to enable financing statements to be registered. ● Sections 165 and 166 provide further rules for defective financing statements.

[164.4]

Concepts

● Defect This is defined by s 10 as an irregularity, omission or error in the registration. ● Seriously misleading This important concept is discussed below.

[164.5]

Commentary

[164.5.1] Overview of s 164 — defects in registration — general rule ...504 [164.5.2] Seriously misleading .....................................................................505 [164.5.3] Seriously misleading defects ........................................................508 [164.5.4] Defects that were not seriously misleading ...............................509

[164.5.1] Overview of s 164 — defects in registration — general rule This section is important as it provides that the registration of a financing statement may be rendered ineffective (in whole or in part) if it contains one or more defects of a particular kind. It should be noted that rendering the registration ineffective does not affect the validity or enforcement of the

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underlying security agreement, but may affect the priority position of the secured party if another secured party perfects their security interest unless the secured party has also perfected their original security interest by possession or control (depending on the type of collateral involved). The kinds of defects that may render the registration of the financing statement ineffectual are those set out in s 165 and those are defects that are ‘‘seriously misleading’’ (see below at [164.5.2]). A defect that is seriously misleading will not, however, render the registration ineffective if it is prescribed by the regulations. At the time of writing there were no seriously misleading defects prescribed in the regulations. It is important to note that s 164(3) provides that a defect that renders a registration ineffective with respect to the description of particular collateral covered by the financing statement will not thereby invalidate the registration covering descriptions of other collateral that are not defective. This stems from the fact that a single financing statement may be registered to cover multiple transactions and multiple security agreements which may cover various classes of collateral. This is in accordance with the overriding purpose of the PPSA.

‘‘One of the Act’s goals is to promote certainty in commercial dealing. This is achieved through the creation of clear substantive and procedural rules that at times might be perceived to work an injustice on particular facts. This is the cost of promoting certainty but is deemed justified . . . protecting the register’s integrity and promoting the accuracy of the information contained in it is necessary for the proper function of the personal property securities regime. Courts need to bear this in mind when considering the degree of latitude that will be allowed to registering parties who make errors or omissions in financing statements.’’ See similar comments in Re Hoskins (2014) 8 CBR (6th) 98 (NL SC Trial Division) at [32]–[33]. Recording the security interest as a PMSI when it is not (to any extent) is a defect: Auburn Shopping Village Pty Ltd v Nelmeer Hoteliers Pty Ltd [2017] NSWSC 1230 at [77]. Describing a security interest as transitional when it is not is also a type of defect recognised by the Court: Re 4 in 1 Wyoming Pty Ltd [2017] NSWSC 407.

[164.5.2] Seriously misleading The concept of seriously misleading defects is used in other PPS systems, including New Zealand and most of the Canadian provinces. It should be noted that the Ontario PPSA does not use the same term but rather focuses on whether a reasonable person is likely to be misled. When considering overseas 28

Gedye M, Cuming R and Wood R, Personal Property Securities in New Zealand, 2002 Thomson Brookers at p 472.

Annotated Personal Property Securities Act 2009 (Cth)

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When interpreting this rule it is useful to consider the comments of Gedye M, Cuming R and Wood R28

506

Personal Property Securities Act 2009

authorities on this issue it is also important to note that the systems for searching the PPS registers in each jurisdiction are not the same. While The UCC Article 9, Ontario and New Zealand systems use the same ‘‘exact match’’ search system that the Australian Personal Property Securities Register (PPSR) has adopted, most of Canada (including Saskatchewan) uses a ‘‘near match’’ system. Different search systems may also allow differing search criteria to be used. For example, the Australian PPSR allows a search to be conducted according to the grantor’s details or a serial number for the collateral or by using the unique number assigned to a registered financing statement. These differences mean that what is misleading for one type of search system will not necessarily be misleading in another system and have resulted in significant differences in the lines of authority. These differences have arisen in cases where multiple search criteria are used, particularly with collateral described by serial number. In the leading case in Ontario (which uses an exact match searching system), the Court of Appeal in Re Lambert (1994) 7 PPSAC (2d) 240; 119 DLR (4th) 93 found that a registered financing statement was not misleading because it contained an error in the grantor’s name where the serial number (VIN) was correctly entered. In that case, the grantor had used his middle name as his first name and that was recorded on the financing statement when the information on his birth certificate was different. The searching party only searched for the name and not the serial number. The Court reasoned that a reasonable searcher for a security interest in a motor vehicle would request the serial number and would search using those details in addition to searching under the grantor’s name. Given that the serial number search retrieved the record, it was not misleading (note: the Ontario PPSA only requires that the record be misleading). Re Lambert was applied by the Court of Appeal in British Columbia in Gold Key Pontiac Buick (1984) Ltd v 464750 BC Ltd (Trustee of) (2000) 77 BCLR (3d) 185; 189 DLR (4th) 668, but has not been generally followed elsewhere outside of Ontario. For more information on searching the PPS Register see Pt 5.5. The dual search approach has not been followed in other Canadian provinces as the Ontario legislation requires a reasonable person to be misled (s 46(4) Ontario PPSA). This objective requirement does not appear in the PPSA in most other provinces. The New Zealand High Court relied upon this distinguishing feature of the Ontario law to refuse to use the Re Lambert test: Polymers International Ltd v Toon (2013) FPPSR ¶700-015; [2013] NZHC 1897 at [23]. Thus, an error in either the grantor’s name or serial number of the collateral will be seriously misleading if it fails to produce a record: see Robie Financial Inc v Pye (2009) 16 PPSAC (3d) 66 (NS SC); Stevenson v GMAC Leaseco Ltd (2003) 257 NBR (2d) 141; 227 DLR (4th) 154 (NB CA) (sub nom GMAC Lease Co Ltd v Moncton Motor Home & Sales Inc (Trustee of) (2003) 4 PPSAC (3d) 211); Kelln (Trustee of) v Strasbourg Credit Union Ltd (1992) 3 PPSAC (2d) 44; 89 DLR (4th) 427 (Sask CA). Whether the dual search approach of Re Lambert should be applied in Australia is an open question. Section 164(1)(b) notes that s 165 renders the registration automatically ineffective for both errors in serial numbers and

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grantor details. However, the wording of s 165 states that a defect in the serial number will render the registration ineffective under s 164(1)(b) where ‘‘the collateral is required by the regulations to be described by serial number’’ (s 165(a)) while errors in naming the grantor will render the registration ineffective under s 164(1)(b) where ‘‘the collateral is not required by the regulations to be described by serial number’’ (s 165(b)). In the authors’ view, where the registration of a financing statement in relation to motor vehicles as collateral includes a mistake in the serial number, this would render the registration ineffective if the motor vehicles are described as consumer property (because the regulations require such collateral to be described by serial number) but not if the collateral was described as commercial property (as description by serial number is merely optional in that case). Of course, outside of the scope of s 165, a mistake in either the serial number or the grantor’s details could still be seriously misleading under s 164(1)(a). This leaves the door open to either the dual search approach favoured in Re Lambert or the single search approach favoured in most of the rest of Canada.

The objective approach has been applied in Future Revelation Ltd v Medica Radiology & Nuclear Medicine Pty Ltd [2013] NSWSC 1741 (defect in secured party details (ABN instead of ACN used) was not seriously misleading because there was no search facility for secured party details). The differences in approach mentioned above relate to whether an objective searcher should be required to search multiple fields (ie name and serial number). In Rabobank New Zealand Ltd v Stockco Ltd [2010] NZHC 271 it was noted that an error in a field which is not specifically searchable (such as the collateral description) is less likely to be seriously misleading than an error in a searchable field (ie the grantor’s details or serial number for collateral). In that case the court stated (at [56]) that: ‘‘it is not at all clear that the burden of [difficulties associated with incorrect details contained on a financing statement] should necessarily fall on a searcher of the PPSR rather than a registering party’’. The Supplementary Explanatory Memorandum to the PPS Bill notes (at [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 Annotated Personal Property Securities Act 2009 (Cth)

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The courts in other PPSA jurisdictions have interpreted the term ‘‘seriously misleading’’ as requiring an objective test, that is, whether a searcher would have found the financing statement by searching the register: Re Hoskins (2014) 8 CBR (6th) 98 (NL SC Trial Division); Stevenson v GMAC Leaseco Ltd (2003) 257 NBR (2d) 141; 227 DLR (4th) 154 (NB CA) (sub nom GMAC Lease Co Ltd v Moncton Motor Home & Sales Inc (Trustee of) (2003) 4 PPSAC (3d) 211); Re Lambert (1994) 20 OR (3d) 108; 119 DLR (4th) 93 (Ont CA); Kelln (Trustee of) v Strasbourg Credit Union Ltd (1992) 3 PPSAC (2d) 44; 89 DLR (4th) 427 (Sask CA). This is confirmed by s 164(2) and the Supplementary Explanatory Memorandum to the Personal Property Securities Bill 2009 (Cth) (PPS Bill) (at [5.71]).

508

Personal Property Securities Act 2009 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.’’

The Rabobank decision was distinguished in Polymers International Ltd v Toon (2013) FPPSR ¶700-015; [2013] NZHC 1897 on the basis that a failure to include the incorporation number for a corporate grantor, where that number was required for a financing statement, rendered the registration defective. This is consistent with Future Revelation Ltd v Medica Radiology & Nuclear Medicine Pty Ltd [2013] NSWSC 1741. The Stockco decision was approved by Brereton J in Re OneSteel Manufacturing Pty Ltd (admin apptd) [2017] NSWSC 21 at [38]–[39]. His Honour held: ‘‘[39] . . . Such a construction furthers the purpose of the PPSA in ensuring the integrity and reliability of the PPS register, and visiting upon secured parties the obligation to ensure — if they are to enjoy the benefits of registration — that their registration be discoverable on search against the grantor’s details required to be included in a financing statement under s 153. The facilitation of ascertaining whether there are prior registrations is a fundamental purpose of the PPSA. [40] It does not avail Alleasing that the administrators, apparently using a B2G interface, discovered the original registrations; it is unnecessary, for a defect to be misleading, to establish that anyone was in fact actually misled.[23] It is the capacity or potential to mislead that is crucial. Here, the defect was such that searchers using one of the two authorised modes of search would not discover the registration. The circumstance that a searcher using one of the authorised means of search would not discover the registration renders the defect misleading, and seriously so — even if, as is suggested, most searchers (the evidence indicates 80%) use B2G platforms which, in the way that has been described, would reveal it.’’

[164.5.3] Seriously misleading defects The following cases provide examples where the courts have found that defects were seriously misleading: ● failure to include the incorporation number of a corporate grantor (Polymers International Ltd v Toon (2013) FPPSR ¶700-015; [2013] NZHC 1897) ● recording the grantor’s name as ‘‘Hoskins, Thomas E.’’ instead of the form required by the regulations ‘‘Hoskins, Edgar Thomas’’ (Re Hoskins (2014) 8 CBR (6th) 98 (NL SC Trial Division)) ● recording grantor’s name as ‘‘technology’’ when name was ‘‘tecnology’’ (Fairbanx Corp v Royal Bank (2010) 16 PPSAC (3d) 96; 68 CBR (5th) 102 — note Ontario only requires whether reasonable searcher would be misled)

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● recording grantor’s name using ‘‘motorhome’’ rather than ‘‘Motor Home’’ (Stevenson v GMAC Leaseco Ltd (2003) 257 NBR (2d) 141; 227 DLR (4th) 154 (NB CA) (sub nom GMAC Lease Co Ltd v Moncton Motor Home & Sales Inc (Trustee of) (2003) 4 PPSAC (3d) 211)) ● recording grantor’s name as Grandstrand rather than Granstrand (KJM Leasing Ltd v Granstrand Brothers Inc (1994) 7 PPSAC (2nd) 197; 158 AR 78 (Alta Queen’s Bench)) ● failing to include a serial number where required to do so (Kelln (Trustee of) v Strasbourg Credit Union Ltd (1992) 3 PPSAC (2d) 44; 89 DLR (4th) 427 (Sask CA)) — see also s 165(a) ● recording a partnership’s name as that of an individual partner rather than the firm name (Rabobank New Zealand Ltd v Stockco Ltd (2010) FPPSR ¶700-004; [2010] NZHC 271) ● recording collateral description simply as reference to date of general security agreement (Re Noriega (2003) 15 Alta LR (4th) 79; 42 CBR (4th) 274 (Alta QB)) ● failing to indicate that collateral covers inventory (Adelaide Capital Corp v Integrated Transportation Finance Inc (1994) 6 PPSAC (2d) 267; 111 DLR (4th) 493 (Ont CJ GD)).

[164.5.4] Defects that were not seriously misleading

● describing collateral as ‘‘all present and after-acquired property’’ when the security interest was narrower (Service Foods Manawatu Ltd (in rec and liq) v NZ Associated Refrigerated Food Distributors Ltd (2006) 9 NZCLC 263,979 — appeal dismissed Simpson v New Zealand Associated Refrigerated Food Distributors Ltd [2007] 2 NZLR 130) ● describing some vehicles as trucks but not others (when they were) but where all vehicle details were correct including the VIN (International Harvester Credit Corp of Canada Ltd v Bell’s Dairy Ltd (Trustee of) (1986) 50 Sask R 177; 6 PPSAC 138 (Sask CA)) ● failing to specify the type of serial numbered goods where serial number correctly recorded and names of items made their identification obvious (Valley Vista Golf Course Ltd (Receiver of) v Maxium Financial Services Inc (2003) 6 PPSAC (3d) 128; 214 NSR (2d) 91 (NS SC)) ● Stating the secured party’s ABN rather than the ACN as required by s 153 (Future Revelation Ltd v Medica Radiology & Nuclear Medicine Pty Ltd [2013] NSWSC 1741).

[164.6] Further reading ● Explanatory Memorandum [4.32, 5.29, 5.69–5.73, 9.54]. ● ALRC Report No 64 [13.1–13.24]. ● Whittaker Report [6.4.2], [6.10.1], [6.10.2], [6.10.3], [6.11.15], [7.2.1]. Annotated Personal Property Securities Act 2009 (Cth)

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The following cases provide examples where the courts have found that defects were not seriously misleading:

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¶5-105 SECTION 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.

[165.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[165.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 150 s 43(7) no parallel provision § 9-506(b)

Outline

This section sets out when (for the purposes of s 164(1)(b)) particular defects will render the registration of a financing statement ineffective. It should be read together with s 164.

[165.3]

Cross-references

● Section 150 provides for the registration of financing statements and financing change statements. ● Sections 153 and 154 and PPS Regulations Sch 1 and 2 (respectively) set out the content required to enable financing statements to be registered. ● Section 166 provides further rules for defective financing statements.

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[165.4]

511

Concepts

● Defect This is defined by s 10 as an irregularity, omission or error in the registration.

[165.5] Commentary [165.5.1] Deemed defects ..............................................................................511 [165.5.2] Serial number defects ....................................................................511 [165.5.3] Grantor identification defects ......................................................512 [165.5.4] PMSI defects ...................................................................................512 [165.5.5] Further prescribed defects ............................................................513 [165.5.6] Transitional defects .......................................................................513

[165.5.1] Deemed defects Section 165 of the PPSA sets out specific categories of defects which, even if they are not ‘‘seriously misleading’’ within the meaning of s 164(1)(a) of the PPSA, nevertheless render a registration ineffective by force of s 164(1)(b) of the PPSA. By rendering ineffective particular registrations, the PPSA mandates strict compliance with particular details included on financing statements with a view to promoting the primacy and transparency of the PPS Register.

Section 165(a) provides that an error in the serial number of a financing statement in respect of a security interest taken over collateral which the PPSA requires to be registered by serial number will render the registration ineffective. In the authors’ view, on a plain reading, s 165(a) only applies where the PPS Regulations mandate the inclusion of the serial number of collateral the subject of the relevant security interest. Clause 2.2 of Sch 1 of the PPS Regulations provides that the certain types of property set-out thereto (including motor vehicles for the most part) must be described by serial number when describes as ‘‘consumer property’’ as opposed to ‘‘commercial property’’. Section 10 of the PPSA defines ‘‘consumer property’’ 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’’. Section 165(a) is consistent with the consumer protection focus of Pt 2.5 of the PPSA in respect of third party purchasers/lessees taking free from existing encumbrances. Annotated Personal Property Securities Act 2009 (Cth)

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[165.5.2] Serial number defects

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Personal Property Securities Act 2009

[165.5.3] Grantor identification defects Section 165(b) of the PPSA applies where a search of the PPS Register using only the grantor’s details as prescribed by the PPS Regulations (see subsection 153(1) of the PPSA; Sch 1, cl 1.2–1.6 of the PPS Regulations) is not capable of disclosing the relevant registration. See for example, Re Accolade Wines Australia Ltd [2016] NSWSC 1023. Consistent with the general focus of this provision, s 165(b) appears to be premised on the view that a secured party ought not benefit from perfected status (and the priority ramifications which follow) in circumstances where they have not, through their defective registration, ensured that the PPS Register accurately and transparently reflects the encumbered position of a particular grantor. In such circumstances, the primacy of the PPS Register is preferred to the individual rights of the relevant secured party. There is some force, in the authors’ view, to the argument that the strictness of interpretation advocated above is context specific. That is to say, it is not appropriate to prejudice the rights of the affected secured party (who will often be left with an entirely ineffective security interest) in circumstances where it is an external administrator and not a reasonable third party searcher who is dealing with the PPS Register to determine the respective rights of creditors of a particular grantor. The argument is such that to give effect to a windfall gain to unsecured creditors (who may or may not have changed their position had the defect registration been correctly registered) as a consequence of rendering ineffective a particular security interest is to treat the PPSA as opportunistic legislation. In the authors’ view, while consideration of the commercial context is important when interpreting the PPSA, as a commercial piece of legislation, the fact that s 165 exists expressly outside the confines of the defect being ‘‘seriously misleading’’ and therefore outside the scope of any inquiry as to the effect of the defect on a reasonable third party, leads to the conclusion that a strict reading of s 165 (and therefore s 165(b)) is the preferred approach. To deal with the above argument squarely, one simply does not get to the inquiry of whether or not it is a reasonable third party purchaser, a competing secured party or an insolvency practitioner who is on the other side of the PPS Register. See for example, Re OneSteel Manufacturing Pty Ltd (admin apptd) [2017] NSWSC 21.

[165.5.4] PMSI defects Section 165(c) provides that a financing statement which indicates that the underlying security interest is a PMSI (when it is, in fact, not a PMSI) is ineffective. The rationale behind this s 165(c) is that it is materially misleading (irrespective of whether anyone is actually misled or not) for a secured party to put the world at large on notice that they have a first ranking priority interest over particular collateral (by force of s 62 of the PPSA and subject to the remainder of Pt 2.6) when they do not have any such interest.

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There has been some argument that a financing statement which triggers s 165(c) of the PPSA should not be deemed entirely ineffective but rather the relevant interest should be afforded priority as a perfected security interest and not as perfected PMSI. For reasons similar to that discussed at 165.5.3, such an argument deviates from the intended strictness of s 165 and is not likely to be preferred in the authors’ view as it would encourage or facilitate the deliberate indication of a security interest constituting a PMSI as the worst that could happen (if the above approach is accepted) is that priorities will be allocated as they would have been had the relevant interest been perfected correctly in the first instance, ie as a perfected security interest with priority from the time of registration. This is in direct conflict with promoting the accuracy and transparency of the PPS Register. See for example, Auburn Shopping Village Pty Ltd v Nelmeer Hoteliers Pty Ltd [2017] NSWSC 1230 (PMSI).

[165.5.5] Further prescribed defects At the time of writing no prescribed errors have been specified in the PPS Regulations.

[165.5.6] Transitional defects

The commentary at [165.5.4] in respect of indicating that a security interest is a PMSI is likely, in the authors’ view, to inform the proper construction of s 337A of the PPSA.

[165.6] Further reading ● Explanatory Memorandum [5.72, 9.54]. ● ALRC Report No 64 [13.1–13.24]. ● Whittaker Report Ch 6, [7.7.8].

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SECTION 166 DEFECTS IN REGISTRATION — TEMPORARY EFFECTIVENESS

Scope 166(1) 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 Annotated Personal Property Securities Act 2009 (Cth)

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Notwithstanding that there have been no further prescribed defects in the PPS Regulations in accordance with s 165(d) of the PPSA, regard should be had to s 337A of the PPSA in circumstances where a financing statement indicates that a security interest is ‘‘transitional’’ when it is not transitional. See for example, Re 4 in 1 Wyoming Pty Ltd [2017] NSWSC 407.

514

Personal Property Securities Act 2009 (b) the defect does not arise only because of an irregularity, omission or error in a financing statement or a financing change statement. 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).

Registration is temporarily unaffected by the defect 166(2) 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.

Registration becomes ineffective 166(3) 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.

[166.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[166.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no equivalent no parallel provision § 9-507

Outline

This section clarifies that a defect in a registration that does not arise because of an irregularity, omission or error in a financing statement or financing change statement will allow the secured party temporary perfection for a particular period.

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Cross-references

● Section 52 provides a taking free rule for temporarily perfected security interests. ● Sections 164 and 165 provide for certain defects in registrations to render the registration ineffective.

[166.4] Concepts ● Actual or constructive knowledge See s 297. ● Defect This is defined in s 10 as an irregularity, omission or error in the registration. See also Re Production Printing (Aust) Pty Ltd (in liq) [2017] NSWSC 505 at [28]. ● Defect arising This does not refer to a defect that existed from the creation of the instrument, but rather one that arose after the instrument was created: Re Production Printing (Aust) Pty Ltd (in liq) [2017] NSWSC 505 at [21].

This section recognises that defects in registration can arise in circumstances that are not the fault of the secured party and therefore deserve temporary perfection. One example given by the Supplementary Explanatory Memorandum to the Personal Property Securities Bill 2009 (Cth) was where an individual grantor changed her name following marriage. The EM explains at [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.’’ In the limited circumstances where this section applies the secured party has temporary perfection until the earliest time set out in s 166(2). For further discussion as to the rationale and effect of temporary perfection see s 21, 33 and 34.

[166.6] Further reading ● Explanatory Memorandum [5.45, 5.74, 8.28]. ● ALRC Report No 64 [13.1–13.24]. ● Whittaker Report Ch 6, [7.2.1]. Annotated Personal Property Securities Act 2009 (Cth)

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[166.5] Commentary

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¶5-115 SECTION 167 SECURITY INTEREST IN CERTAIN PROPERTY BECOMES UNPERFECTED Scope 167(1) 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. Requirement to end effective registration 167(2) 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.

When collateral is registered with a serial number 167(3) 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.

[167.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[167.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision no parallel provision

Outline

This section requires a secured party to register a financing change statement to end the registration where the security interest becomes unperfected. The section only applies to security interests over collateral used or intended to be

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used predominantly for personal, domestic or household purposes or to serial numbered property.

[167.3]

Cross-references

● Section 56 explains how a security interest is continuously perfected. ● Section 150 provides for the registration of a financing change statement. ● Section 153 and PPS Regulations 2010 (Cth) Sch 1 cl 2.2 require certain types of collateral to be described by serial number. ● Part 5.6 allows for amendment demands to be made. ● Section 271 provides a right to seek compensation for a contravention of the Act.

[167.4] Concepts ● Predominantly for personal, domestic or household purposes See [47.4].

[167.5]

Commentary

‘‘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’’.

[167.6] Further reading ● Explanatory Memorandum [5.78, 8.28]. ● ALRC Report No 64 [13.1–13.24]. ● Whittaker Report [6.2.1], [6.10.4].

¶5-120

SECTION 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. 168(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. Annotated Personal Property Securities Act 2009 (Cth)

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This provision is aimed at ensuring that grantors of security interests over certain types of collateral will not be prejudiced by outdated registrations. Note that the obligation to end the registration time does not apply to general commercial financing arrangements. This was explained in the Supplementary Explanatory Memorandum to the Personal Property Securities Bill 2009 (Cth) (at [5.79]):

518

Personal Property Securities Act 2009 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).

[168.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[168.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision no parallel provision

Outline

This section allows the Registrar to charge maintenance fees in respect of registered financing statements and to register a financing change statement to end the effect of the registration if the fees are not paid on time.

[168.3]

Cross-references

● Section 190 provides for fees. At the time of writing the fees under this provision had not yet been set: see www.ppsr.gov.au. Personal Property Securities (Fees) Determination 2013 (Cth) sets the fees for searching and registering documents on the PPSR but does not include maintenance fees. At the time of writing this book the fee to register a financing statement was $140 where there is no stated end time and $40 where the duration is more than seven years but less than or equal to 25 years. The fees are available on the PPSR at www.ppsr.gov.au/AbouttheRegister/ AboutFees/Pages/default.aspx. ● Section 195 provides the Registrar with the power to do anything necessary or convenient for the performance of his/her functions under the PPSA.

[168.4]

Concepts

● Financing statement and financing change statement These are defined by s 10. See also s 150, 153.

[168.5]

Commentary

This section allows the Registrar to charge fees and end the registration if the fees are not paid. Note that the Registrar must give a verification statement if they register a financing change statement to end the registration: see s 156.

[168.6] Further reading ● Explanatory Memorandum [5.68, 5.81–5.82]. ● ALRC Report No 64 [13.1–13.24].

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PART 5.5 — ACCESSING THE REGISTER TO SEARCH FOR DATA ¶5-125

SECTION 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.

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.

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SECTION 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). 170(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. 170(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 Annotated Personal Property Securities Act 2009 (Cth)

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The written search results may be used as evidence in a court or tribunal.

520

Personal Property Securities Act 2009 (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).

[170.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[170.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 171 s 48 s 43 § 9-523

Outline

Section 170 outlines the procedure by which interested third parties (or ‘‘searchers’’) can search the PPS Register for existing interests.

[170.3]

Cross-references

● Sections 176B and 176C provide for conditions to be attached to grants of access to the data included in the Personal Property Securities Register (PPSR). ● Section 191 allows for the AAT to review decisions under this section. ● Part 5.9 provides for the PPS Registrar to be established.

[170.4]

Concepts

● Access prohibited by the regulations The Personal Property Securities Regulations 2010 (Cth) reg 5.7 allows for access to information on the PPSR to be refused because of a court order or because the Registrar considers that it is in the public interest that access to the data should not be permitted. ● Approved form See s 302. ● PPS Register See s 147 and 148.

[170.5]

Commentary

[170.5.1] Commentary on s 170 — search — general ...............................520 [170.5.2] Failing to search .............................................................................521 [170.5.3] Access to PPSR prohibited by court or registrar .......................522

[170.5.1] Commentary on s 170 — search — general Section 170 of the Personal Property Securities Act 2009 (Cth) (PPSA) expressly provides for the ability to search the Personal Property Securities Register

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(PPSR) in accordance with the balance of the provisions under Pt 5.5. While misuse of the ability to search can constitute a civil penalty under the PPSA (see s 173; see also s 271), qualifying as an ‘‘interested party’’ for the purposes of conducting a search does not require the satisfaction of onerous requirements. The rationale throughout the PPSA is that primacy is to be given to the PPS Register and that the register is to be transparent insofar as it is not used to breach the privacy of complying parties. That is to say searching parties must not conduct searches or use the data obtained from PPS searches for anything other than defined PPS purposes (see s 172).

[170.5.2] Failing to search While there is no requirement on third parties to conduct a search under the PPSA, failing to search and reveal existing interests operates to the detriment of the party taking an interest over collateral without searching the PPS Register.

The New Zealand Court of Appeal addressed the issue of parties failing to search the New Zealand PPS register in, The Healy Holmberg Trading Partnership v Grant and Khov as liquidators of LBD Civil Ltd (in liq) (2012) FPPSR ¶700-011; [2012] NZCA 451. In that case the ultimate question was whether a perfected security interest later in time prevailed as against a registered security interest earlier in time — where the security agreement of the earlier interest was not signed until after the later interest had arisen and been perfected (see ¶61-000). In such circumstances, the earlier interest was said to prevail, correctly in the authors’ view. Priority rules aside, the rationale for this position was addressed by the Court of Appeal (at [59]): ‘‘The present case is a good example. The Riga parties ought to have searched the PPSA register before making their advances to LBD, and if they had done so they would have realised that they could not claim a prior ranking security interest over the items of equipment referred to in the financing statement that had been filed earlier by the Partnership. If they then went ahead and made the advance in those circumstances, they could not complain about the outcome of the application of the first to register rule. If they did not search the register, they could not complain either, as that is a basic due diligence step that all providers of secured finance can be expected to take. The first to register rule gives certainty and clarity and allows parties to determine their relative priority positions before they commit themselves to the provision of finance.’’ Annotated Personal Property Securities Act 2009 (Cth)

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Such was the case in the Ontario Court of Appeal decision, Charter Financial Co v Royal Bank (2002) 4 PPSAC (3d) 4; 32 CBR (4th) 212. The court held that if the bank in this case had conducted the usual searches, such searches would have revealed the existing interest which the court held the bank took their interest subject to. There is thus no unfair prejudice imposed on a party who does not conduct the relevant searches when seeking to take an interest over personal property under the PPSA (at [9]). The authors support the position taken by the Ontario Court of Appeal in this regard.

522

Personal Property Securities Act 2009

This position is consistent with s 170 and indeed lends support for the view that it is the secured party that must maintain the accuracy of what appears on the PPSR and not the searching party who bears the onus for second-guessing the results of a relevant search.

[170.5.3] Access to PPSR prohibited by court or registrar Regulation 5.7 of the PPS Regulations specifies that access to the PPSR is prohibited where a court determines that access should be prohibited or where the Registrar considers that it is in the public interest that access should be prohibited. This regulation exists to prevent the abuse of the information contained on the PPSR. The Registrar must take into account threats to the life or health of those parties who have information recorded on the PPSR, the interests of the person undertaking the search, the interests of the secured party in providing notice and the overarching public interest in exercising their discretion. Due to the nature of the information on the PPSR, the role of the Registrar in this regard should be taken seriously with consequences imposed for misuse of information obtained from the register pursuant to s 172 (specifically s 172(3)).

[170.6] Further reading ● Explanatory Memorandum [5.86–5.88]. ● ALRC Report No 64 [13.19–13.24].

¶5-135 SECTION 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).

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171(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.

[171.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[171.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 172 s 48(1) s 43(1) no parallel

Outline

Section 171 prescribes the methods of searching available to a searcher for the purposes of identifying the existence of security interests under the PPSA.

[171.3]

Cross-references

● Sections 171–174 provide further provisions related to searching the Personal Property Securities Register (PPSR). ● Section 175 provides for access to copies of financing statements and verification statements. ● Sections 176B and 176C provide for conditions to be attached to the access to data on the PPSR. ● Registered financing statement This refers to a financing statement (see s 10) that is registered on the PPSR. See also Pt 5.3, in particular s 153. ● Serial number This refers to an identification number given to certain types of property (such as motor vehicles and watercraft). See s 153. ● Unique identifier This refers to a number assigned by the Registrar to each registered financing statement in accordance with s 171(1)(da).

[171.5] Commentary While a series of searching particulars may be used pursuant to s 171(1), it is often the nature of the underlying collateral or the instrument creating the security interest which will determine how a search is to be most appropriately conducted (as opposed to the discretion or choice of the searching party). Property which may or must be described by serial number for instance, should be searched by serial number. Section 171(2) expressly provides that s 171 operates subject to the PPS Regulations. While a searcher can search for interests over collateral through the grantor’s name, where the property may or must be described by serial number (and the searcher elects to search exclusively by serial number) — it is Annotated Personal Property Securities Act 2009 (Cth)

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[171.4] Concepts

524

Personal Property Securities Act 2009

possible that the searcher will benefit from the position that the financing statement contains a ‘‘seriously misleading defect’’ (see s 164–166) and thus the searcher will take any subsequent interest free from the defective interest. Additionally, the PPS Regulations prescribe that the results of a search must allow for case-insensitive searching pursuant to reg 5.8. The judiciary in response to the adequacy of searches and the accuracy of the register has produced differing opinions across the Canadian provinces. In giving effect to the transitional provisions of the PPSA, a line of authority has emerged placing a ‘‘dual search’’ requirement on searchers, that is, a search must be conducted as against at least two of the criteria equivalent to those found under s 171(1). As noted in the commentary to s 164 the leading decision on the dual search requirement is the Ontario Court of Appeal case, Re Lambert (1994) 7 PPSAC (2d) 240; 119 DLR (4th) 93 where the court stressed that search requirements must uphold the integrity of the registration system. The Court stated: ‘‘The section is designed to preserve the integrity of the registration system provided by the P.P.S.A. That system has two constituencies: those who register financing statements; and those who search the system for prior registrations. The integrity of the overall system must address the interests of both groups. [the Ontario equivalent to s 164 dealing with seriously misleading errors] seeks to maintain the system’s integrity by distributing the impact of errors, no matter how unavoidable, made in financing statements between the two groups. An interpretation . . . which is too forgiving of such errors places too much of the burden on prospective creditors and purchasers (searchers). An interpretation which is too unforgiving of those errors places too much of the burden on creditors (registrants). In either event, the integrity of the registration system suffers. [The section] should be interpreted, to the extent that its language permits, so as to assign the burden of the error in a manner which best promotes the overall integrity of the system.’’ Re Lambert was applied by the Court of Appeal in British Columbia in Gold Key Pontiac Buick (1984) Ltd v 464750 BC Ltd (Trustee of) (2000) 77 BCLR (3d) 185; 189 DLR (4th) 668, but has not been generally followed elsewhere outside of Ontario. For further discussion of the dual search requirement see [164.5.2]. In the authors’ view, where a searcher is given the choice as to which of the criteria they can search under, the registered financing statement must be accurate with respect to all fields. Where a searcher is, however, confined to one specific field, such as the serial number where the property in question must be described as such, it makes little pragmatic difference whether or not the other fields are completely accurate insofar as they do not detract from the accuracy of the relevant field (see s 164–166 regarding ‘‘seriously misleading defects’’). The onus must ultimately lie with the party perfecting by registration to ensure the PPS Register reflects, as accurately as possible, the existing interest.

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The standard required of the searcher is thus one in the usual course depending on the collateral in question. The number of criteria searched, while relevant, should not be decisive. That said, where commercially feasible, a searching party should make full use of the available search options to reveal the most complete picture as to how the property is encumbered and to what extent. The ‘‘usual standard’’ upholds principles of commerciality and should be assessed on an objective basis. This position was endorsed by the British Columbia Court of Appeal in the case of, Gold Key Pontiac Buick (1984) Ltd v 464750 BC Ltd (Trustee of) (2000) 2 PPSAC (3d) 206; 189 DLR (4th) 668, where the Court held that a reasonable person would search for a serial number where available (the collateral in question were leased vehicles). Searchers should, however, be aware that whatever is uncovered from searching the PPS Register will arm them with actual knowledge of the facts found. Such was the case in Alberta Court of Queen’s Bench decision, Harder (Trustee of) v Alberta Treasury Branches (2004) 6 PPSAC (3d) 346; 36 Alta LR (4th) 118 at [50]–[51], where the Court held:

However, there is nothing inherently illogical in concluding that a party who learns extra information from voluntary searching should be bound by the results of that information; that is one reason the Personal Property Securities Register exists, to allow various searches to ensure that one obtains good title or a good interest in a chattel which is being sold/offered as security. Similarly it would be difficult to see the prejudice in holding someone bound by the results of accurate volunteered information in a business transaction.’’ In Re Accolade Wines Australia Ltd [2016] NSWSC 1023, it was accepted that it is standard market practice to conduct a triple search using ABN, ACN and company name for corporate grantors. While this may be reasonable prudent practice, it is not mandated by the Act and a defect in any of the grantors details that are required to be included in a financing statement will be sufficient to render the registration defective and hence ineffective: Re OneSteel Manufacturing Pty Ltd (admin apptd) [2017] NSWSC 21.

[171.6] Further reading ● Explanatory Memorandum [5.87–5.91]. ● ALRC Report No 64 [13.19–13.24]. Annotated Personal Property Securities Act 2009 (Cth)

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‘‘The results of this argument, if accepted, would mean that a cautious purchaser or lender who does more than the minimal required searches in advance of purchasing/taking security on a chattel is disadvantaged because any information thereupon resulting will bind him. It will mean a purchaser from or lender to an honest vendor/debtor who volunteers the fact of the existence of a prior security is disadvantaged over one who purchases from or lends to someone who is less forthcoming.

526

Personal Property Securities Act 2009

¶5-140 SECTION 172 SEARCH — BY REFERENCE TO DETAILS OF GRANTOR WHO IS AN INDIVIDUAL Scope 172(1) 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. Individual grantor details — permitted searches 172(2) 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 Purpose 1 A person (the first person), or To disclose any registration in another person with the first which the first person is person’s consent registered as a grantor or a secured party. 2 A secured party in relation to a A purpose that relates to a registration security interest attached to collateral described in the registration. 3 A grantor in relation to a A purpose that relates to a registration security interest attached to the collateral described in the registration. 4 A person To disclose any registration in which the person is registered as a secured party. 5 A person To disclose whether collateral to which a security interest is attached is described in a registration. 6 A person 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.

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Individual grantor details — permitted searches Item Searchers Purpose 7 A person 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. 8 A person 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 body corporate named in the search application or of a body corporate with an interest in the personal property described in the application. 9 A person To establish whether to invest in, with, or through, a person named in the search application. 10 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. 11 The Registrar A purpose that relates to the administration of this Act. 12 A person who has taken control A purpose that relates to the of the property of an individual searcher’s control of the who is insolvent under property. administration, within the meaning of the Corporations Act 2001 13 An Official Receiver in A purpose that relates to the Bankruptcy within the meaning exercise of a power, or the of the Bankruptcy Act 1966 performance of a function, of that Official Receiver in Bankruptcy.

Annotated Personal Property Securities Act 2009 (Cth)

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Personal Property Securities Act 2009 Individual grantor details — permitted searches Item Searchers Purpose 14 The legal personal representative A purpose that relates to the of an individual (including a exercise of a power, or the deceased individual) performance of a function, as legal personal representative. 15 A government entity within the A purpose that relates to the meaning of the A New Tax exercise of a power, or the System (Australian Business performance of a function, of Number) Act 1999 that entity, unless the purpose is covered by another purpose listed in this table. 16 A government entity within the A purpose that relates to the meaning of the A New Tax maintenance of the law, System (Australian Business including the prevention, Number) Act 1999 detection, investigation or prosecution of contraventions of laws (whether the penalty for contravention is criminal or civil). 17 The holder of a lien or charge, or A purpose that relates to the a creditor enforcement of the lien or charge, or the creditor’s rights, as the case may be. 18 A bailiff, or sheriff, of a court of A purpose that relates to the the Commonwealth, a State or a enforcement of a court order or Territory warrant. 19 A person To advise another person in connection with any of the purposes referred to in this table.

Search otherwise than for authorised purpose 172(3) 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).

172(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.

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Part 5.5 — Accessing the register to search for data Note: For evidential burden, see section 10.

172(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). Recovery of damages for contravention 172(6)

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. Note: Section 271 gives a right to recover damages for any loss or damage in relation to such a failure.

New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 173 s 48(1)(a) s 43(1) no parallel provision

[172.2] Outline Section 172 establishes the purposes for which searchers can be conducted under the PPSA.

[172.3] Cross-references ● Section 170 provides for searching the Personal Property Securities Register (PPSR). ● Section 171 provides criteria for use in searching the PPSR. ● Section 173 deals with privacy issues and searching the PPSR. ● Section 174 provides for the use of PPSR search results as evidence.

[172.4]

Concepts

● Control See s 25–29. ● Described in a registration This refers to the information provided in a financing statement which is registered on the PPSR: see s 153. Annotated Personal Property Securities Act 2009 (Cth)

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[172.1] Comparable provisions in foreign regimes

530

Personal Property Securities Act 2009

● Evidential burden This is defined in s 10 as meaning (in relation to a matter) ‘‘the burden of adducing or pointing to evidence that suggests a reasonable possibility that the matter exists or does not exist’’. ● Individual This refers to a natural person rather than a body corporate: Acts Interpretation Act 1901 (Cth) s 22(1)(aa). ● Personal property This is defined in s 10.

[172.5]

Commentary

The table pursuant to s 172(2) prescribes an exhaustive list with respect to parties who can conduct searches on the Personal Property Securities Register (PPSR) and for what purposes. Analysing the purposes themselves, the ambit of each varies, however, all searches satisfy the notice based function of the PPSR. The reason for an exclusive list is to prevent threats to the privacy of the information stored on the register. The PPSR, while publically available, exists to support the operation of the Act and not to disclose private information concerning the credit status of particular persons or corporations. A common sense approach should guide the courts in ascertaining whether or not a search was conducted for PPS purposes or for some arbitrary purpose. Failing to establish one of the prescribed purposes constitutes a civil penalty under the PPSA, unless the data obtained through the search could be lawfully collected from another source. The evidential burden rests with the searching party to satisfy the court that their search was in accordance with s 172(2). Enforcement of s 172 is at the discretion of the Registrar (see Pt 5.9) and an aggrieved party who suffers as a consequence of an unauthorised search retains an action for the recovery of damages pursuant to s 172(6) (see also s 271).

[172.6] Further reading ● Explanatory Memorandum [5.92–5.96]. ● ALRC Report No 64 [13.19–13.24]. ● Whittaker Report [6.2.1].

¶5-145 SECTION 173 SEARCH — INTERFERENCE WITH PRIVACY Scope 173(1) 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

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(b) as a result of the search, the person obtains personal information about an individual within the meaning of that Act. Unauthorised search or use of personal information is an interference with privacy 173(2) 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.

173(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). 173(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

[173.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[173.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 174 no parallel provision no parallel provision no parallel provision

Outline

Section 173 extends the ramifications of conducting an unauthorised search.

[173.3]

Cross-references

● Sections 170–172 provide for searching the Personal Property Securities Register (PPSR).

[173.4]

Concepts

● Personal information This is defined in the Privacy Act 1988 (Cth) s 6 as meaning: ‘‘information or an opinion (including information or an opinion forming part of a database), whether true or not, and whether recorded Annotated Personal Property Securities Act 2009 (Cth)

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(c) access to the data for a search of that kind is prohibited by regulations made for the purposes of paragraph 170(3)(d).

532

Personal Property Securities Act 2009 in a material form or not, about an individual whose identity is apparent, or can reasonably be ascertained, from the information or opinion’’.

[173.5]

Commentary

Section 173 prescribes that the unauthorised searching or use of data obtained by such a search can also constitute a breach of s 13 of the Privacy Act 1988 (Cth). Violations of this kind are thus actionable under the Privacy Act in addition to s 172 of the PPSA. While protecting the privacy of register participants is important in encouraging the use and familiarity of the Personal Property Securities Register (PPSR), the concept is restricted to the Australian and New Zealand PPSA models — with no reported cases among the Canadian provinces or the US on point.

[173.6] Further reading ● Explanatory Memorandum [5.97–5.99]. ● ALRC Report No 64 [13.19–13.24, 14.9–14.19].

¶5-150 SECTION 174 SEARCH — WRITTEN SEARCH RESULTS AND EVIDENCE ETC. Search result as evidence 174(1) 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. 174(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; (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. Appropriate form of search result 174(3)

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

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Part 5.5 — Accessing the register to search for data (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. 174(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. Evidence of transient electronic communications etc. 174(5) 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. Instruments of approval 174(6) The Registrar may, by written instrument, authorise an officer or agency for the purposes of subparagraph (3)(b)(i) or (ii). 174(7) The Registrar may, by legislative instrument, determine data for the purposes of subsection (4).

New Zealand Saskatchewan Ontario USA

[174.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 175 s 48(2) s 43(2), (3), (4), (5) no parallel provision

Outline

Section 174 outlines what written search results, obtainable under s 170, can be used for.

[174.3]

Cross-references

● Sections 170–172 provide for searching the Personal Property Securities Register (PPSR). ● Chapter 6 provides rules for judicial proceedings under the PPSA.

[174.4] Concepts ● Financing statement This is defined in s 10 as data registered (or that is to be registered) pursuant to an application for registration under s 150. See also s 153. ● Financing change statement This is an application to amend data included on the PPSR by a financing statement: see further s 153. Annotated Personal Property Securities Act 2009 (Cth)

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[174.1] Comparable provisions in foreign regimes

534

Personal Property Securities Act 2009

● Registered description of collateral This refers to the description of collateral included in a financing statement that is registered on the PPSR: see s 153.

[174.5]

Commentary

Section 174 prescribes that written search results comprise evidence of the PPS Register for the purpose of litigation. The form of the written search results is relevant as it conveys authenticity. That being said, s 174 of the PPSA does not speak to the admissibility or otherwise of searches of the PPS Register conducted via platforms not approved by the Registrar or not issued by a Commonwealth, State or Territory agency but rather a third party platform or interface. At the time of writing, the PPS Register itself provides for interacting with the PPS Register through a ‘‘Business to government (B2G) platform’’ which, essentially, allows high volume users to create their own interface for interacting with (ie searching and registering) the PPS Register: see www.ppsr.gov.au/b2g. At a practical level, while the PPS Register can be searched as it stood at particular dates, deletion of data can occur from time to time pursuant to resource constraints and thus the authors advise that upon notice of litigation proceedings, parties relying on searchers should, as soon as practicable, obtain the relevant written copies of the data on the PPS Register at all material points in time: See SFS Projects Australia Pty Ltd v Registrar of Personal Property Securities (No 2) [2014] FCA 987. In Maroni v Reid [2016] WADC 88, the evidentiary value of a search of the PPS Register was in issue. Principal Registrar Melville held (at [14], [18]–[19]): ‘‘The Personal Property Security register is a register establish by Commonwealth legislation under the PPSA for the purpose of enabling persons to register security over the property of others for the payment of monies that are owing to them. This has the benefit of enabling third persons who may be considering purchasing that property to be aware that the owner of the property does not have a clear title to sell to them. Upon payment of what is owing the party who has registered his security interest is required file documentation putting an end to the registration of the security interest. ... In my opinion the document ‘purports’ to be issued by the Registrar. In 2020 Construction Systems Pty Ltd v Dryka & Associates Pty Ltd [2010] WASC 22 the court when discussing whether a document ‘purports’ to be a statutory demand said the expression ‘purports to be’ means ‘professes or claims to be’, citing Kalamunda Meat Wholesalers Pty Ltd v Reg Russell & Sons Pty Ltd [1994] FCA 1059; (1994) 51 FCR 446, 452. In my view there is no reason to depart from that definition of ‘purports’ as found in the PPSA and when the document is considered as a whole,

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including the fact it represents itself as being issued under s 174 of the PPSA, it purports to be issued by the Registrar in the approved form. There being no evidence to the contrary, the certificate stands as proof that the CBH and Elders have an interest that is secured by the crop. It necessarily follows from that premise that the Reids have not satisfied all obligations to CBH or Elders namely that they would firstly ‘satisfy the obligations to CBH Grain Pty Ltd and Elders Rural . . .’ and that they are, therefore, in breach of the agreement.’’

[174.6] Further reading ● Explanatory Memorandum [5.100–5.104]. ● ALRC Report No 64 [13.19–13.24].

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SECTION 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:

(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). Note 2: The requirement to pay a fee is satisfied if an arrangement for its payment has been approved under subsection 190(4).

[175.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision no parallel provision

[175.2] Outline Section 175 addresses the duplication of financing statements for the benefit of searching parties. Annotated Personal Property Securities Act 2009 (Cth)

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(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

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[175.3]

Cross-references

● Section 153 provides for financing statements. ● Sections 155–158 provide for verification statements. ● Section 191 allows for the AAT to review a decision by the Registrar under this section.

[175.4]

Concepts

● Approved form See s 302. ● Financing statement This is defined in s 10 as data registered (or that is to be registered) pursuant to an application for registration under s 150. See also s 153. ● Registrar See Pt 5.9. ● Verification statement This is defined in s 155. A verification statement is given by the Registrar after a registration event has occurred (ie a change has been made to the information recorded in the PPS Register against a particular grantor, such as change to the name of a secured party or a change to the description of collateral). See further s 155–158.

[175.5]

Commentary

Pursuant to s 175, a searching party can apply to the Registrar for an official copy of a financing statement or verification statement. A searching party may wish to retain a copy of such documents for evidentiary purposes. Whether or not the copies are produced is at the discretion of the Registrar. The financing statement will not include a copy of the underlying security agreement, however, the prospective creditor will need to obtain a copy of that from the debtor.

[175.6] Further reading ● Explanatory Memorandum [5.105–5.106]. ● ALRC Report No 64 [13.19–13.24].

¶5-160 SECTION 176 REPORTS BY REGISTRAR Reports about particular persons 176(1) 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).

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Note 2: The requirement to pay a fee is satisfied if an arrangement for its payment has been approved under subsection 190(4).

176(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)). 176(3) The Registrar may, by legislative instrument, determine matters that may be the subject of reports under this section. Reports for the purposes of the administration of this Act 176(4) For the purposes of the administration of this Act, the Registrar may prepare a report of any matter relating to registered data.

[176.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[176.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision no parallel provision

Outline

Section 176 concerns reports from the Registrar.

Cross-references

● Section 191 allows the AAT to review decisions of the Registrar under this section.

[176.4] Concepts ● Registrar See Pt 5.9.

[176.5]

Commentary

The role of the Registrar under the PPSA is discussed in Pt 5.9. In administering the PPS Register, the Registrar may prepare reports on particular grantors. The effect of such reports is purely administrative, however, may be useful as to evidence of particular conduct. As such, s 176 grants the searching party the ability to request any reports from the Registrar with respect to particular grantors. Whether or not the reports are produced is at the discretion of the Registrar.

[176.6] Further reading ● Explanatory Memorandum [5.107–5.108]. ● ALRC Report No 64 [13.19–13.24]. Annotated Personal Property Securities Act 2009 (Cth)

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[176.3]

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PART 5.5A — CONDITIONS ON DATA ACCESS ¶5-165 SECTION 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 nonregistered 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.

¶5-170 SECTION 176B ACCESS TO REGISTERED DATA — CONDITIONS Scope 176B(1) 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). Registered data conditions 176B(2) 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.

176B(3) Registered data conditions includes, but is not limited to, conditions relating to the use of registered data. 176B(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

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(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. Recovery of damages for contravention 176B(5)

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.

176B(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

[176B.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[176B.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision no parallel provision

Outline

This section allows for conditions to be imposed on the use to be made of the information obtained on the Personal Property Securities Register (PPSR).

[176B.3]

Cross-references

● Section 271 provides for a right to seek compensation for breach of the obligations under the PPSA.

[176B.4] Concepts ● Approved forms See s 302. Annotated Personal Property Securities Act 2009 (Cth)

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(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.

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[176B.5]

Commentary

This section was inserted by amendments made in 2011 and was designed to limit the ability of searchers (particularly commercial enterprises) to on-sell prior search information which could jeopardise the Commonwealths ability to recover its costs in implementing and operating the Personal Property Securities Register (PPSR): see Personal Property Securities (Corporations and Other Amendments) Act 2011 (Cth) Sch 2, s 52, and the Explanatory Memorandum at [61]. See also PPS Registrar’s Practice Statement No 6: Restrict Access to Data (22 August 2013).

[176B.6] Further reading ● Explanatory Memorandum to the Personal Property (Corporations and Other Amendments) Bill 2011 (Cth) [61].

Securities

● ALRC Report No 64 [13.1–13.24].

¶5-175 SECTION 176C ACCESS TO THIRD PARTY DATA Agreement with third parties 176C(1) 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.

176C(2) Third party data does not include personal information, within the meaning of the Privacy Act 1988, about an individual. 176C(3) Third party data conditions includes, but is not limited to, conditions relating to the use of the third party data.

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Use of third party data 176C(4) 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.

176C(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. 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.

176C(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.

Annotated Personal Property Securities Act 2009 (Cth)

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176C(6)

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Personal Property Securities Act 2009

[176C.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[176C.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision no parallel provision

Outline

This section allows for conditions to be imposed on the use of 3rd party data obtained from the Personal Property Securities Register (PPSR).

[176C.3]

Cross-references

● Section 271 provides for a right to seek compensation for breach of the obligations under the PPSA.

[176C.4]

Concepts

● Approved forms See s 302.

[176C.5]

Commentary

This section was inserted by amendments made in 2011 and was designed to protect the use of 3rd party information that may be contained on the Personal Property Securities Register (PPSR) (such as information regarding stolen vehicles provided by the National Exchange of Vehicle and Driver Information System (NEVDIS)): see Personal Property Securities (Corporations and Other Amendments) Act 2011 (Cth) Sch 2, s 55 and the Explanatory Memorandum at [63]–[64].

[176C.6] Further reading ● Explanatory Memorandum to the Personal Property Securities (Corporations and Other Amendments) Bill 2011 (Cth) [63–64]. ● ALRC Report No 64 [13.1–13.24].

PART 5.6 — AMENDMENT DEMANDS Division 1 — Introduction ¶5-180 SECTION 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.

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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.

General commentary The Personal Property Securities Registrar’s Practice Statement No 4: Amendment Demand Process lists the three ways that amendments can be made to the Personal Property Securities Register (PPSR), the order of which is important. These methods are as follows: ‘‘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

The amendment demand process contained within Pt 5.6 of the PPSA is thus somewhat misleading as both the administrative process, pursuant to Div 2, Subdiv A, and the judicial process pursuant to, Div 2 Subdiv B, are alternatives to the first available method which is relatively cheaper, quicker and less coercive than the other approaches. In the authors’ view, the agreement between the lodging party and the secured party need not even extend from the issuing of a formal amendment demand (the concept of which will be discussed below), rather from informal communication seeking to effect the amendment. It is only when this method does not achieve the desired result that one needs to consult the other approaches, otherwise the secured party can simply lodge a financing change statement and effect the relevant change. Note that the secured party is entitled to recover administrative fees from the parties seeking the amendment. Practice Statement No 4 also usefully breaks down the logistical requirements necessary to satisfy Pt 5.6, including what should be contained within the amendment demand and amendment statement and what to expect by way of amendment notice from the Registrar. The following flowchart illustrates the administrative process for an amendment demand: Annotated Personal Property Securities Act 2009 (Cth)

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3. the judicial process for an amendment demand.’’

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¶5-185 SECTION 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.

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Part 5.6 — Amendment demands 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. 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.

2

What amendment is authorised Amendment to end effective registration (including an amendment to remove the registration). Amendment to omit the collateral.

178(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.

178(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.

[178.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[178.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 162 s 50 s 56 § 9-513

Outline

This section allows for amendment demands to be served in particular circumstances.

[178.3]

Cross-references

● Section 150 provides for the registration of financing change statements. ● Sections 180–182 provide for administrative and enforcement processes for achieving amendments to registered financing statements. ● Section 191 allows the AAT to review a decision of the Registrar under this section. Annotated Personal Property Securities Act 2009 (Cth)

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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.

546

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[178.4]

Concepts

● Amendment demand An amendment demand is a request flowing from a party interested in amending the PPS Register (typically the grantor or a third party with a potential dealing in the underlying collateral) to the secured party. It provides formal notice of a request and begins the five-business-day period of time relevant to s 179 of the PPSA. ● Interest This is defined by s 10 as including a right in personal property. ● Predominantly for personal, domestic or household purposes See [47.4].

[178.5]

Commentary

[178.5.1] How amendment demands are given? .......................................546 [178.5.2] What should be included in the amendment demand? ...........547 [178.5.3] Five business days .........................................................................547 [178.5.4] Who pays for the amendment? ....................................................547

[178.5.1] How amendment demands are given? Section 178 of the Personal Property Securities Act 2009 (Cth) (PPSA) provides for a person with an interest in collateral (which may include a security interest) described by a registration, to give an amendment demand to the registered secured party that requires them to register a financing change statement to amend the registration as shown in the table in the section. As the Supplementary Explanatory Memorandum to the Personal Property Securities Bill 2009 (Cth) states (at [5.109]–[5.110]), this section applies where a ‘‘secured party is unwilling or neglects to omit property from, or end, a registration . . . This process would be important as a mere registration could limit the person’s ability to deal with the registered property’’. The person issuing an amendment demand must be properly authorised under s 178(1). In Re Cirillo and Registrar of Personal Property Securities (2013) APPSR ¶701-011; [2013] AATA 733, the grantor/debtor served an amendment demand to the registered secured party after that party had taken an assignment (properly notified) of the original secured party’s debt. Mr Cirillo pursued the administrative process after the secured party refused to end the PPSR registration, and appealed to the AAT when the PPS Registrar refused to end the registration after the secured party provided evidence of the continued existence of the security interest in the collateral (in this case a motor vehicle). Thus the amendment demand was not properly authorised and the AAT upheld the PPS Registrar’s decision. If a demand served under this section fails to achieve the relevant amendment, that is, if the secured party does not lodge a financing change statement to amend the registration, then the party who made the demand may seek assistance from the Registrar via the administrative process (see s 179–181) or the court via the judicial process (s 182).

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547

Personal Property Securities Registrar’s Practice Statement No 4: Amendment Demand Process provides a list of 10 elements which should be included in every amendment demand. These elements are as follows: ‘‘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. 6. The Giving of Notice Identifier (if applicable). 7. 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. 8. Any evidence which supports the statement made in paragraph 7. 9. 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.’’

[178.5.3] Five business days Section 179(1)(b) requires five business days before the party who issued the amendment demand can proceed with the administrative process. While the metric, five business days, is arbitrary — it does provide for an important notice period where the secured party can object to or otherwise query the amendment demand. It is the secured party and only the secured party who stands to have their registered interest altered and thus all notice requirements are extended to the secured party for the purposes Pt 5.6, Div 2, Subdiv A (Administrative process) of the PPSA.

[178.5.4] Who pays for the amendment? There is also an interesting balance between who bears responsibility for the accuracy of the PPSR, is it the secured party or is it the party seeking the amendment? Under the PPSA, in all cases it must be the secured party — that is the party benefiting from perfection by registration. However, if the underlying collateral is not being used for personal, domestic or household Annotated Personal Property Securities Act 2009 (Cth)

¶5-185

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[178.5.2] What should be included in the amendment demand?

548

Personal Property Securities Act 2009

purposes (in circumstances where it was intended to be used as such when the security interest was entered into) a secured party can require payment from the party seeking the amendment in order to lodge the relevant financing change statement: s 178(3). This appears to shift the onus, at least financially, to an independent third party. The practical reality is that the encumbrance affects the party seeking the amendment and not the secured party, thus there is an administrative shift in cost but not a principle shift in burden. Put simply, the secured party remains responsible for the accuracy of the PPSR such that in the event that there is a seriously misleading defect it is the secured party who must bear the consequences. There may be a potential issue where the secured party has notice of a defect on the register but fails to comply with a request for a relevant amendment for want of payment of the administrative costs. The issue has not been considered either in Australia or abroad, however, given the nature of the amendment process, the secured party appears to be entitled to hold off until administration costs are covered provided what appears on the PPSR would not otherwise amount to a seriously misleading defect (see s 164).

[178.6] Further reading ● Explanatory Memorandum [5.109–5.13, 5.143]. ● ALRC Report No 64 [13.1–13.24]. ● Personal Property Securities Registrar’s Practice Statement No 4: Amendment Demand Process. ● Whittaker Report [6.10.5]. ● Nicholas Mirzai, ‘‘A year with the Personal Property Securities Act 2009 (Cth): The Personal Property Securities Register, amendment demands and judicial proceedings’’ (2013) 31 Company and Securities Law Journal 295. ● Nicholas Mirzai, ‘‘Pollution on the PPSR — and what to do about it’’ (2015) 33 Company and Securities Law Journal 30. ● Christopher Pearce, ‘‘A Broken Record: Amending and Removing Registrations on the PPSA’’ (2016) 25 Australian Property Law Journal 173.

Division 2 — Amendment demands: administrative and judicial process Subdivision A — Administrative process

¶5-190 SECTION 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

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Part 5.6 — Amendment demands

(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. 179(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. No application to security trust instruments 179(3) 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.

New Zealand Saskatchewan Ontario USA

[179.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 164 s 50(8) no parallel provision no parallel provision

Outline

This section sets out when s 180–181 (which allows the Registrar to serve an amendment notice on a registered secured party and to register a financing change statement) apply.

[179.3]

Cross-references

● Section 150 provides for the registration of a financing change statement. ● Section 182 provides for court determination of an amendment demand.

[179.4] Concepts ● Amendment demand See s 178. ● Amendment notice See s 180–181. ● Approved form See s 302. Annotated Personal Property Securities Act 2009 (Cth)

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[179.1] Comparable provisions in foreign regimes

550

Personal Property Securities Act 2009

[179.5]

Commentary

[179.5.1] Excluding security trust instruments ..........................................550 [179.5.2] Nature of administrative process ................................................550 [179.5.3] Flow chart .......................................................................................550 Section 179 of the Personal Property Securities Act 2009 (Cth) (PPSA) clarifies when s 180 (Amendment notices) and s 181 (Registration amendments) apply.

[179.5.1] Excluding security trust instruments The reason for excluding security trust instruments is that the beneficiaries should not be penalised for the negligence or omission of the trustee: Supplementary Explanatory Memorandum to the Personal Property Securities Bill 2009 (Cth) at [5.117].

[179.5.2] Nature of administrative process While s 179 merely outlines jurisdiction, something more should be said about the administrative process generally when considering its scope. Subdivision A of Div 2 of Pt 5.6 of the PPSA provides an intermediary process for the resolution of discrepancies regarding what appears on the PPSR without the mandatory need to approach the court. Indeed, when judicial proceedings are commenced or continued at any stage in the administrative process, the administrative process ends: s 179(1)(c), 179(2)(b). There are several further elements within the administrative approach which should be appreciated: ● Coercive: The result of a successful administrative application on the part of the party who issued the amendment demand is no less coercive than a court order compelling the Personal Property Securities (PPS) Registrar to make the amendment. ● Secured party may object: Perfection by registration is no more than the preservation of a priority position to the benefit of a secured party. It is thus the secured party who risks losing their interest pursuant to the amendment. As such the secured party is entitled to notice and an opportunity to query or object to the amendment. The PPS Registrar must consider any response made by the secured party. Where there is an objection it may be necessary for the dispute to take the form of judicial proceedings (see s 182). For an example of an objection see Re Cirillo and Registrar of Personal Property Securities [2013] AATA 733. ● Extension of time limits is discretionary: The administrative process is a formal step and thus the provision of notice and the associated timing requirements are important. While the PPS Registrar can extend the relevant time periods, this requires the exercise of their discretion and is not available as a matter of course.

179.5.3 Flow chart The flow chart depicted in [177.5] should be read in conjunction with the above three points and is relevant to the application of s 179.

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[179.6] Further reading Explanatory Memorandum [5.114–5.118]. ALRC Report No 64 [13.1–13.24]. Whittaker Report [6.10.5]. Personal Property Securities Registrar’s Practice Statement No 4: Amendment Demand Process. ● Nicholas Mirzai, ‘‘A year with the Personal Property Securities Act 2009 (Cth): The Personal Property Securities Register, amendment demands and judicial proceedings’’ (2013) 31 Company and Securities Law Journal 295. ● Nicholas Mirzai, ‘‘Pollution on the PPSR — and what to do about it’’ (2015) 33 Company and Securities Law Journal 30. ● Christopher Pearce, ‘‘A Broken Record: Amending and Removing Registrations on the PPSA’’ (2016) 25 Australian Property Law Journal 173. ● ● ● ●

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SECTION 180 ADMINISTRATIVE PROCESS — AMENDMENT NOTICES

At the initiative of the Registrar 180(2) 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. In response to a statement by the person who gave the amendment demand 180(3) 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.

180(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). Amendment notices 180(5) An amendment notice is given in accordance with this subsection if: (a) the notice is in the approved form; or

Annotated Personal Property Securities Act 2009 (Cth)

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Amendment notice given by Registrar 180(1) The Registrar may give the secured party a notice (an amendment notice), in accordance with subsection (5), of the amendment demanded.

552

Personal Property Securities Act 2009 (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.

[180.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[180.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision no parallel provision

Outline

Section 180 of the Personal Property Securities Act 2009 (Cth) (PPSA) allows for an administrative process to pursue an amendment of the Personal Property Securities Register (PPSR), either by the party seeking the amendment or at the initiative of the Registrar.

[180.3]

Cross-references

● Section 179 sets out the scope of the application of this section. ● Section 181 provides for an amendment to be implemented by the Registrar. ● Personal Property Securities Regulations 2010 (Cth) reg 5.9 provides the prescribed information that is required to be included by a person giving a statement to the Registrar under this section.

[180.4]

Concepts

● Amendment demand See s 178. ● Amendment statement While described within s 180(3) simply as a ‘‘statement,’’ the amendment statement differs from the amendment demand. The demand is issued to the secured party. After a failure of that party to comply within five business days, an amendment statement may be given to the Personal Property Securities (PPS) Registrar.

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553

PPS Registrar’s Practice Statement No 4: Amendment Demand Process states that an amendment statement can either be emailed to: [email protected] or sent via post to: Personal Property Securities Insolvency and Trustee Services National Service Centre GPO Box 1944 Adelaide SA 5001. Unlike the amendment demand (for which there is no prescribed form, although there are recommended elements (see [178.5]), the template amendment statement form can be obtained from the Forms section of the PPSR website: see www.ppsr.gov.au/AsktheRegistrar/forms/ Pages/default.aspx. ● Amendment notices An amendment notice is a further notification by the PPS Registrar to the secured party informing that party that the Registrar is considering making an amendment to the PPSR. Typically an amendment notice will follow from an amendment statement, although the Registrar can notify secured parties of the need for rectification of his/her own volition. Practice Statement No 4 provides that an amendment notice will: ‘‘1. State the amendment demanded. 2. Invite the secured party to respond before the end of: 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.’’ ● Approved form See s 302. Annotated Personal Property Securities Act 2009 (Cth)

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2.1. five business days after the notice is given; or

554

Personal Property Securities Act 2009

[180.5]

Commentary

This section allows the Registrar to serve an amendment notice on the registered secured party, who has five business days to respond (s 180(5)). This is effectively a ‘‘show cause’’ notice, and the Registrar is bound to take into account any response from the secured party (see s 181(4)). The Registrar may act on his/her own initiative or after being given a statement under s 180(3). Unless the secured party satisfies the Registrar that the grounds for serving an amendment notice under s 178 are not satisfied within five business days of the Registrar’s amendment notice being given, the Registrar must register a financing change statement making the necessary amendment to the financing statement (s 181). In Denbride Pty Ltd v Registrar of Personal Property Securities, Eagle Boys Dial-apizza Australia Pty Ltd [2015] AATA 938, the Administrative Appeals Tribunal affirmed the decision of the Registrar of Personal Property Securities not to remove a registration from the PPS Register and provided the scope of the administrative review mechanism provided for by s 180 (at [16]): ‘‘My role, and the role of the Registrar, is narrower. We are not in a position to resolve the larger commercial dispute between the parties. It is enough that I am satisfied the obligations appear to be real; unless and until those obligations are set aside or varied in subsequent proceedings in another place, I am not in a position to order an amendment to the register.’’

[180.6] Further reading Explanatory Memorandum [5.119–5.120, 5.147, 8.13]. ALRC Report No 64 [13.1–13.24]. Whittaker Report [6.10.5]. Personal Property Securities Registrar’s Practice Statement No 4: Amendment Demand Process. ● Nicholas Mirzai, ‘‘A year with the Personal Property Securities Act 2009 (Cth): The Personal Property Securities Register, amendment demands and judicial proceedings’’ (2013) 31 Company and Securities Law Journal 295. ● Nicholas Mirzai, ‘‘Pollution on the PPSR — and what to do about it’’ (2015) 33 Company and Securities Law Journal 30. ● Christopher Pearce, ‘‘A Broken Record: Amending and Removing Registrations on the PPSA’’ (2016) 25 Australian Property Law Journal 173. ● ● ● ●

¶5-200 SECTION 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 amendment to

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Part 5.6 — Amendment demands

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. 181(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. 181(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. 181(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 181(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.

[181.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

Annotated Personal Property Securities Act 2009 (Cth)

s 165 s 50(5) s 56 § 9-518

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(b) any other relevant information.

556

Personal Property Securities Act 2009

[181.2]

Outline

This section provides for the Registrar to register a financing change statement to implement an amendment notice.

[181.3]

Cross-references

● Section 179 sets out the scope of the application of this section. ● Section 182 provides for a court order in relation to an amendment demand. ● Section 191 allows for review by the AAT from a decision of the Registrar under this section.

[181.4]

Concepts

● Amendment demand See s 178. ● Amendment notice See s 180.

[181.5]

Commentary

This section allows the Registrar to register a financing change statement to reflect an amendment demand. The Registrar must make the changes if an amendment notice was given under s 180 unless satisfied that the amendment is not authorised under s 178 (s 181(1)). Although the registered secured party has five business days to respond to a demand notice from the Registrar, that period may be extended by the Registrar under s 181(3). The Registrar’s ability to register the financing change statement is stopped if court proceedings under s 182 are brought (s 179(1)(c)).

[181.6] Further reading ● Explanatory Memorandum [5.120–5.121, 5.142]. ● ALRC Report No 64 [13.1–13.24]. ● Whittaker Report [6.10.5]. ● Personal Property Securities Registrar’s Practice Statement No 4: Amendment Demand Process. ● Nicholas Mirzai, ‘‘A year with the Personal Property Securities Act 2009 (Cth): The Personal Property Securities Register, amendment demands and judicial proceedings’’ (2013) 31 Company and Securities Law Journal 295. ● Nicholas Mirzai, ‘‘Pollution on the PPSR — and what to do about it’’ (2015) 33 Company and Securities Law Journal 30. ● Christopher Pearce, ‘‘A Broken Record: Amending and Removing Registrations on the PPSA’’ (2016) 25 Australian Property Law Journal 173.

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Subdivision B — Judicial process

¶5-205 SECTION 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: (a) the secured party; (b) the person who gave the amendment demand. 182(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.

182(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.

(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. 182(5) The Registrar must comply with a court order to register a financing change statement as soon as reasonably practicable after receiving the order. Annotated Personal Property Securities Act 2009 (Cth)

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182(4) On an application under this section, a court may make the following orders:

558

Personal Property Securities Act 2009 Note: The Registrar must give a verification statement to each secured party after the registration of a financing change statement (see section 156).

182(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.

[182.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[182.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 166–168 s 50(7) s 56(5) no parallel provision

Outline

This section allows the court to make a range of orders in relation to amendment demands.

[182.3]

Cross-references

● Section 293 allows for extensions of time.

[182.4]

Concepts

● Amendment demand See s 178.

[182.5]

Commentary

[182.5.1] Similar approach as used for caveats ..........................................558 [182.5.2] Serious or arguable case ................................................................559 It is important to note that a person who gave an amendment demand must wait five business days before commencing an application under this provision. An application under this provision has the effect of suspending access to the administrative show cause procedure under s 180–181 (an amendment notice): see s 179 of the Personal Property Securities Act 2009 (Cth) (PPSA). There is no obligation to undertake the administrative process in s 180–181 before commencing court action under this section.

[182.5.1] Similar approach as used for caveats In New Zealand, the courts have held that a court should approach applications under the equivalent provision in a similar manner to applications to maintain caveats: Asset Traders Ltd v Favas Sportscar World Ltd [2006] NZHC 903 at [13]; Toyota Finance New Zealand Ltd v Christie [2009] NZHC 827 at [16]. As Asher J held in Toyota Finance at [17], the short timeframe in which a dispute concerning an amendment demand arises is not apt to finally determine the dispute between the parties. The court in Toyota Finance set out the following guidelines (at [18]):

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‘‘(a) The person seeking to maintain their registration has the onus of establishing a sufficient interest (b) The test is whether the person seeking to maintain the registration can establish a seriously arguable case that a security agreement exists between the relevant parties (c) Such a summary procedure is unsuitable for the determination of disputed questions of fact (d) The balance of convenience can be of relevance in exceptional cases, but does not have the same significance as it does in relation to an interim injunction hearing (e) In relation to caveats the court has the discretion to require an undertaking as a condition of an order . . . Where, as here, the undertaking is filed with the application, it can be a relevant factor’’ (citations omitted). This approach was endorsed in Capital Finance Australia Ltd v Clough [2015] NSWSC 1327 at [12]. However, in National Australia Bank Ltd v Garrett [2016] FCA 714 at [33] Beach J said: ‘‘caution has to be exercised in aligning the procedure under s 182 with the procedure for removing or maintaining a caveat over real property and the suggestion of some reverse onus mechanism’’.

The New Zealand High Court decision, Vegar-Fitzgerald v Noyce, Mawdsley and Matakana Estate Ltd (2012) FPPSR ¶700-008; [2012] NZHC 1311, applied a ‘‘seriously arguable case’’ approach to requests to maintain the registration. That is, the secured party need only show that there is a seriously arguable case that the registered interest accurately reflects the position. If there is a dispute with respect to the validity or otherwise of the underlying security interest, the amendment demand procedure is not equipped to address such matters which should be prepared for full hearing. This approach to the amendment demand process is not uniform in New Zealand as there may be cases where the evidence in favour of removing or compelling the removal or amendment of the relevant registered interest is stronger than in other cases. Such circumstances were considered by Mallon J in Universal Trucks and Equipment Ltd v Reynolds [2012] NZHC 483. His Honour held, at [36]–[39]: ‘‘The enquiry of the Court on a s 167 application is a narrow one. The Court is considering only whether: (a) All the obligations under the security agreement have been performed (effectively whether the debtor has paid the debt); and/or (b) The security party has agreed to release the collateral; and/or (c) The financing statement refers to property which is not collateral under the security agreement; and/or Annotated Personal Property Securities Act 2009 (Cth)

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[182.5.2] Serious or arguable case

560

Personal Property Securities Act 2009 (d) There is no security agreement between the parties; and/or (e) The security agreement is ‘extinguished in accordance with the Act’. It is not concerned with the validity of the security interest nor necessarily its enforceability although the Court’s decision may affect the priority of the security interest. Validity, enforcement and priority are matters which may arise at another time, in a different proceeding and with other parties (for example, the party claiming a competing security interest). The first four grounds the Court may need to consider on a s 167 application are all matters which ordinarily ought to be capable of ready proof by, for example, presenting proof of the debt or the security agreement. The last ground appears to contemplate that some other action has already been taken under the Act. If that has occurred, that too ordinarily ought to be capable of ready proof. If, however, there are disputed facts the originating application procedure enables evidence to be taken orally and for cross-examination to take place. If there are affected parties then a judge may give directions as to who is to be joined. Although there are time constraints for obtaining an order maintaining the registration, an interim order can be obtained to preserve the position (as was done here). I approach the application on the basis that the Court is required to evaluate the material put forward and determine on the basis of that material whether the asserted ground has not been made out.’’

Thus, in clear-cut cases such as where there is no evidence to support the secured party’s application to maintain the registration, the court may make the appropriate order. As to the issue of the appropriate test to be applied, the authors are of the view that the ‘‘seriously arguable case’’ approach should be adopted in Australia. In National Australia Bank Ltd v Garrett [2016] FCA 714, the court adopted the standard of requiring the secured party to adduce prima facie evidence to satisfy the provision, at which point the onus shifts the applicant to refute that evidence. See also Jorgenson v ASL Paving Ltd (2007) 12 PPSAC (3d) 90; 302 Sask R 281 (Sask CA); Daniel Smith Industries Ltd v Cranes International NZ Ltd [2009] NZHC 2589.

[182.6] Further reading Explanatory Memorandum [5.126–5.128, 8.28]. ALRC Report No 64 [13.1–13.24]. Whittaker Report [6.10.5]. Nicholas Mirzai, ‘‘A year with the Personal Property Securities Act 2009 (Cth): The Personal Property Securities Register, amendment demands and judicial proceedings’’ (2013) 31 Company and Securities Law Journal 295. ● Nicholas Mirzai, ‘‘Pollution on the PPSR — and what to do about it’’ (2015) 33 Company and Securities Law Journal 30. ● ● ● ●

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● Christopher Pearce, ‘‘A Broken Record: Amending and Removing Registrations on the PPSA’’ (2016) 25 Australian Property Law Journal 173.

PART 5.7 — REMOVAL OF DATA AND CORRECTION OF REGISTRATION ERRORS ¶5-210

SECTION 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.

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SECTION 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:

(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).

184(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: Annotated Personal Property Securities Act 2009 (Cth)

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(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

562

Personal Property Securities Act 2009 (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).

184(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.

[184.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[184.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 170 s 46(2) s 71 no parallel provision

Outline

This provision allows the Registrar to remove data from the Personal Property Securities Register (PPSR).

[184.3]

Cross-references

● Section 150 provides for the registration of financing change statements. ● Section 156 requires the Registrar to issue a verification statement upon a registration event occurring. ● Section 185 allows the Registrar to remove data that has been ineffective for seven years. ● Section 186 provides for the restoration of incorrectly removed data. ● Section 191 allows the AAT to review a decision of the Registrar. ● Personal Property Securities Regulations 2010 (Cth) reg 5.10 prescribes the removal of data from the PPSR by the Registrar acting under a court order.

[184.4]

Concepts

● Financing change statement See the commentary at s 150.

[184.5]

Commentary

This section allows the Registrar to remove information from the Personal Property Securities Register (PPSR) that is contrary to the public interest, such as frivolous registrations and prohibited information. The verification

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Part 5.7 — Removal of data and correction of registration errors

statement sent by the Registrar would serve as notice of the removal to the registered secured party, who may then seek review of the Registrar’s decision by the AAT. The section gives the Registrar the option to remove all record of the data so that it could not be retrieved even in a ‘‘point in time’’ search, in which case the information is treated as never having been included in the register. This should not pose any problems as the categories of information that can be removed under this section are unlikely to adversely affect the perfection of any enforceable security interest. Given the pre-conditions upon which the Registrar may register a financing statement or financing change statement under s 150(3) (which do not allow frivolous, vexatious, offensive registrations or those that are contrary to the public interest), this provision is largely a safety net to catch improper registrations. See for example, NFT Specialized in Tower Cranes LLC v MacHforce Pty Ltd (in liq) [2017] WASC 95; Macquarie Leasing Pty Ltd v The Registrar of the Personal Property Securities Register [2014] NSWSC 1677.

[184.6] Further reading Explanatory Memorandum [5.130, 5.134, 5.142]. ALRC Report No 64 [13.1–13.24]. Whittaker Report [6.11.14], [6.12.2]. Nicholas Mirzai, ‘‘A year with the Personal Property Securities Act 2009 (Cth): The Personal Property Securities Register, amendment demands and judicial proceedings’’ (2013) 31 Company and Securities Law Journal 295. ● Nicholas Mirzai, ‘‘Pollution on the PPSR — and what to do about it’’ (2015) 33 Company and Securities Law Journal 30. ● Christopher Pearce, ‘‘A Broken Record: Amending and Removing Registrations on the PPSA’’ (2016) 25 Australian Property Law Journal 173.

¶5-220

SECTION 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.

[185.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

Annotated Personal Property Securities Act 2009 (Cth)

s 170(1) s 46(2)(a) s 71(2) § 9-522

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● ● ● ●

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[185.2]

Outline

This section allows the registrar to remove data from the Personal Property Securities Register (PPSR) where the registration has been ineffective for seven years.

[185.3]

Cross-references

● Section 150 provides for the registration of a financing change statement. ● Section 156 requires the Registrar to issue a verification statement after a registration event.

[185.4]

Concepts

● Ineffective registration See s 163.

[185.5]

Commentary

Nil.

[185.6] Further reading ● ● ● ●

Explanatory Memorandum [5.135]. ALRC Report No 64 [–]. Whittaker Report [6.11.14]. Nicholas Mirzai, ‘‘A year with the Personal Property Securities Act 2009 (Cth): The Personal Property Securities Register, amendment demands and judicial proceedings’’ (2013) 31 Company and Securities Law Journal 295.

¶5-225 SECTION 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. 186(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.

[186.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario

PPSA 1999 PPSA 1993 PPSA 1990

USA

UCC Article 9 (rev)

¶5-225

s 169A no parallel provision no equivalent parallel provision no parallel provision

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[186.2]

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Outline

This section allows the Registrar to restore information that has been incorrectly removed from the PPSR.

[186.3]

Cross-references

● Section 150 provides for the registration of a financing change statement. ● Section 156 requires the Registrar to issue a verification statement after a registration event. ● Section 188 allows the Registrar to register a financing change statement to correct errors or omissions.

[186.4] Concepts Nil.

[186.5] Commentary

In SFS Projects Australia Pty Ltd v Registrar of Personal Property Securities [2014] FCA 846, the court held that the Registrar has power to alter the Register to correct an error made by a secured party and that s 186 powers are not limited to errors created by the Registrar. Notwithstanding the views in SFS Projects, the Whittaker Report, recommends amending s 186 to make it clear that it is limited to information removed by error by the Registrar (Recommendation 159). In the authors’ view, the interpretation of s 186 as remedial, while broad, is consistent with the court’s approach to deficiencies on the PPS Register elsewhere under the PPSA (see for example in respect of s 293 applications and applications pursuant to s 588FM of the Corporations Act 2001 (Cth)).

[186.6] Further reading ● Explanatory Memorandum [4.78, 5.136, 5.142]. ● ALRC Report No 64 [–]. ● Whittaker Report [6.11.14]. ● Nicholas Mirzai, ‘‘A year with the Personal Property Securities Act 2009 (Cth): The Personal Property Securities Register, amendment demands and judicial proceedings’’ (2013) 31 Company and Securities Law Journal 295. Annotated Personal Property Securities Act 2009 (Cth)

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The Supplementary Explanatory Memorandum to the Personal Property Securities Bill 2009 (Cth) notes that the Registrar should consider the impact of restoration on the rights of third parties as s 186(2) provides that the information will be deemed to have never been removed. Deeming restored information to never having been removed will allow for continuous perfection of a security interest validly covering collateral in the registered financing statement.

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¶5-230 SECTION 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.

[187.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[187.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision no parallel provision

Outline

This section provides for the retention of records of information contained (or previously contained) on the Personal Property Securities Register (PPSR).

[187.3]

Cross-references

● Sections 184 and 185 provide for information recorded on the PPSR to be removed.

[187.4]

Concepts

Nil.

[187.5]

Commentary

This section is for clarification purposes to ensure that removed data may be retained by the Registrar. This is necessary to allow the information to be restored.

[187.6] Further reading ● Explanatory Memorandum [5.137]. ● ALRC Report No 64 [–]. ● Nicholas Mirzai, ‘‘A year with the Personal Property Securities Act 2009 (Cth): The Personal Property Securities Register, amendment demands and judicial proceedings’’ (2013) 31 Company and Securities Law Journal 295.

¶5-235 SECTION 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. 188(2) If a registration is corrected under subsection (1), this Act applies as if the error or omission had never been made.

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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).

[188.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[188.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 170A no parallel provision no parallel provision no parallel provision

Outline

This section allows the Registrar to register a financing change statement to correct a registration to rectify errors or omissions by the Registrar.

[188.3]

Cross-references

● Section 150 provides for the registration of financing change statements.

● Section 191 allows for the AAT to review a decision of the Registrar.

[188.4] Concepts Nil.

[188.5] Commentary Nil.

[188.6] Further reading ● Explanatory Memorandum [5.138, 5.142]. ● ALRC Report No 64 [–]. ● Nicholas Mirzai, ‘‘A year with the Personal Property Securities Act 2009 (Cth): The Personal Property Securities Register, amendment demands and judicial proceedings’’ (2013) 31 Company and Securities Law Journal 295. Annotated Personal Property Securities Act 2009 (Cth)

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● Section 156 requires the Registrar to issue a verification statement.

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PART 5.8 — FEES, ADMINISTRATIVE REVIEW AND ANNUAL REPORTS ¶5-240 SECTION 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.

General commentary Part 5.8 provides for the determination of fees for registration and search functions. At the time of writing these fees had not yet been determined by the Minister, although the fees are to be assessed on a cost recovery basis (s 190(5)) so as not to amount to taxation by the Commonwealth. Section 190 allows for the payment arrangements to be determined, which the Supplementary Explanatory Memorandum to the Personal Property Securities Bill 2009 (Cth) notes could include pay per service or a periodic account with the Registrar. Section 191 and 192 provide accountability for the conduct of the Registrar. Section 191 allows for certain specified decisions by the Registrar to be reviewed by the AAT. Section 192 requires the Registrar to prepare annual reports.

¶5-245 SECTION 190 REGISTRATION AND SEARCH FEES Determination of fees and arrangements 190(1) The Minister may, by legislative instrument, determine fees for the purposes of this Act. 190(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). 190(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). Approval of arrangements 190(4) 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).

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Miscellaneous 190(5) The fees determined under subsection (1) must not be such as to amount to taxation. 190(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.

¶5-250

SECTION 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); (b) a decision to refuse to register a financing change statement, 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); Annotated Personal Property Securities Act 2009 (Cth)

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(c) a decision to register a financing change statement to amend the register to end the effect of a registration, under subsection 150(2);

570

Personal Property Securities Act 2009 (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).

¶5-255 SECTION 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.

192(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.

PART 5.9 — REGISTRAR OF PERSONAL PROPERTY SECURITIES ¶5-260 SECTION 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.

General commentary Part 5.9 establishes the Registrar of Personal Property Securities as well as a Deputy Registrar. The Registrar’s website is www.ppsr.gov.au. Subsection 195(2) confers powers on the Registrar to do all things necessary or convenient to be done for or in connection with the performance of his or her functions.

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The Registrar is given other specific express powers throughout the PPSA. The Registrar may delegate some or all of his or her powers under s 197. Section 195A was inserted by amendments made to the Act in 2011 in order to support the functions and powers of the Registrar: Explanatory Memorandum to the Personal Property Securities (Corporations and Other Amendments) Bill 2011 (Cth) at [54]–[57].

¶5-265

SECTION 194 REGISTRAR — ESTABLISHMENT OF OFFICE

194(1) There is to be a Registrar of Personal Property Securities. 194(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. 194(3) The office of the Registrar of Personal Property Securities is not a public office for the purposes of the Remuneration Tribunal Act 1973.

SECTION 195 REGISTRAR — FUNCTIONS AND POWERS

195(1) The Registrar has the functions given under this Act or any other Act. 195(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.

¶5-275

SECTION 195A REGISTRAR — INVESTIGATIONS

195A(1) The Registrar may conduct an investigation into any matter for the purpose of performing his or her functions. 195A(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. 195A(3) The period specified in a notice under subsection (2) must be at least 14 days after the notice is given. 195A(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. Annotated Personal Property Securities Act 2009 (Cth)

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¶5-270

572

Personal Property Securities Act 2009 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).

