PERSONAL PROPERTY SECURITIES BILL 2009

i Personal Property Securities Bill 2009 No. , 2009

Contents

Chapter 1--Introduction

Part 1.1--Preliminary

Short title ............................................................................................ 1

Commencement .................................................................................. 2

Guide to this Act ................................................................................. 2

Part 1.2--General application of this Act

Guide to this Part ................................................................................ 6

Crown to be bound.............................................................................. 6

Connection with Australia .................................................................. 6

Application in the external Territories ................................................ 7

Interests to which this Act does not apply .......................................... 8

Part 1.3--Definitions

Division 1--Introduction

Guide to this Part .............................................................................. 12

Division 2--The Dictionary

The Dictionary .................................................................................. 13

Application of the Acts Interpretation Act 1901............................... 28

Division 3--Concepts relating to security interests and personal

property

Meaning of security interest ............................................................. 29

Meaning of PPS lease....................................................................... 30

Meaning of purchase money security interest .................................. 31

Meaning of investment entitlement and related terms ...................... 34

Chapter 2--General rules relating to security interests

Part 2.1--Guide to this Chapter

Guide to this Chapter ........................................................................ 36

Part 2.2--Security interests: general principles

Guide to this Part .............................................................................. 37

General rules about security agreements and security

interests ............................................................................................. 37

Enforceability of security interests against grantors--

attachment......................................................................................... 38

Enforceability of security interests against third parties................... 39

Perfection--main rule....................................................................... 41

Personal Property Securities Bill 2009 No. , 2009 ii

Perfection--goods possessed by a bailee ......................................... 41

Part 2.3--Possession and control of pe rsonal property

Guide to this Part .............................................................................. 43

Possession ......................................................................................... 44

Control of an ADI account ............................................................... 45

Control of investment entitlements................................................... 46

Control of investment instruments.................................................... 47

Control of a letter of credit ............................................................... 48

Control of negotiable instruments that are not evidenced by a

certificate .......................................................................................... 49

Part 2.4--Attachme nt and perfection: specific rules

Division 1--Introduction

Guide to this Part .............................................................................. 50

Division 2--Proceeds and transfer

Meaning of proceeds ........................................................................ 52

Proceeds--attachment ...................................................................... 53

Proceeds--perfection and temporary perfection .............................. 55

Transferred collateral--temporary perfection after transfer............. 55

Division 3--Collateral returned to grantor or debtor

Returned collateral--from bailee ..................................................... 57

Returned collateral--negotiable instruments and investment

instruments........................................................................................ 58

Returned collateral--following sale or lease.................................... 58

Returned collateral--accounts and chattel paper ............................. 59

Division 4--Relocation of collateral or grantor to Australia etc.

Relocation--main rule...................................................................... 61

Relocation--intangible property and financial property .................. 62

Part 2.5--Taking personal property free of security interests

Guide to this Part .............................................................................. 64

Application of this Part ..................................................................... 65

Taking personal property free of unperfected security interest ........ 65

Taking personal property free of security interest if serial

number incorrect or missing ............................................................. 65

Taking motor vehicles free of security interest ................................ 66

Taking personal property free of security interest in ordinary

course of business ............................................................................. 68

Taking personal, domestic or household property free of

security interest ................................................................................. 68

Taking currency free of security interest .......................................... 69

iii Personal Property Securities Bill 2009 No. , 2009

Taking investment interest or entitlement free of security

interest in the ordinary course of trading .......................................... 69

Taking investment instrument free of security interest .................... 70

Taking investment entitlement free of security interest ................... 70

Taking personal property free of temporarily perfected

security interest ................................................................................. 71

Rights of secured party and transferee on taking personal

property free of security interest....................................................... 71

Part 2.6--Priority between security inte rests

Division 1--Introduction

Guide to this Part .............................................................................. 73

Division 2--Priority of security interests generally

Default priority rules......................................................................... 75

How a security interest is continuously perfected ............................ 76

Priority of security interests perfected by control............................. 76

Priority of advances .......................................................................... 77

Priority rules and intervening security interests ............................... 77

Transfer of security interests does not affect priority ....................... 77

Voluntary subordination of security interests................................... 77

Division 3--Priority of purchase money security interests

When purchase money security interests take priority over

other security interests ...................................................................... 79

Priority between competing purchase money security

interests in collateral ......................................................................... 80

Non-purchase money security interests in accounts ......................... 81

Possession of goods shipped by a common carrier .......................... 82

Division 4--Priority of security interests in transferred collateral

Application of this Division.............................................................. 83

Priority when transferor-granted interest has been

continuously perfected...................................................................... 83

Priority when there is a break in the perfection of the

transferor-granted interest................................................................. 84

Division 5--Priority of creditors, and purchasers of negotiable

instruments, chattel paper and negotiable

documents of title

Priority of creditor who receives payment of debt ........................... 86

Priority of person who acquires a negotiable instrument or an

interest in a negotiable instrument .................................................... 86

Priority of person who acquires chattel paper or an interest in

chattel paper...................................................................................... 87

Personal Property Securities Bill 2009 No. , 2009 iv

Priority of holder of negotiable document of title ............................ 88

Division 6--Priority of other interests

Priority between security interests and declared statutory

interests ............................................................................................. 89

Execution creditor has priority over unperfected security

interest............................................................................................... 90

Priority of security interests held by ADIs ....................................... 91

Priority of security interests in returned goods................................. 91

Priority of certain security interests if there is no foreign

Part 2.7--Transfer and assignment of interest in collateral

Guide to this Part .............................................................................. 94

Transfer of collateral despite prohibition in security

agreement.......................................................................................... 94

Rights on transfer of account or chattel paper--rights of

transferee and account debtor ........................................................... 95

Rights on transfer of account or chattel paper--contractual

restrictions and prohibitions on transfer ........................................... 97

Chapter 3--Specific rules for certain security interests

Part 3.1--Guide to this Chapter

Guide to this Chapter ........................................................................ 98

Part 3.2--Agricultural interests

Guide to this Part .............................................................................. 99

Relationship between security interest in crops and interest

in land ............................................................................................... 99

Priority of crops .............................................................................. 100

Priority of livestock ........................................................................ 100

Part 3.3--Accessions

101

Guide to this Part ............................................................................ 101

Continuation of security interests in accessions ............................. 101

Default rule--interest in accession has priority.............................. 102

Priority interest in whole--before security interest in

accession is perfected ..................................................................... 102

Priority interest in whole--security interest in accession

attaches after goods become accession ........................................... 102

Secured party must not damage goods when removing

accession ......................................................................................... 103

Reimbursement for damage caused in removing accessions.......... 103

Refusal of permission to remove accession .................................... 103

v Personal Property Securities Bill 2009 No. , 2009

Secured party must give notice of removal of accession................ 103

When person with an interest in the whole may retain

accession ......................................................................................... 105

Court order about removal of accession ......................................... 105

Part 3.4--Processed or commingle d goods

106

Guide to this Part ............................................................................ 106

Continuation of security interests in goods that become

processed or commingled ............................................................... 106

100

Perfection of security interest in goods that become

processed or commingled applies to product or mass .................... 106

101

Limit on value of priority of goods that become part of

processed or commingled goods ..................................................... 107

102

Priority where more than one security interest continues in

processed or commingled goods ..................................................... 107

103

Priority of purchase money security interest in processed or

commingled goods .......................................................................... 107

Part 3.5--Intellectual property

109

104

Guide to this Part ............................................................................ 109

105

Implied references to intellectual property rights ........................... 109

106

Intellectual property licences and transfers of intellectual

property........................................................................................... 110

Chapter 4--Enforcement of security interests

111

Part 4.1--Guide to this Chapter

111

107

Guide to this Chapter ...................................................................... 111

Part 4.2--General rules

112

108

Guide to this Part ............................................................................ 112

109

Application of this Chapter............................................................. 112

110

Rights and remedies ........................................................................ 114

111

Rights and duties to be exercised honestly and in a

commercially reasonable manner ................................................... 114

112

Rights and remedies under this Chapter ......................................... 114

113

Recovering judgment or issuing execution does not

extinguish a security interest in collateral ...................................... 115

114

Rights and remedies under this Chapter are cumulative ................ 115

115

Contracting out of enforcement provisions .................................... 115

116

Chapter does not apply to property in the hands of receivers

or controllers ................................................................................... 117

117

Obligations secured by interests in personal property and

land ................................................................................................. 117

Personal Property Securities Bill 2009 No. , 2009 vi

118

Enforcing security interests in accordance with land law

decisions ......................................................................................... 119

119

Relationship with consumer credit legislation................................ 121

120

Enforcement of security interests in liquid assets--general........... 121

121

Enforcement of security interests in liquid assets--notice to

higher priority parties and grantor .................................................. 122

Part 4.3--Seizure and disposal or retention of collateral

124

Division 1--Introduction

124

122

Guide to this Part ............................................................................ 124

Division 2--Seizing collateral

125

123

Secured party may seize collateral ................................................. 125

124

Secured party who has perfected a security interest in

collateral by possession or control.................................................. 125

125

Obligation to dispose of or retain collateral ................................... 126

126

Apparent possession of collateral ................................................... 126

127

Seizure by higher priority parties--notice...................................... 127

Division 3--Disposing of collateral (including by purchasing

collateral)

130

128

Secured party may dispose of collateral ......................................... 130

129

Disposal by purchase ...................................................................... 131

130

Notice of disposal of collateral ....................................................... 131

131

Duty of secured party disposing of collateral to obtain

market value.................................................................................... 133

132

Secured party to give statement of account .................................... 133

133

Disposing of collateral free of interests .......................................... 135

Division 4--Retaining collateral

136

134

Proposal of secured party to retain collateral ................................. 136

135

Notice of retention of collateral ...................................................... 136

136

Retaining collateral free of interests ............................................... 137

Division 5--Objection to purchase or retention

139

137

Persons entitled to notice may object to proposal .......................... 139

138

Person making objection may be requested by secured party

to prove interest .............................................................................. 139

Part 4.4--Rules applying after enforcement

140

139

Guide to this Part ............................................................................ 140

140

Distribution of proceeds received by secured party ....................... 140

141

Secured party may take steps to reflect transfer of title.................. 142

142

Entitled persons may redeem collateral .......................................... 142

143

Entitled persons may reinstate security agreement......................... 142

vii Personal Property Securities Bill 2009 No. , 2009

144

When certain enforcement notices are not required ....................... 143

Chapter 5--Personal Property Securities Register

144

Part 5.1--Guide to this Chapter

144

145

Guide to this Chapter ...................................................................... 144

Part 5.2--Establishme nt of the register

145

146

Guide to this Part ............................................................................ 145

147

Personal Property Securities Register............................................. 145

148

What the register contains .............................................................. 146

Part 5.3--Registration

147

149

Guide to this Part ............................................................................ 147

150

Registration--on application .......................................................... 147

151

Registration--belief that collateral secures obligation................... 148

152

Registration--location of personal property and interested

persons outside Australia ................................................................ 150

153

Financing statements with respect to security interests .................. 151

154

Financing statements with respect to prescribed property.............. 153

155

Meanings of verification statement and registration event ............ 154

156

Verification statements--Registrar to give to secured parties ....... 154

157

Verification statements--secured parties to give notice to

grantors ........................................................................................... 155

158

Verification statements--publication as alternative ....................... 156

Part 5.4--When a registration is effective

157

159

Guide to this Part ............................................................................ 157

160

Registration time--general ............................................................. 157

161

Registration time--security agreements and interests.................... 158

162

Registration time--transfers ........................................................... 158

163

Effective registration ...................................................................... 158

164

Defects in registration--general rule.............................................. 159

165

Defects in registration--particular defects ..................................... 159

166

Defects in registration--temporary effectiveness .......................... 160

167

Security interest in certain property becomes unperfected............. 161

168

Maintenance fees ............................................................................ 162

Part 5.5--Searching the register

163

169

Guide to this Part ............................................................................ 163

170

Search--general.............................................................................. 163

171

Search--criteria .............................................................................. 164

172

Search--by reference to details of grantor who is an

individual ........................................................................................ 165

Personal Property Securities Bill 2009 No. , 2009 viii

173

Search--interference with privacy ................................................. 168

174

Search--written search results and evidence etc............................ 169

175

Copy of financing statement ........................................................... 171

176

Reports by Registrar ....................................................................... 171

Part 5.6--Amendment demands

173

Division 1--Introduction

173

177

Guide to this Part ............................................................................ 173

178

How amendment demands are given .............................................. 173

Division 2--Amendment demands: administrative and judicial

process

175

Subdivision A--Administrative process

175

179

Scope of Subdivision ...................................................................... 175

180

Administrative process--amendment notices ................................ 176

181

Administrative process--registration amendments ........................ 177

Subdivision B--Judicial process

178

182

Judicial process for considering amendment demand .................... 178

Part 5.7--Removal of data and correction of registration errors

180

183

Guide to this Part ............................................................................ 180

184

Removal of data--general grounds ................................................ 180

185

Removal of data--registration ineffective for 7 years or

more ................................................................................................ 181

186

Incorrectly removed data--restoration ........................................... 181

187

Records of removed data ................................................................ 182

188

Correction of registration errors ..................................................... 182

Part 5.8--Fees, administrative review and annual reports

183

189

Guide to this Part ............................................................................ 183

190

Registration and search fees ........................................................... 183

191

Review of decisions ........................................................................ 184

192

Annual reports ................................................................................ 185

Part 5.9--Registrar of Personal Property Securities

186

193

Guide to this Part ............................................................................ 186

194

Registrar--establishment of office ................................................. 186

195

Registrar--functions and powers ................................................... 186

196

Registrar--acting appointments ..................................................... 186

197

Registrar--delegation ..................................................................... 187

198

Registrar--resignation .................................................................... 188

199

Registrar--termination ................................................................... 188

200

Deputy Registrar--establishment of office .................................... 188

ix Personal Property Securities Bill 2009 No. , 2009

201

Deputy Registrar--functions and powers....................................... 188

202

Deputy Registrar--resignation ....................................................... 189

203

Deputy Registrar--termination ...................................................... 189

Chapter 6--Judicial proceedings

190

Part 6.1--Guide to this Chapter

190

204

Guide to this Chapter ...................................................................... 190

Part 6.2--Judicial proceedings generally

191

Division 1--Introduction

191

205

Guide to this Part ............................................................................ 191

206

Scope of this Part ............................................................................ 191

Division 2--Conferral of jurisdiction

193

207

Jurisdiction of courts....................................................................... 193

208

Cross-jurisdictional appeals............................................................ 193

209

Courts to act in aid of each other .................................................... 195

Division 3--Transfers between courts

196

210

Application of this Division............................................................ 196

211

Exercise of transfer power .............................................................. 197

212

Criteria for transfers between courts............................................... 198

213

Initiating transfers between courts.................................................. 199

214

Documents and procedure .............................................................. 199