195A(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). 195A(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.

¶5-280 SECTION 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. 196(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.

¶5-285 SECTION 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

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(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).

197(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.

¶5-290

SECTION 198 REGISTRAR — RESIGNATION

198(1) The Registrar may resign by writing signed by him or her and given to the Minister. 198(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.

SECTION 199 REGISTRAR — TERMINATION

199(1) The Minister may terminate the appointment of the Registrar by written instrument. 199(2) The appointment of the Registrar is terminated if the Registrar stops being engaged under the Public Service Act 1999 for any reason.

¶5-300

SECTION 200 DEPUTY REGISTRAR — ESTABLISHMENT OF OFFICE

200(1) There is to be at least one Deputy Registrar of Personal Property Securities (a Deputy Registrar). 200(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. 200(3) The office of Deputy Registrar of Personal Property Securities is not a public office for the purposes of the Remuneration Tribunal Act 1973.

Annotated Personal Property Securities Act 2009 (Cth)

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¶5-295

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Personal Property Securities Act 2009

¶5-305 SECTION 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. 201(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. 201(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. 201(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. 201(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.

¶5-310 SECTION 202 DEPUTY REGISTRAR — RESIGNATION 202(1) A Deputy Registrar may resign by writing signed by him or her and given to the Minister. 202(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.

¶5-315 SECTION 203 DEPUTY REGISTRAR — TERMINATION 203(1) The Minister may terminate the appointment of a Deputy Registrar by written instrument. 203(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.

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CHAPTER 6 — JUDICIAL PROCEEDINGS PART 6.1 — GUIDE TO THIS CHAPTER ¶6-005

SECTION 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 Division 1 — Introduction ¶6-010

SECTION 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.

General commentary Part 6.2 provides the jurisdictional basis for specified courts to consider ‘‘PPS matters’’. These are defined by s 206 as matters arising under a provision of the PPSA that authorises an application to be made to a court (such as s 182) or that otherwise arise relating to a security agreement (see further s 18) or a security interest (see further s 12). Section 206 specifies however that this Part does not apply to matters for which the Federal Court or Federal Circuit Court has jurisdiction under the Administrative Decisions (Judicial Review) Act 1977 (Cth). As this Part provides rules for transferring PPS matters between courts it operates to the exclusion of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth). Matters arising under the Judiciary Act 1903 (Cth) s 39B (such as prerogative writs) are also excluded from the operation of this Part by s 206. Furthermore, civil penalty proceedings are dealt within Pt 6.3 and do not come within the scope of Pt 6.2. Annotated Personal Property Securities Act 2009 (Cth)

¶6-010

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The Registrar may intervene in judicial proceedings.

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Section 207 sets out a table of which courts have jurisdiction in respect of PPS matters, namely the Federal Court of Australia and Federal Circuit Court, the Family Court of Australia and state and territory courts (specified as superior courts — ie the Supreme Courts of each state and territory and a state family court, and lower courts — any other court that is not a superior court). Section 208 sets out how matters may be transferred between courts, and s 210–217 provide the administrative machinery to assist with transfers. Section 209 specifies that courts with jurisdiction under the PPSA are to assist each other. Section 218 gives the Registrar the right to intervene in a court proceeding involving a PPS matter. Section 219 allows the Registrar to commence court proceedings with respect to a PPS matter as long as it is in the public interest to do so. Reference should also be made to Pt 7.2.

¶6-015 SECTION 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. 206(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. 206(3) This Part does not limit the operation of the provisions of the Judiciary Act 1903 other than section 39B. 206(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. 206(5) Nothing in this Part affects any other jurisdiction of any court. 206(6) This Part does not apply to matters arising under Part 6.3 (civil penalty proceedings).

General commentary The jurisdiction of the Court to determine matters concerning the operation of the PPSA is, as a general proposition, broadly conferred on superior courts of record. General statutory restrictions regarding quantum in lower courts, as a general proposition, follows under the PPSA.

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Where there are several means by which a party may effect a particular result, a party looking to apply a section of the PPSA ought not be constrained, as a matter of jurisdiction, to any one of those ways even if one way would give rise to the most orderly process. This would be a matter of administration rather than jurisdiction. The issue arose in SFS Projects Australia Pty Ltd v Registrar of Personal Property Securities (2014) 226 FCR 188; [2014] FCA 846 where Gleeson J considered whether or not the Federal Court of Australia had jurisdiction to make orders pursuant to s 186 of the PPSA (compelling the Registrar to exercise discretion in accordance with orders of the Court) notwithstanding the availability of s 191(k) to review decisions of the Registrar of Personal Property Securities under s 186 (see s 191(k) of the PPSA). In this respect, Gleeson J held (at [10]–[12]): ‘‘The applicants contend that this is a PPS matter falling within either s 206(1)(b) or (c). It is clear that the matter is a matter ‘arising in relation to’ the PPS Act. The ultimate issue is whether the Registrar has power under s 186 of the Act to restore data to the register that was incorrectly removed as a result of an error on the part of the person who made an application for its removal.

In the absence of an application under the ADJR Act, my provisional view is that the matter is a ‘PPS matter’ within s 206 and, accordingly, that this court has jurisdiction to determine the matter under s 207.’’ In the authors’ view, if the jurisdiction of the Federal Court of Australia is only enlivened under the Administrative Decisions (Judicial Review) Act 1977 (Cth) by an application under that Act then where there is no such application of that nature does not deny the jurisdiction of the Court. Ultimately, it may be that a Court would decline, in its discretion, to entertain an application purporting to be made pursuant to s 186 of the PPSA in circumstances where an alternative avenue may be available pursuant to s 191 — but this would be a question of discretion and not jurisdiction. Compare with Scottish Pacific (BFS) Pty Ltd v Registrar of Personal Property Securities [2017] FCA 1378. Annotated Personal Property Securities Act 2009 (Cth)

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The Registrar submitted that, if the court has jurisdiction under the ADJR Act, then the court may not have jurisdiction ‘otherwise arising in relation to [the PPS Act]’ within s 206(1)(b). The solicitor for the Registrar, Mr Markus, did not put a positive submission that the court has jurisdiction under the ADJR Act in this case. However, he submitted that, if the court finds in favour of the applicants, then it will be necessary to determine whether the court’s jurisdiction is derived from the ADJR Act or the PSS Act, in order to identify the relief available to be granted.

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Division 2 — Conferral of jurisdiction ¶6-020 SECTION 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

3

A superior court, or lower court, of a State or Territory

4

The Family 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) if another amount is prescribed by the regulations — that other amount. The court’s general jurisdictional limits, including (but not limited to) limits as to locality and subject matter, to the extent that the Constitution permits. No specified limits.

¶6-025 SECTION 208 CROSS-JURISDICTIONAL APPEALS 208 The following table has effect: Cross-jurisdictional appeals Item Unless expressly provided by a 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

2

¶6-020

the Federal Circuit Court

to any of the following courts:

(a) the Federal Circuit Court; (b) a court of a State; (c) a court of a Territory; (d) the Family Court. (a) a court of a State; (b) a court of a Territory.

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4

a court of the Australian Capital Territory

5

a court of the Northern Territory

6

a court of an external Territory

7

the Family Court

8

a State Family Court

¶6-030

to any of the following courts:

(a) the Federal Court; (b) the Federal Circuit Court; (c) a court of another State; (d) a court of a Territory; (e) the Family Court; (f) a State Family Court of the same State. (a) the Federal Court; (b) the Federal Circuit Court; (c) a court of a State; (d) a court of another Territory; (e) the Family Court. (a) the Federal Court; (b) the Federal Circuit Court; (c) a court of a State; (d) a court of another Territory; (e) the Family Court. (a) the Federal Circuit Court; (b) a court of a State; (c) a court of another Territory (whether internal or external); (d) the Family Court. (a) the Federal Court; (b) the Federal Circuit Court; (c) a court of a State; (d) a court of a Territory. (a) 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.

SECTION 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.

Annotated Personal Property Securities Act 2009 (Cth)

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Cross-jurisdictional appeals Item Unless expressly provided by a law of the Commonwealth, a State or a Territory, an appeal with respect to a PPS matter does not lie from a decision of ... 3 a court of a State (other than a State Family Court)

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Division 3 — Transfers between courts ¶6-035 SECTION 210 APPLICATION OF THIS DIVISION Scope 210(1) 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. Transfers to which other legislation applies 210(2) 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 Receiving court 1 The Federal Court The Federal Circuit Court. 2 The Family Court The Federal Circuit Court. 3 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.

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¶6-040

SECTION 211 EXERCISE OF TRANSFER POWER

General rule 211(1) 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. Cross-jurisdictional transfers between lower courts and superior courts 211(2) 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. 211(3)

In this Act:

lower court means: (a) the Federal Circuit Court; or 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.

Annotated Personal Property Securities Act 2009 (Cth)

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(b) a court of a State or Territory that is not a superior court.

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¶6-045 SECTION 212 CRITERIA FOR TRANSFERS BETWEEN COURTS General 212(1) 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. Relevant considerations 212(2) 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.

¶6-050 SECTION 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.

¶6-055 SECTION 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

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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.

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SECTION 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. 215(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.

¶6-065

SECTION 216 ENTITLEMENT TO PRACTISE AS BARRISTER OR SOLICITOR

Right to appear 216(2) 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. 216(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.

Annotated Personal Property Securities Act 2009 (Cth)

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Scope 216(1) This section applies if a proceeding with respect to a PPS matter in a transferring court is transferred to another court under section 211.

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¶6-070 SECTION 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).

Division 4 — Registrar’s role in judicial proceedings ¶6-075 SECTION 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. 218(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).

¶6-080 SECTION 219 INITIATION OF JUDICIAL PROCEEDINGS Scope 219(1) 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. Initiation of proceedings by Registrar 219(2) The Registrar may, on behalf of the Commonwealth, cause the proceeding to be begun and carried on in the person’s name. 219(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).

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Part 6.3 — Civil penalty proceedings

PART 6.3 — CIVIL PENALTY PROCEEDINGS Division 1 — Introduction ¶6-085

SECTION 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 contraventions of civil penalty provisions.

relating

to

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.

General commentary Part 6.3 sets out rules for dealing with contraventions of civil penalty provisions under the PPSA. A civil penalty provision is expressly designated in the relevant sections which (at the time of writing) are: ● s 151 — belief about security interest ● s 172 — unauthorised access or use of Personal Property Securities Register (PPSR) data The phrase ‘‘civil penalty provision’’ is defined in s 221. A penalty unit, at the time of writing, is $170 (Crimes Act 1914 (Cth) s 4AA). Since 1997, a penalty unit had been $110, but from 28 December 2012, the amount increased to $170. The increased penalty applies to offences committed on or after this date. In the future, increases in the value of a penalty unit may become more regular. Section 4AA(1A) of the Crimes Act provides that a review of the amount of a penalty unit must be conducted as soon as possible after each third anniversary of the day an alteration of the amount of a penalty unit last came into force. The penalty may be recovered by the Commonwealth under s 225. It should be noted that the contravention of a civil penalty provision is not a criminal offence (s 223). Annotated Personal Property Securities Act 2009 (Cth)

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● s 195A — failing to comply with Registrar’s investigation.

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Personal Property Securities Act 2009

Section 222 provides for the Federal Court to order a person to pay a pecuniary penalty for contravening a civil penalty provision. A person involved in the contravention of a civil penalty provision is caught by this provision (s 224). Sections 226–228 provide for overlapping civil and criminal proceedings in respect of conduct allegedly in contravention of a civil penalty provision that is substantially similar to conduct allegedly in contravention of a criminal law. Section 229 imposes limitations on evidence obtained during civil penalty proceedings for subsequent criminal proceedings. The High Court of Australia in Rich v ASIC (2004) 220 CLR 129 found that civil penalty proceedings could give rise to equitable protection against penalties in respect of disclosure by the individual defendant. The High Court ruled that the defendant did not have to give complete discovery. In subsequent cases, it has been held that information required to be disclosed by defendants in civil penalty cases may be more limited than in non-penalty cases. The Corporations Act 2001 (Cth) was amended in 2007 to insert s 1349 to limit the operation of the privilege against penalties. However, there is no similar provision in the PPSA. While this may give rise to procedural issues for the Registrar, the number of civil penalty provisions in the PPSA is much more limited than under the Corporations Act and any adverse effect of the privilege is likely to be minimal. See further Middleton T, ‘‘The privilege against selfincrimination, the penalty privilege and legal professional privilege under the laws governing ASIC, APRA, the ACCC and the ATO — suggested reforms’’ (2008) 30 Australian Bar Review 282; Harris J and Siow W, ‘‘Uncertainty regarding civil penalties and privilege against penalties’’ (2008) 60 Keeping Good Companies 68. Section 230 allows the Registrar to accept enforceable undertakings in respect of potential contraventions of civil penalty provisions. Undertakings are enforced in the Federal Court under s 231 of the PPSA.

¶6-090 SECTION 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.

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Division 2 — Obtaining an order for a civil penalty ¶6-095

SECTION 222 FEDERAL COURT MAY ORDER PERSON TO PAY PECUNIARY PENALTY FOR CONTRAVENING CIVIL PENALTY PROVISION

Application for order 222(1) 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. Court may order wrongdoer to pay pecuniary penalty 222(2) 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). Determining amount of pecuniary penalty 222(3) 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

Conduct contravening more than one civil penalty provision 222(4) 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.

¶6-100 223

SECTION 223 CONTRAVENING A CIVIL PENALTY PROVISION IS NOT AN OFFENCE A contravention of a civil penalty provision is not an offence.

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(d) whether the person has previously been found by the Court in proceedings under this Act to have engaged in any similar conduct.

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¶6-105 SECTION 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. 224(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.

¶6-110 SECTION 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.

Division 3 — Civil penalty proceedings and criminal proceedings ¶6-115 SECTION 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.

¶6-120 SECTION 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

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(b) the offence is constituted by conduct that is substantially the same as the conduct alleged to constitute the contravention. 227(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.

¶6-125

SECTION 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.

¶6-130

SECTION 229 EVIDENCE GIVEN IN PROCEEDINGS FOR PENALTY NOT ADMISSIBLE IN CRIMINAL PROCEEDINGS

(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.

Annotated Personal Property Securities Act 2009 (Cth)

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229 Evidence of information given or evidence of production of documents by an individual is not admissible in criminal proceedings against the individual if:

590

Personal Property Securities Act 2009

Division 4 — Enforceable undertakings relating to contraventions of civil penalty provisions ¶6-135 SECTION 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. 230(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. 230(3) The person may withdraw or vary the undertaking at any time, but only with the consent of the Registrar.

¶6-140 SECTION 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). 231(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.

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Part 7.2 — Australian laws and those of other jurisdictions

CHAPTER 7 — OPERATION OF LAWS PART 7.1 — GUIDE TO THIS CHAPTER ¶7-005

SECTION 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 ¶7-010

SECTION 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.

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.

Annotated Personal Property Securities Act 2009 (Cth)

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The rules for determining the governing law in relation to a security interest differ depending on the type of interests.

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Personal Property Securities Act 2009

¶7-015 SECTION 234 SCOPE OF THIS PART General rule 234(1) 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 nonperfection of the security interest. Preservation of contractual obligations 234(2) However, this Part does not affect the law that governs contractual obligations (including any obligations arising under a security agreement).

[234.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[234.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 26 s 5(1), (2) s 5(1), 6 § 9-301, 9-305

Outline

Section 234 of the Personal Property Securities Act 2009 (Cth) (PPSA) prescribes the scope of Pt 7.2.

[234.3]

Cross-references

● Section 235 determine location under the PPSA. ● Sections 236–241 provide rules for determining the governing law for Australian court proceedings in relation to security interests.

[234.4]

Concepts

● The law that governs See s 236–241.

[234.5]

Commentary

Section 234 of the Personal Property Securities Act 2009 (Cth) states that by default, the law of the jurisdiction specified by the various provisions which comprise Pt 7.2 governs the validity, perfection and effect of perfection or nonperfection of a security interest. The contractual obligations between the parties themselves thus operates beyond Pt 7.2 and may be effective irrespective of the law of the jurisdiction. While the term ‘‘attachment’’ is not specifically used in this provision, attachment is one of the essential steps to perfection (see s 21) and is therefore included by implication. Additionally, a distinction between the location of the personal property and the location of the grantor arises and is of seminal importance pursuant to Pt 7.2. While the security interest operates in its own right irrespective of the

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grantor (for instance, the transfer of a security interest does not affect its validity or priority — see s 60), as a general principle, it is often the location of the grantor which will determine which law applied at the time the security interest was created.

[234.6] Further reading ● Explanatory Memorandum [7.2–7.8]. ● ALRC Report No 64 [11.3–11.15].

¶7-020

SECTION 235 MEANING OF LOCATED

Location of personal property 235(1) 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. 235(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.

Location within Australia 235(6) 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. Annotated Personal Property Securities Act 2009 (Cth)

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Location of a person 235(3) A body corporate is located in the jurisdiction in which the body corporate is incorporated. 235(4) A body politic is located in the jurisdiction of the body politic. 235(5) An individual is located at the individual’s principal place of residence.

594

Personal Property Securities Act 2009 Location within a foreign country that has a federal character 235(7) 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.

[235.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[235.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 29 s 7(1) s4 § 9-307

Outline

Section 235 of the Personal Property Securities Act 2009 (Cth) (PPSA) provides the definition of the term ‘‘located’’ under the PPSA. The definition is central to the correct determination of which regime will apply to which interest. As s 233 isolates, Pt 7.2 is concerned with cross-jurisdiction issues and thus in an overarching sense, the Australian PPSA is analysed against foreign securities regimes to establish which will apply and in what circumstances. Whether the particular foreign regime in question is a PPS variant or not is an irrelevant consideration.

[235.3]

Cross-references

● The concept of location is central to the PPSA, particularly in relation to governing law provisions (s 236–241) and the relocation provisions s 39 and 40.

[235.4]

Concepts

● Chattel paper This is defined by s 10. See further [12.5.3.1]. ● Investment instrument This is defined by s 10. See further s 27. ● Located See below. ● Negotiable instrument This is defined by s 10. See further s 29.

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● Principal place of residence The term ‘‘principal place of residence’’ is not defined by the PPSA but is well known to the law, particularly in tax and succession matters. See for example, Re Will and Estate of Hood [2004] VSC 328; Deane v CSD (Qld) (No 2) [1996] 2 Qd R 557.

[235.5]

Commentary

[235.5.1] Electronic data — s 235(1), (2) ......................................................595 [235.5.1] [235.5.2] Located — s 235(3), (4), (5), (6), (7) ..............................595

[235.5.1] Electronic data — s 235(1), (2) The recognition of electronic data under the Personal Property Securities Act 2009 (Cth) (PPSA), while beneficial in terms of addressing issues of increased reliance on internet-based transactions, introduces issues concerning the Australian PPSA’s governance over particular instruments which exist purely electronically. In the general sense, with respect to tangibles and pursuant to s 235(1), personal property is located where it is physically situated at the time an issue arises. Evidence can be adduced to trace the movement of such property in the physical sense. Electronically recorded data, pursuant to s 235(2), is located where the law under which the instrument is governed is located. The implications with respect to chattel paper pursuant to s 235(2)(c) are significant as a perfected interest over chattel paper takes priority as against a perfected interest in the underlying collateral (see s 71). If the underlying collateral is located outside of Australia, that is, the physical existence of the personal property in question is situated abroad, but chattel paper over the collateral was created and exists under Australian law, then the PPSA applies to the chattel paper and the resulting priority will likely extend to the holder of the highest priority interest over the chattel paper (for information about priorities under the PPSA see Pt 2.6).

The consideration of the concept of ‘‘location’’ under the Personal Property Securities Act 2009 (Cth) (PPSA) is important in two respects, firstly, in relation to the underlying collateral, and secondly, in relation to the place of the grantor (as stated above at s 234). The provisions of the PPSA are specific as to the prevailing location, that is, under some provisions the location of the grantor is seminal while in others the location of the underlying collateral is of decisive importance (depending largely on the commerciality of the circumstances and the overarching rationales of the PPSA). In the decision of Re Maiden Civil (P&E) Pty Ltd; Albarran and Pleash (as receivers and managers of Maiden Civil (P&E) Pty Ltd v Queensland Excavation Services Pty Ltd (2013) APPSR ¶701-008; [2013] NSWSC 852, the court considered s 235 and held that motor vehicles (large construction vehicles) were covered by the law of the Northern Territory (where they had long been used and where it was intended that they remain) rather than the law of the grantor (a leasing company based in Queensland). This was important because the vehicles were Annotated Personal Property Securities Act 2009 (Cth)

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[235.5.2] Located — s 235(3), (4), (5), (6), (7)

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covered by transitional security agreements but could not take advantage of the protection granted to transitional security interests as the law of the Northern Territory required the vehicles to be registered prior to the PPSA and the grantor did not register them on the migrated register: see PPS Regulations 2010 (Cth) reg 9.2. Section 235 provides that the physical situation of the property or the grantor is the ‘‘location’’ where the property is tangible (see [235.5.1] for treatment of intangible property). Section 235(6) prescribes that if the place where the underlying property or the grantor is situated in an Australian state or territory (each provision, where relevant, will address whether it is the collateral or the grantor which is to be assessed) then the PPSA applies. Section 235(7) prescribes that if the location of the underlying collateral or the grantor lies beyond Australia, where relevant, then the rules of the relevant jurisdiction apply to such interests.

[235.6] Further reading ● Explanatory Memorandum [7.10–7.13]. ● ALRC Report No 64 [11.3–11.15]. ● Whittaker Report [9.1.5].

¶7-025 SECTION 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.

[236.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[236.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision no parallel provision

Outline

Section 236 of the Personal Property Securities Act 2009 (Cth) (PPSA) prescribes the impact of Commonwealth laws outside of the PPSA on the remaining provisions of Pt 7.2.

[236.3]

Cross-references

● Sections 237–241 provide further rules for determining the governing law for Australian court proceedings in relation to security interests.

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[236.4]

597

Concepts

● Security interest See s 12.

[236.5] Commentary Section 236 of the Personal Property Securities Act 2009 (Cth) (PPSA) expressly provides for the primacy of Commonwealth laws in relation to security interests created or otherwise governed by such legislation. Section 8 of the PPSA additionally excludes the PPSA from applying to security interests created by statute as opposed to consent between the parties involved (see also s 12). For the priority rules with respect to interests created by Commonwealth legislation beyond the PPSA see Pt 2.6, Div 6.

[236.6] Further reading ● Explanatory Memorandum [7.14–7.19]. ● ALRC Report No 64 [11.3–11.15].

¶7-030 SECTION 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. 237(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;

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)).

Annotated Personal Property Securities Act 2009 (Cth)

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(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.

598

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[237.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[237.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 31 s 7(3) s 7(2) § 9-307, 9-316

Outline

Section 237 of the Personal Property Securities Act 2009 (Cth) (PPSA) addresses the implications of the security agreement itself, that is, the contract between the parties, in relation to the application of the Australian PPSA.

[237.3]

Cross-references

● Section 6 requires a territorial connection to Australia. ● Sections 236 and 238–241 provide further rules regarding the governing laws in relation to security interests under the PPSA.

[237.4]

Concepts

● Account This is defined by s 10. See further s 12. ● Attaches See s 19. ● Chattel paper This is defined by s 10. See further s 12. ● Intangible property This is defined by s 10. ● Intellectual property or an intellectual property license These are defined by s 10. See further s 105 and 106 and [12.5.3.5]. ● Security agreement See s 18 and 20.

[237.5]

Commentary

A security agreement can, pursuant to s 237, provide for the Personal Property Securities Act 2009 (Cth) (Australian PPSA) to govern the transaction where the grantor is an Australian entity at the time the interest attaches to the underlying collateral. Certain intangible items are excluded from this section as they are alternatively covered by s 239. In order to reduce ambiguity all security agreements should include a clause regarding the governing jurisdiction. Note also that, while effect is given to the terms of the agreement (see s 18(1)), such terms cannot oust the application of other Commonwealth laws which prevail where relevant pursuant to s 236.

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The interpretation of this section is consistent with foreign authorities on point: JPM Express Inc v 2092889 Ontario Inc (2010) 16 PPSAC (3d) 337 (Ont SCJ); Re Fairmont Resort Properties Ltd (2009) 15 PPSAC (3d) 161; 56 CBR (5th) 235 (Alta QB).

[237.6] Further reading ● Explanatory Memorandum [7.14–7.19]. ● ALRC Report No 64 [11.3–11.15]. ● Whittaker Report [9.1.6].

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SECTION 238 GOVERNING LAWS — GOODS

Main rules 238(1) 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.

238(1A) 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 the jurisdiction (other than the law relating to the conflict of laws) in which the goods are located at that time. Goods that are moved 238(2) 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. 238(2A)

Subsection (2) applies from the attachment time.

238(3) 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 Annotated Personal Property Securities Act 2009 (Cth)

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Goods that are normally moved between jurisdictions

600

Personal Property Securities Act 2009 (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.

Goods entered on registers of ships 238(4) 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.

[238.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[238.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 27 s 5(3), (4) s 5(2), (3) § 9-301, 9-316

Outline

Section 238 of the Personal Property Securities Act 2009 (Cth) (PPSA) relates to the movement of goods and the law which applies in this regard. The section prescribes that separate and distinct PPSA provisions may apply over the course of the security interest as such goods move between jurisdictions. Different rules may also apply as a security interest takes different manifestations (mainly between attachment and perfection). Note, however, while the importance of perfection cannot be stressed enough with respect to domestic PPSA priority, often it is the attachment of a security interest which forms the focus of consideration pursuant to Pt 7.2 as the effect of perfection or non-perfection is limited in application to the jurisdiction where the Australian PPSA applies (namely Australia). Attachment of a security interest is not limited in such respects.

[238.3]

Cross-references

● Sections 236, 237 and 239–241 provide further rules regarding the governing law of security interests.

[238.4]

Concepts

● Attaches See s 19. ● Goods This is defined in s 10.

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601

● Located See s 235. ● Perfection See s 21. ● Personal, domestic or household purposes See [47.5].

[238.5]

Commentary

[238.5.1] Main rule — s 238(1), (1A) ...........................................................601 [238.5.2] Moved goods — s 238(2), (2A) ....................................................603 [238.5.3] Moved between jurisdictions — in the normal course — s 238(3) ..........................................................................................................................603 [238.5.4] Registers of ships — s 238(4) .......................................................604

[238.5.1] Main rule — s 238(1), (1A) The default position under the Personal Property Securities Act 2009 (Cth) (PPSA) is that the validity of a security interest in goods is governed by the law of the jurisdiction where the goods were located when the security interest attached to them. Section 237, however, allows parties to determine that the Australian PPSA applies (irrespective of where the collateral was located at the time the security interest attached) where, the grantor is an Australian entity at the time of attachment. Justice Brereton considered the application of s 238 in Re Maiden Civil (P&E) Pty Ltd; Albarran and Pleash (as receivers and managers of Maiden Civil (P&E) Pty Ltd v Queensland Excavation Services Pty Ltd (2013) APPSR ¶701-008; [2013] NSWSC 852 with respect to moveable goods (Caterpillar vehicles). The plaintiff in this proceeding made submissions that as the Caterpillars were goods ‘‘of a kind that is normally used in more than one jurisdiction’’, that the relevant jurisdiction was the state within which the grantor was located (Queensland in this case, as opposed to the Northern Territory where the collateral was being used). His Honour rejected this argument and in doing so provided six cogent reasons as to how s 238 applies (at [60]–[67]), the authors respectfully adopt such analysis:

Secondly, even if there were a choice of law issue, s 238 has no application or relevance in this situation. It is in Part 7.2 (Australian laws and those of other jurisdictions) of the PPSA. As s 233 (Guide to this Part) explains, that part is about how Australian laws interact with foreign laws — not about internal private international issues as between jurisdictions within Australia. It is concerned with choice of law between Annotated Personal Property Securities Act 2009 (Cth)

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‘‘First, there is no requirement to resort to s 238, because no question of choice of law arises. The issue raised by PPSR, regulation 9.2, is whether the collateral was registrable on a transitional register. For this purpose, it suffices that the relevant interest could have been registered on a Register. QES’s interests in the Caterpillars could have been registered on the NT Register, whether or not they could have been registered on a Queensland register.

602

Personal Property Securities Act 2009 Australia and foreign countries; not within Australia. In the absence of statutory provision, the general law would refer such questions to the lex situs, being the law of the Northern Territory [see Douglas Financial Consultants Pty Ltd v Price [1992] 1 Qd R 243, 251–253]. Thirdly, in any event, s 238(3) does not apply. I do not accept that the Caterpillars are goods are of a kind normally used in more than one jurisdiction. No doubt it is possible that some such equipment will be used in more than one jurisdiction, but there is nothing to show that that is ‘normally’ the case. In my view, the provision is intended to deal with goods of a kind that are characterised by their inter-jurisdictional character — for example, shipping containers. If (contrary to my opinion) Part 7.2 applied to interstate conflicts within Australia, then arguably heavy transport vehicles of the kind used in interstate trade might be within the concept. But it has not been shown to be characteristic of earth moving equipment that it will be moved from one jurisdiction to another, even within, let alone out of, Australia. Accordingly, if s 238 applied at all, sub-section 238(1A) and (2) would both refer the issue to the law of the Northern Territory. Fourthly, while s 235(3) specifies as the location of a ‘body corporate’ the jurisdiction in which it is incorporated, there is no provision in respect of corporations equivalent to that in s 235(6), which makes provision that in the application of the section in relation to Australia, the jurisdiction in which property or an individual is located is the jurisdiction of the state or territory in which the property, or the individual’s principal place of residence, is located. This is because nowadays, although corporations may be registered in a particular state, they are incorporated in Australia. Thus s 235(3) would not have the consequence, even if s 238(3) applied, that the relevant jurisdiction was Queensland. Fifthly — unlike sub-section (1), (1A) and (2) — s 238(3) includes the laws of the jurisdiction relating to conflict of laws. Under the rules of private international law applicable in Queensland, the lex situs governs the validity and effect of the assignment of chattels, and where there are multiple assignments, the lex situs of the later transaction [Douglas v Price, 251–253]. Accordingly, application of s 238(3) would result in the application, to the question of the validity and perfection of QES’ security interest, of the laws of the Northern Territory. Sixthly, even if the law of Queensland were applicable, at least the 930 was registrable, but was not registered, in a transitional register in Queensland. Under the (QLD) Motor Vehicles and Boats Securities Act 1986, s 2: security interest means an interest in a motor vehicle, boat or outboard motor by way of security for or in respect of a liability, whether present, contingent or future created or otherwise arising in or under or in

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connection with a bill of sale, mortgage, charge, lien, hire-purchase agreement, lease or instrument having a like effect to any of them and includes the interest of— (a) an owner within the meaning of the Hire-purchase Act 1959 in respect of the liability of the hirer within the meaning of that Act; and (b) a lessor in respect of the liability of a lessee. Under s 3: (1) Motor vehicle means a land vehicle that moves on wheels and is propelled by a motor that is part of the vehicle. (2) Motor vehicle also includes a caravan or trailer designed to be attached to, or drawn by, a motor vehicle of a type mentioned in subsection (1). (3) Motor vehicle does not include the following— (a) a vehicle designed for use primarily in the mining industry; (b) farm machinery; (c) a vehicle designed for use on a railway or tramway. The 930 is admittedly a wheeled vehicle. (The plaintiffs accepted that the 320 and 330, being tracked vehicles, were not). Although QES suggested that the 930 was designed for use primarily in the mining industry, there is no evidence, nor any other basis, on which I could reach that conclusion. Accordingly, the 930 was a motor vehicle within the meaning of the Queensland Act and registrable under it, but not registered. (It may be — as argued by the plaintiffs — but is unnecessary to decide, that the 320 and 330 were registrable under the (QLD) Bills of Sale and Other Instruments Act 1955).’’

[238.5.2] Moved goods — s 238(2), (2A)

[238.5.3] Moved between jurisdictions — in the normal course — s 238(3) Where the goods are normally moved between jurisdictions, the position is the same as under the main rule, that is, the location of the grantor, rather than the collateral, is the determinant of which body of law will apply to the arising interest. This provision only applies, however, if the grantor is located where Annotated Personal Property Securities Act 2009 (Cth)

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The default position discussed in [238.5.1], however, does not apply if, at the time the security interest attached, it was reasonable to believe that the goods would be moved to a particular jurisdiction and at the time the issue arose the goods were actually in that jurisdiction. The element of ‘‘reasonable belief ’’ comprises a question of fact to be determined objectively in light of the surrounding facts and circumstances. Further, if the goods are of a type normally moved between jurisdictions (without reference to the specific facts and circumstances of the case in question) then s 238(3) of the Personal Property Securities Act 2009 (Cth) (PPSA) applies. See for example, Northwest Equipment Inc v Daewoo Heavy Industries America Corp (2002) 3 PPSAC (3d) 101; 1 Alta LR (4th) 14 (Alta CA).

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the security interest attaches. Section 238(3) of the Personal Property Securities Act 2009 (Cth) (PPSA), however, does not apply if the goods are used predominately for personal, domestic or household purposes (for more information on the phrase ‘‘personal, domestic or household purposes’’ see [47.4]). In such circumstances, the PPSA is silent as to the governing law. In the authors’ view, where the goods are used for such purposes any security interest that attaches will be governed by the securities law regime of the location of the underlying collateral, and not the grantor. This is consistent with the consumer protection imperatives of the PPSA in circumstances where property is used predominately for such purposes (see Pt 2.5, particularly s 47), as it is no doubt reasonable to expect that where collateral is found in a particular jurisdiction, the laws of the jurisdiction should apply to it. See for example, GMAC Commercial Credit Corp Canada v TCT Logistics Inc (2004) 6 PPSAC (3d) 163; 238 DLR (4th) 487 (Ont CA).

[238.5.4] Registers of ships — s 238(4) Where the goods forming part of a security interest are entered on a ‘‘register of ships’’ — as maintained by particular jurisdictions — the law of the jurisdiction containing the register governs any resulting security interests over such collateral pursuant to s 238(4) of the Personal Property Securities Act 2009 (Cth) (PPSA). For a discussion of s 238 and the application of the PPSA to maritime liens and s 73, see The Ship ‘‘Sam Hawk’’ v Reiter Petroleum Inc (2016) 246 FCR 337; [2016] FCAFC 26.

[238.6] Further reading ● Explanatory Memorandum [7.20–7.27]. ● ALRC Report No 64 [11.3–11.15]. ● Whittaker Report [9.1.7].

¶7-040 SECTION 239 GOVERNING LAWS — INTANGIBLE PROPERTY Main rules 239(1) 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. 239(2) At a particular time, the perfection, and the effect of perfection or non-perfection, 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.

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Intellectual property 239(3) 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 (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. ADI accounts 239(4) 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. 239(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.

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.

Annotated Personal Property Securities Act 2009 (Cth)

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Rights evidenced by letters of credit not covered 239(6) 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.

606

Personal Property Securities Act 2009

[239.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[239.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 30 s 7(2) s 7(1) § 9-301

Outline

Section 239 of the Personal Property Securities Act 2009 (Cth) (PPSA) outlines the governing laws with respect to intangible property. Different rules regarding the location of such property apply pursuant to s 235.

[239.3]

Cross-references

● Sections 236–238, 240 and 241 provide further rules regarding the governing law of security interests.

[239.4]

Concepts

● ADI account This is defined by s 10. See further s 25. ● Attaches See s 19. ● Intangible property This is defined by s 10. ● Intellectual property or an intellectual property license These are defined by s 10. See further s 105 and 106 and [12.5.3.5]. ● Located See s 235. ● Letter of credit A letter of credit is an instrument under which a bank agrees to make a payment once certain criteria are met. This is different from a bank guarantee which only obliges the bank to make a payment if the principal obligor defaults. Letters of credit are frequently used as instruments to finance trade and also in the construction industry and are covered by the Uniform Customs and Practice for Documentary Credits 2008 Revision published by the International Chamber of Commerce. A letter of credit that must be presented for payment is expressly included in the concept of negotiable instruments under s 10. See further s 28. ● Perfection See s 21. ● Security agreement This is defined by s 10. See further s 18 and 20.

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[239.5]

607

Commentary

[239.5.1] Main rule — s 239(1), (2) ..............................................................607 [239.5.2] Intellectual property — s 239(3) .................................................607 [239.5.3] ADI accounts — s 239(4), (5) .......................................................607 [239.5.4] Letters of credit — s 239(6) ..........................................................607

[239.5.1] Main rule — s 239(1), (2) The main rule, pursuant to s 239(1) and (2) of the Personal Property Securities Act 2009 (Cth) (PPSA), is the same as the rule with respect to goods pursuant to s 238(1) and (1A) (see s 238).

[239.5.2] Intellectual property — s 239(3) The main rule discussed in [239.5.1] applies to intellectual property where the attachment of a security interest occurs in the relevant jurisdiction and, at the time the interest is brought into issue, the grantor is located in the law of the jurisdiction the interest is perfected in. This is also the position where the law of the jurisdiction provides for public registration or recording of the interest including available notices where the interest is taken free and as to the validity of the security interest. (see Personal Property Securities Act 2009 (Cth), s 239(3)).

[239.5.3] ADI accounts — s 239(4), (5) By default, the law governing the authorised deposit-taking institution account (ADI account) is that of the jurisdiction which governs such an account. The parties can, however, agree to a different jurisdiction unless this is manifestly against public policy. The assessment of public policy in these circumstances seeks to deter parties from utilizing foreign jurisdictions for the purpose of circumventing critical policy objections of the Personal Property Securities Act 2009 (Cth) (Australian PPSA) (such as consumer protection ideals). The policy initiatives of the Australian PPSA are discussed further at Intro.IVff.

[239.5.4] Letters of credit — s 239(6)

Chapter 7

The rights evidenced by letters of credit are dealt with under s 240 of the Personal Property Securities Act 2009 (Cth) (PPSA).

[239.6] Further reading ● Explanatory Memorandum [7.28–7.36]. ● ALRC Report No 64 [11.3–11.15]. ● Whittaker Report [9.1.9]. Annotated Personal Property Securities Act 2009 (Cth)

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Personal Property Securities Act 2009

¶7-045 SECTION 240 GOVERNING LAWS — FINANCIAL PROPERTY AND RIGHTS EVIDENCED BY LETTERS OF CREDIT Validity rules 240(1) 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. 240(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. 240(3) However, the validity of a security interest to which subsection (1) applies is governed by the law of Australia if: (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. Perfection rules 240(4) 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. 240(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. Non-negotiable documents of title 240(6) Despite subsections (1) to (5), a security interest in a nonnegotiable 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.

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Negotiable instruments not evidenced by a certificate 240(7) 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.

[240.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[240.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 30 s 7(2) s 7(1) § 9-301

Outline

Section 240 of the Personal Property Securities Act 2009 (Cth) (PPSA) addresses governing rules in relation to financing property and rights evidenced by letters of credit.

[240.3]

Cross-references

● Sections 236–239 and 241 provide further rules regarding the governing law of security interests.

Concepts

● Attaches See s 19. ● Document of title This is defined in s 10. ● Financial property This is defined in s 10. ● Located See s 235. ● Letter of credit A letter of credit is an instrument under which a bank agrees to make a payment once certain criteria are met. This is different from a bank guarantee which only obliges the bank to make a payment if the principal obligor defaults. Letters of credit are frequently used as instruments to finance trade and also in the construction industry and are covered by the Uniform Customs and Practice for Documentary Credits 2008 Revision published by the International Chamber of Commerce. A letter of credit that must be presented for payment is expressly included in the concept of negotiable instruments under s 10. See further s 28. Annotated Personal Property Securities Act 2009 (Cth)

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[240.4]

610

Personal Property Securities Act 2009

● Negotiable instruments These are defined in s 10. See further s 29. ● Perfection See s 21. ● Possession See s 24. ● Security agreement This is defined by s 10. See further s 18 and 20.

[240.5]

Commentary

[240.5.1] Attachment — s 240(1), (2), (3) ....................................................610 [240.5.2] Perfection — s 240(4), (5) .............................................................610

[240.5.1] Attachment — s 240(1), (2), (3) The position under s 240 of the Personal Property Securities Act 2009 (Cth) (PPSA) with respect to the validity of a security interest over financial property derives from the law of the jurisdiction where the grantor is located at the time of attachment. This position also applies in relation to rights evidenced by letters of credit. With respect to financial property, an exception applies where the property is in Australia at the time of attachment and the secured party perfects by possession or control. The commerciality of such property takes precedence over the main rule and thus the possessing or controlling party prevails. This position is consistent with the underlying principles of the PPSA pursuant to s 24–29, 57 and Pt 2.6, Div 5.

[240.5.2] Perfection — s 240(4), (5) The law with respect to perfection applies similarly to financial property as it does to goods and intangibles (see s 238(2) and 240(2) of the Personal Property Securities Act 2009 (Cth) (PPSA) respectively). The same exception, however, applies to perfected interests, that is, property located in Australia where the security interest is perfected by possession or control will be governed by Australian law, that is, the PPSA.

[240.6] Further reading ● Explanatory Memorandum [7.37–7.38]. ● ALRC Report No 64 [11.3–11.15]. ● Whittaker Report [9.1.9].

¶7-050 SECTION 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.

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241(2) The perfection, and the effect of perfection or nonperfection, 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. 241(3)

This section applies despite any other provision of this Part.

241(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)).

[241.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[241.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 27, 30 s 5(3), (4), 7(2), (4) s 5(2), (3), 7(1) § 9-301, 9-316

Outline

Section 241 of the Personal Property Securities Act 2009 (Cth) (PPSA) creates a specific rule in relation to proceeds of valid security interests. Section 241(3) additionally prescribes that the section applies irrespective of the remainder of Pt 7.2.

[241.3]

Cross-references

● Sections 234–236 provide further rules regarding the governing law of security interests.

[241.4] Concepts ● Account This is defined by s 10. See further s 12. ● Perfection See s 21. See s 31.

[241.5]

Commentary

Section 241 of the Personal Property Securities Act 2009 (Cth) (PPSA) prescribes that the proceeds of a valid security interest are governed by the law of the jurisdiction that governed the original security interest. Annotated Personal Property Securities Act 2009 (Cth)

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● Proceeds

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Personal Property Securities Act 2009

Effects of perfection similarly follow their application with respect to the underlying security interest. Exceptions apply in relation to accounts (see s 239(4), (5)). On a general note, the Personal Property Securities Regulations 2010 have been left open as a source of amendment once the ramifications of the PPSA are better understood, that is, after the Act takes force. Considering the complexity of the regime and difficulties abroad, this is beneficial for the Australian regime, however, there may be some constitutional ramifications (see Pt 7.3).

[241.6] Further reading ● Explanatory Memorandum [7.39–7.40]. ● ALRC Report No 64 [11.3–11.15]. ● Whittaker Report [9.1.10].

PART 7.3 — CONSTITUTIONAL OPERATION Division 1 — Introduction ¶7-055 SECTION 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.

General commentary The Personal Property Securities Act 2009 (Cth) (PPSA) relies upon a referral of powers from each state under s 51(xxxvii) of the Commonwealth of Australia Constitution Act 1900 (the Constitution). A referral of powers is necessary as the Commonwealth has a number of limitations on its legislative power, including the inability to acquire property otherwise than on just terms (Constitution s 51(xxxi)). Section 252B provides that the provisions of the

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PPSA are not to apply to the extent that they involve the acquisition of property otherwise than on just terms. This Part sets out rules for addressing constitutional issues with the implementation and application of the PPSA. It should be read in conjunction with Pt 7.4, Pt 9.2–9.4 and s 5–7. Part 7.3 draws a distinction between referring states and non-referring states. Given the status of territories as distinct from states under s 122 of the Constitution, the PPSA applies to the territories. Sections 246–250 set out circumstances where the PPSA will apply in non-referring states. All states referred their powers to the Commonwealth to allow for the PPSA.

Division 2 — Constitutional basis ¶7-060

SECTION 243 CONSTITUTIONAL BASIS FOR THIS ACT

Operation in a referring State 243(1) 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.

Operation in a Territory 243(3) 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).

243(4) Despite subsection 22(3) of the Acts Interpretation Act 1901, this Act as applying in a Territory is a law of the Commonwealth. Annotated Personal Property Securities Act 2009 (Cth)

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Operation in a non-referring State 243(2) 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.

614

Personal Property Securities Act 2009 Operation outside Australia 243(5) 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.

[243.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[243.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

Outline

Nil.

[243.3]

Cross-references

Nil.

[243.4]

Concepts

Nil.

[243.5]

Commentary

[243.5.1] Overview ........................................................................................614 [243.5.2] Non-referring states — s 243(2) ..................................................615 [243.5.3] Operation outside Australia — s 243(5) ....................................615

[243.5.1]

Overview

The single Commonwealth statute which comprises the Personal Property Securities Act 2009 (Cth) (PPSA) may be taken for granted now that the legislation is in operative force in Australia, however, the validity of each individual provision of the Act is dependent upon an express grant of power under the Constitution or a referral of state power from the Australian states. At the time of drafting, three viable options were considered to introduce the personal property securities (PPS) reform in Australia. 1. The single Commonwealth statute (which was ultimately adopted) would be enacted following a referral of power from the states.

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2. The enactment of Commonwealth legislation to establish the Personal Property Securities Register (PPSR), with all substantive provisions of the PPS reform to be embodied in state-based legislation mirrored throughout the Australian states. 3. The use of Commonwealth legislation to create the PPSR including substantive provisions which would exhaust the balance of federal legislative power under the heads of s 51 of the Constitution. The difficulties with adopting approaches 2 or 3 above related primarily to an inability to ensure a fundamental objective of the PPSA, namely, uniformity across Australia. In addition, each state would need to expressly adopt any amending legislation — a significant pragmatic deficiency with multiple amendments occurring even prior to the regime commencing in Australia. Further, while a referring state can choose to prevent particular components of the PPSA from applying in that state, express revocation of a referral of power is unlikely — a process distinct from amending state-based legislation. Evidence of this can be seen with respect to the referrals of power necessary to enact the Corporations Act 2001 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth).

[243.5.2] Non-referring states — s 243(2) A ‘‘referring State’’ is defined by the PPSA under s 244. By process of deduction, a non-referring state is one which does not satisfy s 244, namely, a state which does not refer power necessary to give force to those provisions of the PPSA which require a referral of power in that relevant state. At the time of writing, no state had elected not to refer power and thus the provisions with respect to non-referring states are rendered largely moot. It should, however, be kept in mind that a referring state can revoke a referral. Should a referring state ever become a non-referring state, s 243(2) provides that a nonreferring state is bound by the PPSA to the extent that the federal parliament has the power to legislate, namely, if the relevant provision can be properly characterised as one which falls under a head of power pursuant to s 51 of the Constitution, then the provision is applicable in a non-referring state. The utility of revoking a referral of power is thus limited.

[243.5.3] Operation outside Australia — s 243(5) The extension of the PPSA to interests outside of Australia is subject to conflict of law questions. Section 243(5) states the Commonwealth parliament’s intention that the PPSA should operate outside Australia to the extent that it can under s 51 of the Constitution. However, whether the purported extended application of the regime is effective is a separate question. ● DE Allan, P Quirk, N Martin ‘‘Final Report — Workshop on Personal Property Security Reform’’ (2002) 14 Bond LR 8. ● D Rose, ‘‘Uniform Personal Property Security Legislation for Australia — Constitutional Issues’’ (2002) 14 Bond LR 26. ● M Hetherington, ‘‘The Constitutional Mechanism for Personal Property Security Legislation in Australia’’ (2002) 14 Bond LR 47. Annotated Personal Property Securities Act 2009 (Cth)

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[243.6] Further reading

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¶7-065 SECTION 244 MEANING OF REFERRING STATE General meaning 244(1) 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.

244(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 (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. Reference covering the relevant version of this Act 244(3) 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.

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Amendment references 244(4) 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. When a State stops being a referring State 244(5) 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. 244(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. 244(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. Definitions 244(8) In this section: amendment includes the insertion, omission, repeal, substitution or relocation of words or matter.

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] (Repealed by No 96 of 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. [referral version of this Act] (Repealed by No 96 of 2010) Annotated Personal Property Securities Act 2009 (Cth)

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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).

618

Personal Property Securities Act 2009 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. 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. 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.

[244.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

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[244.2]

Outline

Nil.

[244.3]

Cross-references

Nil.

[244.4]

Concepts

Nil.

[244.5]

Commentary

The referral of state power can be seen in the following legislation: ● Personal Property Securities (Commonwealth Powers) Act 2009 (NSW) ● Personal Property Securities (Commonwealth Powers) Act 2009 (Vic) ● Personal Property Securities (Commonwealth Powers) Act 2009 (Qld) ● Personal Property Securities (Commonwealth Powers) Act 2009 (SA) ● Personal Property Securities (Commonwealth Laws) Act 2011 (WA) ● Personal Property Securities (Commonwealth Powers) Act 2010 (Tas). The legislation in all states bar Western Australia adopts predominately the same form. There was some contention expressed by Western Australia prior to the registration commencement time (30 January 2012, see s 306 of the Personal Property Securities Act 2009 (Cth) (PPSA), [306.5.2]) regarding an absolute and irrevocable grant of power. The consequential referring legislation is thus more involved whereby Western Australia preserves its right to prevent particular parts of the PPSA from operating within Western Australia (subject to s 243(2)). The following amendment legislation should be read in conjunction with the referring legislation: ● Personal Property Securities (Commonwealth Powers) Amendment Act 2009 (NSW) ● Personal Property Securities Legislation Amendment Act 2010 (NSW) ● Personal Property Securities (Statute Law Revision and Implementation) Act 2010 (Vic) ● Personal Property Securities (Ancillary Provisions) Act 2010 (Qld) ● Personal Property Securities (National Uniform Legislation) Implementation Act 2011 (Tas).

245(1) In this Act, referred PPS matters, in relation to personal property covered by paragraph 244(4)(a), (b) or (c), means: (a) the matter of security interests in the personal property; and (b) without limiting the generality of paragraph (a), each of the following matters: Annotated Personal Property Securities Act 2009 (Cth)

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¶7-070 SECTION 245 MEANING OF REFERRED PPS MATTERS

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Personal Property Securities Act 2009 (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). 245(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). 245(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).

General commentary Section 245 of the Personal Property Securities Act 2009 (Cth) (PPSA) attempts to limit the scope of the referral of power or otherwise expressly define it. It constitutes an ‘‘abundance of caution’’ type provision likely to give some

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comfort to state parliaments who made a decision to refer power. For practitioners, s 245 highlights dealings with personal property which are beyond the scope of the regime and thus s 245 should be read with s 8.

¶7-075

SECTION 246 NON-REFERRING STATE OPERATION — OVERVIEW

Operation 246(1) 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. 246(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. Constitutional meaning of terms 246(3) 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.

¶7-080

SECTION 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

247(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). 247(3)

This subsection covers the following persons:

(a) a bankrupt or an insolvent; Annotated Personal Property Securities Act 2009 (Cth)

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(b) the grantor of the security interest is a person covered by subsection (3).

622

Personal Property Securities Act 2009 (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.

¶7-085 SECTION 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. 248(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. 248(3) Subsection (2) does not limit the operation of this Act in a non-referring State otherwise than under this section.

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SECTION 249 NON-REFERRING STATE OPERATION — INTERESTS

General rule 249(1) 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. Constitutional interests exclusively — severable operation 249(2) 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.

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SECTION 250 NON-REFERRING STATE OPERATION — INCLUSION OF DATA IN REGISTER

General commentary The implementation of a nationwide register was not left open to the states. Section 250 of the Personal Property Securities Act 2009 (Cth) (PPSA) prescribes that regardless of whether or not the PPSA was adopted, the Personal Property Securities Register (PPSR) operates in all Australian states. This is Annotated Personal Property Securities Act 2009 (Cth)

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250 Chapter 5 of this Act (Personal Property Securities Register) operates in a non-referring State in relation to personal property.

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important as, despite the existing referral of power, the PPSR is central to the regime and drafting of this nature is reflective of the emphasis placed upon it.

¶7-100 SECTION 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.

General commentary A specific taking free provision under s 251 facilitates the ability of a nonreferring state to refer power to the Commonwealth without risking a conflict of law.

¶7-105 SECTION 252 PRIORITY BETWEEN CONSTITUTIONAL AND NONCONSTITUTIONAL 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.

General commentary Federal laws are subject to the Constitution regarding validity. A law which can not be characterised as one with respect to a relevant head of power is invalid. Whether or not Div 3 of Pt 7.3 of the Personal Property Securities Act 2009 (Cth) (PPSA) is included, the interpretation of each provision is subject to the Constitution. It is inherent with all laws passed by the federal parliament that they seek to comply with the Constitution, that is in this case, that no provision discriminates between the states and no provision provides for an acquisition of property on unjust terms. The work done by s 252A and 252B is thus precautionary at best.

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Division 3 — Constitutional guarantees ¶7-110

SECTION 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.

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SECTION 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. 252B(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.

General commentary The validity of the vesting provision pursuant to s 267(2) of the PPSA (and therefore s 588FL(4) of the Corporations Act 2001 (Cth)) was considered in White v Spiers Earthworks Pty Ltd (2014) 99 ACSR 214; [2014] WASC 139, a case concerning a hire purchase arrangement where the defendants (the hirers) failed to perfect any interest held over the underlying collateral on the PPS Register nor did they register any interest under the Chattel Securities Act 1987 (WA). The defendants argued, among other things, that s 267(2) of the PPSA constituted an acquisition of property on otherwise than just terms in breach of s 51(xxxi) and s 252B of the PPSA would disentitle s 267(2) to be read this way (at 221 [34]). ‘‘Section 267(2) of the PPSA does not effect an acquisition of property within the meaning of ‘acquisition of property’ in s 51(xxxi) of the Constitution. The operation of s 267 to vest the defendants’ interest in the hire assets does not result in an acquisition of property within the meaning of ‘acquisition of property’ in s 51(xxxi) of the Constitution, and hence s 252B of the PPSA does not apply to the circumstances of this case. The result is that s 267(2) of the PPSA applies and the interests of the defendants in the hire assets are vested in the company by reason of s 267 of the PPSA notwithstanding s 252B of the PPSA.’’ Annotated Personal Property Securities Act 2009 (Cth)

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In rejecting this contention, Le Miere J held (at 223 [40]):

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In reaching this conclusion, his Honour relied on dictum set out in Australian Tape Manufacturers Association Ltd v Commonwealth (1993) 176 CLR 480, where Mason CJ, Brennan, Deane and Gaudron JJ held (at 509–510): ‘‘The answer to the question whether a legislative imposition of an obligation to pay money involves an ‘acquisition of property’ for the purposes of s 51(xxxi) of the Constitution must depend upon the context in which the obligation is imposed. ... In a case where an obligation to make a payment is imposed as genuine taxation, as a penalty for proscribed conduct, as compensation for a wrong done or damages for an injury inflicted, or as a genuine adjustment of the competing rights, claims or obligations of persons in a particular relationship or area of activity, it is unlikely that there will be any question of an ‘acquisition of property’ within s 51(xxxi) of the Constitution. On the other hand, the mere fact that what is imposed is an obligation to make a payment or to hand over property will not suffice to avoid s 51(xxxi)’s guarantee of ‘just terms’ if the direct expropriation of the money or other property itself would have been within the terms of the subsection. Were it otherwise, the guarantee of the section would be reduced to a hollow facade.’’ (emphasis added). This was expanded upon in Georgiadis v Australian and Overseas Telecommunications Corp (1994) 179 CLR 297 where Mason CJ, Deane and Gaudron JJ held (at 307): ‘‘Not every Commonwealth law with respect to the acquisition of property falls within s 51(xxxi) of the Constitution. It may be outside that paragraph because, although it effects an acquisition of property, it is a law of a kind that is clearly within some other head of legislative power. That is the case with a law imposing taxation or a law providing for the sequestration of the estate of a bankrupt. Or it may be outside s 51(xxxi) because it effects an acquisition of a kind that does not permit of just terms, as in the case of a law imposing a penalty by way of forfeiture. And, it may fall outside s 51(xxxi) because it cannot fairly be characterised as a law for the acquisition of property for a purpose in respect of which the parliament has power to make laws. That will generally be the case with laws directed to resolving competing claims or providing for ‘the creation, modification, extinguishment or transfer of rights and liabilities as an incident of, or a means for enforcing, some general regulation of the conduct, rights and obligations of citizens in relationships or areas which need to be regulated in the common interest’.’’ (emphasis added) And further in Mutual Pools & Staff Pty Ltd v Commonwealth (1994) 179 CLR 155 where Mason CJ held (at 169–170): ‘‘[I]t is a well-accepted principle of interpretation that, when a power is conferred and some qualification or restriction is attached to its exercise, other powers should be construed, absent any indication of contrary

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intention, so as not to authorise an exercise of the power free from the qualification or restriction. Hence, the effect of s 51(xxxi) when read in conjunction with the other legislative powers of the parliament is that, subject to any contrary intention, it forbids the making of laws with respect to the acquisition of property from any State or person for a relevant purpose on terms that are not just. Consequently, a law with respect to the acquisition of property must comply prima facie with the requirement of just terms. An indication of contrary intention may be provided by the express terms in which a specific power is conferred or by the very nature of the subject matter of a specific power or what is included within it. Thus, the very terms of s 51(xxxiii), which confers power to make laws with respect to the acquisition of State railways ‘on terms arranged between the Commonwealth and the State’, indicate that an acquisition of State railways stands outside s 51(xxxi). And, so does s 85 which makes special provision with respect to compensation payable by the Commonwealth for property passing from a State under that section. Likewise, a law made in the exercise of the power with respect to bankruptcy and insolvency, which provides for the sequestration of the property of a bankrupt and its vesting in the Official Receiver, is not a law with respect to the acquisition of property within s 51(xxxi). It is no more and no less than a law which regulates the incidents and effects of bankruptcy, the provision for the vesting of title to the bankrupt’s property in the Official Receiver being subordinate to sequestration. That element in the law would not enable one to describe it with any semblance of accuracy as a law for the acquisition of property.’’ (emphasis added). In the subsequent decision Brereton J held that vesting under s 267 is not an acquisition at all (at [45]):

His Honour also held (at [52]) that s 267 was not a law directed at acquiring property ‘‘applied for any purpose in respect of which the Commonwealth has power to make laws, but for the grantor’s own purposes: to enlarge the grantor’s assets and the property that will be divisible among its creditors. As such an acquisition is not for a relevant Commonwealth purpose . . .’’. Rather, the vesting provisions are directed at adjusting competing rights and so do not come within the scope of s 51(xxxi): at [53]. The authors respectfully agree with the analysis of Le Miere and Brereton JJ. Annotated Personal Property Securities Act 2009 (Cth)

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‘‘The section does not effect a taking of property which the PPS lessor held prior to its becoming subject to the PPSA; rather, it prescribes a consequence, in certain circumstances, of a lease entered into subject to the PPSA. It is an incident of any PPS lease entered into after the commencement of the PPSA that the lessor’s interest is liable to vest in the lessee in certain events, if it has not been perfected.’’

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PART 7.4 — RELATIONSHIP BETWEEN AUSTRALIAN LAWS Division 1 — Introduction ¶7-120 SECTION 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.

Division 2 — Concurrent operation ¶7-125 SECTION 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. 254(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:

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(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.

Note: The following provisions of this Act expressly allow for the operation (or the limited operation) of State and Territory laws: (a) section 73 (interests arising under laws of the Commonwealth, States and Territories); (b) section 110 (rights and remedies of debtors and secured parties); (c) section 119 (relationship with credit legislation); (ca) section 140 (distribution of proceeds received by secured party); Annotated Personal Property Securities Act 2009 (Cth)

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(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.

630

Personal Property Securities Act 2009 (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).

254(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.

[254.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[254.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision s 73 no parallel provision

Outline

While Pt 7.2 of the Personal Property Securities Act 2009 (Cth) (PPSA) examines the relationship between the Australian PPSA and foreign laws, Pt 7.4 analyses the interaction between the PPSA and other Australian laws (including Commonwealth, state, territory and general laws). Section 254 provides the general position while the balance of Pt 7.4 discusses the specific rules and where they apply.

[254.3]

Cross-references

● Section 255 allows for regulations to resolve inconsistencies between the operation of the PPSA and concurrent laws. ● Sections 256–259 set out where other laws prevail over the PPSA. ● Sections 261–264 set out where the PPSA prevails over other laws.

[254.4]

Concepts

● Personal property This is defined by s 10.

[254.5]

Commentary

The general rule pursuant to s 254(1) is that the Personal Property Securities Act 2009 (Cth) (PPSA) will not circumvent the operation of any of the other laws of Australia (including Commonwealth, state, territory and general law principles) to the extent that concurrent operation is available. Section 254(2) outlines several areas explicitly providing for the concurrent operation of Australian laws and the PPSA, however, s 254(1) is not to be limited by s 254(2). The court should thus aim to facilitate the concurrent operation of the laws where available.

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The PPSA is not a complete commercial ‘‘code’’: Warehouse Sales Pty Ltd (in liq) & Lewis and Templeton v LG Electronics Australia Pty Ltd (2014) 291 FLR 407; [2014] VSC 644 at [35]. If a particular outcome or circumstance is not contemplated by the PPSA then there is nothing to suggest that existing statutory law or the general law (namely, principles of common law and equity) would not apply to such a scenario. The following example demonstrates the point: Assume Party A owns a motor vehicle which is stolen by Party B. Party B then seeks to raise finance from Party C who agrees to provide such finance on the basis that Party B grants it a security interest over the motor vehicle. Party C does so and Party B perfects their interest by registration. Subsequently, Party B defaults on their loan obligations owed to Party C and Party C seeks to enforce their security against the motor vehicle as a consequence. However, upon seizing the motor vehicle, Party A discovers their motor vehicle and asserts their ownership as against Party C.

When looking to ascertain who should prevail in the above scenario it is critical to appreciate that the outcome is not PPSA dependent. Part 2.6 of the PPSA, which would ordinarily be consulted if a priority dispute (as the above appears to be) were to arise, resolves priority disputes between competing security interests. The theft of the motor vehicle did not create a security interest in favour of Party A from Party B and thus any dispute regarding the motor vehicle cannot, as a matter of proper characterisation, be one with respect to priority. As the PPSA does not otherwise resolve the dispute (with Pt 2.5 equally being inapplicable in the circumstances), s 254 provides that resort can be to the general law and presumably the principle of nemo dat quod non-habet would apply. That being said, and particularly with the expiration of the transitional provisions under Ch 9, it does not necessarily follow that the general law will apply in circumstances where the PPSA does operate but would produce a seemingly unfair result. Section 254(1) provides that the general law, inter alia, is relevant and applicable only where it is capable of ‘‘operating concurrently’’ with the PPSA. The point is further made clear by s 254(3).

In KBA Canada Inc v Supreme Graphics Ltd [2014] BC CA 117, the court considered whether the British Columbia equivalent provision in the PPSA (BC PPSA s 68) allowed the court to use equitable principles to determine priority instead of applying the PPSA priority rules. The Court of Appeal rejected this argument and stated (at [26]–[27]): ‘‘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 Annotated Personal Property Securities Act 2009 (Cth)

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It is particularly crucial to observe this provision, and its scope, effect and limit, in the context of a priority dispute arising squarely under the PPSA. Speaking generally, it would be an error, in the authors’ view, to assume that Equity or restitution principles would have any place in coming to the aid of a party who is adversely affected by the proper application of any such provision of the PPSA.

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Personal Property Securities Act 2009 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. It is difficult to conceive of a situation in which principles of common law, equity, or the law merchant will be applicable to a priorities dispute, because the PPSA deals with priorities comprehensively.’’

This issue was addressed in the case of Re Pacific Shores Resort & Spa Ltd (2013) 1 PPSAC (4th) 131; [2013] BCSC 480, where Fitzpatrick J considered whether or not a strata corporation took priority with respect to strata fees despite the fact that such fees could be properly characterised as receivables over which competing creditors held perfected security interests. The strata corporation brought its case on the doctrine of unjust enrichment with a claim for equitable relief in the alternative. His Honour held (at [32]–[33]): ‘‘The application of equitable principles in the context of a statutory priority regime inevitably gives rise to the suggestion that the fundamental purpose of the legislation will be undermined if equity is wielded to defeat statutory priorities. After all, commercial law rests on the bedrock principles of certainty and predictability. Mr. Justice Kelleher recently commented on the importance of these principles in KBA Canada, Inc. v. 3S Printers Inc., 2012 BCSC 1078 (CanLII), 2012 BCSC 1078: [43] The importance of certainty and predictability was underlined by the Supreme Court in Royal Bank of Canada v. Sparrow Electric Corp., 1997 CanLII 377 (SCC), [1997] 1 S.C.R. 411, where Mr. Justice Gonthier said in a dissenting opinion, at para. 21: More recently, provincial legislatures have moved to protect secured creditors generally through the enactment of personal property security legislation . . . these statutory regimes have been implemented to increase certainty and predictability in secured transactions through the creation of a coherent system of priorities . . . the benefits of such certainty in commercial transactions on basic economic principles, are intended to accrue to the health of the economy in general. As such, courts have indeed held that introducing equitable principles into such a priority regime can have the effect of defeating the priority scheme. In the context of the priority scheme under the Personal Property Security Act, R.S.B.C. 1996, c. 359 (the ‘PPSA’), Master Hyslop, as she then was, in Bankruptcy of Canadian Auto Lease Corp., 2006 BCSC 849 (CanLII), 2006 BCSC 849 at para. 26, quoted with approval the comments of Mr. Justice Killeen in Canadian Imperial Bank of Commerce v. Melnitzer (Trustee of), [1993] O.J. No. 3021 (C. J. (Gen. Div.)) at para. 138: . . . the drafters of the PPSA did not intend to have its perfection-ofinterests system overridden or emasculated by an endless serious of ad hoc rulings in individualized settings. Respect must be

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maintained for the perfection system no matter how harsh its application may appear to be in a given isolated case.’’ In this regard, his Honour also noted (at [56]–[58]) that: ‘‘. . . there are usually two bases upon which the court will disregard the statutory priority provisions at the first stage of the Garland test and go on to consider whether the enriched party can establish a juristic reason at the second stage of that test. First, where a secured party has mistakenly discharged its security and subsequent charge holders have not been prejudiced, the court may impose a constructive trust rather than allow the later charge holder, who had no expectation of gaining priority, to reap a windfall . . . [and] Second, a constructive trust may be imposed in accordance with the reasonable expectations of the parties and ‘good commercial conscience’.’’ His Honour concluded (at [75]–[76]):

No such ‘limited’ circumstances exist here. I have decided that the strata corporation should not be entitled to assert a priority on the basis of what it could  or, more appropriately, should  have done. Creditors make credit decisions all the time, some of which turn out, in retrospect, to have been made in error. Imposing a constructive trust in these circumstances would only invite those types of creditors, having then had the benefit of hindsight, to ask the court to revisit and remedy those decisions. I consider that allowing such applications would detract from, rather than enhance, the efficacy of statutory priority regimes and the public policy objectives that were intended to be achieved under those statutes.’’ The authors respectfully agree with the analysis of Fitzpatrick J. Annotated Personal Property Securities Act 2009 (Cth)

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‘‘In the second stage of the juristic reason analysis, public policy concerns may be raised and addressed. I have already mentioned the concepts of certainty and predictability which are so important to commercial law. The priority regimes under the Act, the PPSA and the LTA rely on these concepts so as to provide clear rules upon which commercial players can operate, particularly within the context of potential or ongoing insolvency proceedings. It is beyond question that violence would be done to commercial law if established priority regimes could be regularly altered or circumvented on an ad hoc basis and based on individual notions of fairness. Such an approach was especially decried by the court in Melnitzer and by Chief Justice McEachern in Ellingsen. Having said that, there will no doubt continue to be cases where the application of equitable principles is appropriate. The court in KBA Canada found the facts there to support the relief, but even there, the court noted that the constructive trust was imposed in what was described as ‘limited circumstances’: para. 80.

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[254.6] Further reading ● Explanatory Memorandum [7.52]. ● ALRC Report No 64 [11.3–11.15]. ● Whittaker Report [9.2.3]. ● Sheelagh McCracken, ‘‘Personal Property Securities Legislation: Analysing the New Lexicon’’ (2014) 35 Adelaide Law Review 71. ● Sheelagh McCracken, ‘‘When is a ‘Buyer’ a ‘Buyer’? Solving Riddles When New Legislation Confronts Established Concepts’’ in S. Griffiths, S. McCracken, A. Wardrop (Eds.), Exploring Tensions in Finance Law: Trans-Tasman Insights, Thomson Reuters NZ, 2014.

¶7-130 SECTION 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. 255(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

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(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. 255(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).

[255.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[255.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision s 74 no parallel provision

Outline

Section 255 of the Personal Property Securities Act 2009 (Cth) (PPSA) expressly provides for the imposition of the Personal Property Securities Regulations 2010 to determine the outcome of a conflict between law applicable in Australia and the PPSA where necessary.

[255.3]

Cross-references

● Section 254 provides the general rule regarding the relationship between the PPSA and other laws.

Chapter 7

[255.4] Concepts ● Licence This is defined by s 10. See also s 105 and [12.5.3.5]. ● Personal property This is defined by s 10. Annotated Personal Property Securities Act 2009 (Cth)

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Personal Property Securities Act 2009

[255.5]

Commentary

The purpose of s 255 of the Personal Property Securities Act 2009 (Cth) (PPSA), in substance, is to expressly provide for the intervention of the PPS Regulations to resolve inconsistencies between the PPSA and the general body of Australian law where appropriate. The PPSA can arguably be amended in the absence of s 255, however, utilising the PPS Regulations may be quicker and more efficient. While no specific regulations have emerged to date as a result of this provision, as the Act continues in operation the need may subsequently arise.

[255.6] Further reading ● Explanatory Memorandum [7.53–7.55]. ● ALRC Report No 64 [11.3–11.15].

Division 3 — When other laws prevail ¶7-135 SECTION 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) the International Interests in Mobile Equipment (Cape Town Convention) Act 2013.

[256.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[256.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision s 73 no parallel provision

Outline

Section 256 of the Personal Property Securities Act 2009 (Cth) (PPSA) outlines specific legislation which takes precedence to the PPSA. The provision is the first operative section under Pt 7.4, Div 3 — a division which specifies and particularizes when other Australian laws will prevail over the PPSA.

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[256.3]

Cross-references

● Section 255 provides the main rule for the concurrent operation of the PPSA with other laws. ● Section 255 allows for regulations to resolve inconsistencies between the operation of the PPSA and concurrent laws. ● Sections 257–259 set out further rules where other laws prevail over the PPSA. ● Sections 261–264 set out where the PPSA prevails over other laws.

[256.4] Concepts Nil.

[256.5] Commentary The express provision for the three Commonwealth Acts under s 256 of the Personal Property Securities Act 2009 (Cth) (PPSA) indicates the continued application of these statutory regimes with respect to personal property securities. While subsections (b) and (c) of s 256 relate mainly to issues of construction and formality regarding particular instruments, the Payment Systems and Netting Act 1998 (Cth) preserves the position in Australia with respect to statutory set-off rights and netting arrangements — the commerciality of which is integral to the Australian derivatives and banking market. In the authors’ view, this may lead to some complexity whereby security is taken by way of a set-off right, however, the recognition of commercial affairs in Australia means that such arrangements are best governed by the Payment Systems and Netting regime (see also s 8).

[256.6] Further reading ● Explanatory Memorandum [7.57]. ● ALRC Report No 64 [11.3–11.15]. ● Whittaker Report [7.6.13].

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SECTION 257 WHEN OTHER LAWS PREVAIL — SECURITY AGREEMENTS

Scope

Operation of other laws dealing with security agreements 257(2)

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. Annotated Personal Property Securities Act 2009 (Cth)

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257(1) This section sets out restrictions on the extent to which a security agreement is effective according to its terms under subsection 18(1).

638

Personal Property Securities Act 2009 257(3) apply:

However, a law mentioned in subsection (2) does not

(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.

[257.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[257.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision s 73 no parallel provision

Outline

While a security agreement is effective according to its terms pursuant to s 18(1) of the Personal Property Securities Act 2009 (Cth) (PPSA), s 257 reigns in the scope of the agreement with respect to the general body of law in Australia.

[257.3]

Cross-references

● Section 254 provides the main rule for the concurrent operation of the PPSA with other laws. ● Section 255 allows for regulations to resolve inconsistencies between the operation of the PPSA and concurrent laws. ● Sections 256, 258 and 259 set out further rules where other laws prevail over the PPSA. ● Sections 261–264 set out where the PPSA prevails over other laws.

[257.4]

Concepts

● Security agreement This is defined by s 10. See further s 18 and 20.

[257.5]

Commentary

The freedom of contract principles pursuant to s 18(1) allow the parties to a security agreement to essentially become bound by any such term as they see fit. Parties are, however, unable to contract out of the provisions of the Personal Property Securities Act 2009 (Cth) (PPSA) (unless explicitly authorised to do so, for example pursuant to s 115) and where an agreement conflicts with the PPSA, the PPSA prevails to the extent of the inconsistency (see s 236 and 237). Pursuant to s 257, the same rule applies for the general body of law

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as against a security agreement, that is, the provisions of other governing laws of Australia prevail against a security agreement to the extent that they are inconsistent. This must be the case in order to give primacy to the legislature’s intentions. This rule does not apply where the provisions of Pt 7.4, Div 4 apply, whereby Div 4 articulates where the PPSA prevails against other laws of Australia. Additionally, the PPSA prescribes circumstances where a security agreement prevails against other laws for PPS purposes (see s 257(3)).

[257.6] Further reading ● Explanatory Memorandum [2.1]. ● ALRC Report No 64 [11.3–11.15]. ● Whittaker Report [8.1.2].

¶7-145

SECTION 258 WHEN OTHER LAWS PREVAIL — PERSONAL PROPERTY, SECURITY INTERESTS AND MATTERS EXCLUDED FROM STATE AMENDMENT REFERRALS

Personal property and security interests 258(1) 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).

258(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. 258(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); Annotated Personal Property Securities Act 2009 (Cth)

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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.

640

Personal Property Securities Act 2009 (c) a law of a Territory; (d) the general law. 258(4) Subsection (1) does not apply to an effect of a law to the extent (if any) prescribed by the regulations. Matters excluded by State amendment referrals 258(5) 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)).

258(6) Subsection (5) only applies in relation to a law of a referring State while the State is a referring State.

[258.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[258.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision s 73 no parallel provision

Outline

Section 258 of the Personal Property Securities Act 2009 (Cth) (PPSA) specifies when other laws applicable in Australia prevail as against the PPSA.

[258.3]

Cross-references

● Section 254 provides the main rule for the concurrent operation of the PPSA with other laws. ● Section 255 allows for regulations to resolve inconsistencies between the operation of the PPSA and concurrent laws. ● Sections 257 and 259 set out further rules where other laws prevail over the PPSA. ● Sections 261–264 set out where the PPSA prevails over other laws.

[258.4]

Concepts

● Personal property This is defined by s 10.

[258.5]

Commentary

The Personal Property Securities Act 2009 (Cth) (PPSA), pursuant to s 258, grants primacy to other laws of Australia (including those Commonwealth, state, territory and general law provisions and principles) above that of the PPSA

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concerning the creation, acquiring or dealing with personal property or a security interest taken in such property to the extent of any inconsistency. This approach is in line with the rationale and objective of the PPSA, that is, the PPSA is predominately concerned with regulating security interests after they arise and has little if any influence over the commercial circumstances giving rise to the such interests. Additionally, in the absence of a security interest, the PPSA has little application and thus other laws duly prevail with the dealing of personal property. Further, nothing in the PPSA operates to remove the application of the laws of a referring state (see also s 259). The legislation responsible for referring the power of the state to the Commonwealth with respect to the PPSA takes primacy against the PPSA (for reasons as to why a reference of power is necessary see Pt 7.3 of the PPSA). See also Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd (in liq) (recs and mgrs apptd) (2017) 320 FLR 259; [2017] WASC 152, which considered the operation s 80 and 258 of the PPSA together with statutory set-off in insolvency under Corporations Act 2001 (Cth), s 553C. It was held that set-off under s 553C is an exclusive code and that s 258 did not apply, but in the circumstances of the case the granting of a security interest severed the ‘‘mutuality’’ required for set-off under the Corporations Act to apply.

[258.6] Further reading ● Explanatory Memorandum [7.60]. ● ALRC Report No 64 [11.3–11.15].

¶7-150

SECTION 259 WHEN OTHER LAWS PREVAIL — EXCLUSION BY REFERRING STATE LAW OR TERRITORY LAW

Scope 259(1) 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:

(b) a specified provision of this Act (or an instrument made under this Act); or (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. Annotated Personal Property Securities Act 2009 (Cth)

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(a) the whole of this Act (or an instrument made under this Act); or

642

Personal Property Securities Act 2009 Matters excluded by declaration 259(2) 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. Regulations under this Act may affect operation of declaration 259(3) Subsection (2) does not apply to the declaration to the extent (if any) prescribed by the regulations.

[259.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[259.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision s 73 no parallel provision

Outline

Section 259 of the Personal Property Securities Act 2009 (Cth) (PPSA) prescribes what is to occur where a state or territory law excludes the operation of a particular PPSA provision.

[259.3]

Cross-references

● Section 254 provides the main rule for the concurrent operation of the PPSA with other laws. ● Section 255 allows for regulations to resolve inconsistencies between the operation of the PPSA and concurrent laws. ● Sections 257 and 258 set out further rules where other laws prevail over the PPSA. ● Sections 261–264 set out where the PPSA prevails over other laws.

[259.4]

Concepts

Nil.

[259.5]

Commentary

Section 259 of the Personal Property Securities Act 2009 (Cth) (PPSA) simply holds that where the PPSA is excluded, in whole or in part, other laws, where applicable, will prevail to the extent of the PPSA’s non-application. While there is no substantive deviation from the PPSA from any state or territory at the time of writing, the opportunity to exclude particular provisions is preserved.

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[259.6] Further reading ● Explanatory Memorandum [7.62–7.63]. ● ALRC Report No 64 [11.3–11.15]. CCH Note: S 260 repealed by No 96 of 2010, s 3, Sch 2, Pt 1, item 106, effective 6 July 2010.

Division 4 — When this Act prevails ¶7-155

SECTION 261 WHEN THIS ACT PREVAILS — REGISTRATION REQUIREMENTS

Scope 261(1) 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.

261(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. Failure to register under applicable law 261(3) A failure to register the security interest under the applicable law does not:

(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).

Annotated Personal Property Securities Act 2009 (Cth)

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Chapter 7

(a) affect the validity, priority or enforceability of the security interest, or of a security agreement providing for the security interest; or

644

Personal Property Securities Act 2009

[261.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[261.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision s 73 no parallel provision

Outline

Section 261 of the Personal Property Securities Act 2009 (Cth) (PPSA) provides that a failure to register a security interest under a non-PPSA law does not affect the validity of the security interest.

[261.3]

Cross-references

● Section 254 provides the main rule for the concurrent operation of the PPSA with other laws. ● Section 255 allows for regulations to resolve inconsistencies between the operation of the PPSA and concurrent laws. ● Sections 257–259 set out rules where other laws prevail over the PPSA. ● Sections 262–264 set out further where the PPSA prevails over other laws.

[261.4]

Concepts

● Security agreement This is defined by s 10. See further s 18 and 20.

[261.5]

Commentary

Section 261 of the Personal Property Securities Act 2009 (Cth) (PPSA) prescribes, in essence, that any failure to register a security interest pursuant to a regime outside of the PPSA will not affect the validity, enforceability or priority of a security interest if it conforms with the requirements of the PPSA. While this may interfere with the existence of the underlying collateral itself (for instance, see particular requirements with respect to recognising intellectual property), for the purposes of the PPSA, a security interest is valid regardless of registration requirements which form part of the general body of Australian law.

[261.6] Further reading ● Explanatory Memorandum [7.64]. ● ALRC Report No 64 [11.3–11.15].

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Part 7.4 — Relationship between Australian laws

¶7-160

SECTION 262 WHEN THIS ACT PREVAILS — ASSIGNMENT REQUIREMENTS

Scope 262(1) 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. 262(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. 262(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. Failure to register under applicable law 262(4) A failure to register the assignment of the security interest under the applicable law does not: (a) affect the validity of the assignment; 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).

Annotated Personal Property Securities Act 2009 (Cth)

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Chapter 7

(b) affect the validity, priority or enforceability of the security interest, or of a security agreement providing for the security interest; or

646

Personal Property Securities Act 2009

[262.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[262.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision s 73 no parallel provision

Outline

Section 262 of the Personal Property Securities Act 2009 (Cth) (PPSA) addresses the prescribed rules in relation to registering an assignment.

[262.3]

Cross-references

● Section 254 provides the main rule for the concurrent operation of the PPSA with other laws. ● Section 255 allows for regulations to resolve inconsistencies between the operation of the PPSA and concurrent laws. ● Sections 257–259 set out rules where other laws prevail over the PPSA. ● Sections 261, 263 and 264 set out further rules where the PPSA prevails over other laws.

[262.4]

Concepts

● Security agreement This is defined by s 10. See further s 18 and 20.

[262.5]

Commentary

Like s 261 of the Personal Property Securities Act 2009 (Cth) (PPSA), s 262 prescribes that where an assignment of property requires registration by law in Australia outside of the PPSA, and the relevant party fails to comply with such requirements, such an occurrence does not affect the validity, enforceability or priority of the security interest provided the requisite elements of the PPSA are complied with. Section 262 applies where the assignment also constitutes a security interest and while failing to satisfy the requirements of any statute is ill-advised in the authors’ view, it will not affect the assignment for the purposes of the PPSA.

[262.6] Further reading ● Explanatory Memorandum [7.64–7.65]. ● ALRC Report No 64 [11.3–11.15].

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Part 7.4 — Relationship between Australian laws

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647

SECTION 263 WHEN THIS ACT PREVAILS — FORMAL REQUIREMENTS RELATING TO AGREEMENTS

Scope 263(1) 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. 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.

263(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. Failure to comply with formal requirement under applicable law 263(3) 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

(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).

Annotated Personal Property Securities Act 2009 (Cth)

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Chapter 7

(b) affect the validity, priority or enforceability of the security interest; or

648

Personal Property Securities Act 2009

[263.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[263.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision s 73 no parallel provision

Outline

Section 263 of the Personal Property Securities Act 2009 (Cth) (PPSA) applies to any formal requirements as specified by other laws which affect PPSA-related interests.

[263.3]

Cross-references

● Section 254 provides the main rule for the concurrent operation of the PPSA with other laws. ● Section 255 allows for regulations to resolve inconsistencies between the operation of the PPSA and concurrent laws. ● Sections 257–259 set out rules where other laws prevail over the PPSA. ● Sections 261, 262 and 264 set out further rules where the PPSA prevails over other laws. ● Personal Property Securities Regulations 2010 (Cth) Reg 7.1.

[263.4]

Concepts

● Security agreement This is defined by s 10. See further s 18 and 20.

[263.5]

Commentary

Like s 261 and 262 of the Personal Property Securities Act 2009 (Cth) (PPSA), where other Australian laws require formal elements to be complied with, and the relevant party has not complied, this will not affect the validity, enforceability or priority of the security interest if the interest has accorded with the requirements of the PPSA. The only formal requirements the PPSA requires are to be found in the Act itself and take preference to other requirements pursuant to general Australian laws in the event of any inconsistency. In addition, reg 7.1 prescribes a series of statutes for the purposes of s 263(1)(c).

[263.6] Further reading ● Explanatory Memorandum [7.64]. ● ALRC Report No 64 [11.3–11.15].

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649

Part 7.4 — Relationship between Australian laws

¶7-170

SECTION 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.

[264.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[264.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision s 73 no parallel provision

Outline

Section 264 of the Personal Property Securities Act 2009 (Cth) (PPSA) expressly prescribes what the balance of Div 4 makes reference to, that is, PPSA concepts prevail against other CONCEPTS at law with respect to security interests should any inconsistency arise — but should generally not prevail against issues which do not relate to the regulation of security interests taken over personal property.

[264.3]

Cross-references

● Section 255 allows for regulations to resolve inconsistencies between the operation of the PPSA and concurrent laws. ● Sections 257–259 set out rules where other laws prevail over the PPSA. ● Sections 261–263 set out further rules where the PPSA prevails over other laws. Annotated Personal Property Securities Act 2009 (Cth)

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Chapter 7

● Section 254 provides the main rule for the concurrent operation of the PPSA with other laws.

650 [264.4]

Personal Property Securities Act 2009

Concepts

Nil.

[264.5]

Commentary

Attachment and perfection are concepts defined and focused upon by the Personal Property Securities Act 2009 (Cth) (PPSA). Where the terms arise pursuant to other laws of Australia in relation to security interests taken over personal property, the PPSA prevails to the extent of any inconsistency between the laws. No additional requirements over and above those required by the PPSA thus apply in relation to attachment or perfection of a security interest in personal property. See VW Credit Canada Inc v Roberts (2001) 2 PPSAC (3d) 124; 197 DLR (4th) 274 (NS CA) and more generally Re Giffen (1998) 13 PPSAC (2d) 255; 155 DLR (4th) 332 (SCC).

[264.6] Further reading ● Explanatory Memorandum [7.64–7.65]. ● ALRC Report No 64 [11.3–11.15].

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651

Chapter 8

Part 8.2 — Vesting of certain unperfected security interests

CHAPTER 8 — MISCELLANEOUS PART 8.1 — GUIDE TO THIS CHAPTER ¶8-005

SECTION 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 ¶8-010 SECTION 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.

Annotated Personal Property Securities Act 2009 (Cth)

¶8-010

652

Personal Property Securities Act 2009

¶8-015 SECTION 267 VESTING OF UNPERFECTED SECURITY INTERESTS IN THE GRANTOR UPON THE GRANTOR’S WINDING UP OR BANKRUPTCY ETC. Scope 267(1)

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; (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,

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653

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.

Security interest vested in grantor 267(2) 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).

Title of person acquired for new value without knowledge 267(3) 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.

[267.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

Annotated Personal Property Securities Act 2009 (Cth)

no parallel provision s 20(2) s 20(1),(2) § 9-317(a) — note definition of lien creditor in § 9-102(52)(c)

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Chapter 8

Part 8.2 — Vesting of certain unperfected security interests

654

Personal Property Securities Act 2009

[267.2]

Outline

Section 267 of the Personal Property Securities Act 2009 (Cth) (PPSA) provides that a security interest will vest in the grantor if it is unperfected at the time that the grantor enters formal insolvency proceedings.

[267.3]

Cross-references

● Sections 21 and 22 of the PPSA provide for the perfection of security interests. ● Section 268 provides that the vesting rule in this section does not apply to certain security interests. ● Section 269 provides for damages to be paid in certain circumstances where the vesting rules apply. ● Section 296 provides rules for the onus of proof under this section. ● Corporations Act 2001 (Cth), s 588FK–588FO provide further vesting rules.

[267.4]

Concepts

● Actual or constructive knowledge See s 297–299 of the PPSA. ● Company This is defined in s 10. ● On a day The calculation of time was discussed in detail in Re Carpenter International Pty Ltd [2016] VSC 118. In that case, the question was whether registration at any time on the day that the administrator was appointed was sufficient. The court held that the relevant time was the actual appointment of the administrators as a precise event, not merely anytime on that day or necessarily on the day before the appointment.

[267.5]

Commentary

Section 267 of the Personal Property Securities Act 2009 (Cth) provides that an unperfected security interest will vest in a grantor immediately before the grantor enters formal insolvency proceedings. These include winding up, voluntary administration or a deed of company arrangement for corporate grantors and a sequestration order or debtor’s petition for individual bankruptcy. In Bredenkamp v Gas Sensing Technology Corporation, Re Welldog Pty Ltd (In Liq) (Rec and Man Apptd) [2017] FCA 1065 at [12], it was noted: ‘‘That vesting may be said to reflect a policy choice by the legislature, and needs to be borne in mind when considering the interaction of different provisions within the PPSA, as well as a claim by a putative legal owner of personal property following a vesting event (for example, as here, on the appointment of the administrator).’’

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A security interest can be unperfected for a number of reasons including, but not limited to: 1. A secured party failing to lodge a financing statement on the PPS Register. 2. A financing statement containing a defect or defects which render the financing statement ineffective: See s 164, 165 and 337A of the PPSA. 3. A secured party lodging a valid financing statement on the PPS Register but doing so out of time (noting that this requirement relates only to corporate grantors in which case the appropriate vesting provision is not found in the PPSA but rather at s 588FL of the Corporations Act 2001 (Cth): see [588FL.2] Outline. In respect of point 3 above, unlike s 588FL of the Corporations Act, which contains a provision for the secured party to apply to the court to extend time to comply with the timing requirements imposed by s 588FL; see, s 588FM of the Corporations Act, the PPSA does not contain any such provision. The holder of an unperfected security interest does not appear to have any ability to extend time to comply with the perfection requirements imposed by the PPSA after an event referred to in s 267(1) has occurred: Re OneSteel Manufacturing Pty Ltd [2017] NSWSC 21; Re Production Printing (Aust) Pty Ltd (in liq) [2017] NSWSC 505. In the Canadian case of Central Refrigeration & Restaurant Services Inc (Trustee of) v Canadian Imperial Bank of Commerce (1986) 5 PPSAC 262; 47 Sask R 124 (Sask CA) it was held that temporary perfection at the commencement of bankruptcy was sufficient to maintain priority against the trustee in bankruptcy even where the security interest became unperfected after the end of the period of temporary perfection. A person who acquires the collateral for new value from a secured party (or their agent) or a receiver is not affected by the vesting where they had no actual or constructive knowledge of the initiation of formal insolvency proceedings (s 267(3)). There has been some contention regarding exactly what property vests in the trustee pursuant to this section (and its equivalents), as the trustee effectively obtains rights greater than the bankrupt/insolvent party under this section. In Re Giffen (1996) 10 PPSAC (2d) 277; 131 DLR (4th) 453 (BC CA), Finch JA held that the PPSA cannot add to the bankrupt’s estate (at [49]–[53]). The Supreme Court of Canada (on appeal) considered the vesting rules in Re Giffen (1998) 13 PPSAC (2d) 255; 155 DLR (4th) 332 and noted that it was the function of the PPSA to determine who a secured creditor was and failing to perfect a security interest prior to bankruptcy meant that the lessor became merely an unsecured creditor with a subordinate right to the bankruptcy trustee over the leased collateral. The rationale of the Supreme Court follows that of the Annotated Personal Property Securities Act 2009 (Cth)

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Chapter 8

Part 8.2 — Vesting of certain unperfected security interests

656

Personal Property Securities Act 2009

Saskatchewan Court of Appeal in International Harvester Credit Corp of Canada v Bell’s Dairy Ltd (Trustee of) (1986) 6 PPSAC 138 (sub nom, International Harvester Credit Corp of Canada v Touche Ross Ltd (1986) 30 DLR (4th) 387) (at [35]): ‘‘I fail to see any legitimate basis for confining him to no greater claim upon the goods than that which the bankrupt enjoyed. That would require resort to traditional common law concepts, to form over substance, to a technical construction of the term ‘interest’, and to the defeat of the policy choice made by the legislature in choosing, as it did, to include within the scope of the Act a true lease of goods. It would render the section largely, if not wholly, ineffective in this instance.’’ As noted by Master Caldwell in Re Kuzilla (2009) 13 PPSAC (2d) 255; 50 CBR (5th) 144 (at [5]) (BC SC) ‘‘the provisions of the PPSA do not allow the exercise of discretion’’. Of course, s 267 of the PPSA in Australia is even stronger in its wording than the Canadian PPSA statutes because it states that the security interest vests in the grantor, while the Canadian provisions hold that the unperfected security interest is merely ineffective against a trustee in bankruptcy or a liquidator. This was confirmed in Re Maiden Civil (P&E) Pty Ltd (2013) APPSR ¶701-008; (2013) 277 FLR 337; [2013] NSWSC 852 at [71]. In that case, Brereton J explained the effect of vesting under this section as follows: ‘‘The practical effect is that QES’s security interest is extinguished; QES has no further interest in the Caterpillars; and Maiden holds them subject only to the perfected security interest of Fast.’’ The factual matrix concerned QES, a lessor of vehicles, who leased certain vehicles to Maiden Civil but had failed to perfect any resulting security interest in the vehicles at a time when Maiden had obtained further secured finance from Fast Financial, using the same vehicles as collateral. Fast had perfected its security interest and QES’s security interest vested when Maiden entered voluntary administration at the same time as Fast appointed a receiver. In White v Spiers Earthworks Pty Ltd [2014] WASC 139 (16 April 2014), the court held (at [39]) that: ‘‘the vesting of the security interest in the grantor adjusts the competing rights of the secured party on the one hand and the unsecured creditors of the grantor on the other hand in relation to the personal property in relation to which the secured party has a security interest’’. This was raised in response to an argument by the unperfected secured party that the vesting of its security interest was an acquisition of property otherwise than on just terms in breach of the Commonwealth Constitution s 51(xxxi). The court applied the High Court’s decision in Australian Tape Manufacturers Association Ltd v The Commonwealth (1993) 176 CLR 480 which held that an adjustment of rights between competing parties is not an acquisition of property for the purposes of s 51(xxxi). However, the statement that the vesting of security rights in the grantor debtor represents a mere

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adjustment of rights as between the secured and unsecured creditors in the collateral is questionable given that unsecured creditors have no rights in the grantor’s property, but rather a mere interest in the due administration of the insolvency arising out of their debt or claim against the debtor. If the application of the vesting rule was an acquisition of property for constitutional purposes then s 252B would provide that the vesting rule would not be operational to the extent that it represented an acquisition of property otherwise than on just terms. In White v Spiers, the court held that there was no acquisition of property and hence s 252B did not apply. In the authors’ view the vesting rule is unlikely to infringe s 51(xxxi) of the Constitution because the power to enact the PPSA regime is supported by the referral of state powers under s 51(xxxvii) and the PPSA cannot be characterised as a law for the acquisition of property, hence, s 51(xxxi) would not be engaged: see for example Nintendo Co Ltd v Centronics Systems Pty Ltd (1994) 181 CLR 134; Mutual Pools & Staff Pty Ltd v Commonwealth (1994) 179 CLR 155. Law making power referred under s 51(xxxvii) should be given it’s full scope: see for example Pauls Ltd v Dwyer [2002] 2 Qd R 176; [2002] QCA 545 at [37]–[39]. There is also support for the view that the extinguishment of rights is not necessarily an acquisition of property for the purposes of s 51(xxxi): Health Insurance Commission v Peverill (1994) 179 CLR 226. Following from White v Spiers, it would seem that s 252B will have a very limited operation as a safety net only. This view is consistent with the decision in Re OneSteel Manufacturing Pty Ltd (admin apptd) [2017] NSWSC 21, where Brereton J held that vesting under s 267 is not an acquisition at all (at [45]): ‘‘The section does not effect a taking of property which the PPS lessor held prior to its becoming subject to the PPSA; rather, it prescribes a consequence, in certain circumstances, of a lease entered into subject to the PPSA. It is an incident of any PPS lease entered into after the commencement of the PPSA that the lessor’s interest is liable to vest in the lessee in certain events, if it has not been perfected.’’ His Honour also held (at [52]) that s 267 was not a law directed at acquiring property ‘‘applied for any purpose in respect of which the Commonwealth has power to make laws, but for the grantor’s own purposes: to enlarge the grantor’s assets and the property that will be divisible among its creditors. As such an acquisition is not for a relevant Commonwealth purpose . . .’’. Rather, the vesting provisions are directed at adjusting competing rights and so do not come within the scope of s 51(xxxi): at [53].

[267.6] Further reading ● Explanatory Memorandum [8.1–8.11, 8.31]. ● ALRC Report No 64 [10.8–10.11]. ● Whittaker Report [4.2.2], [4.5.14], [5.1.4], [7.2.1], [7.3.2], [7.10.2], [8.7], [9.2.2]. ● Linda Widdup, ‘‘Registration errors, priority rules and the policy behind the PPSA: In pursuit of certainty or fairness?’’ (2016) 44 Australian Business Law Review 175. Annotated Personal Property Securities Act 2009 (Cth)

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Chapter 8

Part 8.2 — Vesting of certain unperfected security interests

658

Personal Property Securities Act 2009

¶8-020 SECTION 267A VESTING IN GRANTOR OF SECURITY INTEREST THAT ATTACHES AFTER WINDING UP ETC. Vesting of security interest 267A(1) 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 (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).

Property acquired for new value without knowledge 267A(2) 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;

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(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.

[267A.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[267A.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no equivalent provision no parallel provision no parallel provision

Outline

Section 267A of the Personal Property Securities Act 2009 (Cth) (PPSA) provides a further vesting rule to clarify that security interests granted in between the commencement of formal insolvency proceedings and the relevant court order or conduct which triggers the insolvency proceedings will vest in the grantor if they are not perfected by the time the insolvency proceedings are triggered.

[267A.3]

Cross-references

● Section 266 provides a vesting rule for unperfected security interests where the grantor enters formal insolvency proceedings.

[267A.4] Concepts ● Actual or constructive knowledge See s 297–299. ● New value This is defined by s 10 as meaning ‘‘means value other than value provided to reduce or discharge an earlier debt or liability owed to the person providing the value’’.

[267A.5]

Commentary

Section 267A of the Personal Property Securities Act 2009 (Cth) (PPSA) clarifies that a security interest granted after the time deemed to be the commencement of formal insolvency (such as the date an application for winding up is filed) but before the actual order that installs the formal insolvency proceedings (eg the winding up order issued by the court) can still vest in the grantor if the security interest is unperfected (or perfected only by registration that came after the deemed commencement of the insolvency) at the time of the commencement of the proceedings. This provision should be read in conjunction with s 266. It contains a similar rule for third parties for new value without notice of the commencement of insolvency proceedings (s 267A(3)). Annotated Personal Property Securities Act 2009 (Cth)

¶8-020

Chapter 8

659

Part 8.2 — Vesting of certain unperfected security interests

660

Personal Property Securities Act 2009

[267A.6] Further reading ● Explanatory Memorandum [–]. ● ALRC Report No 64 [10.8–10.11]. ● Whittaker Report [8.7].

¶8-025 SECTION 268 SECURITY INTERESTS UNAFFECTED BY SECTION 267 Security interests to which vesting rule does not apply 268(1) 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) (Repealed by No 74 of 2015) (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. Security interests and subordinated debts 268(2) 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

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(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).

[268.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[268.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision no parallel provision

Outline

Section 268 of the Personal Property Securities Act 2009 (Cth) (PPSA) provides that certain security interests do not come within the vesting rules in s 266 and 267A.

[268.3]

Cross-references

● Sections 267 and 267A provide rules for unperfected security interests to vest in the grantor upon the commencement of formal insolvency proceedings.

[268.4]

Concepts

● Commercial consignment See s 12. ● PPS Lease See s 12, 13. ● Transfer of an account or chattel paper See s 12.

[268.5] Commentary Section 268 of the PPSA provides that a limited range of security interests do not fall within the scope of vesting rule pursuant to s 267. These security interests include certain deemed security interests that do not secure the payment or performance of an obligation (see s 12(3) — namely transfers of accounts and chattel paper and commercial consignments. The range of security interests covered by this section also includes foreign security interests and security interests involving debt subordination arrangements that involve turnover trusts. Annotated Personal Property Securities Act 2009 (Cth)

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Part 8.2 — Vesting of certain unperfected security interests

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Personal Property Securities Act 2009

The Supplementary Explanatory Memorandum to the Personal Property Securities Bill 2009 (Cth) explained that the arrangements excluded are all common methods of commercial finance and are often short term in nature which would create commercial inconvenience to require registration in order to avoid vesting on insolvency.

[268.6] Further reading ● Explanatory Memorandum [8.6]. ● ALRC Report No 64 [10.8–10.11]. ● Whittaker Report [4.2.3], [4.5.14], [8.7].

¶8-030 SECTION 269 CERTAIN LESSORS, BAILORS AND CONSIGNORS ENTITLED TO DAMAGES Scope 269(1) 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)). Entitlement to damages and compensation 269(2)

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 (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.

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Chapter 8

Part 8.2 — Vesting of certain unperfected security interests

[269.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[269.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision s 21 no parallel provision no parallel provision

Outline

Section 269 of the Personal Property Securities Act 2009 (Cth) (PPSA) provides that certain secured parties will be entitled to damages if their security interest becomes vested in the grantor as a result of s 267 or s 267A.

[269.3]

Cross-references

● Sections 267 and 267A provide vesting rules.

[269.4]

Concepts

● Bailment See also, Bredenkamp v Gas Sensing Technology Corporation, Re Welldog Pty Ltd (In Liq) (Rec and Man Apptd) [2017] FCA 1065; Re Arcabi Pty Ltd (Rec and Man Apptd) (in liq) [2014] WASC 310. ● Commercial consignment See s 12. ● PPS lease See s 13.

[269.5]

Commentary

Section 269 of the Personal Property Securities Act 2009 (Cth) (PPSA) allows certain secured parties to obtain compensation from the grantor where their security interest vests in the grantor pursuant to s 267 or s 267A. As deemed security interests that do not secure the payment or performance of an obligation are excluded from the vesting rules by s 268, this rule will only apply to deemed security interests (namely commercial consignments and PPS leases) that secure the payment or performance of an obligation. The policy of this section was explained by Cuming R and Wood R29 who note that deemed lessors and bailors may have difficulty in proving for damages in an insolvency where the loss of the collateral was caused by the failure to perfect the security interest rather than a breach of the contract by the grantor. In the Alberta Court of Queen’s Bench case, Donaghy v CSN Vehicle Leasing (1992) 4 PPSAC (2d) 37; 14 CBR (3d) 256, it was held (at [16]): ‘‘I would point out that under s. 21 of the Alberta P. P. S. A., a lessor who has failed to register its lease and consequently loses its interest in the leased property to the trustee in bankruptcy is deemed to have a claim in 29

Cuming R and Wood R, Saskatchewan and Manitoba Personal Property Security Acts Handbook, 1994 Carswell at pp 171–172.

Annotated Personal Property Securities Act 2009 (Cth)

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664

Personal Property Securities Act 2009 damages against the bankrupt’s estate equal to the value of the leased goods and any loss resulting from the termination of the lease.’’

See also Southern Property Rentals Ltd v Deloitte & Touche Inc (1998) 14 PPSAC (2d) 335; 6 CBR (4th) 141 (Alta QB); Unisource Canada Inc v Hongkong Bank of Canada (1998) 14 PPSAC (2d) 112; 43 BLR (2d) 226 (Ont SC GD) (varied in (2000) 15 PSSAC (2d) 95 (Ont CA)).

[269.6] Further reading ● Explanatory Memorandum [8.1–8.11]. ● ALRC Report No 64 [10.8–10.11]. ● Whittaker Report [8.7.3].

PART 8.3 — EXERCISE AND DISCHARGE OF RIGHTS, DUTIES AND OBLIGATIONS ¶8-035 SECTION 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.

¶8-040 SECTION 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. 271(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.

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Chapter 8

Part 8.3 — Exercise and discharge of rights, duties and obligations

[271.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[271.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 176 s 65 s 67(2) § 9-625

Outline

Section 271 of the PPSA provides a right to seek compensation for a failure to comply with a duty or obligation imposed by the PPSA.

[271.3]

Cross-references

● Section 111 obliges parties taking enforcement action to act in an honest and commercially reasonable manner. ● Section 272 restricts the right to seek damages against the Commonwealth, the Minister, the Registrar or a delegate.

[271.4] Concepts ● Loss or damage that was reasonably foreseeable as like to result from the failure This wording seems to exclude the ability to award aggravated or exemplary damages for a breach of the statutory obligation as these damages are not based strictly on the loss suffered by the injured party. However, given that s 271(2) allows the general law remedies to operate concurrently, it is possible to obtain aggravated or exemplary damages based on a tortious cause of action: see for example, Loewen v Superior Acceptance Corp (1997) 12 PPSAC (2d) 230; 33 BCLR (3d) 72 (BC SC) where punitive damages were awarded where a secured party deliberately deprived the grantor of any opportunity to redeem their collateral.

[271.5]

Commentary

Section 271 of the PPSA has a broad application although it is tempered by the requirements to prove that the person claiming compensation had a reasonable expectation to rely upon the performance of the duty or obligation and to establish that the harm was reasonably foreseeable. As noted in Canada Permanent Trust Co v Thomas (1983) 3 PPSAC 66; 149 DLR (3d) 338 (Sask QB), a debtor is not entitled to a windfall simply because a secured party failed to comply with a required step in the enforcement process (in that case serving notice); cf National Bank of Canada v Lasalle Excavating of Sudbury Ltd (1986) 5 PPSAC 279 (Ont DC) (where the importance of giving notice prior to disposal of seized collateral was stressed). While certain obligations clearly create an expectation of compliance, such as complying with an amendment notice to amend the registration of a financing statement or selling collateral at below market value, it is unclear whether other obligations such as the requirements to describe collateral could give rise to the reasonable expectation of compliance. For example, if a secured party enters an overly broad description of the collateral (such as all current Annotated Personal Property Securities Act 2009 (Cth)

¶8-040

666

Personal Property Securities Act 2009

and future property) when the security agreement is over a narrower class of property, would this allow a grantor to seek compensation from the secured party under this section (based on an alleged reasonable expectation to comply with the obligations to accurately describe the collateral) if the grantor finds it more difficult or more expensive to obtain credit? Of course the grantor could serve an amendment demand on the secured party and pursue administrative action through the Registrar or court action to rectify the registered financing statement. Presumably a failure by the grantor to mitigate their losses will come within the scope of the reasonable forseeability and reasonable expectation requirements. The right to seek damages will frequently derive from defective enforcement action taken under Ch 4 of the PPSA, which contains the obligation to act honestly and in a commercially reasonable manner (s 111). That is an obligation that cannot be contracted out (s 115) although it will not apply in all cases of enforcement action as Ch 4 does not apply where the grantor is a company and a receiver is appointed to enforce the secured party’s rights. In such a case, the receiver is an officer of the grantor company (s 9 of the Corporations Act 2001 (Cth)) and must conduct themselves with due care and diligence and act properly and in good faith (s 180, 181 of the Corporations Act). The issue of causation of harm was considered in the Ontario case of Coward v Rich (1995) 9 PPSAC (2d) 236 (Ont CJ). In that case, damages were awarded to a junior secured creditor who lost money on the sale of a mobile home when a senior secured creditor put temporary tenants in possession and refused to allow inspections as part of the sale process. While the senior creditor failed to act in a commercially reasonable manner, the main reason the creditor suffered harm was because of the depressed market and so the damages were minimal. The court also has the power to alter awards of damages pursuant to the facts of each case. In the British Columbia Supreme Court decision, Hornby Equipment Ltd v Andrushko (2000) 1 PPSAC (3d) 98, an award of $74,000 was reduced to $64,000 on the finding that there was a failure to comply with the notice and sale provisions — making the sale improvident but not invalid. Damages for failure to comply with the enforcement provisions of the PPSA (see Ch 4) can thus also serve to set-off claims made by the enforcing party; See also Lease Truck Inc v 375603 Ontario Ltd (1996) 11 PPSAC (2d) 351 (Ont CJ); Donnelly v International Harvester Credit Corp of Canada (1983) 2 PPSAC 290; 22 BLR 66 (Ont SCJ).

[271.6] Further reading ● Explanatory Memorandum [5.21, 5.61, 5.78, 8.12]. ● ALRC Report No 64 [10.8–10.11].

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¶8-045

SECTION 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.

[272.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[272.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision no parallel provision

Outline

Section 272 of the Personal Property Securities Act 2009 (Cth) (PPSA) limits the liability for damages of certain persons.

[272.3]

Cross-references

● Section 271 creates a right to seek damages for failing to comply with an obligation or a duty imposed by the Act.

[272.4]

Concepts

Nil.

[272.5]

Commentary

Although individuals cannot seek damages against any of the named parties in this section unless they failed to act honestly, persons who suffer harm as a result of defective administration may come within the scope of the Scheme Annotated Personal Property Securities Act 2009 (Cth)

¶8-045

Chapter 8

667

Part 8.3 — Exercise and discharge of rights, duties and obligations

668

Personal Property Securities Act 2009

for Compensation for Detriment caused by Defective Administration (the CDDA Scheme) administered by the Commonwealth Department of Finance and Deregulation.

[272.6] Further reading ● Explanatory Memorandum [8.14]. ● ALRC Report No 64 [10.8–10.11].

¶8-050 SECTION 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.

[273.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[273.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 24 s 3(1) s 2(a) § 9-202

Outline

Section 273 of the Personal Property Securities Act 2009 (Cth) (PPSA) clarifies that the issue of who holds title over collateral does not affect the operation of the Act relating to rights, duties, obligations and remedies.

[273.3]

Cross-references

● Section 12(1) also states that recognition of a security interest is to be determined without regard to who holds title to the property. ● Section 112 provides that the rights and remedies that may be exercised by secured parties under Ch 4 of the PPSA are limited to the same extent as the grantor’s right to deal with the collateral: see Re Maiden Civil (P&E) Pty Ltd (2013) APPSR ¶701-008; Albarran v Queensland Excavation Services Pty Ltd (2013) 277 FLR 337; [2013] NSWSC 852.

[273.4]

Concepts

Nil.

[273.5]

Commentary

One of the common misconceptions regarding the operation of the PPSA regime is that title is now irrelevant. This misunderstands what the PPSA does and does not do. It does not purport to be a complete code for regulating security interests in personal property.

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In Warehouse Sales Pty Ltd (in liq) v LG Electronics Australia Pty Ltd [2014] VSC 644 at [37] Sifris J stated: ‘‘The PPSA provides for a priority regime, not a title regime. Under s 273 of the PPSA ownership or title to personal property is not determinative and as a consequence a retention of title (‘ROT’) financier’s ownership interest is replaced by a simple security interest.’’ As discussed in the commentary to s 12, and 18–21, the PPSA regime depends upon the security agreement between the parties which will regulate what interests arise, when they arise and what rights and liabilities the parties to the agreement will have. The PPSA operates once these matters are determined by the parties themselves. Title is only irrelevant under the PPSA where there is a priority contest between interests regulated by the PPSA. Thus, the taking free provisions in Pt 2.5 apply despite the fact that the secured party may have legal title to the collateral (as in the case of a lease or supply under retention of title). Similarly, the priority rules in Pt 2.6 will apply regardless of which contesting secured party has title to the collateral. The existence of title is relevant for non-PPSA issues, such as disputes involving thieves and transferees who take from them and the true owners of goods (where neither party is relying upon their rights as holders of PPSA security interests). Title may also be relevant for determining how other laws may treat PPSA security interests: see for example the concept of ‘‘PPSA retention of title property’’ under the Corporations Act 2001 (Cth), s 51F.

[273.6] Further reading ● Explanatory Memorandum [8.16]. ● ALRC Report No 64 [10.8–10.11].

PART 8.4 — PROVISION OF INFORMATION BY SECURED PARTIES ¶8-055

SECTION 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.

Annotated Personal Property Securities Act 2009 (Cth)

¶8-055

Chapter 8

Part 8.4 — Provision of information by secured parties

670

Personal Property Securities Act 2009

¶8-060 SECTION 275 SECURED PARTY TO PROVIDE CERTAIN INFORMATION RELATING TO SECURITY INTEREST Requests for information 275(1) 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. 275(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. 275(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.

Compliance with request 275(4) 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).

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275(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. 275(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. 275(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. 275(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.

Annotated Personal Property Securities Act 2009 (Cth)

¶8-060

Chapter 8

671

Part 8.4 — Provision of information by secured parties

672

Personal Property Securities Act 2009 Interested persons 275(9) 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. 275(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.

[275.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[275.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 177 s 18 s 18 § 9-210

Outline

Section 275 of the Personal Property Securities Act 2009 (Cth) (PPSA) allows access to information regarding the nature of the security agreement, covered collateral and the amount outstanding.

[275.3]

Cross-references

● Section 276 requires a secured party to disclose successor details. ● Section 277 imposes a 10 business day timeframe for responding to a request. ● Section 278 allows the court to extend the time for complying with a request or to exempt a person in whole or in part from complying with the request. ● Section 279 allows for fees to be charged. ● Sections 280 and 281 deal with court applications under this Part. ● Section 282 provides for the consequences of non-compliance. ● Section 283 provides for an estoppel against those who respond to a request. ● Section 293 allows the court to extend time.

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[275.4]

673

Concepts

● After acquired property This is defined by s 10 as ‘‘personal property acquired by the grantor after a security agreement is made’’. ● Copy of the security agreement In Spir-l-ok Industries Canada Ltd v Bank of Montreal (1985) 41 Sask R 128 (Sask QB), the court held that the party applying for information was not entitled to copies of all security agreements between the secured party and the grantor but only the particular security agreement that involved the collateral in which the requestor had an interest. ● Execution creditor A person may be an execution creditor for the purposes of this section even if the enforcement is stayed pending an appeal: Kotarba Technologies Ltd v Process Group Inc (1997) 12 PPSAC (2d) 144 (Ont CJ). ● Interested person This is defined by s 275(9). ● Security agreement This is defined in s 10. See also s 18 and 20.

[275.5]

Commentary

Section 275 of the Personal Property Securities Act 2009 (Cth) (PPSA) is an important section of the PPSA because the Act adopts a ‘‘notice-based’’ filing regime which does not involve the security agreement being lodged with the Registrar (see s 150). The Personal Property Securities Register (PPSR) contains only basic information provided in financing statements. This is designed to give mere notice of a security interest over a particular grantor’s personal property. This section therefore allows for interested parties to obtain further details from secured creditors. It should be noted that access is not available to any person with an actual or potential interest in the grantor’s personal property. Access is only granted to ‘‘interested persons’’ which is defined in s 175(9) as the grantor (or an auditor of a corporate grantor), an execution creditor with an interest in the collateral or a person with another security interest in the grantor’s personal property (or a representative of any of the above. This means that a potential creditor cannot require information regarding the security agreement to be disclosed using this section. Of course, a potential creditor of the grantor can require details from the grantor before extending credit. The general timeframe for responding to a request for information is 10 business days after the request is received (s 277) although the period may be varied by the court (s 278). An interested party can additionally pre-empt changes to the register and specify the day at which the request for information is to occur, but no later than 20 business days after the request is made (s 275(3)). The secured party is obliged to respond under s 275(4), unless Annotated Personal Property Securities Act 2009 (Cth)

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Chapter 8

Part 8.4 — Provision of information by secured parties

674

Personal Property Securities Act 2009

s 275(5) or (s 275(6)) applies. The ability to protect confidential information under s 275(6) is particularly important. Further action may be taken under s 280 to enforce compliance. A secured party who receives a notice under this section may apply to the court for an exemption under s 278.

[275.6] Further reading ● Explanatory Memorandum [8.17–8.19, 8.28]. ● ALRC Report No 64 [13.23–13.24]. ● Kenton Steicke and Michael Spurritt, ‘‘Preventing the release of commercially-sensitive information under the Personal Property Securities Act 2009 (Cth)’’ (2012) 23 Journal of Banking and Finance Law and Practice 99.

¶8-065 SECTION 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. 276(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.

[276.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[276.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 183 s 18(9) s 18(6) § 9-210(d), (e)

Outline

Section 276 of the Personal Property Securities Act 2009 (Cth) (PPSA) requires a person who receives a request under s 275 to provide details of their successor if they no longer have an interest in the collateral. This section should be read in conjunction with s 275.

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[276.3]

675

Cross-references

● Section 277 imposes a 10 business day timeframe for responding to a request. ● Section 278 allows the court to extend the time for complying with a request or to exempt a person in whole or in part from complying with the request. ● Section 279 allows for fees to be charged. ● Section 293 allows the court to extend time.

[276.4] Concepts Nil.

[276.5] Commentary See the commentary for s 275 of the Personal Property Securities Act 2009 (Cth) (PPSA) at [275.1ff].

[276.6] Further reading ● Explanatory Memorandum [8.23]. ● ALRC Report No 64 [13.23–13.24].

¶8-070 SECTION 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. 277(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.

[277.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[277.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 178 s 18(6), (7) s 18(5) § 9-210

Outline

Section 277 of the Personal Property Securities Act 2009 (Cth) (PPSA) provides a default time limit of 10 days for complying with requests under s 275 and 276.

[277.3]

Cross-references

● Sections 278 and 293 allow the court to extend time. Annotated Personal Property Securities Act 2009 (Cth)

¶8-070

Chapter 8

Part 8.4 — Provision of information by secured parties

676

Personal Property Securities Act 2009

[277.4]

Concepts

● The request is received For service of documents see Acts Interpretation Act 1901 (Cth), s 28A; Corporations Act 2001 (Cth), s 109X (for service of documents on corporations). Persons seeking to serve a request can obtain contact information from a copy of the financing statements registered on the Personal Property Securities Register (PPSR) (see s 153(1) item 3).

[277.5]

Commentary

Section 277 of the Personal Property Securities Act 2009 (Cth) (PPSA) provides a default timeframe of 10 business days after receipt of a request for information under s 275 and 276. A failure to comply may lead to court action under s 280. A secured party who receives such a request may apply to the court for a full or partial exemption or for an extension of time in which to comply (s 278).

[277.6] Further reading ● Explanatory Memorandum [8.19]. ● ALRC Report No 64 [13.23–13.24].

¶8-075 SECTION 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.

278(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. 278(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.

¶8-075

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[278.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[278.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 179 s 18(13) s 18(8) no parallel provision

Outline

Section 278 of the Personal Property Securities Act 2009 (Cth) (PPSA) allows the court to extend time for compliance with a request for information or to grant an exemption in whole or in part from the obligation to respond to the request.

[278.3]

Cross-references

● Sections 275 and 276 provide for requests for information to be made. ● Section 277 specifies the time for compliance for a request for information.

[278.4] Concepts ● Court Courts with jurisdiction over PPSA matters are set out in Pt 6.2 (see s 207 in particular).

[278.5]

Commentary

Section 278 of the Personal Property Securities Act 2009 (Cth) (PPSA) is based on the New Zealand PPSA equivalent. Although Canadian PPSA statutes also have a court exemption power, only the New Zealand provision contains the standard of unreasonableness that is present in s 278(2). There do not appear to have been any cases on point in New Zealand or in Canada. The learned authors, Gedye M, Cuming R and Wood R,30 note in their commentary on the New Zealand legislation that relevant factors would include: ● the relevance of the information for the requestor ● whether the requestor is acting in good faith ● the difficulty and cost faced by the secured party in complying with the request.

[278.6] Further reading ● Explanatory Memorandum [8.28]. ● ALRC Report No 64 [13.23–13.24]. Annotated Personal Property Securities Act 2009 (Cth)

¶8-075

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Personal Property Securities Act 2009

¶8-080 SECTION 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. 279(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.

279(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.

279(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.

279(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.

[279.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

¶8-080

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 180 s 18(17) s 18(7) § 9-210(f)

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[279.2]

679

Outline

Section 279 of the Personal Property Securities Act 2009 (Cth) (PPSA) allows a secured party to charge fees for providing information requested under s 275 and 276.

[279.3]

Cross-references

● Sections 275 and 276 provide for requests for information to be made. ● Section 278 allows a secured party to apply for an exemption from the requirement to respond to a request for information. ● Section 281 allows a person requesting information to obtain a court order regarding the cost for obtaining the information. ● Section 296 provides rules regarding the onus of proof.

[279.4]

Concepts

● Reasonable marginal costs For a discussion of calculating reasonable marginal costs see AXA Asia Pacific Holdings Ltd v Direct Share Purchasing Corp Pty Ltd (2009) 173 FCR 434; [2009] FCAFC 15 (reasonable marginal costs for copy of share register to be provided).

[279.5] Commentary Section 279 of the Personal Property Securities Act 2009 (Cth) (PPSA) provides for the secured party who receives a request for information under s 275 or s 276 to charge a reasonable marginal cost for the provision of the information, although the grantor is not to be subject to the fee unless s 279(3) applies. Failing to pay the fee allows the secured party to refuse the provision of the information.

[279.6] Further reading ● Explanatory Memorandum [8.19, 8.21, 8.31]. ● ALRC Report No 64 [13.23–13.24].

¶8-085

SECTION 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). Annotated Personal Property Securities Act 2009 (Cth)

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280(2) On application, the court may make an order requiring the person who received the request to: (a) respond to the request within a specified period; or (b) provide a complete and correct response within a specified period.

[280.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[280.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 181 s 18(8), (10)–(12) s 18(8) no parallel provision

Outline

Section 280 of the Personal Property Securities Act 2009 (Cth) (PPSA) allows the court to make an order enforcing compliance with a request for information under s 275 or s 276.

[280.3]

Cross-references

● Sections 275 and 276 allow for a person to request information from a secured party. ● Section 277 provides the time for complying with a request for information. ● Section 181 allows the court to set a reasonable fee for the provision of information. ● Section 182 provides consequences for failing to comply with a court order regarding the provision of information.

[280.4]

Concepts

● Court Courts with jurisdiction over PPSA matters are set out in Pt 6.2 (see s 207 in particular).

[280.5]

Commentary

Section 280 of the Personal Property Securities Act 2009 (Cth) (PPSA) provides that the court may order compliance with a request to provide information under s 275 or s 276. The court may make an order with respect to both a total failure to comply as well as a failure to provide complete information. An application to the court for this purpose cannot be made prior to the request being made under s 275: see Mac Property Finance Ltd v Hanover Finance Ltd [2009] NZHC 50. A failure to comply with an order of the court may lead to the security interest being extinguished (s 282).

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[280.6] Further reading ● Explanatory Memorandum [8.20]. ● ALRC Report No 64 [13.23–13.24].

¶8-090

SECTION 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.

281(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.

281(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;

Annotated Personal Property Securities Act 2009 (Cth)

¶8-090

682

Personal Property Securities Act 2009 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.

Consequential orders 281(4) If the court makes an order under this section, it may also make any other consequential orders that it considers appropriate.

[281.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[281.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision no parallel provision

Outline

Section 281 of the Personal Property Securities Act 2009 (Cth) (PPSA) allows a person to obtain a court order in relation to the fee that is to be charged for the provision of information requested under s 275 or s 276.

[281.3]

Cross-references

● Section 275 and 276 provide for a request to be made for access to information from a secured party. ● Section 279 allows the secured party to charge a fee for the provision of information. ● Section 182 provides consequences for failing to comply with a court order regarding the provision of information. ● Section 296 provides rules regarding the onus of proof.

[281.4]

Concepts

● Reasonable marginal costs For a discussion of calculating reasonable marginal costs see AXA Asia Pacific Holdings Ltd v Direct Share Purchasing Corp Pty Ltd (2009) 173 FCR 434; [2009] FCAFC 15 (reasonable marginal costs for copy of share register to be provided).

[281.5]

Commentary

Section 281 of the Personal Property Securities Act 2009 (Cth) (PPSA) provides for a court determination regarding the cost of access to information pursuant to a request under s 275 or s 276. Section 279 allows the secured party who receives a request for information to charge a fee for providing the information.

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However, this fee must not amount to taxation, nor may it exceed the reasonable marginal costs of providing the information (s 279(2)). Furthermore, the grantor is not obliged to pay the fee where the information should have already been provided under a prior request within the previous six months (and was not) or where information previously provided has changed in a material way. A failure to comply with an order of the court may lead to the security interest being extinguished (s 282). The analysis of the court is largely fact oriented in this regard and will turn on what information is or is not relevantly included (see s 281(2), (3))).

[281.6] Further reading ● Explanatory Memorandum [8.21, 8.31]. ● ALRC Report No 64 [13.23–13.24].

¶8-095

SECTION 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.

[282.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 182 s 18(12) s 18(8) no parallel provision

[282.2] Outline Section 282 of the Personal Property Securities Act 2009 (Cth) (PPSA) provides for the consequences of failing to comply with a court order under s 280 or s 281.

[282.3]

Cross-references

● Sections 275 and 276 provide for a request to be made for access to information from a secured party. ● Sections 280 and 281 provide the court with the power to make orders with respect to the provision of information. Annotated Personal Property Securities Act 2009 (Cth)

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[282.4]

Concepts

● Financing change statement See s 150.

[282.5]

Commentary

Section 282 of the Personal Property Securities Act 2009 (Cth) (PPSA) allows the court to extinguish the security interest for a failure to comply with a court order to provide information. The section also allows the court to make such orders as it thinks appropriate to ensure compliance. The extinguishment of the security interest would be a severe order, although this section only arises when the secured party has failed to comply with a prior court order to provide information under s 280 or s 281. The court could additionally or alternatively hold the secured party in contempt for failing to comply or could subordinate the secured party’s priority position to that of the applicant under s 282(2) until the required information is obtained.

[282.6] Further reading ● Explanatory Memorandum [8.22]. ● ALRC Report No 64 [13.23–13.24].

¶8-100 SECTION 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. 283(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.

¶8-100

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Chapter 8

Part 8.4 — Provision of information by secured parties

[283.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[283.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision s 18(14), (15), (16) no parallel provision no parallel provision

Outline

Section 283 of the Personal Property Securities Act 2009 (Cth) (PPSA) provides that a secured party who provides information pursuant to a request under s 275 or s 276 is estopped from denying the accuracy of certain information provided.

[283.3]

Cross-references

● Section 275 provides for a request for information to be provided by a secured party.

[283.4]

Concepts

● Actual knowledge See s 297. ● Security agreement This is defined in s 10. See further s 18 and 20.

[283.5] Commentary Section 283 of the Personal Property Securities Act 2009 (Cth) (PPSA) provides for an estoppel to be raised against a secured party that provides a copy of the security agreement under s 275 or who corrects information that was previously provided under s 275(1)(b)–(d) (which deal with details of the secured collateral and the amounts outstanding). Therefore, where information that has been provided has changed, the secured party should update that information with the person who requested the information and any person who the secured party actually knows will rely on the information.

[283.6] Further reading ● Explanatory Memorandum [8.18]. ● ALRC Report No 64 [13.23–13.24]. Annotated Personal Property Securities Act 2009 (Cth)

¶8-100

686

Personal Property Securities Act 2009

PART 8.5 — NOTICES AND TIMING ¶8-105 SECTION 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.

General commentary Part 8.5 of the Personal Property Securities Act 2009 (Cth) (PPSA) provides rules relating to the giving of notices under the PPSA. Section 285 excludes the operation of these rules to notices given in court proceedings and notices given in accordance with a notice procedure specified in a security agreement. Section 286 requires notices under the PPSA to be given in writing (note that some notices must be in an approved form and the PPSA will specify where this is the case — see s 302 regarding what constitutes an ‘‘approved form’’). Section 287 provides a mandatory rule for serving notices on registered secured parties. Section 288 deals with notices to multiple secured parties. Section 289 requires an identification number included by the Registrar in a document to be included in the notice. For example, the registrar may include an identification number for a verification statement which then must be included in notices relating to that statement. A person required to give notice under the PPSA may apply to the court for orders specifying how the notice is to be given or to dispense with the requirement to give notice under s 291. Section 292 gives the court a dispensation power to cure formal defects or an irregularity in a notice given under the PPSA provided that no substantial injustice would be caused. This is similar to the wording of s 1322 of the Corporations Act 2001 (Cth), although that provision uses the term ‘‘procedural irregularity’’. The courts have interpreted the term ‘‘substantial injustice’’ as meaning ‘‘real, and not merely insubstantial or theoretical prejudice. A degree of prejudice to a person or persons may be outweighed if the overwhelming weight of justice is in favour of making the order’’ (Elderslie Finance Corp Ltd v Australian Securities Commission (1993) 11 ACLC 787 at 790 per Owen J). Substantial injustice is more than mere detriment or harm: Super John Pty Ltd v Futuris Rural Pty Ltd (1999) 17 ACLC 1,242. In the Super John case, Santow J held that the interests of all persons who may be directly affected by the proposed dispensation should be considered by the court before making an order. A failure to comply with the obligations to give notice may lead to proceeds for damages under s 271. For a discussion of the Canadian cases on this issue

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see: Royal Bank v J Segreto Construction Ltd (1986) 6 PPSAC 37; 59 CBR (NS) 190 (Ont DC); Commercial Credit Corp v Long (1971) 4 NBR (2d) 127 (NB QB); 391720 BC Ltd v Daser (2008) 12 PPSAC (3d) 261 (BC SC); Yuan v Mah Investments Ltd (2001) 2 PPSAC (3d) 159; 205 Sask R 22 at [56] (Sask QB). The extent to which notice will have a bearing on proceedings in Australia will depend on the factual matrix surrounding the importance of the notice and the resulting detriment caused. Section 293 allows the court to extend timeframes required under specific provisions of the PPSA Section 294 sets out clarification rules for the calculation of time.

¶8-110

SECTION 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.

¶8-115

SECTION 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).

¶8-120

SECTION 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.

Annotated Personal Property Securities Act 2009 (Cth)

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¶8-125 SECTION 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. 288(2) The notice or document may be given to each of the secured parties by giving a single notice in accordance with section 287.

¶8-130 SECTION 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.

¶8-135 SECTION 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.

¶8-140 SECTION 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:

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(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.

291(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.

¶8-145

SECTION 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.

¶8-150

SECTION 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); Annotated Personal Property Securities Act 2009 (Cth)

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Personal Property Securities Act 2009 (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) ineffective);

(when

defect

makes

registration

(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). 293(2)

The court may make the order even if the period has ended.

293(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.

¶8-155 SECTION 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. 294(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.

PART 8.6 — ONUS OF PROOF AND KNOWLEDGE ¶8-160 SECTION 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.

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691

SECTION 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 (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).

Annotated Personal Property Securities Act 2009 (Cth)

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Personal Property Securities Act 2009

[296.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[296.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision s 65(9), (10) s 65(4) § 1-201

Outline

Section 296 of the Personal Property Securities Act 2009 (Cth) (PPSA) is a miscellaneous provision which explicitly covers who bears the onus of establishing various facts under the PPSA.

[296.3]

Cross-references

● Sections 297–299 deal with actual and constructive knowledge.

[296.4]

Concepts

● Attachment See s 19. ● Market value See s 131. ● Perfected See s 21. ● Registration See Pt 5.3. ● Taking free See Pt 2.5.

[296.5]

Commentary

The onus of proving facts generally lies on the party seeking to rely on such facts. Certain facts are listed under s 296 of the Personal Property Securities Act 2009 (Cth) (PPSA), however, these sub-provisions operate in aid of the general rule rather than seeking to exhaustively define it. Section 296 additionally provides cross-references where relevant to the specific provisions where such an onus arises.

[296.6] Further reading ● Explanatory Memorandum [8.30–8.33]. ● ALRC Report No 64 [–].

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SECTION 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.

[297.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[297.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 19 s 2(2) s 69 § 1-201

Outline

Section 297 of the Personal Property Securities Act 2009 (Cth) (PPSA) defines constructive knowledge for the purposes of the PPSA. While the definition is not substantially different from the principle at common law, there are some qualifications under the PPSA which must be considered. In examining constructive knowledge, it is also convenient to address ‘‘actual knowledge’’.

[297.3]

Cross-references

● Constructive knowledge is an important concept in the PPSA and is referred to in over 20 provisions of the Act. ● Sections 298–300 provide further rules for determining constructive knowledge.

[297.4]

Concepts

● Actual knowledge Like actual possession, pursuant to s 24, actual knowledge refers to the existence of knowledge subjectively in the mind of the relevant party on the facts, that is, the relevant party knew (not ought to have known — but actually knew) of the circumstances in issue. Under the PPSA, actual knowledge typically refers to knowledge of a security interest and in all instances where constructive knowledge satisfies a legislative requirement under the PPSA, actual knowledge will also satisfy the requirement (the reverse is not, however, always the case). ● Constructive knowledge This is discussed below. Annotated Personal Property Securities Act 2009 (Cth)

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Part 8.6 — Onus of proof and knowledge

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[297.5]

Commentary

In essence, constructive knowledge is an objectively assessed element of knowledge which asks what the relevant party would have known at the relevant time had they made inquiries that an honest and prudent person would have made. The definition also extends to subsequent inquiries which would have been made by the hypothetical honest and prudent person if actual knowledge in the first instance existed. A finding of constructive knowledge will usually defeat the party to which it attaches, or subject their interest to an existing security interest. Constructive knowledge is a relatively lower requirement to satisfy when compared to proving actual knowledge on the facts and is thus only available in some circumstances under the Personal Property Securities Act 2009 (Cth) (PPSA) while in others only actual knowledge will suffice. Section 297 of the PPSA is peculiar, however, as the most obvious situation where constructive knowledge could be readily inferred is from knowledge of what is available on the PPS Register. Section 300, however, explicitly removes knowledge of the register from consideration of constructive knowledge, that is, only actual knowledge of what is contained on the PPS Register can ever be found on the facts of a PPSA dispute. See for example Bank of Nova Scotia v Steffens (2002) 4 PPSAC (3d) 197 at [21] (NS SC); Flexi-Coil Ltd v Kindersley District Credit Union Ltd (1993) 5 PPSAC (2d) 192 at [14] (Sask CA). Knowledge is also important in determining the consequence of a defective registration under the PPSA. The issue arose in the Alberta Court of Queen’s Bench decision, Harder (Trustee of) v Alberta Treasury Branches (2004) 6 PPSAC (3d) 346; 36 Alta LR (4th) 118 where the Court held that actual knowledge of the relevant fact could be used to offset what would otherwise constitute a seriously misleading financing statement.

[297.6] Further reading ● Explanatory Memorandum [8.34–8.40]. ● ALRC Report No 64 [6.13–6.17].

¶8-175 SECTION 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

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(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. 298(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. 298(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.

[298.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[298.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 19(1)(b) s 2(2)(d) s 69(c) § 1-201

Outline

Section 298 of the Personal Property Securities Act 2009 (Cth) (PPSA) addresses how actual or constructive knowledge can arise with respect to body corporates. Annotated Personal Property Securities Act 2009 (Cth)

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[298.3]

Cross-references

● Constructive knowledge is an important concept in the PPSA and is referred to in over 20 provisions of the Act. ● Sections 297, 299 and 300 provide further rules for determining constructive knowledge.

[298.4]

Concepts

● Actual or constructive knowledge See s 297.

[298.5]

Commentary

Actual or constructive knowledge forms part of a body corporate where directors, employees or agents possess the relevant knowledge and are responsible, in their capacities as engaged by the body corporate, or when acting on behalf of the entity: see for example Bank of New Zealand v Waewaepa Station 2002 Ltd [2013] NZHC 3321 (director’s knowledge of the effect of a transaction on the secured party was attributed to his company, where director was on the boards of both transferor and transferee). The Personal Property Securities Act 2009 (Cth) (PPSA) is thus not concerned with the knowledge held by such parties in their personal or individual capacity but only in their appointed role with respect to the body corporate. For parties without direct decision-making power, only knowledge obtained in line with regular duties conducted by such parties will bind the entity.

[298.6] Further reading ● Explanatory Memorandum [8.34–8.40]. ● ALRC Report No 64 [6.13–6.17].

¶8-180 SECTION 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.

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299(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.

[299.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[299.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 19 s 2(2) s 69 § 1-201

Outline

Section 299 of the Personal Property Securities Act 2009 (Cth) (PPSA) infers knowledge in certain relationships of close proximity. The purpose of this provision is to avoid improper transfers of property which may seek to circumvent the commercial rationale of the PPSA.

[299.3]

Cross-references

● Constructive knowledge is an important concept in the PPSA and is referred to in over 20 provisions of the Act. ● Sections 297–300 provide further rules for determining constructive knowledge.

[299.4]

Concepts

● Actual or constructive knowledge See s 297. ● Security agreement This is defined by s 10. See further s 18 and 20. ● Value This is defined in s 10. See further [19.5.2.2].

[299.5] Commentary Section 299 of the Personal Property Securities Act 2009 (Cth) (PPSA) imposes a presumption of knowledge on the transferee in certain capacities which prevents the operation of the taking free and some priority positions pursuant to Pt 2.5 and 2.6 respectively. While conflicts of interests do not always arise between parties in such close proximity, as is addressed by s 299, the existing presumption benefits sound commerciality through mandatory disclosure and knowledge requirements. The onus effectively shifts to the party seeking to take free or take priority, to prove that such an interest was not taken with Annotated Personal Property Securities Act 2009 (Cth)

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Personal Property Securities Act 2009

actual or constructive knowledge of an existing security interest. The provisions operate much like the presumptions against related parties under Ch 2E of the Corporations Act 2001 (Cth).

[299.6] Further reading ● Explanatory Memorandum [8.34–8.40]. ● ALRC Report No 64 [6.13–6.17].

¶8-185 SECTION 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.

[300.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[300.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 20 s 47 s 46(5) § 9-331(c)

Outline

Section 300 of the Personal Property Securities Act 2009 (Cth) (PPSA) operates to remove the information which appears on the PPS Register from the assessment of constructive knowledge under the PPSA pursuant to s 297.

[300.3]

Cross-references

● Constructive knowledge is an important concept in the PPSA and is referred to in over 20 provisions of the Act. ● Sections 297–299 provide further rules for determining constructive knowledge.

[300.4]

Concepts

● Actual or constructive knowledge See s 297. ● Register See Pt 5.3.

[300.5]

Commentary

As stated under s 297 of the Personal Property Securities Act 2009 (Cth) (PPSA) at [297.5], s 300 is peculiar as it renders the most self-evident application of constructive knowledge inapplicable. The rationale here is uncertain as primacy of the register principles work in support of s 297 in the absence of s 300, as opposed to with the said exclusion.

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699

Section 300 should not be confused in its application, however, as somehow permitting the taking of an interest over personal property previously encumbered. Section 300 only applies where constructive knowledge is a relevant consideration. There is some premise behind giving effect to the consumer protection rationale of the PPSA through s 300 by seeking to prevent secured parties from bringing actions against those who take property predominately for personal, domestic or household purposes free from security interests in the absence of knowledge. The drafters of the PPSA could have alternatively removed the constructive knowledge requirement in this regard (see s 47), however, other elements of constructive knowledge would then also need to be removed. While this does not prove a complete conclusion, the Australian PPSA is clear that constructive knowledge cannot constitute knowledge as to what information was/is on the PPS Register. As a matter of practice, a secured party (or other interested party) seeking to prove that a particular party seeking to take free or assert that they did not have knowledge of a particular security interest can make a request with the Registrar of Personal Property Securities for all searches conducted in respect to particular data (for example, a grantor’s ACN in the case of a corporate grantor) over a particular time period. Given the technological basis of the PPS Register, this may provide a secured party (or other interested party) with a means of addressing the statutory presumption set out in s 300.

[300.6] Further reading ● Explanatory Memorandum [8.34–8.40]. ● ALRC Report No 64 [6.13–6.17].

PART 8.7 — FORMS AND REGULATIONS ¶8-190

SECTION 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.

General commentary Section 302 of the Personal Property Securities Act 2009 (Cth) (PPSA) provides for the Registrar to create and maintain approved forms. Various provisions of the Act require approved forms to be used (such as s 150 — applying for registration; s 157 — registered party to give notice of verification statement to grantors; s 180 — amendment demands). At the time of writing no forms had Annotated Personal Property Securities Act 2009 (Cth)

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been approved. See further, Re OneSteel Manufacturing Pty Ltd (admin apptd) [2017] NSWSC 21. Section 303 provides a power to make regulations. At the time of writing, the only regulations produced under this power were the Personal Property Securities Regulations 2010 (Cth).

¶8-195 SECTION 302 APPROVED FORMS 302(1) This section applies if this Act requires or authorises something to be in the approved form. 302(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. 302(3) The Registrar may, by written instrument, approve a form for the purposes of paragraph (2)(a). 302(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); (c) section 175 (copies of financing statements and verification statements).

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302(5) A form approved under matter by applying, adopting or modification, any matter contained as in force or existing from time to Acts Interpretation Act 1901.

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subsection (3) may provide for a incorporating, with or without in an instrument or other writing time, despite section 46AA of the

SECTION 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.

Annotated Personal Property Securities Act 2009 (Cth)

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Part 8.7 — Forms and regulations

703

Part 9.1 — Guide to this Chapter

CHAPTER 9 — TRANSITIONAL PROVISIONS PART 9.1 — GUIDE TO THIS CHAPTER SECTION 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.

General commentary The effect of Ch 9 of the Personal Property Securities Act 2009 (Cth) (PPSA) is confined to those interests which arose because of security agreements that were enforceable prior to 30 January 2012 and which would, were the Act in force at the time, constitute a security interest for personal property securities (PPS) purposes. Put simply, Ch 9 does not affect security interests which were created or arise after 30 January 2012, however, such instruments would be caught by the PPSA generally. Chapter 9 thus broadly serves two purposes, a ‘‘logistics’’ based purpose and an ‘‘alleviation’’ based purpose or function. Annotated Personal Property Securities Act 2009 (Cth)

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Personal Property Securities Act 2009

In a logistical sense, Ch 9 helped facilitate the process of transition and migration which comprised the largely administrative and technologically demanding task of moving registered entries of those interests existing on various Commonwealth and state based registers across Australia to the Personal Property Securities Register (PPSR) (see www.ppsr.gov.au). The logistics based function concluded at the end of the migration process (see s 306 regarding ‘‘migration time,’’ [306.5.1]). The alleviation function, a term coined to characterise those provisions which alter the effect of the PPSA in favour of a particular party over the period of transition, however, continued to operate until the expiration of the two-year transition period (see s 306(2) regarding ‘‘registration commencement time’’ at [306.5.2]; Pt 9.4 Div 2 regarding the end of the transitional period at [320.1]ff). Importantly, Ch 9 should not be read as a comprehensive regime in its own right. It is, at best, an adjunct to the PPSA as a whole, as can be seen from both: (a) its reliance on terms defined by the PPSA generally, and (b) its location at the end of the PPSA. It is thus recommended that one understands the operation of the PPSA generally before one seeks to interpret and apply those provisions contained within Ch 9. Below is a summary as to what interests arise under Ch 9 of the PPSA. The summary chart illustrates a downward hierarchy of interests which will become relevant throughout the commentary to Ch 9. Additionally, while the US, Canadian and New Zealand legislation includes provisions for transition, the Australian provisions are considerably more detailed on the whole and cover a broader range of issues than their foreign counterparts. For these reasons the utility of foreign case law across the transitional provisions is limited. Despite the cessation of the Ch 9 transitional provisions from 30 January 2014 onwards, priority disputes and other questions of interpretation which may have arisen between the registration commencement time and the cessation of the transitional period will still require one to analyse the effect of Ch 9. Like all law, the law as it applied at the relevant time at which the dispute arose is the applicable law — the PPSA offers no reason to deviate from this general rule.

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705

Chapter 9

Part 9.2 — Key concepts

PART 9.2 — KEY CONCEPTS ¶9-010

SECTION 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.

Annotated Personal Property Securities Act 2009 (Cth)

¶9-010

706

Personal Property Securities Act 2009

¶9-015 SECTION 306 MEANING OF MIGRATION TIME AND REGISTRATION COMMENCEMENT TIME Migration time 306(1)

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.

Registration commencement time 306(2) For the purposes commencement time is at:

of

this

Act,

the

registration

(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.

306(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. 306(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.

306(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)). 306(6) A determination made under subsection (5) is a legislative instrument, but section 42 (disallowance) of the Legislation Act 2003 does not apply to the determination.

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707

Part 9.2 — Key concepts

New Zealand Saskatchewan Ontario USA

[306.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 193 s 73, 74 s 75, 76 § 9-701

Outline

Section 306 provides definitions specific to the operation of the transitional provisions of the PPSA pursuant to Ch 9.

[306.3]

Cross-references

● Section 333 deals with registration of migrated data. ● Section 336 allows for preparatory registration at or after the migration time. ● The ‘‘registration commencement time’’ concept is central to the PPSA and appears in over 30 provisions in the Act. ● Personal Property Securities Regulations 2010 (Cth) reg 9.1.

[306.4] Concepts ● Migration time See below. ● Registered commencement time See below. ● Watercraft This has a special definition in Pt 9 by PPS Regulations 2010 (Cth) reg 9.1.

[306.5]

Commentary

[306.5.1] Migration time — s 306(1) ...........................................................707 [306.5.2] Registration commencement time — s 306(2) ..........................708

[306.5.1] Migration time — s 306(1) The migration time was 21 November 2011 (s 4 of the Personal Property Securities (Migration Time and Registration Commencement Time) Determination, available at www.comlaw.gov.au/Details/F2011L02397). This date was determined pursuant to s 306(1)(b) of the PPSA. Note, the default period of migration was anticipated to be a period of one month (namely, no less than 28 days: s 306(3)). The migration time, as formally declared in accordance with the above instrument, entailed slightly over double this time. The real difficulties with migration stemmed from the creation and maintenance of the Personal Property Securities Register (PPSR) (see www.ppsr.gov.au) — a task which remains subject to ongoing monitoring and maintenance. While some delay in the process of migration was helpful by way of assisting further consultation between the Commonwealth AttorneyAnnotated Personal Property Securities Act 2009 (Cth)

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[306.1] Comparable provisions in foreign regimes

708

Personal Property Securities Act 2009

General’s department and various market participants and legal professionals (which resulted in several useful amendments to the underlying PPSA), the vast majority of the issues with implementation have been unanticipated and unhelpful, creating a number of concerns for both registering and searching parties. The term ‘‘migration time’’ refers to the logistics period where the data present on previously existing Australian registers was transferred to or recreated under the Personal Property Securities Register (PPSR) (a task undertaken by the Registrar — see Pt 5.9). According to s 306(1) of the PPSA, the migration time was to be the: (a) start of the first day of the month that was 25 months after the month of Royal Assent (which occurred on 14 December 2009), that is, 1 January 2012, or (b) another time set by the Minister. For the purposes of s 306(1)(b) of the PPSA, the migration time was the start of 21 November 2011 (s 4 of the Personal Property Securities (Migration Time and Registration Commencement Time) Determination). The extent of the continued technological interference with the operation of the PPSA can be appreciated in light of the Personal Property Securities Amendment (Registration Commencement) Act 2011 (Cth), which received Royal Assent on 29 November 2011. The amendment empowered the AttorneyGeneral to provide a date for the registration commencement time beyond the date mandated in the PPSA, namely, 1 February 2012. While the amendment proved to be ultimately unnecessary, there is some merit in the body of criticism surrounding the PPSR which suggested further delays in commencement, particularly, in light of the complications announced at: www.ppsr.gov.au/EventUpdates/Announcements/Pages/default.aspx. See also Carson, in the matter of Hastie Group Limited (No 3) (2012) APPSR ¶701-001 [2012] FCA 719.

[306.5.2] Registration commencement time — s 306(2) The registration commencement time was 30 January 2012 (s 5 of the Personal Property Securities (Migration Time and Registration Commencement Time) Determination, available at www.comlaw.gov.au/Details/F2011L02397). The term ‘‘registration commencement time’’ refers to the time at which the Personal Property Securities Register (PPSR) began operation and effect. Section 306(2) of the PPSA prescribed that the PPSR had to commence: (a) on the start of the first day of the month that was 26 months after Royal Assent (which occurred on 14 December 2009), that is, 1 February 2012, or (b) at another time set by the Minister, provided that the Minister allows at least 28 days prior to the registration commencement time for the migration period (due to s 306(3)). For the purposes of s 306(2)(b) of the PPSA, the registration commencement time was the start of 30 January 2012 (s 5 of the Personal Property Securities (Migration Time and Registration Commencement Time) Determination).

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The words ‘‘registration commencement’’ are useful in interpreting how the relevant period of transition should be understood. In essence, parties have only been able to perfect their security interests by registration since 30 January 2012. While the PPSA provides for, and the authors encouraged, ‘‘preregistration’’ of security interests if and when the opportunity was available, the benefit of pre-registration is first realised as at the registration commencement time. The following example illustrates this point: Party A pre-registered a security interest taken over Grantor B’s truck on 20 December 2011. On 30 January 2012, Party C also registered an interest over Grantor B’s truck as soon as the PPSR became available. Leaving issues of transitional priority aside, Party A would prevail over Party C, however, this would not be because Party A was registered first in time. Under the PPSA, Party A could only benefit from registration as at the registration commencement time and thus both parties are perfected equally in time. Party A would prevail due to earlier attachment of a security interest.

Pre-registering a security interest, however, had the benefit of preventing a secured party from acquiescing or forgetting to perfect. Given the effect of the priority rules discussed under Pt 2.6 of the PPSA, and the complexities that the PPSR experienced as it went live, pre-registering presented a viable option for ensuring priority status.

[306.6] Further reading ● Explanatory Memorandum [9.9–9.15]. ● ALRC Report No 64 [11.1–11.15]. ● Nicholas Mirzai, ‘‘A period of transition: Ch 9 of the Personal Property Securities Act 2009’’ (2012) 20 Australian Property Law Journal 193.

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SECTION 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.

[307.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 193 s 73, 74 s 75, 76 § 9-701

[307.2] Outline Section 307 defines the term ‘‘transitional security agreement’’ for the purposes of the PPSA. Annotated Personal Property Securities Act 2009 (Cth)

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Part 9.2 — Key concepts

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[307.3]

Cross-references

● The term transitional security agreement is central to the transitional provisions and is mentioned in over 10 sections.

[307.4]

Concepts

● Registration commencement time See s 306. ● Security agreement This is defined in s 10 as meaning: (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. See further s 18 and 20. ● Transitional security agreement See below.

[307.5]

Commentary

The concept of a transitional security agreement applies in relation to security agreements created (and in force) prior to the registration commencement time for the Personal Property Securities Act 2009 (Cth) (PPSA) which continues to have effect after that time. The term ‘‘security agreement’’ as part of this definition takes its meaning from s 10 of the PPSA as opposed to s 20 (see [20.5.1]), that is, s 307 applies to agreements or acts which create security interests. This much is made clear when one refers to s 311 which applies despite what is set out in s 20. The rationale behind the PPSA transitional provisions is to encapsulate and preserve the integrity of interests existing prior to the PPSA in accordance with the commercial realities and pre-PPSA rules which would govern such interests had the PPSA not taken force. In the authors’ view, where there is doubt regarding whether or not an interest constitutes a transitional security interest, the question should be asked whether the relevant agreement would be recognised under pre-PPSA law. If such an agreement would be recognised had the PPSA not taken force, s 307 should apply to it regardless of whether or not the agreement in issue validly meets the s 12 requirements regarding what constitutes a security interest. This should especially occur where interests which would not commonly constitute security arrangements under pre-PPSA law become security interests under the PPSA (see s 12 and 13). For interests which are excluded from the application of the PPSA, however, such exclusions should also apply to transitional securities (see s 8). The question is one of fact to be established by the party seeking to rely on the pre-PPSA security interest. The following scenario may help in illustrating some of the complexity which may arise with respect to this provision:

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711

In January 2009, Party A enters into an agreement with Party B whereby Party A agrees to supply Party B with widgets on payment terms. No formal terms of agreement are drafted, however, Party A and Party B transact in this fashion for some time. Party A also includes a term on all invoices issued by it to Party B that title is retained by Party A unless and until payment is received in full. In January 2010, Party C lends money to Party B and takes an ‘‘all present and after acquired personal property’’ security interest (AllPAP) over Party B’s assets. In January 2011, Party B defaults on obligations owing to Party A and Party C.

If Party A can establish they have a security interest, they will be entitled to collect any widgets held by Party B at the time Party B went into default as against Party C. The onus is on Party A to establish an existing security interest which would have been recognised prior to the position under the PPSA. It is clear that under the PPSA, a lack of an agreement in writing would prevent Party A from perfecting by registration by force of s 20. However, the combined effect of s 307 and 311 open the question of an existing transitional security interest for Party A to prove as a matter of fact and in light of the evidence. The further question which should be considered is whether the individual supplies pursuant to each invoiced amount create a new security interest between the parties on the basis that each invoice contains retention of title terms or alternatively that such supplies are mere instances of a central agreement between the parties. While the subsequent view is to be preferred ordinarily, there is some doubt cast when there is no central agreement at the outset of the relationship of the parties — any terms of which must be implied by conduct. As a matter of general contractual interpretation, ambiguity cannot favour the person who benefits from the terms (retaining title being the benefit of the purported secured party) and thus, in the authors’ view, there are reasonable prospects to the view that each invoiced supply creates a new security interest. The position is of course avoided by having clear and certain terms defined and entered into at the commencement of a relationship of supply between the parties. It should also be noted that while there is no active requirement imposed on secured parties to have their pre-PPSA interests recognised as transitional security agreements under the PPSA, more can be said about whether or not the transitional interests retain the necessary protections conferred by the PPSA as elaborated upon under s 320 (see [320.1]ff).

[307.6] Further reading ● Explanatory Memorandum [9.9–9.15]. ● ALRC Report No 64 [11.1–11.15]. ● Nicholas Mirzai, ‘‘A period of transition: Ch 9 of the Personal Property Securities Act 2009’’ (2012) 20 Australian Property Law Journal 193. Annotated Personal Property Securities Act 2009 (Cth)

¶9-020

Chapter 9

Part 9.2 — Key concepts

712

Personal Property Securities Act 2009

¶9-025 SECTION 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: (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.

[308.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[308.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 193 s 73, 74 s 75, 76 § 9-701

Outline

Section 308 defines the term ‘‘transitional security interests’’.

[308.3]

Cross-references

The concept of a transitional security interest is central to Pt 9 of the PPSA and is mentioned in over 20 sections in the Act.

[308.4]

Concepts

● Transitional security interest See below. ● Transitional security agreement See s 307. ● Registration commencement time See s 306.

¶9-025

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Part 9.3 — Initial application of this Act

Commentary

Section 308 applies only to interests which satisfy s 307. Like s 307, s 308 operates to alleviate any prejudice suffered by parties complying with prePPSA law merely upon the Act taking force. Examples of such interests include, retention of title clauses, leases and commercial consignments (see s 12 and 13 in this regard) in addition to the recognised security classes of mortgages, charges, liens and pledges. See for example, Central Cleaning Supplies (Aust) Pty Ltd v Elkerton (2015) 296 FLR 25; [2015] VSCA 92.

[308.6] Further reading ● Explanatory Memorandum [9.9–9.15]. ● ALRC Report No 64 [11.1–11.15]. ● Nicholas Mirzai, ‘‘A period of transition: Ch 9 of the Personal Property Securities Act 2009’’ (2012) 20 Australian Property Law Journal 193.

PART 9.3 — INITIAL APPLICATION OF THIS ACT ¶9-030

SECTION 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.

Annotated Personal Property Securities Act 2009 (Cth)

¶9-030

Chapter 9

[308.5]

713

714

Personal Property Securities Act 2009

General commentary Something should be said about Pt 9.3 of the Personal Property Securities Act 2009 (Cth) (PPSA) generally, as its existence is, in the authors’ view, purely for abundant caution. Much, if not all, of what is included in Pt 9.3 operates by force of the PPSA, properly interpreted, in any event. While provisions such as those outlined here provide initial comfort, there is an inherent danger that they may, on some interpretations, conflict with the general operation of the PPSA. In such circumstances, the authors take the view that the transitional provisions must apply over the period of transition despite this being an undesirable result. As far as can be seen, there are no conflicting provisions; however, this style of drafting is unfavourable as it adds an unnecessary level of confusion and provides additional operative provisions for practitioners to interpret and understand.

¶9-035 SECTION 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; (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).

[310.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

¶9-035

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision § 9-703, 9-704, 9-705

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Part 9.3 — Initial application of this Act

[310.2]

715

Outline

This section prescribes when the PPSA will begin to apply to the specified matters.

Cross-references

Chapter 9

[310.3] Nil.

[310.4]

Concepts

● Personal property This is defined by s 10. ● Registration commencement time See s 306. ● Security agreement This is defined by s 10. See further s 18 and 20. ● Transitional register This refers to a pre-PPSA register which has data given in an approved form to the PPS Registrar who accepts the data. See further s 330. ● Transitional security interest See s 308. ● Transitional security agreement See s 307.

[310.5] Commentary This section specifies when the PPSA commences operation with respect to the matters listed. Compare this provision with s 2 which specifies that the Act commences on the day after it receives Royal Assent. Essentially, what this section means is that the provisions of the PPSA do not apply until the registration commencement time. The matters listed in the section will catch all forms of security interests under both PPSA and pre-PPSA regimes as well as other interests in personal property that would not constitute security interests under pre-PPSA law, however, arise at or after the registration commencement time.

[310.6] Further reading ● Explanatory Memorandum [9.16–9.17]. ● ALRC Report No 64 [11.1–11.15]. ● Nicholas Mirzai, ‘‘A period of transition: Ch 9 of the Personal Property Securities Act 2009’’ (2012) 20 Australian Property Law Journal 193. Annotated Personal Property Securities Act 2009 (Cth)

¶9-035

716

Personal Property Securities Act 2009

¶9-040 SECTION 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).

[311.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[311.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 195 s 73, 74 s 77, 78 § 9-703, 9-704, 9-705

Outline

Section 311 provides an exception to the general application of the PPSA provisions for the purpose of recognising transitional security interests.

[311.3]

Cross-references

● Section 310 sets out when the PPSA begins to operate with respect to transitional security interests.

[311.4]

Concepts

● Registration commencement time See s 306. ● Transitional security interest See s 308.

[311.5]

Commentary

Section 20 of the PPSA requires a valid security agreement to exist before a security interest can be enforced against a third party. The PPSA does not, however, seek to act retrospectively and thus interests that were valid as against third parties prior to the PPSA taking force continue to be effective as though the PPSA was never enacted.

[311.6] Further reading ● Explanatory Memorandum [9.16–9.17]. ● ALRC Report No 64 [11.1–11.15]. ● Nicholas Mirzai, ‘‘A period of transition: Ch 9 of the Personal Property Securities Act 2009’’ (2012) 20 Australian Property Law Journal 193.

¶9-040

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Part 9.3 — Initial application of this Act

SECTION 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.

[312.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[312.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 196 s 73, 74 s 77, 78 no parallel provision

Outline

Section 312 prescribes the time at which statutory security interests are recognised.

[312.3]

Cross-references

Nil.

[312.4]

Concepts

● Declared security interests See s 73.

[312.5] Commentary Section 312 prescribes that s 73 only operates at or after the date the PPSA takes force, that is, the registration commencement time. The provision provides little more than certainty on the position as presumably all of the priority rules pursuant to Pt 2.6 apply only after the registration commencement time, particularly given the wording of s 310.

[312.6] Further reading ● Explanatory Memorandum [9.16–9.17]. ● ALRC Report No 64 [11.1–11.15]. ● Nicholas Mirzai, ‘‘A period of transition: Ch 9 of the Personal Property Securities Act 2009’’ (2012) 20 Australian Property Law Journal 193. Annotated Personal Property Securities Act 2009 (Cth)

¶9-045

Chapter 9

¶9-045

718

Personal Property Securities Act 2009

¶9-050 SECTION 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.

[313.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[313.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision no parallel provision

Outline

Section 313 prescribes a modification to the operation of s 106 over the PPSA transitional period.

[313.3]

Cross-references

● Sections 105 and 106 provide for security interests in intellectual property and intellectual property licenses.

[313.4]

Concepts

● Intellectual property licence See s 10 and 105. See further 12.5.5. ● Registration commencement time See s 306. ● Security agreement This is defined by s 10. See further s 18 and 20.

[313.5]

Commentary

Section 313 provides that s 106 (which addresses the binding effect of security agreements in relation to security interests in intellectual property licenses where the intellectual property is transferred) will bind successors of the licensor who transferred the intellectual property only where the security agreement was made at or after the registration commencement time. That is, s 106 will not apply to transitional security interests and will only bind successive licence holders of intellectual property under security agreements made after the PPSA takes force.

¶9-050

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Part 9.3 — Initial application of this Act

[313.6] Further reading ● Explanatory Memorandum [9.16–9.17]. ● ALRC Report No 64 [11.1–11.15].

¶9-055

SECTION 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.

[314.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision no parallel provision

[314.2] Outline This section provides that the Ch 4 enforcement provisions do not apply to security agreements made before the registration commencement time.

[314.3] Cross-references ● Section 310 specifies when the PPSA applies to transitional security interests but is subject to provisions in Pt 9 and therefore is subordinate to this section in that regard.

[314.4]

Concepts

● Registration commencement time See s 306.

[314.5]

Commentary

Section 314 prescribes that the PPSA enforcement provisions apply at or after the registration commencement time. The Ch 4 enforcement provisions of the PPSA are, however, influenced by, and indeed should be read in conjunction with, the security agreement itself. There is nothing to stop the proper application of enforcement procedures arising from the security agreement even where these merely parallel the active provisions of the PPSA. That is to say, where parties, familiar with the PPSA provisions prior to them taking force, draft their agreements in accordance with the enforcement provisions of the PPSA, such provisions will bind the relevant parties accordingly. Annotated Personal Property Securities Act 2009 (Cth)

¶9-055

Chapter 9

● Nicholas Mirzai, ‘‘A period of transition: Ch 9 of the Personal Property Securities Act 2009’’ (2012) 20 Australian Property Law Journal 193.

720

Personal Property Securities Act 2009

[314.6] Further reading ● Explanatory Memorandum [9.16–9.17]. ● ALRC Report No 64 [11.1–11.15]. ● Nicholas Mirzai, ‘‘A period of transition: Ch 9 of the Personal Property Securities Act 2009’’ (2012) 20 Australian Property Law Journal 193.

¶9-060 SECTION 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. 315(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.

[315.1] Comparable provisions in foreign regimes Note: see also s 322(2). New Zealand Saskatchewan Ontario USA

[315.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 197 s 73, 74 s 77, 78 § 9-706

Outline

Section 315 outlines the commencement of the registration process.

[315.3]

Cross-references

● Section 333 provides for the Registrar to register migrated security interests on the Personal Property Securities Register (PPSR). ● Section 336 deals with preparatory registrations.

[315.4]

Concepts

● Financing statement and financing change statement These are defined in s 10. See also s 153. ● Registration commencement time See s 306.

¶9-060

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Part 9.3 — Initial application of this Act

[315.5]

Commentary

The Registrar may, however, register transitional interests prior to this point, however, no new interests are to be registered until the registration commencement time.

[315.6] Further reading ● Explanatory Memorandum [9.16–9.17]. ● ALRC Report No 64 [11.1–11.15]. ● Nicholas Mirzai, ‘‘A period of transition: Ch 9 of the Personal Property Securities Act 2009’’ (2012) 20 Australian Property Law Journal 193.

¶9-065

SECTION 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.

[316.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[316.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision no parallel provision

Outline

Section 316 concerns the conflict of laws provisions pursuant to Pt 7.2.

[316.3]

Cross-references

● Part 7.2 provides rules that set out what laws will govern the operation of security interests over particular forms of personal property.

[316.4]

Concepts

● Registration commencement time See s 306. ● Transitional security interests See s 308.

[316.5] Commentary This section provides that the rules pursuant to Pt 7.2 only apply after the registration commencement time. Annotated Personal Property Securities Act 2009 (Cth)

¶9-065

Chapter 9

Section 306 prescribes that the PPS Register opens to the public for registration at the registration commencement time. Pursuant to s 315, parties can therefore only lodge a financing statement or financial change statement at or after this time.

722

Personal Property Securities Act 2009

[316.6] Further reading ● Explanatory Memorandum [9.16–9.17]. ● ALRC Report No 64 [11.1–11.15]. ● Nicholas Mirzai, ‘‘A period of transition: Ch 9 of the Personal Property Securities Act 2009’’ (2012) 20 Australian Property Law Journal 193.

¶9-070 SECTION 317 CONSTITUTIONAL AND NONCONSTITUTIONAL 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. 317(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.

[317.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[317.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision no parallel provision

Outline

Section 317 concerns constitutional and non-constitutional interests under the PPSA pursuant to s 251 and 252.

[317.3]

Cross-references

● Section 310 provides when the PPSA operates.

[317.4]

Concepts

● Constitutional security interests See s 251. ● Non-constitutional security interest See s 252. ● Registration commencement time See s 306. ● Transitional security interest See s 308.

¶9-070

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[317.5]

Commentary

[317.6] Further reading ● Explanatory Memorandum [9.16–9.17]. ● ALRC Report No 64 [11.1–11.15]. ● Nicholas Mirzai, ‘‘A period of transition: Ch 9 of the Personal Property Securities Act 2009’’ (2012) 20 Australian Property Law Journal 193.

¶9-075

SECTION 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.

[318.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision no parallel provision

[318.2] Outline This section sets out when Pt 9.5 (which regulates how to describe under the PPSA, security interests described as fixed or floating charges) will apply.

[318.3] Cross-references ● Section 339 provides for the naming of fixed and floating charges under the PPSA. ● Sections 340–341A define key terms (circulating assets, control and inventory) that are used in identifying the correct label for fixed and floating charges under the PPSA. Annotated Personal Property Securities Act 2009 (Cth)

¶9-075

Chapter 9

This section prescribes that the rules in relation to property taken free when the Act takes force and priority between constitutional and non-constitutional security interests only apply at or after the registration commencement time.

724

Personal Property Securities Act 2009

[318.4]

Concepts

● Registration commencement time See s 306. ● Security agreement This is defined by s 10. See further s 18 and 20. ● Transitional security interest See s 308.

[318.5]

Commentary

Prior to the PPSA taking force, the terms ‘‘fixed charge’’ and ‘‘floating charge’’ carried significant legal and commercial ramifications by way of conferring a security interest recognised at common law (see Intro.III and Pt 9.5 for more information). While the underlying concept of a ‘‘charge’’ remains after the registration commencement time, s 318, in essence, prescribes that the provisions pursuant to Pt 9.5 will apply at and after this point. From a practical perspective, as is discussed further at Pt 9.5, it is unrealistic to expect the terms ‘‘fixed charge’’ and ‘‘floating charge’’ to disappear in legal and commercial contexts immediately after the registration commencement time, however, as the PPSA removes the utility of form it is expected that over time drafting techniques will change to better facilitate the operation of the Act.

[318.6] Further reading ● Explanatory Memorandum [–]. ● ALRC Report No 64 [11.1–11.15]. ● Alice Tranter-Wilson, ‘‘The Circulating Security Interest in Review: Architectures of Certainty, Flexibility and Control’’ (2017) 28 Journal of Banking and Finance Law and Practice 3. ● Jason Harris, ‘‘Assessing the effect of the PPSA on the Corporations Act and corporate law teaching’’ (2012) 27 Australian Journal of Corporate Law 72. ● Lionel Meehan, ‘‘Circulating Security Interests under the Personal Property Securities Act 2009 (Cth) Compared to Floating Charges’’ (2011) 22 Journal of Banking and Finance Law and Practice 322. ● Nicholas Mirzai, ‘‘A period of transition: Ch 9 of the Personal Property Securities Act 2009’’ (2012) 20 Australian Property Law Journal 193.

¶9-075

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Part 9.4 — Transitional application of this Act

725

PART 9.4 — TRANSITIONAL APPLICATION OF THIS ACT Division 1 — Introduction SECTION 319 GUIDE TO THIS PART

Chapter 9

¶9-080 319

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.

Annotated Personal Property Securities Act 2009 (Cth)

¶9-080

726

Personal Property Securities Act 2009 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.

Division 2 — Attachment, perfection and priority of transitional security interests ¶9-085 SECTION 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: Priorities involving transitional security interests Item The following has priority over . . . security interest: 1 a perfected an unperfected transitional security security interest interest (whether transitional or not) 2 a perfected a perfected security transitional security interest that is not a interest transitional security interest 3 an unperfected an unperfected transitional security security interest that interest is not a transitional security interest 4 a perfected security an unperfected interest (whether transitional security transitional or not) interest

because of . . . subsection 55(3).

subsection 55(5) and sections 322 and 322A. subsection 55(2) and section 321.

subsection 55(3).

320(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.

¶9-085

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Part 9.4 — Transitional application of this Act

Chapter 9

320(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.

[320.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[320.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 200 s 73, 74 s 77, 78 § 9-709

Outline

Part 9.4 of the PPSA provides the rules with respect to transitional security interests in terms of temporarily perfected security interests over the first 24 months after the PPSA takes force. Part 9.4 is mainly relevant where interests are to be perfected by registration as interests perfected by possession or control continue to be possessed or controlled by the secured party and are thus largely unaffected by the transitional period (unless possession or control is lost prior to registering a financing statement). Section 320 outlines the default priority rules for transitional security interests under the PPSA. The creation of transitional security interests adds a new dimension to the PPSA whereby common law and equitable interests may be characterised as ‘‘transitional security interests’’ (see s 308) which in turn may compete for priority with PPSA security interests pursuant to s 12 and 13.

[320.3]

Cross-references

● Section 55 provides the default priority rules. ● Section 321 provides for attachment of transitional security interests. ● Section 322 provides for perfection of transitional security interests. ● Sections 322A–324 provide further priority rules for transitional security interests.

[320.4] Concepts ● Continuous perfection See s 56. ● Perfected See s 21. ● Transitional security interest See s 308. Annotated Personal Property Securities Act 2009 (Cth)

¶9-085

728 [320.5]

Personal Property Securities Act 2009

Commentary

Section 320 of the Personal Property Securities Act 2009 (Cth) (PPSA) prescribes the default priority rules in relation to transitional security interests. The provision should thus be read where at least one of the competing priority interests constitutes a transitional security interest. The table of priorities pursuant to s 320(1) addresses how transitional security interests interact with PPSA interests (where the term ‘‘PPSA interest’’ has been used to describe interests created under security agreements that arise at or after the registration commencement time). In essence, the PPSA default priority regime also provides the default rules with respect to transitional security interests. Importantly, transitional security interests neither suffer prejudice nor are they treated favorably as against PPSA security interests with respect to priority. The general rule, pursuant to the default priority regime established under s 55 thus prevails, that is, a perfected security interest of either description takes priority as against an unperfected interest. Where a transitional security interest is in dispute with a PPSA interest and both interests are either perfected or unperfected — the ‘‘first in time’’ rule, as discussed under s 55, will prevail. By definition, the transitional security interest will prevail as it must have existed prior to the PPSA taking force and therefore even the earliest perfected PPSA interest will be later in time. Section 320, however, does not provide the mechanics for resolving every priority dispute and must be read in accordance with the remaining provisions under Pt 9.4, Div 5. In addition, the PPSA is silent as to the existence of super priority interests such as purchase money security interests (PMSIs) (see s 14). In the authors’ view, where specific provisions of the PPSA provide for priority modifications, such modifications prevail as against transitional security interests in the same way as they prevail against perfected security interests. The rationale here is that the PMSI is given super priority in recognition of the increase in assets of the debtor that the PMSI financier has facilitated. This view is supported by the following reasoning. The transitional security interest is recognised as a perfected security interest for PPSA purposes. The ‘‘alleviation’’ or aid provided to parties relying on the transitional interests is one of timeliness, namely, a transitional security interest is recognised as being perfected immediately before the registration commencement time (30 January 2012). Should a priority contest arise between notionally equal interests (that is, between a transitional security interest and a perfected security interest), the transitional interest thus prevails as a perfected security interest can never achieve perfection before the time when a transitional security interest is deemed to be perfected. Note, however, that the PMSI is not a time dependent instrument with respect to priority. Under the PPSA, a PMSI prevails over a perfected security interest irrespective of the point in time at which the PMSI is perfected (s 62). The same reasoning is applicable when faced with a competing PMSI and transitional security interest. Further, one must understand what it is the PMSI is designed to achieve (see s 14), that is, it is an instrument relevant to new collateral and new value. Whether or not

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Further, where both interests are transitional and one could be characterised as a PMSI, were the PPSA applicable at the time, then consistent with the prePPSA position, priority will likely follow the PMSI holder as against a competing general security agreement. The point is better understood with reference to an example, consider the following: Party A has a general security agreement (an AllPAP) as against Party B whereby Party A agrees to loan Party B funds. Party C agrees to provide widgets to Party B on retention of title terms subsequent to Party B engaging with Party A. Party B defaults against both Party A and Party C.