215

Conduct of transferred proceedings ................................................ 199

216

Entitlement to practise as barrister or solicitor ............................... 200

217

Limitation on appeals ..................................................................... 200

Division 4--Registrar's role in judicial proceedings

201

218

Intervention in judicial proceedings ............................................... 201

219

Initiation of judicial proceedings .................................................... 201

Part 6.3--Civil penalty proceedings

202

Division 1--Introduction

202

220

Guide to this Part ............................................................................ 202

221

What is a civil penalty provision? .................................................. 202

Division 2--Obtaining an order for a civil penalty

203

222

Federal Court may order person to pay p ecuniary penalty for

contravening civil penalty provision .............................................. 203

223

Contravening a civil penalty provision is not an offence ............... 204

224

Persons involved in contravening civil penalty provision .............. 204

225

Recovery of a pecuniary penalty .................................................... 204

Personal Property Securities Bill 2009 No. , 2009 x

Division 3--Civil penalty proceedings and criminal proceedings

205

226

Civil proceedings after criminal proceedings ................................. 205

227

Criminal proceedings during civil proceedings .............................. 205

228

Criminal proceedings after civil proceedings ................................. 205

229

Evidence given in proceedings for penalty not admissible in

criminal proceedings ....................................................................... 205

Division 4--Enforceable undertakings relating to contraventions

of civil penalty provisions

207

230

Acceptance of undertakings relating to contraventions of

civil penalty provisions................................................................... 207

231

Enforcement of undertakings .......................................................... 207

Chapter 7--Operation of laws

208

Part 7.1--Guide to this Chapter

208

232

Guide to this Chapter ...................................................................... 208

Part 7.2--Australian laws and those of othe r jurisdictions

209

233

Guide to this Part ............................................................................ 209

234

Scope of this Part ............................................................................ 209

235

Meaning of located ......................................................................... 210

236

Commonwealth laws may provide for governing law .................... 210

237

Express agreement .......................................................................... 211

238

Governing laws--goods ................................................................. 211

239

Governing laws--intangible property ............................................ 212

240

Governing laws--financial property and rights evidenced by

letters of credit ................................................................................ 213

241

Governing laws--proceeds............................................................. 215

Part 7.3--Constitutional operation

216

242

Guide to this Part ............................................................................ 216

243

Constitutional basis for this Act ..................................................... 216

244

Meaning of referring State ............................................................. 218

245

Meaning of referred PPS matters ................................................... 221

246

Non-referring State operation--overview ...................................... 222

247

Non-referring State operation--persons......................................... 223

248

Non-referring State operation--activities....................................... 223

249

Non-referring State operation--interests........................................ 224

250

Non-referring State operation--inclusion of data in register ......... 225

251

Personal property taken free of security interest when Act

begins to operate ............................................................................. 225

252

Priority between constitutional and non-constitutional

security interests ............................................................................. 225

xi Personal Property Securities Bill 2009 No. , 2009

Part 7.4--Relationship between Australian laws

226

Division 1--Introduction

226

253

Guide to this Part ............................................................................ 226

Division 2--Concurrent operation

227

254

Concurrent operation--general rule ............................................... 227

255

Concurrent operation--regulations may resolve

inconsistency................................................................................... 228

Division 3--When other laws prevail

231

256

When other laws prevail--certain other Commonwealth Acts ...... 231

257

When other laws prevail--security agreements ............................. 231

258

When other laws prevail--personal property, security

interests and matters excluded from State amendment

referrals ........................................................................................... 232

259

When other laws prevail--exclusion by referring State law

or Territory law............................................................................... 233

260

When other laws prevail--no constitutional preference to

one State over another .................................................................... 234

Division 4--When this Act prevails

235

261

When this Act prevails--registration requirements ....................... 235

262

When this Act prevails--assignment requirements........................ 235

263

When this Act prevails--formal requirements relating to

agreements ...................................................................................... 236

264

When this Act prevails--attachment and perfection of

security interests ............................................................................. 238

Chapter 8--Miscellaneous

239

Part 8.1--Guide to this Chapter

239

265

Guide to this Chapter ...................................................................... 239

Part 8.2--Vesting of certain unperfected security interests

240

266

Guide to this Part ............................................................................ 240

267

Vesting of unperfected security interests in the grantor upon

the grantor's winding up or bankruptcy etc. ................................... 240

268

Security interests unaffected by section 267 .................................. 242

269

Certain lessors, bailors and consignors entitled to damages........... 243

Part 8.3--Exercise and discharge of rights, duties and

obligations

245

270

Guide to this Part ............................................................................ 245

271

Entitlement to damages for breach of duties or obligations ........... 245

272

Liability for damages ...................................................................... 245

Personal Property Securities Bill 2009 No. , 2009 xii

273

Application of Act not affected by secured party having title

to collateral ..................................................................................... 246

Part 8.4--Provision of information by secured parties

247

274

Guide to this Part ............................................................................ 247

275

Secured party to provide certain information relating to

security interest ............................................................................... 247

276

Obligation to disclose successor in security interest when

request made ................................................................................... 250

277

Time for responding to a request .................................................... 250

278

Application to court for exemption or extension of time to

respond to requests ......................................................................... 250

279

Persons may recover costs arising from request............................. 251

280

Application to court for response to request etc. ............................ 252

281

Application to court in relation to costs charged ............................ 252

282

Consequences of not complying with court order .......................... 254

283

Estoppels against persons who respond to a request ...................... 254

Part 8.5--Notices and timing

256

284

Guide to this Part ............................................................................ 256

285

Application of this Part--notices etc. ............................................. 256

286

Notices--writing............................................................................. 256

287

Notices--registered secured parties ............................................... 256

288

Notices--more than one registered secured party .......................... 257

289

Notices etc. must be given to persons registered as secured

parties using identifier .................................................................... 257

290

Notices--deceased persons ............................................................ 257

291

Notices--Court orders .................................................................... 258

292

Notices--formal defects ................................................................. 258

293

Timing--applications for extension of time................................... 258

294

Timing--references to time in this Act .......................................... 259

Part 8.6--Onus of proof and knowledge

261

295

Guide to this Part ............................................................................ 261

296

Onus of proof .................................................................................. 261

297

Meaning of constructive knowledge ............................................... 262

298

Actual or constructive knowledge by bodies corporate and

other entities.................................................................................... 263

299

Actual or constructive knowledge in relation to certain

property transfers ............................................................................ 264

300

Registration of data does not constitute constructive notice .......... 264

Part 8.7--Forms and regulations

265

301

Guide to this Part ............................................................................ 265

xiii Personal Property Securities Bill 2009 No. , 2009

302

Approved forms .............................................................................. 265

303

Regulations ..................................................................................... 266

Chapter 9--Transitional provisions

267

Part 9.1--Guide to this Chapter

267

304

Guide to this Chapter ...................................................................... 267

Part 9.2--Key concepts

268

305

Guide to this Part ............................................................................ 268

306

Meaning of migration time and registration commencement

time ................................................................................................. 268

307

Meaning of transitional security agreement................................... 269

308

Meaning of transitional security interest ....................................... 269

Part 9.3--Initial application of this Act

271

309

Guide to this Part ............................................................................ 271

310

When this Act starts to apply, and in relation to which

matters............................................................................................. 272

311

Enforceability of transitional security interests against third

parties.............................................................................................. 272

312

Declared statutory security interests ............................................... 272

313

Enforcement of security interests in intellectual property

licences ........................................................................................... 273

314

Enforcement of security interests provided for by security

agreements ...................................................................................... 273

315

Starting time for registrations ......................................................... 273

316

Governing laws ............................................................................... 273

317

Constitutional and non-constitutional interests .............................. 273

318

References to charges and fixed and floating charges .................... 274

Part 9.4--Transitional application of this Act

275

Division 1--Introduction

275

319

Guide to this Part ............................................................................ 275

Division 2--Priority protection for certain transitional security

interests

276

320

Scope............................................................................................... 276

321

Priority protected transitional security interests--attachment

rule .................................................................................................. 277

322

Priority protected transitional security interests--temporary

perfection rule (non-migrated security interests)............................ 277

323

Priority protected transitional security interests--perfection

by registration (migrated security interests) ................................... 278

Personal Property Securities Bill 2009 No. , 2009 xiv

324

Priority protected transitional security interests--priority

between interests............................................................................. 278

325

Priority protected transitional security interests--migrated

security interests and acquisition of property ................................. 280

Division 3--Non-protected priority for other transitional

security interests

281

326

Non-protected priority--general rule ............................................. 281

Division 4--Taking free and vesting of transitional security

interests in certain situations

282

327

Scope............................................................................................... 282

328

Rules about taking free and vesting................................................ 283

Division 5--Taking free and vesting of transitional security

interests in other situations

284

329

Existing rules to apply in other situations....................................... 284

Division 6--Migration of personal property interests

285

330

Scope of Division ........................................................................... 285

331

Requirement for Commonwealth officers etc. to provide data....... 285

332

Meaning of migrated security interest............................................ 285

333

Registration with respect to migrated data ..................................... 286

334

Incorrectly registered migrated data ............................................... 287

335

No requirement for notice of verification statement....................... 287

Division 7--Preparatory registration relating to transitional

security interests

288

336

Preparatory registration--transitional security interests ................ 288

Division 8--Transitional security interests: registration defects

289

337

Registration continues despite certain defects ................................ 289

Part 9.5--Charges and fixed and floating charges

291

338

Guide to this Part ............................................................................ 291

339

References to charges and fixed and floating charges .................... 291

340

Meaning of circulating asset .......................................................... 292

341

Control of inventory and accounts.................................................. 293

Part 9.6--Review of operation of Act

295

342

Guide to this Part ............................................................................ 295

343

Review of operation of Act............................................................. 295

Chapter 1 Introduction

Part 1.1 Preliminary

Section 2

2 Personal Property Securities Bill 2009 No. , 2009

2 Commence ment

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

3 Guide to this Act

Overview

This Act is a law about security interests in personal property.

A security interest is an interest in personal property provided for

by a transaction that secures payment or the performance of an

obligation. The form of the transaction and the identity of the

person who has title to the property do not affect whether an

interest is a security interest.

Personal property includes many different kinds of tangible and

intangible property, other than real property. Examples include

motor vehicles, household goods, business inventory, intellectual

property and company shares. Personal property is known as

collateral if it is (or is anticipated to be) the subject of a security

interest.

A security interest is enforceable against a grantor when it attaches

to collateral. A security interest attaches to collateral when a

person gives value for acquiring the security interest (or does

something else to acquire it), and in return, the person gains rights

in the collateral.

A security interest is enforceable against third parties when it has

attached to the collateral and either the secured party has

possession or control of the collateral, or a security agreement

covers the collateral.

If a security interest in collateral is perfected, it takes priority over

another security interest that is unperfected when the security

interest comes to be enforced. A security interest is perfected if:

(a) it has attached to collateral; and

Introduction Chapter 1

Preliminary Part 1.1

Section 3

Personal Property Securities Bill 2009 No. , 2009 3

(b) 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, or the interest is perfected by

force of 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);

Chapter 1 Introduction

Part 1.1 Preliminary

Section 3

4 Personal Property Securities Bill 2009 No. , 2009

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 and assignment of interests

in collateral (Part 2.7).

Chapter 3 contains specific rules about the following:

(a) agricultural interests (Part 3.2);

(b) security interests in accessions to personal property

and their priority (Part 3.3);

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

prescribed personal property (the Register of Personal Property

Securities).

Introduction Chapter 1

Preliminary Part 1.1

Section 3

Personal Property Securities Bill 2009 No. , 2009 5

The Registrar of Personal Property Securities is responsible for

maintaining the register. Chapter 5 also deals with how the register

can be searched.

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);

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.

Chapter 9 also deals with references to charges and fixed and

floating charges in this Act and in security agreements, and

provides for an independent review of the Act within 3 years after

it is enacted.

Chapter 1 Introduction

Part 1.2 General application of th is Act

Section 4

6 Personal Property Securities Bill 2009 No. , 2009

Part 1.2--General application of this Act

4 Guide to this Part

This Part contains general rules about the application of this Act.

These deal with the following matters:

(a) binding the Crown;

(b) geographical rules;

apply.

5 Crown to be bound

This Act binds the Crown in each of its capacities.

6 Connection with Australia

(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.

(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

chattel paper if:

(i) the assignor 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

Introduction Chapter 1

General application of this Act Part 1.2

Section 7

Personal Property Securities Bill 2009 No. , 2009 7

(e) the intangible property is created, arises or is provided for by

a law of the Commonwealth, a State or a Territory.

Note:

For the application of Australian and foreign law in relation to a

security interest, see Part 7.2.

7 Application in the external Te rritories

Extension to Norfolk Island

(1) This Act extends to Norfolk Island.

(2) A reference in this Act to "Australia" includes a reference to

Norfolk Island.

Extension to other external Territories

(3) This Act extends to such other external Territories (if any) as are

prescribed by the regulations for the purposes of this section.

(4) Without limiting subsection (3), if an external Territory is

prescribed for the purposes of this section, regulations prescribing

the external Territory may provide that:

(a) only some of the provisions of this Act apply in the external

Territory; and

(b) provisions that apply in the external Territory only apply in

specified circumstances.

(5) If:

(a) an external Territory is prescribed by the regulations for the

purposes of this section; and

(b) in a provision of this Act that applies (either generally or in

particular circumstances) in the external Territory there is a

reference to "Australia" or a reference to a term the definition

of which includes a reference to "Australia";

then, unless the contrary intention appears, the reference to

"Australia" in that provision as so applying, or in that definition as

applying for the purposes of that provision as so applying, includes

a reference to that external Territory.

Chapter 1 Introduction

Part 1.2 General application of th is Act

Section 8

8 Personal Property Securities Bill 2009 No. , 2009

Acts Interpretation Act 1901 definition of Australia

(6) To avoid doubt, this section applies despite paragraph 17(a) of the

Acts Interpretation Act 1901 (definition of Australia).