In a priority dispute between Party A and Party C with respect to the widgets, as Party C retained title to the widgets they would have never formed part of Party B’s pool of assets and therefore Party C would prevail over Party A. Under the PPSA, Party C would be treated as having a PMSI and would prevail against Party A. Thus, while the rationale is different the result is the same. In contrast to what is said above regarding PMSIs, it should be noted that super priority is also commonly given to perfection by control, however, s 322A provides that a perfected transitional security interest will take priority over a non-transitional security interest perfected by control. Given what is said about transitional security interests and their priority status with respect to perfected security interests under the PPSA generally, there may be a view that parties should seek to retain for as long as possible temporary rather than generally perfected status. This misconception suffers two important flaws. ● First, perfecting an interest which is perfected by another means does not reset the priority time (provided the interest has been continuously perfected: see s 56 of the PPSA). Thus, if a transitional security interest is subsequently perfected by registration, this would not reset the point in time at which priority is to be determined. ● If there is a misdescription in the collateral, a transitional security interest might lose its priority. The term misdescription is used with respect to the foreign case law, and covers both incorrect and inadequate description of collateral. An inadequate description may result in the same consequences as an incorrect description. The second, and perhaps more important, flaw is the error in the arbitrary reliance of secured parties on transitional or migrated security interests where they are aware of and have the means to perfect by an alternative method (in most cases, perfection by registration). The case of Carson, in the matter of Hastie Group Ltd (No 3) (2012) APPSR ¶701-001; [2012] FCA 719, the first of its kind with respect to the PPSA, although taking the form of a directions hearing as opposed to a final determination of a party’s rights, demonstrates the dangers with misdescription as has been increasingly prevalent in the transition process. It Annotated Personal Property Securities Act 2009 (Cth)

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the PMSI is in conflict with existing interests of the grantor is thus rendered largely moot.

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is no excuse that the Registrar, or the Registrar’s staff, have misdescribed collateral by way of migration. All parties aware of the PPSA and its effects should be directed to Pt 8.3, particularly s 272 of the PPSA, and the immunity conferred upon those who administer the Personal Property Securities Register (PPSR). The PPSR itself contains a general condition of use that parties must take the register ‘‘as is’’ and ‘‘as available’’: cl 24, see www.ppsr.gov.au/AbouttheRegister/PPSRConditionsofUse/Pages/General ConditionsofUse.aspx. The conclusion, while perhaps prima facie unfair, is that the PPSA imposes an onus on the party ultimately benefiting from a priority position to take steps to preserve that priority. Upon a more complete understanding of what it is that Ch 9 confers, it is thus recommended that parties perfect by alternate means (in most instances, appropriately by perfecting by registration) or by amending existing entries on the PPSR to reflect, as particularly as possible, the true position between the parties.

[320.6] Further reading ● Explanatory Memorandum [9.24–9.26]. ● ALRC Report No 64 [11.1–11.15]. ● Nicholas Mirzai, ‘‘A period of transition: Ch 9 of the Personal Property Securities Act 2009’’ (2012) 20 Australian Property Law Journal 193.

¶9-090 SECTION 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)). 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.

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New Zealand Saskatchewan Ontario USA

[321.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 200, 201 s 73, 74 s 77, 78 § 9-709

Outline

Section 321 prescribes when attachment occurs in relation to transitional security interests for the purposes of the PPSA.

[321.3]

Cross-references

● Section 55 provides the default priority rules.

[321.4] Concepts ● Attached See s 19. ● Registration commencement time See s 306. ● Transitional security interest See s 308.

[321.5]

Commentary

Pursuant to s 321, a transitional security interest is deemed to attach at a time immediately before the registration commencement time. The practical reason for this overarching provision is that often establishing when a security interest attached under pre-PPSA law was irrelevant or immaterial and thus seeking to impose PPSA sensitive rules retrospectively is against the PPSA’s fundamental policy position of preserving commercial realities. See for example, NCO Finance Australia Pty Ltd v Australian Pacific Airports (Melbourne) Pty Ltd [2013] FCCA 2274 (two competing secured parties with transitional security interests that were deemed to have attached and been perfected at the same time. Priority was determined by pre-PPSA law). Section 321, while commercially convenient, presents a complication of its own, however, by reason of the priority rules under the PPSA. The issue arises where two unperfected transitional security interests are in a priority dispute with one another. The general rule, pursuant to s 320, holds that the first interest to attach in time will prevail. In the present circumstances, however, neither security interest can be said to attach earlier in time — they attach at the same time pursuant to s 321. Note 2 of s 321 prescribes that in such circumstances, the pre-PPSA priority position will determine the dispute. In the authors’ view, a dispute of this fashion should never arise in practice. Under the PPSA, there is no restriction as to when perfection of a security interest can occur and thus either party, upon notice of the dispute, should simply perfect their interest. This view is much the same as the view expressed in the commentary to s 55(2). With the expiry of the transition Annotated Personal Property Securities Act 2009 (Cth)

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[321.1] Comparable provisions in foreign regimes

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period such interests should have been perfected otherwise than pursuant to the provisions of Pt 9.4 or they risk being subject to perfected secured parties or taking free rules. Further, where attachment occurs some time in the future pursuant to an agreement created prior to the PPSA taking force (under a ‘‘floating charge’’ for instance — see Pt 9.5), in the authors’ view, s 321 applies. This is consistent with the view expressed under s 307 and 308.

[321.6] Further reading ● Explanatory Memorandum [9.25]. ● ALRC Report No 64 [11.1–11.15]. ● Nicholas Mirzai, ‘‘A period of transition: Ch 9 of the Personal Property Securities Act 2009’’ (2012) 20 Australian Property Law Journal 193.

¶9-095 SECTION 322 PERFECTION RULE Main rule 322(1) 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.

322(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 (migration of personal property interests); (b) when the security interest is perfected by preparatory registration under Division 7; (c) when a registration under Division 6 or 7 is amended so that the registration perfects the security interest; (d) when the security interest is otherwise perfected registration, or is perfected by possession or control;

by

(e) when the security interest is otherwise perfected (but not temporarily perfected) by this Act, other than under this section; (f) the end of the month that is 24 months after the registration commencement time.

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(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.

Exception 322(3) 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.

[322.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[322.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 200, 201, 198 s 73, 74 s 77, 78 § 9-709

Outline

Section 322 prescribes when perfection occurs for transitional security interests.

[322.3]

Cross-references

● Section 320 provides default priority rules for transitional security interests. ● Sections 322A–324 provide specific priority rules for transitional security interests. ● Personal Property Securities Regulations 2010 (Cth) reg 9.2.

[322.4] Concepts ● Continuous perfection See s 56. ● Perfected See s 21. ● Registration commencement time See s 306. ● Transitional security interest See s 308. Annotated Personal Property Securities Act 2009 (Cth)

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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:

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[322.5]

Commentary

[322.5.1] Main rule — s 322(1) .....................................................................734 [322.5.2] Exceptions and replacement rules — s 322(2) ..........................734 [322.5.3] Imposition of regulations — s 322(3) .........................................736

[322.5.1] Main rule — s 322(1) Transitional security interests, pursuant to s 322(1), achieve perfection at a time immediately prior to the registration commencement time. The priority disputes that can arise from this are dealt with in s 322A–324.

[322.5.2] Exceptions and replacement rules — s 322(2) Due to the broad compass of this rule, deemed perfection under this section ceases to have operative effect 24 months after the registration commencement date. Interests arising after this time which would be classified as ‘‘transitional security interests’’ additionally benefit from s 322(1) provided that s 322(2) does not end the application of s 322(1): see for example, NCO Finance Australia Pty Ltd v Australian Pacific Airports (Melbourne) Pty Ltd [2013] FCCA 2274. Section 322, in essence, establishes a two-year transition period after which the PPSA applies unencumbered by concepts of transitional interests. This gives secured parties whose security interest extends beyond the twoyear transition period time to perfect their interest so as to maintain continuous perfection after the end of the transition period. It should be understood that, in essence, the transitional provisions of the PPSA provide a period of temporary perfection (see s 21(1)(a)) and the onus is on holders of transitional security interests to comply with the PPSA after this point (and prior to the expiration of the transitional period). Where a transitional security interest is continuously perfected after this 24-month period, however, (see s 56 regarding the concept of continuous perfection), the interest retains perfection as at a time immediately before the registration commencement time: see Holland v Chrysler Credit Canada Ltd (1992) 4 PPSAC (2d) 250; 5 Alta LR (3d) 258 (Alta QB); see also, Advance Diamond Drilling (Receiver of) v National Bank Leasing Inc (1992) 3 PPSAC (2d) 154; 67 BCLR (2d) 173 (BC SC). Section 322(2) lists six prevailing conditions which end the operation of s 322(1). The conditions establish a series of steps available to a holder of a transitional security interest such that the holder can achieve a more permanent means of perfection. Section 322(2)(a) provides for perfection by registration under Pt 9.4, Div 6 — establishing a ‘‘migrated’’ security interest. Interests transferred from one of the various previously existing registers to the PPS Register thus do not constitute transitional security interests rather they comprise ‘‘migrated security interests’’ pursuant to s 332. If a transitional security interest becomes a migrated security interest through its own registration, the rules with respect to migrated security interests under Div 6 govern the interest. In a hierarchical sense, a migrated security interest presents more permanency than a transitional security interest.

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Section 322(b) provides for preparatory perfection by registration whereby during the period between the migration time and the registration commencement time (see s 306) a person can apply to the Registrar (see Pt 5.9) to pre-register an interest. Pre-registration allows a PPSA interest to arise as soon as the PPSA commences force (for more information, see Pt 9.4, Div 7). Importantly, preparatory perfection is not available under the PPSA merely for transitional security interests but to any party anticipating the creation of a security interest at any point pending the commencement of the PPSA. Section 322(c) provides for perfection by registration under the PPSA, that is, where interests pursuant to Div 6 or Div 7 are amended to eliminate their transitional effect. Such interests become PPSA security interests and are bound by the provisions of the Act. Section 322(d) provides for perfection by registration, possession or control in the ordinary sense under the PPSA (see s 21–29). An interest perfected under the PPSA need not rely on the temporary perfection granted by the Act with respect to transitional security interests although, provided it was continuously perfected (see s 56), such an interest would retain priority from the point in time immediately before the registration commencement time (see s 306). Section 322(e) provides for other forms of perfection by the PPSA but not temporary perfection. This section relates to specific forms of perfection for specific collateral classes through the PPSA. Section 322(f) provides for the default position discussed above, that is, 24 months after the registration commencement time. Again, while s 322(1) provides that an interest arising after this time benefits from the transitional security interest provisions, it will only do so for the purposes of continuous perfection (see s 56) in the authors’ view, that is, such an interest, where perfected by some other means before the expiry of the transitional period, will retain perfection from the point in time immediately before the PPSA took force. The note to s 322(2) is instructive and should be further considered. Element (b) of the note highlights the consequences of failing to perfect within the 24-month temporary perfection period (or prior to any of the subparagraphs pursuant to s 322(2)) — namely that the security interest ‘‘becomes unperfected’’. It is therefore important to consider what these words actually mean to which there are two hypotheses, first, the term ‘‘becomes unperfected’’ means that at the expiration of the transitional period the security interest is taken to be unperfected (namely, as of 31 January 2014). However, the second hypothesis is that the security interest, upon becoming unperfected, is taken to have never been perfected as at the first point it was conferred perfection — that is to say, the security interest is and has been unperfected from the registration commencement time to the present point. The distinction in interpretation produces vastly different results and exposures from the perspective of the secured party. While the second reading may appear to be anomalous, when one reads s 56 of the PPSA and the requirements of ‘‘continuous perfection’’, the second hypothesis appears to be Annotated Personal Property Securities Act 2009 (Cth)

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consistent with the overall understanding of temporary perfection under the PPSA and should be preferred. Further, the concept of continuous perfection is clearly relevant and a requirement of preserving perfected status as referred to specifically in element (a) of the note. Thus, to suggest that s 322(2) confers a particular type of temporary perfection immune from consideration of s 56 appears to put too broad a reading on the application of Ch 9. The practical effect of this would be such that if a security interest was created during the transitional period (as opposed to before) and was perfected at some time prior (assuming the interest is validly perfected), then applying the second hypothesis for s 322(2), a transitional security interest which was not subsequently perfected would lose in a priority contest as against the security interest created and perfected later in time. This is so notwithstanding the fact that had the priority contest occurred during the transitional period, the transitional security interest would have prevailed (see s 320). While this may appear to be a harsh result, the transitional provisions were designed, again — as the name suggests, merely to transition secured parties from the former position at common law to the statutory position. To that, it can be said that with the expiration of the ‘‘grace period’’ such seemingly harsh results must occur should the PPSA apply the way it was intended. That is to say, the failure to appreciate a need to otherwise perfect during the 24 months warrants, at least on one view, the security interest perfected later in time to prevail.

[322.5.3] Imposition of regulations — s 322(3) The PPS Regulations stipulate, at reg 9.2, that a transitional security interest is prescribed for the purposes of s 322(3) where it is registrable on a transitional register and where it was not registered on the relevant register prior to the registration commencement time, that is, such interests will not benefit from s 322(1) and (2). Regulation 9.2(1), however, does not apply to charges which must be registered in accordance with the Corporations Act 2001 (Cth) s 262 which are deemed unregistered pursuant to Corporations Act 2001 (Cth) s 265(9) (which deals with charges that only have provisional registration in the Australian Securities and Investment Commission (ASIC’s) Australian Register of Company Charges). Several recent cases have found that a failure to register motor vehicles under pre-PPSA chattel security laws (where registration was required under the prior law) come within this subsection: see Re Maiden Civil (P&E) Pty Ltd (2013) APPSR ¶701-008; Albarran v Queensland Excavation Services Pty Ltd (2013) 277 FLR 337; [2013] NSWSC 852; White v Spiers Earthworks Pty Ltd [2014] WASC 139.

[322.6] Further reading ● Explanatory Memorandum [9.22]. ● ALRC Report No 64 [11.1–11.15]. ● Nicholas Mirzai, ‘‘A period of transition: Ch 9 of the Personal Property Securities Act 2009’’ (2012) 20 Australian Property Law Journal 193.

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SECTION 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.

[322A.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[322A.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision no parallel provision

Outline

This section provides clarification regarding priority contests between a perfected transitional security interest and a non-transitional security interest in the same collateral that is perfected by control.

[322A.3]

Cross-references

● Sections 320, 323 and 324 provide further priority rules for transitional security interests.

[322A.4] Concepts ● Registration commencement time See s 306. ● Transitional security interest See s 308.

[322A.5] Commentary This section was inserted by the Personal Property Securities (Corporations and Other Amendments) Act 2011 (Cth) Sch 2, item 58 in order to ensure that perfected transitional security interests take priority over non-transitional security interests that are perfected by control. As noted in the commentary for s 320, while a non-transitional security interest that is a purchase money Annotated Personal Property Securities Act 2009 (Cth)

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security interest (PMSI) provides new value to the debtor and can therefore have its super priority justified, a non-transitional security interest that is perfected by control (or possession) provides no such justification.

[322A.6] Further reading ● Explanatory Memorandum 2011 [70–74]. ● ALRC Report No 64 [11.1–11.15]. ● Nicholas Mirzai, ‘‘A period of transition: Ch 9 of the Personal Property Securities Act 2009’’ (2012) 20 Australian Property Law Journal 193.

¶9-105 SECTION 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)).

[323.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[323.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

s 199, 200 s 73, 74 s 77, 78 § 9-709

Outline

Section 323 expressly prescribes the priority position where the PPSA provisions are unable to resolve a priority dispute.

[323.3]

Cross-references

● Sections 320, 322A and 324 provide further priority rules for transitional security interests.

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[323.4]

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Concepts

[323.5] Commentary Section 323 seeks to confirm the position comprising the notes to s 321 and 322. The provision makes it clear that if no alternative provision of the PPSA can determine a priority dispute between two perfected or two unperfected transitional security interests, then the law as it stood prior to the PPSA will be used to determine the dispute. In the authors’ view, the PPSA would operate to the same effect in the absence of s 323, however, due to the significance of this rule, a separate section is not unwarranted. Such a dispute arose in NCO Finance Australia Pty Ltd v Australian Pacific Airports (Melbourne) Pty Ltd [2013] FCCA 2274. In that case, the priority competition was between the financier of a motor vehicle, which was properly perfected under the pre-PPSA law, and the company running Melbourne Airport’s carparks which had a contractual lien over the vehicle for unpaid parking fees of several thousand dollars. Both security agreements were transitional. The vehicle had been abandoned in the car park by the registered owner and a dispute arose as to who had priority. The court held that the car park operator had priority under pre-PPSA law by reason of the Chattel Securities Act 1987 (Vic) which provided priority for a repairer’s lien (which the court held the car park operator had) over any registered interest (ie the finance company’s interest registered on the REVS in Queensland). While the date of perfection, pursuant to s 322(1), is thus important, where the date of attachment or registration under pre-PPSA regimes is available, such information should be included in the registration of any transitional security interest (by way of preparatory registration pursuant to s 337 in the authors’ view). The Newfoundland and Labrador Court of Appeal case, Re Hickman Equipment (1985) Ltd (2004) 7 PPSAC (3d) 37; 239 Nfld& PEIR 296 at [34], discusses the importance of this inclusion, the Court holding that: ‘‘The reason for the date of the registration being included in the information provided in the transition financing statement is obvious. It is critical to the question of priorities since priorities created by prior security interests operate not from the date of the registration of the transition financing statement but from an earlier date — the date of registration of a document under a prior law (section 75(1)).’’ See also Assiniboine Credit Union Ltd v Canadian Imperial Bank of Commerce (1984) 4 PPSAC 96; 11 DLR (4th) 744 (MB CA). It is fortunate, or perhaps somewhat unfortunate, that the ‘‘catch-all’’ or fallback position under s 323 of the PPSA is the position at law as it stood prior to Annotated Personal Property Securities Act 2009 (Cth)

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● Registration commencement time See s 306. ● Transitional security interest See s 308.

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the enactment of the personal property securities (PPS) regime. Section 254 has a similar effect under the PPSA generally, namely, absent express provision (as would be the case should an irreconcilable priority dispute arise) the general law remains applicable. The fortunate aspect is that there can be no priority contest ultimately unresolvable by force of the PPSA. The unfortunate aspect is the reliance on mechanics that the PPSA was largely designed to replace. Ideally, there will be a limited number of cases which will demand the invocation of common law and equitable priority principles (although the general law retains critical importance with respect to characterisation of security interests in the first instance (see s 12 in particular)), however, this outlook is purely a speculative. In any event, secured parties and commercial participants generally are encouraged to comply with the PPSA provisions.

[323.6] Further reading ● Explanatory Memorandum [9.18–9.20]. ● ALRC Report No 64 [11.1–11.15]. ● Nicholas Mirzai, ‘‘A period of transition: Ch 9 of the Personal Property Securities Act 2009’’ (2012) 20 Australian Property Law Journal 193.

¶9-110 SECTION 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. 324(2) Subsection (1) is in addition to, and does not derogate from, any other provision of this Division.

[324.1] Comparable provisions in foreign regimes New Zealand

PPSA 1999

Saskatchewan Ontario USA

PPSA 1993 PPSA 1990 UCC Article 9 (rev)

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[324.2]

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Outline

[324.3]

Cross-references

● Section 322 provides for deemed perfection of transitional security interests.

[324.4] Concepts ● Registration commencement time See s 306. ● Transitional security interest See s 308.

[324.5]

Commentary

Section 324 prescribes that a Bankruptcy Practitioner is to apply the rules of the PPSA if, after the month ending 24 months after the PPSA commences force, a priority dispute arises involving at least one transitional security interests. By way of implication, this means that a Bankruptcy Practitioner is bound by the transitional provisions in the same respect as other competing secured parties, that is, a Bankruptcy Practitioner must determine priorities in accordance with Ch 9. Deeming s 322 not to have effect in this context means that one or more of the competing transitional security interests will not be perfected. Part 8.2 of the PPSA provides for the vesting of unperfected security interests in the grantor upon the occurrence of certain insolvency events in relation to the grantor. A Bankruptcy Practitioner should be encouraged to understand the priority regime of the PPSA before determining whether or not a security interest validly meets the PPSA requirements. The case of Carson, in the matter of Hastie Group Limited (No 3) (2012) APPSR ¶701-001; [2012] FCA 719 demonstrates some of the concerns which have arisen as a consequence of misdescription (which includes a failure to properly particularise one’s security interest, as well as incorrect description). It is also an example of one of the options available to a Bankruptcy Practitioner when facing PPSA issues, namely, the ability to seek judicial directions. Fellow Bankruptcy Practitioners would be well advised to maintain an awareness of proceedings concerning judicial directions in this space, particularly over the period of transition, to benefit from the perspective of the court in interpreting some of the more complex PPSA provisions. Annotated Personal Property Securities Act 2009 (Cth)

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Section 324 addresses the position of insolvency practitioners or bankruptcy trustees in dealing with transitional security interests (termed collectively as ‘‘Bankruptcy Practitioners’’ in this commentary for convenience). The PPSA provisions in relation to Bankruptcy Practitioners appears at Pt 8.2.

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[324.6] Further reading ● Explanatory Memorandum [9.31–9.33]. ● ALRC Report No 64 [11.1–11.15]. ● Nicholas Mirzai, ‘‘A period of transition: Ch 9 of the Personal Property Securities Act 2009’’ (2012) 20 Australian Property Law Journal 193. NOTE: Sections 325 to 329 inclusive repealed by No 96 of 2010, s 3, Sch 2, Pt 1, item 121, effective 6 July 2010.

Division 6 — Migration of personal property interests ¶9-115 SECTION 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.

¶9-120 SECTION 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.

[331.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

¶9-115

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision no parallel provision

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Outline

Part 9.4, Div 6 addresses the logistics of migration of data from pre-PPSA registers to the PPS Register at the migration time. Migrated security interests (see s 332) emerging from this process are classed as such and while all transitional security interests are migrated security interests, the reverse is not always the case. Where an interest constitutes both a transitional security interest and a migrated security interest, pursuant to s 322(2), it will be classed as a migrated security interest. Section 331 addresses the ability of the Registrar to request and receive relevant data on pre-PPSA registers.

[331.3]

Cross-references

● Section 333 provides for data to be migrated onto the Personal Property Securities Register (PPSR). ● Section 334 deals with errors in the migration process.

[331.4] Concepts ● Approved form See s 302. ● Registrar See Pt 5.9. ● Migrated security interest See s 332.

[331.5]

Commentary

Section 331 requires officers of the Commonwealth to present all data to the Registrar at their request for PPSA purposes. This provision thus activates at the migration time pursuant to s 306 and provides at least one month for the transition of existing data to the PPS Register. The practical translation of interests to the PPS Register has demonstrated the constraints on resources in Australia. As such, one month comprises a potential miscalculation for the migration period, a process which has taken much longer and delayed the implementation of the PPSA throughout the course of 2010 and 2011. While technical deficiencies constituted widely publicised problems with the PPSA, problems with the technical accuracy of the PPS Register have also arisen and should be of concern to both secured and potentially secured parties (see below, particularly at s 334).

[331.6] Further reading ● Explanatory Memorandum [9.42–9.50]. ● ALRC Report No 64 [11.1–11.15]. ● Nicholas Mirzai, ‘‘A period of transition: Ch 9 of the Personal Property Securities Act 2009’’ (2012) 20 Australian Property Law Journal 193. Annotated Personal Property Securities Act 2009 (Cth)

¶9-120

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[331.2]

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¶9-125 SECTION 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.

[332.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[332.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision no parallel provision

Outline

Section 332 defines the term ‘‘migrated security interest’’.

[332.3]

Cross-references

● Section 44 provides a taking free rule that includes migrated security interests. ● Section 333 provides for data migration to occur.

[332.4]

Concepts

● Approved form See s 302. ● Migrated security interest See below.

¶9-125

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[332.5]

Commentary

A migrated security interest constitutes a transitional security interest which has been successfully ‘‘migrated’’ to the PPSA and is thus reflected on the PPS Register. Perfection by registration is distinct from the registration of a migrated security interest as it is the Registrar and not the secured party who registers the migrated security interest. This is achieved in accordance with s 330 and 331. As previously stated, all migrated security interests constitute transitional security interests and thus benefit from attachment and perfection immediately prior to the PPSA taking force pursuant to s 321 and 322 respectively. A migrated security interest also benefits from the existence of the relevant entry on the PPS Register. While this arguably adds little to the priority of the security interest as against a transitional security interest, notice of the register may serve to prevent a priority dispute ever arising in a practical sense. Additionally, where a security interest is successfully migrated it adopts a form distinct from transitional security interests (see s 322(2)(a)) and may outlive the 24-month transition period in accordance with what exists of the PPS Register. Secured parties will need to review their registered entries to ensure that the details are correct, particularly serial numbers, grantor details and collateral descriptions.

[332.6] Further reading ● Explanatory Memorandum [9.42–9.50]. ● ALRC Report No 64 [11.1–11.15]. ● Rebecca Hope, ‘‘Migrated Security Interests: Lost in Transition’’ (2011) 34 University of New South Wales Law Journal 646. ● Nicholas Mirzai, ‘‘A period of transition: Ch 9 of the Personal Property Securities Act 2009’’ (2012) 20 Australian Property Law Journal 193.

¶9-130

SECTION 333 REGISTRATION WITH RESPECT TO MIGRATED DATA

Determination of registrable personal property 333(1) 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: (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 Annotated Personal Property Securities Act 2009 (Cth)

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● Registrar See Pt 5.9. ● Transitional security interest See s 308.

746

Personal Property Securities Act 2009 (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. Registration of determined personal property 333(2) 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).

Matters to be included in registered data 333(3) 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. 333(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). Registration time 333(5) 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).

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New Zealand Saskatchewan Ontario USA

[333.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision no parallel provision

Outline

Section 333 provides the particulars with which a migration security interest can arise under the PPSA. While informative, the provision is applicable to the Registrar and generally not to secured parties.

[333.3]

Cross-references

● Section 331 provides for the data to be migrated to be provided to the Registrar. ● Section 335 provides that a secured party does not need to give a copy of a verification statement.

[333.4] Concepts ● Financing statement See s 10. See further s 153. ● Migrated security interest See s 332. ● Migration time See s 306. ● Registration commencement time See s 306. ● Registrar See Pt 5.9. ● Transitional register The term ‘‘transitional register’’ is defined under s 330 of the PPSA. It refers to a register which holds data to be transitioned to the PPS Register maintained by a law of the Commonwealth, state or territory, and constitutes data in the approved form (where the term ‘‘approved form’’ is defined by s 302). A transitional register may exist for as long as is necessary at the discretion of the Registrar in migrating data to the PPSA. ● Transitional register end time By way of extension from the above definition, the ‘‘transitional register end time’’ refers to a time upon which the transitional register ends, to be determined by the Registrar, in accordance with the law under which the register was maintained. All security interests benefiting from migration thus go through the transitional register and once the PPS Register takes force all transitional registers should cease to function. Annotated Personal Property Securities Act 2009 (Cth)

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[333.1] Comparable provisions in foreign regimes

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● Transitional security agreement See s 307. ● Transitional security interest See s 308.

[333.5]

Commentary

The Registrar utilises s 333 to perform the migration process from transitional registers, where data in the approved form is held, to the PPS Register — over the migration time and before the registration commencement time. Only interests validly operative and existing at the time migration is to occur (and continuing in force after the registration commencement time) are to be transitioned to the PPS Register. The concept of a PPSA security interest requires the filing of a fully particularised financing statement in accordance with Pt 5.3. Many of the registers existing prior to the PPSA did not require such detail and thus in transitioning existing interests the discretion of the Registrar as to what class certain property constitutes (for a discussion on the different classes of personal property see Pt 5.3) can be exercised for the purposes of registration pursuant to s 333(2). The Registrar must also include particulars as to the nature of the interest registered, namely, that the registered statement comprises a transitional security interest that is a migrated security interest. Additionally, the Registrar’s opinion as to the life of the interest must be included in accordance with its life on the transitional register. Where it is not included, the migrated security interest operates much like a perfected security interest with permanent application until removed or the primary obligation is satisfied (assuming the accuracy and validity of the particulars registered). While the particulars registered by the Registrar govern the security interest, such details can be changed by way of amendment by the relevant secured party through lodging a financial change statement (see s 10). A new financing statement can also be lodged in order to perfect by registration, and the presently existing migrated security interest can be removed. In the authors’ view, where holders of security interests are aware of their interest existing by way of a migrated security interest, the particulars of such interests should be carefully reviewed in order to isolate and eliminate any inaccuracies (see s 334; see also Pt 9.4, Div 8).

[333.6] Further reading ● Explanatory Memorandum [9.42–9.50]. ● ALRC Report No 64 [11.1–11.15]. ● Rebecca Hope, ‘‘Migrated Security Interests: Lost in Transition’’ (2011) 34 University of New South Wales Law Journal 646. ● Nicholas Mirzai, ‘‘A period of transition: Ch 9 of the Personal Property Securities Act 2009’’ (2012) 20 Australian Property Law Journal 193.

¶9-130

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¶9-135

SECTION 334 INCORRECTLY REGISTERED MIGRATED DATA

334(1) 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. Removal of data 334(2) 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. 334(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).

[334.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[334.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision no parallel provision

Outline

Section 334 outlines the consequences of errors in migrated security interests.

[334.3]

Cross-references

● Section 186 allows the Registrar to restore incorrectly removed data. ● Section 191 allows the AAT to review a decision of the Registrar under this section. ● Section 333 provides for the Registrar to include data on the Personal Property Securities Register (PPSR) relating to migrated security interests. Annotated Personal Property Securities Act 2009 (Cth)

¶9-135

Chapter 9

Incorrectly registered data taken never to have been registered

750

Personal Property Securities Act 2009

[334.4]

Concepts

● Determined class This refers to a class of collateral in accordance with PPS Regulations Sch 1, Pt 2, reg 2.3. ● Financing statement See s 10 and 153. ● Financial change statement See s 10 and 153. ● Registered This refers to data registered in accordance with s 333 by the Registrar with respect to migrated security interests.

[334.5]

Commentary

Incorrectly describing collateral as one class when it in fact constitutes a separate class removes the registered entry as though it had never been included under the PPSA. A migrated security interest, thus, becomes a transitional security interest without the benefit of the registered entry. While the error of the Registrar should not be imposed on the secured party relying on the security interest in the authors’ view, a deficiency on the PPS Register is undesirable and may constitute a seriously misleading defect when left unaddressed (see s 164–166). The secured party should, in the authors’ view, take responsibility for the accuracy of the PPS Register once knowledge of the deficiency occurs (see Pt 9.4, Div 8). The Registrar may additionally remove such data by way of financial change statement.

[334.6] Further reading ● Explanatory Memorandum [9.48]. ● ALRC Report No 64 [11.1–11.15]. ● Rebecca Hope, ‘‘Migrated Security Interests: Lost in Transition’’ (2011) 34 University of New South Wales Law Journal 646. ● Nicholas Mirzai, ‘‘A period of transition: Ch 9 of the Personal Property Securities Act 2009’’ (2012) 20 Australian Property Law Journal 193.

¶9-140 SECTION 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.

¶9-140

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New Zealand Saskatchewan Ontario USA

[335.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision no parallel provision

Outline

Section 335 addresses the use of verification statements in relation to financing statements or financing change statements lodged by the Registrar in creating migrated security interests.

[335.3]

Cross-references

● Section 333 allows the Registrar to include migrated data on the Personal Property Securities Register (PPSR) by registering a financing statement. ● Section 334 allows the Registrar to amend information on the PPSR that has been incorrectly migrated by registering a financing change statement.

[335.4] Concepts ● Financing statement and financing change statement See s 10 and 153. ● Verification statement See s 155.

[335.5]

Commentary

Section 335 does away with the formal registration requirement that a copy of a verification statement be provided by a secured party for every financing statement and financing change statement in relation to Registrar or transitional registrations.

[335.6] Further reading ● Explanatory Memorandum [9.49]. ● ALRC Report No 64 [11.1–11.15]. ● Rebecca Hope, ‘‘Migrated Security Interests: Lost in Transition’’ (2011) 34 University of New South Wales Law Journal 646. ● Nicholas Mirzai, ‘‘A period of transition: Ch 9 of the Personal Property Securities Act 2009’’ (2012) 20 Australian Property Law Journal 193. Annotated Personal Property Securities Act 2009 (Cth)

¶9-140

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[335.1] Comparable provisions in foreign regimes

752

Personal Property Securities Act 2009

Division 7 — Preparatory registration relating to transitional security interests ¶9-145 SECTION 336 PREPARATORY REGISTRATION — TRANSITIONAL SECURITY INTERESTS Application for preparatory registration 336(1) 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. 336(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. Registration 336(3) 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.

336(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.

¶9-145

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Part 9.4 — Transitional application of this Act

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).

336(6) Chapter 5 (registration) applies in relation to an application for registration under this section, and to such a registration, subject to this section.

[336.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[336.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision no parallel provision

Outline

Part 9.4, Div 7 comprises one section and that is s 336. Section 336 addresses the ability for secured parties to proactively pre-register or conduct ‘‘preparatory registration’’ in order to secure priority under the PPSA.

[336.3]

Cross-references

● Section 310 provides for when the PPSA begins to operate in relation to security interests. ● Section 315 provides that applications to the Registrar for registration of a financing statement or a financing change statement may only be made at or after the registration commencement time.

[336.4] Concepts ● Financing statement See s 10 and 153. ● Financial change statement See s 10 and 153. ● Migration time See s 306. ● Registration commencement time See s 306. ● Registrar See Pt 5.9. Annotated Personal Property Securities Act 2009 (Cth)

¶9-145

Chapter 9

336(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.

754

Personal Property Securities Act 2009

● Transitional security interest See s 308. ● Transitional security agreement See s 307.

[336.5]

Commentary

Section 336 provides secured parties with the opportunity to conduct preparatory registration from the time the migration period commences to the time of the registration commencement date in relation to transitional security interests. A preparatory registered interest stops being automatically perfected under s 322 when it is perfected by preparatory perfection under this section (s 322(2)(b)). The discretion remains with the Registrar as to whether the interest will be validly registered in a preparatory sense on the grounds that the interest will continue as a transitional security interest and that it is operationally practicable for the Registrar to accept this course. The benefits for the secured party include control over the registration process, an element missing from migrated security interests which are transferred by the Registrar. Financing change statements can be lodged in a similar fashion. A preparatory interest must additionally specify that the interest registered is a transitional security interest and the application should conform with Ch 5 of the PPSA. Following the cessation of the transitional period, the notion of pre-registering should be thought of exclusively in the capacity of a security interest which has been created but not yet attached.

[336.6] Further reading ● Explanatory Memorandum [9.51–9.52]. ● ALRC Report No 64 [11.1–11.15]. ● Rebecca Hope, ‘‘Migrated Security Interests: Lost in Transition’’ (2011) 34 University of New South Wales Law Journal 646. ● Nicholas Mirzai, ‘‘A period of transition: Ch 9 of the Personal Property Securities Act 2009’’ (2012) 20 Australian Property Law Journal 193.

Division 8 — Transitional security interests: registration defects ¶9-150 SECTION 337 REGISTRATION EFFECTIVE DESPITE CERTAIN DEFECTS Scope 337(1)

This section applies if:

(a) a registration describes collateral covered by a transitional security agreement; and

¶9-150

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Part 9.4 — Transitional application of this Act

(b) the transitional security agreement has given rise to a transitional security interest; and

(d) the Registrar has made a determination under subsection (2) in relation to defects of that type; and (e) 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.

337(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. 337(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). Registration temporarily unaffected by the defect 337(4) 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); (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). Registration becomes ineffective 337(5) 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.

[337.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

Annotated Personal Property Securities Act 2009 (Cth)

no parallel provision no parallel provision no parallel provision no parallel provision

¶9-150

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(c) 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

756

Personal Property Securities Act 2009

[337.2]

Outline

Part 9.4, Div 8 of the PPSA concerns the validity of transitional security interests upon defects on the PPS Register. Unlike the general PPSA provisions for defects on the register, Ch 5, Div 8 provides a degree of leniency over the transitional period for the purposes of priority. Section 337 provides for the effectiveness of registration despite errors in certain circumstances.

[337.3]

Cross-references

● Part 5.4 provides when registration is effective and ineffective. ● Section 320 provides when the PPSA begins to apply to transitional security interests.

[337.4]

Concepts

● Registration describes collateral This refers to the collateral description in a financing statement: see s 153. ● Transitional security agreement See s 307. ● Transitional security interest See s 308.

[337.5]

Commentary

Section 337 prescribes that the Registrar can, by legislative instrument, determine that some defects in the registration of particular transitional security interests do not invalidate a registration which would otherwise render the financing statement ineffective by virtue of the PPSA’s general provisions. The PPSA provides a period of 60 months, or five years, after the registration commencement time unless the registered entry specifies a time earlier than this (which would appear on the relevant registered entry). Presumably, the Registrar would not exercise the power conferred by s 337(2) for general defects. In the authors’ view, the Registrar should reserve the use of legislative power for defects made in their capacity when migrating particular security interests. The Registrar is thus given broad power with regards to the PPS Register for the purposes of transitional security interests. Section 337 additionally applies irrespective of s 164 and 165 concerning the effects of defects to the PPS Register. While this may seem to disturb the proper function of the PPSA, ensuring the integrity of the PPS Register over the transitional period is essential to the policy position granting primacy to the Register. Additionally, and in accordance with the authors’ view, the errors of the Registrar by way of defective migrated security interests should not impinge on secured parties seeking to rely on such interests.

¶9-150

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● Explanatory Memorandum [9.53–9.55]. ● ALRC Report No 64 [11.1–11.15]. ● Rebecca Hope, ‘‘Migrated Security Interests: Lost in Transition’’ (2011) 34 University of New South Wales Law Journal 646. ● Nicholas Mirzai, ‘‘A period of transition: Ch 9 of the Personal Property Securities Act 2009’’ (2012) 20 Australian Property Law Journal 193.

¶9-155

SECTION 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.

[337A.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[337A.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision no parallel provision

Outline

Section 337A concerns the scope of registration with regards to a transitional security interest.

[337A.3]

Cross-references

● Section 164 provides for defects in registration.

[337A.4]

Concepts

● Registration See Pt 5.3. ● Transitional security agreement See s 307.

[337A.5] Commentary Section 337A confines the scope of defective registration with regards to the subject matter of a transitional security interest. While the transitional provisions seek to alleviate the complexities of the Personal Property Securities Act 2009 (Cth) (PPSA) in favour of the secured party over the course of the transitional period (as has been discussed in the commentary above), where a registered transitional security interest purports to cover collateral not a part of the transitional security agreement, the registration will be ineffective as Annotated Personal Property Securities Act 2009 (Cth)

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[337.6] Further reading

758

Personal Property Securities Act 2009

against such collateral. While s 337 exists with respect to defects on the register, in seeking to maintain an accurate PPS Register, such registrations should be avoided and amended where discovered. It should be noted that s 337A is not designed to extinguish legitimate security interests and in this regard it presents a low threshold test. Looking beyond the Ch 9 transitional provisions, it is difficult to envisage circumstances whereby a perfected security interest would cover collateral which the security interest does not attach to (as attachment is a necessary precondition to perfection: see s 21) and thus the issue of a failure to note collateral in the security agreement is likely confined to transitional interests. There is some conflict between the operation of s 337A and 164 of the PPSA. The prefacing words of s 337A lead the reader to believe that s 337A is to operate in addition to s 164 (the words ‘‘without limiting’’) while the operation of s 337A appears to be more coercive on a plain reading. By way of illustration, a security interest which indicates that it is transitional and which covers property which is not a part of a transitional interest but some subsequent interest may not constitute a ‘‘seriously misleading defect’’ (see s 164), however, would seemingly trigger the effects of s 337A. As a matter of construction, the question appears to be, did the legislature intend for s 337A to be read in light of s 164, that is to say, is it possible for one to breach s 337A without also breaching s 164 or is s 337A, despite its opening words, meant to be read and applied according to its terms. In addressing this question, one should also refer to the expanded definition of a transitional security agreement pursuant to s 307, 308 and 311. The issue remains unresolved in Australia, although in Re 4 in 1 Wyoming Pty Ltd [2017] NSWSC 407, the court accepted that describing a security interest as transitional when the security agreement was not (to any extent) transitional would render the PPSR registration wholly ineffective. In that case, an amendment was made to the registration to correct the error and an order extending the time for registration under Corporations Act 2001 (Cth), s 588FM was made.

[337A.6] Further reading ● Explanatory Memorandum [9.51–9.52]. ● ALRC Report No 64 [11.1–11.15]. ● Whittaker Review [6.10.2.2]. ● Rebecca Hope, ‘‘Migrated Security Interests: Lost in Transition’’ (2011) 34 University of New South Wales Law Journal 646. ● Nicholas Mirzai, ‘‘A period of transition: Ch 9 of the Personal Property Securities Act 2009’’ (2012) 20 Australian Property Law Journal 193.

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Part 9.5 — Charges and fixed and floating charges

PART 9.5 — CHARGES AND FIXED AND FLOATING CHARGES SECTION 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.

¶9-165

SECTION 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 (b) title to the personal property to which the charge has attached is in the grantor; and (c) the charge is a security interest to which this Act applies. 339(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. 339(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. 339(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. 339(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.

Annotated Personal Property Securities Act 2009 (Cth)

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[339.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[339.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision no parallel provision

Outline

This section provides that references to fixed and floating charges are to be read consistently with PPSA terminology. Section 318 limits the application of this section to references to charges in security agreements made after the commencement of the PPSA.

[339.3]

Cross-references

Sections 340–341A provide rules for determining what are circulating assets in particular contexts.

[339.4]

Concepts

● Attached to personal property See s 19. ● Circulating assets These are defined by s 340. Also note the concept of a ‘‘circulating security interest’’ under the Corporations Act 2001 (Cth), s 51C. ● Fixed and floating charges See Intro.III and 12.5.2.

[339.5]

Commentary

Section 339 of the Personal Property Securities Act 2009 (Cth) (PPSA) provides that the use of the term ‘‘charge’’ over property is taken to be a reference to a security interest that has attached either to circulating or non-circulating assets. A floating charge is to be referred to as a security interest that has attached to personal property that is a circulating asset, while a fixed charge is a secured interest attached to personal property that is not a circulating asset (s 339(4), (5)). The deemed references implemented by this section do not apply to other references to fixed and floating charges in the PPSA (see s 12(2) and 19(4)) or to references to charges that arise in perfected security interests in transfers of accounts or chattel paper (s 339(2)(b)). As noted by Loxton,31 excluding transfers of accounts and chattel paper is curious as such obligations would not ordinarily be classified as a charge. This change in terminology is necessary because of the functional approach to recognising security interests taken by the PPSA as opposed to the form-based 31

In Wappett C, Whittaker B and Edwards S, Personal Property Securities in Australia, LexisNexis (looseleaf).

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This section only applies where the charge has attached to personal property in which the grantor has title and the charge is a security interest to which the PPSA applies. Thus, references to charges would not be changed under this section where they are used in circumstances where the grantor does not have title, such as retention of title and leasing arrangements: see Supplementary Explanatory Memorandum to the Personal Property Securities Bill 2009 (Cth) at [9.59]. However, title can have a variety of meanings. A lessee has a form of legal title, although not a complete title as it is subject to the terms of the lease and the rights of the lessor. These issues are discussed further in the commentary to s 19. Determining whether the charge is a security interest to which the PPSA applies will involve a number of other provisions of the Act. Firstly, assuming that Western Australia refers its powers to the Commonwealth to allow the complete national implementation of the PPSA (otherwise s 243–252 will need to be referred to), it must be determined whether the charge is exempt from the PPSA under s 8 and whether there is a sufficient territorial connection to Australia (see s 6). Secondly, it must be determined whether the charge would satisfy the test for a security interest in s 12, which is likely. Even where the concepts of fixed and floating charges persist, to the extent that the PPSA applies to the security arrangement the distinction is of little import as the notion of crystallisation has no application to the enforcement of security interests: see further s 19; Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd (in liq) (rec and man apptd) [2017] WASC 152; Re Amerind Pty Ltd (rec and man apptd) (in liq) [2017] VSC 127 at [453] (‘‘the concept of crystallization is now redundant under the PPSA’’ — not affected by comments on appeal, Commonwealth v Byrnes [2018] VSCA 41); Langdon, in the matter of Forge Group Ltd (rec and man apptd) (in liq) [2017] FCA 170 at [40]; Credit Suisse Canada v 1133 Yonge St Holdings Ltd (1998) 14 PPSAC (2d) 61 (Ont CA). The concepts of security interests over circulating assets and assets that are not circulating assets is, however, important in the context of the Corporations Act 2001 (Cth), where issues of priority payments in insolvency often depend upon the status of the charge. Identifying whether a security interest covers circulating or non-circulating assets is most relevant when the grantor is subject to receivership or liquidation, because under the Corporations Act, s 433 (for receivership) and 561 (for liquidation), certain payments to secured creditors with a circulating security interest are subordinated to statutory priority entitlements payable to employees: see further Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd (in liq) (rec and man apptd) [2017] WASC 152; Commonwealth v Byrnes [2018] VSCA 41. It is in the authors’ view that over time the use of the term ‘‘fixed’’ and ‘‘floating’’ charge will fade from commercial use as there is no longer any legal significance of using such terminology. See also IRC v Stiassny [2013] 1 NZLR 140 at [55] (‘‘care should be taken not to import pre-PPSA language and concepts into the interpretation of the PPSA’’ (NZ CA) (appeal dismissed Annotated Personal Property Securities Act 2009 (Cth)

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approach under pre-PPSA security law. The nature of this change was discussed at Intro.IV.

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[2012] NZSC 106). See further Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd (in liq) (rec and man apptd) [2017] WASC 152; Langdon, in the matter of Forge Group Ltd (rec and man apptd) (in liq) [2017] FCA 170. Specifically, in Hamersley Iron Pty Ltd v Forge Group Pty Ltd (in liq) (rec and ma apptd) [2017] WASC 152 at [343] per Tottle J: ‘‘I do not accept Hamersley’s submissions that the references to floating charges in various provisions of the PPSA are indicative of a statutory intention that floating charges are to be of continued relevance in taking security over personal property. That is reading too much into those references which are necessary because of the widespread use of floating charges as a method of taking security over personal property prior to the PPSA. As s 338 of the PPSA states, the rules governing the references are expected to have less relevance over time because the scheme provides an alternative to reliance on fixed and floating charges for security interest transactions.’’ The authors respectfully agree with this analysis. As to the effect of the foreign authority concerning the concept of the ‘‘floating charge’’, his Honour reached certain conclusions as to how the PPSA alters the pre-PPS position in respect of fixed and floating charges (at [377]–[384]): ‘‘The following propositions may be derived from the Canadian and New Zealand authorities in relation to security interests created under the legislation enacted in those jurisdictions. First, the security interest is fixed in nature and upon satisfaction of the statutory requirements governing attachment, the secured party acquires a proprietary interest in the collateral. Second, the concept of crystallisation is no longer relevant. Third, the secured party’s statutory interest in collateral acquired on attachment is recognised not only for the purposes of determining priority between interests regulated by the legislation, but because it is a statutory interest, it is recognised at law for the purposes of determining disputes between security interests covered by the personal property security legislation and interests that exist outside of the legislation. Fourth, parties can make security agreements that operate in a manner that achieves a similar commercial outcome as that achieved by a floating charge. ... Parliament may be taken to have intended the attachment rule in s 19 of the PPSA to operate in the same manner as the attachment rule in equivalent legislation in Canada and New Zealand has been held to operate: on satisfaction of the statutory conditions for attachment, the secured party acquires a statutory interest that is proprietary in nature; the security interest has this characteristic for all purposes; and, the requirement for a crystallising event is no longer relevant.’’

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It is worth clarifying that while s 339 appears in Ch 9, which is dedicated to the period of transition, the redundancy of the terms ‘‘fixed’’ and ‘‘floating’’ charge as a commercial instrument is a permanent feature under the PPSA. Recall under the introductory comments to Ch 9, that the transitional provisions are divided into a ‘‘logistics’’ or an ‘‘alleviation’’ role. Section 339 operates by way of alleviation, recognising the existence of fixed and floating charge terminology and characterising the interest in line with the effect it would have had under the pre-PPSA position. By virtue of s 339, and particularly its temporary application, it can be deduced that security interests entered after the registration commencement time (30 January 2012) will not benefit from s 339 and indeed, use of the term fixed and/or floating should not be assumed to convey the intention of the parties to the security agreement. The form adopted is no longer decisive (it if ever was). The substance of the interest is subject to the requirements of s 12.

[339.6] Further reading ● Explanatory Memorandum [9.58–9.60]. ● ALRC Report No 64 [8.30–8.37]. ● Whittaker Review [9.3.2]. ● Alice Tranter-Wilson, ‘‘The Circulating Security Interest in Review: Architectures of Certainty, Flexibility and Control’’ (2017) 28 Journal of Banking and Finance Law and Practice 3. ● Jason Harris, ‘‘Assessing the effect of the PPSA on the Corporations Act and corporate law teaching’’ (2012) 27 Australian Journal of Corporate Law 72. ● Lionel Meehan, ‘‘Circulating security interests under the Personal Property Securities Act 2009 (Cth) compared to floating charges’’ (2011) 22 Journal of Banking and Finance Law and Practice 322. ● Nicholas Mirzai, ‘‘A period of transition: Ch 9 of the Personal Property Securities Act 2009’’ (2012) 20 Australian Property Law Journal 193.

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SECTION 340 MEANING OF CIRCULATING ASSET

General definition 340(1) 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. Annotated Personal Property Securities Act 2009 (Cth)

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Personal Property Securities Act 2009 Exceptions 340(2) 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.

340(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. 340(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. 340(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. Current assets 340(5)

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); (b) an account that is the proceeds of inventory; (c) an ADI account (other than a term deposit); (d) currency; (e) inventory; (f) 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.

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Part 9.5 — Charges and fixed and floating charges

New Zealand Saskatchewan Ontario USA

[340.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision no parallel provision

Outline

This section defines what a circulating asset is. This section should be read in conjunction with s 339, 341 and 341A.

[340.3]

Cross-references

● Section 318 limits the application of this section to references to charges in security agreements made after the commencement of the PPSA. ● Section 339 provides that references to fixed and floating charges are to be deemed to be references to security interests over personal property that is not a circulating asset or is a circulating asset (respectively).

[340.4] Concepts ● Control It should be noted that control, for the purposes of fixed and floating charges, has a meaning outside perfection by control defined and discussed pursuant to s 25–29. The term is defined by s 341. For control over authorised deposit-taking institution accounts (ADI accounts) see s 341A. See further Commonwealth v Byrnes [2018] VSCA 41. ● Effective registration See Pt 5.4. ● Inventory Like control, the term ‘‘inventory’’ has a specific meaning with respect to Pt 9.5. This is defined in s 341. The definition of inventory under s 10 thus does not apply for this section. ● Ordinary course of business See [46.3]. See also Langdon, in the matter of Forge Group Ltd (rec and man apptd) (in liq) [2017] FCA 170.

[340.5]

Commentary

Section 340 of the Personal Property Securities Act 2009 (Cth) (PPSA) provides the definition of circulating assets. The ‘‘circulating asset’’ is one which carries qualities, by way of comparison, similar to that under a floating charge. All security interests under the PPSA should thus be thought of as fixed charges which may contain circulating assets, that is, it is the underlying asset itself and not the overall instrument which may confer dealings in the ordinary course. Circulating assets are defined as personal property covered by s 340(5) or personal property over which the secured party has given the grantor express or implied authority for any transfer of the personal property to be made free of the security interest provided it is in the ordinary course of the Annotated Personal Property Securities Act 2009 (Cth)

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Personal Property Securities Act 2009

grantor’s business. Permission to transfer a specific item of personal property, or a specific class of personal property, will not however of itself be sufficient to create a circulating asset under s 340(1)(b): s 340(4). For a discussion of authority to transfer in the ordinary course of business see [46.5.1]. See further Commonwealth v Byrnes [2018] VSCA 41. An examination of s 25–29 of the PPSA reveals that much of the property within s 340(5) can also be perfected by control. Importantly, however, despite s 340(5), personal property is not defined as a circulating asset if it is covered by a registered financing statement which discloses that the secured party has control of the property and the secured party actually has control of the property (s 340(4)). Control in this context is defined in s 341 as either: ● control in the ordinary meaning of the term ● control under Pt 2.3 of the PPSA ● control of an account or in inventory (in the ordinary meaning of the word) — as explained in s 341(1)–(4) ● control of an ADI account by the ADI (see further s 341A). See further Re Kimberley Diamond Company Pty Ltd (in liq) [2017] NSWSC 538. Furthermore, collateral which comprise ‘‘goods’’ (see s 10) that are perfected by possession by the secured party are not circulating assets under s 340(3). See further s 24 and Re Kimberley Diamond Company Pty Ltd (in liq) [2017] NSWSC 538. A security interest in a transfer of an account or chattel will not render the account or chattel paper circulating assets: s 340(4A). As set out above, a circulating asset, in effect, resembles a floating charge, however, preserves the commercial reality surrounding many historical issues with charges by avoiding the need to distinguish between fixed and floating interests. The PPSA thus removes the relevance of a fundamental issue under pre-PPSA law, that parties who encumbered their property through fixed charge would be unable to deal with such property in the ordinary course of business without the express consent from the secured party each and every time this was to occur. Fixed and floating charges have significant legal effect with reference to the Corporations Act 2001 (Cth) and changes have been duly incorporated in that regime: see s 433 and 561 of the Corporations Act: see further Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd (in liq) (rec and man apptd) [2017] WASC 152; Commonwealth v Byrnes [2018] VSCA 41. As to the specifics of factual matters before the court in the Amerind appeal (Commonwealth v Byrnes), Amerind Trade Accounts (which constituted cash at bank) were held to be circulating assets (and the bank gave authorisation to deal with the funds); funds advances to the company to purchase accounts were held to be circulating assets (on the basis that the characterisation of an asset occurs on the appointment date and not after); stock realisations were held to be circulating assets; tax refunds and sundry receipts were held to be circulating assets (notwithstanding that they were realised post-appointment in circumstances where they were identifiable at appointment).

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[340.6] Further reading Explanatory Memorandum [9.61]. ALRC Report No 64 [8.30–8.37]. Whittaker Review [9.2.1]. Alice Tranter-Wilson, ‘‘The Circulating Security Interest in Review: Architectures of Certainty, Flexibility and Control’’ (2017) 28 Journal of Banking and Finance Law and Practice 3. ● Jason Harris, ‘‘Assessing the effect of the PPSA on the Corporations Act and corporate law teaching’’ (2012) 27 Australian Journal of Corporate Law 72. ● Lionel Meehan, ‘‘Circulating security interests under the Personal Property Securities Act 2009 (Cth) compared to floating charges’’ (2011) 22 Journal of Banking and Finance Law and Practice 322. ● Nicholas Mirzai, ‘‘A period of transition: Ch 9 of the Personal Property Securities Act 2009’’ (2012) 20 Australian Property Law Journal 193.

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SECTION 341 MEANING OF CONTROL AND INVENTORY

General rules 341(1A) 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. 341(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. Control of inventory 341(1) 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: Annotated Personal Property Securities Act 2009 (Cth)

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● ● ● ●

768

Personal Property Securities Act 2009 (i) will specifically appropriate the inventory to the security interest; and (ii) will not remove any specifically appropriated inventory without 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. Control of accounts 341(2) 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: (a) an account mentioned in paragraph 340(5)(a); (b) an account that is the proceeds of inventory. 341(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). 341(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. 341(5)

(Repealed by No 96 of 2010)

[341.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

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PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision no parallel provision

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Outline

This section defines control of personal property and inventory for the purposes of determining what is a circulating asset under s 340.

Cross-references

● Section 318 limits the application of this section to references to charges in security agreements made after the commencement of the PPSA. ● Section 341A provides a definition of control of an authorised deposittaking institution account (ADI account) for the purposes of s 340(2). This is different from the concept of control of an ADI account for the purposes of perfection of a security interest in the ADI account by control (as to which see s 25).

[341.4] Concepts ● Account See s 12. ● ADI account See s 25 and 341A. ● Inventory In this section inventory is not given the definition under s 10 but rather has its ordinary meaning. The Encyclopaedic Australian Legal Dictionary defines inventory as ‘‘the amount or value of a company’s current assets that consist of plant and equipment, raw materials, work in progress, stock and finished goods, or such goods individually’’. This is consistent with the definition given by Australian Accounting Standards Board 102 which is (at [6]): ‘‘assets: (a) held for sale in the ordinary course of business; (b) in the process of production for such sale; or (c) in the form of materials or supplies to be consumed in the production process or in the rendering of services.’’ ● Proceeds See s 31.

[341.5]

Commentary

[341.5.1] Overview ........................................................................................769 [341.5.2] General rules ..................................................................................770 [341.5.3] Control of inventory .....................................................................770 [341.5.4] Control of accounts .......................................................................770

[341.5.1] Overview This section gives meaning to the terms ‘‘control’’ of personal property and ‘‘inventory’’ for the purposes of s 340 (which uses these terms in defining a circulating asset). Inventory is explained at [341.4]. Annotated Personal Property Securities Act 2009 (Cth)

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[341.3]

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The meaning of control under this section is divided into three categories: general rules, control of inventory and control of accounts.

[341.5.2] General rules The general rules are set out in s 341(1) as control within the ordinary meaning of the term, control within the meaning of Pt 2.3 (as to which see s 25–29) or control of an authorised deposit-taking institution account (ADI account, see s 341A). The general rules also recognise the specific rules for control of inventory or accounts (s 341(1)–(4)), s 341(1A)(c). Control within the ordinary meaning is defined in the Encyclopaedic Australian Legal Dictionary as ‘‘physical or legal possession or the power of direction and command which is indicative of possession’’.

[341.5.3] Control of inventory Control of inventory (for the purposes of determining what is a circulating asset under s 340(2) by way of exclusion) is determined by an agreement between the secured party and the grantor that appropriates the inventory to the security interest and restricts its removal without the secured party’s consent: s 341(1)(a). Note: the grantor must adopt the usual practice of complying with such an agreement (s 341(1)(b)). This is included to address issues such as supply agreements with retention of title clauses that require segregation of property and proceeds but where the grantor rarely complies with such requirements. Where assets are specifically appropriated for a secured party and are not removed without prior consent of the secured party it is more difficult for third parties to believe that those assets are part of the circulating assets of the grantor. Note also, in order to fall outside of the circulating asset concept under s 340(2) the secured party must not only control the personal property but must also have an effective registration (see Pt 5.4).

[341.5.4] Control of accounts Control of accounts, for the purposes of s 340(2) by way of exclusion, is determined under s 341(2)–(4). These subsections cover 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), or ● are proceeds of inventory (see s 31). Section 341(3) recognises control of one of these two types of account where each of the elements are satisfied. There is also a special rule for transferees of accounts under s 341(4) which operates if s 80(8) would apply. However, this would seem to have only limited practical relevance: see Loxton in Wappett C, Whittaker B and

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In order to fall outside of the circulating asset concept under s 340(2) it should be noted that the secured party must not only control the personal property but must also have an effective registration (see Pt 5.4).

[341.6] Further reading ● Explanatory Memorandum [9.63–9.67]. ● ALRC Report No 64 [8.30–8.37]. ● Whittaker Review [9.2.1]. ● Lionel Meehan, ‘‘Circulating security interests under the Personal Property Securities Act 2009 (Cth) compared to floating charges’’ (2011) 22 Journal of Banking and Finance Law and Practice 322. ● Nicholas Mirzai, ‘‘A period of transition: Ch 9 of the Personal Property Securities Act 2009’’ (2012) 20 Australian Property Law Journal 193. ● Alice Tranter-Wilson, ‘‘The Circulating Security Interest in Review: Architectures of Certainty, Flexibility and Control’’ (2017) 28 Journal of Banking and Finance Law and Practice 3.

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SECTION 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). 32

Wappett C, Whittaker B and Edwards S, Personal Property Securities in Australia, LexisNexis (looseleaf) at [4.6.2850].

Annotated Personal Property Securities Act 2009 (Cth)

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Edwards S.32 It should be noted that perfected security interests in a transfer of an account are excluded from the deemed references to circulating security interests under s 339(2)(b).

772

Personal Property Securities Act 2009 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).

341A(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.

[341A.1] Comparable provisions in foreign regimes New Zealand Saskatchewan Ontario USA

[341A.2]

PPSA 1999 PPSA 1993 PPSA 1990 UCC Article 9 (rev)

no parallel provision no parallel provision no parallel provision no parallel provision

Outline

This section provides rules for determining control of an authorised deposittaking institution account (ADI account) for the purposes of s 340(2) (that is, an exception to the definition of circulating assets).

[341A.3]

Cross-references

● Section 318 limits the application of this section to references to charges in security agreements made after the commencement of the PPSA. ● Section 339 provides for references to fixed and floating charges to be read as references to security interests in personal property that is a noncirculating asset or a circulating asset (respectively).

[341A.4]

Concepts

● ADI account See s 25. ● Circulating assets See s 340. ● Inventory See s 340.

[341A.5]

Commentary

Section 341A was inserted into the Personal Property Securities Act 2009 (Cth) (PPSA) in 2011 by the Personal Property Securities (Corporations and Other Amendments) Act 2011 (Cth) Sch 2 item 62 to clarify when control of an authorised deposit-taking institution account (ADI account) is sufficient for determining whether the ADI account can be classified as a circulating asset under s 340(2). In essence, a secured party seeking to perfect by control in this regard must itself be the relevant authorised deposit-taking institution (ADI) with which the account is held. The notion of control is not altered by s 341A, namely, for one to ‘‘control’’ collateral, another cannot. Bearing in mind this mutual exclusivity, the concept of control of an ADI account for the purposes of perfection by control is defined separately under s 25.

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Part 9.6 — Review of operation of Act

[341A.6] Further reading ● Explanatory Memorandum to the Personal Property (Corporations and Other Amendments) Bill 2011 (Cth) [86].

Securities

● ALRC Report No 64 [8.30–8.37]. ● Lionel Meehan, ‘‘Circulating security interests under the Personal Property Securities Act 2009 (Cth) compared to floating charges’’ (2011) 22 Journal of Banking and Finance Law and Practice 322. ● Nicholas Mirzai, ‘‘A period of transition: Ch 9 of the Personal Property Securities Act 2009’’ (2012) 20 Australian Property Law Journal 193. ● Alice Tranter-Wilson, ‘‘The Circulating Security Interest in Review: Architectures of Certainty, Flexibility and Control’’ (2017) 28 Journal of Banking and Finance Law and Practice 3.

PART 9.6 — REVIEW OF OPERATION OF ACT ¶9-185

SECTION 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).

General commentary Part 9.6 of the Personal Property Securities Act 2009 (Cth) (PPSA) contains one operative provision, namely, s 343. Section 343 provides for the mandatory review of the PPSA within three years after the registration commencement time (30 January 2012). On 4 April 2014 the Commonwealth Attorney-General announced the terms of reference for the review of the PPSA, to be chaired by Bruce Whittaker. The terms of reference require the Committee to consider the following: a. the effects of the reforms introduced by the PPS Act 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 PPS Act at all levels of business, particularly small business c. the incidence and, where applicable, causes of non-compliance with the requirements of the PPS Act particularly among small businesses Annotated Personal Property Securities Act 2009 (Cth)

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● Whittaker Review [9.2.1].

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d. opportunities for minimising regulatory and administrative burdens, including costs, on businesses, particularly small business, and consumers e. opportunities for further efficiencies in the PPS Act regime including (but not limited to) simplification of the Personal Property Securities Register and its use f. the scope and definitions of personal property covered by the PPS Act g. the desirability of specifying thresholds for the operation of the PPS Act regime in respect of particular types of personal property h. the interaction of the PPS Act with other legislation including the Corporations Act 2001, and i. any other relevant matters. The Review (undertaken by Mr Bruce Whittaker) was completed in 2015 and tabled before parliament on 18 March 2015. A copy of the report can be found at: www.ag.gov.au/Consultations/Pages/StatutoryreviewofthePersonal PropertySecuritiesAct2009.aspx. At the time of writing (July 2017) the government had not yet responded to the report.

¶9-190 SECTION 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.

343(2) The persons who undertake the review under subsection (1) must give the Minister a written report of the review. 343(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.

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Corporations Act 2001

777

CORPORATIONS ACT Chapter 1 — Introductory Part 1.2 — Interpretation ..................................................................... 781 Division 6A — Security interests ............................................................. 781 Commentary .......................................................................................... 781 Section 51 Meaning of PPSA security interest ..................................... 782 Section 51A Meaning of security interest ............................................. 782 Section 51B Meaning of secured party ................................................. 783 Section 51C Meaning of circulating security interest .......................... 783 Section 51D Meaning of possessory security interest ........................... 783 Section 51E Meaning of secured creditor ............................................. 784 Section 51F Meaning of PPSA retention of title property .................... 784 Chapter 5 — External administration Part 5.7B — Recovering property or compensation for the benefit of creditors of insolvent company ....................................... 785 Division 2 — Voidable transactions ........................................................ 785 Section 588FJ Circulating security interest created within 6 months before relation-back day ..................................................... 785 Division 2A — Vesting of PPSA security interests if not continuously perfected ........................................................................ 786 Section 588FK Interpretation and application ................................... 786 Section 588FL Vesting of PPSA security interests if collateral not registered within time ................................................................. 787 [588FL.2] Outline ............................................................................... 789 [588FL.3] Cross-references ................................................................. 789 [588FL.4] Concepts ............................................................................. 789 [588FL.5] Commentary ....................................................................... 790 [588FL5.1] Application and operation ........................................... 790 [588FL.5.2] Why is the distinction important, if at all? .......................................................................................... 790 [588FL.5.3] The timing requirements of s 588FL .......................... 791 [588FL.5.3.1] The PPSA requirements ...................................... 791

Annotated Personal Property Securities Act 2009 (Cth)

778

Corporations Act 2001

[588FL.5.3.2] External administrator ......................................... 791 [588FL.5.3.3] Timings ............................................................... 791 [588FL.5.4] ‘‘Vesting’’ of the security interest .............................. 792 [588FL.5.5] ‘‘Vesting’’ as opposed to ‘‘void against’’ ...................................................................................... 794 [588FL.6] Further resources ........................................................... 794 Section 588FM Extension of time for registration .............................. 794 [588FM.2] Outline .............................................................................. 795 [588FM.3] Cross-references ............................................................... 795 [588FM.4] Concepts ........................................................................... 795 [588FM.5] Commentary ..................................................................... 795 [588FM.5.1] ‘‘Vests’’ as opposed to ‘‘void against’’ — s 588FM(1) ............................................................. 796 [588FM.5.2] Discretionary factors — s 588FM(2) .................................................................................... 802 [588FM.5.2.1] ‘‘Accidental’’ or ‘‘due to inadvertence’’ — s 588FM(2)(a)(i) ....................................... 802 [588FM.5.2.2] ‘‘Some other sufficient cause’’ — s 588FM(2)(a)(i) ................................................... 804 [588FM.5.2.3] Prejudice to creditors or shareholders — s 588FM(2)(a)(ii) ......................................... 804 [588FM.5.2.4] Just and equitable — s 588FM(2)(b) ........................................................................... 806 [588FM.5.3] Terms and Conditions — s 588FM(3) .................................................................................... 807 [588FM.6] Further resources .............................................................. 808 Section 588FN PPSA security interests unaffected by section 588FL .................................................................................................. 808 [588FN.2] Outline ............................................................................... 810 [588FN.3] Cross-references ................................................................ 810 [588FN.4] Concepts ............................................................................ 810 [588FN.5] Commentary ...................................................................... 810 [588FN.6] Further resources ............................................................... 811 Section 588FO Certain lessors, bailors and consignors entitled to damages .......................................................................................... 811 [588FO.2] Outline ............................................................................... 812 [588FO.3] Cross-references ................................................................ 812

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[588FO.4] Concepts ............................................................................ 812 [588FO.5] Commentary ...................................................................... 812 [588FO.6] Further resources ............................................................... 813 Division 2B — Security interests in favour of company officers etc. .......................................................................................... 813 Section 588FP Security interests in favour of an officer of a company etc. void .............................................................................. 813 Chapter 10 — Transitional Provisions Part 10.13 — Transitional Provisions Relating to the Personal Property Securities (Corporations and other amendments) Act 2009 ...................................................................... 815 Section 1499 Definitions ........................................................................ 815 Section 1500 Charges, liens and pledges — continuation of restriction of references .................................................................... 815 Section 1501 Charges, liens, pledges and third party property — application ..................................................................................... 816 Section 1501A References to the whole or substantially the whole of a company’s property ........................................................ 816 Section 1501B Constructive notice of registrable charges ................. 816 Section 1502 Repeal of Chapter 2K (charges) — general .................. 817 Section 1503 Repeal of Chapter 2K (charges) — cessation of requirements in relation to documents or notices .......................... 817 Section 1504 Repeal of Chapter 2K (charges) — application of section 266 ...................................................................................... 818 Section 1505 Repeal of Chapter 2K (charges) — cessation of company registration requirements ................................................ 818 Section 1506 Repeal of Chapter 2K (charges) — priority between registrable charges ............................................................. 819 Section 1507 New section 440B (restrictions on third party property rights) ................................................................................. 819 Section 1508 New subsection 442CB(1) (administrator’s duty of care) ................................................................................................ 819

Annotated Personal Property Securities Act 2009 (Cth)

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Section 1509 New section 588FP (security interests in favour of an officer of a company etc. void) ................................................ 820 Section 1510 Winding up applied for before the commencement time .......................................................................... 820

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CORPORATIONS ACT 2001 CHAPTER 1 — INTRODUCTORY PART 1.2 — INTERPRETATION Division 6A — Security interests Commentary

Division 6A of the Corporations Act 2001 (Cth) (Corporations Act) contains definitional sections which seek to address the change in language from the terms used prior to the commencement of the Personal Property Securities Act 2009 (Cth) (PPSA) to the PPSA lexicon. The term ‘‘PPSA security interest’’, defined by s 51 of the Corporations Act, essentially means a ‘‘security interest’’ as defined by s 12 of the PPSA (including interests which fall within the scope of s 12(1) and interest that are otherwise deemed to constitute security interest pursuant to s 12(3) of the PPSA): see [12.5]. On the other hand, the term ‘‘security interest’’ when used in the Corporations Act, as defined by s 51A, is intended to include the concept of the PPSA security interest (defined by s 51 of the Corporations Act) in addition to ‘‘charges, liens and pledges’’ (as recognised forms of security prior to the implementation of the PPSA). Respectfully, it is difficult to see how charges, liens or pledges, by definition, would ever not fall within the definition of a ‘‘PPSA security interest’’ in any event but nevertheless s 51A exists for abundant caution. The term ‘‘secured party’’, defined by s 51B of the Corporations Act, is otherwise defined by s 10 of the PPSA. Similarly, the term ‘‘circulating security interest’’, defined by s 51C of the Corporations Act, is otherwise referred to by Ch 9 of the PPSA, specifically Pt 9.5. The term ‘‘circulating asset’’ is defined by s 340 and should be read with s 51C of the Corporations Act. The definition is applied specifically in Ch 5 of the Corporations Act: see s 442B of the Corporations Act. The term ‘‘possessory security interest’’ is defined by s 51D of the Corporations Act as a security interest which is perfected by possession: see further, s 24 of the PPSA and the commentary thereto. The definition of ‘‘secured creditor’’ is defined by s 51E of the Corporations Act. It is an interesting definition as it does not make reference to a ‘‘perfection’’ requirement within the meaning of s 21 of the PPSA — which is consistent also with the view that a secured party can be secured notwithstanding being unperfected: see s 19 and 20 of the PPSA and the commentary thereto. The distinction between a secured creditor and a Annotated Personal Property Securities Act 2009 (Cth)

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perfected secured creditor is of significance and has arisen for consideration, albeit not producing a definitive view one way or the other, in the context of s 588FA of the Corporations Act claims: see Hussain v CSR Building Products Limited, in the matter of FPJ Group Pty Ltd (in Liq) [2016] FCA 392; Matthews v The Tap Inn Pty Ltd [2015] SADC 108; The Tapp Inn Pty Ltd v Matthews [2015] SASCFC 188. Finally, separately to the definition of a ‘‘PPSA security interest’’, the Corporations Act defines the term ‘‘PPSA retention of title property’’ pursuant to s 51F. The term ‘‘retention of title’’ is a reference to a contractual stipulation which preserved title to the collateral in favour of the seller unless and until payment for the relevant collateral was made in full by the purchaser: see s 12(2)(d) and the commentary thereto. Subsection 51F(1) of the Corporations Act encapsulates the essence of the concept by way of statutory definition. The definition has significance in respect of Ch 5 of the Corporations Act specifically: see s 442C, 442CB, 442CC of the Corporations Act.

¶10-010 SECTION 51 MEANING OF PPSA SECURITY INTEREST 51

In this Act:

PPSA security interest (short for Personal Property Securities Act security interest) means a security interest within the meaning of the Personal Property Securities Act 2009 and to which that Act applies, other than a transitional security interest within the meaning of that Act. Note 1: The Personal Property Securities Act 2009 applies to certain security interests in personal property. See the following provisions of that Act: (a) section 8 (interests to which the Act does not apply); (b) section 12 (meaning of security interest); (c) Chapter 9 (transitional provisions). Note 2: For the meaning of transitional security interest, see section 308 of the Personal Property Securities Act 2009.

¶10-015 SECTION 51A MEANING OF SECURITY INTEREST 51A

In this Act:

security interest means: (a) a PPSA security interest; or (b) a charge, lien or pledge.

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¶10-020 SECTION 51B MEANING OF SECURED PARTY 51B

In this Act:

secured party, in relation to a security interest, means:

(b) if the security interest is not a PPSA security interest, but consists of a charge, lien or pledge in relation to the property — a chargee, lienee or pledgee in relation to the charge, lien or pledge. Note: Security interests are either PPSA security interests, or charges, liens or pledges (see section 51A).

¶10-025 51C

SECTION 51C MEANING OF CIRCULATING SECURITY INTEREST In this Act:

circulating security interest means a security interest that is: (a) a PPSA security interest, if: (i) the security interest has attached to a circulating asset within the meaning of the Personal Property Securities Act 2009; and (ii) the grantor (within the meaning of that Act) has title to the asset; or (b) a floating charge. Note: Security interests are either PPSA security interests, or charges, liens or pledges (see section 51A).

¶10-030 51D

SECTION 51D MEANING OF POSSESSORY SECURITY INTEREST In this Act:

possessory security interest, in relation to property, means a security interest that is: (a) a PPSA security interest in the property that is perfected by possession or control, within the meaning of the Personal Property Securities Act 2009; or

Annotated Personal Property Securities Act 2009 (Cth)

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(a) if the security interest is a PPSA security interest — a secured party within the meaning of the Personal Property Securities Act 2009; or

784

Corporations Act 2001 (b) a lien or a pledge in relation to the property. Note: Security interests are either PPSA security interests, or charges, liens or pledges (see section 51A).

¶10-035 SECTION 51E MEANING OF SECURED CREDITOR 51E

In this Act:

secured creditor of a corporation means a creditor of the corporation, if the debt owing to the creditor is secured by a security interest.

¶10-040 SECTION 51F MEANING OF PPSA RETENTION OF TITLE PROPERTY Definition 51F(1) Property is PPSA retention of title property (short for Personal Property Securities Act retention of title property) of a corporation if: (a) the property is personal property; and (b) the property is used or occupied by, or is in the possession of, the corporation; and (c) the corporation does not have title to the property; and (d) a PPSA security interest is attached to the property, within the meaning of the Personal Property Securities Act 2009; and (e) the corporation is the grantor in relation to the PPSA security interest, within the meaning of that Act. Examples: The following personal property is PPSA retention of title property if a PPSA security interest attaches to the property by virtue of the transaction concerned, and the grantor is a corporation:

(a) property that is the subject of an agreement to sell subject to retention of title, or a hire purchase agreement, that secures the payment or performance of an obligation (see subsection 12(2) of the Personal Property Securities Act 2009); (b) property that is the subject of a lease, or a consignment agreement, that secures the payment or performance of an obligation (see subsection 12(2) of the Personal Property Securities Act 2009); (c) goods that are the subject of a commercial consignment (see subsection 12(3) of the Personal Property Securities Act 2009); (d) goods that are leased or bailed under a PPS lease (see subsection 12(3) of the Personal Property Securities Act 2009).

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Part 5.7B — Compensation for Creditors of Insolvent Company

References to property of a corporation 51F(2) A reference in this Act to the property of a corporation does not include a reference to any PPSA retention of title property of the corporation, unless provided otherwise expressly or by necessary implication. Note: See also the definition of property in section 9.

PART 5.7B — RECOVERING PROPERTY OR COMPENSATION FOR THE BENEFIT OF CREDITORS OF INSOLVENT COMPANY Division 2 — Voidable transactions ¶10-045

SECTION 588FJ CIRCULATING SECURITY INTEREST CREATED WITHIN 6 MONTHS BEFORE RELATION-BACK DAY

588FJ(1) This section applies if: (a) a company is being wound up in insolvency; and (b) the company created a circulating security interest in property of the company at a particular time that is at or after 23 June 1993 and: (i) during the 6 months ending on the relation-back day; or (ii) after that day but on or before the day when the winding up began. 588FJ(2) The circulating security interest is void, as against the company’s liquidator, except so far as it secures: (a) an advance paid to the company, or at its direction, at or after that time and as consideration for the circulating security interest; or (b) interest on such an advance; or (c) the amount of a liability under a guarantee or other obligation undertaken at or after that time on behalf of, or for the benefit of, the company; or (d) an amount payable for property or services supplied to the company at or after that time; or (e) interest on an amount so payable. 588FJ(3) Subsection (2) does not apply if it is proved that the company was solvent immediately after that time. 588FJ(4) Paragraphs (2)(a) and (b) do not apply in relation to an advance so far as it was applied to discharge, directly or indirectly, an Annotated Personal Property Securities Act 2009 (Cth)

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CHAPTER 5 — EXTERNAL ADMINISTRATION

786

Corporations Act 2001 unsecured debt, whether contingent or otherwise, that the company owed to: (a) the secured party; or (b) if the secured party was a body corporate — a related entity of the body. 588FJ(5) Paragraphs (2)(d) and (e) do not apply in relation to an amount payable as mentioned in paragraph (2)(d) in so far as the amount exceeds the market value of the property or services when supplied to the company. 588FJ(6) If, during the 6 months ending on the relation-back day, or after that day but on or before the day when the winding up began, a debt secured by the circulating security interest was discharged, out of the company’s money or property, to the extent of a particular amount (in this subsection called the realised amount), the liquidator may, by proceedings in a court of competent jurisdiction, recover from the secured party, as a debt due to the company, the amount worked out in accordance with the formula: Unsecured amount − Realisation costs where: realisation costs means so much (if any) of the costs and expenses of enforcing the security interest as is attributable to realising the realised amount. unsecured amount means so much of the realised amount as does not exceed so much of the debt as would, if the debt had not been so discharged, have been unsecured, as against the liquidator, because of subsection (2).

Division 2A — Vesting of PPSA security interests if not continuously perfected ¶10-050 SECTION 588FK INTERPRETATION AND APPLICATION 588FK(1) A word or expression used in this Division has the same meaning as in the Personal Property Securities Act 2009. 588FK(2) Subsection (1) applies despite any other provision of this Act (subject to subsection (4)). 588FK(3) For the purposes of this Division, whether or not a person has acquired actual or constructive knowledge of a circumstance is to be determined in accordance with sections 297 to 300 of the Personal Property Securities Act 2009. 588FK(4) In this Division: PPSA security interest has the meaning given by section 51.

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Note: As a result of this section, in this Division, company has the same meaning as in the Personal Property Securities Act 2009. At the time this section was enacted, section 10 of that Act provided that company means: (a) a company registered under Part 2A.2 or Part 5B.1 of the Corporations Act 2001; or (b) a registrable body that is registered under Division 1 or 2 of Part 5B.2 of that Act.

Scope 588FL(1) 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; (ii) an administrator of a company is appointed under section 436A, 436B or 436C; (iii) a company executes a deed of company arrangement under Part 5.3A; and (b) a PPSA security interest granted by the company in collateral is covered by subsection (2). Note: A security interest granted by a company in relation to which paragraph (a) applies that is unperfected at the critical time may vest in the company under section 267 or 267A of the Personal Property Securities Act 2009.

588FL(2) This subsection covers a PPSA security interest if: (a) at the critical time, or, if the security interest arises after the critical time, when the security interest arises: (i) the security interest is enforceable against third parties under the law of Australia; and (ii) the security interest is perfected by registration, and by no other means; and (b) the registration time for the collateral is after the latest of the following times: (i) 6 months before the critical time; (ii) the time that is the end of 20 business days after the security agreement that gave rise to the security interest came into force, or the time that is the critical time, whichever time is earlier; (iii) if the security agreement giving rise to the security interest came into force under the law of a foreign jurisdiction, but the security interest first became enforceable against third parties under the law of Annotated Personal Property Securities Act 2009 (Cth)

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Corps Act

¶10-055 SECTION 588FL VESTING OF PPSA SECURITY INTERESTS IF COLLATERAL NOT REGISTERED WITHIN TIME

788

Corporations Act 2001 Australia after the time that is 6 months before the critical time — the time that is the end of 56 days after the security interest became so enforceable, or the time that is the critical time, whichever time is earlier; (iv) a later time ordered by the Court under section 588FM. Note 1: For the meaning of critical time, see subsection (7). Note 2: For when a security interest is enforceable against third parties under the law of Australia, see section 20 of the Personal Property Securities Act 2009. Note 3: A security interest may become perfected at a particular time by a registration that is made earlier than that time, if the security interest attaches to the collateral at the later time (after registration). See section 21 of the Personal Property Securities Act 2009. Note 4: The Personal Property Securities Act 2009 provides for perfection by registration, possession or control, or by force of that Act (see section 21 of that Act).

588FL(3) (Repealed by No 35 of 2011, s 3, Sch 1[8] (effective 30 January 2012).) Vesting of security interest in company 588FL(4) The PPSA security interest vests in the company at the following time, unless the security interest is unaffected by this section because of section 588FN: (a) if the security interest first becomes enforceable against third parties at or before the critical time — immediately before the event mentioned in paragraph (1)(a); (b) if the security interest first becomes enforceable against third parties after the critical time — at the time it first becomes so enforceable. Note: For the meaning of critical time, see subsection (7).

Property acquired for new value without knowledge 588FL(5) Subsection (4) 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;

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(iii) the appointment of an administrator of the company under section 436A, 436B or 436C; (iv) the execution of a deed of company arrangement by the company under Part 5.3A. Note: For what is actual or constructive knowledge, see sections 297 and 298 of the Personal Property Securities Act 2009.

588FL(6) In a proceeding in Australia under this Act, the onus of proving the fact that a person acquires personal property without actual or constructive knowledge as mentioned in paragraph (5)(b) lies with the person asserting that fact. 588FL(7)

In this section:

(a) if the company 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 under section 513A or 513B; or (b) in any other case — when, on a day, the event occurs by virtue of which the day is the section 513C day for the company.

[588FL.2]

Outline

Section 588FL of the Corporations Act 2001 (Cth) (Corporations Act) is similar in its operation and effect to s 267 of the Personal Property Securities Act 2009 (Cth) (PPSA). The upshot of the section is that property, the subject of a security interest, is vested in the grantor if a secured party fails to perfect that security interest in accordance with the timing requirements stipulated by the section. Prior to the repeal of Ch 2K of the Corporations Act, s 263 provided that a chargeholder had 45 days to lodge the charge from the time of the creation of the charge. Section 588FL on the other hand imposes a timing requirement of 20 business days after the security agreement that gave rise to the security interest came into force.

[588FL.3]

Cross-references

● Sections 513A, 513B and 513C of the Corporations Act. ● Sections 436A, 436B and 436C of the Corporations Act.

[588FL.4] Concepts ● Security interest – See s 12 of the PPSA. ● Critical time – See s 588FL(7) of the Corporations Act. ● Enforceable against third parties – See s 20 of the PPSA. ● Perfected by registration – See s 21 of the PPSA. Annotated Personal Property Securities Act 2009 (Cth)

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critical time, in relation to a company, means:

790

Corporations Act 2001

● Possession – See s 21 and 24 of the PPSA. ● Control – See s 21 and 25–29 of the PPSA. ● Vests – See s 267 and 267A of the PPSA; See also Re Production Printing (Aust) Pty Ltd (in liquidation) [2017] NSWSC 505. ● New value – See s 10 of the PPSA. ● Knowledge – See s 297 and 298 of the PPSA.

[588FL.5]

Commentary

[588FL5.1] Application and operation ........................................................792 [588FL.5.2] Why is the distinction important, if at all? ............................792 [588FL.5.3] The timing requirements of s 588FL .......................................793 [588FL.5.3.1] The PPSA requirements ...............................................793 [588FL.5.3.2] External administrator .................................................793 [588FL.5.3.3] Timings ..........................................................................793 [588FL.5.4] ‘‘Vesting’’ of the security interest ...........................................794 [588FL.5.5] ‘‘Vesting’’ as opposed to ‘‘void against’’ ...............................796

[588FL5.1] Application and operation As a prima facie question, one must consider whether s 267 of the PPSA or s 588FL of the Corporations Act is applicable to a particular factual circumstance. The provisions are different and govern different positions. Expressed simply: 1. Section 267 of the PPSA applies where the secured party has failed to perfect their security interest at all prior to the appointment of an external party to the grantor within the meaning of s 267(1) 2. Section 588FL of the Corporations Act applies where the secured party has perfected their security interest by registration of a financing statement on the Personal Property Securities Register (PPSR) but the relevant registration falls foul of the timing stipulations provided for by s 588FL(2)(b) of the Corporations Act.

[588FL.5.2] Why is the distinction important, if at all? If s 267 of the PPSA applies to a particular factual circumstance (or s 267A of the PPSA for that matter) there is no recourse available to the secured party, on the face of the PPSA, which otherwise provides for a possible extension of time to perfect a security interest by registration. To the contrary, in circumstances where s 588FL is applicable, or potentially applicable, recourse may be had to s 588FM of the Corporations Act and the ability to extend the time for registration so as to fall within s 588FL(2)(b)(iv).

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For more information on s 588FM see the commentary to s 588FM.

[588FL.5.3] The timing requirements of s 588FL The mechanics behind the operation of s 588FL are contained within s 588FL(1) and (2).