8 Inte rests to which this Act does not apply

(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;

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;

(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

Introduction Chapter 1

General application of this Act Part 1.2

Section 8

Personal Property Securities Bill 2009 No. , 2009 9

who is to perform the transferor's obligations under the

contract;

(iv) a transfer of present or future remuneration (including

wages, salary, commission, allowances or bonuses)

payable to an individual as an employee or a contractor;

(v) a transfer of an interest or claim in, or under, a contract

of annuity or policy of insurance;

(vi) an assignment of an account made solely to facilitate the

collection of the account on behalf of the person making

the assignment;

(vii) without limiting subparagraph (vi), an assignment of an

account, if the assignee's sole purpose in acquiring the

account is to collect it;

(viii) an assignment 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) an assignment of the beneficial interest in an account

where, after the assignment, the assignee holds the

account on trust for the assignor;

(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;

Chapter 1 Introduction

Part 1.2 General application of th is Act

Section 8

10 Personal Property Securities Bill 2009 No. , 2009

(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;

(j) an interest in a fixture;

(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)

(2) The following table has effect:

Provisions of this Act that apply to interests mentioned in subsection (1)

Item

Despite subsection (1), the

following provision:

applies in relation to the following

interest mentioned in

subsection (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).

section 80

a right of set-off (see

Introduction Chapter 1

General application of this Act Part 1.2

Section 8

Personal Property Securities Bill 2009 No. , 2009 11

Provisions of this Act that apply to interests mentioned in subsection (1)

Item

Despite subsection (1), the

following provision:

applies in relation to the following

interest mentioned in

subsection (1):

paragraph (1)(d)).

sections 117 and 118

an interest provided for by the

creation or transfer of an interest in

land (see subparagraph (1)(f)(i)).

paragraph 140(2)(a)

a lien, charge or other interest in

personal property of a kind

described in paragraph (1)(b) or (c).

paragraph 148(c) and regulations

made for the purposes of that

paragraph

a lien, charge or other interest in

personal property of a kind

described in paragraph (1)(b) or (c).

(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 and assignments of interests and rights

(4) To avoid doubt, the interest provided for by a transfer or

assignment of an interest or right (see paragraph (1)(f)) is the

interest that the transferee has to claim against the transferor.

Chapter 1 Introduction

Part 1.3 Definitions

Division 1 Introduction

Section 9

12 Personal Property Securities Bill 2009 No. , 2009

Part 1.3--Definitions

Division 1--Introduction

9 Guide to this Part

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).

Introduction Chapter 1

Definitions Part 1.3

The Dictionary Division 2

Section 10

Personal Property Securities Bill 2009 No. , 2009 13

Division 2--The Dictionary

10 The Dictionary

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.

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:

(d) chattel paper;

(e) an investment entitlement;

(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.

Chapter 1 Introduction

Part 1.3 Definitions

Division 2 The Dictionary

Section 10

14 Personal Property Securities Bill 2009 No. , 2009

ADI account means a protected account within the meaning of the

Banking Act 1959.

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.

attaches has the meaning given by section 19.

Australia has a meaning affected by subsection 7(4).

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);

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.

Introduction Chapter 1

Definitions Part 1.3

The Dictionary Division 2

Section 10

Personal Property Securities Bill 2009 No. , 2009 15

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

(d) a day on which the Registrar has refused access to the

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:

(d) an investment entitlement;

(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.

Chapter 1 Introduction

Part 1.3 Definitions

Division 2 The Dictionary

Section 10

16 Personal Property Securities Bill 2009 No. , 2009

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

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.

Introduction Chapter 1

Definitions Part 1.3

The Dictionary Division 2

Section 10

Personal Property Securities Bill 2009 No. , 2009 17

constitutional corporation means a corporation to which

paragraph 51(xx) of the Constitution applies.

constructive knowledge has the meaning given by section 297.

Note:

Section 298 deals with knowledge in relation to bodies corporate and

other entities.

consumer property means personal property held by an individual,

other than personal property held in the course or furtherance, to

any degree, of carrying on an enterprise to which an ABN has been

allocated.

continuously perfected has the meaning given by section 56.

control has the meaning given by Part 2.3.

Note:

Control has an extended meaning in section 341 (control of inventory

and accounts in relation to fixed and floating ch arges).

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.

Chapter 1 Introduction

Part 1.3 Definitions

Division 2 The Dictionary

Section 10

18 Personal Property Securities Bill 2009 No. , 2009

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.

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)).

Introduction Chapter 1

Definitions Part 1.3

The Dictionary Division 2

Section 10

Personal Property Securities Bill 2009 No. , 2009 19

express amendment, of this Act, has the meaning given by

section 244.

Family Court means the Family Court of Australia.

Federal Court means the Federal Court of Australia.

financial product has the meaning given by the Corporations Act

2001.

financial property means any of the following personal property:

(a) chattel paper;

(b) currency;

(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

Chapter 1 Introduction

Part 1.3 Definitions

Division 2 The Dictionary

Section 10

20 Personal Property Securities Bill 2009 No. , 2009

(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;

(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 investment

entitlement.

grantor means:

(a) a person who owns the personal property, or 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

(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.

Introduction Chapter 1

Definitions Part 1.3

The Dictionary Division 2

Section 10

Personal Property Securities Bill 2009 No. , 2009 21

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;

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;

trade mark that is registered under the Trade Marks Act 1995;

(d) the right to do, or to license another person to do, an act

referred to in section 11 of the Plant Breeder's Rights Act

1994 in relation to propagating material of a plant variety;

(e) the right to do an act referred to in section 17 of the Circuit

Layouts Act 1989 in relation to an eligible layout during the

protection period of the layout;

(f) the right under the Copyright Act 1968 to do an act

comprised in the copyright in a literary, dramatic, musical or

artistic work or a published edition of such a work, or in a

sound recording, cinematograph film, television broadcast or

sound broadcast.

intellectual property licence means an authority or licence (within

the ordinary meaning of that term) to exercise rights comprising

intellectual property.

interest, in relation to personal property, includes a right in the

personal property.

Chapter 1 Introduction

Part 1.3 Definitions

Division 2 The Dictionary

Section 10

22 Personal Property Securities Bill 2009 No. , 2009

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

(d) is held, used or consumed by the person, as materials.

investment entitlement has the meaning given by section 15.

investment entitlement account has the meaning given by

section 15.

investment entitlement intermediary has the meaning given by

section 15.

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;

(d) a foreign exchange contract that is not a derivative;

(e) an assignable option to have an allotment of an investment

instrument (apart from this paragraph) made to the holder of

the option;

(f) an interest in, or a unit in an interest in, a managed

investment scheme;

(g) a unit in a share in a body;

(h) a financial product that is traded on a financial market that is:

(i) operated in accordance with an Australian market

licence; or

(ii) exempt from the operation of Part 7.2 of the

Corporations Act 2001;

(i) any other financial product that is prescribed by the

regulations;

Introduction Chapter 1

Definitions Part 1.3

The Dictionary Division 2

Section 10

Personal Property Securities Bill 2009 No. , 2009 23

(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 investment entitlement;

(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.

land includes all estates and interests in land, whether freehold,

leasehold or chattel, but does not include fixtures.

land law has the meaning given by section 117.

law of the Commonwealth, a State or a Territory means:

(a) an Act of the Commonwealth, the State or the Territory; or

(b) an instrument made under such an Act.

licence means either of the following, if it is transferable by the

licensee (whether or not the right, entitlement, authority or licence

is exclusive, and whether or not a transfer is restricted or requires

consent):

(a) a right, entitlement or authority to do one or more of the

following:

(i) to manufacture, produce, sell, transport or otherwise

deal with personal property;

(ii) to provide services;

(iii) to explore for, exploit or use a resource;

(b) an intellectual property licence;

but does not include a right, entitlement or authority that is:

Territory; and

(d) declared by that law not to be personal property for the

purposes of this Act.

Chapter 1 Introduction

Part 1.3 Definitions

Division 2 The Dictionary

Section 10

24 Personal Property Securities Bill 2009 No. , 2009

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).

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.

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

Bills of Exchange Act 1909); or

(d) any other writing that evidences a right to payment of

currency and that is of a kind that, in the ordinary course of

business, is transferred by delivery with any necessary

endorsement or assignment; or

(e) a letter of credit that states that it must be presented on

claiming payment;

but does not include any of the following:

(f) the creation or transfer (including a successive transfer) of a

right to payment in connection with interests in land, if the

writing evidencing the creation or transfer does not

specifically identify that land;

(g) a document of title;

(h) an investment entitlement.

Introduction Chapter 1

Definitions Part 1.3

The Dictionary Division 2

Section 10

Personal Property Securities Bill 2009 No. , 2009 25

new value means value other than value provided to reduce or

discharge an earlier debt or liability.

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:

Chapter 1 Introduction

Part 1.3 Definitions

Division 2 The Dictionary

Section 10

26 Personal Property Securities Bill 2009 No. , 2009

(a) that has arisen; and

(b) whose extent or amount is fixed or capable of being

ascertained;

whether or not the liability is immediately due to be met.

proceeds has the meaning given by section 31.

provides: a security agreement provides for a security interest if the

interest arises under the agreement.

purchase money security interest has the meaning given by

section 14.

receiving court has the meaning given by section 210.

referring State has the meaning given by section 244.

register means the Personal Property Securities Register

established under section 147.

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

(b) section 336 (preparatory registration with respect to

transitional security interests).

relevant superior court has the meaning given by section 211.

secured party:

Introduction Chapter 1

Definitions Part 1.3

The Dictionary Division 2

Section 10

Personal Property Securities Bill 2009 No. , 2009 27

(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

interest--includes a person registered as a secured party in

the registration.

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.

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).

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.

Chapter 1 Introduction

Part 1.3 Definitions

Division 2 The Dictionary

Section 11

28 Personal Property Securities Bill 2009 No. , 2009

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

interest--has a meaning affected by section 14.

verification statement has the meaning given by section 155.

wool means the natural fibre from any livestock that produce fleece

that can be shorn (such as sheep, goats, alpacas and llamas).

writing includes:

(a) the recording of words or data in any way (including

electronically), if, at the time the recording was made, it was

reasonable to expect that the words or data would be readily

accessible so as to be useable for subsequent reference; and

(b) the display, or other representation, of words or data by any

form of communication (including electronic), if:

(i) the display or representation is recorded in any way

(including electronically); and

(ii) at the time the recording was made, it was reasonable to

expect that the words or data would be readily

accessible so as to be useable for subsequent reference.

11 Application of the Acts Interpretation Act 1901

(1) The Acts Interpretation Act 1901, as in force at the start of the day

on which this Act receives the Royal Assent, applies to this Act.

(2) Amendments of the Acts Interpretation Act 1901 made after that

time do not apply to this Act.

Introduction Chapter 1

Definitions Part 1.3

Concepts relating to security interests and personal property Division 3

Section 12

Personal Property Securities Bill 2009 No. , 2009 29

Division 3--Concepts relating to security interests and

personal property

12 Meaning of security interest

(1) A security interest means an interest in relation to 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.

(2) For example, a security interest includes an interest in relation to

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;

(d) a conditional sale agreement (including an agreement to sell

subject to retention of title);

(e) a hire purchase agreement;

(f) a pledge;

(g) a trust receipt;

(h) a consignment (whether or not a commercial consignment);

(i) a lease of goods (whether or not a PPS lease);

(j) an assignment;

(k) a transfer of title;

(l) a flawed asset arrangement.

(3) A security interest also includes the following interests in relation

to personal property, 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;

Chapter 1 Introduction

Part 1.3 Definitions

Division 3 Concepts relating to security interests and personal property

Section 13

30 Personal Property Securities Bill 2009 No. , 2009

(4) An account debtor, in relation to an account or chattel paper, may

take a security interest in the account or chattel paper.

(5) A security interest does not include:

(a) a licence; or

(b) an interest of a kind prescribed by the regulations for the

purposes of this section.

(6) A security interest is not created only by an agreement or

undertaking to do either of the following:

(a) to postpone or subordinate a person's right to payment or

performance of all or any part of a debtor's obligation to

another person's right to payment or performance of all or

any part of another of the debtor's obligations;

(b) to postpone or subordinate all or any part of a secured party's

rights under a security agreement to all or any part of another

secured party's rights under another security agreement with

the same grantor.

13 Meaning of PPS lease

(1) A PPS lease means a lease or bailment of goods:

(a) for a term of more than one year; or

(b) for an indefinite term (even if the lease or bailment is

determinable by any party within a year of entering into the

lease or bailment); or

or that is renewable at the option of one of the parties, for one

or more terms if the total of all the terms might exceed one

year; or

(d) for a term of up to one year, in a case in which the lessee or

bailee, with the consent of the lessor or bailor, retains

uninterrupted (or substantially uninterrupted) possession of

the leased or bailed property for a period of more than one

year after the day the lessee or bailee first acquired

possession of the property (but not until the lessee's or

bailee's possession extends for more than one year); or

(e) for goods that may or must be described by serial number in

accordance with the regulations, if the lease or bailment is:

Introduction Chapter 1

Definitions Part 1.3

Concepts relating to security interests and personal property Division 3

Section 14

Personal Property Securities Bill 2009 No. , 2009 31

(i) for a term of 90 days or more; or

(ii) for a term of less than 90 days, but is automatically

renewable, or is renewable at the option of one of the

parties, for one or more terms if the total of all the terms

might be 90 days or more; or

(iii) for a term of less than 90 days, in a case in which the

lessee or bailee, with the consent of the lessor or bailor,

retains uninterrupted (or substantially uninterrupted)

possession of the leased or bailed property for a period

of 90 days or more after the day the lessee or bailee first

acquired possession of the property, (but not until the

lessee's or bailee's possession extends for 90 days or

more).

(2) However, a PPS lease does not include:

(a) a lease by a lessor who is not regularly engaged in the

business of leasing goods; or

(b) a bailment by a bailor who is not regularly engaged in the

business of bailing goods; or

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

(3) This section only applies to a bailment if the bailor provides value

for the bailment to the bailee.

14 Meaning of purchase money security interest

General definition

(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

Chapter 1 Introduction

Part 1.3 Definitions

Division 3 Concepts relating to security interests and personal property

Section 14

32 Personal Property Securities Bill 2009 No. , 2009

in the collateral, to the extent that the value is applied to

acquire those rights;

(d) the interest of a consignor who delivers goods to a consignee

under a commercial consignment.

Exceptions

(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 investment entitlement, a

monetary obligation or a negotiable instrument; or

attaches to the collateral) the grantor intends to use

predominantly for personal, domestic or household purposes.

Mixed securities

(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.

(4) If a security interest is granted in personal property (purchase

money collateral) that secures a purchase money obligation,

together with other collateral, the security interest is a purchase

money security interest only to the extent that it is granted in the

purchase money collateral.

Renewal etc.

(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).

Introduction Chapter 1

Definitions Part 1.3

Concepts relating to security interests and personal property Division 3

Section 14

Personal Property Securities Bill 2009 No. , 2009 33

Application of payments to obligations

(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

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

(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

(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.

Chapter 1 Introduction

Part 1.3 Definitions

Division 3 Concepts relating to security interests and personal property

Section 15

34 Personal Property Securities Bill 2009 No. , 2009

15 Meaning of investment entitlement and related terms

Meaning of investment entitlement

(1) An investment entitlement is the rights of a person in whose name

an investment entitlement intermediary maintains an investment

entitlement account.

Meaning of investment entitlement intermediary

(2) An investment entitlement intermediary is:

(a) a person who, in the course of business or other regular

activity, maintains investment entitlement accounts on behalf

of others, and includes a central securities depository; or

(b) a person (a CS facility licence holder) who operates a

securities transfer and settlement facility under an Australian

CS facility licence (within the meaning of the Corporations

Act 2001).