[588FL.5.3.1] The PPSA requirements

[588FL.5.3.2] External administrator The appointment of an external administrator to the grantor company is dealt with by s 588FL(1). The events mentioned in s 588FL(1)(a) include a corporate grantor going into liquidation, voluntary administration or being subject to a deed of company arrangement. The lack of reference to the appointment of a receiver or a receiver and manager, pursuant to Pt 5.2 of the Corporations Act, is consistent with s 116 of the PPSA which, in essence, provides that Ch 4 of the PPSA does not apply to a receiver or a receiver and manager. The timing stipulations behind which an event pursuant to s 588FL(1)(a) has occurred centres around the ‘‘critical time’’ which is dealt with by s 588FL(7) and which generally follows the timings provided for by s 513A, 513B and 513C of the Corporations Act. If the members’ resolution to appoint a voluntary liquidator is invalid then s 588FL will not apply: Knauf Plasterboard Pty Ltd v Plasterboard West Pty Ltd (In Liquidation) (Receivers and Managers Appointed) [2017] FCA 866.

[588FL.5.3.3]

Timings

Once the above requirements are met, the external practitioner appointed to the grantor company will evaluate the security interests registered against the company over which they are appointed (which can be done by performing a search of the ACN of the company on the PPSR). From there, any security interest which does not have a financing statement lodged in respect of it: 1. within 20 business days after the day the security agreement that gave rise to the security agreement came into force, and 2. is within six months from the ‘‘critical time’’, and 3. to which no order pursuant to s 588FM of the Corporations Act has been made, will fall within the operation of s 588FL(4) of the Corporations Act. A separate rule applies for security agreements governed by the law of a foreign jurisdiction, whereby s 588FL(2)(b)(iii) allows 56 days from the date the interest became enforceable in Australia (as opposed to 20 business days for security agreements governed by Australian law). Importantly, for the purposes of the six-month aspect contained in s 588FL(2)(b)(i), the event which must occur outside of six months from the Annotated Personal Property Securities Act 2009 (Cth)

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Pursuant to s 588FL(2)(a), s 588FL only applies to security interests which are: 1. Enforceable against third parties — to which see s 20 of the PPSA and the commentary thereto, and 2. Perfected by registration, and by no other means — to which see s 21 of the PPSA and the commentary thereto.

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critical time is the lodgement of the financing statement to perfect by registration and not merely the creation of the security agreement. In respect of security interests governed by a security agreement dated within six months of the critical time, s 588FJ may apply. For further detail in respect of the potential application of s 588FJ see the commentary to s 588FJ. The calculation of the 20 business day period is from the creation of the security agreement, not merely from the date of the latest purchase order or invoice: Re Amerind Pty Ltd (recs and mgrs apptd) (in liq) [2017] VSC 127. If a security interest is granted after the company enters voluntary administration or liquidation it must come after the critical time, even where it was registered within 20 business days after the creation of the security agreement, and hence will need an extension under s 588FM in order to avoid vesting: Korda, in the matter of Ten Network Holdings Ltd (Administrators Appointed) (Receivers and Managers Appointed) [2017] FCA 1144; K.J. Renfrey Nominees Pty Ltd (Trustee), in the matter of OneSteel Manufacturing Pty Ltd v OneSteel Manufacturing Pty Ltd [2017] FCA 325. The calculation of the period six months before the critical time does not include the critical day itself (ie the appointment date), and will go back as calculated as follows. In Overflow FNQ Pty Ltd (in liquidation); Kelly v Austwide Consumer Products Pty Ltd [2017] QSC 76, Henry J held (at [18]): ‘‘The calculation of six ‘months before the critical time’ therefore requires identification of a period commencing at ‘the beginning’ of a day of a month and ending ‘immediately before the beginning’ of the corresponding day of the month six months subsequent thereto.’’ In that case, the Court also raised the possibility that the registration time should be calculated at a particular time, although in that case it was still after the corresponding time of the administrators’ appointment.

[588FL.5.4] ‘‘Vesting’’ of the security interest The operative provision responsible for the vesting of the security interest is s 588FL(4). Typically, the operation of s 588FL will occur by force of s 588FL(4)(a) (as opposed to s 588FL(4)(b)) noting that a security interest which becomes enforceable after the critical time is commercially unlikely. Importantly, s 588FL(4)(a) applies ‘‘immediately before’’ the appointment event discussed above at s 588FL(1)(a). The reference to the point in time at which the property ‘‘vests’’ has raised a significant and unresolved issue about termination of agreements which are not otherwise perfected or which are perfected but which fail to otherwise comply with s 588FL(2)(b). The issue, or argument, is essentially that unless and until an event set out at s 588FL(1)(a) actually occurs, a secured party (irrespective of whether they are validly perfected or not) retains the ability to terminate the security agreement and thus bring to an end the security interest prior to ‘‘immediately before’’ the appointment event such that s 588FL(4) has no application as there is no security interest which s 588FL(4) would otherwise vest.

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If the above argument reflects the position at law, this does not sit well with the primacy of the PPSR upon which a large part of the PPSA is fundamentally premised. It also effectively permits avoidance of the requirement that a secured party is required to perfect one’s security interest in the first place.

The argument here is that the termination of the security interest falls within the definition of a ‘‘transaction’’ which results in the secured party receiving an unfair preference in circumstances where the secured party has the benefit of a security interest which either is unperfected or would be unperfected as a consequence of s 588FL. Again, the timing of the inquiry as to when s 588FA applies is a question which remains unresolved in Australia. On the one hand, Pt 5.7B of the Corporations Act (to which s 588FA is a part) only becomes applicable upon a corporation entering liquidation — whereby, s 588FF orders can only be sought be a liquidator — and as such, there is an argument available that the appropriate time for assessing the existence or value of the security is as at the critical time and not earlier. However, on the other hand, to assess the existence or value of the security interest at the critical time is again inconsistent with the counter argument that one is to consider what position the secured party would be in should the transaction be set aside and a liquidator appointed at the time of the transaction (in this case, the termination). While the appropriate point in time when applying s 588FA of the Corporation Act was considered in the case of Hussain v CSR Building Products Limited, in the matter of FPJ Group Pty Ltd (in liq) [2016] FCA 392, the question was not ultimately decided: see [2016] FCA 392 at [169]–[179]. It is also worth noting in this regard that the analysis set out in Matthews v The Tap Inn [2015] SADC 108 was overturned in The Tapp Inn Pty Ltd v Matthews [2015] SASCFC 188 such that there remains no judicial consideration or opinion in favour of one argument as against the other on this issue. In the respectful view of the authors, the High Court of Australia has again provided comment on the proper approach to statutory construction in Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27 at [47] (see also Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at [69]): ‘‘This Court has stated on many occasions that the task of statutory construction must begin with consideration of the text itself. Historical considerations and extrinsic materials cannot be relied on to displace the clear meaning of the text. The language which has actually been Annotated Personal Property Securities Act 2009 (Cth)

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Even if the above position accurately reflects the intention of parliament through the use of the words ‘‘immediately before’’ (which the authors do not agree with), it remains difficult to reconcile the effect of termination with s 588FA of the Corporations Act should the grantor company go into liquidation at any material time.

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Corporations Act 2001 employed in the text of the legislation is the surest guide to legislative intention. The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy.’’

Bearing in mind the rationale behind the PPSA, which, in large part, involved ascribing primacy to the PPSR, and the rateable distribution of assets in accordance with pari passu principles upon the insolvency of a corporation, it is difficult to see how a Court would allow an opportunistic secured party from escaping the operation of the PPSA and Corporations Act by terminating the relevant security agreement prior to a s 588FL(1)(a) event occurring.

[588FL.5.5] ‘‘Vesting’’ as opposed to ‘‘void against’’ The distinction, if any, between the use of the term ‘‘vests’’ in s 588FL(4) of the Corporations Act as separate and distinct from the use of the phrase ‘‘void against’’ when considering company charges under the former s 266 of the Corporations Act is discussed in the commentary to s 588FM.

[588FL.6] Further resources ● N Mirzai, ‘‘Vesting in the Insolvency Practitioner’’ July–September 2013 Australian Insolvency Journal 26. ● R P Austin and A Black, Australian Corporations Legislation 2017 — supplement (LexisNexis, 2017).

¶10-060 SECTION 588FM EXTENSION OF TIME FOR REGISTRATION 588FM(1) A company, or any person interested, may apply to the Court (within the meaning of section 58AA) for an order fixing a later time for the purposes of subparagraph 588FL(2)(b)(iv). Note: If an insolvency-related event occurs in relation to a company, paragraph 588FL(2)(b) fixes a time by which a PPSA security interest granted by the company must be registered under the Personal Property Securities Act 2009, failing which the security interest may vest in the company.

588FM(2) On an application under this section, the Court may make the order sought if it is satisfied that: (a) the failure to register the collateral earlier: (i) was accidental or due to inadvertence or some other sufficient cause; or (ii) is not of such a nature as to prejudice the position of creditors or shareholders; or (b) on other grounds, it is just and equitable to grant relief. 588FM(3) The Court may make the order sought on any terms and conditions that seem just and expedient to the Court.

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Outline

It is possible to grant an extension on an ex parte application under this section: see for example, Re Appleyard Capital Pty Ltd [2014] NSWSC 782 at [34] per Brereton J; Re Accolade Wines Australia Ltd [2016] NSWSC 1023; Re Amotran Pty Ltd [2017] VSC 637, although this approach has attracted criticism by the Court and all parties whose rights might be affected by the grant of relief ought to be parties to any such application: see Re Accolade Wines Australia Ltd [2016] NSWSC 1023 at [6]–[10] per Brereton J. Extensions of time under s 588FM are not available where the security interest has already vested under PPSA s 267: Re OneSteel Manufacturing Pty Ltd (administrators appointed) [2017] NSWSC 21; NFT Specialized in Tower Cranes LLC v MacHforce Pty Ltd (in liq) [2017] WASC 95; Kaizen Global Investments Limited, in the matter of Australia New Agribusiness & Chemical Group Limited (in liq) v Australia New Agribusiness & Chemical Group Limited (in liq) [2017] FCA 431.

[588FM.3]

Cross-references

● Section 58AA of the Corporations Act — meaning of ‘‘Court’’ ● Section 588FL of the Corporations Act ● Personal Property Securities Act 2009 (Cth) (PPSA).

[588FM.4]

Concepts

● PPSA Security Interest – See s 51 of the Corporations Act; s 12 of the PPSA. ● Vest – See s 588FL(4) of the Corporations Act; s 267 and 267A of the PPSA. ● Register – See s 21 of the PPSA.

[588FM.5]

Commentary

[588FM.5.1] ‘‘Vests’’ as opposed to ‘‘void against’’ — s 588FM(1) ........798 [588FM.5.2] Discretionary factors — s 588FM(2) ......................................804 [588FM.5.2.1] ‘‘Accidental’’ or ‘‘due to inadvertence’’ — s 588FM(2)(a)(i) .......................................................................................804 [588FM.5.2.2] ‘‘Some other sufficient cause’’ — s 588FM(2)(a)(i) .806 [588FM.5.2.3] Prejudice to creditors or shareholders — s 588FM(2)(a)(ii) ......................................................................................806 [588FM.5.2.4] Just and equitable — s 588FM(2)(b) ..........................808 [588FM.5.3] Terms and Conditions — s 588FM(3) ...................................809 Annotated Personal Property Securities Act 2009 (Cth)

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Section 588FM allows a secured party who has failed to comply with s 588FL of the Corporations Act 2001 (Cth) (Corporations Act), specifically s 588FL(2)(b), to fix a later time for the registration of a financing statement in respect of a security interest which would allow that interest to fall within s 588FL(2)(b)(iv).

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[588FM.5.1] ‘‘Vests’’ as opposed to ‘‘void against’’ — s 588FM(1) A preliminary question which has been the subject of domestic judicial consideration is whether or not s 588FM empowers the Court to grant relief to a secured party even where an event set out in s 588FL(1)(a) has occurred. To date, the view of the Court has been that the occurrence of a s 588FL(1)(a) event, namely — the appointment of an external administrator, does not act as a threshold bar to the application and operation of s 588FM and a secured party can still seek to enliven the jurisdiction of the Court for such relief: Re Quality Blended Liquor Pty Ltd [2014] QSC 234; (2014) 102 ACSR 451 at [83]; Re Carpenter International Pty Ltd [2016] VSC 118 at [127]. In such a case, see the summary of principles set out in Kaizen Global Investments Limited, in the matter of Australia New Agribusiness & Chemical Group Limitedd (in liq) v Australia New Agribusiness & Chemical Group Limited (in liq) [2017] FCA 431 at [87]. This approach appears to be premised on the overarching view that s 588FM of the Corporations Act was enacted to operate in a similar fashion to the former s 266 of the Corporations Act (prior to the repeal of Ch 2K): see In the matter of Apex Gold Pty Ltd [2013] NSWSC 881 at [12]; Re Cardinia Nominees Pty Ltd [2013] NSWSC 32 at [14]–[15]; Re Caason Investments Pty Ltd v Ausroc Metals Ltd [2016] WASC 267 at [7]. The basis for the ability to consider the making of orders pursuant to s 588FM, notwithstanding the occurrence of an event set out in s 588FL(1)(a), is explained by Brereton J in Re Appleyard Capital Pty Ltd; 123 Sweden AB v Appleyard Capital Pty Ltd (2014) 101 ACSR 629; [2014] NSWSC 782, where his Honour held (at [22]–[24]): ‘‘In Hewlett Packard Australia Pty Ltd v GE Capital Finance Pty Ltd [2003] FCAFC 256; (2003) 135 FCR 206; 47 ACSR 589, the Full Federal Court by majority (Branson and Allsop JJ; Whitlam J dissenting) upheld an order made after the company had gone into administration, where the failure to register was attributable to inadvertence, notwithstanding that this would be to the detriment of unsecured creditors. The majority held that an extension order could be made even after the company went into liquidation or administration, although an extension would almost invariably be refused, and would be granted only in exceptional circumstances, after the commencement of a winding up. Branson J, observing that a rule of practice or guide to the exercise of the discretion that had evolved over the years should not lightly be disregarded, continued: One such rule of practice or guide is that an extension of time ‘will almost invariably be refused after the commencement of a winding up and will only be granted in exceptional circumstances’: see Douglas-Brown (as liq of De Barros Nominees Pty Ltd (in liq)) v Standard Chartered Finance Ltd (1990) 2 ACSR 737; 8 ACLC 993 at 998 per Malcolm CJ and Rowland J; see also Campbell Finance Pty Ltd v Vivstan Packaging (Aust) Pty Ltd [1998] 2 VR 340 per Batt J; Morris v Woodings (1997) 25 ACSR 636 per Wheeler J; Re Lloyd Anthony Furniture Pty Ltd; Ex parte Walker (1996) 19 ACSR 478 per

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Branson J. This rule of practice reflects the fact that the validation of a charge that would otherwise be void against the liquidator will reduce the assets available to satisfy the claims of unsecured creditors. The chargee will thus be assisted by the court at the expense of the unsecured creditors. However, as Allsop J explains, ‘exceptional circumstances’ in the above context are simply circumstances sufficient to justify defeating the rights of unsecured creditors, which they acquired when the liquidation commenced, in the assets the subject of the charge: see Re Anglo-Oriental Carpet Manufacturing Co [1903] 1 Ch 914 at 918. To put the matter another way, ‘exceptional circumstances’ are simply circumstances sufficient to render it just and equitable to grant relief notwithstanding that the grant of relief will defeat rights of unsecured creditors. The requirement that the court be satisfied that it is just and equitable to grant relief has, as it seems to me, the following practical consequences. If an application for an extension of time within which to lodge notice of a charge is made where none of the events referred to in s 266(1)(a), (b) or (ba) has occurred, the starting position is that the security is valid but could be rendered void if, in the events that happen, the notice is not lodged within the time frame specified by s 266(1)(c). For this reason, as it seems to me, consideration should ordinarily be given to the financial position of the company. If the financial position of the company is apparently secure, in the sense that the company is solvent and no threat to its solvency can be identified, the court will readily be satisfied that it is just and equitable to grant relief. The financial position of the company means that a ‘critical day’ is unlikely to arise in the foreseeable future. The chargee would therefore face little risk of losing its security if, without approaching the court, it were to obtain a fresh charge and lodge it within the relevant period, or alternatively, if it were to lodge a notice in relation to the existing charge outside the relevant period. Consequently the grant of relief would be unlikely to affect any person adversely. However, if the financial position of the company is insecure, the court will ordinarily assess the extent of the risk that a grant of relief might adversely affect a person with an interest in the assets of the company in the course of determining whether the court is satisfied that it is just and equitable to grant relief. If liquidation, or an administration founded on insolvency, seems imminent, the risk that, for example, unsecured creditors could be adversely affected by a grant of relief would be high. Where insolvency is a remote and distant possibility only, that risk would be low.’’ Thus an order can be made, even after liquidation, so long as the circumstances are such as to render it just and equitable to grant relief, notwithstanding that the grant of relief will defeat rights of unsecured creditors. Annotated Personal Property Securities Act 2009 (Cth)

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Corporations Act 2001 In Bevillesta Pty Ltd v Imagine UN Ltd [2009] VSC 50; 69 ACSR 574, Robson J summarised many of the considerations that emerge from the cases (at [28]), and referred with approval to remarks of Sangster J at first instance in Re Flinders Trading Co (1978) 3 ACLR 218 to the effect that the court’s concern for the position of the unsecured creditors varied according to a scale whereby, at one end, where the position had been crystallized by a winding up order, the court would generally not extend time; approaching that end, the court would be reluctant to extend time if a winding up appeared to be imminent; at the other end, the court would grant an extension if satisfied that the company was solvent. But between those points, the course was less clear (at [31]).’’

The rationale behind s 588FM was then discussed by his Honour (at [29]): ‘‘The purpose of giving the court a discretion to fix a later time is to relieve a secured creditor from the consequences of accident or inadvertence. In the event of insolvency this necessarily involves detriment to unsecured creditors who would otherwise benefit from the vesting of the security in the company. It would be contrary to the purpose of the section to treat the risk that unsecured creditors could be adversely affected by making an order as a dominant consideration. The fact that absence of prejudice to creditors is an alternative ground for relief [s 588FM(2)(a)(ii)] indicates that it was not intended that relief from accident or inadvertence be granted only where there is no prejudice to creditors, as Bray CJ observed in Re Flinders Trading Co (1978) 3 ACLR 218 (at 220). The cases to which I have referred show that, despite the majority view in Re Flinders Trading Co, courts have not infrequently been prepared to grant extensions of time, even in a context where liquidation or administration is in contemplation, though reserving leave to any liquidator or administrator to apply to set the order aside.’’ In Re Enviro Pallets (NSW) Pty Ltd [2013] QSC 220 (a case where a liquidator had been appointed to the grantor by the time s 588FM relief was sought from the secured party), Philippides J, in making the orders sought, held (at p 5, [24–39]): ‘‘The terms of section 588FM(2) are similar to the circumstances which previously pertained to the extension of time for lodgement of a notice of charge under section 266(4) of the Act (see In the matter of Cardinia Nominees Pty Ltd [2013 NSWSC 32 at [10]; see also In re Apex Gold Pty Ltd [2013] NSWSC 881). The grounds for relief, in section 588FM(2)(a)(i) and (a)(ii) and 588FM(2)(b), are alternative and any one of the three separate grounds, if established, is sufficient to allow the court to extend the time for registration; see National Australia Bank Ltd v Davis & Waddell (Vic) Pty Ltd [2003] VSC 1 at [45]. In the present case, the applicant relies upon the ground, in section 588FM(2)(a)(i), that the failure to register the security documents within the time required was ‘due to inadvertence’. There is an ancillary submission, made in the alternative, that the applicant is able to rely on the fact that ‘it is just and equitable to grant relief’, as provided by section 588FM(2)(b). In my view, there is no need

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to deal with the alternate basis, as the first and primary basis is satisfied.’’

‘‘It is argued for the applicant that the discretion under s 588FM only arises for purposes associated with s 588FL, and that the latter section only applies if an order has been made to wind up the company or an administrator has been appointed, or it is entered into a deed of company arrangement. (The appointment of provisional liquidators, as occurred here at the end of the hearing, is not an insolvency event and does not operate to enliven s 588FM.) Conversely it is said for Toyco that the court’s power to make an order under s 588FM is not contingent on s 588FL already being engaged, because there is nothing in the wording of the latter provision suggesting such a limitation. Section 588FL commences with a sub-section stating that the section itself applies if the company is wound up, etc, and a security interest is in place. Under subs (2), certain time limits attach to security interest to which subs (1), and the balance of s 588FL, apply. Section 588FM provides that a company or an interested person may apply to the court for an order fixing a ‘later time’ for the purposes of subs 588FL(2)(b)(iv). The latter says that subs 588FL(2) covers a security interest if it is registered at a later time (ie, later than the 20 business days allowed under s 588FL(2)(b)(ii)) ordered by the court under s 588FM. The opening limitation on the operation of s 588FL(1) is not repeated in s 588FM and, in my view, the latter can operate independently of the former and the discretion is not contingent on s 588FL being engaged. It follows that Toyco’s application can proceed even though QBL has not been wound up, etc. Section 588FM replaced s 266 in preceding legislation, and cases decided under that provision are relevant to the present application. The discretion may be exercised if the court is satisfied that the failure to register the security was accidental, or due to inadvertence, or some other sufficient cause.’’ See also In the matter of Southern Engineering Services Pty Ltd (in liquidation) ACN 000 091 716 [2014] NSWSC 1882 (where relief pursuant to s 588FM of the Corporations Act was sought notwithstanding that an administrator had been appointed to the grantor company). Noting the authorities set out above, some broad comments were made in respect of the operation and application of s 588FM of the Corporations Act in Re Carpenter International Pty Limited [2016] VSC 118 by Cameron J at [217], [236]: Annotated Personal Property Securities Act 2009 (Cth)

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A similar position was reached in Re Quality Blended Liquor Pty Ltd (2014) 2 Qd R 381; [2014] QSC 234 (a case where a provisional liquidator has been appointed by the time the s 588FM application came before the Court) where Alan Wilson J held (at [79]–[84]):

800

Corporations Act 2001 ‘‘It appears that s 588FM has been applied liberally. One of the cases under s 588FM involved an application for extension filed after a liquidator had been appointed to the company [noting Re Enviro Pallets (NSW) Pty Ltd]. In another case, an administrator had already been appointed [noting Re Southern Engineering Services Pty Ltd]. In Re Quality Blend Liquor Pty Ltd a provisional liquidator had been appointed by the time Wilson J granted an extension. In yet another case, an extension was granted even though the plaintiff intended to appoint a voluntary administrator and receivers to the grantor company [noting Re Apex Gold Pty Ltd]. In Appleyard an extension was granted despite the high degree of likelihood that the grantor was insolvent and would go into liquidation or administration within six months. As CS submitted, the fact that administrators have been appointed to Carpenter is not a bar to relief under s 588FM. ... As Brereton J explained in Appleyard, the only utility of an extension order is in the event that the company does go into liquidation or administration within six months after the actual date of registration. Section 588FM therefore contemplates that within six months of the actual date of registration, the company will go into administration or liquidation, and the unsecured creditors will receive less dividend if an extension is granted. The fact that administrators have been appointed to Carpenter does not mean an extension should not be granted. If some prejudice to unsecured creditors other than a reduced dividend can be shown, the Court may decline to exercise its discretion under s 588FM. The prejudice that must be shown is prejudice from the failure to register in time, not prejudice from the granting of an extension.’’

However, while consideration of case law which applied s 266 of the Corporations Act prior to the repeal of Ch 2K is of utility in circumstances where the factors listed in s 588FM(2) of the Corporations Act require the exercise of the Court’s discretion — the case law cannot, respectfully, speak to the threshold issue of whether a Court can fix a later time for registration of a security interest after s 588FL(4) of the Corporations Act has been triggered. The proper approach to statutory construction has been the subject of considerable analysis of the High Court of Australia. Without seeking to traverse the scope and detail of that analysis, in Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355, the High Court held, at [69], that the essence of interpreting statutory provisions ‘‘is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute’’. This approach was expanded upon by Hayne, Heydon, Crennan and Kiefel JJ in Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27 at [47]: ‘‘This Court has stated on many occasions that the task of statutory construction must begin with consideration of the text itself. Historical considerations and extrinsic materials cannot be relied on to displace the

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Applying the above to s 588FL and 588FM of the Corporations Act, once s 588FL(4) triggers it is arguable, on a plain reading of the sections themselves, that there is no work to be done by s 588FM. That is to say, fixing a later time for the registration of a security interest which has already vested in the grantor does not, and in the authors’ respectful view, cannot, undo the vesting of the security interest in the grantor — at least not without further order of the Court — to which there does not appear to be any provision in the PPSA or the Corporations Act which empowers the Court to undo the operation of s 588FL(4) by way of granting declaratory relief or otherwise. The reason why the above conclusion would not arise under the former s 266 of the Corporations Act is because s 266(1) provided that: ‘‘a registrable charge on property of the company is void as a security on that property as against the liquidator, the administrator of the company, or the deed’s administrator, as the case may be’’. The statutory use of the operative word ‘‘void’’ in s 266(1) carries with it a different meaning to the use of the term ‘‘vests’’ which now appears in s 588FL(4). ‘‘Void’’, as a concept is also distinct from the concept of ‘‘void ab initio’’ at law. Something which becomes ‘‘void’’ on and from the occurrence of an event is taken to be void on and from that event. To the contrary, something which, by force of an event or circumstance, is taken to be or otherwise rendered ‘‘void ab initio’’ is taken never to have existed — not just from the occurrence of the event, but at all. Where parliament has intended that the occurrence of a particular event or circumstance has the consequence of rendering something ‘‘void ab initio’’ the term has been used in the statutory provision: see Competition and Consumer Act 2010 (Cth), s 243. Further, at law, an interest which is rendered ‘‘void’’ continues to exist albeit being unenforceable to the extent that it is void (in the s 266 case, as against the liquidator, administrator or deed administrator of the relevant company). Consequentially, if the element rendering the interest void is removed by force of Court order — namely, the application of s 266(4) of the Corporations Act (now repealed), then the interest could be enforced even after the event voiding the interest had occurred. In the authors’ view, primacy must be given to the express terms of the legislation in the circumstances. In respect of the argument that the term ‘‘vests’’ does not carry with it a meaning separate and distinct from ‘‘void’’ it is, with respect, unlikely that the departure from the use of the term ‘‘vests’’ as opposed to ‘‘void’’ in s 588FM was accidental, particularly in circumstances where s 588FJ and 588FP retain the use of the word ‘‘void’’. If the above is accepted, then contrary to the emerging body of case law applying s 588FM of the Corporations Act, the proper operation of s 588FM is Annotated Personal Property Securities Act 2009 (Cth)

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clear meaning of the text. The language which has actually been employed in the text of the legislation is the surest guide to legislative intention. The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy.’’

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limited to circumstances prior to a s 588FL(1)(a) event occurring. This construction is consistent with the lack of an extension of time mechanism for security interests which vest as a consequence of s 267 of the PPSA (as opposed to s 588FL of the Corporations Act): for the distinction between s 267 of the PPSA and s 588FL of the Corporations Act, see [588FL.5.1]. If the above is not accepted, there appears to be little to prevent a secured party whose interest in the underlying collateral would or has vested in accordance with s 267 of the PPSA from seeking to perfect its already vested security interest after a s 267(1)(a) event has occurred and to then seek appropriate relief pursuant to s 588FM of the Corporations Act (noting the limitations on the priority of such an interest). In the case of Mentha, in the matter of Arrium Limited (administrators appointed) [2016] FCA 972, both the registration and the extension application occurred after the appointment of external administrators. However, importantly, the agreement that created the security interest in that matter was entered by the grantor company under the control of external administrators (ie after the company was in external administration) arguably not triggering s 588FL of the Corporations Act unless and until a further s 588FL(2)(b) event in any event. That said, the Court was comfortable to grant relief pursuant to s 588FM for abundant caution: see Mentha, in the matter of Arrium Limited (administrators appointed) [2016] FCA 972 at [20]–[21].

[588FM.5.2] Discretionary factors — s 588FM(2) On application from a secured party pursuant to s 588FM(1), the Court may grant the relief sought if any of the three criteria set out in s 588FM(2) are made out.

[588FM.5.2.1] ‘‘Accidental’’ or ‘‘due to inadvertence’’ — s 588FM(2)(a)(i) Earlier applications applying for relief pursuant to s 588FM of the Corporations Act, particularly those brought within the transitional period (namely, two years after the registration commencement time: see PPSA, s 306) took into account the commencement of the PPSA and its complexities when considering the question of a failure to register within time by accident or inadvertence: see Re Barclays Bank Plc [2012] NSWSC 1095; Re Cardinia Nominees Pty Ltd [2013] NSWSC 32; In the matter of Apex Gold Pty Ltd [2013] NSWSC 881. On the issue of what constitutes ‘‘inadvertence’’, in Re Appleyard Brereton J held, at [10]: ‘‘For the purpose of s 588FM(2)(a)(i), ‘inadvertence’ includes failure to advert to or understand the requirement for registration within the specified period, and innocent error in the sense of failure to register through ignorance of the legal requirement to do so, or of the consequences of not doing so [Sanwa Australia Finance Ltd v GroundBreakers Pty Ltd (in liq) [1991] 2 Qd R 456; (1990) 2 ACSR 692; Campbell Finance Pty Ltd v Vivstan Packaging (Aust) Pty Ltd (in liq) [1998] 2 VR 340;

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(1996) 22 ACSR 109; Freightlines Northern Territory Pty Ltd (1999) 32 ACSR 573, 576; In the matter of Cardinia Nominees Pty Ltd [2013] NSWSC 32, [14]–[16]].’’ ‘‘The concept of ‘inadvertence’ has been considered in the case law dealing with s 266 of the Corporations Act. In the present case, there seems to me to have been a least a lack of clarity as to who was responsible for registration of the security interest and, if clause 6.1 of the Secured Convertible Bond Deed was intended to confer that responsibility on Inika, a lack of action by Inika to discharge that responsibility. However, I do not consider that lack of clarity gave rise to an actual misunderstanding as to who was responsible for registration, of the kind considered in Re Kris Cruisers Ltd [1949] 1 Ch 138; [1948] 2 All ER 1105 or Queensland Company Credit Union v Na-Kuraga Ltd [2005] QSC 149; (2005) 55 ACSR 219. The parties appear to have proceeded on the (possibly mistaken) basis that Cardinia should attend to registration of the security interest in the collateral on the PPS Register, albeit that it ultimately did so by giving instructions to Inika’s solicitors in that regard. However, ‘inadvertence’ may also be established where a party operates under a mistake as to the consequences of failing to register a security interest: Sanwa Australia Finance Ltd v Ground-Breakers Pty Ltd (in liq) [1991] 2 Qd R 456 at 461; (1990) 2 ACSR 692 at 695; National Australia Bank Limited v Davis & Waddell (Vic) Pty Ltd [2003] VSC 1; (2003) 44 ACSR 296; Metcash Trading Ltd v 8 Nai Investments Pty Ltd [2011] FCA 1400 at [8]. The approach adopted in the case law of treating a matter of that kind as amounting to inadvertence is consistent with the emphasis placed in the case law upon the benevolent operation of predecessor sections, at least where an error of a secured creditor in not attending to registration of its security within time is innocent and does not result from any disregard of its statutory obligations: Re Kris Cruisers Ltd above at 142; National Australia Bank v Davis & Waddell above at [67]. In the present case, Inika’s solicitor had informed Mr McGilvray of the time within which registration was required, but the potentially significant consequences of a failure to register had not been communicated to Mr McGilvray. In my view, Cardinia, through Mr McGilvray, was plainly operating under a mistake as to that matter. Cardinia has therefore established that the failure to register the security interest in the collateral earlier in this case was at least due to inadvertence, and that is sufficient to establish the basis for the Court to make the order which Cardinia seeks under s 588FM of the Corporations Act.’’ See also Re Quality Blended Liquor Pty Ltd [2014] QSC 234 at [84]. In Re Carpenter, Cameron J held at [227]–[229]: ‘‘I find that the reason CS failed to register in time was a belief that Carpenter could and would pay CS. CS knew of the requirement to Annotated Personal Property Securities Act 2009 (Cth)

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In Re Cardinia Nominees Pty Ltd, Black J held, at [14]–[16]:

804

Corporations Act 2001 register. It decided to register because it learnt that Carpenter might not be able to pay, not because 20 business days from 4 or 10 March 2015 was fast approaching. Put another way, I am not satisfied that had CS’ mistaken belief been corrected on the day the individual contracts were executed, it would have registered in time. The reason CS failed to register in time, namely a belief that Carpenter could and would pay in time, does not amount to inadvertence within the meaning of s 588FM(2)(a)(i). Given my finding as to the reason CS did not register its security interests in time, I also find that the failure to register in time does not amount to an accident or ‘some other sufficient cause’ within the meaning of s 588FM(2)(a)(i), and that CS has failed to establish that on other grounds, it is just and equitable to grant relief, within the meaning of s 588FM(2)(b). This means the Court’s discretion under s 588FM is not enlivened. I will now consider whether the Court would have exercised its discretion to grant an extension, had the discretion been enlivened.’’

See also Re NFT Specialized in Tower Cranes LLC v Machforce Pty Ltd (in liq) [2017] WASC 95. In respect of whether the accident or inadvertence must be one in respect of the requirement to perfect by registration at all as opposed to the requirements to register or perfect on time (in accordance with s 588FL of the Corporations Act), it is likely that the later view prevails: see Re Transurban CCT Pty Ltd (in its own capacity and as trustee for the Transurban CCT Trust) [2014] NSWSC 1909 at [8] per Brereton J; see also Caason Investments Pty Ltd v Ausroc Metals Ltd [2016] WASC 267 at [11].

[588FM.5.2.2] ‘‘Some other sufficient cause’’ — s 588FM(2)(a)(i) The term ‘‘some other sufficient cause’’ has not been the subject of direct judicial comment. In Re Transurban, the finding of Brereton J in favour of granting relief pursuant to s 588FM of the Corporations Act was that the failure to register fell within the whole of s 588FM(2)(a)(i) without differentiating accident from inadvertence or from some other sufficient cause. Given the placement of the phrase within s 588FM(2)(b), the scope of the words is likely to limited to expanding the notions of accidence or inadvertence in accordance with how the provision was applied in Re Transurban in the authors’ respectful view.

[588FM.5.2.3] Prejudice to creditors or shareholders — s 588FM(2)(a)(ii) The preservation of the position of creditors and shareholders has formed the subject of analysis in Australia in respect of applications brought pursuant to s 588FM. The consideration was also relevantly a part of the former s 266(4) of the Corporations Act from which the present analysis derives.

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805

‘‘Notwithstanding the historic practice of sometimes imposing a socalled ‘Joplin condition’, to the effect that the extension is without prejudice to the rights of parties acquired prior to the time of actual registration [see Re Joplin Brewery Co Ltd [1902] 1 Ch 79; explained in Re Ehrmann Bros Ltd [1906] 2 Ch 697; and see Re Dudley Engineering Pty Ltd [1968] 1 NSWR 483], an s 588FM order has no effect on the priority of security interests registered before the plaintiff’s charge inter se, as their priorities are established under Pt 2K.3. Under the present legislation, making the order sought will not afford 123 Sweden’s security interest any priority over other security interests already registered before 29 April 2014, including those registered since February 2013. As the secured creditors will not be affected, there is no need to make an order or impose a condition in that respect, nor any utility in doing so [Re Guardian Securities Ltd [1984] 1 NSWLR 95 at 97; Douglas-Brown v Standard Chartered Finance Ltd (1990) 2 ACSR 737, 740; Bevillesta Pty Ltd v Imagine UN Ltd [2009] VSC 50; 69 ACSR 574, 581 [28]].’’ Justice Brereton then considered, in depth, the authorities considering the extent to which prejudice to creditors or shareholders is to be considered (and what weight is to be applied to the consideration in applications of this nature) in paragraphs [16]–[27] of his Honour’s reasons: See also, Caason Investments Pty Ltd v Ausroc Metals Ltd [2016] WASC 267 at [15]. The upshot of the analysis appears to be where there is evidence of solvency concerns for the grantor company at the time the application pursuant to s 588FM is made, prejudice to creditors and shareholders is a more significant factor given that their position in respect of the grantor company may more readily be compromised should the grantor company actually be the subject of a s 588FL(1)(a) event. At [31], Brereton J held: ‘‘[W]hile the interests of unsecured creditors are relevant, the mere fact that if the extension is granted they will be deprived of the benefit of the security interest vesting in the company, and thus receive a lesser dividend, is no objection to making an order. It would be otherwise if the position of the unsecured creditors was detrimentally affected by the delay in registration, for example if they traded with the company on the faith of a register that showed no security interest.’’ The relevant inquiry in respect of prejudice is therefore one which leans towards considering whether any such creditor or shareholder would have acted differently had the Personal Property Securities Register (PPSR) accurately reflected the interest the secured party now wishes to have put onto the PPSR by force of order pursuant to s 588FM of the Corporations Act. If the creditor or shareholder would have acted differently (noting that they would bear the onus of establishing this proposition) then it is likely that an order pursuant to s 588FM would not be granted or would be granted on terms and conditions which alleviate or otherwise address that prejudice (see s 588FM(3) of the Corporations Act). Annotated Personal Property Securities Act 2009 (Cth)

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In Re Appleyard, Brereton J held, at [15]:

806

Corporations Act 2001

See also, Findlay v Jones [2015] NSWSC 277 at [6]; Re Southern Engineering Services Pty Ltd [2014] NSWSC 1882; Re Barclays Bank Plc [2012] NSWSC 1095 at [18]. If the grantor is in voluntary administration or liquidation, the administrator’s or liquidator’s view that the extension is in the best interests of creditors is a relevant consideration for the court in determining whether to grant an extension: Mentha, in the matter of Arrium Finance Ltd v National Australia Bank Ltd [2017] FCA 818 at [23].

[588FM.5.2.4] Just and equitable — s 588FM(2)(b) The making of orders pursuant to s 588FM on the basis that it is ‘‘just and equitable’’ to do so is not a concept foreign to other legislative provisions. Perhaps most closely, as it is contained in the same act, is s 461(1)(k) of the Corporations Act which empowers a Court to wind up a corporation on the basis that it is just and equitable to do so. As a matter of law, consideration of what constitutes ‘‘just and equitable’’ grounds is not limited to a prescribed list of circumstances nor is it restricted to particular factual categories: see Re Catombal Investments Pty Ltd [2012] NSWSC 775 at [20]. In Re Appleyard, the term ‘‘just and equitable’’ was considered through the analysis of Branson and Allsop JJ; Whitlam J dissenting in Hewlett Packard Australia Pty Ltd v GE Capital Finance Pty Ltd [2003] FCAFC 256 (see above at [588FM.5.3.1]). See also the summary of the pre-PPSA law (which contained the same term) in Re Imagine UN Ltd [2009] VSC 50. Delay in seeking an order under s 588FM is a relevant factor in determining whether it is just and equitable to grant an extension of time: Korda, in the matter of Ten Network Holdings Ltd (Administrators Appointed) (Receivers and Managers Appointed) [2017] FCA 1144; Alleasing Pty Ltd, in the matter of OneSteel Manufacturing Pty Ltd v OneSteel Manufacturing Pty Ltd [2017] FCA 656; Re Appleyard Capital Pty Ltd [2014] NSWSC 782 at [30]. Mere delay will not of itself require that an application for an extension be refused: Re Appleyard Capital Pty Ltd [2014] NSWSC 782. In Caason Investments Pty Ltd v Ausroc Metals Ltd [2016] WASC 267, the delay was 18 months and an extension was granted. It is also relevant whether creditors have been notified and if so, whether any wish to object (noting the scope of creditor prejudice as a relevant factor above): Korda, in the matter of Ten Network Holdings Ltd (Administrators Appointed) (Receivers and Managers Appointed) [2017] FCA 1144. The upshot of the analysis set out in respect of s 588FM(2)(b) appears to be that the Court is required to consider not only the situation facing the applicant/plaintiff on an application under s 588FM for the purposes of discerning what is just and equitable but rather the Court is to have regard to other creditors and shareholders of the grantor company, the financial position of the grantor company and the factual matrix of the particular case before the Court, taken as a whole.

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It should also be said that s 588FM(2)(b) appears to be a ‘‘catch-all’’ provision included for abundant caution as it is more likely than not that the circumstances for which relief pursuant to s 588FM would assist falls within one of the categories provided for in s 588FM(2)(a): see Re Cardinia Nominees Pty Ltd [2013] NSWSC 32 at [17]; Re Appleyard at [23]. Orders pursuant to s 588FM of the Corporations Act are often made subject to a carve out for interested persons (typically creditors or shareholders) who may seek to vary or set aside the orders provided that sufficient notice of any such application is given to the original applicant/plaintiff and to the Court. The making of orders on terms and conditions like this is permissible as a consequence of s 588FM(3). In respect of s 588FM(3), in Re Appleyard, Brereton J held at [28]: ‘‘In practice, the strictures of Re Flinders Trading Co have not been applied, and it has been commonplace, even when it appears that the company may be insolvent and liquidation or administration is imminent, to extend time subject to a ‘Guardian Securities condition’ reserving leave to any liquidator or administrator appointed within six months to apply to set the order aside. This course, or one similar to it, was taken in Re a Ltd Co (Long Innes J), where solvency was dubious; in Re L H Charles (Clauson J), where liquidation was in contemplation; in Re Cinema Art Films (Myers CJ); in Re Guardian Securities (McLelland J), where there was ‘no evidence whatsoever as to the solvency or otherwise of the company creating the charge’ (at 98); and in Bevillesta (Robson J), where the evidence of solvency was inconclusive. In recent times in this court, such orders have been made in Cardinia Nominees (Black J), where again the evidence of solvency was inconclusive; in In the matter of Apex Gold Pty Ltd [2013] NSWSC 881 (Hammerschlag J), where administration was imminent; and in Black Opal IP (Brereton J), where there was some but less than comprehensive evidence of solvency.’’ For the purposes of s 588FM(3), the relevant form of order adopted in that case (noting the similar forms of order in the cases referred to by his Honour in the above passage) is set out at [35] of his Honour’s reasons: ‘‘The court orders that: ... (4) Pursuant to Corporations Act, s 588FM, 29 April 2014 be fixed as the later time for the purposes of subparagraph 588FL(2)(b)(iv) in respect of the collateral being all of the present and after-acquired property of the defendant referred to in registration number 201404290045242 in the Register established under the (Cth) Personal Property Securities Act 2009. (5) In the event that within 6 months of 29 April 2014 a winding up of the defendant commences, or an administrator of the defendant is appointed under Corporations Act s 436A, 436B or 436C, or the defendant executes a deed of company arrangement, the liquidator, administrator, deed administrator and any unsecured creditor of the defendant has liberty to apply to discharge or vary order 4; Annotated Personal Property Securities Act 2009 (Cth)

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Corps Act

[588FM.5.3] Terms and Conditions — s 588FM(3)

808

Corporations Act 2001 (6) The defendant has liberty to apply within seven days of service on it of this order to discharge or vary order 4.’’

[588FM.6] Further resources ● N Mirzai, ‘‘Vesting in the Insolvency Practitioner’’ July–September 2013 Australian Insolvency Journal 26.

¶10-065 SECTION 588FN PPSA SECURITY INTERESTS UNAFFECTED BY SECTION 588FL PPSA security interests arising under certain transactions 588FN(1) Subsection 588FL(4) (vesting of security interests in company) does not apply to a PPSA security interest provided for by any of the following transactions, if the interest does not secure the payment or performance of an obligation: (a) a transfer of an account or chattel paper; (b) a PPS lease, if paragraph (e) (serial numbered goods) of the definition of PPS lease in subsection 13(1) of the Personal Property Securities Act 2009 applies to the lease, and none of paragraphs (a) to (d) of that definition applies to the lease; (c) a commercial consignment. Example: An example of a PPSA security interest mentioned in paragraph (b) 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 regulations made for the purposes of the Personal Property Securities Act 2009; 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) of the Personal Property Securities Act 2009 do not apply to the lease. PPSA security interests and subordinated debts 588FN(2) Subsection 588FL(4) (vesting of security interests in company) does not apply to a PPSA 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

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809

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

(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). Transfer of collateral subject to PPSA security interests 588FN(3) Subsection 588FL(4) (vesting of security interests in company) does not apply to a PPSA security interest if: (a) before the critical time that applies under section 588FL, the company acquired, by transfer, the collateral in which the PPSA security interest is granted; and (b) the company did not acquire the collateral free of the security interest; and (c) the security interest became perfected before the critical time; and (d) the security interest was continuously perfected by registration during a period covered by subsection (4) that begins before the critical time. 588FN(4)

The period covered by this subsection:

(a) begins at whichever of the following times is applicable: (i) in a case in which the secured party consented to the transfer — the end of 5 business days after the day of the transfer; (ii) in a case in which the secured party otherwise acquires the actual or constructive knowledge required to perfect the secured party’s interest by registration (or to reperfect the interest by an amendment of a registration) — the end of 5 business days after the day the secured party acquires the knowledge; and

Annotated Personal Property Securities Act 2009 (Cth)

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Corps Act

(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

810

Corporations Act 2001 (b) ends no earlier than at the critical time that applies under section 588FL. Note: For what is actual or constructive knowledge, see sections 297 and 298 of the Personal Property Securities Act 2009.

[588FN.2]

Outline

Section 588FN of the Corporations Act 2001 (Cth) (Corporations Act) limits the scope of s 588FL of the Corporations Act (particularly s 588FL(4)) by carving out particular types of transactions from the operation of that provision.

[588FN.3] ● ● ● ●

Cross-references

Section 13 of the Personal Property Securities Act 2009 (Cth) (PPSA). Section 297 of the PPSA. Section 298 of the PPSA. Section 588FL of the Corporations Act.

[588FN.4]

Concepts

● PPSA security interest – See s 51 of the Corporations Act, s 12 of the PPSA. ● Chattel paper – See s 10 of the PPSA. ● Account – See s 10 of the PPSA. ● PPS lease – See s 13 of the PPSA. ● Commercial consignment – See s 10 of the PPSA. ● Critical time – See s 588FL(7) of the Corporations Act. ● Actual or constructive knowledge – See s 297 and 298 of the PPSA.

[588FN.5]

Commentary

Since the amendments to the Corporations Act were implemented, the PPSA has been amended by the Personal Property Securities Amendment (Deregulatory Measures) Act 2015 (Cth), which took effect on and from 1 October 2015. The amending legislation repealed s 13(1)(e) of the PPSA such that s 588FN(1)(b) has little, if any, further application. Subsections 588FN(1)(a) and (c) remain relevant exclusions which correlate with s 12(3)(a) and (b) of the PPSA respectively. As the commentary to s 12 of the PPSA provides, certain interests/transactions are deemed by the PPSA to constitute a ‘‘security interest’’ even where they do not satisfy s 12(1) of the PPSA. These ‘‘deemed’’ security interests fall within the scope of the PPSA unless carved out (as is the case with the Ch 4 requirements under the PPSA and to the extent that s 588FN is applicable).

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Part 5.7B — Compensation for Creditors of Insolvent Company

Subsection 588FN(2) likewise provides for a carve out from the vesting provision debt arrangements which are the subject of subordination. Subsections 588FN(3) and (4) cross-refer to s 34 of the PPSA and the timing stipulations provided for in respect of transfers of collateral in that section are mirrored in s 588FN. Importantly, nothing in s 588FN seeks to prevent or qualify the application of s 267 of the PPSA such that the underlying interest may still vest for failure to perfect by registration (where required) prior to a s 267(1)(a) event in any event.

[588FN.6] Further resources Nil.

¶10-070 SECTION 588FO CERTAIN LESSORS, BAILORS AND CONSIGNORS ENTITLED TO DAMAGES Scope 588FO(1) This section applies if either of the following PPSA security interests is vested in a company under section 588FL: (a) a PPSA security interest of a consignor under a commercial consignment; (b) a PPSA security interest of a lessor or bailor under a PPS lease. Entitlement to damages and compensation 588FO(2)

The consignor, lessor or bailor:

(a) is taken to have suffered damage immediately before the PPSA security interest was vested in the company; and (b) may recover an amount of compensation from the company equal to the greater of the following amounts: (i) the amount determined in consignment, lease or bailment;

accordance

with

the

(ii) the sum of the market value of the consigned, leased or bailed property immediately before the critical time that applies under section 588FL, and the amount of any other damage or loss resulting from the termination of the consignment, lease or bailment. Note: The consignor, lessor or bailor may be able to prove the amount of compensation in proceedings related to the winding up of the company.

Annotated Personal Property Securities Act 2009 (Cth)

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Corps Act

At the time of writing, there have been no domestic cases which have considered the application and operation of s 588FN of the Corporations Act.

812

Corporations Act 2001

[588FO.2]

Outline

Section 588FO seeks to preserve a statutory right to recover damages from the corporate grantor in favour of a lessor, bailor or consignor who has suffered loss as a consequence of the operation of s 588FL(4) of the Corporations Act 2001 (Cth) (Corporations Act).

[588FO.3]

Cross-references

● Section 588FL of the Corporations Act.

[588FO.4]

Concepts

● PPSA security interest – See s 51 of the Corporations Act; s 12 of the Personal Property Securities Act 2009 (Cth) (PPSA). ● Commercial consignment – See s 10 and 12(3) of the PPSA. ● PPS lease – See s 13 of the PPSA. ● Vested – See s 588FL of the Corporations Act; s 267 of the PPSA.

[588FO.5]

Commentary

Section 588FO allows a lessor, bailor or consignor who is adversely affected by the operation of s 588FL(4) to seek damages not only in respect of amounts due and owing under the agreement with the corporate grantor (which would likely arise by way of contractual liability in any event) but also for the market value of the property leased, bailed or consigned. The preservation of a right to damages under the Corporations Act is consistent with s 271 of the PPSA which similarly allows for the recovery of damages in particular circumstances. However, the inherent limitation on any damages claim, and the pursuit of any such claim, is not the legal threshold for establishing loss and damage suffered but rather the often impecuniosity of the defendant company. This is particularly so when looking to apply s 588FO as if a s 588FL(1)(a) event has occurred such that s 588FL(4) has been triggered, it is very likely that the solvency of the potential corporate defendant is a considerable issue and perhaps an overwhelming consideration against pursuing relief pursuant to s 588FO. What s 588FO of the Corporations Act does do is give the relevant creditor (who is unsecured as a consequence of the operation of s 588FL(4)) a potentially larger claim in the insolvency of the corporate grantor such that any dividend would result in a larger portion in favour of the unsecured creditor as a consequence of being able to claim the market value of the property itself in addition to monies owing under the lease, bailment or consignment (if any).

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[588FO.6] Further resources Nil.

Division 2B — Security interests in favour of company officers etc. SECTION 588FP SECURITY INTERESTS IN FAVOUR OF AN OFFICER OF A COMPANY ETC. VOID

General rule 588FP(1) A security interest, and any powers purporting to be conferred by the instrument under which the security interest is created, are void, and are taken always to have been void, if: (a) a company grants the security interest; and (b) a person covered by subsection (2) is a secured party; and (c) the secured party purports to take a step to enforce the security interest, within 6 months after the time (the relevant time) the instrument is made, without the leave of the Court under subsection (4). 588FP(2)

This subsection covers the following persons:

(a) a person who is an officer (including a local agent of a foreign company) of the company at the relevant time; (b) a person who has been such an officer of the company at any time within the period of 6 months ending at the relevant time; (c) a person associated, in relation to the creation of the security interest, with a person of a kind mentioned in paragraph (a) or (b). 588FP(3) Without limiting paragraph (1)(c), a secured party takes a step to enforce a security interest if: (a) the secured party appoints a receiver, or a receiver and manager, under powers conferred by an instrument creating or evidencing the security interest; or (b) whether directly or by an agent, the secured party enters into possession or assumes control of property of a company for the purposes of enforcing the security interest; or (c) the secured party seizes the property under section 123 of the Personal Property Securities Act 2009 for the purposes of enforcing the security interest.

Annotated Personal Property Securities Act 2009 (Cth)

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Corps Act

¶10-075

814

Corporations Act 2001 Extension of time on application to the Court 588FP(4) On application by a secured party, the Court may give leave for a security interest granted by a company to be enforced by the secured party within 6 months after the relevant time, if it is satisfied that: (a) the company was solvent immediately before the relevant time; and (b) in all the circumstances of the case, it is just and equitable for the Court to do so. Exception for security interests in PPSA retention of title property 588FP(5) This section does not apply in relation to a PPSA security interest in PPSA retention of title property. Effect on debts, liabilities, obligations and title 588FP(6) A debt, liability or obligation is not affected by the fact that the security interest securing the debt, liability or obligation is void under subsection (1). 588FP(7) Subsection (1) does not affect the title of a person to property if: (a) the person acquires the property for new value (within the meaning of the Personal Property Securities Act 2009) from any of the following persons (the seller): (i) a person covered by subsection (2); (ii) another person on behalf of a person covered by subsection (2); (iii) a receiver, or receiver and manager, appointed under powers conferred by an instrument creating or evidencing the security interest; and (b) at the time the person acquires the property, the person has no actual or constructive knowledge that the seller is a secured party or acting on behalf of a secured party. 588FP(8) Sections 297 to 300 of the Personal Property Securities Act 2009 apply in relation to the determination of whether or not a person has actual or constructive knowledge as mentioned in paragraph (7)(b) of this section. Onus of proof 588FP(9) In a proceeding in Australia under this Act, the onus of proving the fact that a person acquires property without actual or constructive knowledge as mentioned in paragraph (7)(b) lies with the person asserting that fact.

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Part 10.13 — Transitional Provisions

CHAPTER 10 — TRANSITIONAL PROVISIONS PART 10.13 — TRANSITIONAL PROVISIONS RELATING TO THE PERSONAL PROPERTY SECURITIES (CORPORATIONS AND OTHER AMENDMENTS) ACT 2009

1499

SECTION 1499 DEFINITIONS In this Part:

amending Act means the Personal Property Securities (Corporations and Other Amendments) Act 2010. commencement time means the time item 187 of Schedule 1 to the amending Act commences. Note: Item 187 of Schedule 1 to the amending Act inserts sections 1499 to 1510. The item commences at the registration commencement time within the meaning of section 306 of the Personal Property Securities Act 2009 (as provided by section 2 of the amending Act).

registrable charge means a charge created before the commencement time that was a registrable charge within the meaning of section 261 when it was created.

¶10-085

SECTION 1500 CHARGES, LIENS AND PLEDGES — CONTINUATION OF RESTRICTION OF REFERENCES

1500(1) This section applies despite the amendment of this Act made by item 10 of Schedule 1 to the amending Act if a reference to a charge in a provision of this Act, as in force immediately before the commencement time, did not include a reference to a lien or a pledge, or any other particular form of security over the property. Note: Item 10 of Schedule 1 to the amending Act inserts the definition of security interest in section 51A.

1500(2) In its application in relation to an interest in property created or arising before the commencement time, or under an agreement or instrument made before that time, the reference in that provision (as amended by the amending Act) to a security interest does not include a reference to a lien or a pledge, or that particular form of security over the property, as the case may be.

Annotated Personal Property Securities Act 2009 (Cth)

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Corps Act

¶10-080

816

Corporations Act 2001

¶10-090 SECTION 1501 CHARGES, LIENS, PLEDGES AND THIRD PARTY PROPERTY — APPLICATION 1501 The amendments made by Part 1 (new concepts) of Schedule 1 to the amending Act apply: (a) in relation to charges, liens and pledges, whether created or arising before, at or after the commencement time; and (b) in relation to property owned, occupied or used by, or in the possession of, a corporation, whether the ownership, occupation, use or possession started before, at or after the commencement time.

¶10-095

SECTION 1501A REFERENCES TO THE WHOLE OR SUBSTANTIALLY THE WHOLE OF A COMPANY’S PROPERTY

1501A(1) This section applies to a transitional security interest within the meaning of the Personal Property Securities Act 2009. Note: For the meaning of transitional security interest, see section 308 of the Personal Property Securities Act 2009.

1501A(2) In working out for the purposes of this Act whether the security interest covers the whole, or substantially the whole, of the company’s property at a time (the later time) that is at or after the commencement time, disregard any of the company’s property that is PPSA retention of title property of the company at the later time. Note: This Act gives certain powers to secured parties who hold security interests over the whole, or substantially the whole, of a company’s property (for example, the power to appoint an administrator under section 436C).

¶10-100

SECTION 1501B CONSTRUCTIVE NOTICE OF REGISTRABLE CHARGES

1501B Section 130 does not apply in relation to a document that has been lodged with ASIC to the extent that the document relates to a registrable charge. Note: Section 130 provides that a person is not taken to have information about a company merely because the information is available to the public from ASIC.

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Part 10.13 — Transitional Provisions

¶10-105 SECTION 1502 REPEAL OF CHAPTER 2K (CHARGES) — GENERAL 1502(1) For the period of 7 years after the commencement time, the amendments made by Part 2 of Schedule 1 to the amending Act do not apply in relation to registrable charges. Note: The amendments made by Part 2 of Schedule 1 to the amending Act repeal Chapter 2K and make consequential amendments to other provisions.

¶10-110

This section applies subject to sections 1503 to 1506.

SECTION 1503 REPEAL OF CHAPTER 2K (CHARGES) — CESSATION OF REQUIREMENTS IN RELATION TO DOCUMENTS OR NOTICES

Scope 1503(1) This section applies if, immediately before the commencement time, a document (however described) or notice is required to be lodged or given by a company or other person under one of the following provisions: (a) paragraph 263(1)(a), (b) or (c); (b) paragraph 263(2)(b); (c) subsection 263(3); (d) paragraph 264(1)(a) or (b); (e) paragraph 265(6)(b); (f) paragraph 268(1)(a) or (b); (g) subsection 268(2); (h) subsection 269(1) or (2); (i) subsection 270(4). Requirements that stop applying 1503(2) Whichever of the following requirements would otherwise apply stops applying at the commencement time: (a) the requirement to lodge or give the document or notice; (b) the requirement for ASIC to enter or delete particulars in the Register in relation to the document or notice.

Annotated Personal Property Securities Act 2009 (Cth)

¶10-110

Corps Act

1502(2)

818

Corporations Act 2001

¶10-115 SECTION 1504 REPEAL OF CHAPTER 2K (CHARGES) — APPLICATION OF SECTION 266 1504(1) Subject to this section, section 266 stops applying at the commencement time in relation to registrable charges. 1504(2) However, if a registrable charge is void under section 266 immediately before the commencement time, that section continues to apply in relation to the charge, subject to subsection (3) of this section. 1504(3) The Court may, on such terms and conditions as seem to the Court just and expedient, by order, declare a registrable charge not to be, and never to have been, void under subsection 266(1) or (3), if: (a) before the commencement time, the charge is void under subsection 266(1) or (3) (as the case requires); and (b) either: (i) an application is made to the Court under subsection 266(4) before the commencement time for an extension of the relevant period, and as at the commencement time, the Court had not made a decision in relation to the application; or (ii) an application is made to the Court at or after the commencement time for an order under this subsection; and (c) the Court is satisfied of the matters set out in subsection 266(4).

¶10-120

SECTION 1505 REPEAL OF CHAPTER 2K (CHARGES) — CESSATION OF COMPANY REGISTRATION REQUIREMENTS

1505 The requirements in section 271 (company documentation and registration of charges) stop applying in relation to registrable charges at the commencement time.

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Part 10.13 — Transitional Provisions

¶10-125 SECTION 1506 REPEAL OF CHAPTER 2K (CHARGES) — PRIORITY BETWEEN REGISTRABLE CHARGES

¶15-130

SECTION 1507 NEW SECTION 440B (RESTRICTIONS ON THIRD PARTY PROPERTY RIGHTS)

1507 The repeal of sections 440B, 440BA, 440BB and 440C by item 156 of Schedule 1 to the amending Act does not affect the operation of subsections 1483(9) and (10) in relation to: (a) the administration of a company that began at or after the start of the day section 440BA commenced, and before the commencement time within the meaning of section 1499; or (b) distress for rent that began to be carried out before the day section 440BB commenced. Note: Sections 440BA and 440BB commenced on 31 December 2007.

¶10-135

SECTION 1508 NEW SUBSECTION 442CB(1) (ADMINISTRATOR’S DUTY OF CARE)

1508 The amendment of this Act by item 135 of Schedule 1 to the amending Act does not apply in relation to the exercise of a power of sale if the power began to be exercised before the commencement time. Note: Item 135 of Schedule 1 to the amending Act repealed subsection 442CB(1) and substituted a new subsection.

Annotated Personal Property Securities Act 2009 (Cth)

¶10-135

Corps Act

1506 At and after the commencement time, registrable charges have the priority between themselves that they would have had under this Act as in force immediately before the commencement time, subject to Chapter 9 (Transitional provisions) of the Personal Property Securities Act 2009.

820

Corporations Act 2001

¶10-140 SECTION 1509 NEW SECTION 588FP (SECURITY INTERESTS IN FAVOUR OF AN OFFICER OF A COMPANY ETC. VOID) 1509

¶10-145

Section 588FP does not apply in relation to a registrable charge.

SECTION 1510 WINDING UP APPLIED FOR BEFORE THE COMMENCEMENT TIME

1510 Subject to this Part, the amendments made by the amending Act do not apply in relation to the winding up of a company under Part 5.4, Part 5.4A or Part 5.4B, or the subsequent liquidation of the company, if the application for winding up for the purposes of those Parts is made before the commencement time.

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Personal Property Securities Regulations 2010

Personal Property Securities Regulations

823

PERSONAL PROPERTY SECURITIES REGULATIONS Select Legislative Instrument 2010 No 291 CONTENTS

Part 1 — Preliminary ............................................................................ 825 Division 1 — Preliminary ................................................................. 825 Reg 1.1 Name of Regulations ......................................................... 825 Reg 1.2 Commencement ................................................................. 825 Division 2 — General application of the Act ....................................... 825 Reg 1.3 Application of the Act to external Territories ................................................................................... 825 Reg 1.4 Interests to which the Act does not apply ........................................................................................... 825 Reg 1.5 Interests to which the Act applies ...................................... 826 Division 3 — Definitions ....................................................................... 826 Reg 1.6 Definitions ......................................................................... 826 Reg 1.7 Meaning of motor vehicle .................................................. 830 Reg 1.8 Meaning of security interest .............................................. 831 Reg 1.9 Meaning of PPS lease ....................................................... 831 Reg 1.10 Meaning of investment instrument .................................. 832 Part 2 — General rules for security interests ..................................... 832 Reg 2.1 Taking motor vehicles free of security interests ....................................................................................... 832 Reg 2.2 Taking motor vehicles from prescribed persons ........................................................................................ 833 Part 3 — Specific rules for certain security interests ......................... 833 Part 4 — Enforcement of security interests ........................................ 833 Reg 4.1 Relationship with consumer credit legislation ................................................................................... 833

Annotated Personal Property Securities Act 2009 (Cth)

824

Personal Property Securities Regulations

Part 5 — Personal property securities register .................................. 835 Reg 5.1 Access to register ............................................................... 835 Reg 5.2 Notification of suspension of access to register ........................................................................................ 835 Reg 5.3 What the register contains ................................................. 836 Reg 5.4 Prohibited registration ....................................................... 837 Reg 5.5 Financing statements ......................................................... 838 Reg 5.6 Verification statements — publication as alternative ............................................................................... 838 Reg 5.7 Access to the register prohibited ....................................... 839 Reg 5.8 Search — criteria ............................................................... 839 Reg 5.8A Access to third party data — third party ............................................................................................ 840 Reg 5.9 Administrative process — statements in relation to amendment demand .................................................. 840 Reg 5.10 Removal of data ............................................................... 841 Part 6 — Judicial proceedings .............................................................. 841 Part 7 — Operation of laws .................................................................. 841 Reg 7.1 Concurrent operation of provisions of Corporations Act 2001 — resolution of inconsistency .............................................................................. 841 Part 8 — Miscellaneous ......................................................................... 842 Part 9 — Transitional provisions ......................................................... 842 Reg 9.1 Transitional meaning of watercraft ................................... 842 Reg 9.2 Temporary perfection rule — exception ........................... 842 Reg 9.3 Sunset of Part 9 .................................................................. 842 Schedule 1 — Financing statement matters for items of table in subsection 153(1) of Act ................................................................ 843 Schedule 2 — Financing statement matters for table in section 154 of the Act ..................................................................................... 853  2018 CCH Australia Limited

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Part 1 — Preliminary

PERSONAL PROPERTY SECURITIES REGULATIONS 2010 PART 1 — PRELIMINARY Division 1 — Preliminary ¶11-005

REG 1.1 NAME OF REGULATIONS

1.1 These Regulations are the Personal Property Securities Regulations 2010.

¶11-010

REG 1.2 COMMENCEMENT

1.2 These Regulations commence on the day after they are registered.

¶11-015

REG 1.3 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.

¶11-020 REG 1.4 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. 1.4(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. 1.4(3) However, subregulation (1A) does not apply to an interest to which paragraph 8(1)(k) of the Act applies. 1.4(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 Annotated Personal Property Securities Act 2009 (Cth)

¶11-020

PPSReg

Division 2 — General application of the Act

826

Personal Property Securities Regulations (b) not registered under Part 5B.2 of the Corporations Act 2001. Note: For the definition of grantor, see section 10 of the Act.

1.4(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: (a) paragraph 8(1)(b); (b) paragraph 8(1)(c); (c) subparagraph 8(1)(f)(ii); (d) subparagraph 8(1)(f)(iv).

¶11-025 REG 1.5 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. 1.5(2) In this regulation: mortgage-backed security has the meaning given by section 286 of the Duties Act 2001 (Qld).

Division 3 — Definitions ¶11-030

REG 1.6 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.

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Part 1 — Preliminary

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.

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 after-acquired 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. Annotated Personal Property Securities Act 2009 (Cth)

¶11-030

PPSReg

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

828

Personal Property Securities Regulations 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. 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 http://www.abr.business.gov.au.

Register

can

be

viewed

at

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: (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

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Part 1 — Preliminary

(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.

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 subregulation 5.3(1).

means

personal

property

mentioned

in

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.

Annotated Personal Property Securities Act 2009 (Cth)

¶11-030

PPSReg

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 (b) appears to uniquely identify the aircraft, motor vehicle or outboard motor.

830

Personal Property Securities Regulations 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.

¶11-035 REG 1.7 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. 1.7(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

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Part 1 — Preliminary

831

(d) does not run on rails, tram lines or other fixed path. 1.7(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; (ii) a chassis number; (iii) the manufacturer’s number.

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.

¶11-045

REG 1.9 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. 1.9(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.

Annotated Personal Property Securities Act 2009 (Cth)

¶11-045

PPSReg

¶11-040 REG 1.8 MEANING OF SECURITY INTEREST

832

Personal Property Securities Regulations

¶11-050 REG 1.10 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.

PART 2 — GENERAL RULES FOR SECURITY INTERESTS ¶11-055 REG 2.1 TAKING MOTOR VEHICLES FREE OF SECURITY INTERESTS Incorrect or missing serial number 2.1(1) For subsection 45(1) of the Act, a motor vehicle described in regulation 1.7 is prescribed. 2.1(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. Taking from prescribed persons 2.1(3) For subsection 45(3) of the Act, a motor vehicle described in regulation 1.7 is prescribed.

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Part 4 — Enforcement of security interests

¶11-060 REG 2.2 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.

PART 3 — SPECIFIC RULES FOR CERTAIN SECURITY INTERESTS

PART 4 — ENFORCEMENT OF SECURITY INTERESTS ¶11-070

REG 4.1 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 1

Provision of Act Section 130

Circumstances for Act 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

Annotated Personal Property Securities Act 2009 (Cth)

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

¶11-070

PPSReg

Note: This Part heading is reserved for future use.

834

Personal Property Securities Regulations Item 2

3

¶11-070

Provision of Act Sections 128 and 131

Circumstances for Act 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

Provision of NCC Section 104

Section 132

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, amounts paid to other secured parties; (c) amounts paid to other secured parties; (d) the balance owing to the grantor or by the debtor to the secured party

Subsection 104(3)

Circumstances for NCC 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 sale; (c) the amount required to pay out the credit contract; (d) any further recovery action that the secured party intends to take against the grantor; (e) any other information prescribed by these Regulations

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Item 4

Provision of Act Section 140

Circumstances for Act A secured party distributes 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

Provision of NCC Section 105

Circumstances for NCC 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

PART 5 — PERSONAL PROPERTY SECURITIES REGISTER ¶11-075 REG 5.1 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.

¶11-080 REG 5.2 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.

Annotated Personal Property Securities Act 2009 (Cth)

¶11-080

PPSReg

835

Part 5 — Personal property securities register

836

Personal Property Securities Regulations

¶11-085 REG 5.3 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.

5.3(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.

¶11-085

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Part 5 — Personal property securities register

837

¶11-090 REG 5.4 PROHIBITED REGISTRATION 5.4(1) For paragraph 150(3)(d) of the Act, the following registrations are prohibited: (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;

(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. Annotated Personal Property Securities Act 2009 (Cth)

¶11-090

PPSReg

(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:

838

Personal Property Securities Regulations 5.4(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. 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.

¶11-095 REG 5.5 FINANCING STATEMENTS 5.5(1) Schedule 1 sets out matters prescribed for items of the table in subsection 153(1) of the Act. 5.5(2) Schedule 2 sets out matters prescribed for items of the table in section 154 of the Act.

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Part 5 — Personal property securities register

¶11-100 REG 5.6 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. 5.6(2) A statement published under subregulation (1) must not include the date of birth of a grantor.

¶11-105

REG 5.7 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:

(b) the Registrar considers that it is in the public interest that access to the data should not be permitted. 5.7(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.

¶11-110

REG 5.8 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.

Annotated Personal Property Securities Act 2009 (Cth)

¶11-110

PPSReg

(a) a court has ordered that access to the data is not permitted; or

840

Personal Property Securities Regulations

¶11-115 REG 5.8A 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.

¶11-120

REG 5.9 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

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841

(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.

¶11-125 REG 5.10 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. 5.10(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.

PPSReg

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

PART 7 — OPERATION OF LAWS ¶11-135 REG 7.1 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

Annotated Personal Property Securities Act 2009 (Cth)

¶11-135

842

Personal Property Securities Regulations

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

PART 9 — TRANSITIONAL PROVISIONS ¶11-145 REG 9.1 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.

¶11-150 REG 9.2 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. 9.2(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.

¶11-155 REG 9.3 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.

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Schedule 1

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

¶11-160 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 1.1

In this Part:

individual:

(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. 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. 1.2(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. 1.2(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. 1.2(4) For a grantor, in addition to the details mentioned in each item of the table, the grantor’s date of birth is prescribed. 1.2(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. 1.2(6) Item 1 of the table applies only to a registration by the Registrar under subsection 333(2) of the Act. Annotated Personal Property Securities Act 2009 (Cth)

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PPSReg

(a) includes a sole trader who has an ABN for the enterprise for which the security interest is granted or held; and

844

Personal Property Securities Regulations Item 1

2

¶11-160

Individual Individual whose details are recorded in a transitional register, for a migrated security interest Individual grantor who is known to the secured party, because of the operation of the AML-CTF Act

3

Individual who holds a current driver’s licence

4

Individual who holds a current proof of identity or current proof of age card

5

Individual who holds a current Australian passport

6

Individual who holds a current visa, issued by the Australian Government

7

Individual who holds a current passport other than an Australian passport

8

Any other individual

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

Source Transitional register

Individual’s surname and given names, as known to the secured party, because of the operation of the AML-CTF Act Individual’s surname and given names, as recorded on the individual’s driver’s licence Individual’s surname and given names, as recorded on a proof of identity or proof of age card issued by a State or Territory body Individual’s surname and given names, as recorded on the individual’s current Australian passport Individual’s surname and given names, as recorded on the individual’s current Australian visa 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 data known by the secured party, because of the operation of the AML-CTF Act 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 ordinarily resides

Birth certificate issued for the individual

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Schedule 1

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. 1.3(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. 1.3(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

Item 1

2

3 4 5

Body corporate Body corporate for which details have been included on the 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

Details Body corporate number or name of body corporate, as recorded on the transitional register

Source Transitional register

Registered scheme’s ARSN

National Names Index

ACN

National Names Index National Names Index Body corporate’s constitution or equivalent document

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

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. 1.4(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.

Annotated Personal Property Securities Act 2009 (Cth)

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PPSReg

(b) has the lowest item number. 1.3(4) Item 1 of the table applies only to a registration by the Registrar under subsection 333(2) of the Act.

846

Personal Property Securities Regulations 1.4(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. 1.4(4) Item 1 of the table applies only to a registration by the Registrar under subsection 333(2) of the Act. 1.4(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. 1.4(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. Item 1

2

3

Partner Partner of a partnership for which details of the partnership have been included on the transitional register, for a migrated security interest 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 Partner in any other partnership

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

Source 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

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

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Schedule 1 (b) any other trustee of a trust.

1.5(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. 1.5(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. 1.5(4)

In this clause:

trustee details means: (b) the ACN or ARBN allocated to the trustee; or (c) the name of the trust or trustee. 1.5(5) Item 1 of the table applies only to a registration by the Registrar under subsection 333(2) of the Act. Item 1

2

3

Trustee Trustee of a trust for which details have been included on the transitional register, for a migrated security interest Trustee of a trust that holds or has an interest in collateral 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)

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. 1.6(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. Annotated Personal Property Securities Act 2009 (Cth)

¶11-160

PPSReg

(a) the ABN allocated to the enterprise carried on by the trust; or

848

Personal Property Securities Regulations 1.6(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. 1.6(4) Item 1 of the table applies only to a registration by the Registrar under subsection 333(2) of the Act. Item 1

2

3

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

Details Body politic details, as recorded on the transitional register

Source Transitional register

ABN

Australian Business Register

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

Constitution of body politic

PART 2 — MATTERS FOR ITEM 4 2.1 For this Part, personal property that is intermediated security is to be treated as financial property. 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 sub-subparagraphs (A) to (D).

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Schedule 1 (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 design; or a patent; or a plant breeder’s right; or a trade mark; or a licence over any intangible property mentioned in sub-subparagraphs (A) to (D). 2.2(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. 2.2(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: (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;

Annotated Personal Property Securities Act 2009 (Cth)

¶11-160

PPSReg

(A) (B) (C) (D) (E)

850

Personal Property Securities Regulations (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; or (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

2.2(4)

(ii) if it does not have a trade mark number — the trade mark application number issued by IP Australia. 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. 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; (g) motor vehicles; (h) other goods; (i) watercraft.

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Schedule 1 2.3(2)

In paragraph (1)(h):

other goods means personal property that is goods, other than agriculture, aircraft, motor vehicles and watercraft. 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

PART 4 — MATTERS FOR ITEM 8 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 Determining whether collateral may include inventory, for Part 9.5 of the Act

2

Control

Determining whether collateral may be subject to control, for Part 9.5 of the Act

3

Transitional security interest

Indicating whether a security interest is a transitional security interest

Annotated Personal Property Securities Act 2009 (Cth)

Details For collateral that is commercial property — whether or not the 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

¶11-160

PPSReg

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.

852

Personal Property Securities Regulations Item 4

5

Subject Migrated security interest

Purpose Indicating whether a registration is a migrated registration

Data from Australian Business Register or National Names Index

Recording details from Australian Business Register or National Names Index

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

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

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Schedule 2

SCHEDULE 2 — FINANCING STATEMENT MATTERS FOR TABLE IN SECTION 154 OF ACT

¶11-165 SCHEDULE 2 — FINANCING STATEMENT MATTERS FOR TABLE IN SECTION 154 OF ACT (subregulation 5.5(2))

PART 1 — PRELIMINARY 1.1

In this Schedule:

individual:

(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 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. 2.1(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. 2.1(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. 2.1(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. 2.1(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. Annotated Personal Property Securities Act 2009 (Cth)

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PPSReg

(a) includes a sole trader who has an ABN for the enterprise that holds or has an interest in the prescribed property; and

854

Personal Property Securities Regulations Item 1

2

¶11-165

Individual Individual whose details are recorded in a transitional register, for migrated data Individual whose property is subject to a court order

3

Individual who holds a current driver’s licence

4

Individual who holds a current proof of identity or current proof of age card

5

Individual who holds a current Australian passport

6

Individual who holds a current visa issued by the Australian Government

7

Individual who holds a current passport other than an Australian passport

8

Any other individual

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’s surname and given names, as recorded on the individual’s current driver’s licence 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’s surname and given names, as recorded on the individual’s current Australian passport Individual’s surname and given names, as recorded on the individual’s current Australian visa 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

Source Transitional register

Court order

Current driver’s licence issued by a State or Territory licensing authority to the individual Current proof of identity or current proof or 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 ordinarily resides

Birth certificate issued for the individual

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Schedule 2

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. 2.2(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. 2.2(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

Item 1

2

3 4 5

Body corporate Body corporate for which details have been included on the transitional register, for migrated data 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

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

Source Transitional register

ACN

National Names Index National Names Index Body’s constitution or equivalent document

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

National Names Index

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. 2.3(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. 2.3(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. Annotated Personal Property Securities Act 2009 (Cth)

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PPSReg

(b) has the lowest item number.

856

Personal Property Securities Regulations Item 1

2

3

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

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

Source Transitional register

ABN

Australian Business Register

Details mentioned in 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

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. 2.4(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. 2.4(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.

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Schedule 2 2.4(4)

In this clause:

Item 1

2

3

Trustee Trustee of a trust for which details of the trust have been included on the transitional register, for migrated data 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)

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. 2.5(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. 2.5(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.

Annotated Personal Property Securities Act 2009 (Cth)

¶11-165

PPSReg

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.

858

Personal Property Securities Regulations Item 1

2

3

¶11-165

Body politic Body politic for which details have been included on the transitional register, for migrated data Body politic that holds prescribed property in course of, or for, an enterprise for which an ABN has been given Body politic that holds prescribed property other than in course of, or for, an enterprise for which an ABN has been given

Details Body politic details, as recorded on the transitional register

Source Transitional register

ABN

Australian Business Register

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

Constitution of body politic

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Finding Aids

861

References The following references have been used by the authors in the preparation of the commentary in this book. The reference will be referred to in the commentary by the name contained within the brackets.

Australian PPSA ● Cseti D, Understanding Personal Property Securities Law, 2010 CCH (Cseti D) ● O’Donovan J, Personal Property Securities, Thomson Reuters (looseleaf) (O’Donovan J) ● Wappett C, Whittaker B and Edwards S, Personal Property Securities in Australia, LexisNexis (looseleaf) (Wappett C, Whittaker B and Edwards S) ● ● ● ●

New Zealand PPSA Allen B, Personal Property Securities Act 1999: Act and Analysis, 2010 Thomson Reuters (Allen B) Fenton R, Garrow and Fenton’s Law of Personal Property in New Zealand, 2010 LexisNexis (Fenton R) Gedye M, Cuming R and Wood R, Personal Property Securities in New Zealand, 2002 Thomson Brookers (Gedye M, Cuming R and Wood R) Widdup L and Mayne L, Personal Property Securities Act: a conceptual approach, 2002 revised ed, LexisNexis (Widdup L and Mayne L)

Canadian PPSA ● Cuming R, Walsh C and Wood R, Personal Property Securities Law, 2005 Irwin Law (Cuming R, Walsh C and Wood R) ● Cuming R and Wood R, British Columbia Personal Property Security Act Handbook, 1998 Carswell (Cuming R and Wood R, BC) ● Cuming R and Wood R, Saskatchewan and Manitoba Personal Property Security Acts Handbook, 1994 Carswell (Cuming R and Wood R, Sask) ● Duggan A and Ziegel J, Secured Transactions in Personal Property, 5th ed 2009 Emond Montgomery (Duggan A and Ziegel J) ● McLaren R, Secured Transactions in Personal Property in Canada, Carswell (looseleaf) (McLaren R) ● Ziegel J and Dennome D, The Ontario Personal Property Security Act Commentary and Materials, 2nd ed 2000 Butterworths (Ziegel J and Dennome D) US Article 9 ● Gilmore G, Security Interests in Personal Property, 1965 Lawbook Exchange (Gilmore G) ● Miller F (ed), Hawkland’s Uniform Commercial Code Series, Westlaw (looseleaf) (Miller F (ed)) ● White J and Summers R, Uniform Commercial Code, 2010 Thomson Reuters (White J and Summers R)

Annotated Personal Property Securities Act 2009 (Cth)

863

Abbreviations AASB........................... Australian Accounting Standards Board ACN ............................ Australian Company Number ADI ..............................Authorised deposit taking institution AML-CTF ................... Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) ARBN .......................... Australian Registered Business Number ARSN .......................... Australian Registered Scheme Number ASIC ............................Australian Securities and Investment Commission NCC.............................National Credit Code NEVDIS ...................... National Exchange of Vehicle and Driver Information System PMSI............................ Purchase money security interest PPS...............................Personal Property Securities PPSA ...........................Personal Property Securities Act 2009 (Cth) PPSR ............................Personal Property Securities Register ROT .............................Retention of title

Annotated Personal Property Securities Act 2009 (Cth)

865

Glossary of Terms References are to paragraph numbers.

Accession Goods that are installed or affixed to other goods which are readily identifiable and can be removed from the goods they are installed or affixed to. 3-040 Account debtor A person who is obligated under an account or chattel paper. 2-325 Accounts A monetary obligation that arises from disposing of property or granting a right or providing services. An example is a book debt. The concepts of accounts and chattel paper are mutually exclusive. 1-065 An act A form of consideration in lieu of payment. An example is the grantor obtaining underlying collateral after the agreement has been drafted. 2-020 Actual knowledge Existence of knowledge subjectively in the mind of the relevant party on the facts, that is, the relevant party actually knew of the circumstances in issue. 8-170 ADI A body authorised under the Banking Act 1959 (Cth) to accept deposits (authorised deposit taking institution). 2-050 ADI account An account kept by a person or persons with an ADI that is payable on demand or at some time in the future. 1-065 Advance The payment of currency, the provision of credit or the giving of value. 2-215 After acquired property Personal property acquired by the grantor after a security agreement is made. 8-060 Assignment A transfer of property from one party to another. An assignment is absolute in essence, that is, there remains behind no interest held by the assignor. 1-065 Attachment The moment where a security interest is recognised against particular personal property defined by the security agreement. 2-020 Bailment The temporary transfer of possession of goods from one (the bailor) to another (the bailee) on the condition that the goods will be returned to the bailor at the end of the bailment or dealt with according to the bailor’s instructions. 2-035 Best price reasonable obtainable The best or highest sale price for collateral where there is no readily available market value. 4-125 Bill of lading Evidence of title to goods which are subject to a contract of carriage. 1-045 Charge A security interest that has attached either to circulating or noncirculating assets. 9-165 Chattel mortgage A mortgage with respect to personal property or ‘chattels’. 1-065 Chattel paper One or more writings that evidence a monetary obligation and either or both of a security interest in specific goods and a security

Annotated Personal Property Securities Act 2009 (Cth)

866

Glossary of Terms

interest in specific intellectual property. A new type of personal property that is created by the PPSA. Common examples are hire purchase and leasing agreements. 1-065 Circulating asset Personal property over which the secured party has given the grantor express or implied authority for any transfer to be made free of the security interest provided it is in the ordinary course of the grantor’s business. 9-170 Commercial consignments A consignment where the consignor retains an interest in goods that he or she delivers to the consignee, the consignor delivers the goods to the consignee for the purpose of sale, lease or other disposal, and the consignor and the consignee both deal in goods of that kind in the ordinary course of business. 1-065 Commercial property Personal property other than consumer property. 5-045 Common carrier A carrier who holds himself or herself out as ready without discrimination to carry the goods of all persons who may choose to employ them or send them goods to be carried. 2-045 Conditional sale agreement Instruments which purport to convey title only after the primary obligation(s) owing to the relevant creditor has been met in full. 1-065 Constructive knowledge An objectively assessed element of knowledge which asks what the relevant party would have known at the relevant time had they made inquiries that an honest and prudent person would have made. 8-170 Consumer property Personal property held by an individual, other than property held in the course or furtherance of carrying on an enterprise to which an ABN has been allocated. 5-045 Continuous perfection A requirement that the secured party ensure they maintain perfection at all times. 2-085 Controller A receiver, or receiver and manager, of the property of a corporation, or anyone else who is in possession of that property for the purpose of enforcing a security interest. 4-045 Debt A legal obligation to pay a sum of money, either at present or in the future. 2-270 Debtor The party who must pay or perform the primary obligation(s) owing to the creditor or party making the relevant advances. 2-270 Default A circumstance whereby the debtor fails to meet obligations (usually financial) owing to the secured party. 4-085 Defect An irregularity, omission or error in the registration. 5-100 Disposal of collateral The process of exchanging the collateral in order to recover, as much as possible, the underlying obligation still outstanding. 4-110 Encryption The process of converting data into a language which is unintelligible in order to prevent improper use of the data from unauthorised parties. 2-025

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Glossary of Terms

867

Evidential burden In relation to a matter, the burden of adducing or pointing to evidence that suggests a reasonable possibility that the matter exists or does not exist. 5-140 Execution creditor A creditor who has recovered judgment and issued execution against a grantor. 2-295 Financing change statement Data amending a registered financing statement. 5-030 Financing statement Data registered pursuant to an application for registration. 5-030 Fixed charge A secured interest attached to personal property that is not a circulating asset. 9-165 Fixtures Goods that are affixed to land, excluding crops. 1-045 Flawed asset arrangements The conditions imposed on an asset (typically an account) which trigger before other interests arise. 1-065 Floating charge A security interest that has attached to personal property that is a circulating asset. 9-165 Future advance An advance made after the security agreement has arisen. 2-015 Garnishee order An order allowing a judgment creditor to recover funds owed to them under the judgment directly from the debtor’s bank account. 2-295 General law The principles and rules of the common law and equity. 1-045 Grantor The person granting the security interest. 1-065 Individual A natural person rather than a body corporate. 5-140 Intermediated securities A financial account which is maintained by an intermediary as a security account on behalf of another party. 2-085 Intermediary An Australian financial services licence (AFSL) holder who is permitted by the AFSL to maintain securities accounts on behalf of others or a clearing and settlement facility. 1-080 Inventory Personal property that is held for sale or lease, to be provided under a contract for services, as raw materials or work in progress, or used or consumed as materials. 2-145 Investment instrument A financial product traded over the counter or on an exchange. 2-085 Lease An agreement whereby a leasehold interest in property is conveyed to another usually in exchange for consideration of rent or other periodical payment. 1-070 Letter of credit An instrument under which a bank agrees to make a payment once certain criteria are met. 2-065 Lien An instrument that entitles a party to retain possession of encumbered property until a debt incurred with respect to such property has been paid. Intro. IIIB(iii) Location The place where the personal property is situated. 2-120

Annotated Personal Property Securities Act 2009 (Cth)

868

Glossary of Terms

Market value The rate or price at which comparable collateral is readily obtainable from the market. 4-125 Migrated security interest A transitional security interest which has been successfully transitioned to the PPSA and is thus reflected on the PPS Register. 9-125 Migration time The logistics period where the data present on previously existing Australian registers are transferred to or recreated under the PPS Register. 9-015 Modification An addition, omission or substitution. 2-325 Monetary obligation A written undertaking to pay a sum of money. 1-075 Mortgage A security created by agreement for the payment of a debt, or a future advance, which involves an actual or executor conveyance of real or personal property. Intro. IIIB(i) Negotiable instrument A traditional instrument such as a bill of exchange, promissory note or cheque, but also includes further instruments such as particular letters of credit. 2-045 New value Value other than value provided to reduce or discharge an earlier debt or liability owed to the person providing the value. 2-150 Ordinary course of business Transactions with a view to carrying on the business concern, such as sales, leases and mortgages. 2-155 Personal information Information or an opinion about an individual whose identity is apparent or can reasonably be ascertained from the information or opinion. 5-145 Personal property Property (including a licence) other than land or a right, entitlement or authority that is granted under statute and declared by that statute not to be personal property for the purposes of the PPSA. 1-065 Pledge A possessory security, otherwise referred to as a ‘pawn’. Intro. IIIB(iv) Possession A mutually exclusive concept, that is, where one party has possession another cannot and therefore only one party can have possession of the underlying collateral at any point in time. 2-045 Proceeds A return, be it in cash or otherwise, derived through the utilization of a particular asset or consideration flowing in relation of a transfer of the asset to a new party. 2-080 Proprietary rights Rights the party granting the security interests holds in the particular item(s) of property or the rights the granting party will in future hold over such property. 1-065 Receiver A receiver of property of a body corporate and also a manager if the receiver manages, or has under the terms of appointment power to manage, affairs of the body. 4-050 Reasonable expenses An objective standard in determining the costs incurred when enforcing a security interest. 4-105 Registered description of collateral The description of collateral included in a financing statement that is registered on the PPSR. 5-150

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Glossary of Terms

869

Registered financing statement A financing statement that is registered on the PPSR. 5-135 Registration commencement time The time at which the PPS Register begins operation and effect. 9-015 Secured party The holder of the security interest. 2-030 Security A transaction whereby a person to whom an obligation is owed by another person called the ‘debtor’ is afforded, in addition to the personal promise of the debtor to discharge the obligation, rights exercisable against some property of the debtor in order to enforce discharge of the obligation. Intro. IIIA Security agreement An agreement or act by which a security interest is created, arises or is provided for or writing evidencing such an agreement or act. 9-020 Security interest An interest in personal property provided for by a transaction that in substance secures payment or performance of an obligation. 1-065 Seize To take possession of the underlying collateral or remove control of the collateral from the hands of the grantor. 4-085 Serial number An identification number given to certain types of property, such as motor vehicles and watercraft. 5-135 Specific goods An agreement where an interest held in priority is rendered subject to some other interest. 1-065 Subordination agreement The secured party taking the shoes of the transferor by way of any right to receive payments still owing. 1-065 Subrogation The secured party taking the shoes of the transferor by way of any right to receive payments still owing. 2-190 Temporary perfection A period of time after a security interest has arisen which the PPSA will recognise as validly perfected in the absence of perfection by registration, possession or control. 2-090 Title The legal or equitable rights in property which determined who was recognised as the ‘owner’ of the property at law. Intro. IVA Transfer The transfer of collateral from one grantor (the transferor) to another grantor (the transferee). 2-095 Transitional register A register which holds data to be transitioned to the PPS Register maintained by a law of the Commonwealth, State or Territory, and constitutes data in the approved form. 9-130 Unique identifier A number assigned by the Registrar to each registered financing statement. 5-135 Value Consideration that is sufficient to support a contract. Includes an antecedent debt or liability which takes the meaning. 2-020 Verification statement A written statement in the approved form verifying the registration of a financing statement or financing change statement with respect to a security interest. 5-055

Annotated Personal Property Securities Act 2009 (Cth)

871

List of Citations The following citations have been used in this book. We have provided a list of Canadian and US citations for ease of reference. We have not included Australian or New Zealand citations in this list.

A Alta LR Alberta Law Reports (CAN)

B BR Bankruptcy Reporter BCLR British Columbia Law Reports (CAN) BCSC British Columbia Supreme Court, Neutral Citation (CAN) BLR Business Law Reports (CAN)

C Cal App 3d California (CA) Appellate Reports, Third Series CBR Canadian (CAN) Bankruptcy Reports CBR (5th) Canadian (CAN) Bankruptcy Reports, Fifth Series CCLT (2d) Canadian (CAN) Cases on the Law of Torts, Second Series

D DLR Dominion Law Reports (CAN) DLR (4th) Dominion Law Reports, Fourth Series (CAN)

F F2d Federal Reporter, Second Series F Supp 2d Federal Supplement, Second Series

M Man R Manitoba Reports (CAN)

N Nfd & PEIR Newfoundland & Prince Edward Island Reports Unedited (CAN) NBR New Brunswick Reports (CAN) NW 2d North Western Reporter, Second Series NSSC Nova Scotia Supreme Court, Neutral Citation (CAN) NSR (2d) Nova Scotia Reports (CAN)

O ONCA Ontario Court of Appeal OR (2d) Ontario Reports, Second Series (CAN)

P P.2d Pacific Reporter, Second Series PPSAC Personal Property Security Act Cases (CAN) PPSAC (2d) Personal Property Security Act Cases, Second Series (CAN) PPSAC (3d) Personal Property Security Act Cases, Third Series (CAN)

R RPR Real Property Reports (CAN)

Annotated Personal Property Securities Act 2009 (Cth)

872

List of Citations S

Sask R Saskatchewan Reports (CAN)

U UCC Rep Serv Uniform Commercial Code Reporting Service (Callaghan)

W WWR Western Weekly Reports (CAN)

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873

CASE TABLE References are to paragraph numbers.

Paragraph A ASIC v Letten (No 7) [2010] FCA 1231; (2010) 80 ACSR 401 ............................................................... 2-080 AXA Asia Pacific Holdings Ltd v Direct Share Purchasing Corp Pty Ltd [2009] FCAFC 15; (2009) 173 FCR 434 ...................................................................................................................8-080; 8-090 Accent Leasing & Sales Ltd v Babic (2007) 12 PPSAC (3d) 1; 62 RPR (4th) 269 .................................. 1-070 Access Cash International Inc v Elliot Lake & North Shore Corp for Business Development (2000) 1 PPSAC (3d) 209 ...................................................................................................................... 1-065 Accolade Wines Australia Ltd, Re [2016] NSWSC 1023 ......................... 2-235; 5-045; 5-105; 5-135; 10-060 Adelaide Capital Corp v Integrated Transportation Finance Inc (1994) 6 PPSAC (2d) 267; 111 DLR (4th) 493 (Ont CJ GD) ........................................................................................... 1-065; 2-205; 5-100 Advance Diamond Drilling (Receiver of) v National Bank Leasing Inc (1992) 3 PPSAC (2d) 154; 67 BCLR (2d) 173 (BC SC) .......................................................................................................... 9-095 Advocate Financial LLC v Longenecker & Associates Ltd (2008) 2008 La App LEXIS 1538 (Louisiana CA)....................................................................................................................................... 1-045 Agnew v Pardington [2006] 2 NZLR 520 ................................................................................................. 4-050 Agricultural Credit Corp of Saskatchewan v Pettyjohn 90 Sask R 206 (Sask CA)................................... 2-020 Agricultural Credit Corp of Saskatchewan v Pettyjohn (1991) 1 PPSAC (2d) 273; 79 DLR (4th) 22 (Sask CA)........................................................................................................1-075; 2-020; 2-080; 2-235 Agricultural Credit Corp of Saskatchewan v Royal Bank of Canada (1994) 7 PPSAC (2d) 1; 115 DLR (4th) 569........................................................................................................................................ 5-030 Agriculture Financial Services Corp v Bar XH Sales Inc (2009) 16 PPSAC (3d) 1; 20 Alta LR (5th) 43................................................................................................................................................... 2-080 Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd (1981) 146 CLR 249...................... 3-070 Albarran v Queensland Excavation Services Pty Ltd [2013] NSWSC 852; (2013) 277 FLR 337 .......... 2-200; 8-015; 8-050; 9-095 Albarran and Pleash (as recs and mgrs of Maiden Civil (P&E) Pty Ltd v Queensland Excavation Services Pty Ltd [2013] NSWSC 852; (2013) APPSR ¶701-008; 277 FLR 337 ........... 2-120; 4-030; 4-085 Alberta (Minister of Justice) v Letawsky (2009) 15 PPSAC (3d) 303; 13 Alta LR (5th) 234 .......2-275; 4-025 Alberta Pacific Leasing Inc v Petro Equipment Sales Ltd (1995) 10 PPSAC (2d) 69; 34 Alta LR (3d) 66)................................................................................................................................................... 2-155 Alcan (NT) Alumina Pty Ltd v Commr of Territory Revenue (NT) (2009) 239 CLR 27...........1-065; 10-055; 10-060 Alleasing Pty Ltd, In re OneSteel Manufacturing Pty Ltd v OneSteel Manufacturing Pty Ltd [2017] FCA 656 ................................................................................................................................... 10-060 Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] 1 WLR 676 ................................. 1-065 American Bank FSB v Cornerstone Community Bank (2012) 903 F Supp 2d 568 (US DC-ED Tennessee).............................................................................................................................................. 1-045 Amerind Pty Ltd (recs and mgrs apptd) (in liq), Re (2017) 121 ACSR 206; [2017] VSC 127.....1-065; 9-165; 9-170; 10-055 Amex-Protein Development Corp, Re (1974) 504 F 2d 1056 (USCA 9th Circ)....................................... 2-025 Amotran Pty Ltd, Re [2017] VSC 637..................................................................................................... 10-060 Andrews v Mack Financial (Can) Ltd (1987) 8 PPSAC 110; 46 DLR (4th) 731............... 4-025; 4-045; 4-085 Angelkovski v Trans-Canada Foods Ltd (1986) 6 PPSAC 1 .................................................................... 4-145 Anglo-Oriental Carpet Manufacturing Co, Re [1903] 1 Ch 914 ............................................................. 10-060 Apex Gold Pty Ltd ACN 124 893 778, In re [2013] NSWSC 881; (2013) APPSR ¶701-009 ....2-030; 10-060 Apollo Fitness Academy Inc, Re (1984) 3 PPSAC 280; 6 DLR (4th) 654 ............................................... 2-025 Appleyard Capital Pty Ltd, Re; 123 Sweden AB v Appleyard Capital Pty Ltd [2014] NSWSC 782; (2014) 101 ACSR 629 ................................................................................................................. 10-060 Application of Guardian Securities Ltd, Re (1984) 1 NSWLR 95 ............................................................ 2-030

Annotated Personal Property Securities Act 2009 (Cth)

App

874

Case Table Paragraph

Arcabi Pty Ltd (recs & mgrs apptd) (in liq), Re (2014) 288 FLR 236; [2014] WASC 310..........1-065; 1-070; 8-030 Asset Traders Ltd v Favas Sportscar World Ltd [2006] NZHC 903 ......................................................... 5-205 Assiniboine Credit Union Ltd v Canadian Imperial Bank of Commerce (1984) 4 PPSAC 96; 11 DLR (4th) 744 (MB CA) ....................................................................................................................... 9-105 Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (2000) 202 CLR 588; [2000] HCA 25 ............. 1-065 Associates Discount Corp v Rattan Chevrolet Inc (1970) 462 SW 2d 546 ............................................... 2-155 Astral Communications Inc v 825536 Ontario Inc (Trustee of) (2000) 15 PPSAC (2d) 256; 183 DLR (4th) 455........................................................................................................................................ 2-025 Atlas Industries v Federal Business Development Bank (1983) 3 PPSAC 39 (Sask QB) ........................ 2-025 Auburn Shopping Village Pty Ltd v Nelmeer Hoteliers Pty Ltd [2017] NSWSC 1230.................5-100; 5-105 Aurora Mines Inc v Mariah Mining Corp (2004) 7 PPSAC (3d) 185; 5 CBR (5th) 163 .......................... 4-105 Australian Provincial Assurance Co Ltd v Coroneo (1938) 38 SR (NSW) 700........................................ 1-045 Australian Tape Manufacturers Association Ltd v The Commonwealth (1993) 176 CLR 480................ 8-015 Auto Sales v Cash Store Inc [2005] ABQB 212; (2005) 7 PPSAC (3d) 356 ............................................ 2-110

B BHP Trading Asia Ltd v Oceaname Shipping Ltd (1996) 67 FCR 211 .................................................... 1-045 BMP & Daughters Investment Corp v 941242 Ontario Ltd (1992) 4 PPSAC (2d) 220 ........................... 2-200 Bank of Credit and Commerce International SA (No 8), Re [1998] AC 214............................................ 1-065 Bank of Montreal v 414031 Ontario Ltd (1983) 2 PPSAC 248; 45 CBR (NS) 77 (Ont DC) ................... 1-045 Bank of Montreal v Featherstone (1989) 9 PPSAC 139; 58 DLR (4th) 567............................................. 4-120 Bank of Montreal v i Trade Finance Inc (2011) 17 PPSAC (3d) 250; 332 DLR (4th) 193 ...................... 1-045 Bank of Montreal v Innovation Credit Union [2010] SCC 47; (2010) 17 PPSAC (3d) 1.............1-045; 1-065; 2-030; 2-290 Bank of Montreal v Judges (1991) 1 PPSAC (2d) 240.............................................................................. 4-125 Bank of New Zealand v Waewaepa Station 2002 Ltd [2013] NZHC 3321 ....................... 2-085; 2-155; 8-175 Bank of Nova Scotia v IPS Invoice Payment System Corporations (2010) 17 PPSAC (3d) 99; 101 OR (3d) 352 (Ont SCJ) ................................................................................................................... 2-080 Bank of Nova Scotia v Royal Bank (1987) 8 PPSAC 17; 42 DLR (4th) 636 (Sask CA).......................... 2-200 Bank of Nova Scotia v Steffens (2002) 4 PPSAC (3d) 197 ...................................................................... 8-170 Bankers Trust Co v Shapira [1980] 3 All ER 353 ..................................................................................... 2-080 Bankruptcy of Canadian Auto Lease Corp 2006 BCSC 849 (CanLII)...................................................... 7-125 Banque Belge pour L’Etranger v Hambrouck [1921] 1 KB 321 ............................................................... 2-080 Barclays Bank Plc, Re [2012] NSWSC 1095; (2012) APPSR ¶701-003 .....................................2-030; 10-060 Barclays Business Credit Inc v Fletcher Challenge Canada Ltd (1993) 5 PPSAC (2d) 105; 13 OR (3d) 118.................................................................................................................................................. 1-045 Battlefords Credit Union Ltd v Ilnicki (1991) 82 DLR (4th) 69; 93 Sask R 7 (Sask CA) ........................ 1-075 Bayview Credit Union v Doucette (2012) 19 PPSAC (3d) 224; [2012] NBQB 200 ................................ 4-115 Beck v Montana Constructions Pty Ltd (1963) 5 FLR 298 ....................................................................... 3-125 Beecham Group Ltd v Bristol Laboratories (1968) 118 CLR 618 ............................................................ 3-070 Belarus Equipment of Canada Ltd v C & M Equipment (Brooks) Ltd (Receiver of) (1994) 8 PPSAC (2d) 32....................................................................................................................................... 2-275 Bennet Funding Group Inc, In re (1996) 230 BR 30 ................................................................................. 2-280 Bermingham v Corrective Services Commr of NSW (1988) 15 NSWLR 292 ......................................... 1-070 Bevillesta Pty Ltd v Imagine UN Ltd [2009] VSC 50; 69 ACSR 574 .................................................... 10-060 Blue Water Resort Ltd v Marac Finance Ltd [2008] NZHC 1307 ............................................................ 1-045 Brant Avenue Manor Limited Partnership v Transamerica Life Insurance Co of Canada (2000) 1 PPSAC (3d) 73 (Ont SCJ)...................................................................................................................... 2-025 Bredenkamp v Gas Sensing Technology Corp; Re Welldog Pty Ltd (in liq) (recs & mgrs apptd) [2017] FCA 1065 ............................................................................................................ 1-070; 8-015; 8-030

Arc

 2018 CCH Australia Limited

Case Table

875 Paragraph

Bucala, In re (2012) 464 BR 626 (Bankr SD NY)..................................................................................... 2-030 Bulut v Brampton (City) (2000) 15 PPSAC (2d) 213; 185 DLR (4th) 278............................................... 2-200 Bunnings Group Ltd v Laminex Group Ltd (2006) 153 FCR 479 ............................................................ 2-160 Business Development Bank of Canada v ABN Amro Leasing (2003) 5 PPSAC (3d) 76 ....................... 2-235

C CNH Capital Canada Ltd v Diamond4 Holdings Ltd (2012) 19 PPSAC (3d) 262; 92 CBR (5th) 167.......................................................................................................................................................... 4-115 CPC Networks Corp v Eagle Eye Investments Inc (2012) 405 Sask R 86; 95 CBR (5th) 76 (Sask CA)......................................................................................................................................................... 2-015 C Dixon Fuels Ltd v SWS Fuels Ltd (2011) 17 PPSAC (3d) 175; [2011] NSCA 35 (Nova Scotia CA).................................................................................................................................. 2-020; 2-045; 2-235 Caason Investments Pty Ltd v Ausroc Metals Ltd [2016] WASC 267 ................................................... 10-060 Camco Inc v Frances Olson Realty (1979) Ltd (1986) 6 PPSAC 167; 50 Sask R 161 ...... 2-070; 2-155; 2-275 Campbell Finance Pty Ltd v Vivstan Packaging (Aust) Pty Ltd (in liq) [1998] 2 VR 340; (1996) 22 ACSR 109 ....................................................................................................................................... 10-060 Canada Permanent Trust Co v Thomas (1983) 3 PPSAC 66; 149 DLR (3d) 338..................................... 8-040 Canada Trustco Mortgage Corp v Port O’Call Hotel Inc (1996) 11 PPSAC (2d) 1; 133 DLR (4th) 609.......................................................................................................................................................... 1-065 Canadian case of Central Refrigeration & Restaurant Services Inc (Trustee of) v Canadian Imperial Bank of Commerce (1986) 5 PPSAC 262; 47 Sask R 124 ..................................................... 8-015 Canadian Imperial Bank of Commerce v McGhie (2005) 9 PPSAC (3d) 108.......................................... 4-025 Canadian Imperial Bank of Commerce v Tux & Tails Ltd (2006) 9 PPSAC (3d) 115; 20 CBR (5th) 316......................................................................................................................................2-095; 2-265 Canadian Imperial Bank of Commerce v Melnitzer (Trustee of) [1993] OJ No 3021 .............................. 7-125 Canamsucco Road House Food Co v LNGAS Ltd (1991) 2 PPSAC (2d) 203 ......................................... 2-015 Canamsucco Road House Food Co v LNGAS Ltd (1997) 12 PPSAC (2d) 227 ....................................... 2-015 Capital Finance Australia Ltd v Clough [2015] NSWSC 1327................................................................. 5-205 Cardinia Nominees Pty Ltd, In re (2013) APPSR ¶701-005; [2013] NSWSC 32........................2-030; 10-060 Carevest Capital Inc v 1262459 Alberta Ltd [2011] ABQB 148............................................................... 1-045 Carpenter International Pty Ltd, Re [2016] VSC 118; (2016) 111 ACSR 477 ......2-030; 2-225; 5-035; 5-090; 8-015; 10-060 Carpet Call Pty Ltd v Chan (1987) ATPR (Digest) ¶46-025..................................................................... 2-160 Carrafa (as liq of Relux Commercial Pty Ltd (ACN 155 749 438) (in liq) v Doka Formwork Pty Ltd [2014] VSC 570; (2014) 104 ACSR 163 ........................................................................................ 1-070 Carson, In re Hastie Group Ltd (No 3) [2012] FCA 719; (2012) APPSR ¶701-001......... 9-015; 9-015; 9-085; 9-110 Case Credit Ltd v Rhodan Contracting Ltd (2004) 7 PPSAC (3d) 346..................................................... 4-125 Caterpillar Financial Services Corp v Peoples National Bank NA (2013) 710 F 3d 691 (US CA 7th Cir) ................................................................................................................................................... 2-020 Caterpillar Financial Services Ltd v 360networks Corp (2007) 10 PPSAC (3d) 311; 27 CBR (5th) 115 (BC CA) ................................................................................................................................. 1-045 Catombal Investments Pty Ltd, Re [2012] NSWSC 775......................................................................... 10-060 Central Cleaning Supplies (Aust) Pty Ltd v Elkerton [2014] VSC 61 ............................... 1-065; 2-025; 2-200 Central Cleaning Supplies (Aust) Pty Ltd v Elkerton (in his capacity as joint and several liquidator of Swan Services Pty Ltd (in liq)) [2015] VSCA 92; (2015) 321 ACSR 181 ..........1-065; 2-025; 2-200; 9-025 Charter Financial Co v Royal Bank (2002) 4 PPSAC (3d) 4; 32 CBR (4th) 212...................................... 5-130 Chase Manhattan Bank NA v Israel British Bank (London) Ltd [1981] 1 Ch 105 ................................... 2-080 Chiips Inc v Skyview Hotels Ltd (1994) 7 PPSAC (2d) 23; 116 DLR (4th) 385...................................... 2-230 Chrysler Credit Canada Ltd v Royal Bank (1986) 6 PPSAC 153; 30 DLR (4th) 616 (Sask CA)............. 2-235 Cirillo and Registrar of Personal Property Securities, Re [2013] AATA 733; (2013) APPSR ¶701-011 .....................................................................................................................................5-185; 5-190

Annotated Personal Property Securities Act 2009 (Cth)

Cir

876

Case Table Paragraph

Citadel Financial Corporation Pty Ltd v Elite Highrise Services Pty Ltd (No 3) [2014] NSWSC 1926........................................................................................................................................................ 2-025 Cliffs Over Maple Bay, Re (2010) 16 PPSAC (3d) 237; 65 CBR (5th) 241............................................. 1-045 Cliffs Over Maple Bay, Re [2011] BCCA 180.......................................................................................... 1-045 Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337.......... 3-125 Colonial Mutual General Insurance Co Ltd v ANZ Banking Group (New Zealand) Ltd [1995] 3 All ER 987 ............................................................................................................................................. 1-045 Commercial Bank of Australia v Friedrich (1991) 5 ACSR 115............................................................... 4-025 Commercial Credit Corp v Harry D Shields Ltd (1981) 1 PPSAC 301; 122 DLR (3d) 736 (Ont HCJ) ....................................................................................................................................................... 1-045 Commercial National Bank v Seubert & Associates Inc (2002) 807 A 2d 297 ........................................ 1-045 Commonwealth Bank of Australia v Saleh [2007] NSWSC 903 .............................................................. 2-080 Communication Dynamics Inc, In re (2003) 300 BR 220 ......................................................................... 2-325 Community Development Pty Ltd v Engwirda Construction Co (1969) 120 CLR 455............................ 2-270 Community Futures Development Corp of Howe Sound v Spargo (2000) 1 PPSAC (3d) 263; 76 BCLR (3d) 190 (BC SC); 2000 BCSC 1471 ..............................................................................1-065; 2-025 Compass Capital Ltd v The New Zealand Guardian Trust Co Ltd [2009] NZHC 344 ............................. 4-025 Construction Systems Pty Ltd v Dryka & Associates Pty Ltd [2010] WASC 22 ..................................... 5-150 Copp v Medi-Dent Services (1991) 2 PPSAC (2d) 114; 30 OR (3d) 370................................................. 4-125 Coward v Rich (1995) 9 PPSAC (2d) 236 (Ont CJ).................................................................................. 8-040 Crago v Multiquip (1998) ATPR ¶41-620................................................................................................. 2-160 Credit Suisse Canada v 1133 Yonge Street Holdings Ltd (1998) 14 PPSAC (2d) 61; 5 CBR (4th) 174...............................................................................................................................................1-065; 9-165

D DCD Industries (1995) Ltd, Re (2005) 7 PPSAC (3d) 251; 253 DLR (4th) 171 (Alta CA) .........1-075; 2-230; 2-235 DaimlerChrysler Services Canada Inc v Cameron [2007] BCCA 144; (2007) 11 PPSAC (3d) 19 .......... 1-065 Daly v Shrimplin (1980) 610 P 2d 397...................................................................................................... 1-045 Daniel Smith Industries Ltd v Cranes International NZ Ltd [2009] NZHC 2589 ..................................... 5-205 Dapper Apper Holdings Ltd v 895453 Ontario Ltd (1996) 11 PPSAC (2d) 57; 38 CBR (3d) 284 (Ontario CJ) ........................................................................................................................................... 1-065 David Morris Fine Cars Ltd v North Sky Trading Inc (Trustee of) (1996) 11 PPSAC (2d) 142; 39 CBR (3d) 284..............................................................................................................................1-070; 2-155 Davidson v Registrar of Personal Property Securities [2015] AATA 549 ................................................ 1-065 Dean-Willcocks v Nothintoohard Pty Ltd (2005) 53 ACSR 587 .............................................................. 2-015 Dean-Willcocks v Nothintoohard Pty Ltd (2007) 25 ACLC 109 .............................................................. 2-015 Deane v CSD (Qld) (No 2) [1996] 2 Qd R 557 ......................................................................................... 7-020 Denbride Pty Ltd v Registrar of Personal Property Securities, Eagle Boys Dial-a-pizza Australia Pty Ltd [2015] AATA 938..................................................................................................................... 5-195 Devaynes v Noble (1816) 1 Mer 772; 35 ER 871 ..................................................................................... 2-085 Diplock, Re [1948] Ch 465........................................................................................................................ 2-080 Director under the Seizure of Criminal Property Act 2009 v Kaytor [2012] SKQB 346.......................... 1-065 Discount Auto Sales v Cash Store Inc (2005) 7 PPSAC (3d) 356............................................................. 2-100 District of Columbia v Thomas Funding Corp (1991) 593 A 2d 1030, 1034 (DC CA)............................ 1-045 Dixon Fuels Ltd v SWS Fuels Ltd (2011) FPPSR ¶700-127; (2011) 17 PPSAC (3d) 175; [2011] NSCA 35................................................................................................................................................ 2-225 Doctors Hospital of Hyde Park Inc, In re (2003) 337 F 3d 951................................................................. 2-325 Donaghy v CSN Vehicle Leasing (1992) 4 PPSAC (2d) 37; 14 CBR (3d) 256........................................ 8-030 Donnelly v International Harvester Credit Corp of Canada (1983) 2 PPSAC 290; 22 BLR 66 (Ont CJ).................................................................................................................................................. 8-040 Dor-O-Matic of Canada Inc, Re (1996) 28 OR (3d) 125................................................................4-055; 4-060 Douglas-Brown (as liq of De Barros Nominees Pty Ltd (in liq)) v Standard Chartered Finance Ltd (1990) 2 ACSR 737; 8 ACLC 993 ...................................................................................10-060; 10-060

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Douglas Financial Consultants Pty Ltd v Price [1992] 1 Qd R 243, 251–253 .......................................... 7-035 Downs Distributing Company Pty Ltd v Associated Blue Star Stores Pty Ltd (1948) 76 CLR 463......... 2-155 Downsview Nominees Ltd v First City Corp Ltd [1993] AC 295............................................................. 4-125 Dube v Bank of Montreal (1986) 7 PPSAC 223 (Sask CA)...................................................................... 1-045 Duckett v McKinnon [2012] BCSC 2147.................................................................................................. 2-025 Dudley Engineering Pty Ltd, Re [1968] 1 NSWR 483............................................................................ 10-060 Dura (Aust) Constructions Pty Ltd (in liq) (recs and mgrs apptd) v Hue Boutique Living Pty Ltd (formerly SC Land Richmond Pty Ltd) (2014) 49 VR 86; [2014] VSCA 326....1-045; 1-065; 2-015; 2-020

E Ehrmann Bros Ltd, Re [1906] 2 Ch 697 .................................................................................................. 10-060 Elite Sydney Pty Ltd, Re [2016] NSWSC 1934 ........................................................................................ 1-065 Ellingsen (Trustee of) v Hallmark Ford Sales Ltd (2000) 1 PPSAC (3d) 307; 190 DLR (4th) 47 (BC CA) ......................................................................................................................................1-045; 1-065 Ellingsen, Re (2000) FPPSR ¶700-115; 2000 BCCA 458; (2000) 1 PPSAC (3d) 307............................. 1-065 Engel Canada Inc v TCE Capital Corp (2002) 4 PPSAC (3d) 124; 34 CBR (4th) 169............................. 2-230 Enviro Pallets, Re (NSW) Pty Ltd [2013] QSC 220................................................................................ 10-060 Erjo Investments Ltd v Michener Allen Auctioneering Ltd (2004) 6 PPSAC (3d) 220; 238 DLR (4th) 32; 241 Sask R 228 (Sask CA)............................................................................... 2-020; 2-295; 4-085 Euroclean Canada Inc v Forest Glade Investments Ltd (1984) 4 PPSAC 271.......................................... 2-230 Evans v European Bank Ltd [2004] NSWCA 82 ...................................................................................... 2-080

F Fairbanx Corp v Royal Bank (2009) 15 PPSAC (3d) 265; 57 CBR (5th) 310.......................................... 2-045 Fairbanx Corp v Royal Bank (2010) 16 PPSAC (3d) 96; 68 CBR (5th) 102.................................1-065; 5-100 Fairline Boats Ltd v Leger (1980) 1 PPSAC 218 ...................................................................................... 2-155 Fairmont Resort Properties Ltd, Re (2009) 15 PPSAC (3d) 161............................................................... 7-030 Farm Credit Corp v Valley Beef Producers Co-operative Ltd (2001) 3 PPSAC (3d) 23; 211 Sask R 222...........................................................................................................................................1-065; 1-075 Farm Credit Corp v Valley Beef Producers Co-operative Ltd (2002) 5 PPSAC (3d) 1; 218 DLR (4th) 86 (Sask CA) ...............................................................................................1-045; 1-065; 1-075; 2-080 Ferandos, Re (2005) 402 F 3d 147 (US CA 3rd Cir)................................................................................. 2-020 Field v Battye [1939] SASR 235 ............................................................................................................... 1-045 Fin One Pty Ltd v Kucharski [2017] QMC 17 .......................................................................................... 4-085 Findlay v Jones [2015] NSWSC 277 ....................................................................................................... 10-060 Fire Nymph Products Pty Ltd v Heating Centre Pty Ltd (in liq) (1992) 7 ACSR 365.............................. 2-155 First National Bank of Brush v Bostron (1977) 564 P.2d 964................................................................... 3-095 518718 Alberta Ltd v Canadian Forest Products Ltd [1999] 3 WWR 672; 63 Alta LR (3d) 371............. 4-025 5198837 Manitoba Ltd v Ozirny (2007) 12 PPSAC (3d) 121; 221 Man R (2d) 211 (MB QB)................ 1-045 Flexi-Coil Ltd v Kindersley District Credit Union Ltd (1993) 5 PPSAC (2d) 192; 113 Sask R 298; 107 DLR (4th) 129 (Sask CA)......................................................... 2-080; 2-230; 2-270; 2-275; 8-170 Flinders Trading Co, Re (1978) 3 ACLR 218 ......................................................................................... 10-060 Florgale Uniforms Pty Ltd v Orders (2004) 11 VR 54.............................................................................. 4-125 Flown Pty Ltd v Goldrange Pty Ltd [2016] WASC 419; (2016) 316 FLR 81 ...............................2-030; 2-045 Foothill Capital Corp v Clare’s Food Market, Inc (In re Coupon Clearing Serv Inc) (1997) 113 F 3d 1091 (USCA 9th Cir) ........................................................................................................................ 2-020 Ford v Petford (1996) 11 PPSAC (2d) 227 (BC SC)................................................................................. 4-195 Ford Motor Co of Canada Ltd v Manning Mercury Sales Ltd (Trustee of) (1997) 12 PPSAC (2d) 1; 140 DLR (4th) 344............................................................................................................................. 1-065 Forge Group Power Pty Limited (in liq) (recs and mgrs apptd) v General Electric International Inc [2016] NSWSC 52 ........................................................................................................................... 1-070 Fortson Pty Ltd v Commonwealth Bank of Australia (2008) 100 SASR 162........................................... 4-125 4 in 1 Wyoming Pty Ltd, Re [2017] NSWSC 407...................................................5-045; 5-100; 5-105; 9-155 436399 Ontario Inc v Bank of Nova Scotia (1983) 3 PPSAC 187; 49 CBR (NS) 142 ............................. 1-045

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Frank v James Talcott Inc (1982) 692 F 2d 734 ........................................................................................ 5-045 Freightlines Northern Territory Pty Ltd (1999) 32 ACSR 573................................................................ 10-060 Future Revelation Ltd v Medica Radiology & Nuclear Medicine Pty Ltd [2013] NSWSC 1741 ........... 5-045; 5-100

G GATX Corporate Leasing Inc v William Day Constructions Ltd (1986) 6 PPSAC 118; 60 CBR (NS) 319................................................................................................................................................. 4-015 GE Canada Equipment Financing GP v ING Insurance Co of Canada (2009) 14 PPSAC (3d) 49; 308 DLR (4th) 127; 94 OR (3d) 321 (Ont CA) .............................................................. 1-045; 2-085; 2-155 GE Capital Canada Equipment Financing Inc v HSBC Bank Canada (2002) 4 PPSAC (3d) 145............ 2-275 GMAC Commercial Credit Corp Canada v TCT Logistics Inc (2004) 238 DLR (4th) 487; 6 PPSAC (3d) 163 (Ont CA) .........................................................................................................1-065; 7-035 GMAC Lease Co Ltd v Best Audio Design Inc (2004) 6 PPSAC (3d) 385.............................................. 3-040 GMAC Lease Co Ltd v Moncton Motor Home & Sales Inc (Trustee of) (2003) 4 PPSAC (3d) 211; 227 DLR (4th) 154.................................................................................................. 2-200; 5-100; 5-100 GMAC Lease Co Ltd v Tomax Credit Corp (2001) 3 PPSAC (3d) 15 ..................................................... 3-040 G M Homes Inc, Re (1984) 4 PPSAC 116; 10 DLR (4th) 439 (Sask CA)................................................ 2-020 G Slocombe & Associates Inc v Gold River Lodges Ltd (2001) 2 PPSAC (3d) 324; 24 CBR (4th) 32............................................................................................................................................................ 4-195 Gamer’s Motor Centre (Newcastle) Pty Ltd v NatWest Wholesale Australia Pty Ltd [1987] HCA 30; (1987) 163 CLR 236 ........................................................................................................................ 2-045 Garnett v M’Kewan (1872) LR 8 Ex 10 .................................................................................................... 1-045 Gateway Hotel Partners LLC v CIR (2014) TC Memo 2014-5; 2014 WL 92027 (US Tax Court) ......... 1-065; 2-025 Gauntlet Energy Corp, Re (2003) 5 PPSAC (3d) 236; 20 Alta LR (4th) 314 (Alta QB) ...............1-065; 2-230 Gelowitz v Garcon Enterprises Ltd (1995) 132 Sask R 273...................................................................... 1-070 Gelpack Enterprises Pty Ltd (in liq), Re [2015] NSWSC 1558 .....................................................1-065; 2-025 General Electric Capital Canada Inc v Interlink Freight Systems Inc (1998) 14 PPSAC (2d) 198; 7 CBR (4th) 173..................................................................................................................................... 2-085 General Motors Acceptance Corp of Canada v Bank of Nova Scotia (1986) 6 PPSAC 53; 55 OR (2d) 438.................................................................................................................................................. 2-080 Gibbston Downs Wines Ltd v Perpetual Trust Ltd [2012] NZHC 1022; (2012) FPPSR ¶700-007.......... 2-200 Gibbston Downs Wines Ltd v Perpetual Trust Ltd [2013] NZCA 506 ..........................................2-230; 4-085 Gibson v Stockco Ltd [2010] NZHC 2398 .....................................................................................2-085; 4-025 Giffen, Re (1996) 10 PPSAC (2d) 277; 131 DLR (4th) 453 ..................................................................... 8-015 Giffen, Re [1998] 1 SCR 91; (1998) 13 PPSAC (2d) 255; 155 DLR (4th) 332 (SCC)..... 1-070; 2-020; 7-170; 8-015 Gimli Auto Ltd v BDO Dunwoody Ltd) 160 DLR (4th) 373.................................................................... 2-120 Gimli Auto Ltd v Canada Campers Inc (Trustee of) (1998) 13 PPSAC (2d) 378..................................... 2-120 Glengarry AET Inc (Trustee of) v Manhattan Electric Cable Corp (1986) 6 PPSAC 112 (Ont SC) ........ 1-065 Glosser v Colonial Pacific Leasing Co (In re Equitable Financial Management Inc) (1994) 164 BR 53 ..................................................................................................................................................... 2-280 Gold Coast Leasing Co v California Carrots Inc (1979) 93 Cal App 3d 274 (Cal CA) ............................ 1-045 Gold Key Pontiac Buick (1984) Ltd v 464750 BC Ltd (Trustee of) (2000) 77 BCLR (3d) 185; 2 PPSAC (3d) 206; 189 DLR (4th) 668.........................................................................................5-100; 5-135 Graham v Portacom New Zealand Ltd [2004] 2 NZLR 528 .............................................. 2-020; 2-030; 2-200 Graham and Gibson v Portacom New Zealand Ltd [2004] 2 NZLR 528; (2004) FPPSR ¶700-001 ........ 1-070 Gray v Royal Bank of Canada (1997) 12 PPSAC (2d) 126; 143 DLR (4th) 179 (BC SC)....................... 2-020 Greenlight Asset Pty Ltd v WBK Ricetti Pty Ltd [2017] WASC 278....................................................... 2-235 Guardian Securities Ltd, Re [1984] 1 NSWLR 95 .................................................................................. 10-060

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H HSBC Bank Canada v Kupritz [2011] BCSC 788..................................................................................... 4-125 Haliburton Broadcasting Group Inc v Van Duyn (2008) 14 PPSAC (3d) 77 (Ont Superior Court of Justice) ............................................................................................................................................... 1-065 Hall v Poolman (2007) 65 ACSR 123 ....................................................................................................... 4-025 Hallet’s Estate, Re (1880) 13 Ch D 696 .................................................................................................... 2-080 Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd (in liq) (recs and mgrs apptd) (2017) 320 FLR 259; [2017] WASC 152......................1-065; 1-075; 2-015; 2-020; 2-080; 2-325; 7-145; 9-165; 9-170 Harder (Trustee of) v Alberta Treasury Branches (2004) 6 PPSAC (3d) 346; 36 Alta LR (4th) 118...............................................................................................................................................5-135; 8-170 Health Insurance Commission v Peverill (1994) 179 CLR 226 ................................................................ 8-015 Healy Holmberg Trading Partnership v Grant and Khov as liq of LBD Civil Ltd (in liq) [2012] NZCA 451; (2012) FPPSR ¶700-011 ............................................................................. 2-020; 2-200; 5-130 Hewlett Packard Australia Pty Ltd v GE Capital Finance Pty Ltd [2003] FCAFC 256; (2003) 135 FCR 206; 47 ACSR 589 ...................................................................................................................... 10-060 Hickman Equipment (1985) Ltd, Re (2003) 4 PPSAC (3d) 252; 40 CBR (4th) 58; 41 CBR (4th) 101...............................................................................................................................................2-030; 2-265 Hickman Equipment (1985) Ltd, Re (2003) 7 PPSAC (3d) 37; 2 CBR (5th) 226 .................................... 2-030 Hickman Equipment (1985) Ltd, Re (2004) 7 PPSAC (3d) 56; 239 Nfld & PEIR 312 (N& CA)........... 1-075; 9-105 Hickman Equipment (1985) Ltd, Re (2006) 10 PPSAC (3d) 206; 274 DLR (4th) 372 ............................ 1-065 Hobbs v Petersham Transport Co Pty Ltd (1971) 124 CLR 220............................................................... 1-070 Holland v Chrysler Credit Canada Ltd (1992) 4 PPSAC (2d) 250; 5 Alta LR (3d) 258 (Alta QB).......... 9-095 Holroyd v Marshall [1861–1873] All ER Rep 414.................................................................................... 2-015 Hongkong Bank of Canada v National Bank of Canada (1990) 1 PPSAC (2d) 73; 72 DLR (4th) 372.......................................................................................................................................................... 2-025 Hooks, Re (1984) 40 BR 715..................................................................................................................... 1-075 Hopkinson v Rolt (1861) 9 HL Cas 514 .................................................................................................... 2-015 Horbay Inc v Great West Golf & Industrial Inc (2000) 2 PPSAC (3d) 179; 87 Alta LR (3d) 98 (Alta QB) ............................................................................................................................................... 2-015 Hornby Equipment Ltd v Andrushko (2000) 1 PPSAC (3d) 98................................................................ 8-040 Hoskins, Re (2014) 8 CBR (6th) 98 (NL SC Trial Division) .................................................................... 5-100 Hughes v Fea [2013] NZHC 2863 ..................................................................................................1-065; 1-070 Hussain v CSR Building Products Ltd, In re FPJ Group Pty Ltd (in liq) [2016] FCA 392..................... 10-055

I IRC v Stiassny [2013] 1 NZLR 140; [2012] NZCA 93..................................................................1-065; 9-165 i Trade Finance Inc v Bank of Montreal [2011] 2 SCR 360; (2011) FPPSR ¶700-125; 2011 SCC 26..................................................................................................................................... 1-065; 2-020; 2-320 Imagine UN Ltd, Re [2009] VSC 50 ....................................................................................................... 10-060 Industrial Progress Corp Pty Ltd v Wilson [2013] WASC 225......................................................1-065; 2-025 Inland Contracting Ltd v Bakken (2010) 16 PPSAC (3d) 282; 354 Sask R 54......................................... 4-135 Inland Kenworth Inc v Laboucane (2004) 11 PPSAC (3d) 50; 26 BCLR (4th) 108......................4-120; 4-125 Innovation Credit Union v Bank of Montreal (2009) 14 PPSAC (3d) 149; 306 DLR (4th) 407 .............. 2-200 Innovation Credit Union v Bank of Montreal (2010) 17 PPSAC (3d) 1; 235 DLR (4th) 605 (SCC) ..................................................................................................................................................... 2-020 Instant Auto Loans Inc v Spak (2000) 15 PPSAC (2d) 287 ...................................................................... 1-075 International Harvester Credit Corp of Canada v Bell’s Dairy Ltd (Trustee of) (1986) 6 PPSAC 138; 30 DLR (4th) 387; 50 Sask R 177 .......................................................................... 1-070; 5-100; 8-015 International Harvester Credit Corp of Canada v Touche Ross Ltd (1986) 30 DLR (4th) 387 ................ 8-015 Interstate Parcel Express Co Pty Ltd v Time-Life International (Nederlands) BV (1977) 138 CLR 534.......................................................................................................................................................... 3-125 Investec Bank (Australia) Ltd v Glodale Pty Ltd (2009) 24 VR 617 (VSCA).......................................... 4-125

Annotated Personal Property Securities Act 2009 (Cth)

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J JII Liquidating Inc, Re (2006) 344 BR 875 (Bankruptcy Court-ND Illinois) ........................................... 1-045 JPM Express Inc v 2092889 Ontario Inc (2010) 16 PPSAC (3d) 337 (Ont SCJ) ..................................... 7-030 JS Brooksbank and Co (Australasia) Ltd v EXFTX Ltd (in rec and liq) [2009] NZCA 122; (2009) 10 NZCLC 264,520.................................................................................................................... 1-065 Jamail, In re (1980) 609 F.2d 1387 (USCA 5th Circ)................................................................................. 3-095 James v Cth (1939) 62 CLR 339................................................................................................................ 2-045 James Roscoe (Bolton) Ltd v Winder [1915] 1 Ch 62............................................................................... 2-080 Jensen & Jensen, Re [2015] FCCA 2721................................................................................................... 2-015 John Deere Ltd v Firdale Farms Ltd (Receiver of) (1987) 8 PPSAC 52; 45 DLR (4th) 641 .................... 1-065 Joplin Brewery Co Ltd, Re [1902] 1 Ch 79 ............................................................................................. 10-060 Jorgenson v ASL Paving Ltd (2007) 12 PPSAC (3d) 90; 302 Sask R 281 (Sask CA) ............................. 5-205

K KBA Canada Inc v 3S Printers Inc 2012 BCSC 1078 (CanLII); 2012 BCSC 1078 ................................. 7-125 KBA Canada Inc v Supreme Graphics Ltd [2014] BC CA 117 ................................................................ 7-125 KJM Leasing Ltd v Granstrand Brothers Inc (1994) 7 PPSAC (2nd) 197; 158 AR 78 ............................ 5-100 Kaak v Bank of Montreal (2003) 5 PPSAC (3d) 187 (Ont SCJ); (2003) 6 PPSAC (3d) 13 (Ont CA)......................................................................................................................................................... 1-065 Kaizen Global Investments Ltd, In re Australia New Agribusiness & Chemical Group Ltd (in liq) v Australia New Agribusiness & Chemical Group Ltd (in liq) [2017] FCA 431................................ 10-060 Kalamunda Meat Wholesalers Pty Ltd v Reg Russell & Sons Pty Ltd [1994] FCA 1059; (1994) 51 FCR 446 ............................................................................................................................................ 5-150 Karkoulas v Farm Credit Canada (2005) 8 PPSAC (3d) 249; 270 Sask R 291 (Sask QB) ....................... 1-070 Kasten Energy Inc v Shamrock Oil & Gas Ltd (2013) 20 PPSAC (3d) 128; 2013 ABQB 63.................. 4-050 Kelln (Trustee of) v Strasbourg Credit Union Ltd (1992) 3 PPSAC (2d) 44; 89 DLR (4th) 427 (Sask CA)............................................................................................................................................... 5-100 Kervan Trading Pty Ltd v Aktas (1987) 8 IPR 583 ................................................................................... 3-125 Kimberley Diamond Company Pty Ltd, Re (in liq) [2017] NSWSC 538 ................................................. 9-170 The King v Brown (1912) 14 CLR 17 ....................................................................................................... 2-270 Klein v Lemore Investments Ltd (1983) 2 PPSAC 252 ............................................................................ 4-145 Knauf Plasterboard Pty Ltd v Plasterboard West Pty Ltd (in liq) (recs and mgrs apptd) [2017] FCA 866................................................................................................. 2-030; 2-045; 4-085; 4-090; 10-055 Koppel v Koppel [1966] 2 All ER 187 ...................................................................................................... 2-045 Korda, In reTen Network Holdings Ltd (admin apptd) (recs and mgrs apptd) [2017] FCA 1144......... 10-055; 10-060 Kotarba Technologies Ltd v Process Group Inc (1997) 12 PPSAC (2d) 144 (Ont CJ)............................. 8-060 Kris Cruisers Ltd, Re [1949] 1 Ch 138; [1948] 2 All ER 1105 ............................................................... 10-060 Kulchyski v Shuswap Ventures Corp (1994) 7 PPSAC (2d) 216.............................................................. 3-040 Kuzilla, Re (2009) 13 PPSAC (2d) 255; 50 CBR (5th) 144...................................................................... 8-015

L Lambert, Re (1994) 7 PPSAC (2d) 240; 119 DLR (4th) 93; 20 OR (3d) 108.................... 5-030; 5-135; 5-100 Laminated Veneers Co Inc, Re (1973) 471 F 2d 1124 (USCA 2nd Circ) ................................................. 2-025 Langdon, Re; Forge Group Ltd (recs and mgrs apptd) (in liq) [2017] FCA 170; (2017) 118 ACSR 434 ................................................................................................ 1-065; 2-015; 2-020; 9-165; 9-170 Lanson v Saskatchewan Valley Credit Union Ltd (1998) 14 PPSAC (2d) 71; 172 Sask R 106 (Sask CA)....................................................................................................................................2-080; 2-085 Laughton, Re [1962] Tas SR 300 .............................................................................................................. 2-080 Lease Truck Inc v 375603 Ontario Ltd (1996) 11 PPSAC (2d) 351 (Ont CJ) .......................................... 8-040 Leavere v Port Colborne (City) (1995) 122 DLR (4th) 200 (Ont CA)...........................................1-045; 2-290 Loewen v Superior Acceptance Corp (1997) 12 PPSAC (2d) 230; 33 BCLR (3d) 72 ............................. 8-040 Leu v NM Paterson & Sons Ltd (1997) 13 PPSAC (2d) 27 156 Sask R 36.............................................. 3-025

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881 Paragraph

Liberty National Bank & Trust Co of Oklahoma City v Acme Tool Division of the Rucker Co (1976) 540 F2d 1375.............................................................................................................................. 4-125 Lindholm, Re; Opes Prime Stockbroking Ltd (admin apptd) (recs and mgrs apptd) [2008] FCA 1425; (2008) 171 FCR 473 .................................................................................................................... 1-045 Lisec America Inc v Barber Suffolk Ltd [2012] ONCA 37; (2012) FPPSR ¶700-128; 18 PPSAC (3d) 252.................................................................................................................................................. 2-205 Lloyd Anthony Furniture Pty Ltd, Re; Ex parte Walker (1996) 19 ACSR 478 ...................................... 10-060 Lloydminster Credit Union Ltd v 324007 Alberta Ltd (2011) 18 PPSAC (3d) 267 ................................. 2-085 ´ (2004) 7 PPSAC (3d) 194 .................................... 4-125 Loeb Canada Inc v Caisse Populaire Alexandria Ltee

M MC United Masonry Ltd, Re (1983) 2 PPSAC 237; 142 DLR (3d) 470................................................... 2-030 McCloy v Manukau Institute of Technology [2013] NZHC 936; (2013) FPPSR ¶700-013..................... 2-045 McKeown (Horseman’s Haven) (1984) 4 PPSAC 209; 35 Sask R 211 .................................................... 2-085 McMillen v Drive Financial Services LP (2005) 57 UCC Rep Serv 2d (Callaghan) 517......................... 4-195 McWinn Air Filter Cleaning Systems Ltd v 604859 Saskatchewan Ltd (1999) 15 PPSAC (2d) 19; 181 Sask R 185 ................................................................................................................................ 2-080 Mac Property Finance Ltd v Hanover Finance Ltd [2009] NZHC 50....................................................... 8-085 Macquarie Leasing v The Registrar of the Personal Property Securities Register [2015] NSWSC 94............................................................................................................................................................ 5-035 Macquarie Leasing Pty Ltd v DEQMO Proprietary Ltd [2014] NSWSC 1466 ........................................ 5-035 Macquarie Leasing Pty Ltd v The Registrar of the Personal Property Securities Register [2014] NSWSC 1677..............................................................................................................................5-035; 5-215 Maiden Civil (P&E) Pty Ltd, Re; Albarran v Queensland Excavation Services Pty Ltd [2013] NSWSC 852; (2013) APPSR ¶701-008; 277 FLR 337 ... 1-065; 1-070; 2-020; 2-120; 2-200; 4-030; 4-085; 7-020; 7-035; 8-015; 8-050; 9-095 Maksteel Inc, Re (2002) 4 PPSAC (3d) 77................................................................................................ 2-085 Marac Finance Ltd v Greer [2012] 2 NZLR 497; [2012] NZCA 45 ......................................................... 1-045 Marandola v Marandola Mechanical Inc (2004) 53 UCC Rep.Serv.2d 1057 (RI Superior Court)........... 1-045 Maroni v Reid [2016] WADC 88 .............................................................................................................. 5-150 Mason v Westside Cemeteries Ltd (1996) 29 CCLT (2d) 125.................................................................. 1-070 Mason J; Moorhead v Brennan (1991) 20 IPR 161 ................................................................................... 3-125 Massey-Ferguson Industries Ltd v Melfort Credit Union Ltd (1987) 8 PPSAC 1; 62 Sask R 293.......... 3-095; 3-110 Matthews v The Tap Inn Pty Ltd [2015] SADC 108............................................................................... 10-055 Mentha, In re Arrium Ltd (admin apptd) [2016] FCA 972...........................................................2-030; 10-060 Mentha, In re Arrium Finance Ltd v National Australia Bank Ltd [2017] FCA 818 .............................. 10-060 Merchants Bank v Atchison (In re Atchison) (1987) 832 F.2d 1236 (US CA 11th Cir)........................... 2-020 Metcash Trading Ltd v 8 Nai Investments Pty Ltd [2011] FCA 1400 .................................................... 10-060 Miller, Re (1977) 545 F 2d 916 (US CA 5th Circ).........................................................................1-065; 2-025 Moffett, In re (2004) 356 F 3d 518 (US CA 4th Cir) ................................................................................ 4-195 Money in a Minute Auto Loans Ltd v Price (2002) 4 PPSAC (3d) 99 (BC SC)....................................... 1-075 Monks v Poynice Pty Ltd (1987) 8 NSWLR 662 ...................................................................................... 2-015 Morris v Woodings (1997) 25 ACSR 636 ............................................................................................... 10-060 Mutual Pools & Staff Pty Ltd v Commonwealth (1994) 179 CLR 155 .................................................... 8-015

N NAV Canada v Wilmington Trust Co (2006) 10 PPSAC (3d) 66; 269 DLR (4th) 79 .............................. 3-040 NCO Finance Australia Pty Ltd v Australian Pacific Airports (Melbourne) Pty Ltd [2013] FCCA 2274......................................................................................................................1-045; 9-090; 9-095; 9-105 NFT Specialized in Tower Cranes LLC v Machforce Pty Ltd (in liq), Re [2017] WASC 95 .....5-215; 10-060 N’Amerix Logistix Inc, Re (2001) 57 OR (3d) 248 (Ont SCJ) ................................................................. 1-045 National Australia Bank Ltd v Blacker (2000) 104 FCR 288; [2000] FCA 1458..................................... 1-045

Annotated Personal Property Securities Act 2009 (Cth)

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882

Case Table Paragraph

National Australia Bank Ltd v Davis & Waddell (Vic) Pty Ltd [2003] VSC 1; (2003) 44 ACSR 296........................................................................................................................................................ 10-060 National Australia Bank Ltd v Garrett [2016] FCA 714 .........................................1-045; 1-065; 5-035; 5-205 National Bank of Canada v Lasalle Excavating of Sudbury Ltd (1986) 5 PPSAC 279 ............................ 8-040 National Bank of Canada v Makin Metals Ltd (1992) 4 PPSAC (2d) 167; 106 Sask R 266 .................... 2-035 National Bank of Canada v Makin Metals Ltd (1994) 6 PPSAC (2d) 164; 116 Sask R 237 (Sask CA)..............................................................................................................................................2-035; 2-065 National Provincial Bank Ltd v Ainsworth [1965] AC 1175 .........................................................1-045; 1-065 National Westminster Bank Ltd v Halesowen Presswork & Assemblies Ltd [1972] AC 785.................. 1-045 New Solutions Financial Corp v 952339 Ontario Ltd (2007) 10 PPSAC (3d) 246; 29 CBR (5th) 222.......................................................................................................................................................... 2-080 New Zealand Associated Refrigerated Food Distributors Ltd v Simpson [2008] NZHC 951 .................. 3-095 New Zealand Bloodstock Ltd v Waller and Agnew (2005) FPPSR ¶700-002; [2006] 3 NZLR 629...............................................................................................................................................1-070; 2-020 Newcourt Credit Group Inc v GA Finance Inc (1998) 13 PPSAC (2d) 372 ............................................. 1-065 Nichibo Trading Company New Zealand Ltd v Lucich [2011] NZHC 722; (2011) 9 NZBLC 103,253........................................................................................................................................2-150; 2-155 Nicholson Leasing 1994 Ltd v Saskatchewan Government Growth Fund II Ltd (1999) 14 PPSAC (2d) 285 (Alta QB)................................................................................................................................. 1-075 994814 Ontario Inc v RSL Canada Inc (2006) 9 PPSAC (3d) 240; 20 CBR (5th) 163 (Ont CA) ............ 2-020 Nintendo Co Ltd v Centronics Systems Pty Ltd (1994) 181 CLR 134 ..................................................... 8-015 Noriega, Re (2003) 15 Alta LR (4th) 79; 42 CBR (4th) 274..................................................................... 5-100 North Platte State Bank v Production Credit Association of North Platte (1972) 200 NW 2d 1 (Neb SC) ................................................................................................................................................ 1-075 North Shore City Council v Stiassny [2009] 1 NZLR 342 (NZ CA) ........................................................ 1-065 North Shore Gas Co Ltd v Commissioner of Stamp Duties (NSW) (1940) 63 CLR 52 ........................... 1-045 Northwest Equipment Inc v Daewoo Heavy Industries America Corp (2002) 3 PPSAC (3d) 101; 1 Alta LR (4th) 14 (Alta CA)........................................................ 2-045; 2-120; 2-140; 2-155; 4-025; 7-035 Numeric Corp, Re (1973) 485 F 2d 1328 (USCA 1st Circ) ...................................................................... 2-025

O OM Scott Credit Corp v Apex Inc (1964) 198 A 2d 673........................................................................... 2-275 ORIX New Zealand Ltd v Milne [2007] 3 NZLR 637 ...................................................................2-140; 2-155 Ogden v Award Realty Inc (1999) 14 PPSAC (2d) 99.............................................................................. 1-065 Old Colony LLC, Re (2012) 476 BR 1, 18ff (Bankr Dist Mass)............................................................... 1-045 1153496 Ontario Ltd, Re (1996) 11 PPSAC (2d) 149; 25 BLR (2d) 285 .......................... 1-065; 4-055; 4-060 1662254 Ontario Inc v Coby’s Cookies Inc (2008) 12 PPSAC (3d) 150.................................................. 2-230 OneSteel Manufacturing Pty Ltd (admin apptd), Re [2017] NSWSC 21... 5-045; 5-100; 5-105; 5-135; 8-015; 10-060 OneSteel Manufacturing Pty Ltd; In re OneSteel Manufacturing Pty Ltd v [2017] FCA 325................ 10-055 1231640 Ontario Inc, Re (2007) 13 PPSAC (3d) 57; 289 DLR (4th) 684 ......................... 2-025; 2-050; 2-200 101056998 Saskatchewan Ltd v Kipp & Zonen Inc (2004) 7 PPSAC (3d) 365; 265 Sask R 153 ............ 4-155 101056998 Saskatchewan Ltd v Kipp & Zonen Inc (2005) 8 PPSAC (3d) 25 ......................................... 4-155 Ontario Dairy Cow Leasing Ltd v Ontario (Milk Marketing Board) (1993) 4 PPSAC (2d) 269.............. 2-085 Ontario Equipment, Re (1976) Ltd (1981) 1 PPSAC 303; 33 OR (2d) 648.............................................. 1-065 Ontario Equipment, Re (1982) 141 DLR (3d) 766; 35 OR (2d) 194......................................................... 1-065 Overflow FNQ Pty Ltd (in liq); Kelly v Austwide Consumer Products Pty Ltd [2017] QSC 76 ........... 10-055

P P Twin Holdings Pty Ltd v SG Old Pty Ltd [2017] WADC 77 ................................................................ 2-025 Paccar Financial Services v Sinco Trucking Ltd (Trustee of) (1989) 9 PPSAC 7; 74 Sask R 181 (Sask CA)....................................................................................................................................1-070; 2-045 Pacific Shores Resort & Spa Ltd, Re (2013) 1 PPSAC (4th) 131; [2013] BCSC 480 .............................. 7-125 Palmdale Hills Property LLC, In re (2011) 457 BR 29 (US Bankr Appeal Panel 9th Circ) ..................... 1-075

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Paradise Valley Marine Ltd, Re (1997) 7 CBR (4th) 252 (BC SC) .......................................................... 1-075 Parker v British Airways Board [1982] QB 1004...................................................................................... 2-045 Paul, Re (1986) 53 OR (2d) 225; 5 PPSAC 86.......................................................................................... 1-045 Pauls Ltd v Dwyer [2002] 2 Qd R 176; [2002] QCA 545 ......................................................................... 8-015 Payless Cashways Inc, In re (2002) 273 BR 789....................................................................................... 5-045 People ex rel, Franchise Tax Board v Credit Managers Assn (1977) 76 Cal App 3d 344 (Cal CA) ........ 1-045 Petron Trading Co Inc v Hydrocarbon Trading and Transport Co Inc (1986) 663 F Supp 1153 (US DC, ED Pennsylvania).................................................................................................................... 1-045 Planwest Consultants Ltd v Milltimber Holdings Ltd (1995) 10 PPSAC (2d) 116; 32 Alta. LR (3d) 397; (1997) 54 Alta LR (3d) 256 ................................................................................................... 1-070 Pluton Resources Ltd (Rec & Man Appt) (in liq), Re [2017] WASC 142 ................................................ 1-045 Polymers International Ltd v Toon (2013) FPPSR ¶700-015; [2013] NZHC 1897 .................................. 5-100 Poplar Properties Ltd v Cranewood Financial Corp (2002) 5 PPSAC (3d) 53; 38 CBR (4th) 43............. 4-085 Poss v Melfort Credit Union Ltd (1993) 5 PPSAC (2d) 72....................................................................... 3-025 Power Rental Op Co Australia, LLC v Forge Group Power Pty Ltd (in liq) (recs and mgrs apptd) [2017] NSWCA 8; (2017) 93 NSWLR 765.................................................................... 1-045; 1-065; 1-070 Powers v Mesaros (2007) 12 PPSAC (3d) 128 (BC SC)........................................................................... 4-025 Pratt & Whitney Canada Leasing Inc v Ellis Air Inc (2002) 6 PPSAC (3d) 84; 3 CBR (5th) 81 ............. 3-050 PricewaterhouseCoopers LLP v Cranewood Financial Corp (2000) 5 PPSAC (3d) 47............................ 4-025 Prince Edward Island Potato Board v Cardigan Feed Services Ltd (2006) 10 PPSAC (3d) 135; 262 Nfld & PEIR 91 .............................................................................................................................. 2-030 Printz, In re (2012) 478 BR 876 (US Bankr Court for CD Ill) .................................................................. 2-325 Pristas v Landaus of Plymouth Inc (1984) 742 F2d 797 ........................................................................... 1-075 Producers Cotton Oil Co v Amstar Corp (1988) 197 Cal App 3d 638 ...................................................... 2-325 Production Enhancement Group Inc, Re (2011) 18 PPSAC (3d) 6; 79 CBR (5th) 33 (Alta QB)............. 1-065 Production Printing (Aust) Pty Ltd (in liq), Re [2017] NSWSC 505 ........ 5-045; 5-095; 5-110; 8-015; 10-055 ProGrowth Bank Inc v Wells Fargo Bank NA (2009) 558 F 3d 809, 812 ................................................ 5-030 Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355......................10-055; 10-060 Puritan Finance Corp v Bechstein Construction Corp (2012) 980 NE 2d 135.......................................... 2-325

Q Quality Blended Liquor Pty Ltd, Re [2014] QSC 234; (2014) 102 ACSR 451; 2 Qd R 381.................. 10-060 Queensland Company Credit Union v Na-Kuraga Ltd [2005] QSC 149; (2005) 55 ACSR 219 ............ 10-060 Quistclose Investments Ltd v Rolls Razor Ltd [1970] AC 567 ................................................................. 1-045

R R v Toohey; Ex parte Meneling Station Pty Ltd (1982) 158 CLR 327 ..........................................1-045; 1-065 R and A Bailey and Co v Boccaccio Pty Ltd (1986) 77 ALR 117 ............................................................ 3-125 Rabobank New Zealand Ltd v McAnulty [2011] 3 NZLR 192; [2011] NZCA 212 ................................. 1-070 Rabobank New Zealand Ltd v Stockco Ltd [2010] NZHC 271; (2010) FPPSR ¶700-004....................... 5-100 Radius Credit Union Ltd v Royal Bank (2009) 14 PPSAC (3d) 124; 306 DLR (4th) 444 ............1-065; 2-200 Redi-Mix Ltd v Hub Dairy & Barn Systems Ltd (1987) 7 PPSAC 165; 41 DLR (4th) 360..................... 2-015 Reese v Ellis, Painter, Ratterree & Adams LLP (2012) 678 F 3d 1211 .................................................... 1-065 Rektor, Re (1983) 3 PPSAC 32; 47 CBR (NS) 267 (Ont SC)................................................................... 1-045 Reliable Manufacturing Corp, Re (1983) 703 F 2d 996 (USCA 7th Circ)................................................ 2-020 Renovation Boys Pty Ltd, Re (admins apptd) [2014] NSWSC 340 ...............................................2-155; 2-160 Reynolds Bros (Motors) Pty Ltd v Esanda Ltd (1983) 8 ACLR 422 ........................................................ 2-155 Robie Financial Inc v Pye (2009) 16 PPSAC (3d) 66 (NS SC)................................................................. 5-100 Robinson v Briggs (1870) LR 6 Exch 1..................................................................................................... 2-045 Roy Foss Motors Ltd v Auto Service Finance Centre [2005] CarswellOnt 4074 ..................................... 3-040 Royal Bank v Agricultural Credit Corp of Saskatchewan (1994) 7 PPSAC (2d) 1; 115 DLR (4th) 569.......................................................................................................................................................... 2-030 Royal Bank v Body Blue Inc (2008) 13 PPSAC (3d) 176; 42 CBR (5th) 125 (Ont SCJ)......................... 2-080

Annotated Personal Property Securities Act 2009 (Cth)

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Case Table Paragraph

Royal Bank v Canadian Commercial Corp (2001) 3 PPSAC (3d) 81; 243 NBR (2d) 122 ....................... 1-045 Royal Bank v Cow Harbour Construction Ltd (2012) 19 PPSAC (3d) 31, 59 Alta LR (5th) 215 (Alta QB) ............................................................................................................................................... 1-065 Royal Bank v Moosomin Credit Union (2003) 7 PPSAC (3d) 118; 241 Sask R 1 (Sask CA)......1-065; 1-075; 4-085 Royal Bank v Sparrow Electric Corp [1997] 1 SCR 411; 2 PPSAC (2d) 68; (1997) 12 PPSAC (2d) 68; 143 DLR (4th) 385 (SCC)......................................................................1-045; 1-065; 2-020; 2-085 Royal Bank v Touche Ross (1984) 31 Sask R 131.................................................................................... 5-030 Royal Bank of Canada v Sparrow Electric Corp 1997 CanLII 377 (SCC) ............................................... 7-125 Royal Bank of Canada v 216200 Alberta Ltd (1986) 6 PPSAC 277; 33 DLR (4th) 80 (Sask CA) ......... 2-140; 2-155 Royal Palm Senior Investors LLC v Carbon Capital II Inc 2009 US Dist LEXIS 57452......................... 4-195

S SFS Projects Australia Pty Ltd v Registrar of Personal Property Securities [2014] FCA 846; (2014) 226 FCR 188 ...................................................................................................................5-020; 5-225 SFS Projects Australia Pty Ltd v Registrar of Personal Property Securities (No 2) [2014] FCA 987.......................................................................................................................................................... 5-150 SM Construction v Folmar Electric Ltd (2000) 1 PPSAC (3d) 150; 188 DLR (4th) 494 ..............2-295; 2-300 ´ ecom ´ SR Tel & Co v Apex — Micro Manufacturing Corp (2008) 15 PPSAC (3d) 136; 52 CBR (5th) 204 (BC SC).................................................................................................................................. 2-065 Sandhurst Golf Estates Pty Ltd v Coppersmith Pty Ltd [2014] VSC 217 ........................ 1-0651; 5-030; 5-035 Sanwa Australia Finance Ltd v Ground-Breakers Pty Ltd (in liq) [1991] 2 Qd R 456; (1990) 2 ACSR 692 ............................................................................................................................................ 10-060 Saskatchewan Economic Development Corp v Pryor (1992) 3 PPSAC (2d) 235..................................... 2-150 Saulnier v Royal Bank of Canada [2008] 3 SCR 166; 298 DLR (4th) 193....................................1-045; 1-065 Saulnier (Receiver of) v Saulnier [2008] SCC 58; (2008) 3 SCR 166 (SCC)........................................... 4-050 Scandees Danish Home Ice Creem Pty Ltd, Re [1995] 2 Qd R 678 ......................................................... 4-185 Scott Auto Sales Ltd v Becker (2012) 19 PPSAC (3d) 329; 99 CBR (5th) 148 (BCSC).......................... 2-020 Service Foods Manawatu Ltd (in rec and liq) v NZ Associated Refrigerated Food Distributors Ltd (2006) 9 NZCLC 263,979 ............................................................................................................... 5-100 The Ship ‘‘Sam Hawk’’ v Reiter Petroleum Inc (2016) 246 FCR 337; [2016] FCAFC 26 ..........1-045; 2-290; 7-035 Silver Spoon Developments Ltd v Botham Holdings (Trustee of) (2008) 13 PPSAC (3d) 257; 299 DLR (4th) 519 (BC SC).................................................................................................................. 2-020 Simpson v New Zealand Associated Refrigerated Food Distributors Ltd [2007] 2 NZLR 130................ 5-100 674921 BC Ltd v Advanced Wing Technologies Corp (2006) 9 PPSAC (3d) 43; 263 DLR (4th) 290 (BC CA) ........................................................................................................2-015; 2-025; 2-030; 2-200 Skinner v Jeogla Pty Ltd (2001) 19 ACLC 1,163...................................................................................... 4-125 Skybridge Holidays Inc, Re (1999) 15 PPSAC (2d) 24 (BC CA) ..................................................1-045; 1-065 Southern Engineering Services Pty Ltd (in liq) ACN 000 091 716, In re [2014] NSWSC 1882............ 10-060 Southern Property Rentals Ltd v Deloitte & Touche Inc (1998) 14 PPSAC (2d) 335; 6 CBR (4th) 141 (Alta QB) ........................................................................................................................................ 8-030 Spencer v Cth (1907) 5 CLR 418 .............................................................................................................. 4-125 Sperry Inc v Canadian Imperial Bank of Commerce and Throne Riddle Inc (1985) 4 PPSAC 314; 17 DLR (4th) 236 (Ont CA)........................................................................................................2-065; 2-200 Spir-l-ok Industries Canada Ltd v Bank of Montreal (1985) 41 Sask R 128 ............................................ 8-060 Spittlehouse v Northshore Manne Inc (1994) 7 PPSAC (2d) 67; 114 DLR (4th) 500 (Ont CA).............. 2-140 Stelco, Re (2005) 7 PPSAC (3d) 281; 253 DLR (4th) 524........................................................................ 1-045 Stephanian’s Persian Carpets Ltd, Re (1980) 34 CBR (NS) 35 (Ont Bktcy) ............................................ 1-065 Stevenson v GMAC Lease Co Ltd (2003) 257 NBR (2d) 141; 227 DLR (4th) 154 ................................. 5-100 Stewart v Atco Controls Pty Ltd (in liq) [2014] HCA 15; (2014) 252 CLR 307 ...................................... 2-015 Stiassny v Commr of IR [2013] 1 NZLR 453; [2012] NZSC 106............................................................. 2-270 Stiassny v The North Shore City Council [2009] 1 NZLR 342 (NZ CA) ................................................. 1-045

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Stockco Ltd v Gibson [2012] NZCA 330; (2012) 10 NZBLC ¶99-709 ..................2-085; 2-155; 3-095; 4-025 Stockco Ltd v Walker [2011] NZHC 601.................................................................................................. 2-290 Stoke Resources & Consulting Inc v Auto Body Services Red Deer Ltd (2009) 15 PPSAC (3d) 329; 59 CBR (5th) 290........................................................................................................................... 2-100 Stoke Resources & Consulting Inc v Auto Body Services Red Deer Ltd [2011] ABCA 370 .................. 1-070 Strategic Finance Ltd v Bridgman [2013] 3 NZLR 650; [2013] NZCA 357 .................................1-065; 1-075 Swindle v Matakana Estate Ltd (in liq) [2011] NZHC 1345; [2012] 1 NZLR 806........................2-155; 3-095 Sycom Enterprises LP, In re (2004) 310 BR 669 ...................................................................................... 2-325 Systran Financial Services Corp v Giant Cement Holding (2003) 252 F Supp 2d 500............................. 2-325

T TCE Capital Corp v Kolenc (Trustee of) (1999) 14 PPSAC (2d) 257; 172 DLR (4th) 186 (Ont SC) ......................................................................................................................................................... 1-065 TLK Transport Pty Ltd v Thornthwaite Pty Ltd t/a Yass Valley Mobile Mechanic [2014] NSWCATCD 147 .................................................................................................................................. 5-065 Tanbro Fabrics Corp v Deering Milliken Inc (1976) 350 NE 2d 590 ....................................................... 2-155 The Tapp Inn Pty Ltd v Matthews [2015] SASCFC 188......................................................................... 10-055 Taylor v Bank of New Zealand [2010] NZHC 2256 ................................................................................. 4-025 Terminal Moving and Storage Co Inc, Re (1980) 631 F 2d 547 (USCA 8th Circ)................................... 2-020 Thackray v Gunns Plantations Ltd [2011] VSC 380; (2011) 85 ACSR 144 ............................................. 2-015 Thomas v Price (1992) 975 F 2d 231 (USCA 5th Cir) .............................................................................. 4-125 Thompson v Goold & Co [1910] AC 409 ................................................................................................. 1-070 Thomson v Golden Destiny Investments Pty Ltd (No 2) [2015] NSWSC 1929 ....................................... 1-045 Thorn v RFD Finance Ltd [2012] NZHC 1959; (2012) FPPSR ¶700-010................................................ 4-040 Timothy Dean’s Inc v White (2006) 342 BR 1.......................................................................................... 2-325 Toll Logistics (NZ) Ltd v McKay [2011] NZCA 188 ............................................................................... 2-290 Toronto Dominion Bank v Co-Pac Ltd (1999) 15 PPSAC (2d) 52; 178 DLR (4th) 149 .......................... 2-080 Toronto Dominion Bank v Flexi-Coil Ltd (1993) 4 PPSAC (2d) 288; 107 Sask R 221 (Sask QB) ......... 2-025 Toronto Dominion Bank v Royal Bank (1998) 15 PPSAC (2d) 16 .......................................................... 2-230 Toyota Finance New Zealand Ltd v Christie [2009] NZHC 827 .............................................................. 5-205 Transurban CCT Pty Ltd (in its own capacity and as trustee for the Transurban CCT Trust), Re [2014] NSWSC 1909 ........................................................................................................................... 10-060 Transamerica Commercial Finance Corp Canada v Karpes (1994) 8 PPSAC (2d) 86 ............................. 2-085 Transamerica Commercial Finance Corp Canada v Royal Bank (1990) 1 PPSAC (2d) 61; 70 DLR (4th) 627; (1990) FPPSR ¶700-104 ....................................................................... 2-045; 2-080; 2-245 Treasury Wine Estates Vintners Ltd v Garrett [2016] FCA 715 ............................................................... 1-045 Tubbs v Ruby 2005 Ltd [2010] NZCA 353............................................................................................... 2-155 241301 Alberta Ltd v 482176 BC Ltd (2003) 6 PPSAC (3d) 32; 46 CBR (4th) 156.....................4-120; 4-145 356447 BC Ltd v Canadian Imperial Bank of Commerce (1998) 13 PPSAC (2d) 155; 157 DLR (4th) 682 (BC CA) ................................................................................................................................. 1-065 369413 Alberta Ltd. v Pocklington (2000) 194 DLR (4th) 109; 271 AR 280 (Alta CA) ......................... 2-155

U US Aeroteam Inc v Delphi Automotive Systems LLC (2005) 327 BR 852.............................................. 2-325 Unger v Royal Bank of Canada (1983) 30 Sask R 183; 51 CBR (NS) 145 (Sask QB)............................. 1-075 Unisource Canada Inc v Hongkong Bank of Canada (1998) 14 PPSAC (2d) 112; 43 BLR (2d) 226 (Ont SC GD) .................................................................................................1-075; 2-085; 3-100; 3-115 Unisource Canada Inc v Hongkong Bank of Canada (2000) 15 PPSAC (2d) 95...................................... 3-100 Universal Distributing Co Ltd (in liq), Re (1933) 48 CLR 171................................................................. 2-015 Universal Handling Equipment Co v Redipac Recycling Inc (1992) 4 PPSAC (2d) 15 (Ont Court of Justice) ............................................................................................................................................... 2-025 Universal Trucks and Equipment Ltd v Reynolds [2012] NZHC 483 ...................................................... 5-205 Unisource Canada Inc v Hongkong Bank of Canada (1998) 14 PPSAC (2d) 112; 43 BLR (2d) 226; (Ont SC GD) (varied in (2000) 15 PSSAC (2d) 95 (Ont CA))........ 1-075; 2-085; 3-100; 3-115; 8-030

Annotated Personal Property Securities Act 2009 (Cth)

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Case Table Paragraph

V VW Credit Canada Inc v Roberts (2001) 2 PPSAC (3d) 124; 197 DLR (4th) 274 (NS CA).................... 7-170 Valley Vista Golf Course Ltd (Receiver of) v Maxium Financial Services Inc (2003) 6 PPSAC (3d) 128; 214 NSR (2d) 91 .................................................................................................................... 5-100 Vegar-Fitzgerald v Noyce, Mawdsley and Matakana Estate Ltd [2012] NZHC 1311; (2012) FPPSR ¶700-008.................................................................................................................................... 5-205

W Walker v European Electronics Pty Ltd (in liq) (1990) 23 NSWLR 1...................................................... 2-155 Waller v New Zealand Bloodstock Ltd [2005] 3 NZLR 629 .................................................................... 2-200 Warehouse Sales Pty Ltd (in liq) & Lewis and Templeton v LG Electronics Australia Pty Ltd [2014] VSC 644; (2014) 291 FLR 407 .................................................... 2-085; 2-140; 2-155; 7-125; 8-050 Wawanesa Mutual Insurance Co v Rosario Enterprises Ltd (2000) 15 PPSAC (2d) 270; 146 Man R (2d) 236 (MB QB).............................................................................................................................. 4-195 Weiner v Harris [1910] 1 KB 285.............................................................................................................. 1-065 Western Express Air Lines Inc, Re (2005) PPSAC (3d) 229; 10 CBR (5th) 154 ..................................... 1-070 Westpac Banking Corp v Royal Tongan Airlines (1996) Aust Torts Reports ¶81-403 ............................ 1-070 Wheatland Industries (1990) Ltd v Baschuk (1994) 8 PPSAC (2d) 247; 127 Sask R 178 (Sask QB)......................................................................................................................................................... 1-075 White, Re (2006) 352 BR 633 ................................................................................................................... 1-075 White v Spiers Earthworks Pty Ltd (2014) 99 ACSR 214; [2014] WASC 139 .....1-065; 1-070; 2-200; 8-015; 9-095 Will and Estate of Hood, Re [2004] VSC 328........................................................................................... 7-020 Willi v Don Shearer Ltd (1993) 5 PPSAC (2d) 179; 107 DLR (4th) 121 (BC CA).................................. 2-140 Willoughby v Willoughby (1756) 99 ER 1366.......................................................................................... 2-015 Winnipeg Motor Express Inc, Re (2009) 15 PPSAC (3d) 242; 56 CBR (5th) 265 (MB CA)........1-065; 2-085

Y Yuan v Mah Investments Ltd (2001) 2 PPSAC (3d) 159; 205 Sask R 22................................................. 4-145

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SECTION FINDING LIST References are to paragraph numbers.