(3) To avoid doubt, an investment entitlement intermediary may also

maintain an investment entitlement account on its own behalf.

(4) An investment entitlement intermediary (including a central

securities depository) is an investment entitlement intermediary

only while acting in the capacity of an investment entitlement

intermediary.

(5) A person is not an investment entitlement intermediary merely

because the person:

(a) acts as a registrar or transfer agent for an issuer of a financial

product; or

(b) records details of interests in financial products in its own

books, being interests credited to investment entitlement

accounts in the names of other persons for whom the person

acts as manager or agent or otherwise in a purely

administrative capacity.

(6) A person is not an investment entitlement intermediary, in relation

to particular (or any) financial products issued under the laws of

Australia or a foreign country, if:

Introduction Chapter 1

Definitions Part 1.3

Concepts relating to security interests and personal property Division 3

Section 15

Personal Property Securities Bill 2009 No. , 2009 35

(a) the person credits interests in financial products to

investment entitlement accounts maintained by the person, in

the person's capacity as operator of a system for holding and

transferring such interests, on records of the issuer or other

records which constitute the primary record of entitlement to

them as against the issuer; and

(b) the country under which the financial products are issued

makes a written declaration that the person is not to be an

investment entitlement intermediary for the purposes of this

Act in relation to the particular financial product, or in

relation to all financial products; and

subsection.

Meaning of investment entitlement account

(7) In this Act:

investment entitlement account means:

(a) an account to which interests in financial products may be

credited or debited; or

(b) in the case of an account maintained by a CS facility licence

holder--writing that records holdings and transfers

maintained by the CS facility licence holder in the course of

operating the facility.

Chapter 2 General rules relating to security interests

Part 2.1 Gu ide to this Chapter

Section 16

36 Personal Property Securities Bill 2009 No. , 2009

Chapter 2--General rules relating to security

interests

Part 2.1--Guide to this Chapter

16 Guide to this Chapter

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.

General rules relating to security interests Chapter 2

Security interests: general principles Part 2.2

Section 17

Personal Property Securities Bill 2009 No. , 2009 37

Part 2.2--Security interests: general principles

17 Guide to this Part

This Part sets out some general principles about security interests.

These principles relate to the enforceability of security agreements

against grantors of security interests and third parties.

A security interest is only effective if it has attached to collateral.

A security interest attaches to collateral when the grantor has rights

in the collateral, or can transfer it to the secured party, and value is

given, or the security interest otherwise arises.

A security interest is only enforceable against a third party if it has

attached to collateral and the secured party possesses the collateral,

has perfected the security interest by controlling the collateral or

has entered into a written security agreement that describes the

collateral.

This Part also contains rules about how a security interest is

perfected and how it is continuously perfected. A perfected

security interest has priority over an unperfected security interest,

and the security interest that has been continuously perfected for

the longest time generally has the highest priority (see Part 2.6 for

priority rules).

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

situations this Act provides for perfection, or temporary perfection,

by the operation of the Act itself.

18 General rules about security agreements and security interests

(1) A security agreement is effective according to its terms.

Chapter 2 General rules relating to security interests

Part 2.2 Security interests: general principles

Section 19

38 Personal Property Securities Bill 2009 No. , 2009

(2) A security agreement may provide for security interests in

after-acquired property.

(3) A security interest in after-acquired property attaches without

specific appropriation by the grantor.

(4) A security agreement may provide for future advances.

(5) A security interest is taken to secure reasonable expenses in

relation to the enforcement of the security interest, unless the

parties agree otherwise.

19 Enforceability of security interests against grantors--attachme nt

Attachment required for enforceability

(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

(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

(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.

(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).

General rules relating to security interests Chapter 2

Security interests: general principles Part 2.2

Section 20

Personal Property Securities Bill 2009 No. , 2009 39

Goods leased, consigned or sold under a conditional sale

agreement.

(5) For the purposes of paragraph (2)(a), a grantor has rights in goods

that are leased 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.

(6) Subsection (5) does not limit any other rights the grantor may have

in the goods.

20 Enforceability of security interests against third parties

General rule

(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

(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 specified in

the writing that is 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

Chapter 2 General rules relating to security interests

Part 2.2 Security interests: general principles

Section 20

40 Personal Property Securities Bill 2009 No. , 2009

(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

(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

(4) If particular personal property is described using the term

"consumer property", "commercial property" or "equipment" 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.

(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

(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.

General rules relating to security interests Chapter 2

Security interests: general principles Part 2.2

Section 21

Personal Property Securities Bill 2009 No. , 2009 41

21 Perfection--main rule

(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) both:

(i) the security interest is attached to the collateral; and

(ii) subsection (2) applies.

(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

control of the collateral:

(i) an ADI account;

(ii) an investment entitlement;

(iii) an investment instrument;

(iv) a negotiable instrument that is not evidenced by a

certificate;

(v) a right evidenced by a letter of credit that states that the

letter of credit must be presented on claiming payment

or requiring the performance of an obligation;

(vi) satellites and other space objects.

Note:

For what constitutes possession and control of collateral, see Part 2.3.

(3) A security interest may be perfected regardless of the order in

which attachment and any step mentioned in subsection (2) occur.

(4) A single registration may perfect one or more security interests.

22 Perfection--goods possessed by a bailee

Perfection of security interest

(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

Chapter 2 General rules relating to security interests

Part 2.2 Security interests: general principles

Section 22

42 Personal Property Securities Bill 2009 No. , 2009

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;

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

(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.

(3) The security interest in the goods becomes unperfected at the end

of the period mentioned in subsection (2), unless the security

interest is perfected otherwise than under subsection (2) before the

end of the period.

(4) However, subsection (2) does not apply, and is taken never to have

applied, unless, before the end of the period of 5 business days

after the day of issue of the negotiable document of title:

(a) the secured party takes possession of the document; or

(b) the security interest is perfected otherwise than under that

subsection.

General rules relating to security interests Chapter 2

Possession and control of personal property Part 2.3

Section 23

Personal Property Securities Bill 2009 No. , 2009 43

Part 2.3--Possession and control of personal

property

23 Guide to this Part

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 in the possession of a common carrier;

(b) negotiable instruments not 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) investment entitlements;

(d) letters of credit;

(e) negotiable instruments not evidenced by a

certificate.

Chapter 2 General rules relating to security interests

Part 2.3 Possession and control of personal property

Section 24

44 Personal Property Securities Bill 2009 No. , 2009

24 Possession

Possession by one party exclusive of possession by others

(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.

(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

(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

(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

(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

assignee of the record; and

General rules relating to security interests Chapter 2

Possession and control of personal property Part 2.3

Section 25

Personal Property Securities Bill 2009 No. , 2009 45

by, the secured party or the secured party's agent; and

(d) copies or revisions of the record that change the assignee 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.

Possession of investment instruments

(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:

(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

(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.

25 Control of an ADI account

(1) A secured party has control of an ADI account if:

(a) any 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;

Chapter 2 General rules relating to security interests

Part 2.3 Possession and control of personal property

Section 26

46 Personal Property Securities Bill 2009 No. , 2009

(iii) the secured party becomes the ADI's customer with

respect to the account; and

(b) except if subparagraph (a)(i) applies--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).

(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.

(3) To avoid doubt, this section applies in relation to:

(a) perfecting a security interest by control; and

(b) determining whether personal property is a circulating asset

under section 340.

(4) Subsection (1) does not limit the ways in which a secured party has

control of an ADI account.

26 Control of investment entitlements

(1) A secured party has control of an investment entitlement that is

credited to an investment entitlement account if, and only if:

(a) there is an agreement in force between the secured party, the

grantor and the investment entitlement intermediary who

maintains the account; and

(b) the agreement has the effect that:

(i) the intermediary must not comply with instructions

given by the grantor in relation to the investment

entitlement without seeking the consent of the secured

party (or a person who has agreed to act on the

instructions of the secured party); and

(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 investment entitlement

without seeking the consent of the grantor (or any

General rules relating to security interests Chapter 2

Possession and control of personal property Part 2.3

Section 27

Personal Property Securities Bill 2009 No. , 2009 47

person who has agreed to act on the instructions of the

grantor).

(2) For the purposes of this section, a secured party has control of an

investment entitlement even if the person (who might be the

grantor) in whose name the investment entitlement intermediary

maintains the account to which the investment entitlement is

credited retains the right:

(a) to make substitutions for the instrument; or

(b) to originate instructions to the issuer; or

27 Control of investment instrume nts

Main rule

(1) A person has control of an investment instrument if, and only if,

this section so provides.

Control of any investment instrument

(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

(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

(4) A person has control of an investment instrument that is not

evidenced by a certificate if:

Chapter 2 General rules relating to security interests

Part 2.3 Possession and control of personal property

Section 28

48 Personal Property Securities Bill 2009 No. , 2009

(a) there is an agreement in force between the person and the

grantor; and

(b) the agreement has the effect that the person (or a person who

has agreed to act on the instructions of the first person) is

able to initiate or control sending instructions by which the

investment instrument could be transferred or otherwise dealt

with.

(5) A person (the controller) has control of an investment instrument

that is not evidenced by a certificate if:

(a) either:

(i) the issuer of the instrument registers another person

(who is not the grantor or debtor) as the registered

owner of the investment instrument on behalf of the

controller; or

(ii) the registered owner (who is not the grantor or debtor)

of the investment instrument acknowledges in writing

that he, she or it holds the investment instrument on

behalf of the controller; and

(b) there is an agreement in force under which the controller (or

a person who has agreed to act on the instructions of the

controller) is able to initiate or control the sending of some or

all electronic messages or other electronic communications

by which the investment instrument could be transferred or

otherwise dealt with.

(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

28 Control of a letter of credit

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.

General rules relating to security interests Chapter 2

Possession and control of personal property Part 2.3

Section 29

Personal Property Securities Bill 2009 No. , 2009 49

29 Control of negotiable instruments that are not evidenced by a

certificate

(1) A secured party has control of a negotiable instrument that is not

evidenced by a certificate if, and only if:

(a) the instrument is able to be transferred in accordance with the

operating rules of a clearing and settlement facility; and

(b) there is an agreement in force under which the secured party

(or a person who has agreed to act on the instructions of the

secured party) controls the sending of some or all electronic

messages or other electronic communications by which the

instrument could be transferred.

(2) For the purposes of subsection (1), a secured party has control of a

negotiable instrument even if the registered owner (who might be

the grantor) retains the right:

(a) to make substitutions for the instrument; or

(b) to originate instructions to the issuer; or

Chapter 2 General rules relating to security interests

Part 2.4 Attachment and perfection: specific ru les

Division 1 Introduction

Section 30

50 Personal Property Securities Bill 2009 No. , 2009

Part 2.4--Attachment and perfection: specific rules

Division 1--Introduction

30 Guide to this Part

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 investment entitlements.

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,

General rules relating to security interests Chapter 2

Attachment and perfection: specific rules Part 2.4

Introduction Division 1

Section 30

Personal Property Securities Bill 2009 No. , 2009 51

and (if the security interest had been perfected by registration) the

perfection status of the security interest is unaffected.

Division 3 also provides special rules for the attachment and

perfection of a security interest in goods if a sale or lease of the

goods creates an account or chattel paper that is transferred to

another person.

Division 4 deals with situations where collateral or a grantor of a

security interest is relocated from a foreign jurisdiction to

Australia. The security interest in the collateral is temporarily

perfected if certain conditions are met.

Chapter 2 General rules relating to security interests

Part 2.4 Attachment and perfection: specific ru les

Division 2 Proceeds and transfer

Section 31

52 Personal Property Securities Bill 2009 No. , 2009

Division 2--Proceeds and transfer

31 Meaning of proceeds

(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);

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 investment entitlement;

(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 investment

entitlement--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

(2) Proceeds are traceable whether or not there is a fiduciary

relationship between the person who has a security interest in the

General rules relating to security interests Chapter 2

Attachment and perfection: specific rules Part 2.4

Proceeds and transfer Division 2

Section 32

Personal Property Securities Bill 2009 No. , 2009 53

proceeds, as provided in section 32, and the person who has rights

in or has dealt with the proceeds.

Restriction to proceeds in which grantor has a transferable interest

(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

(4) The proceeds of collateral that is crops include the harvested

produce of the crops, if the produce is identifiable or traceable.

(5) The proceeds of collateral that is livestock include products of the

livestock (for example, meat or wool), if the products are

identifiable or traceable.

(6) However, livestock are not the proceeds of collateral merely

because they are the unborn young, or the offspring, of livestock

that are collateral.

32 Proceeds--attachment

Continuation of security interest in collateral, and attachment to

proceeds

(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 the secured party expressly

or impliedly authorised a dealing giving rise to the proceeds;

and

Chapter 2 General rules relating to security interests

Part 2.4 Attachment and perfection: specific ru les

Division 2 Proceeds and transfer

Section 32

54 Personal Property Securities Bill 2009 No. , 2009

(b) attaches to the proceeds, unless the security agreement

provides otherwise.

Note 1:

The effect of paragraph (a) is to extinguish the security interest in the

collateral if the secured party expressly or impliedly authorised the

dealing mentioned.

Note 2:

A transferee can also take the collateral free of the security interest

because of the operation of another provision of this Act (for example,

under Part 2.5).

Enforcement of security interest against collateral and proceeds

(2) If the secured party enforces a security interest against both

collateral (other than an investment instrument) 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).

(3) However, subsection (2) does not apply if, at the time of the

transfer of the collateral, the transferee has actual or constructive

knowledge that the transfer was in breach of a security agreement

that provides for the security interest in the collateral.

(4) To avoid doubt, subsection (2) does not affect any right the secured

party may have to recover the amount secured without enforcing

the security interest.

Priority of proceeds

(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.

General rules relating to security interests Chapter 2

Attachment and perfection: specific rules Part 2.4

Proceeds and transfer Division 2

Section 33

Personal Property Securities Bill 2009 No. , 2009 55

33 Proceeds--perfection and temporary pe rfection

Perfection by reference to perfection of security interest in original

collateral

(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

currency, cheques or an ADI account, or a right to an

insurance payment or any other payment as indemnity or

compensation for loss or damage to the collateral or

proceeds.

Temporary perfection in other situations

(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.

(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.

34 Transferred collateral--temporary pe rfection afte r transfer

Security interest is temporarily perfected

(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:

Chapter 2 General rules relating to security interests

Part 2.4 Attachment and perfection: specific ru les

Division 2 Proceeds and transfer

Section 34

56 Personal Property Securities Bill 2009 No. , 2009

(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);

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

(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

(3) This section does not apply in relation to a transfer of collateral if

the transferee takes the collateral free of the security interest.