AUSTRALIAN LEGISLATION Acts Interpretation Act 1901 (Cth) Section Paragraph

22(1)(aa)..................................................5-140 28A..........................................................8-070 Section

Air Services Act 1995 (Cth) Paragraph

59.............................................................1-045 Banking Act 1959 (Cth) Section

Paragraph

Generally.................................................2-050 Section

Bills of Exchange Act 1909 (Cth) Paragraph

Generally.................................................2-275 Section

Chattel Securities Act 1987 (Vic) Paragraph

Generally.................................................2-150 Cheques Act 1986 (Cth) Section

Paragraph

Generally.................................................2-275 Commonwealth of Australia Constitution Act 1900 (Commonwealth Constitution) Section Paragraph

51.............................................................7-060 Competition and Consumer Act 2010 (Cth) Section Paragraph

47.............................................................1-075 Sch 2........................................................1-075 Generally.................................................2-160 Section

Corporations Act 2001 (Cth) Paragraph

1.............................................................10-060 2.............................................................10-060 9........................................ 4-045; 4-050; 8-040 51................................ 10-060; 10-065; 10-070 51C.............................................. 1-065; 9-165 51F ..........................................................8-050 58AA.....................................................10-060 90.............................................................4-050 109X........................................................8-070

Section

Paragraph

180...........................................................8-040 181...........................................................8-040 Ch 2E ......................................................8-180 262...........................................................9-095 262(2)(c) .................................................1-065 263............................................. 2-030; 10-055 265(9)......................................................9-095 266........................................... 10-055; 10-060 266(1)....................................................10-060 266(4)....................................................10-060 267...........................................................4-185 416...........................................................4-050 420A........................................................4-125 433............................................... 9-165; 9-170 Pt 5.3A (435A–451D).............................1-045 436A........................................ 10-055; 10-060 436B........................................ 10-055; 10-060 436C........................................ 10-055; 10-060 443F ........................................................1-045 461(1)....................................................10-060 513A......................................................10-055 513B......................................................10-055 513C......................................................10-055 553C................................. 1-045; 2-325; 7-145 555...........................................................2-015 556...........................................................2-015 561.................................... 4-185; 9-170; 9-165 588FA ...................................................10-055 588FF ....................................................10-055 588FJ....................................... 10-055; 10-060 588FK–588FO ........................................8-015 588FL... 2-030; 2-200; 8-015; 10-055; 10-060; 10-065; 10-070 588FL(1) .................... 10-055; 10-060; 10-070 588FL(2) ................................. 10-055; 10-060 588FL(2)(b)(iv).......................................2-030 588FL(4) ....... 2-030; 10-055; 10-060; 10-065; 10-070 588FL(7) ................................. 10-055; 10-065 588FL(17) .............................................10-055 588FM... 2-030; 2-200; 9-155; 10-055; 10-060 588FM(1) ..............................................10-060 588FM(2) ..............................................10-060 588FM(3) ..............................................10-060 588FN ...................................................10-065 588FN(1)...............................................10-065

Annotated Personal Property Securities Act 2009 (Cth)

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Section Finding List

Section

Paragraph

588FN(2)...............................................10-065 588FN(3)...............................................10-065 588FO ...................................................10-070 588FP ...................................... 10-060; 10-075 588M .......................................................2-030 Ch 7.........................................................2-060 Pt 7.1 Div 3 ................................. 1-080; 2-045 1499.......................................................10-080 1500.......................................................10-085 1501.......................................................10-090 1501A....................................................10-095 1501B....................................................10-100 1502.......................................................10-105 1503.......................................................10-110 1504.......................................................10-115 1505.......................................................10-120 1506.......................................................10-125 1507.......................................................15-130 1508.......................................................10-135 1509.......................................................10-140 1510.......................................................10-145 Generally.................................................1-065 Fair Work Act 2009 (Cth) Section

Paragraph

324...........................................................1-045 Goods Act 1986 (NSW) Section

Paragraph

Generally.................................................2-150 Section

Life Insurance Act 1995 (Cth) Paragraph

200...........................................................1-045 National Consumer Credit Protection Act 2009 (Cth) Section Paragraph

Sch 1........................................................4-065 Sch 1 cl 5-7 .............................................4-065 Sch 1 Pt 13 ..............................................4-065 Section

Partnership Act 1892 (NSW) Paragraph

41(a) ........................................................1-045 Payment Systems and Netting Act 1998 (Cth) Section Paragraph

Generally.......................... 1-045; 1-065; 4-100 Personal Property Securities Act 2009 (Cth) Section Paragraph

1(1)(y) .....................................................1-070

Section

Paragraph

2...............................................................9-035 3...............................................................7-150 4...............................................................9-015 5........................................ 1-070; 4-065; 9-015 6......2-120; 2-125; 4-065; 5-040; 7-030; 9-165 6(1A) .......................................................1-080 7........................................ 2-120; 2-125; 4-065 8.....1-065; 2-035; 2-050; 2-070; 2-080; 2-105; 2-185; 2-200; 2-270; 2-275; 2-285; 2-290; 2-295; 2-300; 3-015; 3-020; 4-055; 7-025; 7-135; 9-020; 9-165 8(1)................................... 1-045; 1-045; 1-065 8(1)(a) .....................................................1-045 8(1)(b) ......................................... 1-045; 1-065 8(1)(c) ......................................... 1-045; 1-065 8(1)(d) .............................. 1-045; 1-065; 2-085 8(1)(e) ......................................... 1-045; 1-065 8(1)(f)....................1-045; 1-065; 2-015; 2-080 8(1)(f)(i) ..................................................1-045 8(1)(f)(ii) .................................................1-045 8(1)(f)(iv) ................................................1-045 8(1)(f)(v) .................................................1-045 8(1)(f)(vi)–(ix) ............................ 1-045; 1-065 8(1)(f)(x) .................................................1-045 8(1)(h) .....................................................1-045 8(1)(i) ......................................................1-045 8(1)(j) ............................... 1-045; 1-065; 1-070 8(1)(ja) ....................................................1-045 8(1)(jb) ....................................................1-045 8(1)(jc) ....................................................1-045 8(1)(k) .....................................................1-045 8(1)(l) ......................................................1-045 8(2).............................................. 1-045; 1-065 8(3)(b) .....................................................2-150 8(5)..........................................................1-045 10 definitions – ‘‘accession’’ ............2-190; 3-040; 3-045; 3-050; 3-055; 3-060; 3-065; 3-070; 3-075; 3-080; 3-085 – ‘‘account’’ ... 1-045; 1-065; 1-080; 2-115; 2-245; 2-305; 2-310; 2-325; 2-330; 7-030; 7-040; 7-050 – ‘‘account dector’’ ............................2-325 – ‘‘ADI’’ .............................................2-300 – ‘‘ADI account’’ .......1-065; 2-050; 2-090; 2-300; 7-040 – ‘‘advance’’ ........................... 2-215; 3-050 – ‘‘after-acquired property’’ ... 2-015; 8-060 – ‘‘attaches’’ .......................................2-020 – ‘‘Australian entity’’ .........................5-040 – ‘‘chattel paper’’ .......1-065; 1-075; 2-080; 2-115; 2-280; 2-305; 2-325; 2-330; 7-020; 7-030

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– ‘‘collateral’’ .....................................2-295 – ‘‘commercial consignment’’ ..........1-065; 1-075; 4-015 – ‘‘commercial property’’ ...... 2-025; 5-045 – ‘‘commingling’’ ..............................3-095 – ‘‘company’’ .....................................8-015 – ‘‘consigned’’ ...................................2-020 – ‘‘consumer property’’ ......... 1-070; 2-025; 5-045 – ‘‘crops’’ .........3-015; 3-020; 3-025; 4-170 – ‘‘currency’’ ............... 2-020; 2-165; 2-330 – ‘‘debtor’’ ............................. 1-065; 4-020 – ‘‘defect’’ ................... 5-100; 5-105; 5-110 – ‘‘description’’ ..................................2-025 – ‘‘document of title’’ ........... 1-045; 2-035; 2-250; 7-045 – ‘‘equipment’’ ...................................2-025 – ‘‘evidential burden’’ ........................5-140 – ‘‘execution creditor’’ ........... 2-150; 2-295 – ‘‘financial products’’ .......................1-080 – ‘‘financial property’’ .......... 2-125; 2-310; 7-045 – ‘‘financial change statement’’ ........9-135; 9-145 – ‘‘financing change statement’’ .......5-030; 5-035; 5-040; 5-055; 5-060; 5-090; 5-120; 9-060; 9-140 – ‘‘financing statement’’ ....... 1-065; 2-030; 5-030; 5-035; 5-040; 5-055; 5-060; 5-090; 5-120; 5-135; 5-150; 5-155; 9-060; 9-130; 9-135; 9-140; 9-145 – ‘‘fish’’ .................................. 3-020; 3-030 – ‘‘fixtures’’ .......................................1-045 – ‘‘future advance’’ ............................2-015 – ‘‘general law’’ .................................1-045 – ‘‘goods’’ ...... 2-100; 2-240; 2-305; 3-020; 3-045; 3-060; 3-065; 7-035; 8-025 – ‘‘grantor’’ ................. 1-065; 4-020; 4-035 – ‘‘intangible property’’ ........ 2-125; 4-085; 7-030; 7-040 – ‘‘intellectual property’’ ...... 2-080; 3-125; 3-130; 4-110; 7-030; 7-040 – ‘‘intellectual property licence’’ ......3-125; 3-130; 7-030; 7-040; 9-050 – ‘‘interest’’ ........................................5-185 – ‘‘intermediated security’’ ... 1-075; 2-080; 2-310; 4-015 – ‘‘inventory’’ ............2-025; 2-145; 2-150; 2-155; 2-235; 2-240; 2-245; 9-170; 9-175 – ‘‘investment instrument’’ ... 1-075; 1-080; 2-045; 2-060; 2-080; 2-085; 2-170; 2-175; 4-015; 7-020 – ‘‘land’’ ................................. 1-045; 4-055

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– ‘‘licence’’ .... 1-045; 1-065; 4-030; 4-085; 4-090; 7-130 – ‘‘livestock’’ ...3-020; 3-030; 4-165; 4-175 – ‘‘modification’’ ................... 2-325; 4-060 – ‘‘negotiable document of title’’ ......2-100; 2-285 – ‘‘negotiable instrument’’ .... 1-045; 1-075; 2-045; 2-065; 2-070; 2-275; 7-020; 7-040; 7-045 – ‘‘new value’’ ...........2-150; 2-160; 2-185; 2-245; 2-280; 4-150; 8-020 – ‘‘other financial instruments or other financial assets’’ .............................1-080 – ‘personal property’’ ............ 1-045; 1-065; 4-055; 5-140; 7-125; 7-130; 7-145; 9-035 – ‘‘predominantly for personal, domestic or household use’’ ..........1-075; 2-160; 4-015; 4-045; 4-065; 5-185 – ‘‘property’’ ......................................1-065 – ‘‘secured party’’ ......2-030; 4-020; 4-035; 4-195 – ‘‘security agreement’’ ........ 2-025; 2-215; 2-320; 3-125; 3-130; 4-045; 4-085; 4-090; 4-095; 5-050; 7-040; 7-045; 7-140; 7-155; 7-160; 8-060; 8-100; 8-180; 9-020; 9-035; 9-050; 9-075 – ‘‘security interest’’ ..........................1-065 – ‘‘serial number’’ ....... 1-075; 2-145; 5-135 – ‘‘transfer of an account’’ .................1-045 – ‘‘transfer of account or chattel paper’’ .............................................4-015 – ‘‘value’’ ....... 1-070; 1-075; 2-020; 2-140; 2-175; 2-180; 2-275; 2-285; 3-025; 3-030; 3-050; 3-075; 3-080; 3-105; 8-180 – ‘‘writing’’ ........................................2-025 12–14.......................................................2-035 12...1-045; 1-065; 1-070; 1-075; 2-020; 2-035; 2-080; 2-190; 2-200; 2-240; 2-275; 3-055; 3-130; 4-015; 5-035; 7-025; 7-030; 7-050; 8-025; 8-030; 8-050; 9-020; 9-025; 9-085; 9-105; 9-165; 9-175; 10-055 12(1)......... 1-045; 1-065; 1-070; 1-075; 2-020; 2-235; 8-050 12(1)(k) ...................................................2-260 12(2)................................. 1-065; 1-070; 9-165 12(2)(a) ...................................................1-065 12(2)(b) ...................................................1-065 12(2)(c) ...................................................1-065 12(2)(d)–(f) .............................................1-065 12(2)(g) ....................................... 1-045; 1-065 12(2)(h) ....................................... 1-065; 2-020 12(2)(i) ....................................................1-065 12(2)(j) ....................................................1-065

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12(2)(k) ...................................................1-065 12(2)(l) ....................................................1-065 12(3)......... 1-045; 1-065; 2-020; 2-030; 2-260; 2-320; 2-325 12(3)(a) ............................ 1-045; 1-065; 2-245 12(3)(b) ...................................................1-065 12(3)(c) ...................................................1-065 12(3A) .....................................................1-065 12(4)........................................................1-065 12(5)............................................ 1-045; 1-065 12(5)(a) ...................................................1-065 12(6)............................................ 1-065; 2-230 12(6)(a) ...................................................1-065 12(6)(b) ...................................................1-065 13...1-065; 1-070; 1-075; 2-020; 2-030; 2-035; 2-140; 2-200; 2-240; 4-015; 5-035; 8-025; 8-030; 9-020; 9-025; 9-085 13(1)........................................................1-070 13(1)(a) ...................................................1-070 13(1)(b) ....................................... 1-070; 2-200 13(1)(c) ...................................................1-070 13(1)(d) ...................................................1-070 13(2)........................................................1-070 13(2)(a) ...................................................1-070 13(2)(b) ...................................................1-070 13(2)(c) ...................................................1-070 13(2)(d) ...................................................1-070 13(3)............................................ 1-070; 2-035 14...1-065; 1-070; 1-075; 2-035; 2-050; 2-055; 2-060; 2-235; 2-240; 2-245; 3-025; 3-115; 5-045; 9-085 14(1)........................................................1-075 14(1)(a) ...................................................1-075 14(1)(b) ...................................................1-075 14(1)(c) ...................................................1-075 14(1)(d) ...................................................1-075 14(2)............................................ 1-075; 2-060 14(2)(a) ...................................................1-075 14(2)(b) ..................................... 1-0752; 1-080 14(2)(c) ...................................................1-075 14(2A) .....................................................1-075 14(3)........................................................1-075 14(4)........................................................1-075 14(5)........................................................1-075 14(6)........................................................1-075 14(7)........................................................1-075 14(8)........................................................1-075 15....1-080; 2-055; 2-060; 2-085; 2-180; 4-015 – ‘‘intermediated security’’ ... 2-080; 2-170; 2-180 15(1)–(7) .................................................1-080 Pt 2.2 .......................................................2-015 18–20.......................................................2-110

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18–21.......................................................8-050 18...2-015; 2-085; 2-215; 2-230; 2-320; 3-025; 3-030; 3-125; 3-130; 4-045; 4-085; 4-090; 4-095; 5-085; 7-030; 7-040; 7-140; 7-155; 7-160; 7-165; 8-060; 8-100; 8-180; 9-020; 9-035; 9-050; 9-075 18(1)......... 2-015; 2-020; 2-325; 4-015; 4-030; 4-085; 7-030; 7-140 18(2)........................................................2-015 18(3)............................................ 1-070; 2-015 18(4)................................. 2-015; 2-215; 2-225 18(5)................................. 2-015; 4-095; 4-185 19–21........................................... 2-025; 2-090 19...1-065; 1-070; 2-015; 2-020; 2-025; 2-030; 2-025; 2-030; 2-085; 2-200; 2-235; 2-240; 2-245; 2-295; 3-020; 3-045; 3-055; 4-135; 5-050; 5-085; 7-030; 7-035; 7-045; 8-165; 9-090; 9-165 19(1)........................................................2-020 19(2)........................................................2-020 19(2)(a) ...................................................2-020 19(2)(b) ...................................................2-020 19(3)........................................................2-020 19(4)............................................ 2-020; 9-165 19(5)............................................ 1-070; 2-020 19(6)........................................................2-020 20...1-065; 1-070; 2-015; 2-020; 2-025; 2-030; 2-085; 2-090; 2-140; 2-215; 2-230; 2-320; 3-025; 3-030; 3-125; 3-130; 4-045; 4-085; 4-090; 4-095; 4-120; 5-030; 5-050; 5-085; 7-030; 7-140; 7-155; 7-160; 7-165; 8-060; 8-100; 8-180; 9-020; 9-035; 9-040; 9-050; 9-075; 10-055 20(1)(a) ...................................................2-025 20(1)(b) ...................................................2-025 20(1)(b)(i) ...............................................2-025 20(1)(b)(iii) .............................................2-025 20(2)................................. 1-070; 1-080; 2-025 20(2)(a)(ii)...............................................2-025 20(3)........................................................2-025 20(4)............................................ 1-080; 2-025 20(5)............................................ 1-080; 2-025 20(6)................................. 2-025; 2-085; 2-090 21...1-065; 1-070; 1-080; 2-015; 2-025; 2-030; 2-035; 2-045; 2-050; 2-055; 2-060; 2-065; 2-070; 2-100; 2-105; 2-120; 2-140; 2-185; 2-200; 2-205; 2-210; 2-235; 2-260; 2-265; 2-300; 3-050; 3-110; 4-015; 4-085; 4-090; 4-100; 5-030; 5-085; 7-015; 7-035; 7-040; 7-045; 8-015; 8-165; 9-085; 9-095; 9-155; 10-055 21(1)........................................................9-095 21(1)(a) ....................................... 2-030; 9-095

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21(1)(b) ....................................... 2-030; 2-045 21(1)(b)(iii) .............................................2-030 21(2)........................................................2-030 21(2)(a) ...................................................2-030 21(2)(b) ....................................... 2-030; 2-045 21(2)(c) ............................ 2-030; 2-050; 2-210 21(3)............................................ 2-020; 2-030 21(4)........................................................2-030 22...1-045; 2-030; 2-035; 2-100; 2-205; 2-210; 2-250; 2-285; 8-015 22(1)........................................................2-035 22(1)(a) ...................................................2-035 22(1)(b) ....................................... 2-035; 2-045 22(2)............................................ 2-030; 2-035 22(3)............................................ 2-030; 2-035 22(4)........................................................2-035 Pt 2.3 ................................ 2-045; 9-135; 9-175 24–26.......................................................2-170 24–29................................ 4-015; 5-030; 7-045 24...1-070; 2-020; 2-025; 2-030; 2-035; 2-045; 2-060; 2-070; 2-100; 2-150; 2-175; 2-200; 2-205; 2-210; 2-235; 2-240; 2-250; 2-275; 2-280; 2-305; 3-060; 4-090; 4-100; 4-105; 4-170; 4-175; 7-045; 8-170; 10-055 24(1)........................................................2-045 24(2)........................................................2-045 24(3)........................................................2-250 25–29........ 1-080; 2-025; 2-030; 2-050; 2-200; 9-170 25...1-065; 2-050; 2-085; 2-090; 2-125; 2-245; 2-300; 4-085; 7-040; 9-175; 9-180; 10-055 26...1-075; 1-080; 2-060; 2-070; 2-080; 2-085; 2-125; 2-170; 2-310; 4-015 27...1-075; 2-070; 2-080; 2-085; 2-105; 2-175; 2-310; 4-015; 7-020 27(2)........................................................2-060 27(3)........................................................2-060 27(5)........................................................2-060 27(6)........................................................2-060 27(3)(b) ...................................................2-060 28................................................. 4-125; 4-130 29...1-075; 2-025; 2-060; 2-065; 2-070; 2-275; 7-020; 7-045; 9-095; 10-055 Div 1........................................................1-075 30(2)........................................................1-070 Div 2........................................................3-095 31–33........................................... 2-320; 2-330 31–34.......................................................2-210 31...1-080; 2-025; 2-055; 2-060; 2-070; 2-080; 2-085; 2-095; 2-105; 2-210; 2-235; 2-240; 2-245; 3-015; 3-025; 4-065; 4-170; 4-175; 4-185; 5-045; 7-050; 9-175; 9-175 – ‘‘proceeds’’ ......................... 2-080; 2-330

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31(1)(a) ...................................................2-080 31(1)(b) ....................................... 1-045; 2-080 31(1)(c) ...................................................2-080 31(1)(d) ...................................................2-080 31(1)(e) ...................................................2-080 31(2)........................................................2-080 31(3)........................................................2-080 31(4).......... 2-080; 3-015; 3-020; 3-025; 3-030 31(6)........................................................2-080 32............... 2-080; 2-085; 2-090; 2-330; 4-065 32(1)........................................................2-085 32(1)(a) ...................................................2-085 32(1)(b) ...................................................2-085 32(2)........................................................2-085 32(4)........................................................2-085 32(5)........................................................2-085 33...........................2-090; 2-140; 2-185; 2-330 33(1)........................................................2-090 33(2)........................................................2-090 33(3)........................................................2-090 34...2-030; 2-090; 2-095; 2-120; 2-140; 2-185; 2-260; 2-265; 2-320; 3-130 34(1)........................................................2-095 34(1)(a) ...................................................2-095 34(1)(b) ...................................................2-095 34(1)(c) ...................................................2-095 34(2)........................................................2-095 34(3)........................................................2-095 Div 3........................................................2-100 35............... 1-045; 2-100; 2-105; 2-110; 3-040 35(1)(b) ...................................................2-200 36................................................. 2-060; 2-070 37................................................. 2-115; 2-305 37(1)........................................................2-110 38...........................1-065; 2-110; 2-110; 2-305 38(2)............................................ 2-110; 2-305 38(3)(b)(ii) ..............................................3-050 39............... 2-125; 2-140; 2-185; 5-040; 7-020 39(1)(a) ...................................................2-120 39(4)........................................................2-120 40............... 2-120; 2-140; 2-185; 5-040; 7-020 40(5)(b) ...................................................2-125 Pt 2.5 ........ 1-075; 2-045; 2-070; 2-095; 2-110; 2-140; 2-160; 2-170; 2-185; 2-190; 2-235; 2-320; 3-045; 7-035; 7-125; 8-050; 8-165; 8-180 42–52.......................................................2-190 42...2-140; 2-145; 2-150; 2-155; 2-160; 2-165; 2-170; 2-185 43....2-030; 2-140; 2-145; 2-155; 2-185; 2-200 43(2)............................................ 2-140; 2-145 44–51.......................................................2-185 44....1-075; 2-145; 2-150; 2-155; 2-160; 9-125

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44(1)........................................................2-145 44(2)........................................................2-145 44(3)........................................................2-145 45............... 1-075; 2-150; 2-155; 2-160; 2-295 45(1)........................................................2-150 45(2)........................................................2-150 45(3)........................................................2-150 45(3)(b) ...................................................2-150 45(4)........................................................2-150 46...........................2-085; 2-140; 2-155; 2-170 46(1)........................................................2-155 46(2)........................................................2-155 46(2)(b) ...................................................2-155 47...........................1-075; 2-160; 7-035; 8-185 47(1)........................................................2-160 47(2)........................................................2-160 48................................................. 2-165; 2-270 49....1-080; 2-055; 2-060; 2-105; 2-170; 2-175 50...........................2-060; 2-105; 2-175; 2-180 50(1)........................................................2-175 50(2)............................................ 2-175; 2-180 50(3)........................................................2-175 51...................................... 1-080; 2-180; 8-015 51(1)........................................................2-180 51(2)........................................................2-180 52...1-045; 2-030; 2-095; 2-100; 2-120; 2-125; 2-185; 2-285; 5-110 52(1)........................................................2-185 52(2)........................................................2-185 53...................................... 2-140; 2-190; 2-200 53(1)........................................................2-190 53(2)........................................................2-190 53(3)........................................................2-190 Pt 2.6 ........ 1-075; 2-025; 2-035; 2-045; 2-160; 2-200; 2-205; 2-210; 7-020; 7-025; 7-045; 7-125; 8-050; 8-180; 9-015; 9-045 54.............................................................2-160 55...1-075; 2-015; 2-020; 2-025; 2-030; 2-045; 2-080; 2-200; 2-235; 3-025; 5-030; 5-080; 5-085; 9-085; 9-090 55(1)–(6) .................................................2-200 55(2)............................................ 3-110; 9-090 55(3)................................. 1-070; 2-030; 2-200 55(4)............................................ 2-025; 3-110 55(5)........................................................2-025 55(6)................................. 2-030; 2-045; 2-205 56...2-030; 2-045; 2-100; 2-120; 2-125; 2-200; 2-205; 2-210; 2-260; 2-265; 5-095; 5-115; 9-085; 9-095 56(1)........................................................2-205 56(2)........................................................2-205 57...2-050; 2-055; 2-060; 2-200; 2-210; 2-235; 2-245; 7-045

Section

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57(1)............................................ 2-205; 2-210 57(2)........................................................2-210 57(2A) .....................................................2-210 57(3)........................................................2-210 58...................................... 2-215; 2-265; 3-050 60...................................... 2-225; 2-260; 7-015 61................................................. 1-065; 2-230 61(1)........................................................2-230 61(1)(b) ...................................................1-065 Div 3................................. 2-250; 3-045; 3-075 62–64........................................... 2-250; 2-280 62–65........................................... 1-075; 5-045 62...1-065; 1-075; 2-020; 2-045; 2-085; 2-235; 2-240; 2-245; 3-025; 5-085; 9-085 62(1)........................................................2-235 62(2)............................................ 2-235; 3-025 62(2)(b) ...................................................2-235 62(2)(c) ...................................................2-235 62(3)........................................................2-235 62(3)(b) ...................................................2-235 62(3)(c) ...................................................2-235 63...........................2-235; 2-240; 2-245; 3-025 64............... 2-015; 2-085; 2-235; 2-240; 2-245 64(1)........................................................2-245 64(2)........................................................2-245 64(2)(a) ...................................................2-245 64(3)........................................................2-245 65................................................. 2-035; 2-250 Div 4........................................................2-225 66–68.......................................................2-095 66................................................. 2-260; 2-265 67................................................. 2-260; 2-265 68–70.......................................................2-225 68...................................... 2-215; 2-265; 7-125 68(1)–(5) .................................................2-265 68(2)............................................ 2-215; 2-265 68(3)........................................................2-215 68(5)........................................................2-265 Div 5........................................................2-035 69....2-070; 2-080; 2-105; 2-270; 2-275; 4-065 69(1)(b) ...................................................2-270 69(3)........................................................2-270 70............... 2-070; 2-105; 2-275; 2-280; 2-285 71...................................... 1-065; 2-235; 2-280 72...................................... 1-045; 2-185; 2-280 72(a) ........................................................1-045 Div 6........................................................7-025 73...........................1-045; 2-200; 2-290; 9-045 73(2)........................................................2-290 74...........................1-045; 2-150; 2-295; 4-035 75...........................1-065; 2-050; 2-085; 5-085 76................................................. 2-110; 2-115 76(1)–(3) .................................................2-305

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Paragraph

77................................................. 2-120; 2-125 77(4)........................................................2-310 79................................................. 2-320; 4-030 79(2)........................................................2-320 80...........................1-065; 2-280; 7-145; 4-025 80(2)–(4) .................................................2-325 80(6)–(8) .................................................2-325 80(8)........................................................9-175 81................................................. 1-065; 2-280 84–86.......................................................2-020 84...................................... 3-020; 3-025; 4-170 84(1)........................................................3-015 84(2)........................................................3-015 84A................................... 3-015; 3-025; 4-170 85...........................3-015; 3-020; 3-030; 4-170 86....2-235; 2-240; 2-245; 3-025; 3-030; 4-175 Pt 3.3 .................... 1-070; 2-190; 3-040; 3-085 88...3-040; 3-045; 3-050; 3-055; 3-060; 3-065; 3-070; 3-075; 3-080; 3-085; 3-095 89–91.......................................................3-040 89...................................... 3-045; 3-050; 3-055 90–91........................................... 3-040; 3-045 90...................................... 3-045; 3-050; 3-055 91................................................. 3-050; 3-055 92–94.......................................................3-075 92–95................................ 3-040; 3-065; 3-080 92–96.......................................................3-085 92...........................3-060; 3-060; 3-065; 3-070 93–95.......................................................3-060 93...........................2-290; 3-060; 3-065; 3-070 94................................................. 3-070; 3-075 95...........................3-040; 3-060; 3-070; 3-075 95(1)........................................................3-075 95(5)–(7) .................................................3-075 96...................................... 3-040; 3-080; 4-045 97...3-040; 3-060; 3-065; 3-070; 3-080; 3-085; 3-105 Pt 3.4 .................... 3-095; 3-100; 3-105; 3-110 99–102.....................................................3-115 99............... 3-095; 3-100; 3-105; 3-110; 3-115 100–103...................................................3-095 100.................................... 3-100; 3-105; 3-110 101.................................... 3-100; 3-105; 3-110 102.................................... 3-100; 3-105; 3-110 102(1)......................................................3-110 102(3)......................................................3-110 102(4)......................................................3-110 103............ 2-235; 2-240; 2-245; 3-100; 3-105; 3-110; 3-115 Pt 3.5 ........................................... 1-065; 4-110 105............ 1-065; 2-080; 3-125; 3-130; 4-090; 7-030; 7-040; 7-130; 9-050 106–106...................................................2-125

Section

Paragraph

106............. 3-125; 3-130; 7-030; 7-040; 9-050 Ch 4.......... 1-065; 1-070; 1-080; 2-015; 2-045; 2-055; 2-110; 2-320; 3-070; 3-075; 3-080; 8-050; 9-055 109............ 1-065; 1-070; 2-055; 2-060; 4-045; 4-100; 4-115; 4-140; 4-185 109(1)......................................................4-015 109(2)......................................................4-015 109(3)(b) .................................................1-080 109(5)........ 4-015; 4-055; 4-065; 4-100; 4-115 110............................................... 4-015; 4-045 111............ 3-060; 3-065; 3-070; 3-075; 3-080; 4-015; 4-055; 4-085; 4-090; 4-095; 4-110; 4-115; 4-120; 4-125; 4-130; 4-185; 8-040 111(2)......................................................4-025 112...........................................................8-050 112(2)......................................................4-030 112(3)......................................................4-030 113...........................................................4-015 114............................................... 4-020; 4-040 115............ 3-015; 3-020; 3-025; 3-030; 3-075; 3-080; 4-040; 4-045; 4-085; 4-090; 4-095; 4-100; 4-105; 4-110; 4-115; 4-120; 4-130; 4-140; 4-185; 4-195; 4-200; 7-140; 8-040 115(2)......................................................4-045 116...........................................................4-115 116(2)......................................................4-115 117............ 1-045; 3-015; 3-020; 3-025; 3-030; 4-060; 4-065 117(1)(b) .................................................4-055 117(5)......................................................4-060 118...........................................................4-205 118(1)(b) .................................................4-060 118(6).......................................... 4-055; 4-060 120............................................... 2-070; 4-075 120(5)......................................................4-065 121(4)......................................................4-075 121(5)......................................................4-075 Pt 4.3 Div 2 .............................................4-110 123–127...................................................4-065 123............ 3-060; 3-065; 4-085; 4-090; 4-095; 4-100; 4-105; 4-110; 4-130; 4-135; 4-140; 4-170; 4-175 123(2)......................................................4-085 123(3)......................................................4-085 124............................................... 4-085; 4-090 125............. 4-085; 4-095; 4-100; 4-105; 4-140 126............................................... 4-100; 4-115 127............................................... 2-015; 4-135 127(10)....................................................4-105 127(11)....................................................4-105 Pt 4.3 Div 3 ...................... 4-095; 4-100; 4-105

Annotated Personal Property Securities Act 2009 (Cth)

894 Section

Section Finding List Paragraph

128............ 4-110; 4-115; 4-120; 4-125; 4-130; 4-135; 4-155; 4-170; 4-175; 4-190; 4-195; 4-200 129.................................... 4-110; 4-115; 4-120 130–132...................................................4-110 130............ 4-120; 4-125; 4-130; 4-145; 4-155; 4-160; 4-160; 4-205 131............ 2-085; 2-160; 4-115; 4-120; 4-125; 4-130; 8-165 132.................................... 4-125; 4-130; 4-205 133............. 4-105; 4-110; 4-135; 4-150; 4-185 Pt 4.3 Div 4 .............................................4-115 134............ 4-140; 4-145; 4-150; 4-155; 4-170; 4-175; 4-185; 4-190; 4-200 135............ 4-140; 4-145; 4-150; 4-155; 4-160; 4-205 137............ 4-110; 4-120; 4-140; 4-145; 4-150; 4-155; 4-160 138............................................... 4-155; 4-160 138B.......... 3-015; 3-020; 3-025; 3-030; 4-170 138C.......... 3-020; 3-025; 3-030; 4-165; 4-175 140............ 2-080; 4-015; 4-025; 4-060; 4-065; 4-110; 4-185 140(1)......................................................4-185 140(2)(b) .................................................2-015 140(7)......................................................4-185 142............................................... 4-045; 4-200 142(2)......................................................4-195 142(3)......................................................4-195 143.................................... 1-070; 4-195; 4-200 144.........................4-060; 4-120; 4-130; 4-145 Ch 5............................................. 9-145; 9-150 147...........................................................5-130 148............................................... 5-050; 5-130 148(b)......................................................5-020 Pt 5.3 ........ 1-065; 1-080; 2-025; 2-030; 2-105; 2-200; 2-235; 3-075; 8-165; 9-130; 9-155 150............ 1-075; 2-025; 5-020; 5-030; 5-035; 5-040; 5-045; 5-050; 5-055; 5-065; 5-070; 5-080; 5-085; 5-090; 5-095; 5-100; 5-105; 5-115; 5-120; 5-150; 5-185; 5-190; 5-215; 5-220; 5-225; 5-235; 8-060; 8-095 150(1)......................................................5-030 150(3)......................................................5-215 151............................................... 2-015; 5-030 151(2)(a) .................................................5-035 152...........................................................5-040 153............ 1-065; 1-075; 2-015; 2-025; 2-030; 2-035; 2-090; 2-095; 2-145; 2-200; 2-205; 2-230; 2-235; 2-240; 2-245; 2-265; 3-125; 4-120; 5-020; 5-030; 5-040; 5-050; 5-055; 5-080; 5-095; 5-100; 5-105; 5-115; 5-120;

Section

Paragraph

5-140; 5-150; 5-155; 9-060; 9-130; 9-135; 9-140; 9-145; 9-150 153(1).......................................... 5-045; 8-070 153(2)......................................................5-045 153(3)......................................................5-045 153(5)......................................................5-030 154............. 5-020; 5-030; 5-095; 5-100; 5-105 155–158...................................................5-155 155.................................... 5-065; 5-070; 9-140 156–158...................................................5-030 156............ 5-055; 5-070; 5-120; 5-215; 5-220; 5-225; 5-235 157............................................... 5-055; 5-070 157(3)......................................................5-065 Pt 5.4 ................................ 9-150; 9-170; 9-175 160............................................... 5-030; 5-045 160(2).......................................... 5-080; 5-095 161.........................2-015; 2-030; 2-120; 5-030 163.........................2-110; 4-150; 5-030; 5-220 164–166.................1-075; 5-080; 5-095; 5-135 164............ 1-075; 2-030; 2-145; 5-105; 5-110; 5-185; 8-015; 9-150; 9-155 164(1)(a) .................................................5-100 164(1)(b) ..................................... 5-100; 5-105 165............ 2-235; 2-240; 2-245; 5-030; 5-130; 5-110; 8-015; 9-150 166............................................... 5-100; 5-105 166(2)......................................................5-110 168...........................................................5-030 Pt 5.5 .......................................................2-145 170.................................... 5-030; 5-130; 5-140 170–172....................................... 5-145; 5-150 170–175...................................................5-080 171............................................... 5-135; 5-140 171(1)......................................................5-135 171(1)(da) ...............................................5-135 171(5)......................................................5-135 172.................................... 5-130; 5-140; 5-145 172(2)......................................................5-140 172(3)......................................................5-130 172(6)......................................................5-140 173.................................... 5-130; 5-140; 5-145 174............................................... 5-140; 5-150 175...........................................................5-155 176...........................................................5-160 176B.......... 5-065; 5-190; 5-195; 5-200; 5-205 Pt 5.6 .......................................................5-115 178–182....................................... 2-020; 5-185 178(3)......................................................5-185 179–181...................................................5-205 179.........................5-185; 5-190; 5-195; 5-200 179(1)(b) .................................................5-185 179(1)(c) ..................................... 5-190; 5-200

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Section Finding List Section

Paragraph

179(2)......................................................5-190 180–182...................................................5-185 180.................................... 5-190; 5-195; 5-200 180(3)......................................................5-195 180(5)......................................................5-195 181.................................... 5-190; 5-195; 8-085 181(1)......................................................5-200 181(3)......................................................5-200 181(4)......................................................5-195 182.........................5-190; 5-200; 8-085; 8-090 184...........................................................5-230 185............................................... 5-215; 5-230 186............................................... 5-215; 9-135 186(2)......................................................5-225 188...........................................................5-225 190............................................... 5-030; 5-120 191............ 5-030; 5-130; 5-155; 5-160; 5-185; 5-200; 5-215; 5-235; 9-135 Pt 5.9 ........ 9-015; 9-095; 9-120; 9-125; 9-130; 9-145 195...........................................................5-120 Pt 6.2 ........................................... 8-075; 8-085 Pt 6.3 .......................................................5-035 3-075 ........ 4-060; 4-065; 4-075; 4-085; 4-090; 4-105; 4-120; 4-140; 4-145; 4-150; 4-155; 4-205 207............. 4-060; 4-205; 5-185; 8-075; 8-085 Pt 7.2 ........ 2-290; 7-015; 7-020; 7-035; 7-050; 9-065 233............................................... 7-020; 7-035 234–236...................................................7-050 234............................................... 7-015; 4-145 235–241...................................................7-015 235............ 2-120; 2-310; 4-015; 5-040; 7-020; 7-035; 7-040; 7-045 235(1)......................................................7-020 235(2)......................................................7-020 235(2)(c) .................................................7-020 235(3)......................................................7-020 235(4)......................................................7-020 235(5)......................................................7-020 235(6)......................................................7-020 235(7)......................................................7-020 236–239...................................................7-045 236–241....................................... 7-015; 7-020 236............. 7-025; 7-030; 7-035; 7-040; 7-140 237–241...................................................7-025 237.................................... 7-030; 7-035; 7-140 238–241............................ 2-120; 2-125; 7-030 238............................................... 7-035; 7-040 238(1).......................................... 7-035; 7-040 238(1A) ....................................... 7-035; 7-040 238(2).......................................... 7-035; 7-045

Section

Paragraph

238(2A) ...................................................7-035 238(3)......................................................7-035 238(4)......................................................7-035 239–241...................................................7-035 239.........................2-065; 2-310; 7-030; 7-040 239(1)......................................................7-040 239(2)......................................................7-040 239(3)......................................................7-040 239(4)......................................................7-050 239(5).......................................... 7-040; 7-050 240............. 2-065; 2-070; 2-310; 7-040; 7-045 240(1)–(5) ...............................................7-045 241.................................... 7-040; 7-045; 7-050 241(3)......................................................7-050 Pt 7.3 .......................................................7-050 243(2).......................................... 7-060; 7-065 243(5)......................................................7-060 244...........................................................7-060 251...........................................................9-070 252...........................................................9-070 252B........................................................8-015 Pt 7.4 ........................................... 7-125; 7-140 254–256...................................................7-140 254............ 2-015; 2-330; 4-020; 7-125; 7-130; 7-140; 7-145; 7-150; 7-155; 7-160; 7-165; 7-170; 9-105 254(1)–(3) ...............................................7-125 255............ 7-125; 7-130; 7-135; 7-140; 7-145; 7-150; 7-155; 7-160; 7-165; 7-170 256–259...................................................7-125 256.................................... 2-275; 7-135; 7-140 257–259..... 7-135; 7-155; 7-160; 7-165; 7-170 257.................................... 7-140; 7-145; 7-150 257(3)......................................................7-140 258.................................... 7-140; 7-145; 7-150 259............................................... 7-140; 7-145 260...........................................................7-150 261–263...................................................7-170 261–264..... 7-125; 7-135; 7-140; 7-145; 7-150 261.................................... 7-155; 7-160; 7-165 262–264...................................................7-155 262............................................... 7-160; 7-165 263.................................... 2-030; 7-160; 7-165 263(1)(c) .................................................7-165 264.................................... 7-160; 7-165; 7-170 Pt 8.2 .......................................................9-110 266............................................... 8-020; 8-025 267............ 1-065; 1-070; 2-030; 2-200; 8-015; 8-025; 8-030; 10-055 267(1)......................................................8-015 267(3)......................................................8-015 267A................................. 8-020; 8-025; 8-030 268.........................1-065; 8-015; 8-025; 8-030

Annotated Personal Property Securities Act 2009 (Cth)

896 Section

Section Finding List Paragraph

269............................................... 8-015; 8-030 Pt 8.3 .......................................................9-085 271............ 2-015; 4-025; 5-035; 5-115; 5-130; 5-170; 5-175; 8-040; 8-045 271(2)......................................................8-040 272.................................... 8-040; 8-045; 9-085 273...........................................................8-050 275–277............................ 8-070; 8-075; 8-085 275–278...................................................8-070 275............ 2-295; 8-060; 8-065; 8-080; 8-085; 8-090; 8-095; 8-100 275(1)(b)–(d)...........................................8-100 275(3)–(6) ...............................................8-060 275(9)......................................................5-030 – ‘‘interested person’’ ........................8-060 276–283...................................................8-060 276............ 8-065; 8-080; 8-085; 8-090; 8-095; 8-100 277–279...................................................8-065 277...........................................................8-060 278.........................8-060; 8-070; 8-075; 8-080 278(2)......................................................8-075 279............................................... 8-080; 8-090 279(2)......................................................8-090 279(3)......................................................8-080 280.........................8-060; 8-070; 8-085; 8-095 281.................................... 8-080; 8-090; 8-095 281(2)......................................................8-090 281(3)......................................................8-090 282.................................... 8-085; 8-090; 8-095 283...........................................................8-100 Pt 8.5 ........................................... 2-265; 3-075 293............ 2-235; 2-245; 4-065; 4-075; 4-145; 5-205; 8-060; 8-065; 8-070 293(1)(a) .................................................2-235 Pt 8.6 ......... 2-150; 2-155; 2-160; 2-165; 4-150 296.........................8-015; 8-080; 8-090; 8-165 297–299.... 2-155; 2-160; 2-165; 2-175; 2-180; 2-270; 8-015; 8-020; 8-165; 8-185 297–300...................................................8-180 297............ 2-085; 2-095; 2-120; 2-125; 2-150; 2-185; 2-265; 2-270; 2-275; 2-285; 2-290; 4-025; 4-150; 5-110; 8-100; 8-170; 8-175; 8-180; 8-185 298–300...................................................8-170 298...........................................................8-175 299............................................... 8-175; 8-180 300.........................2-150; 8-170; 8-175; 8-185 302............ 2-245; 3-075; 4-060; 4-065; 4-120; 5-030; 5-055; 5-130; 5-155; 5-170; 5-175; 5-190; 5-195; 9-120; 9-125; 9-130

Section

Paragraph

Ch 9.......... 2-025; 2-030; 2-145; 2-200; 9-015; 9-025; 9-055; 9-085; 9-095; 9-165; 9-110; 9-155 Pt 9.2 ................................ 7-020; 7-035; 9-095 306............ 2-290; 7-065; 9-015; 9-020; 9-025; 9-035; 9-040; 9-050; 9-055; 9-060; 9-065; 9-070; 9-090; 9-095; 9-100; 9-105; 9-110; 9-120; 9-130; 9-145 306(1)......................................................9-015 306(1)(b) .................................................9-015 306(2)......................................................9-015 306(2)(b) .................................................9-015 306(3)......................................................9-015 307............ 9-020; 9-025; 9-035; 9-090; 9-130; 9-150; 9-155 308............ 2-145; 5-030; 9-025; 9-035; 9-040; 9-065; 9-070; 9-075; 9-085; 9-090; 9-095; 9-100; 9-105; 9-110; 9-125; 9-130; 9-145; 9-150; 9-155 – ‘‘transitional security interests’’ ......9-025 310............. 9-040; 9-045; 9-055; 9-070; 9-145 311.........................2-025; 9-020; 9-040; 9-155 312............................................... 2-290; 9-045 313...........................................................9-050 314...........................................................9-055 315.................................... 5-030; 9-060; 9-145 316...........................................................9-065 317...........................................................9-070 318............. 9-075; 9-165; 9-170; 9-175; 9-180 Pt 9.4 ........ 9-085; 9-095; 9-120; 9-130; 9-135; 9-145; 9-150 320............ 9-020; 9-085; 9-090; 9-095; 9-100; 9-105; 9-150 320(1)......................................................9-085 321.........................9-085; 9-090; 9-105; 9-125 322............ 1-065; 1-070; 2-200; 9-085; 9-095; 9-105; 9-110; 9-110; 9-125; 9-145 322(1).......................................... 9-095; 9-105 322(2).......................................... 9-095; 9-120 322(2)(a) ..................................... 9-095; 9-125 322(2)(b)–(f) ...........................................9-095 322(2)(b) .................................................9-145 322(3).......................................... 1-070; 9-095 322A............................................ 9-085; 9-105 322A–324.................................... 9-085; 9-095 323–324...................................................2-200 323............................................... 9-100; 9-105 324.................................... 9-100; 9-105; 9-110

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Section Finding List Section

Paragraph

Div 6........................................................9-120 330.................................... 5-020; 9-035; 9-125 331.................................... 9-120; 9-125; 9-130 332.........................5-030; 9-120; 9-125; 9-130 333............ 2-090; 9-015; 9-060; 9-120; 9-125; 9-130; 9-135; 9-140 333(2)......................................................9-130 334.........................9-120; 9-130; 9-135; 9-140 335............................................... 9-130; 9-140 Div 7........................................................9-145 336.................................... 9-015; 9-060; 9-145 Div 8................................. 9-130; 9-135; 9-150 337............................................... 9-105; 9-150 337(2)......................................................9-150 337A........................................................9-155 Pt 9.5 ......... 2-020; 1-065; 2-050; 9-075; 9-170 338...........................................................9-165 339–341A................................................9-075 339.................................... 1-065; 9-170; 9-180 339(2)......................................................9-165 339(2)(b) ..................................... 9-165; 9-175 339(3)......................................................2-050 339(4)......................................................2-050 339(5)......................................................2-050 340–341A.................................... 2-050; 9-165 340............ 2-050; 2-070; 2-105; 2-300; 9-165; 9-170; 9-175; 9-180 340(1)......................................................9-170 340(2)....................2-050; 2-070; 9-175; 9-180 340(3).......................................... 2-050; 9-170 340(4)......................................................9-170 340(4A) ...................................................9-170 340(5)............................... 2-050; 2-070; 9-170 341.................................... 2-070; 2-105; 9-170 341(1).......................................... 2-050; 9-175 341(1)(a) ..................................... 2-050; 9-175 341(1)(b) ..................................... 2-050; 9-175 341(1)(d) .................................................2-050 341(1A)(c)...............................................9-175 341(2)–(4) ...............................................9-175 341(5)......................................................2-050 341A.......... 2-050; 2-300; 9-170; 9-175; 9-180 341A(1)(a)................................... 2-050; 2-070 341A(1)(b) ..............................................2-070 341A(2) ...................................................2-050 Sch 2........................................................9-100 Generally..................................... 1-045; 1-065

Personal Property Securities Amendment (PPS Leases) Act 2017 Section Paragraph

Generally.................................................1-070 Personal Property Securities (Ancillary Provisions) Act 2010 (Qld) Section Paragraph

Generally..................................... 1-045; 7-065 Personal Property Securities (Commonwealth Powers) Act 2009 (NSW) Section Paragraph

Generally.................................................7-065 Personal Property Securities (Commonwealth Powers) Act 2009 (Vic) Section Paragraph

Generally.................................................7-065 Personal Property Securities (Commonwealth Powers) Act 2009 (Qld) Section Paragraph

Generally.................................................7-065 Personal Property Securities (Commonwealth Powers) Act 2009 (SA) Section Paragraph

Generally.................................................7-065 Personal Property Securities (Commonwealth Powers) Act 2009 (WA) Section Paragraph

Generally.................................................7-065 Personal Property Securities (Commonwealth Powers) Act 2009 (Tas) Section Paragraph

Generally.................................................7-065 Personal Property Securities (Commonwealth Powers) Amendment Act 2009 (NSW) Section Paragraph

Generally.................................................7-065

Personal Property Securities Act 2010 (ACT) Section Paragraph

Personal Property Securities (Consequential Repeals and Amendments) Act 2011 (WA) Section Paragraph

Generally.................................................1-045

Generally.................................................1-045

Annotated Personal Property Securities Act 2009 (Cth)

898 Personal Property Securities (Corporations and Other Amendments) Act 2010 (Cth) Section Paragraph

Sch 2........................................................1-045 Personal Property Securities (Corporations and Other Amendments) Act 2011 (Cth) Section Paragraph

Sch 2, s 10 ...............................................2-025 Sch 2, s 12 ...............................................2-050 Sch 2, s 13 ...............................................2-055 Sch 2, s 14 ...............................................2-055 Sch 2, s 17-19..........................................2-300 Sch 2, s 22 ...............................................4-045 Sch 2, s 23 ...............................................4-050 Sch 2, s 31-33..........................................5-035 Sch 2, s 52 ...............................................5-170 Sch 2, s 55 ...............................................5-175 Sch 2, s 64 ...............................................2-050 Sch 2, s 66 ...............................................3-020 Generally...............1-045; 1-080; 4-170; 4-175 Personal Property Securities Legislation Amendment Act 2010 (NSW) Section Paragraph

Generally..................................... 1-045; 7-065 Personal Property Securities (National Uniform Implementation) Act 2010 (NT) Section Paragraph

Generally.................................................1-045 Personal Property Securities (National Uniform Legislation) Implementation Act 2010 (Tas) Section Paragraph

Generally.................................................1-045 Personal Property Securities (National Uniform Legislation) Implementation Act 2011 (Tas) Section Paragraph

Section Finding List Regulation

Personal Property Securities (Statute Law Revision and Implementation) Act 2010 (Vic) Section Paragraph

Generally..................................... 1-045; 7-065

Generally.................................................7-065 Personal Property Securities Regulation 2010 (Cth) Regulation Paragraph

1.1.............................................. 5-045; 11-005 1.2.............................................. 5-045; 11-010 1.3................................... 2-120; 2-125; 11-015 1.4................................... 1-045; 5-045; 11-020 1.5................................... 1-045; 5-045; 11-025 1.6.............................................. 5-045; 11-030

Paragraph

1.7.............................................. 2-150; 11-035 1.8.............................................. 1-065; 11-040 1.9.............................................. 1-070; 11-045 1.9(2).......................................................1-070 1.10........... 1-080; 2-060; 2-150; 2-170; 2-175; 11-050; 11-055 2.1............................................................1-080 2.2............ 2-145; 2-150; 5-045; 5-115; 11-060 2.2(1)(a) ..................................................1-075 2.3.............. 1-065; 1-080; 2-025; 5-045; 9-135 3.1................................................ 3-125; 5-045 3.2............................................................3-125 4.1.............................................. 4-065; 11-070 5.1.............................................. 5-015; 11-075 5.2.............................................. 5-015; 11-080 5.3................................... 5-020; 5-050; 11-085 5.4.............................................. 5-030; 11-090 5.5..........................................................11-095 5.5(1).......................................................5-045 5.6.............................................. 5-070; 11-100 5.7........................5-015; 5-030; 5-130; 11-105 5.8.............................................. 5-135; 11-110 5.8A.......................................................11-115 5.9.............................................. 5-195; 11-120 5.10............................................ 5-215; 11-125 7.1.............................................. 7-165; 11-135 9.1.............................................. 9-015; 11-145 9.2........................1-070; 7-020; 9-095; 11-150 9.3..........................................................11-155 Sch 1....... 1-075; 2-025; 2-145; 5-045; 11-160; 11-160 Sch 2......................................................11-165 Sch 1, cl 2.3................................. 1-065; 1-080 Sch 2, cl 2.1.............................................1-080

Privacy Act 1988 (Cth) Section

Paragraph

6...............................................................5-145 13.............................................................5-145 Section

Sale of Goods Act 1923 (NSW) Paragraph

5...............................................................1-065 24.............................................................1-045 42.............................................................1-045

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Section Finding List Statutes Amendment (Personal Property Securities) Act 2011 (SA) Section Paragraph

Taxation Administration Act 1953 (Cth) Section Paragraph

Sch 1 s 260-5...........................................1-045

Generally.................................................1-045

INTERNATIONAL LEGISLATION Companies’ Creditors Arrangement Act, RSOC 1985 c C-36 (British Columbia, Canada) Section Paragraph

Generally.................................................1-070 Minister’s Order under the PPSA (Ontario, Canada) Section Paragraph

22.............................................................5-060 24.............................................................5-080 Personal Property Securities Act 1999 (NZ) Section Paragraph

16............... 1-065; 1-070; 1-075; 1-080; 2-080 16(1)........................................................1-065 17...................................... 1-065; 3-125; 3-130 18.............................................................2-045 18(3)......................................................1-0801 19................................................. 8-170; 8-180 19(1)(b) ...................................................8-175 19(5)........................................................1-070 20.............................................................8-185 21.............................................................3-100 23.............................................................1-045 23(a) ........................................................1-045 23(e)(ii) ...................................................1-045 24.............................................................8-050 25.............................................................4-025 26.............................................................7-015 27...................................... 2-120; 7-035; 7-050 28.............................................................2-120 29.............................................................7-020 30...........................2-125; 7-040; 7-045; 7-050 31.............................................................7-030 35.............................................................2-015 37.............................................................2-025 38.............................................................2-025 39.............................................................2-025 40.............................................................2-020 41.............................................................2-025 42.............................................................2-205 43.............................................................2-030 44.............................................................2-030 45.............................................................2-085 46.............................................................2-090 47................................................. 2-090; 2-095

Section

Paragraph

48.............................................................2-105 49.............................................................2-100 50.............................................................2-035 51.............................................................3-020 52.............................................................2-140 53................................................. 2-085; 2-155 54.............................................................2-160 55.............................................................2-145 55(3)........................................................1-070 56.............................................................2-185 58.............................................................2-150 60.............................................................2-225 65.............................................................2-190 66.............................................................2-200 68.............................................................2-200 70.............................................................2-230 71.............................................................2-215 72.............................................................2-215 73-75 .......................................................2-235 76.............................................................2-240 77.............................................................2-240 78.............................................................3-040 79.............................................................3-045 80.............................................................3-050 81.............................................................3-055 82.............................................................3-095 83.............................................................3-100 84.............................................................3-105 85.............................................................3-110 86.............................................................3-115 87................................................. 2-260; 2-320 88–91........................................... 2-095; 2-265 93.............................................................2-290 95.............................................................2-270 96.............................................................2-275 98.............................................................2-280 99.............................................................2-285 100...........................................................3-015 101.................................... 3-015; 4-170; 4-175 102...........................................................2-325 103...........................................................2-295 105...........................................................4-015 106...........................................................4-050 107...........................................................4-045 109............ 4-085; 4-090; 4-095; 4-105; 4-110; 4-115

Annotated Personal Property Securities Act 2009 (Cth)

900 Section

Section Finding List Paragraph

110...........................................................4-125 111...........................................................4-100 114............................................... 4-120; 4-145 115...........................................................4-135 116...........................................................4-130 116A........................................................4-185 117...........................................................4-185 120............................................... 4-140; 4-145 121...........................................................4-155 122...........................................................4-160 123...........................................................4-150 125...........................................................3-060 126...........................................................3-065 127...........................................................3-070 128...........................................................3-085 129...........................................................3-075 130...........................................................3-080 131...........................................................3-085 132............................................... 4-040; 4-195 133...........................................................4-200 139...........................................................5-015 140...........................................................5-020 141...........................................................5-030 142...........................................................5-045 144...........................................................5-080 145...........................................................5-060 146...........................................................5-085 149...........................................................5-100 150...........................................................5-105 151...........................................................5-100 152...........................................................5-100 153...........................................................5-095 162...........................................................5-185 164...........................................................5-190 165...........................................................5-200 166–168...................................................5-205 169A........................................................5-225 170...........................................................5-215 170(1)......................................................5-220 170A............................................ 5-130; 5-235 172...........................................................5-135 173...........................................................5-140 174...........................................................5-145 175...........................................................5-150 176...........................................................8-040 177...........................................................8-060 178...........................................................8-070 179...........................................................8-075 180...........................................................8-080 181...........................................................8-085 182...........................................................8-095 183...........................................................8-065 193.................................... 9-015; 9-020; 9-025

Section

Paragraph

195...........................................................9-040 196...........................................................9-045 197...........................................................9-060 198...........................................................9-095 199...........................................................9-105 200.........................9-085; 9-090; 9-095; 9-105 201............................................... 9-090; 9-095 Generally............. 1-045; 1-065; 2-050; 2-055; 2-060; 2-065 Personal Property Securities Regulations 2001 (NZ) Regulation Paragraph

9...............................................................5-065 12.............................................................5-065 Sch 1........................................................5-045 Personal Property Security Act, RSO 1990 c P-10 (Ontario, Canada) Section Paragraph

1.............................1-080; 2-055; 2-060; 3-125 1(1)............ 1-065; 1-070; 1-075; 2-080; 2-085 1(2)..........................................................1-065 2...............................................................1-065 4................................................... 1-045; 7-020 4(2)..........................................................1-045 5...............................................................2-125 5(1)..........................................................7-015 5(2)..........................................................7-035 5(3)..........................................................7-035 5–7...........................................................2-120 6...............................................................7-015 7...............................................................2-125 7(1).............................................. 7-040; 7-045 7(2)..........................................................7-030 9...............................................................2-015 11(2)........................................................2-020 12.............................................................2-030 13.............................................................2-215 16.............................................................4-025 18.............................................................8-060 18(5)........................................................8-070 18(6)........................................................8-065 18(7)........................................................8-080 18(8)................................. 8-075; 8-085; 8-095 19.............................................................2-025 20(1)........................................................8-015 20(1)(a)(ii)...............................................2-295 20(1)(c) ...................................................2-140 20(1)(d) ...................................................2-140 20(2)........................................................8-015 21(1)........................................................2-205 22.............................................................2-025

 2018 CCH Australia Limited

901

Section Finding List Section

Paragraph

23.............................................................2-025 24................................................. 2-100; 2-105 25(2)–(4) ..................................... 2-090; 2-095 26.............................................................2-035 27.............................................................2-110 27(3)........................................................2-115 27(6)........................................................2-305 28................................................. 2-275; 2-285 28(1)........................................................2-155 28(2)........................................................2-155 28(3)........................................................2-280 28(4)........................................................2-175 28(5)........................................................2-145 28(6)........................................................2-180 30.1..........................................................2-210 30(1)........................................................2-200 30(5)........................................................2-200 31.............................................................2-290 32................................................. 3-025; 4-170 33(1)........................................................2-235 33(1)(b) ...................................................2-245 33(2)........................................................2-235 33(3)........................................................2-240 35(1)(a) ....................................... 3-040; 3-045 35(1)(b) ...................................................3-055 35(2)............................................ 3-050; 3-055 35(4)............................................ 3-060; 3-065 35(5)........................................................3-070 35(6)........................................................3-075 35(7)........................................................3-075 35(8)........................................................3-080 37...........................3-095; 3-100; 3-110; 3-115 38.............................................................2-230 39................................................. 2-260; 2-320 40.............................................................2-325 40(4)........................................................2-330 42.............................................................5-015 43.............................................................5-130 43(1)............................................ 5-135; 5-140 43(2)–(5) .................................................5-150 45.............................................................5-030 45(3)........................................................5-085 46(4)........................................................5-100 46(5)........................................................8-185 46(6)........................................................5-065 48.............................................................2-265 51.............................................................5-095 56................................................. 5-185; 5-200 56(5)........................................................5-205 57.............................................................4-015 58.............................................................4-040 59(6)........................................................4-055 59(7)........................................................4-035

Section

Paragraph

61(2)........................................................4-025 62...................................... 1-045; 4-090; 4-105 62(b), (c) .................................................4-100 63............... 4-025; 4-095; 4-110; 4-115; 4-120 63(2)........................................................4-125 63(9)........................................................4-135 63(10)......................................................4-135 64.............................................................4-185 64(1)........................................................4-130 65(2)........................................................4-140 65(3)........................................................4-155 65(4)............................................ 4-160; 8-165 65(6.1).....................................................4-150 66.............................................................4-145 66(1)........................................................4-195 66(2)........................................................4-200 67.............................................................3-085 67(2)........................................................8-040 69.............................................................8-170 69(c) ........................................................8-175 71.............................................................5-215 71(2)........................................................5-220 72.............................................................4-020 73...7-135; 7-140; 7-145; 7-150; 7-155; 7-160; 7-165; 7-170 74.............................................................7-130 75...................................... 9-015; 9-020; 9-025 76...................................... 9-015; 9-020; 9-025 77...9-040; 9-045; 9-060; 9-085; 9-090; 9-095; 9-105; 9-110 78...9-040; 9-045; 9-060; 9-085; 9-090; 9-095; 9-105; 9-110 Generally.......................... 1-045; 2-050; 2-065 Personal Property Security Act 1993 P-6.2 (Saskatchewan, Canada) Section Paragraph

2................. 1-080; 2-055; 2-060; 3-125; 3-130 2(1)(hh) ...................................................2-080 2(1)(jj) .....................................................1-075 2(1)(qq) ....................................... 1-045; 1-065 2(1)(y) .....................................................1-070 2(2).............................................. 8-170; 8-180 2(2)(d) .....................................................8-175 2(2)(4) .....................................................2-080 2(5)..........................................................2-045 3(1).............................................. 1-065; 8-050 4...............................................................1-045 5...............................................................2-125 5(1)..........................................................7-015 5(2)..........................................................7-015 5(3).............................................. 7-035; 7-050 5(4).............................................. 7-035; 7-050

Annotated Personal Property Securities Act 2009 (Cth)

902 Section

Section Finding List Paragraph

5–7...........................................................2-120 7...............................................................2-125 7.1............................................................2-125 7(1)..........................................................7-020 7(2)................................... 7-040; 7-045; 7-050 7(3)..........................................................7-030 7(4)..........................................................7-050 9(1)..........................................................2-015 10(2)........................................................2-045 10(3)........................................................2-025 10(4)........................................................2-025 10(5)........................................................2-025 12(1)........................................................2-020 12(3)........................................................3-020 13.............................................................2-030 14(1)........................................................2-215 18.............................................................8-060 18(6), (7) .................................................8-070 18(8)........................................................8-085 18(9)........................................................8-065 18(10)......................................................8-085 18(12).......................................... 8-085; 8-095 18(13)......................................................8-075 18(14)–(16) .............................................8-100 18(17)......................................................8-080 19.............................................................2-025 20(1)........................................................2-295 20(2)........................................................8-015 20(3)........................................................2-140 20(4)............................................ 2-175; 2-180 21.............................................................8-030 22(2)........................................................2-250 23(1)........................................................2-205 24(1)........................................................2-025 24(2)........................................................2-045 25.............................................................2-025 26................................................. 2-100; 2-105 27.............................................................2-035 28(1)........................................................2-085 28(2)........................................................2-090 28(3)............................................ 2-090; 2-095 29.............................................................2-110 29(3)........................................................2-115 29(5)–(7) .................................................2-305 30(2)........................................................2-155 30(3)............................................ 2-160; 2-215 30(4)........................................................2-160 30(5)........................................................2-185 30(6)................................. 2-145; 2-270; 2-275 31.............................................................2-285 31(7)......................2-145; 2-270; 2-275; 2-280 32.............................................................2-290 33................................................. 2-260; 2-320

Section

Paragraph

34(2)........................................................2-235 34(5)........................................................2-240 34(11)......................................................3-025 34(12)......................................................3-030 35(1)........................................................2-200 35(2)........................................................2-205 35(3)........................................................2-200 35(5)......................2-215; 2-225; 4-170; 4-175 35(7)................................. 2-225; 4-170; 4-175 35(8)........................................................2-265 35(9)........................................................2-265 37.............................................................3-015 38(2)............................................ 3-040; 3-045 38(3)........................................................3-050 38(4)........................................................3-055 38(7)........................................................3-060 38(8)........................................................3-065 38(9)........................................................3-070 38(10)......................................................3-085 38(11)......................................................3-080 38(12)......................................................3-075 38(13)......................................................3-075 38(15)......................................................3-085 39(1)........................................................3-095 39(2)........................................................3-110 39(3)........................................................3-100 39(4)........................................................3-110 39(5)........................................................3-105 39(6)........................................................3-115 40.............................................................2-230 41.............................................................2-325 41(9)........................................................2-330 42.............................................................5-015 42.1..........................................................5-015 43.............................................................5-030 43(2)........................................................5-080 43(4)........................................................5-085 43(6)........................................................5-100 43(7)........................................................5-105 43(8)........................................................5-100 43(9)........................................................5-100 43(12)......................................................5-065 44(1)........................................................5-095 46(2)........................................................5-215 46(2)(a) ...................................................5-220 47.............................................................8-185 48.............................................................5-130 48(1)........................................................5-135 48(1)(a) ...................................................5-140 48(2)........................................................5-150 50.............................................................5-185 50(5)........................................................5-200 50(7)........................................................5-205

 2018 CCH Australia Limited

903

Section Finding List Section

Paragraph

50(8)........................................................5-190 51.............................................................2-265 55(2)(a) ...................................................4-015 55(3)........................................................4-040 55(4)........................................................4-055 55(5)........................................................4-060 55(6)........................................................4-060 55(7)........................................................4-035 56(3)........................................................4-045 58...................................... 4-085; 4-090; 4-105 58(2)(b) ...................................................4-100 59...................................... 4-095; 4-110; 4-115 59(6)........................................................4-120 59(7)........................................................4-120 59(14)......................................................4-135 59(16)......................................................4-120 60.............................................................4-185 60(3)........................................................4-130 61.............................................................4-145 61(1)........................................................4-140 61(2)........................................................4-155 61(3)........................................................4-150 61(5)........................................................4-160 62(1)(a) ...................................................4-195 62(1)(b) ...................................................4-200 65.............................................................8-040 65(2)........................................................4-020 65(3)........................................................4-125 65(9)........................................................8-165 65(10)......................................................8-165 73...7-125; 9-015; 9-020; 9-025; 9-040; 9-045; 9-060; 9-085; 9-090; 9-095; 9-105; 9-110 74...1-045; 9-015; 9-020; 9-025; 9-040; 9-045; 9-085; 9-090; 9-095; 9-105; 9-110 Generally.......................... 1-045; 2-050; 2-065 Personal Property Security Regulations 1995 (Saskatchewan, Canada) Regulation Paragraph

6-19 .........................................................5-045 20-20.3 ....................................................5-070 Generally.................................................1-045 Sale of Goods Act (Ontario, Canada) Section Paragraph

Generally.................................................1-045 Securities Transfer Act, RSO 2006, c 8 (Ontario, Canada) Section Paragraph

Generally.......................... 1-080; 2-055; 2-060

Securities Transfer Act, RSO 2007, (Saskatchewan, Canada) Section Paragraph

Generally.......................... 1-080; 2-055; 2-060 Uniform Commercial Code Article 1 (US) Section Paragraph

1-103(b)...................................................4-020 1-201 ................................ 8-165; 8-170; 8-175 1-201(35).................................................1-070 1-203 .......................................................1-070 Uniform Commercial Code Article 2A (US) Section Paragraph

1-203 .......................................................1-070 Uniform Commercial Code Article 2 (US) Section Paragraph

2-505 .......................................................1-045 Uniform Commercial Code Article 5 (US) Section Paragraph

Generally.................................................2-065 Uniform Commercial Code Article 8 (US) Section Paragraph

8-106 ........................................... 2-055; 2-060 Generally..................................... 1-080; 2-060 Uniform Commercial Code Article 9 (US) Section Paragraph

1-201(35)..................................... 1-065; 1-070 1-209(9)...................................................2-155 8-106(b)...................................................2-060 9-101 .......................................................2-260 9-102 .......................................................1-080 9-102(52)(c) ............................................8-015 9-102(64).................................................2-080 9-103 .......................................................1-075 9-104 .......................................................2-050 9-104(f) ...................................................1-045 9-106 ........................................... 2-055; 2-060 9-107 .......................................................2-065 9-109 ................................ 1-045; 1-065; 5-110 9-109(d)(6)..............................................1-045 9-109(11).................................................1-045 9-136(f) ...................................................3-110 9-201 .......................................................2-015 9-202 .......................................................8-050 9-203 .......................................................2-020 9-204(a)...................................................2-030 9-204(b)...................................................2-030 9-210 ........................................... 8-060; 8-070

Annotated Personal Property Securities Act 2009 (Cth)

904 Section

Section Finding List Paragraph

9-210(d)...................................................8-065 9-210(e)...................................................8-065 9-210(f) ...................................................8-080 9-301 ........ 2-120; 2-125; 7-015; 7-035; 7-040; 7-050 9-305 .......................................................7-015 9-307 ........................................... 7-020; 7-030 9-308–9-314............................................2-025 9-308(c)...................................................2-205 9-312(c)...................................................2-035 9-312(d)...................................................2-035 9-312(f) ...................................................2-100 9-312(g)...................................................2-105 9-315 .......................................................2-085 9-315(c)–(e) ............................................2-090 9-316 ......... 2-120; 2-125; 7-030; 7-035; 7-050 9-317 .......................................................2-295 9-317(a)...................................................8-015 9-317(b)–(d)............................................2-140 9-320 .......................................................2-155 9-322(a)...................................................2-200 9-322(b)...................................................2-200 9-323 .......................................................2-215 9-324 ........................................... 2-235; 2-240 9-325 ........................................... 2-225; 2-265 9-327 ........................................... 2-245; 2-300 9-328 .......................................................2-210 9-330 .......................................................2-280 9-331 ........................................... 2-275; 2-285 9-331(c)...................................................8-185 9-332 .......................................................2-270 9-333 .......................................................2-290 9-334 .......................................................4-175 9-334(i) ...................................................3-015 9-335(a)...................................................3-040 9-335(b)...................................................3-075 9-335(c)....................................... 3-045; 3-050 9-335(e)............................ 3-055; 3-060; 3-065 9-335(f) .................3-055; 3-060; 3-065; 3-070 9-336 .......................................................3-115 9-336(a)–(c) ............................................3-095 9-336(d)...................................................3-100

Section

Paragraph

9-339 .......................................................2-230 9-401 .......................................................2-320 9-404–9-406............................................2-325 9-501 .......................................................5-015 9-502 .......................................................5-045 9-502(d)...................................................5-085 9-506(b)...................................................5-105 9-507 .......................................................2-265 9-508 .......................................................2-265 9-509 .......................................................5-030 9-513 .......................................................5-185 9-515 .......................................................5-095 9-518 .......................................................5-200 9-522 .......................................................5-220 9-523 .......................................................5-130 9-601 .......................................................4-035 9-601 .......................................................4-035 9-601(c)...................................................4-040 9-607(c)...................................................4-025 9-602 .......................................................4-045 9-604(a)...................................................4-055 9-609 ................................ 4-085; 4-090; 4-100 9-610 .....................4-025; 4-110; 4-115; 4-125 9-611 ........................................... 4-105; 4-120 9-612 ........................................... 4-105; 4-120 9-615 .......................................................4-185 9-615(d)....................................... 4-035; 4-130 9-616 .......................................................4-185 9-617 .......................................................4-140 9-620 ........................................... 4-135; 4-150 9-621 ........................................... 4-135; 4-145 9-622 .......................................................4-150 9-623 .......................................................4-195 9-624 ................................ 4-105; 4-120; 4-195 9-625 ........................................... 3-085; 8-040 9-627 ........................................... 4-025; 4-125 9-701 ........................................... 9-020; 9-025 9-703–9-705................................ 9-035; 9-040 9-706 .......................................................9-060 9-709 .....................9-090; 9-095; 9-105; 9-110 Generally..................................... 1-045; 2-045

 2018 CCH Australia Limited

905 INDEX Paragraph A

Ability to transfer or otherwise deal concept............................¶2-060 Access prohibited by the regulations ..............................¶5-130 Accessions — see also Processed or commingled goods concept............... ¶2-190; ¶3-040; ¶3-045; ¶3-050; ¶3-055; ¶3-060; ¶3-065; ¶3-070; ¶3-075; ¶3-080; ¶3-085 continuation of security interests commentary................................ ¶3-040 concepts...................................... ¶3-040 cross-references.......................... ¶3-040 foreign regimes comparable provisions................................ ¶3-040 further reading............................ ¶3-040 outline......................................... ¶3-040 Court order about removal commentary................................ ¶3-085 concepts...................................... ¶3-085 cross-references.......................... ¶3-085 foreign regimes comparable provisions................................ ¶3-085 further reading............................ ¶3-085 outline......................................... ¶3-085 interest has priority commentary................................ ¶3-045 concepts...................................... ¶3-045 cross-references.......................... ¶3-045 foreign regimes comparable provisions................................ ¶3-045 further reading............................ ¶3-045 outline......................................... ¶3-045 priority before security interest is perfected commentary................................ ¶3-050 concepts...................................... ¶3-050 cross-references.......................... ¶3-050 foreign regimes comparable provisions................................ ¶3-050 further reading............................ ¶3-050 outline......................................... ¶3-050

Annotated Personal Property Securities Act 2009 (Cth)

Paragraph

refusal of permission to remove commentary................................ ¶3-070 concepts...................................... ¶3-070 cross-references.......................... ¶3-070 foreign regimes comparable provisions................................ ¶3-070 further reading............................ ¶3-070 outline......................................... ¶3-070 reimbursement for damages in removal commentary................................ ¶3-065 concepts...................................... ¶3-065 cross-references.......................... ¶3-065 foreign regimes comparable provisions................................ ¶3-065 further reading............................ ¶3-065 outline......................................... ¶3-065 secured party must give notice of removal commentary................................ ¶3-075 concepts...................................... ¶3-075 cross-references.......................... ¶3-075 foreign regimes, comparable provisions................................ ¶3-075 further reading............................ ¶3-075 outline......................................... ¶3-075 secured party must not damage goods when removing commentary................................ ¶3-060 concepts...................................... ¶3-060 cross-references.......................... ¶3-060 foreign regimes, comparable provisions................................ ¶3-060 further reading............................ ¶3-060 outline......................................... ¶3-060 security interest attaches after goods become accession commentary................................ ¶3-055 concepts...................................... ¶3-055 cross-references.......................... ¶3-055 foreign regimes, comparable provisions................................ ¶3-055 further reading............................ ¶3-055 outline......................................... ¶3-055

Acc

906

Index Paragraph

Accessions—continued

when person with interest in whole may retain commentary................................ ¶3-080 concepts...................................... ¶3-080 cross-references.......................... ¶3-080 foreign regimes, comparable provisions................................ ¶3-080 further reading............................ ¶3-080 outline......................................... ¶3-080

Account debtors concept........................................... ¶2-325

Accounts certain transfers ............................. ¶1-045 concepts ............. ¶1-065; ¶1-075; ¶1-080; ¶2-115; ¶2-245; ¶2-310; ¶2-325; ¶2-330; ¶7-030; ¶7-050; ¶9-175

Acquired property concept........................................... ¶8-060

Actual knowledge certain property transfers commentary................................ ¶8-180 concepts...................................... ¶8-180 cross-references.......................... ¶8-180 foreign regimes, comparable provisions................................ ¶8-180 further reading............................ ¶8-180 outline......................................... ¶8-180 concept............... ¶2-085; ¶2-095; ¶2-120; ¶2-125; ¶2-150; ¶2-155; ¶2-160; ¶2-165; ¶2-175; ¶2-180; ¶2-185; ¶2-265; ¶2-270; ¶2-275; ¶2-285; ¶2-290; ¶4-025; ¶4-150; ¶8-015; ¶8-020; ¶8-100; ¶8-170; ¶8-175; ¶8-180; ¶8-185 proceeds with attachment .............. ¶2-085

Actual or apparent possession concept........................................... ¶2-045

Actual or constructive knowledge concept........................................... ¶2-275

ADI accounts concept............... ¶1-065; ¶2-050; ¶2-090; ¶2-125; ¶2-300; ¶7-040; ¶9-175 control commentary................................ ¶9-180

Acc

Paragraph

concepts...................................... ¶9-180 cross-references.......................... ¶9-180 further reading............................ ¶9-180 outline......................................... ¶9-180

Advances priority ........................................... ¶2-215 commentary................................ ¶2-215 concepts...................................... ¶2-215 cross-references.......................... ¶2-215 foreign regimes, comparable provisions................................ ¶2-215 further reading............................ ¶2-215 outline......................................... ¶2-215

After-acquired property concept........................................... ¶2-015

Agricultural interests attachment to crops and livestock commentary................................ ¶3-020 concepts...................................... ¶3-020 cross-references.......................... ¶3-020 foreign regimes, comparable provisions................................ ¶3-020 further reading............................ ¶3-020 outline......................................... ¶3-020 commentary ................................... ¶3-015 concepts ......................................... ¶3-015 cross-references ............................. ¶3-015 foreign regimes, comparable provisions ................................... ¶3-015 further reading ............................... ¶3-015 outline ............................................ ¶3-015 priority of crops commentary................................ ¶3-025 concepts...................................... ¶3-025 cross-references.......................... ¶3-025 foreign regimes, comparable provisions................................ ¶3-025 further reading............................ ¶3-025 outline......................................... ¶3-025 priority of livestock commentary................................ ¶3-030 concepts...................................... ¶3-030 cross-references.......................... ¶3-030 foreign regimes, comparable provisions................................ ¶3-030

 2018 CCH Australia Limited

907

Index Paragraph

Paragraph

further reading............................ ¶3-030 outline......................................... ¶3-030

outline ............................................ ¶2-020 security interest attaches rights in the collateral................. ¶2-020 value or an act ............................ ¶2-020 time of attachment ......................... ¶2-020

All or part of the purchase price purchase money security interest... ¶1-075

Amendment demand concept........................................... ¶5-185

Attachment rule commentary ................................... ¶9-090 concepts ......................................... ¶9-090 cross-references ............................. ¶9-090 foreign regimes, comparable provisions ................................... ¶9-090 further reading ............................... ¶9-090 outline ............................................ ¶9-090

Amendment statement concept........................................... ¶5-195

An act concept........................................... ¶2-020

Any right of set-off or right of combination of accounts........¶1-045 concept........................................... ¶1-045

Approved deposit accounts

Authorisation express or implied.......................... ¶2-085

interests.......................................... ¶1-045

Approved forms concept............... ¶2-245; ¶4-060; ¶4-070; ¶5-030; ¶5-055; ¶5-130; ¶5-155; ¶5-170; ¶5-175; ¶5-190; ¶5-195; ¶9-120; ¶9-125

B

Bailments concept........................................... ¶2-035 PPS leases ...................................... ¶1-070 security interests ............................ ¶2-020

Assignments security interests ............................ ¶1-065

Bailors

Attachment — see also Proceeds; Relocation; Transfers concept............... ¶2-020; ¶2-025; ¶2-030; ¶2-085; ¶2-200; ¶2-235; ¶2-240; ¶2-245; ¶3-020; ¶3-045; ¶5-050; ¶5-085; ¶7-045; ¶8-165 continuous express or implied authorisation............................ ¶2-085 provision in security agreement................................ ¶2-085 taking free provisions................. ¶2-085 cross-references ............................. ¶2-020 enforceability ................................. ¶2-020 foreign regimes, comparable provisions ................................... ¶2-020 further reading ............................... ¶2-020 leases, bailments, consignments and conditional sale agreements.................................. ¶2-020

damages ......................................... ¶8-030 purchase money security interests ...................................... ¶1-075

Bankruptcy — see Insolvency Beneficial interests in monetary obligations certain transfers ............................. ¶1-045

Best price reasonable obtainable concept........................................... ¶4-125

Bodies corporate

Annotated Personal Property Securities Act 2009 (Cth)

constructive knowledge commentary................................ ¶8-175 concepts...................................... ¶8-175 cross-references.......................... ¶8-175 foreign regimes, comparable provisions................................ ¶8-175 further reading............................ ¶8-175 outline......................................... ¶8-175

Bod

908

Index Paragraph

Paragraph

financial products .......................... ¶1-080

further reading............................ ¶9-165 outline......................................... ¶9-165

Bonds Buyer

Chattel mortgages

taking free provisions .................... ¶2-140 C

Charge backs security interests ............................ ¶1-065

Charges circulating asset, meaning commentary................................ ¶9-170 concepts...................................... ¶9-170 cross-references.......................... ¶9-170 foreign regimes, comparable provisions................................ ¶9-170 further reading............................ ¶9-170 outline......................................... ¶9-170 control and inventory, meaning ..... ¶9-175 concepts...................................... ¶9-175 control of accounts ..................... ¶9-175 control of inventory.................... ¶9-175 cross-references.......................... ¶9-175 foreign regimes, comparable provisions................................ ¶9-175 further reading............................ ¶9-175 general rules ............................... ¶9-175 outline......................................... ¶9-175 control of ADI account commentary................................ ¶9-180 concepts...................................... ¶9-180 cross-references.......................... ¶9-180 foreign regimes, comparable provisions................................ ¶9-180 further reading............................ ¶9-180 outline......................................... ¶9-180 created under statute ...................... ¶1-045 provided by general law ................ ¶1-045 references to charges, fixed and floating charges commentary................................ ¶9-165 concepts...................................... ¶9-165 cross-references.......................... ¶9-165 foreign regimes, comparable provisions................................ ¶9-165

Bon

security interests ............................ ¶1-065

Chattel paper concept............... ¶1-045; ¶1-065; ¶1-075; ¶2-045; ¶2-080; ¶2-110; ¶2-115; ¶2-280; ¶2-325; ¶2-330; ¶7-020; ¶7-030 contractual restrictions and prohibitions ................................ ¶2-330 deemed security interests............... ¶1-065 person who acquires, priority ........ ¶2-280 purchase money security interests ...................................... ¶1-075 returned collateral .......................... ¶2-115 rights of transferee and account debtor.......................................... ¶2-325

Circulating assets control of ADI account .................. ¶2-050

Collateral — see also Disposal of collateral; Return of collateral; Seizure concept........................................... ¶2-295 proceeds, redemption..................... ¶2-080

Commercial consignments concept... ¶1-075; ¶4-015; ¶8-025; ¶8-030 deemed security interests............... ¶1-065 purchase money security interests ...................................... ¶1-075

Commercial property concept........................................... ¶5-045

Commercially practical concept........................................... ¶3-095

Commingled goods — see Processed or commingled goods Common carrier concept..............................¶2-045; ¶2-250 possession of goods shipped by..... ¶2-250

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Index Paragraph

Paragraph

Commonwealth legislation — see Laws and jurisdictions

cross-references ............................. ¶8-170 foreign regimes, comparable provisions ................................... ¶8-170 further reading ............................... ¶8-170 outline ............................................ ¶8-170 proceeds with attachment .............. ¶2-085 registration of data does not constitute constructive notice commentary................................ ¶8-185 concepts...................................... ¶8-185 cross-references.......................... ¶8-185 foreign regimes, comparable provisions................................ ¶8-185 further reading............................ ¶8-185 outline......................................... ¶8-185

Conditional sale agreements security interests attachment .................................. ¶2-020 scope........................................... ¶1-065

Consensual transaction................¶2-180 Consent..........................................¶3-055 security interests ............................ ¶1-065

Consignments security interests attachment.......... ¶2-020 scope........................................... ¶1-065

Consignors, damages ...................¶8-030 Consolidation purchase money security interests ...................................... ¶1-075

Constitutional security interests commentary ................................... ¶9-070 concepts ......................................... ¶9-070 foreign regimes, comparable provisions ................................... ¶9-070 further reading ............................... ¶9-070 outline ............................................ ¶9-070

Consumer property concept........................................... ¶5-045

Continuous attachment ...............¶2-085 Continuous perfection concept............... ¶2-085; ¶2-120; ¶2-125; ¶2-200; ¶2-210; ¶2-260; ¶2-265; ¶9-085; ¶9-095 manner ........................................... ¶2-205 transferor-granted interests, priority........................................ ¶2-260

Constructive knowledge bodies corporate commentary................................ ¶8-175 concepts...................................... ¶8-175 cross-references.......................... ¶8-175 foreign regimes, comparable provisions................................ ¶8-175 further reading............................ ¶8-175 outline......................................... ¶8-175 certain property transfers commentary................................ ¶8-180 concepts...................................... ¶8-180 cross-references.......................... ¶8-180 foreign regimes, comparable provisions................................ ¶8-180 further reading............................ ¶8-180 outline......................................... ¶8-180 commentary ................................... ¶8-170 concepts ......................................... ¶8-170

Contracts of annuity transfers of interests....................... ¶1-045

Contractual restrictions and prohibitions ............................¶2-330 Control

Annotated Personal Property Securities Act 2009 (Cth)

ADI account................................... ¶2-050 concept ....................................... ¶2-050 cross-references.......................... ¶2-050 foreign regimes, comparable provisions................................ ¶2-050 further reading............................ ¶2-050 outline......................................... ¶2-050 concept............... ¶2-025; ¶2-030; ¶2-050; ¶2-200; ¶2-210; ¶5-140; ¶9-170 perfection ....................................... ¶2-030 seizure of collateral........................ ¶4-090

Con

910

Index Paragraph

Paragraph

concept..............................¶4-045; ¶4-050

further reading............................ ¶2-165 outline......................................... ¶2-165

Controllers Copy of the security agreement

D

concept........................................... ¶8-060

Correction of registration errors commentary ................................... ¶5-235 concepts ......................................... ¶5-235 cross-references ............................. ¶5-235 foreign regimes, comparable provisions ................................... ¶5-235 further reading ............................... ¶5-235 outline ............................................ ¶5-235

Costs application in relation to costs charged ....................................... ¶8-090 recovery of costs arising from request ........................................ ¶8-080

Court information requests — see Information requests non-compliance with order, consequences.............................. ¶8-095 order about removal of accession.. ¶3-085

Creditors execution, over unperfected security interest .......................... ¶2-295 receives payment of debt ............... ¶2-270

Crops concept........................................... ¶3-015 priority commentary................................ ¶3-025 concepts...................................... ¶3-025 cross-references.......................... ¶3-025 foreign regimes, comparable provisions................................ ¶3-025 further reading............................ ¶3-025 outline......................................... ¶3-025 proceeds ......................................... ¶2-080

Currency taking free of interests ................... ¶2-165 concepts...................................... ¶2-165 cross-references.......................... ¶2-165 foreign regimes, comparable provisions................................ ¶2-165

Con

Damages for breaches of rights, duties and obligations .................................. ¶8-040 liability commentary................................ ¶8-045 concepts...................................... ¶8-045 cross-references.......................... ¶8-045 foreign regimes, comparable provisions................................ ¶8-045 further reading............................ ¶8-045 outline......................................... ¶8-045

Debtors concept........................................... ¶2-270

Debts concept........................................... ¶2-270

Declared interests.........................¶1-045 Declared statutory licences..........¶1-045 Deemed security interests............¶1-045 Default concept........................................... ¶4-085

Defect concept.................¶5-100; ¶5-105; ¶5-110

Defective registration collateral not covered commentary................................ ¶9-155 concept ....................................... ¶9-155 cross-references.......................... ¶9-155 foreign regimes, comparable provisions................................ ¶9-155 further reading............................ ¶9-155 outline......................................... ¶9-155 commentary ................................... ¶9-150 concepts ......................................... ¶9-150 cross-references ............................. ¶9-150 foreign regimes, comparable provisions ................................... ¶9-150 further reading ............................... ¶9-150 outline ............................................ ¶9-150

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Index Paragraph

Paragraph

access prohibited by the regulations .................................. ¶5-130 accession........................................ ¶3-040 account........................................... ¶1-065 account debtor ............................... ¶2-325 accounts ......................................... ¶2-245 ACN............................................. ¶11-030 Act ............................................... ¶11-030 actual knowledge ........................... ¶8-170 actual or constructive knowledge .. ¶2-275 ADI account................................... ¶1-065 after-acquired property .....¶2-015; ¶8-060 agriculture.................................... ¶11-030 aircraft.......................................... ¶11-030 aircraft engine .............................. ¶11-030 Aircraft Protocol .......................... ¶11-030 airframe........................................ ¶11-030 all present and after-acquired property .................................... ¶11-030 all present and after-acquired property, except........................ ¶11-030 amendment demand....................... ¶5-185 amendment statement .................... ¶5-195 AML-CTF Act .............................. ¶11-030 an act.............................................. ¶2-020 any right of set-off or right of combination of accounts ............ ¶1-045 ARBN .......................................... ¶11-030 ARSN .......................................... ¶11-030 ASIC ............................................ ¶11-030 assignments.................................... ¶1-065 attachment.........................¶2-015; ¶2-020 Australian Business Register ....... ¶11-030 bailment ............................¶1-070; ¶2-035 best price reasonably obtainable.... ¶4-125 buyer .............................................. ¶2-140 chattel mortgages........................... ¶1-065 chattel paper....... ¶1-045; ¶1-065; ¶1-075; ¶7-020 Chicago Convention .................... ¶11-030 collateral ........................................ ¶2-295 commercial consignments ............ ¶1-065; ¶1-075 commercial property...................... ¶5-045 commercially practical .................. ¶3-095 commingled ................................... ¶3-095

conditional sale agreements........... ¶1-065 consignments ................................. ¶1-065 consumer property ............¶1-070; ¶5-045 continuous perfection .................... ¶2-085 control............................................ ¶9-170 controllers .........................¶4-045; ¶4-050 court order ................................... ¶11-090 crops .................................¶3-015; ¶3-025 debt ................................................ ¶2-270 debtor ............................................. ¶2-270 deemed security interests............... ¶1-065 default ............................................ ¶4-085 defect ...................¶5-100; ¶5-105; ¶5-110 described in a registration.............. ¶5-140 dispose of collateral ....................... ¶4-110 encrypted ....................................... ¶2-025 enforcing a security interest........... ¶4-185 equipment ...................................... ¶2-025 evidential burden ........................... ¶5-140 execution creditor .......................... ¶2-295 financial products .......................... ¶1-080 financial property........................... ¶2-125 financing change statement ........... ¶5-150 financing statement..........¶5-030; ¶5-150; ¶5-155 fixtures ........................................... ¶1-045 flawed asset ................................... ¶1-065 future advances .............................. ¶2-015 garnishee order .............................. ¶2-295 general law..................................... ¶1-045 helicopter ..................................... ¶11-030 hire purchase agreement ................ ¶1-065 honesty........................................... ¶4-025 hull identification number ........... ¶11-030 identifiable ..................................... ¶2-080 individual ....................................... ¶5-140 intangible property......................... ¶2-125 interested person ............................ ¶8-060 intermediary................................... ¶1-080 intermediated security ......¶1-075; ¶1-080 inventory............ ¶2-145; ¶2-235; ¶9-170; ¶9-175 investment instrument .....¶1-075; ¶2-060; ¶2-170; ¶2-175; ¶7-020 land ................................................ ¶1-045 lease ............................................... ¶1-070 letter of credit ...................¶2-065; ¶7-045

Definitions

Annotated Personal Property Securities Act 2009 (Cth)

Def

912

Index Paragraph

Definitions—continued

licence............................................ ¶1-065 livestock............................¶3-020; ¶3-030 manufacturer’s number................ ¶11-030 market value .................................. ¶4-125 migrated security interest ............ ¶11-030 modification......................¶2-325; ¶4-060 National Names Index ................. ¶11-030 negotiable bills of lading ............... ¶1-045 negotiable instrument ......¶1-075; ¶2-045; ¶7-020 new value....................................... ¶2-150 notice of objection ......................... ¶4-155 ordinary course of business ........... ¶2-155 ordinary course of trading in a prescribed financial market ........ ¶2-170 original registration time ............. ¶11-030 other financial instruments or other financial assets .................. ¶1-080 outboard motor ............................ ¶11-030 personal information...................... ¶5-145 personal property ..............¶1-065; ¶4-055 personal property prescribed by regulations .................................. ¶5-020 persons holding interests (other than security interests) in the collateral that have a higher priority........................................ ¶4-185 police commissioner .................... ¶11-090 pooling arrangements .................... ¶1-070 possession ...................................... ¶2-020 pre-perfection ................................ ¶2-200 predominantly for personal, domestic or household use ........ ¶1-075; ¶2-160 prescribed property ...................... ¶11-030 proceeds ............................¶2-080; ¶4-185 proceeds of crime authorised person ....................................... ¶11-090 proceeds of crime law.................. ¶11-090 proprietary rights ........................... ¶1-065 public auction ................................ ¶4-115 purchase money security interests ...................................... ¶1-075 reasonable expenses....................... ¶4-105 reasonable period........................... ¶4-095 receiver .......................................... ¶4-050