General rules relating to security interests Chapter 2

Attachment and perfection: specific rules Part 2.4

Collateral returned to grantor or debtor Division 3

Section 35

Personal Property Securities Bill 2009 No. , 2009 57

Division 3--Collateral returned to grantor or debtor

35 Returned collateral--from bailee

Security interest is temporarily perfected

(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;

including (but not limited to) the following:

(i) loading;

(ii) unloading;

(iii) storing;

(iv) shipping;

(v) manufacturing;

(vi) processing;

(vii) packaging.

Note:

Subsection 22(1) provides for the perfection of a security interest in

goods possessed by a bailee.

(2) This subsection covers the period starting at the action time and

ending at the end of 5 business days after the day the action time

occurs.

Security interest becomes unperfected after 5 business days

(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.

Chapter 2 General rules relating to security interests

Part 2.4 Attachment and perfection: specific ru les

Division 3 Co llateral returned to grantor or debtor

Section 36

58 Personal Property Securities Bill 2009 No. , 2009

36 Returned collateral--negotiable instruments and investment

instruments

Security interest is temporarily perfected

(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 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;

(d) collection;

(e) renewal;

(f) registration (other than under this Act) for the purposes of a

transfer.

(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

(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.

37 Returned collateral--following sale or lease

Reattachment of security interest

(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

General rules relating to security interests Chapter 2

Attachment and perfection: specific rules Part 2.4

Collateral returned to grantor or debtor Division 3

Section 38

Personal Property Securities Bill 2009 No. , 2009 59

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;

enforcing a security agreement;

(d) the grantor or debtor repossesses the goods in the exercise of

a right in enforcing the contract of sale or the lease;

(e) any other circumstances prescribed by the regulations.

Note:

Section 76 deals with the priority of a security interest that reattaches

under this section.

Perfection of security interest

(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

38 Returned collateral--accounts and chattel pape r

Deemed goods security interest

(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;

enforcing a security agreement;

Chapter 2 General rules relating to security interests

Part 2.4 Attachment and perfection: specific ru les

Division 3 Co llateral returned to grantor or debtor

Section 38

60 Personal Property Securities Bill 2009 No. , 2009

(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.

(2) The deemed goods security interest attaches to the goods at the

repossession time.

Deemed goods security interest temporarily perfected for 5

business days

(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

(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.

General rules relating to security interests Chapter 2

Attachment and perfection: specific rules Part 2.4

Relocation of collateral or grantor to Australia etc. Division 4

Section 39

Personal Property Securities Bill 2009 No. , 2009 61

Division 4--Relocation of collateral or grantor to Australia

etc.

39 Relocation--main rule

Continuous perfection prior to move to Australia

(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:

(a) immediately before the collateral became located in

Australia, the collateral was subject to a security interest, in

accordance with a security agreement that was enforceable

against third parties; and

(b) at the time the collateral becomes located in Australia, the

collateral continues to be subject to that security interest in

accordance with such a security agreement.

Note:

For when personal property is located in a jurisdiction, see

section 235.

(2) This subsection covers the period:

(a) starting:

(i) if the law of the foreign jurisdiction provides for the

public registration or recording of the security interest,

or a notice relating to the security interest, under law--

when the registration occurs under that law; or

(ii) in any other case--when the security interest became

effective against third parties under the law of the

foreign jurisdiction; and

(b) ending when the property becomes located in Australia.

Temporary perfection after move to Australia

(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

Chapter 2 General rules relating to security interests

Part 2.4 Attachment and perfection: specific ru les

Division 4 Relocation of collateral or grantor to Australia etc.

Section 40

62 Personal Property Securities Bill 2009 No. , 2009

(b) ending at the earlier of the following times:

(i) the end of 56 days after the day the collateral becomes

located in Australia;

(ii) the end of 5 business days after the day the secured

party has actual knowledge that the collateral has

become located in Australia.

(4) However, the security interest in the collateral becomes

unperfected at the end of the period mentioned in subsection (3),

and is taken never to have been temporarily perfected, unless the

security interest is perfected otherwise than under subsection (3)

before the end of the period.

40 Relocation--intangible prope rty and financial property

Continuous perfection prior to relocation event

(1) If the perfection, and effect of perfection or non-perfection, of a

security interest in intangible property, or financial property, has

been governed by the law of a foreign jurisdiction, 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) as a result of the occurrence of the relocation event, the

perfection, and effect of perfection or non-perfection, of the

security interest becomes governed by the law of Australia.

Note 1:

For when personal property is located in a jurisdiction, see

section 235. For when bodies corporate, bodies politic or individuals

are located in a jurisdiction, see section 235.

Note 2:

For when laws of other jurisdictions govern a security interest, see

Part 7.2.

(2) This subsection covers the period:

(a) starting:

(i) if the law of the foreign jurisdiction provides for the

public registration or recording of the security interest,

General rules relating to security interests Chapter 2

Attachment and perfection: specific rules Part 2.4

Relocation of collateral or grantor to Australia etc. Division 4

Section 40

Personal Property Securities Bill 2009 No. , 2009 63

or a notice relating to the security interest, under law--

when the registration occurs under that law; or

(ii) in any other case--when the security interest became

effective against third parties under the law of the

foreign jurisdiction; and

(b) ending when the relocation event occurs.

Temporary perfection after relocation event

(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.

(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

(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).

Chapter 2 General rules relating to security interests

Part 2.5 Taking personal property free of security interests

Section 41

64 Personal Property Securities Bill 2009 No. , 2009

Part 2.5--Taking personal property free of security

interests

41 Guide to this Part

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) personal, domestic or household property;

(d) certain motor vehicles;

(e) currency;

(f) taking in the ordinary course of business;

(g) taking investment interests or entitlements in the

ordinary course of trading;

(h) investment instruments;

(i) investment entitlements.

(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).

General rules relating to security interests Chapter 2

Taking personal property free of security interests Part 2.5

Section 42

Personal Property Securities Bill 2009 No. , 2009 65

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

(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 (investment entitlements)).

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)).

43 Taking personal property free of unperfected security interest

Main rule

(1) A buyer or lessee of personal property, for new value, takes the

personal property free of an unperfected security interest in the

property.

Exception

(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.

44 Taking personal property free of security interest if serial

number incorrect or missing

Main rule

(1) A buyer or lessee of personal property, for new value, takes the

personal property free of a security interest in the property if:

Chapter 2 General rules relating to security interests

Part 2.5 Taking personal property free of security interests

Section 45

66 Personal Property Securities Bill 2009 No. , 2009

(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

(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) at the time covered by subsection (3), 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,

unless the personal property is of a kind prescribed by the

regulations for the purposes of this subsection.

(3) The time covered by this subsection is:

(a) if the personal property is bought or leased with the intention

of using it predominantly for personal, domestic or household

purposes--the time new value is first given for the sale or

lease; or

(b) in any other case--the time of sale or of entry into agreement

for the lease.

45 Taking motor vehicles free of security interest

Incorrect or missing serial number

(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

General rules relating to security interests Chapter 2

Taking personal property free of security interests Part 2.5

Section 45

Personal Property Securities Bill 2009 No. , 2009 67

which a search of the register (by reference otherwise only to

the serial number of the motor vehicle) would not disclose a

registration that perfected the security interest; and

(i) the person who granted the security interest; or

(ii) if the person who granted the security interest has lost

the right to possess the motor vehicle, or is estopped

from asserting an interest in the motor vehicle--another

person who is in possession of the motor vehicle.

(2) Subsection (1) does not apply if:

(a) the secured party is in possession of the motor vehicle

immediately before the time of the sale or lease; or

(b) the motor vehicle is bought at a sale held by or on behalf of

an execution creditor; or

(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

(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.

(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

(i) as inventory; or

Chapter 2 General rules relating to security interests

Part 2.5 Taking personal property free of security interests

Section 46

68 Personal Property Securities Bill 2009 No. , 2009

(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.

46 Taking personal property free of security interest in ordinary

course of business

Main rule

(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.

Exceptions

(2) Subsection (1) does not apply if:

(a) in a case in which personal property of that kind may, or

must, be described by serial number--the buyer or lessee

holds the personal property:

(i) as inventory; or

(ii) on behalf of a person who would hold the collateral as

inventory; or

(b) in any case--the buyer or lessee buys or leases the personal

property with actual knowledge that the sale or lease

constitutes a breach of the security agreement that provides

for the security interest.

47 Taking personal, domestic or household property free of security

interest

Main rule

(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

General rules relating to security interests Chapter 2

Taking personal property free of security interests Part 2.5

Section 48

Personal Property Securities Bill 2009 No. , 2009 69

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

(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;

(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

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.

48 Taking currency free of security interest

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.

49 Taking investment inte rest or entitlement free of security interest

in the ordinary course of trading

A person who buys an investment instrument or an investment

entitlement in the ordinary course of trading on a prescribed

financial market (within the meaning of the Corporations Act

2001) takes the instrument or entitlement free of a security interest

in the instrument or entitlement.

Chapter 2 General rules relating to security interests

Part 2.5 Taking personal property free of security interests

Section 50

70 Personal Property Securities Bill 2009 No. , 2009

50 Taking investment instrument free of security interest

Main rule

(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

(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.

(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.

51 Taking investment entitle ment free of security interest

Main rule

(1) A person (the transferee) who takes an interest in an investment

entitlement takes the interest free of a security interest in the

entitlement 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 investment entitlement arises is made in

accordance with a consensual transaction.

Exception

(2) Subsection (1) does not apply if, at the time the interest is taken,

the person in whose name an investment entitlement intermediary

General rules relating to security interests Chapter 2

Taking personal property free of security interests Part 2.5

Section 52

Personal Property Securities Bill 2009 No. , 2009 71

maintains the investment entitlement account has actual or

constructive knowledge that crediting the interest in the financial

product to the account constitutes a breach of a security agreement

that provides for a security interest in any investment entitlement

or financial product.

52 Taking personal property free of temporarily perfected security

interest

Main rule

(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 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 temporary perfection for certain transitional

security interests.

Exception

(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:

(a) the time new value is first given for the sale or lease, if the

personal property is bought or leased with the intention of

using it predominantly for personal, domestic or household

purposes; or

(b) in any other case--the time of sale or of entry into agreement

for the lease.

53 Rights of secured party and transferee on taking personal

property free of security inte rest

Scope

(1) This section applies if:

(a) a person (the transferee) acquires personal property from

another person (the transferor); and

Chapter 2 General rules relating to security interests

Part 2.5 Taking personal property free of security interests

Section 53

72 Personal Property Securities Bill 2009 No. , 2009

(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

(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

(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.

General rules relating to security interests Chapter 2

Priority between security interests Part 2.6

Introduction Division 1

Section 54

Personal Property Securities Bill 2009 No. , 2009 73

Part 2.6--Priority between security interests

Division 1--Introduction

54 Guide to this Part

This Part deals with how to work out the priority between

competing security interests in collateral (and in some cases, other

kinds of interests).

Priority rules are relevant when the same personal property is

subject to 2 or more security interests. If the debtor defaults, the

rules determine the order of priority in which the various secured

parties can enforce their security interests under Chapter 4.

Division 2 sets out the default rules that apply if this Act provides

no other way of determining that priority.

Unless otherwise provided:

(a) perfected interests have priority over unperfected

interests; and

(b) priority between perfected interests amongst

themselves, and unperfected interests amongst

themselves, is determined on a first-in-time basis.

The Division contains other rules of general application (such as

the priority that applies to the proceeds of collateral). Security

interests perfected by control have the highest priority.

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.

Chapter 2 General rules relating to security interests

Part 2.6 Prio rity between security interests

Division 1 Introduction

Section 54

74 Personal Property Securities Bill 2009 No. , 2009

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

transferor-granted 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 priority between other kinds of interests

(such as interests that arise under law, interests of execution

creditors and security interests held by ADIs).

General rules relating to security interests Chapter 2

Priority between security interests Part 2.6

Priority of security interests generally Division 2

Section 55

Personal Property Securities Bill 2009 No. , 2009 75

Division 2--Priority of security interests generally

55 Default priority rules

(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);

Priority between unperfected security interests

(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

(3) A perfected security interest in collateral has priority over an

unperfected security interest in the same collateral.

Priority for perfection in other ways

(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.

(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 takes possession of the collateral;

otherwise perfected, by force of this Act.

Chapter 2 General rules relating to security interests

Part 2.6 Prio rity between security interests

Division 2 Priority of security interests generally

Section 56

76 Personal Property Securities Bill 2009 No. , 2009

(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 33(5)).

56 How a security interest is continuously perfected

(1) For the purposes of this Act, a security interest is continuously

perfected after a particular time if the security interest is, after that

time, perfected under this Act at all times.

(2) A security interest may be continuously perfected after a particular

time even if, after that time, it is perfected in 2 or more different

ways:

(a) at any particular time; or

(b) at different times.

Examples: A security interest could be perfected in 2 or more different ways as

follows:

(a) by possession and by a registration;

(b) by 2 different registrations.

57 Priority of security inte rests perfected by control

Priority interests

(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).

(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).

General rules relating to security interests Chapter 2

Priority between security interests Part 2.6

Priority of security interests generally Division 2

Section 58

Personal Property Securities Bill 2009 No. , 2009 77

Control priority takes precedence over any other priority rule

(3) This section applies despite the application of any other provision

of this Part.

58 Priority of advances

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).

59 Priority rules and intervening security interests

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.

60 Transfer of security interests does not affect priority

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.

61 Voluntary subordination of security interests

(1) A secured party may (in a security agreement or otherwise)

subordinate the secured party's security interest in collateral to any

other interest in the collateral.

(2) An agreement to subordinate a security interest:

(a) is effective according to its terms between the parties; and

General rules relating to security interests Chapter 2

Priority between security interests Part 2.6

Priority of purchase money security interests Division 3

Section 62

Personal Property Securities Bill 2009 No. , 2009 79

Division 3--Priority of purchase money security interests

62 When purchase money security inte rests take priority over other

security interests

Scope

(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

(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

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

(3) The purchase money security interest has priority if:

(a) the interest is in personal property, or its proceeds, other than

inventory; and

Chapter 2 General rules relating to security interests

Part 2.6 Prio rity between security interests

Division 3 Priority of purchase money security interests

Section 63

80 Personal Property Securities Bill 2009 No. , 2009

(b) the purchase money security interest is perfected by

registration before the end of 10 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

interest states, in accordance with item 7 of the table in

section 153, that the interest is a purchase money security

interest.

Note:

The period mentioned in paragraph (b) may be extended by a court

under section 293.

63 Priority between competing purchase money security interests in

collate ral

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

end of 10 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 10 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.

General rules relating to security interests Chapter 2

Priority between security interests Part 2.6

Priority of purchase money security interests Division 3

Section 64

Personal Property Securities Bill 2009 No. , 2009 81

64 Non-purchase money security inte rests 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

(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 each secured

party holding a purchase money security interest in the

account in respect of which a registration is effective at

the time the priority interest is perfected by registration;

(ii) the notice is given at least 5 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.

(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).

Chapter 2 General rules relating to security interests

Part 2.6 Prio rity between security interests

Division 3 Priority of purchase money security interests

Section 65

82 Personal Property Securities Bill 2009 No. , 2009

Perfected purchase money security interest in both proceeds and

new value

(3) If a person has a purchase money security interest in an account as

proceeds of inventory that is subordinate to a non-purchase money

security interest under subsection (1):

(a) the person is taken to have a purchase money security interest

in both the proceeds of the inventory and in the new value

mentioned in subsection (1); and

(b) the purchase money security interest in the new value is

taken to be perfected by the registration that perfected the

purchase money security interest in the proceeds.

65 Possession of goods shipped by a common carrie r

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.

General rules relating to security interests Chapter 2

Priority between security interests Part 2.6

Priority of security interests in transferred collateral Division 4

Section 66

Personal Property Securities Bill 2009 No. , 2009 83

Division 4--Priority of security interests in transferred

collateral

66 Application of this Division

(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

security interest (the transferee-granted interest) in the

transferred collateral; and

(d) neither the transferor-granted interest nor the

transferee-granted interest is currently perfected by control.

Note 1:

If either or both of the interests are currently perfected by control

under paragraph 21(2)(c), section 57 applies.

Note 2:

If the priority between a transferor-granted interest and a

transferee-granted interest is not covered by this section, then

section 55 applies.

Note 3:

For attachment and perfection in relation to transferred collateral, see

section 34.

Note 4:

For a grantor's rights in relation to transferring collateral, see

section 79.

(2) This Division does not prevent a secured party from perfecting a

security interest in any way in order to have priority over another

security interest.

67 Priority whe n transferor-granted inte rest 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.

Chapter 2 General rules relating to security interests

Part 2.6 Prio rity between security interests

Division 4 Priority of security interests in transferred collateral

Section 68

84 Personal Property Securities Bill 2009 No. , 2009

68 Priority whe n there is a break in the perfection of the

transferor-granted interest

(1) The transferor-granted interest in the transferred collateral has

priority (except as mentioned in subsection (2)) if:

(a) the transferred collateral is not registered with a serial

number (see subsection (4)); and

(b) the interest was perfected by registration immediately before

the transfer; and

Note:

See subsection 34(3) for one situation in which a security interest

may become unperfected following a transfer of collateral.

(d) the interest is later re-perfected; and

(e) a notice is given (whether before or after the interest is

re-perfected as mentioned in paragraph (d)) to all other

secured parties who have a registration that describes the

transferred collateral; and

(f) the notice is given in accordance with subsection (5); and

(g) the interest has been continuously perfected since it was

re-perfected as mentioned in paragraph (d).

(2) However, the transferee-granted interest has priority if:

(a) subsection (1) applies in relation to the transferor-granted

interest; and

(b) the transferee-granted interest is perfected immediately

before the transferor-granted security is re-perfected as

mentioned in paragraph (1)(d); and

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 re-perfected as

mentioned in paragraph (1)(d); and

(ii) the notice is given under paragraph (1)(e);

but only to the extent of the advance or obligation.

General rules relating to security interests Chapter 2

Priority between security interests Part 2.6

Priority of security interests in transferred collateral Division 4

Section 68

Personal Property Securities Bill 2009 No. , 2009 85

(3) Subsection (2) applies despite section 58 (priority of advances).

(4) For the purposes of this section, the transferred collateral is

registered with a serial number at a particular time only if a search

of the register by reference to that time and by reference only to the

serial number of the collateral is capable of disclosing the

registration.

(5) A notice is given in accordance with this subsection if:

(a) the notice is in the approved form; or

(b) the notice:

(i) states that the secured party expects to perfect a security

interest in the transferred collateral; and

(ii) contains a description of the transferred collateral; and

(iii) sets out the effect of subsections (1) and (2).

Chapter 2 General rules relating to security interests

Part 2.6 Prio rity between security interests

Division 5 Priority of cred itors, and purchasers of negotiable instruments, chattel paper

and negotiable documents of title

Section 69

86 Personal Property Securities Bill 2009 No. , 2009

Division 5--Priority of creditors, and purchasers of

negotiable instruments, chattel paper and

negotiable documents of title

69 Priority of creditor who receives payment of debt

(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

Example: A bank account from which the funds were paid is an example of an

intangible that was the source of the pay ment.

(2) Subsection (1) does not apply if, at the time of the payment, the

creditor had actual knowledge that the payment was made in

breach of the security agreement that provides for the security

interest.

(3) Payments made by a debtor are covered by this subsection if they

are made through the use of:

(a) an electronic funds transfer; or

(b) a debit, transfer order, authorisation, or similar written

payment mechanism executed by the debtor when the

payment was made; or

70 Priority of pe rson who acquires a negotiable instrume nt or an

interest in a negotiable instrument

(1) This section applies if, by a consensual transaction, a person

acquires an interest consisting of:

(a) a negotiable instrument; or

(b) an interest in a negotiable instrument.

(2) The interest of the person in the negotiable instrument has priority

over a perfected security interest in the negotiable instrument if:

(a) the person gave value for the interest; and

General rules relating to security interests Chapter 2

Priority between security interests Part 2.6

Priority of creditors, and purchasers of negotiable instruments, chattel paper and

negotiable documents of title Division 5

Section 71

Personal Property Securities Bill 2009 No. , 2009 87

(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

instrument.

71 Priority of pe rson who acquires chattel paper or an interest in

chattel paper

(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 assignment of chattel paper, see section 80.

(2) The interest of the person in the chattel paper has priority over the

following security interests in the chattel paper:

(a) if the person took possession of the chattel paper without

actual or constructive knowledge of a perfected security

interest in the chattel paper--the perfected security interest;

(b) in any case--a security interest that has attached to proceeds

of inventory as original collateral.

(3) This section applies despite sections 62 and 64.

Chapter 2 General rules relating to security interests

Part 2.6 Prio rity between security interests

Division 5 Priority of cred itors, and purchasers of negotiable instruments, chattel paper

and negotiable documents of title

Section 72

88 Personal Property Securities Bill 2009 No. , 2009

72 Priority of holder of negotiable document of title

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 negotiable instrument without

actual or constructive knowledge of the security interest.

General rules relating to security interests Chapter 2

Priority between security interests Part 2.6

Priority of other interests Division 6

Section 73

Personal Property Securities Bill 2009 No. , 2009 89

Division 6--Priority of other interests

73 Priority between security interests and declared statutory

interests

Interests arising under a law etc. in the ordinary course of business

(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

goods or services; and

(d) no law of the Commonwealth, a State or a Territory provides

for the priority between the priority interest and the security

interest; and

Example: A law of the Commonwealth, a State or a Territory to which

subsection (2) applies is a law that provides for the priority

between the priority interest and the security interest.

(e) the person who holds the priority interest acquired the

interest without actual knowledge that the acquisition

constitutes a breach of the security agreement that provides

for the security interest.

Note:

The priority interest might be an interest to which this Act would

otherwise not apply (see subsection 8(2)).

Statutory interests declared by law

(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

Chapter 2 General rules relating to security interests

Part 2.6 Prio rity between security interests

Division 6 Priority of other interests

Section 74

90 Personal Property Securities Bill 2009 No. , 2009

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)).

(3) However, for the purposes of subsection (2), as it applies to a law

of the Commonwealth:

(a) the Minister may, by an instrument made under

subsection (4), make the declaration required by

paragraph (2)(a); and

(b) the priority mentioned in subsection (2) may be determined

in accordance with that instrument.

(4) The Minister may make a legislative instrument containing a

declaration, or determining priority, or both, for the purposes of

subsection (3).

(5) Subsection (2) is subject to subsection (1).

Rights to payment in connection with specifically identified land

(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).

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).

74 Execution creditor has priority over unperfected security interest

(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).

General rules relating to security interests Chapter 2

Priority between security interests Part 2.6

Priority of other interests Division 6

Section 75

Personal Property Securities Bill 2009 No. , 2009 91

(2) To avoid doubt, an execution creditor does not include a landlord

who exercises a right of distress.

(3) This section applies despite any other section in this Part.

Time of seizure or execution

(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.

75 Priority of security inte rests held by ADIs

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, other than a security interest that is perfected

by control in accordance with subparagraph 25(1)(a)(ii).

Note 1:

A security interest that is held by an ADI in an ADI account is

perfected by control (see subparagraph 25(1)(a)(i)).

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)).

76 Priority of security inte rests in returned goods

Security interest held by account transferee

(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.

Chapter 2 General rules relating to security interests

Part 2.6 Prio rity between security interests

Division 6 Priority of other interests

Section 77

92 Personal Property Securities Bill 2009 No. , 2009

(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;

(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

(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.

77 Priority of certain security inte rests if there is no foreign register

Scope

(1) This section applies to a security interest (the priority interest) in

an account or financial property 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.

Note:

For when laws of other jurisdictions govern a security interest, see

Part 7.2.

General rules relating to security interests Chapter 2

Priority between security interests Part 2.6

Priority of other interests Division 6

Section 77

Personal Property Securities Bill 2009 No. , 2009 93

Security interests in accounts

(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

(3) A priority interest in financial property has priority, in proceedings

in an Australian court, over another interest in the financial

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 property; and

(b) when the other interest arises in the property:

(i) the property is located in Australia; and

(ii) the secured party does not have possession or control of

the property.

Note:

For when personal property is located in a jurisdiction, see

section 235.

Relationship with sections 239 and 240

(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(3).

Chapter 2 General rules relating to security interests

Part 2.7 Transfer and assignment of interest in collateral

Section 78

94 Personal Property Securities Bill 2009 No. , 2009

Part 2.7--Transfer and assignment of interest in

collateral

78 Guide to this Part

This Part deals with the transfer and assignment of interests in

collateral.

Collateral may be transferred despite a contrary provision in a

security agreement (or a provision declaring the transfer to be a

default), if the grantor and transferee consent, or by the operation

of law.

The rights of a transferee of an account or chattel paper are subject

to the contract between the account debtor and the transferor, and

certain general law claims the account debtor may have against the

transferor.

A modification of the contract (or a substituted contract) between

the account debtor and the transferor is effective against the

transferee except in certain situations (dishonesty, commercial

unreasonableness or adverse effects on the transferee's rights or the

transferor's ability to perform the contract).

A term in a contract between an account debtor and a transferor

that imposes certain restrictions on the transfer of an account or

chattel paper binds the transferor to the extent of making the

transferor liable in damages for breach of contract, but is

unenforceable against third parties.

79 Transfer of collateral despite prohibition in security agreement

(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 an agreement (whether or not a

security agreement) prohibiting the transfer or declaring the

transfer to be a default, the collateral may be transferred, despite

the provision:

General rules relating to security interests Chapter 2

Transfer and assignment of interest in collateral Part 2.7

Section 80

Personal Property Securities Bill 2009 No. , 2009 95

(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.

(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.

80 Rights on transfer of account or chattel pape r--rights of

transferee and account debtor

Rights of transferee subject to contractual terms and defences

(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.

(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

(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

Chapter 2 General rules relating to security interests

Part 2.7 Transfer and assignment of interest in collateral

Section 80

96 Personal Property Securities Bill 2009 No. , 2009

(b) the manner in which the modification or the substitution is

made is commercially reasonable; and

adverse effect on:

(i) the transferee's rights under the contract; or

(ii) the transferor's ability to perform the contract.

Note:

For the meaning of modification, see section 10.

(4) Subsection (3) applies:

(a) to the extent that a transferred right to payment arising out of

the contract has not been fully earned by performance; and

(b) even if there has been notice of the transfer to the account

debtor.

(5) If a contract has been modified or substituted in the manner

described in subsection (3), the transferee obtains rights that

correspond to the rights of the transferor under the contract as

modified or substituted.

(6) Nothing in subsections (3) to (5) affects the validity of a term in a

transfer agreement that provides that a modification or substitution

mentioned in subsection (3) is a breach of contract by the

transferor.

Payment by account debtor after transfer

(7) If collateral that is 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;

(b) after receiving a notice under paragraph (a) (other than a

notice from the transferor), if:

General rules relating to security interests Chapter 2

Transfer and assignment of interest in collateral Part 2.7

Section 81

Personal Property Securities Bill 2009 No. , 2009 97

(i) the account debtor requests the transferee to provide

proof of the transfer; and

(ii) the transferee fails to provide proof before the end of 5

business days after the day of the request.

(8) Payment by an account debtor to a transferee in accordance with a

notice under paragraph (7)(a) (including in the circumstances

described in paragraph (7)(b)) discharges the obligation of the

account debtor to the extent of the payment.

81 Rights on transfer of account or chattel pape r--contractual

restrictions and prohibitions on transfer

Scope

(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

(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.

Chapter 3 Specific rules for certain security interests

Part 3.1 Gu ide to this Chapter

Section 82

98 Personal Property Securities Bill 2009 No. , 2009

Chapter 3--Specific rules for certain security

interests

Part 3.1--Guide to this Chapter

82 Guide to this Chapter

This Chapter contains specific rules for certain security interests.

Part 3.2 contains some specific rules relating to agricultural

interests (such as security interests in crops and livestock).

Part 3.3 deals with security interests in accessions to personal

property.

Part 3.4 deals with security interests in personal property that loses

its identity by being processed or commingled.

Part 3.5 deals with security interests in intellectual property.

Specific ru les for certain security interests Chapter 3

Agricultural interests Part 3.2

Section 83

Personal Property Securities Bill 2009 No. , 2009 99

Part 3.2--Agricultural interests

83 Guide to this Part

This Part includes rules on 2 topics:

(a) the relationship between a security interest in crops

and interests in the land on which the crops are

growing;

(b) rules giving priority to security interests in crops

granted to enable the crops to be produced, and

security interests in livestock granted to enable the

livestock to be fed and developed.

84 Relationship between security interest in crops and inte rest in

land

Effect of security interest in crops on lessor or mortgagee of land

(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

(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.

Chapter 3 Specific rules for certain security interests

Part 3.2 Agricu ltural interests

Section 85

100 Personal Property Securities Bill 2009 No. , 2009

85 Priority of crops

A perfected security interest (the priority interest) in crops has

priority over any other security interest in crops that is granted by

the same grantor in the same crops if:

(a) the priority interest is granted for value; and

(b) the priority interest is granted to enable the crops to be

produced; and

(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.

86 Priority of livestock

A perfected security interest (the priority interest) that is granted

by a grantor in 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 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

(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.

Specific ru les for certain security interests Chapter 3

Accessions Part 3.3

Section 87

Personal Property Securities Bill 2009 No. , 2009 101

Part 3.3--Accessions

87 Guide to this Part

This Part deals with security interests in accessions to personal

property.

A security interest in goods that become an accession to other

goods continues in the accession.

The Part sets out the priority between an interest (whether or not a

security interest) in an accession and the goods to which the

accession is affixed.