Des

Paragraph

registered description of collateral..................................... ¶5-150 registered financing statement ....... ¶5-135 registered scheme ........................ ¶11-030 registration event ........................... ¶5-070 registration time........................... ¶11-030 relevant agency ............................ ¶11-090 responsible entity......................... ¶11-030 securities account........................... ¶1-080 security agreement...........¶2-025; ¶8-060; ¶8-100; ¶9-020 seize ............................................... ¶4-085 seizure............................................ ¶2-295 serial number .......¶1-075; ¶2-145; ¶5-135 small aircraft ................................ ¶11-030 specific goods ................................ ¶1-065 subordination ................................. ¶1-065 traceable......................................... ¶2-080 transitional register ........................ ¶9-130 transitional register end time ......... ¶9-130 trust receipts................................... ¶1-065 unique identifier............................. ¶5-135 value ...... ¶1-070; ¶1-075; ¶2-020; ¶2-275 vehicle identification number ...... ¶11-030 watercraft ..................................... ¶11-030 writing............................................ ¶2-025

Described in a registration concept........................................... ¶5-140

Disposal of collateral — see also Collateral; Return of collateral; Seizure free of interests commentary................................ ¶4-135 concepts...................................... ¶4-135 cross-references.......................... ¶4-135 foreign regimes, comparable provisions................................ ¶4-135 further reading............................ ¶4-135 outline......................................... ¶4-135 market value, duty to obtain commentary................................ ¶4-125 concepts...................................... ¶4-125 cross-references.......................... ¶4-125 foreign regimes, comparable provisions................................ ¶4-125 further reading............................ ¶4-125 outline......................................... ¶4-125

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Index Paragraph

Paragraph

notice commentary................................ ¶4-120 concepts...................................... ¶4-120 cross-references.......................... ¶4-120 foreign regimes, comparable provisions................................ ¶4-120 further reading............................ ¶4-120 outline......................................... ¶4-120 objection to purchase or retention, persons entitled commentary................................ ¶4-155 concepts...................................... ¶4-155 cross-references.......................... ¶4-155 foreign regimes, comparable provisions................................ ¶4-155 further reading............................ ¶4-155 outline......................................... ¶4-155 objection to purchase or retention, request to prove interest commentary................................ ¶4-160 concepts...................................... ¶4-160 cross-references.......................... ¶4-160 foreign regimes, comparable provisions................................ ¶4-160 further reading............................ ¶4-160 outline......................................... ¶4-160 process commentary................................ ¶4-110 concepts...................................... ¶4-110 cross-references.......................... ¶4-110 foreign regimes, comparable provisions................................ ¶4-110 further reading............................ ¶4-110 outline......................................... ¶4-110 purchase commentary................................ ¶4-115 concepts...................................... ¶4-115 cross-references.......................... ¶4-115 foreign regimes, comparable provisions................................ ¶4-115 further reading............................ ¶4-115 outline......................................... ¶4-115 retention free of interests commentary................................ ¶4-150 concepts...................................... ¶4-150 cross-references.......................... ¶4-150

foreign regimes, comparable provisions................................ ¶4-150 further reading............................ ¶4-150 outline......................................... ¶4-150 retention, notice commentary................................ ¶4-145 concepts...................................... ¶4-145 cross-references.......................... ¶4-145 foreign regimes, comparable provisions................................ ¶4-145 further reading............................ ¶4-145 outline......................................... ¶4-145 retention, proposal of secured party commentary................................ ¶4-140 concepts...................................... ¶4-140 cross-references.......................... ¶4-140 foreign regimes, comparable provisions................................ ¶4-140 further reading............................ ¶4-140 outline......................................... ¶4-140 statement of account, duty to give commentary................................ ¶4-130 concepts...................................... ¶4-130 cross-references.......................... ¶4-130 foreign regimes, comparable provisions................................ ¶4-130 further reading............................ ¶4-130 outline......................................... ¶4-130 E

Effective registration commentary ................................... ¶5-095 concepts ......................................... ¶5-095 cross-references ............................. ¶5-095 foreign regimes, comparable provisions ................................... ¶5-095 further reading ............................... ¶5-095 outline ............................................ ¶5-095

Electronic data .............................¶7-020 Encryption ....................................¶2-025 Enforcement — see also Rights, duties and obligations; Seizure

Annotated Personal Property Securities Act 2009 (Cth)

commentary ................................... ¶4-015 concept........................................... ¶4-015

Enf

914

Index Paragraph

Paragraph

consumer credit legislation, relationship commentary................................ ¶4-065 concepts...................................... ¶4-065 cross-references.......................... ¶4-065 foreign regimes, comparable provisions................................ ¶4-065 further reading............................ ¶4-065 outline......................................... ¶4-065 contracting out commentary................................ ¶4-045 concepts...................................... ¶4-045 cross-references.......................... ¶4-045 foreign regimes, comparable provisions................................ ¶4-045 further reading............................ ¶4-045 outline......................................... ¶4-045 cross-references ............................. ¶4-015 distribution of proceeds received by secured party commentary................................ ¶4-185 concepts...................................... ¶4-185 cross-references.......................... ¶4-185 foreign regimes, comparable provisions................................ ¶4-185 further reading............................ ¶4-185 outline......................................... ¶4-185 foreign regimes, comparable provisions ................................... ¶4-015 further reading ............................... ¶4-015 judgment or execution does not extinguish security interest in collateral commentary................................ ¶4-035 concepts...................................... ¶4-035 cross-references.......................... ¶4-035 foreign regimes, comparable provisions................................ ¶4-035 further reading............................ ¶4-035 outline......................................... ¶4-035 land and property, interests covering commentary................................ ¶4-055 concepts...................................... ¶4-055 cross-references.......................... ¶4-055 foreign regimes, comparable provisions................................ ¶4-055

further reading............................ ¶4-055 outline......................................... ¶4-055 notices, time when not required commentary................................ ¶4-205 concepts...................................... ¶4-205 cross-references.......................... ¶4-205 foreign regimes, comparable provisions................................ ¶4-205 further reading............................ ¶4-205 outline......................................... ¶4-205 outline ............................................ ¶4-015 PPS leases ...................................... ¶1-070 redemption of collateral, entitled persons commentary................................ ¶4-195 concepts...................................... ¶4-195 cross-references.......................... ¶4-195 foreign regimes, comparable provisions................................ ¶4-195 further reading............................ ¶4-195 outline......................................... ¶4-195 reinstatement of security agreement commentary................................ ¶4-200 concepts...................................... ¶4-200 cross-references.......................... ¶4-200 foreign regimes, comparable provisions................................ ¶4-200 further reading............................ ¶4-200 outline......................................... ¶4-200 rights and duties, honest and commercially reasonable manner commentary................................ ¶4-025 concepts...................................... ¶4-025 cross-references.......................... ¶4-025 foreign regimes, comparable provisions................................ ¶4-025 further reading............................ ¶4-025 outline......................................... ¶4-025 rights and remedies commentary...................¶4-020; ¶4-030 concepts.........................¶4-020; ¶4-030 cross-references.............¶4-020; ¶4-030 foreign regimes, comparable provisions...................¶4-020; ¶4-030 further reading...............¶4-020; ¶4-030 outline............................¶4-020; ¶4-030

Enforcement—continued

Enf

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Index Paragraph

Paragraph

rights and remedies, cumulative commentary................................ ¶4-040 concepts...................................... ¶4-040 cross-references.......................... ¶4-040 foreign regimes, comparable provisions................................ ¶4-040 further reading............................ ¶4-040 outline......................................... ¶4-040 security interests in intellectual property licences commentary................................ ¶9-050 concepts...................................... ¶9-050 cross-references.......................... ¶9-050 foreign regimes, comparable provisions................................ ¶9-050 further reading............................ ¶9-050 outline......................................... ¶9-050 security interests provided for by security agreements commentary................................ ¶9-055 concepts...................................... ¶9-055 cross-references.......................... ¶9-055 foreign regimes, comparable provisions................................ ¶9-055 further reading............................ ¶9-055 outline......................................... ¶9-055 transfer in title, secured party’s steps to reflect commentary................................ ¶4-190 concepts...................................... ¶4-190 cross-references.......................... ¶4-190 foreign regimes, comparable provisions................................ ¶4-190 further reading............................ ¶4-190 outline......................................... ¶4-190

concepts...................................... ¶4-050 cross-references.......................... ¶4-050 foreign regimes, comparable provisions................................ ¶4-050 further reading............................ ¶4-050 outline......................................... ¶4-050 land law, use commentary................................ ¶4-060 concepts...................................... ¶4-060 cross-references.......................... ¶4-060 foreign regimes, comparable provisions................................ ¶4-060 further reading............................ ¶4-060 outline......................................... ¶4-060 liquid assets commentary................................ ¶4-070 concepts...................................... ¶4-070 cross-references.......................... ¶4-070 foreign regimes, comparable provisions................................ ¶4-070 further reading............................ ¶4-070 outline......................................... ¶4-070 liquid assets, notice to higher priority parties commentary................................ ¶4-075 concepts...................................... ¶4-075 cross-references.......................... ¶4-075 foreign regimes, comparable provisions................................ ¶4-075 further reading............................ ¶4-075 outline......................................... ¶4-075 PPS leases ...................................... ¶1-070 purchase money security interests ...................................... ¶1-075

Execution creditor

Enforcing a security interest concept........................................... ¶4-185

Equipment ....................................¶2-025

concept..............................¶2-295; ¶8-060

Execution order............................¶2-295 Express or implied authorisation

Equitable tracing..........................¶2-080 Evidential burden ........................¶5-140 concept........................................... ¶5-140

proceeds with attachment .............. ¶2-085

Extinguishment — see Taking free of interest

Exceptions application where there is receiver or another controller of property commentary................................ ¶4-050

F

Fiduciary relationships

Annotated Personal Property Securities Act 2009 (Cth)

proceeds ......................................... ¶2-080

Fid

916

Index Paragraph

Financial accommodation trusts .......................................¶1-045

Paragraph

Future rights of remuneration transfers ......................................... ¶1-045

Financial products

G

Intermediated securities................. ¶1-080

Financial property concept........................................... ¶2-125

Financing change statements concept............... ¶5-030; ¶5-035; ¶5-040; ¶5-055; ¶5-060; ¶5-090; ¶5-120; ¶5-150; ¶5-155; ¶9-050; ¶9-060; ¶9-135; ¶9-140; ¶9-145

Financing statements commentary ................................... ¶5-155 concept............... ¶5-030; ¶5-035; ¶5-040; ¶5-055; ¶5-060; ¶5-090; ¶5-120; ¶5-150; ¶5-155; ¶9-060; ¶9-130; ¶9-140; ¶9-145 concepts ......................................... ¶5-155 cross-references ............................. ¶5-155 foreign regimes, comparable provisions ................................... ¶5-155 further reading ............................... ¶5-155 outline ............................................ ¶5-155

Fixed charges commentary ................................... ¶9-075 concepts ......................................... ¶9-075 cross-references ............................. ¶9-075 foreign regimes, comparable provisions ................................... ¶9-075 further reading ............................... ¶9-075 outline ............................................ ¶9-075 security interests ............................ ¶1-065

Fixtures definition........................................ ¶1-045

Flawed asset arrangements security interests ............................ ¶1-065

Floating charges commentary ................................... ¶9-075 concepts ......................................... ¶9-075 cross-references ............................. ¶9-075 foreign regimes, comparable provisions ................................... ¶9-075 further reading ............................... ¶9-075 outline ............................................ ¶9-075 security interests ............................ ¶1-065

Fin

Garnishee order concept........................................... ¶2-295

General application of Act any right of set-off or right of combination of accounts ............ ¶1-045 charges arising under particular statutes........................................ ¶1-045 commentary ................................... ¶1-045 concepts ......................................... ¶1-045 cross-references ............................. ¶1-045 dealings in relation to land ............ ¶1-045 declared interests ........................... ¶1-045 declared statutory licenses ............. ¶1-045 financial accommodation trusts ..... ¶1-045 foreign regimes, comparable provisions ................................... ¶1-045 further reading ............................... ¶1-045 interests arising under particular statutes .................................... ¶1-045 fixtures........................................ ¶1-045 held by pawnbrokers .................. ¶1-045 superannuation, retirement savings accounts and approved deposit accounts...................... ¶1-045 liens, charges or other interests concept ....................................... ¶1-045 provided by general law ............. ¶1-045 under statute ............................... ¶1-045 negotiable bills of lading ............... ¶1-045 outline ............................................ ¶1-045 Payment Systems and Netting Act, arrangements under ............ ¶1-045 transfer accounts...................................... ¶1-045 beneficial interest in monetary obligations............................... ¶1-045 future rights of remuneration ..... ¶1-045 interests in contracts of annuity or insurance policies.................... ¶1-045 unearned rights to payment ........ ¶1-045 water rights .................................... ¶1-045

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Index Paragraph

Goods concept............... ¶2-100; ¶2-240; ¶2-305; ¶3-045; ¶3-060; ¶3-065; ¶7-035

Governing laws — see Laws and jursidictions; Personal Property Securities Act 2009 (Cth) Grantors vesting of unperfected security interests attachment after winding up....... ¶8-020 winding up after bankruptcy ...... ¶8-015 H

Hire purchase agreements security interests ............................ ¶1-065

Honesty definition........................................ ¶4-025 I

Identifiable or traceable proceeds ..................................¶2-080 Individuals concept........................................... ¶5-140 financing statement, information required ...................................... ¶5-045

Ineffective registration 7 years or more commentary................................ ¶5-220 concepts...................................... ¶5-220 cross-references.......................... ¶5-220 foreign regimes, comparable provisions................................ ¶5-220 further reading............................ ¶5-220 outline......................................... ¶5-220

Information application to Court for exemption or extension of time to respond to requests commentary................................ ¶8-075 concepts...................................... ¶8-075 cross-references.......................... ¶8-075 foreign regimes, comparable provisions................................ ¶8-075 further reading............................ ¶8-075 outline......................................... ¶8-075

Annotated Personal Property Securities Act 2009 (Cth)

Paragraph

application to Court for response to request commentary................................ ¶8-085 concepts...................................... ¶8-085 cross-references.......................... ¶8-085 foreign regimes, comparable provisions................................ ¶8-085 further reading............................ ¶8-085 outline......................................... ¶8-085 application to Court in relation to costs charged commentary................................ ¶8-090 concepts...................................... ¶8-090 cross-references.......................... ¶8-090 foreign regimes, comparable provisions................................ ¶8-090 further reading............................ ¶8-090 outline......................................... ¶8-090 estoppels against persons who respond to request commentary................................ ¶8-100 concepts...................................... ¶8-100 cross-references.......................... ¶8-100 foreign regimes, comparable provisions................................ ¶8-100 further reading............................ ¶8-100 outline......................................... ¶8-100 non-compliance with Court order concepts...................................... ¶8-095 cross-references.......................... ¶8-095 foreign regimes, comparable provisions................................ ¶8-095 further reading............................ ¶8-095 outline......................................... ¶8-095 obligation to disclose successor when request made commentary................................ ¶8-065 concepts...................................... ¶8-065 cross-references.......................... ¶8-065 foreign regimes, comparable provisions................................ ¶8-065 further reading............................ ¶8-065 outline......................................... ¶8-065 recovery of costs arising from request commentary................................ ¶8-080 concepts...................................... ¶8-080

Inf

918

Index Paragraph

Information—continued

cross-references.......................... ¶8-080 foreign regimes, comparable provisions................................ ¶8-080 further reading............................ ¶8-080 outline......................................... ¶8-080 secured party to provide commentary................................ ¶8-060 concepts...................................... ¶8-060 cross-references.......................... ¶8-060 foreign regimes, comparable provisions................................ ¶8-060 further reading............................ ¶8-060 outline......................................... ¶8-060 time for responding to request commentary................................ ¶8-070 concepts...................................... ¶8-070 cross-references.......................... ¶8-070 foreign regimes, comparable provisions................................ ¶8-070 further reading............................ ¶8-070 outline......................................... ¶8-070

Insolvency transitional security interests commentary................................ ¶9-110 concepts...................................... ¶9-110 cross-references.......................... ¶9-110 foreign regimes, comparable provisions................................ ¶9-110 further reading............................ ¶9-110 outline......................................... ¶9-110

Insurance payments proceeds ......................................... ¶2-080

Insurance policies transfers of interest ........................ ¶1-045

Intangible property ADI accounts ................................. ¶7-040 concepts ............................¶2-125; ¶7-040 cross-references ............................. ¶7-040 foreign regimes, comparable provisions ................................... ¶7-040 further reading ............................... ¶7-040 intellectual property....................... ¶7-040

Ins

Paragraph

letters of credit ............................... ¶7-040 main rule ........................................ ¶7-040 outline ............................................ ¶7-040

Intellectual property — see also Licences concept............... ¶2-080; ¶2-125; ¶3-125; ¶4-110; ¶7-030; ¶7-040 implied references commentary................................ ¶3-125 concepts...................................... ¶3-125 cross-references.......................... ¶3-125 foreign regimes, comparable provisions................................ ¶3-125 further reading............................ ¶3-125 outline......................................... ¶3-125 licences and transfers commentary................................ ¶3-130 concepts...................................... ¶3-130 cross-references.......................... ¶3-130 foreign regimes, comparable provisions................................ ¶3-130 further reading............................ ¶3-130 outline......................................... ¶3-130 proceeds ......................................... ¶2-080

Intellectual property rights — see Intellectual property Interests fixtures ........................................... ¶1-045 held by pawnbrokers...................... ¶1-045 land ................................................ ¶1-045 superannuation, retirement savings accounts and approved deposit accounts ......................... ¶1-045

Interference with privacy commentary ................................... ¶5-145 concepts ......................................... ¶5-145 cross-references ............................. ¶5-145 foreign regimes, comparable provisions ................................... ¶5-145 further reading ............................... ¶5-145 outline ............................................ ¶5-145

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Index Paragraph

Paragraph J

Intermediary concept........................................... ¶1-080

Intermediated instruments

Jurisdiction — see Laws and jurisdictions

proceeds with attachment .............. ¶2-085

Intermediated securities ..............¶1-080 commentary ................................... ¶2-055 concepts ............. ¶1-075; ¶1-080; ¶2-055; ¶2-080; ¶2-085; ¶2-170; ¶2-180; ¶2-310; ¶4-015 cross-references ................¶1-080; ¶2-055 financial products .......................... ¶1-080 foreign regimes, comparable provisions ......................¶1-080; ¶2-055 further reading ..................¶1-080; ¶2-055 intermediary................................... ¶1-080 outline ...............................¶1-080; ¶2-055 particular issues ............................. ¶1-080 purchase money security interests ...................................... ¶1-075

K

Knowledge proceeds with attachment actual .......................................... ¶2-085 constructive ................................ ¶2-085 L

Land dealings in relation to .................... ¶1-045 PPS leases ...................................... ¶1-070

Laws and jurisdictions

Intervening security interests priority commentary................................ ¶2-220 concepts...................................... ¶2-220 cross-references.......................... ¶2-220 foreign regimes, comparable provisions................................ ¶2-220 further reading............................ ¶2-220 outline......................................... ¶2-220

Inventory concept............... ¶2-025; ¶2-145; ¶2-150; ¶2-155; ¶2-235; ¶2-240; ¶2-245; ¶9-170; ¶9-175; ¶9-180

Investment proceeds with attachment .............. ¶2-085

Investment instruments ...............¶2-060 concepts ............. ¶1-075; ¶2-060; ¶2-080; ¶2-085; ¶2-170; ¶2-180; ¶2-310; ¶4-015; ¶7-020 cross-references ............................. ¶2-060 foreign regimes, comparable provisions ................................... ¶2-060 further reading ............................... ¶2-060 outline ............................................ ¶2-060 purchase money security interests ...................................... ¶1-075

Annotated Personal Property Securities Act 2009 (Cth)

assignment requirements, PPSA prevails commentary................................ ¶7-160 concepts...................................... ¶7-160 cross-references.......................... ¶7-160 foreign regimes, comparable provisions................................ ¶7-160 outline......................................... ¶7-160 attachment and perfection of security interests commentary................................ ¶7-170 concepts...................................... ¶7-170 cross-references.......................... ¶7-170 foreign regimes, comparable provisions................................ ¶7-170 further reading............................ ¶7-170 outline......................................... ¶7-170 concurrent operation of Australian laws commentary................................ ¶7-125 concepts...................................... ¶7-125 cross-references.......................... ¶7-125 foreign regimes, comparable provisions................................ ¶7-125 further reading............................ ¶7-125 outline......................................... ¶7-125 concurrent operation, regulations may revolve inconsistency commentary................................ ¶7-130 concepts...................................... ¶7-130 cross-references.......................... ¶7-130

Law

920

Index Paragraph

Paragraph

foreign regimes, comparable provisions................................ ¶7-130 further reading............................ ¶7-130 outline......................................... ¶7-130 exclusion by referring State law or Territory law commentary................................ ¶7-150 concepts...................................... ¶7-150 cross-references.......................... ¶7-150 foreign regimes, comparable provisions................................ ¶7-150 further reading............................ ¶7-150 outline......................................... ¶7-150 express agreement commentary................................ ¶7-030 concepts...................................... ¶7-030 cross-references.......................... ¶7-030 foreign regimes, comparable provisions................................ ¶7-030 further reading............................ ¶7-030 outline......................................... ¶7-030 financial property and rights attachment .................................. ¶7-045 concepts...................................... ¶7-045 cross-references.......................... ¶7-045 foreign regimes, comparable provisions................................ ¶7-045 further reading............................ ¶7-045 outline......................................... ¶7-045 perfection.................................... ¶7-045 goods concepts...................................... ¶7-035 cross-references.......................... ¶7-035 foreign regimes, comparable provisions................................ ¶7-035 further reading............................ ¶7-035 main rule..................................... ¶7-035 moved between jurisdictions...... ¶7-035 moved goods .............................. ¶7-035 outline......................................... ¶7-035 Registers of ships ....................... ¶7-035 governing law, Commonwealth commentary................................ ¶7-025 concepts...................................... ¶7-025 cross-references.......................... ¶7-025 foreign regimes, comparable provisions................................ ¶7-025

further reading............................ ¶7-025 outline......................................... ¶7-025 intangible property ADI accounts.............................. ¶7-040 concepts...................................... ¶7-040 cross-references.......................... ¶7-040 foreign regimes, comparable provisions................................ ¶7-040 further reading............................ ¶7-040 intellectual property ................... ¶7-040 letters of credit............................ ¶7-040 main rule..................................... ¶7-040 outline......................................... ¶7-040 legislation that takes precedence over PPSA commentary................................ ¶7-135 concepts...................................... ¶7-135 cross-references.......................... ¶7-135 foreign regimes, comparable provisions................................ ¶7-135 further reading............................ ¶7-135 outline......................................... ¶7-135 located, meaning concepts...................................... ¶7-020 cross-references.......................... ¶7-020 electronic data ............................ ¶7-020 foreign regimes, comparable provisions................................ ¶7-020 further reading............................ ¶7-020 located ........................................ ¶7-020 outline......................................... ¶7-020 personal property, security interests and matters excluded from State amendment referrals commentary................................ ¶7-145 concepts...................................... ¶7-145 cross-references.......................... ¶7-145 foreign regimes, comparable provisions................................ ¶7-145 further reading............................ ¶7-145 outline......................................... ¶7-145 proceeds commentary................................ ¶7-050 concepts...................................... ¶7-050 cross-references.......................... ¶7-050 foreign regimes, comparable provisions................................ ¶7-050

Laws and jurisdictions—continued

Law

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Index Paragraph

further reading............................ ¶7-050

Paragraph

Leases security interests ...............¶1-065; ¶2-020

outline......................................... ¶7-050 registration requirements, PPSA prevails

Lessors purchase money security interests ...................................... ¶1-075

commentary................................ ¶7-155 concepts...................................... ¶7-155 cross-references.......................... ¶7-155

Lessors, damages..........................¶8-030 Letters of credit ............................¶2-065 commentary ................................... ¶2-065 concept..............................¶2-065; ¶7-045 cross-references ............................. ¶2-065 foreign regimes, comparable provisions ................................... ¶2-065 further reading ............................... ¶2-065 outline ............................................ ¶2-065

foreign regimes, comparable provisions................................ ¶7-155 further reading............................ ¶7-155 outline......................................... ¶7-155 scope of provisions commentary................................ ¶7-015 concepts...................................... ¶7-015

Licences — see also Intellectual property concept... ¶1-065; ¶4-030; ¶4-085; ¶7-130 definition...........................¶1-045; ¶1-065

cross-references.......................... ¶7-015 foreign regimes, comparable provisions................................ ¶7-015

Liens created under statute ...................... ¶1-045 provided by general law ................ ¶1-045

further reading............................ ¶7-015 outline......................................... ¶7-015 security agreements, formal requirements

Liquid assets commentary ................................... ¶4-070 concepts ......................................... ¶4-070 cross-references ............................. ¶4-070 foreign regimes, comparable provisions ................................... ¶4-070 further reading ............................... ¶4-070 outline ............................................ ¶4-070

commentary................................ ¶7-165 concepts...................................... ¶7-165 cross-references.......................... ¶7-165 foreign regimes, comparable provisions................................ ¶7-165 further reading............................ ¶7-165

Livestock

outline......................................... ¶7-165 security agreements, interaction — see also Personal Property Securities Act 2009 (Cth) commentary................................ ¶7-140 concepts...................................... ¶7-140 cross-references.......................... ¶7-140 foreign regimes, comparable provisions................................ ¶7-140 further reading............................ ¶7-140 outline......................................... ¶7-140

Annotated Personal Property Securities Act 2009 (Cth)

commentary ................................... ¶3-020 concepts ............................¶3-020; ¶3-030 cross-references ............................. ¶3-020 foreign regimes, comparable provisions ................................... ¶3-020 further reading ............................... ¶3-020 outline ............................................ ¶3-020 priority commentary................................ ¶3-030 concepts...................................... ¶3-030 cross-references.......................... ¶3-030 foreign regimes, comparable provisions................................ ¶3-030 further reading............................ ¶3-030

Liv

922

Index Paragraph

Livestock—continued

outline......................................... ¶3-030 proceeds ......................................... ¶2-080

Location concept............... ¶2-120; ¶2-125; ¶7-020; ¶7-035; ¶7-040; ¶7-045

Lowest Intermediate Balance rule ..........................................¶2-080 M

Market value concept.................¶4-115; ¶4-125; ¶8-165 proceeds with attachment .............. ¶2-085

Migrated data Commonwealth officer to provide commentary................................ ¶9-120 concepts...................................... ¶9-120 cross-references.......................... ¶9-120 foreign regimes, comparable provisions................................ ¶9-120 further reading............................ ¶9-120 outline......................................... ¶9-120 incorrectly registered migrated data commentary................................ ¶9-135 concepts...................................... ¶9-135 cross-references.......................... ¶9-135 foreign regimes, comparable provisions................................ ¶9-135 further reading............................ ¶9-135 outline......................................... ¶9-135 no requirement for notice of verification statement commentary................................ ¶9-140 concepts...................................... ¶9-140 cross-references.......................... ¶9-140 foreign regimes, comparable provisions................................ ¶9-140 further reading............................ ¶9-140 outline......................................... ¶9-140 registration commentary................................ ¶9-130 concepts...................................... ¶9-130 cross-references.......................... ¶9-130 foreign regimes, comparable provisions................................ ¶9-130

Loc

Paragraph

further reading............................ ¶9-130 outline......................................... ¶9-130

Migrated security interest commentary ................................... ¶9-125 concept... ¶2-145; ¶9-120; ¶9-125; ¶9-130 cross-references ............................. ¶9-125 foreign regimes, comparable provisions ................................... ¶9-125 further reading ............................... ¶9-125 outline ............................................ ¶9-125

Migration time..............................¶9-015 Modification concept..............................¶2-325; ¶4-060

Monetary obligations purchase money security interests ...................................... ¶1-075

Motor vehicle taking free of interests concepts...................................... ¶2-150 exceptions................................... ¶2-150 main rule..................................... ¶2-150 prescribed persons...................... ¶2-150

Mutual enforcement proceeds with attachment .............. ¶2-085 N

National Credit Code concept........................................... ¶4-065

Negotiable bills of lading .............¶1-045 concept........................................... ¶1-045

Negotiable instruments concept............... ¶1-045; ¶1-075; ¶2-045; ¶2-070; ¶2-105; ¶2-270; ¶2-275; ¶7-020; ¶7-045 person who acquires, priority ........ ¶2-275 purchase money security interests ...................................... ¶1-075 returned collateral .......................... ¶2-105 uncertificated ................................. ¶2-070

New value concept............... ¶2-150; ¶2-160; ¶2-185; ¶2-245; ¶2-280; ¶4-150; ¶8-020

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Index Paragraph

Paragraph

control of ADI account .................. ¶2-050

further reading............................ ¶8-165 outline......................................... ¶8-165

Non-circulating asset Non-constitutional interests commentary ................................... ¶9-070 concepts ......................................... ¶9-070 foreign regimes, comparable provisions ................................... ¶9-070 further reading ............................... ¶9-070 outline ............................................ ¶9-070

Non-purchase money security interests cross-references ............................. ¶2-245 foreign regimes, comparable provisions ................................... ¶2-245 outline ............................................ ¶2-245

Notice concept............... ¶3-075; ¶4-085; ¶4-105; ¶4-120; ¶4-140; ¶4-145; ¶4-150; ¶4-155 disposal of collateral...................... ¶4-120 non-purchase money security interests ...................................... ¶2-245 notice of objectionl ..........¶4-140; ¶4-155; ¶4-160 objection to purchase or retention...................................... ¶4-155 removal of accession ..................... ¶3-075 retention of collateral..................... ¶4-145 secured parties, notice to grantors....................................... ¶5-065 seizure by higher priority parties ... ¶4-105 time when not required .................. ¶4-205 verification statement Registrar, notice to secured parties ............. ¶5-060

Ordinary course of business concept............... ¶2-155; ¶2-275; ¶2-280; ¶2-285; ¶2-290; ¶2-330; ¶9-170 definition........................................ ¶2-155 taking personal property free of security interest .......................... ¶2-155

Ordinary course of trading in a prescribed financial market.....................................¶2-170 P

Particulars relating to personal property security interests against third parties ......................................... ¶2-025

Partners financing statement, information required ...................................... ¶5-045

Pawnbrokers interests held by ............................. ¶1-045

Payment or performance of obligation security interests ............................ ¶1-065

Payment Systems and Netting Act 1998 (Cth) arrangements under ....................... ¶1-045

Perfection — see also Return of collateral;Temporary perfection;Transfers

O

Obligations — see Rights, duties and obligations Onus of proof rights, duties and obligations commentary................................ ¶8-165 concepts...................................... ¶8-165 cross-references.......................... ¶8-165 foreign regimes, comparable provisions................................ ¶8-165

Annotated Personal Property Securities Act 2009 (Cth)

by possession ................................. ¶2-045 concept............... ¶2-025; ¶2-030; ¶3-100; ¶7-035; ¶7-040; ¶7-045; ¶7-050 continous express or implied authorisation............................ ¶2-085 provision in security agreement................................ ¶2-085 taking free provisions................. ¶2-085 cross-references ............................. ¶2-030

Per

924

Index Paragraph

Perfection—continued

foreign regimes, comparable provisions ................................... ¶2-030 further reading ............................... ¶2-030 goods possessed by bailee additional considerations............ ¶2-035 application .................................. ¶2-035 concepts...................................... ¶2-035 cross-references.......................... ¶2-035 foreign regimes, comparable provisions................................ ¶2-035 further reading............................ ¶2-035 outline......................................... ¶2-035 priorities ..................................... ¶2-035 temporary for documents in transit ...................................... ¶2-035 nature of......................................... ¶2-030 order of attachment and steps to perfect are irrelevant .................. ¶2-030 outline ............................................ ¶2-030 pre-requisites ................................. ¶2-030 requirements for secured parties.... ¶2-030 control ........................................ ¶2-030 possession................................... ¶2-030 registration.................................. ¶2-030 single registration, multiple interests ...................................... ¶2-030 temporary....................................... ¶2-030

Perfection and temporary perfection proceeds by registration in original collateral ....................... ¶2-090 temporary with respect to........... ¶2-090

Personal information concept........................................... ¶5-145

Personal property — see also Security interests concept............... ¶1-065; ¶4-055; ¶5-140; ¶7-125; ¶7-130; ¶7-145; ¶9-035 interests also covering land ........... ¶4-055 particulars relating to ..................... ¶2-025 relationship to security interests .... ¶1-065

Personal property prescribed by regulations concept........................................... ¶5-020

Per

Paragraph

Personal Property Securities Act 2009 (Cth) — see also Laws and jurisdictions constitutional basis concepts...................................... ¶7-060 cross-references.......................... ¶7-060 foreign regimes, comparable provisions................................ ¶7-060 further reading............................ ¶7-060 non-referring states.................... ¶7-060. operation outside Australia ........ ¶7-060 outline......................................... ¶7-060 overview..................................... ¶7-060 general application — see General application of Act meaning of referring state commentary................................ ¶7-065 concepts...................................... ¶7-065 cross-references.......................... ¶7-065 foreign regimes, comparable provisions................................ ¶7-065 outline......................................... ¶7-065 special requirements for security interests collateral not registered within time ....................................... ¶10-055 entitlement to damages and compensation ........................ ¶10-070 extension of time for registration ............................ ¶10-060 unaffected by vesting of PPSA..................................... ¶10-065

Personal Property Securities Register (PPSR) — see also Registration; Searching the register access to registered data ................ ¶5-170 commentary................................ ¶5-170 concepts...................................... ¶5-170 cross-references.......................... ¶5-170 foreign regimes, comparable provisions................................ ¶5-170 further reading............................ ¶5-170 outline......................................... ¶5-170 access to third party data commentary................................ ¶5-175 concepts...................................... ¶5-175

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Index Paragraph

Paragraph

cross-references.......................... ¶5-175 foreign regimes, comparable provisions................................ ¶5-175 further reading............................ ¶5-175 outline......................................... ¶5-175 amendment demands, administrative and judicial process concepts...................................... ¶5-190 cross-references.......................... ¶5-190 excluding security trust instruments.............................. ¶5-190 flow chart ................................... ¶5-190 foreign regimes, comparable provisions................................ ¶5-190 further reading............................ ¶5-190 nature of administrative process .................................... ¶5-190 outline......................................... ¶5-190 amendment demands, how given .. ¶5-185 concept ....................................... ¶5-185 cross-references.......................... ¶5-185 5 business days........................... ¶5-185 foreign regimes, comparable provisions................................ ¶5-185 further reading............................ ¶5-185 outline......................................... ¶5-185 what should be included............. ¶5-185 who should pay .......................... ¶5-185 amendment demands, judicial process for consideration concepts...................................... ¶5-205 cross-references.......................... ¶5-205 foreign regimes, comparable provisions................................ ¶5-205 further reading............................ ¶5-205 outline......................................... ¶5-205 serious or arguable case ............. ¶5-205 similar approach used for caveats..................................... ¶5-205 amendment notices commentary................................ ¶5-195 concepts...................................... ¶5-195 cross-references.......................... ¶5-195 foreign regimes, comparable provisions................................ ¶5-195 further reading............................ ¶5-195

outline......................................... ¶5-195 contents commentary................................ ¶5-020 concepts...................................... ¶5-020 cross-references.......................... ¶5-020 foreign regimes, comparable provisions................................ ¶5-020 further reading............................ ¶5-020 outline......................................... ¶5-020 correction of registration errors commentary................................ ¶5-235 concepts...................................... ¶5-235 cross-references.......................... ¶5-235 foreign regimes, comparable provisions................................ ¶5-235 further reading............................ ¶5-235 outline......................................... ¶5-235 establishment commentary................................ ¶5-015 concepts...................................... ¶5-015 cross-references.......................... ¶5-015 foreign regimes, comparable provisions................................ ¶5-015 further reading............................ ¶5-015 outline......................................... ¶5-015 Personal Property Securities Regulation (Cth) access........................................ ¶11-075 access prohibited ...................... ¶11-105 administrative process — statements in relation to amendment demand .............. ¶11-120 contents .................................... ¶11-085 financing statements................. ¶11-095 notification of suspension of access .................................... ¶11-080 prohibited registration .............. ¶11-090 removal of data......................... ¶11-125 search criteria ........................... ¶11-110 third party data access .............. ¶11-115 verification statements — publication as alternative ...... ¶11-100 registration amerndments commentary................................ ¶5-200 concepts...................................... ¶5-200 cross-references.......................... ¶5-200

Annotated Personal Property Securities Act 2009 (Cth)

Per

926

Index Paragraph

Paragraph

foreign regimes, comparable provisions................................ ¶5-200 further reading............................ ¶5-200 outline......................................... ¶5-200 removal of data, general grounds commentary................................ ¶5-215 concepts...................................... ¶5-215 cross-references.......................... ¶5-215 foreign regimes, comparable provisions................................ ¶5-215 outline......................................... ¶5-215 removal of data, registration inneffective for 7 years or more commentary................................ ¶5-220 concepts...................................... ¶5-220 cross-references.......................... ¶5-220 foreign regimes, comparable provisions................................ ¶5-220 further reading............................ ¶5-220 outline......................................... ¶5-220 removal of data, restoration of incorrectly removed data commentary................................ ¶5-225 concepts...................................... ¶5-225 cross-references.......................... ¶5-225 foreign regimes, comparable provisions................................ ¶5-225 further reading............................ ¶5-225 outline......................................... ¶5-225 removed data, records commentary................................ ¶5-230 concepts...................................... ¶5-230 cross-references.......................... ¶5-230 foreign regimes, comparable provisions................................ ¶5-230 further reading............................ ¶5-230 outline......................................... ¶5-230

financing statement matters for items of table in subsection 153(1) of Act........................................ ¶11-160 financing statement matters for table in section 154 of Act ....... ¶11-165 investment instrument definition .................................. ¶11-050 motor vehicle ............................... ¶11-035 Personal Property Securities Register access........................................ ¶11-075 access prohibited ...................... ¶11-105 administrative process — statements in relation to amendment demand .............. ¶11-120 contents .................................... ¶11-085 financing statements................. ¶11-095 notification of suspension of access .................................... ¶11-080 prohibited registration .............. ¶11-090 removal of data......................... ¶11-125 search criteria ........................... ¶11-110 third party data access .............. ¶11-115 verification statements publication as alternative ...... ¶11-100 PPS lease definition .................................. ¶11-045 resolution of inconsistency .......... ¶11-135 security interests definition .................................. ¶11-040 relationship with consumer credit legislation.............................. ¶11-070 taking motor vehicles free of interests ................................. ¶11-055 taking motor vehicles from prescribed persons................. ¶11-060 temporary perfection rule — exception .................................. ¶11-150 watercraft definition .................................. ¶11-145

Personal Property Securities Register (PPSR)—continued

Personal Property Securities Regulation (Cth) application of Act external Territories ................... ¶11-015 interests .................................... ¶11-025 not to certain Acts .................... ¶11-020 definitions .................................... ¶11-030

Per

Persons holding interests (other than security interests) in the collateral that have a higher priority concept........................................... ¶4-185

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Index Paragraph

Paragraph

security interests ............................ ¶1-065

further reading ............................... ¶1-070 outline ............................................ ¶1-070

Pledges Pooling arrangements PPS leases ...................................... ¶1-070

Possession concept............... ¶1-070; ¶2-025; ¶2-030; ¶2-045; ¶2-100; ¶2-150; ¶2-175; ¶2-200; ¶2-235; ¶2-240; ¶2-250; ¶2-280; ¶2-305; ¶3-060; ¶4-105; ¶4-170; ¶4-175; ¶7-045 cross-references ............................. ¶2-045 foreign regimes, comparable provisions ................................... ¶2-045 further reading ............................... ¶2-045 outline ............................................ ¶2-045 perfection ....................................... ¶2-030 perfection by possession................ ¶2-045

PPS Register — see Personal Property Securities Register (PPSR) Pre-perfection concept........................................... ¶2-200

Predominately for personal, domestic or household use concept........................................... ¶2-160

Prescribed person concept........................................... ¶2-150

Principal place of residence concept........................................... ¶7-020

Priority

Possession of goods shipped by common carrier commentary................................ ¶2-250 concepts...................................... ¶2-250 cross-references.......................... ¶2-250 foreign regimes, comparable provisions................................ ¶2-250 further reading............................ ¶2-250 outline......................................... ¶2-250

PPS leases application and scope .................... ¶1-070 enforcement provisions .............. ¶1-070 limitations to ambit of Act ......... ¶1-070 priorities ..................................... ¶1-070 bailments for value ........................ ¶1-070 concept............... ¶1-065; ¶1-070; ¶2-020; ¶4-015; ¶8-025; ¶8-030 concept of lease generally ............. ¶1-070 concepts ......................................... ¶1-070 cross-references ............................. ¶1-070 default application ......................... ¶1-070 exceptions ...................................... ¶1-070 consumer property incidental to use of land............................... ¶1-070 pooling arrangements ................. ¶1-070 regularly engaged in business of leasing/bailing goods .............. ¶1-070 foreign regimes, comparable provisions ................................... ¶1-070

Annotated Personal Property Securities Act 2009 (Cth)

advances ........................................ ¶2-215 commentary................................ ¶2-215 concepts...................................... ¶2-215 cross-references.......................... ¶2-215 foreign regimes, comparable provisions................................ ¶2-215 further reading............................ ¶2-215 outline......................................... ¶2-215 between security interests and declared statutory interests commentary................................ ¶2-290 concepts...................................... ¶2-290 cross-references.......................... ¶2-290 foreign regimes, comparable provisions................................ ¶2-290 further reading............................ ¶2-290 outline......................................... ¶2-290 break in perfection of transferorgranted interest concepts...................................... ¶2-265 cross-references.......................... ¶2-265 foreign regimes, comparable provisions................................ ¶2-265 further reading............................ ¶2-265 outline......................................... ¶2-265 particulars................................... ¶2-265 transferee-granted interest prevails.................................... ¶2-265 transferor-granted interest prevails.................................... ¶2-265

Pri

928

Index Paragraph

Paragraph

certain security interests with no foreign register commentary................................ ¶2-310 concepts...................................... ¶2-310 cross-references.......................... ¶2-310 foreign regimes, comparable provisions................................ ¶2-310 further reading............................ ¶2-310 outline......................................... ¶2-310 creditor who receives payment of debt commentary................................ ¶2-270 concepts...................................... ¶2-270 cross-references.......................... ¶2-270 foreign regimes, comparable provisions................................ ¶2-270 further reading............................ ¶2-270 outline......................................... ¶2-270 execution creditor over unperfected security interest commentary................................ ¶2-295 concepts...................................... ¶2-295 cross-references.......................... ¶2-295 foreign regimes, comparable provisions................................ ¶2-295 further reading............................ ¶2-295 outline......................................... ¶2-295 holder of negotiable document of title commentary...................¶2-270; ¶2-285 concepts.........................¶2-270; ¶2-285 cross-references.............¶2-270; ¶2-285 foreign regimes, comparable provisions...................¶2-270; ¶2-285 further reading...............¶2-270; ¶2-285 outline............................¶2-270; ¶2-285 non-purchase money security interests concepts...................................... ¶2-245 further reading............................ ¶2-245 notice .......................................... ¶2-245 proceeds and new value ............. ¶2-245 trumps purchase security interests ................................... ¶2-245 person who acquires chattel paper or interest in commentary................................ ¶2-280

concepts...................................... ¶2-280 cross-references.......................... ¶2-280 foreign regimes, comparable provisions................................ ¶2-280 further reading............................ ¶2-280 outline......................................... ¶2-280 person who acquires negotiable instrument or interest in instrument commentary................................ ¶2-275 concepts...................................... ¶2-275 cross-references.......................... ¶2-275 foreign regimes, comparable provisions................................ ¶2-275 further reading............................ ¶2-275 outline......................................... ¶2-275 possession of goods shipped by common carrier commentary................................ ¶2-250 concepts...................................... ¶2-250 cross-references.......................... ¶2-250 foreign regimes, comparable provisions................................ ¶2-250 further reading............................ ¶2-250 outline......................................... ¶2-250 rules and intervening security interests commentary................................ ¶2-220 concepts...................................... ¶2-220 cross-references.......................... ¶2-220 foreign regimes, comparable provisions................................ ¶2-220 further reading............................ ¶2-220 outline......................................... ¶2-220 security interest, continuously perfected commentary................................ ¶2-205 concepts...................................... ¶2-205 cross-references.......................... ¶2-205 foreign regimes, comparable provisions................................ ¶2-205 further reading............................ ¶2-205 outline......................................... ¶2-205 security interest, protected by control commercial realities ................... ¶2-210 concepts...................................... ¶2-210

Priority—continued

Pri

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Index Paragraph

Paragraph

cross-references.......................... ¶2-210 foreign regimes, comparable provisions................................ ¶2-210 further reading............................ ¶2-210 outline......................................... ¶2-210 perfection by control and proceeds .................................. ¶2-210 perfection by control v perfection by control ................................ ¶2-210 primacy....................................... ¶2-210 security interests between two perfected security interests ................................... ¶2-200 concepts...................................... ¶2-200 cross-references.......................... ¶2-200 default provision......................... ¶2-200 foreign regimes, comparable provisions................................ ¶2-200 further reading............................ ¶2-200 outline......................................... ¶2-200 perfected security interests v unperfected security interests ................................... ¶2-200 priority between unperfected interests ................................... ¶2-200 time............................................. ¶2-200 security interests, collateral commentary................................ ¶2-240 concepts...................................... ¶2-240 foreign regimes, comparable provisions................................ ¶2-240 further reading............................ ¶2-240 outline......................................... ¶2-240 security interests, held by ADIs commentary................................ ¶2-300 concepts...................................... ¶2-300 cross-references.......................... ¶2-300 foreign regimes, comparable provisions................................ ¶2-300 further reading............................ ¶2-300 outline......................................... ¶2-300 security interests, purchase money interests application against ordinary security interests - foreign case analysis.................................... ¶2-235

concepts...................................... ¶2-235 cross-references.......................... ¶2-235 foreign regimes, comparable provisions................................ ¶2-235 further reading............................ ¶2-235 outline......................................... ¶2-235 scope........................................... ¶2-235 taken over inventory................... ¶2-235 taken over non-inventory ........... ¶2-235 security interests, returned goods commentary................................ ¶2-305 concepts...................................... ¶2-305 cross-references.......................... ¶2-305 foreign regimes, comparable provisions................................ ¶2-305 further reading............................ ¶2-305 outline......................................... ¶2-305 security interests, transfer does not affect commentary................................ ¶2-225 concepts...................................... ¶2-225 cross-references.......................... ¶2-225 foreign regimes, comparable provisions................................ ¶2-225 further reading............................ ¶2-225 outline......................................... ¶2-225 security interests, voluntary subordination commentary................................ ¶2-230 concept ....................................... ¶2-230 cross-references.......................... ¶2-230 foreign regimes, comparable provisions................................ ¶2-230 further reading............................ ¶2-230 outline......................................... ¶2-230 when transferor-granted interest has been continuously perfected commentary................................ ¶2-260 concepts...................................... ¶2-260 cross-references.......................... ¶2-260 foreign regimes, comparable provisions................................ ¶2-260 further reading............................ ¶2-260 outline......................................... ¶2-260

Annotated Personal Property Securities Act 2009 (Cth)

Pri

930

Index Paragraph

Paragraph

Proceeds — see also Attachment; Relocation; Transfers

requirements and rationale ............ ¶2-080 scope of.......................................... ¶2-080 traceable......................................... ¶2-080 various applications of tracing principles .................................... ¶2-080 cases of new collateral ............... ¶2-080 equitable notions and concepts... ¶2-080 Lowest Intermediate Balance rule .......................................... ¶2-080 Lowest Intermediate Balance rulepresumption ...................... ¶2-080 recourse for original secured party ........................................ ¶2-080

attachment anomalies when considering priority of proceeds................. ¶2-085 concepts...................................... ¶2-085 continuous attachment as opposed to continuous perfection.......... ¶2-085 cross-reference ........................... ¶2-085 enforcement with respect to both original collateral and proceeds .................................. ¶2-085 foreign regimes, comparable provisions................................ ¶2-085 further reading............................ ¶2-085 knowledge .................................. ¶2-085 outline......................................... ¶2-085 persisting rights in personam ..... ¶2-085 priority of proceeds .................... ¶2-085 concept............... ¶2-025; ¶2-080; ¶2-085; ¶2-210; ¶2-235; ¶2-240; ¶2-245; ¶2-330; ¶3-020; ¶4-070; ¶4-170; ¶4-175; ¶4-185; ¶7-050 crops and livestock ........................ ¶2-080 cross-reference............................... ¶2-080 fiduciary relationships ................... ¶2-080 foreign regimes, comparable provisions ................................... ¶2-080 further reading ............................... ¶2-080 insurance payments ....................... ¶2-080 intellectual property....................... ¶2-080 interest in ....................................... ¶2-080 outline ............................................ ¶2-080 perfection and temporary perfection by registration in original collateral.................................. ¶2-090 concepts...................................... ¶2-090 cross-references.......................... ¶2-090 foreign regimes, comparable provisions................................ ¶2-090 further reading............................ ¶2-090 outline......................................... ¶2-090 temporary with respect to proceeds .................................. ¶2-090 redemption of collateral................. ¶2-080

Pro

Processed or commingled goods — see also Accessions continuation of security interests commentary................................ ¶3-095 concepts...................................... ¶3-095 cross-references.......................... ¶3-095 foreign regimes, comparable provisions................................ ¶3-095 further reading............................ ¶3-095 outline......................................... ¶3-095 limit on value of priority of goods commentary................................ ¶3-105 concepts...................................... ¶3-105 cross-references.......................... ¶3-105 foreign regimes, comparable provisions................................ ¶3-105 further reading............................ ¶3-105 outline......................................... ¶3-105 perfection of security interest applies to product or mass commentary................................ ¶3-100 concepts...................................... ¶3-100 cross-references.......................... ¶3-100 foreign regimes, comparable provisions................................ ¶3-100 further reading............................ ¶3-100 outline......................................... ¶3-100 priority of purchase money security interest commentary................................ ¶3-115 concepts...................................... ¶3-115 cross-references.......................... ¶3-115 foreign regimes, comparable provisions................................ ¶3-115

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Index Paragraph

Paragraph

further reading............................ ¶3-115 outline......................................... ¶3-115 priority where more than one security interest continues commentary................................ ¶3-110 concepts...................................... ¶3-110 cross-references.......................... ¶3-110 foreign regimes, comparable provisions................................ ¶3-110 further reading............................ ¶3-110 outline......................................... ¶3-110

refinancing, renewing, consolidating and restructuring .. ¶1-075 satisfaction and ordering of obligations .................................. ¶1-075 secures only purchase money obligations .................................. ¶1-075 serial numbered collateral.............. ¶1-075 substantive test............................... ¶1-075 value to acquire rights ................... ¶1-075

Property transfers — see Transfer of collateral; Transfers

R

Reasonable expenses concept........................................... ¶4-105 security interests ............................ ¶2-015

Proprietary rights security interests ............................ ¶1-065

Reasonable marginal costs

Public auction concept........................................... ¶4-115

Purchase money obligations........¶1-075 Purchase money security interests...................................¶2-030 all or part of the purchase price ..... ¶1-075 collateral covered........................... ¶1-075 commercial consignments ............. ¶1-075 concept............... ¶1-075; ¶2-235; ¶2-240; ¶2-245; ¶3-110 cross-references ............................. ¶1-075 definition........................................ ¶1-075 exceptions ...................................... ¶1-075 chattel paper ............................... ¶1-075 for personal, domestic or household use.......................... ¶1-075 intermediated securities.............. ¶1-075 investment instruments............... ¶1-075 monetary obligations.................. ¶1-075 negotiable instruments ............... ¶1-075 sale and lease backs.................... ¶1-075 foreign regimes, comparable provisions commentary .............. ¶1-075 further reading ............................... ¶1-075 lessors and bailors of PPS leases .......................................... ¶1-075 outline ............................................ ¶1-075 purchase money obligations .......... ¶1-075 purchase price and value ............... ¶1-075 rationale ......................................... ¶1-075

concept..............................¶8-080; ¶8-090

Reasonable period concept........................................... ¶4-095

Receiver concept........................................... ¶4-050

Refinancing purchase money security interests ...................................... ¶1-075

Register — see also Personal Property Securities Register (PPSR); Registration Registered description of collateral concept........................................... ¶5-150

Registered financing change statement concept........................................... ¶5-020

Registered financing statement concept..............................¶5-020; ¶5-135

Registrar

Annotated Personal Property Securities Act 2009 (Cth)

concept............... ¶5-155; ¶5-160; ¶9-120; ¶9-125; ¶9-130; ¶9-145 reports ............................................ ¶5-160 restoration of incorrectly removed data ............................................. ¶5-225 verification statement to secured parties ......................................... ¶5-060

Reg

932

Index Paragraph

Registration — see also Personal Property Securities Register (PPSR); Searching the register belief that collateral secures obligation commentary................................ ¶5-035 concepts...................................... ¶5-035 cross-references.......................... ¶5-035 foreign regimes, comparable provisions................................ ¶5-035 further reading............................ ¶5-035 outline......................................... ¶5-035 defects, general rule concepts...................................... ¶5-100 cross-references.......................... ¶5-100 defects that were not seriously misleading............................... ¶5-100 foreign regimes, comparable provisions................................ ¶5-100 further reading............................ ¶5-100 outline......................................... ¶5-100 overview of sec 164 ................... ¶5-100 seriously misleading................... ¶5-100 seriously misleading defects ...... ¶5-100 defects, particular commentary................................ ¶5-105 concepts...................................... ¶5-105 cross-references.......................... ¶5-105 foreign regimes, comparable provisions................................ ¶5-105 further reading............................ ¶5-105 outline......................................... ¶5-105 defects, temporary effectiveness commentary................................ ¶5-110 concepts...................................... ¶5-110 cross-references.......................... ¶5-110 foreign regimes, comparable provisions................................ ¶5-110 further reading............................ ¶5-110 outline......................................... ¶5-110 effective registration commentary................................ ¶5-095 concepts...................................... ¶5-095 cross-references.......................... ¶5-095 foreign regimes, comparable provisions................................ ¶5-095

Reg

Paragraph

further reading............................ ¶5-095 outline......................................... ¶5-095 financing statements, prescribed property commentary................................ ¶5-050 concepts...................................... ¶5-050 cross-references.......................... ¶5-050 foreign regimes, comparable provisions................................ ¶5-050 further reading............................ ¶5-050 outline......................................... ¶5-050 financing statements, security interests any matter prescribed by regulations............................... ¶5-045 collateral and proceeds............... ¶5-045 concepts...................................... ¶5-045 cross-references.......................... ¶5-045 end time for registration ............. ¶5-045 foreign regimes, comparable provisions................................ ¶5-045 further reading............................ ¶5-045 giving of notices......................... ¶5-045 grantor ........................................ ¶5-045 outline......................................... ¶5-045 secured party .............................. ¶5-045 security interest (whether it is a PMSI)...................................... ¶5-045 subordination.............................. ¶5-045 location of personal property and interested persons outside Australia commentary................................ ¶5-040 concepts...................................... ¶5-040 cross-references.......................... ¶5-040 foreign regimes, comparable provisions................................ ¶5-040 further reading............................ ¶5-040 outline......................................... ¶5-040 maintenance fees commentary................................ ¶5-120 concepts...................................... ¶5-120 cross-references.......................... ¶5-120 foreign regimes, comparable provisions................................ ¶5-120 further reading............................ ¶5-120 outline......................................... ¶5-120

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Index Paragraph

Paragraph

meanings of ‘‘verification statement’’ and ‘‘registration event’’ commentary................................ ¶5-055 concepts...................................... ¶5-055 cross-references.......................... ¶5-055 foreign regimes, comparable provisions................................ ¶5-055 further reading............................ ¶5-055 outline......................................... ¶5-055 on application access to information on PPSR .. ¶5-030 concepts...................................... ¶5-030 cross-references.......................... ¶5-030 foreign regimes, comparable provisions................................ ¶5-030 further reading............................ ¶5-030 outline......................................... ¶5-030 pre-PPSA security interests........ ¶5-030 role of ......................................... ¶5-030 timing of ..................................... ¶5-030 perfection ....................................... ¶2-030 perfection, single with multiple interests ...................................... ¶2-030 Registrar to give verification statements to secured parties commentary................................ ¶5-060 concepts...................................... ¶5-060 cross-references.......................... ¶5-060 foreign regimes, comparable provisions................................ ¶5-060 further reading............................ ¶5-060 outline......................................... ¶5-060 registration time, generally commentary................................ ¶5-080 concepts...................................... ¶5-080 cross-references.......................... ¶5-080 foreign regimes, comparable provisions................................ ¶5-080 further reading............................ ¶5-080 outline......................................... ¶5-080 registration time, security agreements and interests commentary................................ ¶5-085 concepts...................................... ¶5-085 cross-references.......................... ¶5-085

foreign regimes, comparable provisions................................ ¶5-085 further reading............................ ¶5-085 outline......................................... ¶5-085 registration time, transfers commentary................................ ¶5-090 concepts...................................... ¶5-090 cross-references.......................... ¶5-090 foreign regimes, comparable provisions................................ ¶5-090 further reading............................ ¶5-090 outline......................................... ¶5-090 security interest becomes unperfected commentary................................ ¶5-115 concepts...................................... ¶5-115 cross-references.......................... ¶5-115 foreign regimes, comparable provisions................................ ¶5-115 further reading............................ ¶5-115 outline......................................... ¶5-115 security interests against third parties ......................................... ¶2-025 starting times commentary................................ ¶9-060 concepts...................................... ¶9-060 cross-references.......................... ¶9-060 foreign regimes, comparable provisions................................ ¶9-060 further reading............................ ¶9-060 outline......................................... ¶9-060 verification statement, publication as alternative commentary................................ ¶5-070 concepts...................................... ¶5-070 cross-references.......................... ¶5-070 foreign regimes, comparable provisions................................ ¶5-070 further reading............................ ¶5-070 outline......................................... ¶5-070 verification statements, secured parties to give notice to grantors commentary................................ ¶5-065 concepts...................................... ¶5-065 cross-references.......................... ¶5-065 foreign regimes, comparable provisions................................ ¶5-065

Annotated Personal Property Securities Act 2009 (Cth)

Reg

934

Index Paragraph

Registration—continued

further reading............................ ¶5-065 outline......................................... ¶5-065

Registration commencement time concept............... ¶2-290; ¶9-015; ¶9-020; ¶9-025; ¶9-035; ¶9-040; ¶9-050; ¶9-055; ¶9-060; ¶9-065; ¶9-070; ¶9-075; ¶9-090; ¶9-095; ¶9-100; ¶9-105; ¶9-110; ¶9-130; ¶9-145

Registration event concept........................................... ¶5-070

Reimbursement for damages removal of accession commentary................................ ¶3-065

Relocation — see also Attachment; Proceeds; Transfers commentary ................................... ¶2-120 concepts ......................................... ¶2-120 cross-references ............................. ¶2-120 foreign regimes, comparable provisions ................................... ¶2-120 further reading ............................... ¶2-120 intangible/financial property ......... ¶2-125 concepts...................................... ¶2-125 cross-references.......................... ¶2-125 foreign regimes, comparable provisions................................ ¶2-125 further reading............................ ¶2-125 outline......................................... ¶2-125 outline ............................................ ¶2-120

Remedies — see Enforcement Removal of accession — see also Accessions Renewing purchase money security interests ...................................... ¶1-075

Restructuring purchase money security interests ...................................... ¶1-075

Returned collateral — see also Collateral; Disposal of collateral; Seizure accounts and chattel paper commentary................................ ¶2-115 concepts...................................... ¶2-115

Reg

Paragraph

cross-references.......................... ¶2-115 foreign regimes, comparable provisions................................ ¶2-115 further reading............................ ¶2-115 outline......................................... ¶2-115 commentary ................................... ¶2-100 concepts ......................................... ¶2-100 cross-references ............................. ¶2-100 following sale or lease ................... ¶2-110 concepts...................................... ¶2-110 cross-references.......................... ¶2-110 foreign regimes, comparable provisions................................ ¶2-110 further reading............................ ¶2-110 outline......................................... ¶2-110 foreign regimes, comparable provisions ................................... ¶2-100 further reading ............................... ¶2-100 negotiable/investment instruments commentary................................ ¶2-105 concepts...................................... ¶2-105 cross-references.......................... ¶2-105 foreign regimes, comparable provisions................................ ¶2-105 further reading............................ ¶2-105 outline......................................... ¶2-105 outline ............................................ ¶2-100

Rights, duties and obligations — see also Enforcement concepts ......................................... ¶8-040 cross-references ............................. ¶8-040 foreign regimes, comparable provisions ................................... ¶8-040 further reading ............................... ¶8-040 liability for damages commentary................................ ¶8-045 concepts...................................... ¶8-045 cross-references.......................... ¶8-045 foreign regimes, comparable provisions................................ ¶8-045 further reading............................ ¶8-045 outline......................................... ¶8-045 onus of proof commentary................................ ¶8-165 concepts...................................... ¶8-165 cross-references.......................... ¶8-165

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Index Paragraph

Paragraph

foreign regimes, comparable provisions................................ ¶8-165 further reading............................ ¶8-165 outline......................................... ¶8-165 outline ............................................ ¶8-040 purchase money security interests ...................................... ¶1-075 security interests ............................ ¶1-065 title to collateral commentary................................ ¶8-050 concepts...................................... ¶8-050 cross-references.......................... ¶8-050 foreign regimes, comparable provisions................................ ¶8-050 further reading............................ ¶8-050 outline......................................... ¶8-050

further reading............................ ¶5-140 outline......................................... ¶5-140 general provisions access to PPSR prohibited by court or register....................... ¶5-130 concepts...................................... ¶5-130 cross-references.......................... ¶5-130 failing to search .......................... ¶5-130 foreign regimes, comparable provisions................................ ¶5-130 further reading............................ ¶5-130 outline......................................... ¶5-130 sec 170........................................ ¶5-130 interference with privacy commentary................................ ¶5-145 concepts...................................... ¶5-145 cross-references.......................... ¶5-145 foreign regimes, comparable provisions................................ ¶5-145 further reading............................ ¶5-145 outline......................................... ¶5-145 reports by Registrar commentary................................ ¶5-160 concepts...................................... ¶5-160 cross-references.......................... ¶5-160 foreign regimes, comparable provisions................................ ¶5-160 further reading............................ ¶5-160 outline......................................... ¶5-160 search criteria commentary................................ ¶5-135 concepts...................................... ¶5-135 cross-references.......................... ¶5-135 foreign regimes, comparable provisions................................ ¶5-135 further reading............................ ¶5-135 outline......................................... ¶5-135 written search results and evidence commentary................................ ¶5-150 concepts...................................... ¶5-150 cross-references.......................... ¶5-150 foreign regimes, comparable provisions................................ ¶5-150 further reading............................ ¶5-150 outline......................................... ¶5-150

Rights in personam security interest.............................. ¶2-020 entitlement to damages for breaches of commentary ............ ¶8-040 S

Sale and lease backs purchase money security interests ...................................... ¶1-075

Searching the register — see also Personal Property Securities Register (PPSR); Registration copies of financing and verification statements commentary................................ ¶5-155 concepts...................................... ¶5-155 cross-references.......................... ¶5-155 foreign regimes, comparable provisions................................ ¶5-155 further reading............................ ¶5-155 outline......................................... ¶5-155 details of grantor who is individual commentary................................ ¶5-140 concepts...................................... ¶5-140 cross-references.......................... ¶5-140 foreign regimes, comparable provisions................................ ¶5-140

Annotated Personal Property Securities Act 2009 (Cth)

Sea

936

Index Paragraph

Security agreements concept............... ¶2-215; ¶2-320; ¶3-025; ¶3-030; ¶3-125; ¶3-130; ¶4-045; ¶4-085; ¶4-095; ¶5-050; ¶7-030; ¶7-040; ¶7-045; ¶7-140; ¶7-155; ¶7-160; ¶7-165; ¶8-060; ¶8-100; ¶8-180; ¶9-020; ¶9-035; ¶9-050; ¶9-075 continuous attachment or continuous perfection ................. ¶2-085 enforcement of interests provided for by .......................................... ¶9-055 estoppels against persons noncompliance, consequences ... ¶8-095 who respond to request............... ¶8-100 express agreement ......................... ¶7-030 express or implied authorisation.... ¶2-085 recovery of costs arising from request ........................................ ¶8-080 reinstatement commentary................................ ¶4-200 concepts...................................... ¶4-200 cross-references.......................... ¶4-200 foreign regimes, comparable provisions................................ ¶4-200 further reading............................ ¶4-200 outline......................................... ¶4-200 time for responding to request ....... ¶8-070

Security interests after-acquired property .................. ¶2-015 against third parties........................ ¶2-025 attachment requirement.............. ¶2-025 concepts...................................... ¶2-025 cross-references.......................... ¶2-025 foreign regimes, comparable provisions................................ ¶2-025 further reading............................ ¶2-025 outline......................................... ¶2-025 particulars relating to personal property................................... ¶2-025 proceeds...................................... ¶2-025 signature ..................................... ¶2-025 writing requirement for perfection by registration ......................... ¶2-025 written security agreements........ ¶2-025 attachment rights in the collateral................. ¶2-020

Sec

Paragraph

value or an act ............................ ¶2-020 attachment without specific appropriation .............................. ¶2-015 charge-backs permitted.................. ¶1-065 concept..............................¶1-065; ¶2-015 consent ........................................... ¶1-065 cross-references ................¶1-065; ¶2-015 deemed........................................... ¶1-065 commercial consignments.......... ¶1-065 PPS leases................................... ¶1-065 transfers of accounts and chattel paper........................................ ¶1-065 effective ......................................... ¶2-120 effective according to terms .......... ¶2-015 exclusions ...................................... ¶1-065 foreign regimes, comparable provisions ......................¶1-065; ¶2-015 further reading ..................¶1-065; ¶2-015 future advances .............................. ¶2-015 outline ...............................¶1-065; ¶2-015 payment or performance of obligation.................................... ¶1-065 Personal Property Securities Regulation (Cth) definition .................................. ¶11-040 relationship with consumer credit legislation.............................. ¶11-070 taking motor vehicles free of interests ................................. ¶11-055 taking motor vehicles from prescribed persons................. ¶11-060 proprietary rights ........................... ¶1-065 reasonable expenses....................... ¶2-015 relationship to personal property ... ¶1-065 scope, examples and illustrations .. ¶1-065 assignments ................................ ¶1-065 chattel mortgages ....................... ¶1-065 conditional sale agreements ....... ¶1-065 consignments.............................. ¶1-065 fixed charges .............................. ¶1-065 flawed asset arrangements.......... ¶1-065 floating charges .......................... ¶1-065 hire purchase agreements ........... ¶1-065 leases .......................................... ¶1-065 pledges........................................ ¶1-065 transfers of title .......................... ¶1-065 trust receipts ............................... ¶1-065

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Index Paragraph

Paragraph

subordination agreements excluded by Act.......................... ¶1-065 trust arrangements as ..................... ¶1-065

further reading............................ ¶4-165 outline......................................... ¶4-165 obligation to dispose of or retain collateral commentary................................ ¶4-095 concepts...................................... ¶4-095 cross-references.......................... ¶4-095 foreign regimes, comparable provisions................................ ¶4-095 further reading............................ ¶4-095 outline......................................... ¶4-095 secured party may seize collateral commentary................................ ¶4-085 concepts...................................... ¶4-085 cross-references.......................... ¶4-085 foreign regimes, comparable provisions................................ ¶4-085 further reading............................ ¶4-085 outline......................................... ¶4-085 secured party who has perfected interest by possession and control commentary................................ ¶4-090 concepts...................................... ¶4-090 cross-references.......................... ¶4-090 foreign regimes, comparable provisions................................ ¶4-090 further reading............................ ¶4-090 outline......................................... ¶4-090

Seizure — see also Enforcement apparent possession of collateral commentary................................ ¶4-100 concepts...................................... ¶4-100 cross-references.......................... ¶4-100 foreign regimes, comparable provisions................................ ¶4-100 further reading............................ ¶4-100 outline......................................... ¶4-100 concept..............................¶2-295; ¶4-085 crops commentary................................ ¶4-170 concepts...................................... ¶4-170 cross-references.......................... ¶4-170 foreign regimes, comparable provisions................................ ¶4-170 further reading............................ ¶4-170 outline......................................... ¶4-170 higher priority parties, notice commentary................................ ¶4-105 concepts...................................... ¶4-105 cross-references.......................... ¶4-105 foreign regimes, comparable provisions................................ ¶4-105 further reading............................ ¶4-105 outline......................................... ¶4-105 livestock commentary................................ ¶4-175 concepts...................................... ¶4-175 cross-references.......................... ¶4-175 foreign regimes, comparable provisions................................ ¶4-175 further reading............................ ¶4-175 outline......................................... ¶4-175 meaning of ‘‘take’’ and ‘‘water source’’ commentary................................ ¶4-165 concepts...................................... ¶4-165 cross-references.......................... ¶4-165 foreign regimes, comparable provisions................................ ¶4-165

Serial number concept..............................¶2-145; ¶5-135

Serial numbered collateral purchase money security interests ...................................... ¶1-075

Seriously misleading defects........¶5-100 Shipping goods by common carrier — see Common carrier Signature definition........................................ ¶2-025

Specific goods definition........................................ ¶1-065

Statement of account

Annotated Personal Property Securities Act 2009 (Cth)

secured party’s duty to give........... ¶4-130

Sta

938

Index Paragraph

Subordination agreements excluded by Act ............................. ¶1-065 exclusion by PPSA ........................ ¶1-065 purchase money security interests ...................................... ¶2-235 voluntary subordination of security interests......................... ¶2-230

Substantive test purchase money security interests ...................................... ¶1-075

Superannuation interests.......................................... ¶1-045 T

Taking free of interests commentary ................................... ¶2-140 concept............... ¶2-140; ¶2-145; ¶2-150; ¶2-155; ¶2-160; ¶2-165; ¶2-170; ¶2-175; ¶2-180; ¶4-135; ¶4-150; ¶8-165 cross-references ............................. ¶2-140 currency ......................................... ¶2-165 concepts...................................... ¶2-165 cross-references.......................... ¶2-165 foreign regimes, comparable provisions................................ ¶2-165 further reading............................ ¶2-165 outline......................................... ¶2-165 exceptions ...................................... ¶2-140 foreign regimes, comparable provisions ................................... ¶2-140 further reading ............................... ¶2-140 incorrect or missing commentary................................ ¶2-145 concepts...................................... ¶2-145 coss-references ........................... ¶2-145 foreign regimes, comparable provisions................................ ¶2-145 further reading............................ ¶2-145 outline......................................... ¶2-145 intermediated security commentary................................ ¶2-170 concepts.........................¶2-170; ¶2-180 cross-references.............¶2-170; ¶2-180 exception .................................... ¶2-180

Sub

Paragraph

foreign regimes, comparable provisions...................¶2-170; ¶2-180 further reading...............¶2-170; ¶2-180 main rule..................................... ¶2-180 outline............................¶2-170; ¶2-180 investment instrument commentary................................ ¶2-170 concepts.........................¶2-170; ¶2-175 cross-references.............¶2-170; ¶2-175 exception .................................... ¶2-175 foreign regimes, comparable provisions...................¶2-170; ¶2-175 further reading...............¶2-170; ¶2-175 main rule..................................... ¶2-175 outline............................¶2-170; ¶2-175 practical considerations.............. ¶2-175 main rule ........................................ ¶2-140 motor vehicle concepts...................................... ¶2-150 cross-references.......................... ¶2-150 exceptions................................... ¶2-150 foreign regimes, comparable provisions................................ ¶2-150 further reading............................ ¶2-150 main rule..................................... ¶2-150 outline......................................... ¶2-150 prescribed persons...................... ¶2-150 ordinary course of business ........... ¶2-155 concepts...................................... ¶2-155 cross-references.......................... ¶2-155 definition .................................... ¶2-155 exceptions................................... ¶2-155 foreign regimes, comparable provisions................................ ¶2-155 further reading............................ ¶2-155 outline......................................... ¶2-155 outline ............................................ ¶2-140 personal/household property concepts...................................... ¶2-160 cross references .......................... ¶2-160 exceptions................................... ¶2-160 foreign regimes, comparable provisions................................ ¶2-160 further reading............................ ¶2-160 main rule..................................... ¶2-160 outline......................................... ¶2-160 practical consequences ............... ¶2-160

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Index Paragraph

Paragraph

secured party and transferee concepts...................................... ¶2-190 cross-references.......................... ¶2-190 foreign regimes, comparable provisions................................ ¶2-190 further reading............................ ¶2-190 outline......................................... ¶2-190 rights and ramifications for secured party ........................... ¶2-190 rights of transferee...................... ¶2-190 scope........................................... ¶2-190 temporarily perfected concepts...................................... ¶2-185 cross-references.......................... ¶2-185 exceptions................................... ¶2-185 foreign regimes, comparable provisions................................ ¶2-185 further reading............................ ¶2-185 main rule..................................... ¶2-185 outline......................................... ¶2-185

deemed security interests............... ¶1-065 despite prohibition in security agreement ................................... ¶2-320 concepts...................................... ¶2-320 cross-references.......................... ¶2-320 foreign regimes, comparable provisions................................ ¶2-320 further reading............................ ¶2-320 outline......................................... ¶2-320 foreign regimes, comparable provisions ................................... ¶2-095 further reading ............................... ¶2-095 outline ............................................ ¶2-095 scope of temporary perfection ....... ¶2-095 between 5 days and 24 months... ¶2-095 expiry.......................................... ¶2-095 5 business days........................... ¶2-095 24 months - maximum period .... ¶2-095

Temporary perfection..................¶2-030 concept............... ¶2-030; ¶2-035; ¶2-090; ¶2-100; ¶2-120; ¶2-200 transfer of collateral....................... ¶2-095 between 5 days and 24 months... ¶2-095 expiry.......................................... ¶2-095 5 business days........................... ¶2-095 24 months–maximum period...... ¶2-095

Transferee-granted interest break in perfection, priority ........... ¶2-265

Transferor-granted interests.......¶2-260 break in perfection ......................... ¶2-265 break in perfection, priority ........... ¶2-265

Transfers — see also Attachment; Perfection; Proceeds; Relocation; Return of collateral

Time priority, security interests .............. ¶2-200

Tracing ..........................................¶2-080 cases of new collateral................... ¶2-080 equitable notions and concepts ...... ¶2-080 Lowest Intermediate Balance rule................................ ¶2-080 Re Hallet’s Estate presumption................................ ¶2-080 recourse for original secured party............................................ ¶2-080

Transfer of collateral accounts ......................................... ¶1-045 chattel paper contractual restrictions and prohibitions ............................. ¶2-330 concepts ......................................... ¶2-095 cross-references ............................. ¶2-095

Annotated Personal Property Securities Act 2009 (Cth)

account or chattel paper, contractual restrictions and prohibitions commentary................................ ¶2-330 concepts...................................... ¶2-330 cross-references.......................... ¶2-330 foreign regimes, comparable provisions................................ ¶2-330 further reading............................ ¶2-330 outline......................................... ¶2-330 account or chattel paper, rights of transferee and account debtor commentary................................ ¶2-325 concepts...................................... ¶2-325 cross-references.......................... ¶2-325 foreign regimes, comparable provisions................................ ¶2-325 further reading............................ ¶2-325 outline......................................... ¶2-325

Tra

940

Index Paragraph

Transfers—continued

accounts ......................................... ¶1-045 beneficial interest in monetary obligations .................................. ¶1-045 concepts ......................................... ¶2-095 future rights of remuneration......... ¶1-045 interests in contracts of annuity or insurance policies ....................... ¶1-045 unearned rights to payment ........... ¶1-045

Transfers of accounts deemed security interests............... ¶1-065

Transfers of title security interests ............................ ¶1-065

Transitional provisions attachment rule commentary................................ ¶9-090 concepts...................................... ¶9-090 cross-references.......................... ¶9-090 foreign regimes, comparable provisions................................ ¶9-090 further reading............................ ¶9-090 outline......................................... ¶9-090 charges and fixed and floating charges, references to commentary................................ ¶9-075 concepts...................................... ¶9-075 cross-references.......................... ¶9-075 foreign regimes, comparable provisions................................ ¶9-075 further reading............................ ¶9-075 outline......................................... ¶9-075 constitutional and nonconstitutional interests commentary................................ ¶9-070 concepts...................................... ¶9-070 cross-references.......................... ¶9-070 foreign regimes, comparable provisions................................ ¶9-070 further reading............................ ¶9-070 outline......................................... ¶9-070 declared statutory security interests commentary................................ ¶9-045 concepts...................................... ¶9-045 cross-references.......................... ¶9-045 foreign regimes, comparable provisions................................ ¶9-045

Tra

Paragraph

further reading............................ ¶9-045 outline......................................... ¶9-045 governing laws commentary................................ ¶9-065 concepts...................................... ¶9-065 cross-references.......................... ¶9-065 foreign regimes, comparable provisions................................ ¶9-065 further reading............................ ¶9-065 outline......................................... ¶9-065 migrated data, Commonwealth officer to provide commentary................................ ¶9-120 concepts...................................... ¶9-120 cross-references.......................... ¶9-120 foreign regimes, comparable provisions................................ ¶9-120 further reading............................ ¶9-120 outline......................................... ¶9-120 migrated data, no requirement for notice of verification statement commentary................................ ¶9-140 concepts...................................... ¶9-140 cross-references.......................... ¶9-140 foreign regimes, comparable provisions................................ ¶9-140 further reading............................ ¶9-140 outline......................................... ¶9-140 migrated data, registration commentary................................ ¶9-130 concepts...................................... ¶9-130 cross-references.......................... ¶9-130 foreign regimes, comparable provisions................................ ¶9-130 further reading............................ ¶9-130 outline......................................... ¶9-130 migrated security interest commentary................................ ¶9-125 concepts...................................... ¶9-125 cross-references.......................... ¶9-125 foreign regimes, comparable provisions................................ ¶9-125 further reading............................ ¶9-125 outline......................................... ¶9-125

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Index Paragraph

Paragraph

migration time and registration commencement time concepts...................................... ¶9-015 cross-references.......................... ¶9-015 foreign regimes, comparable provisions................................ ¶9-015 further reading............................ ¶9-015 migration time ............................ ¶9-015 outline......................................... ¶9-015 registration commencement time.......................................... ¶9-015.2 registrations, starting times commentary................................ ¶9-060 concepts...................................... ¶9-060 cross-references.......................... ¶9-060 foreign regimes, comparable provisions................................ ¶9-060 further reading............................ ¶9-060 outline......................................... ¶9-060 security interests in intellectual property licences, enforcement commentary................................ ¶9-050 concepts...................................... ¶9-050 cross-references.......................... ¶9-050 foreign regimes, comparable provisions................................ ¶9-050 further reading............................ ¶9-050 outline......................................... ¶9-050 security interests provided for by security agreements, enforcement commentary................................ ¶9-055 concepts...................................... ¶9-055 cross-references.......................... ¶9-055 foreign regimes, comparable provisions................................ ¶9-055 further reading............................ ¶9-055 outline......................................... ¶9-055 timing of commencement and applicable matters commentary................................ ¶9-035 concepts...................................... ¶9-035 cross-references.......................... ¶9-035 foreign regimes, comparable provisions................................ ¶9-035 further reading............................ ¶9-035

outline......................................... ¶9-035 transitional security agreement commentary................................ ¶9-020 concepts...................................... ¶9-020 cross-references.......................... ¶9-020 foreign regimes, comparable provisions................................ ¶9-020 further reading............................ ¶9-020 outline......................................... ¶9-020 transitional security agreement, registration defective commentary................................ ¶9-155 concepts...................................... ¶9-155 cross-references.......................... ¶9-155 foreign regimes, comparable provisions................................ ¶9-155 further reading............................ ¶9-155 outline......................................... ¶9-155 transitional security interests commentary................................ ¶9-025 concepts...................................... ¶9-025 cross-references.......................... ¶9-025 foreign regimes, comparable provisions................................ ¶9-025 further reading............................ ¶9-025 outline......................................... ¶9-025 transitional security interests and interests perfected by control, priority commentary................................ ¶9-100 concepts...................................... ¶9-100 cross-references.......................... ¶9-100 foreign regimes, comparable provisions................................ ¶9-100 further reading............................ ¶9-100 outline......................................... ¶9-100 transitional security interests, enforceability against third parties commentary................................ ¶9-040 concepts...................................... ¶9-040 cross-references.......................... ¶9-040 foreign regimes, comparable provisions................................ ¶9-040 further reading............................ ¶9-040 outline......................................... ¶9-040

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Transitional provisions—continued

transitional security interests, perfection rules........................... ¶9-095 concepts...................................... ¶9-095 cross-references.......................... ¶9-095 exception and replacement rules......................................... ¶9-095 foreign regimes, comparable provisions................................ ¶9-095 imposition of regulations............ ¶9-095 outline......................................... ¶9-095 transitional security interests, preparatory registration commentary................................ ¶9-145 concepts...................................... ¶9-145 cross-references.......................... ¶9-145 foreign regimes, comparable provisions................................ ¶9-145 further reading............................ ¶9-145 outline......................................... ¶9-145 transitional security interests, priority otherwise undetermined commentary................................ ¶9-105 concepts...................................... ¶9-105 cross-references.......................... ¶9-105 foreign regimes, comparable provisions................................ ¶9-105 further reading............................ ¶9-105 outline......................................... ¶9-105 transitional security interests, priority rules commentary................................ ¶9-085 concepts...................................... ¶9-085 cross-references.......................... ¶9-085 foreign regimes, comparable provisions................................ ¶9-085 further reading............................ ¶9-085 outline......................................... ¶9-085 transitional security interests, priority rules on insolvency or bankruptcy commentary................................ ¶9-110 concepts...................................... ¶9-110 cross-references.......................... ¶9-110 foreign regimes, comparable provisions................................ ¶9-110 further reading............................ ¶9-110 outline......................................... ¶9-110

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transitional security interests, registration effective despite certain defects commentary................................ ¶9-150 concepts...................................... ¶9-150 cross-references.......................... ¶9-150 foreign regimes, comparable provisions................................ ¶9-150 further reading............................ ¶9-150 outline......................................... ¶9-150

Transitional register concept........................................... ¶9-130

Transitional register end time concept........................................... ¶9-130

Transitional security agreements..............................¶9-020 concept............... ¶9-020; ¶9-025; ¶9-035; ¶9-130; ¶9-145; ¶9-150; ¶9-155 defective registration ..................... ¶9-155

Transitional security interests enforceability against third parties commentary................................ ¶9-040 concepts...................................... ¶9-040 cross-references.......................... ¶9-040 foreign regimes, comparable provisions................................ ¶9-040 outline......................................... ¶9-040 perfection rules .............................. ¶9-095 concepts...................................... ¶9-095 cross-references.......................... ¶9-095 exception and replacement rules......................................... ¶9-095 foreign regimes, comparable provisions................................ ¶9-095 further reading............................ ¶9-095 imposition of regulations............ ¶9-095 outline......................................... ¶9-095 priority rules commentary................................ ¶9-085 concepts...................................... ¶9-085 cross-references.......................... ¶9-085 foreign regimes, comparable provisions................................ ¶9-085 further reading............................ ¶9-085 outline......................................... ¶9-085

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Paragraph

Trust arrangements

cross-references ............................. ¶5-155 foreign regimes, comparable provisions ................................... ¶5-155 further reading ............................... ¶5-155 outline ............................................ ¶5-155

security interests ............................ ¶1-065

Trust receipts security interests ............................ ¶1-065 U

Uncertificated negotiable instruments

Vesting of unperfected security interests

commentary ................................... ¶2-070 concepts ......................................... ¶2-070 cross-references ............................. ¶2-070 foreign regimes, comparable provisions ................................... ¶2-070 further reading ............................... ¶2-070 outline ............................................ ¶2-070

Unearned rights to payment transfers ......................................... ¶1-045

Unique identifier concept........................................... ¶5-135

Unperfected security interests execution creditor commentary................................ ¶2-295 concepts...................................... ¶2-295 cross-references.......................... ¶2-295 foreign regimes, comparable provisions................................ ¶2-295 further reading............................ ¶2-295 outline......................................... ¶2-295 V

Value concept............... ¶1-070; ¶1-075; ¶2-020; ¶2-140; ¶2-175; ¶2-180; ¶2-275; ¶2-285; ¶3-025; ¶3-030; ¶3-050; ¶3-075; ¶3-080; ¶3-105 processed or commingled goods, limit on priority .......................... ¶3-105 purchase money security interests ...................................... ¶1-075

Verification statements commentary ................................... ¶5-155 concepts ............. ¶5-060; ¶5-065; ¶5-070; ¶5-155; ¶9-140

Annotated Personal Property Securities Act 2009 (Cth)

attachment after winding up commentary................................ ¶8-020 concepts...................................... ¶8-020 cross-references.......................... ¶8-020 foreign regimes, comparable provisions................................ ¶8-020 further reading............................ ¶8-020 outline......................................... ¶8-020 grantor’s winding up after bankruptcy commentary................................ ¶8-015 concepts...................................... ¶8-015 cross-references.......................... ¶8-015 foreign regimes, comparable provisions................................ ¶8-015 further reading............................ ¶8-015 outline......................................... ¶8-015 lessors, bailors and consignors entitled to damages commentary................................ ¶8-030 concepts...................................... ¶8-030 cross-references.......................... ¶8-030 foreign regimes, comparable provisions................................ ¶8-030 further reading............................ ¶8-030 outline......................................... ¶8-030 unaffected security interests commentary................................ ¶8-025 concepts...................................... ¶8-025 cross-references.......................... ¶8-025 foreign regimes, comparable provisions................................ ¶8-025 further reading............................ ¶8-025 outline......................................... ¶8-025

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Water rights..................................¶1-045 Water source.................................¶4-165 Winding up — see Insolvency

Paragraph

security interests against third parties...................................... ¶2-025 writing, definition....................... ¶2-025

Writing concept............................¶2-025 written security agreements perfection by registration ........... ¶2-025

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