A security interest arising in an accession before it is affixed to

goods has priority over a security interest in the goods as a whole.

However, there are exceptions relating to interests in the whole

created after the accession is affixed and before the security

interest in the accession is perfected.

A security interest arising in an accession after it is affixed will

ordinarily be subordinate to an existing interest in the other goods

(unless, for example, the holder of the existing interest 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.

88 Continuation of security interests in accessions

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.

Chapter 3 Specific rules for certain security interests

Part 3.3 Accessions

Section 89

102 Personal Property Securities Bill 2009 No. , 2009

89 Default rule--interest in accession has priority

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.

90 Priority interest in whole--before security interest in accession is

perfected

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;

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.

91 Priority interest in whole--security interest in accession attaches

after goods become accession

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

Specific ru les for certain security interests Chapter 3

Accessions Part 3.3

Section 92

Personal Property Securities Bill 2009 No. , 2009 103

(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.

92 Secured party must not damage goods whe n removing accession

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.

93 Reimbursement for damage caused in removing accessions

(1) A person, other than the grantor, who has an interest in the other

goods at the time the goods become an accession is entitled to

reimbursement for any damage to that person's interest in the other

goods caused by the removal of the accession.

(2) Any reimbursement payable under subsection (1) does not include

reimbursement for a reduction in the value of the property caused

by the absence of the accession or by the necessity of the

replacement of the accession.

94 Refusal of permission to re move accession

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.

95 Secured party must give notice of re moval of accession

Notice required to be given by secured party

(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

Chapter 3 Specific rules for certain security interests

Part 3.3 Accessions

Section 95

104 Personal Property Securities Bill 2009 No. , 2009

the accession to each of the following persons in accordance with

subsections (2) and (3):

(a) the grantor;

(b) a secured party with a security interest in the accession that

has a higher priority.

(2) The secured party must give a notice to a person:

(a) at least 10 business days before the day the accession is

removed; or

(b) if the person has given a written notice to the secured party

specifying a smaller number of days to apply for the purposes

of this section--at least that number of days before the

accession is removed.

(3) A notice must contain the following:

(a) the name of the secured party giving the notice;

(b) a description of the accession and of the other goods;

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.

(4) The notice may be given in the approved form.

When notice is not required

(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.

(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

Specific ru les for certain security interests Chapter 3

Accessions Part 3.3

Section 96

Personal Property Securities Bill 2009 No. , 2009 105

(b) the cost of expenses for the retention of the accession that are

secured against the accession is disproportionately large in

relation to its value.

Note:

In addition, a secured party is not required to give a notice in any of

the circumstances set out in section 144 (when certain enforcement

notices are not required).

(7) A person is not entitled to a notice under subsection (1) in relation

to an accession to goods only because the person has an interest in

another accession to the same goods.

96 When person with an interest in the whole may retain accession

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.

97 Court order about re moval of accession

A court may, on the application of a person entitled to receive a

notice under section 95 (notice of removal of an accession), make

an order:

(a) postponing the removal of the accession; or

(b) determining the amount payable to the secured party under

section 96 for the retention of the accession.

Note:

For which courts have jurisdiction, and for transfers between courts,

see Part 6.2.

Chapter 3 Specific rules for certain security interests

Part 3.4 Processed or commingled goods

Section 98

106 Personal Property Securities Bill 2009 No. , 2009

Part 3.4--Processed or commingled goods

98 Guide to this Part

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.

99 Continuation of security interests in goods that become processed

or commingled

(1) A security interest in goods that subsequently become part of a

product or mass continues in the product or mass if the goods are

so manufactured, processed, assembled or commingled that their

identity is lost in the product or mass.

Note:

A person might take an interest in the product or mass free of the

security interest because of the operation of another provision of this

Act.

(2) Without limiting subsection (1), the identity of goods that are

manufactured, processed, assembled or commingled is lost in a

product or mass if it is not commercially practical to restore the

goods to their original state.

100 Perfection of security inte rest in goods that become processed or

commingled applies to product or mass

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.

Specific ru les for certain security interests Chapter 3

Processed or commingled goods Part 3.4

Section 101

Personal Property Securities Bill 2009 No. , 2009 107

101 Limit on value of priority of goods that become part of

processed or commingled goods

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.

102 Priority whe re more than one security interest continues in

processed or commingled goods

(1) A perfected security interest continuing in a product or mass has

priority over an unperfected security interest continuing in the

same product or mass.

(2) If more than one perfected security interest continues in the same

product or mass, each perfected security interest is entitled to share

in the product or mass according to the ratio that the obligation

secured by the perfected security interest bears to the sum of the

obligations secured by all perfected security interests in the same

product or mass.

(3) If more than one unperfected security interest continues in the

same product or mass, each unperfected security interest is entitled

to share in the product or mass according to the ratio that the

obligation secured by the unperfected security interest bears to the

sum of the obligations secured by all unperfected security interests

in the same product or mass.

(4) For the purposes of this section, the obligation secured by a

security interest does not exceed the value of the goods on the day

on which the goods became part of the product or mass.

103 Priority of purchase money security interest in processed or

commingled goods

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

Specific ru les for certain security interests Chapter 3

Intellectual property Part 3.5

Section 104

Personal Property Securities Bill 2009 No. , 2009 109

Part 3.5--Intellectual property

104 Guide to this Part

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.

105 Implied references to intellectual prope rty rights

Act applies to intellectual property rights etc.

(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

(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

(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

Chapter 3 Specific rules for certain security interests

Part 3.5 Intellectual property

Section 106

110 Personal Property Securities Bill 2009 No. , 2009

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;

(3) Subsection (2) applies subject to a contrary intention in the security

agreement, registration or notice.

106 Intellectual prope rty licences and transfers of intellectual

property

(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

hold the licence after the transfer;

the security agreement that provides for the security interest binds

every successor in title to the licensor of the intellectual property

licence to the same extent as the security agreement was binding

on the licensor.

(2) If:

(a) a security interest is granted in a sub-licence granted under an

intellectual property licence; and

(b) the intellectual property licence under which the sub-licence

is granted is later transferred; and

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.

Enforcement of security interests Chapter 4

Gu ide to this Chapter Part 4.1

Section 107

Personal Property Securities Bill 2009 No. , 2009 111

Chapter 4--Enforcement of security interests

Part 4.1--Guide to this Chapter

107 Guide to this Chapter

This Chapter deals with how to enforce a security interest in

personal property. Parties can contract out of some of the

provisions of this Chapter.

Security interests in liquid assets can be enforced by giving a

notice to the person who owes an amount to the grantor. Other

kinds of assets can be seized and disposed of under Part 4.3. A

secured party can also retain or purchase the collateral.

Proceeds arising from the disposal of collateral must be distributed

in accordance with Part 4.4. That Part also contains other rules of

general application in relation to the enforcement of security

interests.

Chapter 4 Enforcement of security interests

Part 4.2 General rules

Section 108

112 Personal Property Securities Bill 2009 No. , 2009

Part 4.2--General rules

108 Guide to this Part

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;

property and an interest in land, a secured party

may decide to enforce the personal property

interest in the same way as the interest in the land

would be enforced, or to enforce the security

interest under this Chapter;

(d) rules for the enforcement of security interests in

certain liquid assets (accounts, chattel paper and

negotiable instruments) by giving notice to

specified persons or seizing proceeds.

109 Application of this Chapter

Security interests to which this Chapter does not apply

(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;

Enforcement of security interests Chapter 4

General rules Part 4.2

Section 109

Personal Property Securities Bill 2009 No. , 2009 113

(b) a security interest that is incidental to a security interest

referred to in paragraph (a);

an obligation;

(d) a commercial consignment that does not secure payment or

performance of an obligation.

(2) This Chapter does not apply to security interests in goods that are

located outside Australia.

Note:

For where personal property is located, see section 235.

Security interests in investment instruments or investment

entitlements that are perfected by possession or control

(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 investment entitlement by taking control of the

entitlement.

(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

(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);

or licence);

(d) section 129 (disposal by purchase);

(e) section 134 (retention of collateral).

Chapter 4 Enforcement of security interests

Part 4.2 General rules

Section 110

114 Personal Property Securities Bill 2009 No. , 2009

110 Rights and re medies

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;

111 Rights and duties to be exercised honestly and in a comme rcially

reasonable manner

(1) All rights, duties and obligations that arise under this Chapter must

be exercised or discharged:

(a) honestly; and

(b) in a commercially reasonable manner.

(2) A person does not act dishonestly merely because the person acts

with actual knowledge of the interest of some other person.

112 Rights and re medies unde r this Chapter

(1) In exercising rights and remedies provided by this Chapter, a

secured party may deal with collateral only to the same extent as

the grantor would be entitled to so deal with the collateral.

(2) However, subsection (1) does not apply:

(a) if the secured party had title to the collateral immediately

before starting to exercise any right or remedy provided by

this Part; or

(b) to the extent that it would otherwise prevent the secured party

from dealing with the collateral by way of transfer because a

transfer by the grantor would be prohibited or declared to be

a default under an agreement (whether or not a security

agreement).

Note:

See section 79 (transfer of collateral despite prohibition in

security agreement).

Enforcement of security interests Chapter 4

General rules Part 4.2

Section 113

Personal Property Securities Bill 2009 No. , 2009 115

(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.

113 Recovering judgment or issuing execution does not extinguish a

security interest in collate ral

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.

114 Rights and re medies unde r this Chapter are cumulative

The rights and remedies provided by this Chapter are cumulative.

115 Contracting out of enforcement provisions

Collateral not used predominantly for personal, domestic or

household purposes

(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 grantor may retain an accession);

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);

Chapter 4 Enforcement of security interests

Part 4.2 General rules

Section 115

116 Personal Property Securities Bill 2009 No. , 2009

(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);

(q) section 142 (redemption of collateral);

(r) section 143 (reinstatement of security agreement).

(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.

(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.

Collateral that is used predominantly for personal, domestic or

household purposes

(4) The parties to a security agreement that provides for a security

interest in collateral that is used predominantly for personal,

domestic or household purposes may contract out of section 126

(apparent possession) in relation to the collateral.

Contracts between persons other than the grantor

(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

Enforcement of security interests Chapter 4

General rules Part 4.2

Section 116

Personal Property Securities Bill 2009 No. , 2009 117

or more provisions in this Chapter may contract with the secured

party out of one or more of those provisions.

(6) 2 secured parties may contract out of the right of one of the secured

parties to receive an amount under subsection 127(6) (payment of

enforcing party's expenses) from the other secured party.

116 Chapter does not apply to property in the hands of receivers or

controlle rs

(1) This Chapter does not apply in relation to property while a person

is a receiver, a receiver and manager, or a controller of the

property.

(2) Without limiting subsection (1), the meaning of the following

terms includes their meaning as given by the Corporations Act

2001:

(a) receiver and manager;

(b) controller, in relation to the property of a corporation.

117 Obligations secured by interests in personal prope rty and land

Scope

(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

(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)).

Chapter 4 Enforcement of security interests

Part 4.2 General rules

Section 117

118 Personal Property Securities Bill 2009 No. , 2009

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

(2) The secured party may:

(a) make a decision to enforce the security interest in the

personal property under this Chapter; or

(b) make a decision to enforce the security interest in the

personal property in the same way as the interest in the land

may be enforced under the land law.

(3) In making a decision under subsection (2), the secured party must

act reasonably and only take into account the following matters:

(a) the respective values of the personal property and the land;

(b) whether there is any connection between, and the nature of

any connection between, the personal property and the land;

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

(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

(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.

Enforcement of security interests Chapter 4

General rules Part 4.2

Section 118

Personal Property Securities Bill 2009 No. , 2009 119

118 Enforcing security inte rests in accordance with land law

decisions

Scope

(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.

(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

(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.

(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.

Chapter 4 Enforcement of security interests

Part 4.2 General rules

Section 118

120 Personal Property Securities Bill 2009 No. , 2009

Note:

The effect of this subsection is not to adopt the land law as such, but

to apply law to the same effect as the land law (with any necessary

modification, and subject to this section).

(5) The regulations may modify the law that applies by virtue of

subsection (4) in order to facilitate its application to the

enforcement of security interests in the personal property.

Note:

For the meaning of modification, see section 10.

Additional law that applies

(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.

(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

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

(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).

Enforcement of security interests Chapter 4

General rules Part 4.2

Section 119

Personal Property Securities Bill 2009 No. , 2009 121

(9) If such an agreement is in force, the power, duty or function may

or must be exercised or performed accordingly.

(10) The Minister may make an agreement with the appropriate

Minister of a State or Territory for the variation or revocation of an

agreement made under this section in relation to the State.

(11) An agreement made under subsection (8) or (10) is not a legislative

instrument.

This section does not affect land laws

(12) To avoid doubt, nothing in this section is intended to modify a land

law, or to affect its operation.

119 Relationship with consumer credit legislation

(1) This Chapter, except sections 117 and 118, applies in relation to a

security interest in collateral to which the Consumer Credit Code

of a State or Territory applies.

(2) The regulations may provide that a specified provision of this

Chapter is taken to have been complied with in specified

circumstances if a specified provision of the Consumer Credit

Code of a State or Territory has been complied with in those

circumstances.

120 Enforce ment of security interests in liquid assets--general

(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

Chapter 4 Enforcement of security interests

Part 4.2 General rules

Section 121

122 Personal Property Securities Bill 2009 No. , 2009

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

(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:

(i) sets out the effect of subsection (3); or

(ii) is in the approved form;

(b) seize any proceeds of the collateral to which the secured

party is entitled under section 32.

Note:

A secured party might be prevented from taking action under this

subsection by a higher priority party (see subsection 121(3)).

(3) A person who receives a notice under paragraph (2)(a) must pay, to

the secured party, any amount that the person owes to the grantor

on the collateral before the end of 5 business days after the later of:

(a) the day the notice is received; or

(b) the day the amount becomes due and payable.

Note:

The period mentioned in this subsection may be extended by a court

under section 293.

(4) The secured party must apply any amount received under

paragraph (2)(b) or subsection (3) towards the secured obligation.

(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.

121 Enforce ment of security interests in liquid assets--notice to

higher priority parties and grantor

Notice to higher priority parties

(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.

Enforcement of security interests Chapter 4

General rules Part 4.2

Section 121

Personal Property Securities Bill 2009 No. , 2009 123

(2) The notice must:

(a) contain the name of the secured party giving the notice; and

(b) contain a description of the collateral; and

paragraph 120(2)(a) or (b), as the case requires; and

(d) state the address to which a notice may be given under

subsection (3); and

(e) be given to each higher priority party:

(i) at least 10 business days before the day the action is to

be taken; or

(ii) if a higher priority party has given a written notice to

the enforcing party specifying a shorter period to apply

for the purposes of this subsection--before the end of

that period.

Note:

The period mentioned in paragraph (e) may be extended by a

court under section 293.

(3) A higher priority party who is given a notice under subsection (1)

may, before any action is taken under subsection 120(2), give a

written notice to the enforcing party informing the enforcing party

of the higher priority party's proposal to take action under that

subsection. If the higher priority party gives such a notice, the

enforcing party is not entitled to take action under that subsection.

Notice to grantor

(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).

(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.

Chapter 4 Enforcement of security interests

Part 4.3 Seizure and disposal or retention of collateral

Division 1 Introduction

Section 122

124 Personal Property Securities Bill 2009 No. , 2009

Part 4.3--Seizure and disposal or retention of

collateral

Division 1--Introduction

122 Guide to this Part

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 person may object to a proposal by a secured party to enforce a

security interest by purchasing or retaining the collateral (see

Division 5).

Enforcement of security interests Chapter 4

Seizure and disposal or retention of collateral Part 4.3

Seizing collateral Division 2

Section 123

Personal Property Securities Bill 2009 No. , 2009 125

Division 2--Seizing collateral

123 Secured party may seize collateral

(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.

Seizing intangible property

(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.

(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

(4) A secured party who seizes collateral under this section does not

perfect the secured party's security interest in the collateral.

124 Secured party who has perfected a security interest in collateral

by possession or control

(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.

Chapter 4 Enforcement of security interests

Part 4.3 Seizure and disposal or retention of collateral

Division 2 Seizing collateral

Section 125

126 Personal Property Securities Bill 2009 No. , 2009

(2) A secured party may seize the collateral under section 123 by

giving a notice to:

(a) the grantor; and

(b) if the collateral is a licence--either:

(i) the licensor; or

(ii) the licensor's successor.

(3) To avoid doubt, this section applies whether the secured party has

perfected the security interest only by possession or control, or by

another method as well.

125 Obligation to dispose of or retain collateral

(1) A secured party who seizes collateral under section 123 must:

(a) dispose of the collateral in accordance with Division 3; or

(b) take action to retain the collateral in accordance with

Division 4.

(2) Before disposing of or taking action to retain the collateral, the

secured party is, subject to the security agreement that covers the

collateral, entitled to a reasonable period in which:

(a) to secure, store and value the collateral; and

(b) to determine how to deal with the collateral.

(3) The secured party may delay disposing of, or taking action to

retain, the whole or part of the collateral beyond the reasonable

period mentioned in subsection (2). However, the delay must:

(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.

126 Apparent possession of collateral

(1) If:

(a) collateral cannot be readily moved from a grantor's premises;

(b) adequate storage facilities are not readily available for

collateral;

Enforcement of security interests Chapter 4

Seizure and disposal or retention of collateral Part 4.3

Seizing collateral Division 2

Section 127

Personal Property Securities Bill 2009 No. , 2009 127

a secured party may seize the collateral under section 123 by

taking apparent possession of the collateral.

(2) A secured party who takes apparent possession of collateral may

dispose of the collateral under section 128 on the grantor's

premises. However, the secured party must not cause the grantor

any greater cost or inconvenience than is necessarily incidental to

the disposal.

(3) To avoid doubt, a secured party who takes apparent possession of

collateral in accordance with this section does not perfect the

secured party's security interest in the collateral.

127 Seizure by higher priority parties--notice

Scope

(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

(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.

(3) However, the higher priority party must not give a notice to the

enforcing party under subsection (2) unless the higher priority

party would be entitled to seize the collateral (in the higher priority

party's own right) in accordance with section 123, had the

enforcing party not first seized the collateral.

(4) An enforcing party who is given a notice under subsection (2) must

comply with the notice before the end of the following period:

Chapter 4 Enforcement of security interests

Part 4.3 Seizure and disposal or retention of collateral

Division 2 Seizing collateral

Section 127

128 Personal Property Securities Bill 2009 No. , 2009

(a) the period of 5 business days after the day the notice is

received;

(b) such further period as is reasonable in the circumstances.

Note:

The period may also be extended by a court under section 293.

(5) A higher priority party who is given possession of collateral under

this section is taken to have complied with the requirements of

subsection 123(2) (notice of seizure) in relation to the seizure of

the collateral.

Payment of enforcing party's expenses

(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)).

(7) A higher priority party must pay an amount of expenses under

subsection (6) only to the extent that, before the higher priority

party disposes of the collateral and any proceeds of the collateral

sufficient to meet the expenses, the enforcing party gives the

higher priority party evidence showing that the enforcing party

incurred the amount.

(8) The amount payable under subsection (6) is the lesser of the

following amounts:

(a) the amount mentioned in the subsection;

(b) the amount of any proceeds from the higher priority party's

disposal of the collateral.

(9) A higher priority party must pay an amount of expenses under

subsection (6) before the end of 20 business days after the later of

the following days:

(a) the day the higher priority party disposes of the collateral;

(b) the day the enforcing party gives the higher priority party

evidence showing that the enforcing party incurred the

amount.

Chapter 4 Enforcement of security interests

Part 4.3 Seizure and disposal or retention of collateral

Division 3 Disposing of collateral (including by purchasing collateral)

Section 128

130 Personal Property Securities Bill 2009 No. , 2009

Division 3--Disposing of collateral (including by

purchasing collateral)

128 Secured party may dispose of collate ral

(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).

Method of disposal

(2) A secured party may dispose of collateral under this section:

(a) by private or public sale (including auction or closed tender);

(b) if the collateral is commercial property, and the security

agreement so provides--by lease; or

Note 1:

A different rule applies in relation to disposal by purchase (see

subsection 129(3)).

Note 2:

Paragraph (2)(b) does not apply in relation to collateral that is used

predominantly for personal, domestic or household purposes (see

subsection 109(5)).

(3) For the purposes of this Act, if collateral is disposed of by lease or

licence, the disposal occurs at the time the lease or licence is

entered into.

(4) The power to dispose of collateral by a lease or licence must be

exercised in accordance with the terms and conditions of the

security agreement.

(5) A secured party may, under subsection (1), dispose of the whole or

part of the collateral.

Enforcement of security interests Chapter 4

Seizure and disposal or retention of collateral Part 4.3

Disposing of collateral (including by purchasing collateral) Division 3

Section 129

Personal Property Securities Bill 2009 No. , 2009 131

Note:

The secured party must apply any proceeds etc. of a disposal under

this section in accordance with section 140.

Disposal of licences

(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.

129 Disposal by purchase

(1) A secured party may, under subsection 128(1), dispose of collateral

that is commercial property by purchasing the collateral.

Note:

This section does not apply in relation to collateral that is used

predominantly for personal, domestic or household purposes (see

subsection 109(5)).

(2) However, the secured party may dispose of the collateral by

purchasing it only if:

(a) the secured party gives a notice under section 130 stating that

the secured party proposes to purchase the collateral; and

(b) no notice of objection is given to the secured party in

accordance with subsection 137(2).

(3) Despite subsection 128(2) and section 131, a secured party may

purchase collateral only:

(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.

130 Notice of disposal of collateral

(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

Chapter 4 Enforcement of security interests

Part 4.3 Seizure and disposal or retention of collateral

Division 3 Disposing of collateral (including by purchasing collateral)

Section 130

132 Personal Property Securities Bill 2009 No. , 2009

(b) any other secured party with a security interest in the

collateral that has a higher priority.

(2) A notice must:

(a) contain the name of the secured party giving the notice; and

(b) contain a description of the collateral; and

collateral, unless an obligation is performed, or an amount is

paid, to satisfy the obligation secured by the security interest

in the collateral, on or before the day specified in accordance

with subsection (3); and

(d) state that the notice is given for the purposes of this Act; and

(e) if the secured party is proposing to dispose of the collateral

by purchase:

(i) contain details of rights of objection under Division 5;

and

(ii) contain the address to which a notice of objection may

be given under section 137; and

(f) contain any other matter required by the regulations for the

purposes of this subsection.

Note:

The period under paragraph (c) may be extended by a court under

section 293.

(3) For the purposes of paragraph (2)(c), the day specified in a notice

given to a person:

(a) must be at least 10 business days after the day the notice is

given; or

(b) if the person has given a written notice to the secured party

specifying a shorter period to apply for the purposes of this

section--before the end of that period.

(4) The notice may be given in the approved form.

When notice is not required

(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

Enforcement of security interests Chapter 4

Seizure and disposal or retention of collateral Part 4.3

Disposing of collateral (including by purchasing collateral) Division 3

Section 131

Personal Property Securities Bill 2009 No. , 2009 133

(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

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.

131 Duty of secured party disposing of collateral to obtain market

value

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)).

132 Secured party to give statement of account

Statement of account following disposal

(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).

Chapter 4 Enforcement of security interests

Part 4.3 Seizure and disposal or retention of collateral

Division 3 Disposing of collateral (including by purchasing collateral)

Section 132

134 Personal Property Securities Bill 2009 No. , 2009

(2) A statement of account under subsection (1) must be given to a

person before the end of:

(a) the period of 20 business days after the day the person

requests the statement; or

(b) such further period as is reasonable in the circumstances.

Note:

The period may also be extended by a court under section 293.

(3) A statement of account under subsection (1) must show:

(a) in the case of a disposal by a lease or licence--the total

amount received, and expected to be received, during the

period:

(i) starting when the secured party seized the collateral; and

(ii) ending at the end of the lease or licence; and

(b) in any other case--the total amount received from the

disposal of the collateral (or in the case of disposal by

purchase, paid by the secured party) during the period:

(i) starting when the secured party seized the collateral; and

(ii) ending at the time of the disposal of the collateral; and

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

(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.

(5) The statement of account for a 6 month period must be given to

any other person with a security interest in the collateral, or the

grantor, if the other person (or the grantor) requests the statement

for that period.

(6) A statement of account under subsection (4) must be given to a

person before the end of:

Enforcement of security interests Chapter 4

Seizure and disposal or retention of collateral Part 4.3

Disposing of collateral (including by purchasing collateral) Division 3

Section 133

Personal Property Securities Bill 2009 No. , 2009 135

(a) the period of 20 business days after the day the person

requests the statement; or

(b) such further period as is reasonable in the circumstances.

Note:

The period may also be extended by a court under section 293.

(7) A statement of account under subsection (4) must:

(a) state that the secured party has not disposed of the collateral;

and

(b) show the total amount received in relation to the collateral

during the period:

(i) starting when the secured party seized the collateral; and

(ii) ending at the time the statement is given; and

collateral before the disposal.

133 Disposing of collate ral free of interests

(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;

priority than the security interest of that secured party.

Note:

If a person has a perfected security interest in the collateral that ranks

higher than that of the secured party, the person retains a security

interest in the collateral.

(2) Subsection (1) applies in relation to a disposal of collateral (other

than a disposal by a secured party purchasing the collateral) even if

the requirements of this Chapter have not been complied with.

Chapter 4 Enforcement of security interests

Part 4.3 Seizure and disposal or retention of collateral

Division 4 Retaining collateral

Section 134

136 Personal Property Securities Bill 2009 No. , 2009

Division 4--Retaining collateral

134 Proposal of secured party to retain collateral

(1) A secured party may retain collateral if the secured party has

seized the collateral in the exercise of a right to seize the collateral

on default by the debtor (whether under section 123 or otherwise).

Note 1:

This section does not apply in relation to collateral that is used

predominantly for personal, domestic or household purposes (see

subsection 109(5)).

Note 2:

The secured party may act as agent for the grantor in transferring title

(see section 141).

(2) However, the secured party may retain the collateral only if:

(a) the secured party gives a notice under section 135 to retain

the collateral; and

(b) no notice of objection is given to the secured party in

accordance with subsection 137(2).

135 Notice of retention of collateral

(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

money security interest--a secured party over whom (or

which) the retaining party has priority under section 62 or 63,

but only if, at the time the retaining party gives the notice, the

secured party has a registration that describes the collateral.

(2) The secured party must give a notice to a person:

(a) at least 10 business days before the day the first steps are

taken to retain the collateral; or

Enforcement of security interests Chapter 4

Seizure and disposal or retention of collateral Part 4.3

Retain ing collateral Division 4

Section 136

Personal Property Securities Bill 2009 No. , 2009 137

(b) if the person has given a written notice to the secured party

specifying a shorter period to apply for the purposes of this

section--before the end of that period.

Note:

The period mentioned in paragraph (a) may be extended by a court

under section 293.

(3) A notice must:

(a) contain the name of the secured party giving the notice; and

(b) contain a description of the collateral; and

unless an obligation is performed, or an amount is paid, as

mentioned in paragraph (d), on or before a specified day

(being a day that is at least 10 business days after the day the

notice is given); and

(d) state the obligation to be performed, or the amount of the

payment required, before the day specified in accordance

with paragraph (c), to satisfy the obligation secured by the

security interest in the collateral; and

(e) contain details of rights of objection under Division 5; and

(f) contain the address to which a notice of objection may be

given under section 137; and

(g) contain any other matter required by the regulations for the

purposes of this subsection.

(4) The notice may be given in the approved form.

136 Retaining collateral free of inte rests

Retaining collateral free of interests if notices have been given in

accordance with section 135

(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);

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.

Chapter 4 Enforcement of security interests

Part 4.3 Seizure and disposal or retention of collateral

Division 4 Retaining collateral

Section 136

138 Personal Property Securities Bill 2009 No. , 2009

(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 follow ing

interests in the collateral:

(a) the interest of the grantor;

(b) the security interest of the secured party to whom title passes;

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

(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

(b) the secured party has not done so; and

new value; and

(d) the person has no actual knowledge that the requirements of

section 135 have not been complied with.

(4) Subsection (3) applies in relation to a security interest referred to in

paragraph (2)(c) whether or not a registration with respect to the

security interest is effective.

Enforcement of security interests Chapter 4

Seizure and disposal or retention of collateral Part 4.3

Objection to purchase or retention Division 5

Section 137

Personal Property Securities Bill 2009 No. , 2009 139

Division 5--Objection to purchase or retention

137 Persons entitled to notice may object to proposal

(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.

(2) Before the end of the day specified in accordance with subsection

130(3) or 135(3), the person may give the secured party a notice

(the notice of objection) objecting to the purchase or retention.

Note:

The secured party may request the person to provide proof of the

person's interest under section 138.

(3) The secured party must sell or lease the collateral in accordance

with section 128 if the secured party is given a notice of objection

in accordance with subsection (2).

138 Person making objection may be requested by secured party to

prove interest

(1) A secured party who, in accordance with subsection 137(2), is

given a notice of objection by a person (other than the grantor) may

request the person to provide proof of that person's interest.

(2) The notice of objection is taken not to have been given by the

person in accordance with subsection 137(2) if the person does not

provide proof of the person's interest before the end of 10 business

days after the day the secured party's request is made.

Note:

The period may be extended by a court under section 293.

Chapter 4 Enforcement of security interests

Part 4.4 Rules applying after enfo rcement

Section 139

140 Personal Property Securities Bill 2009 No. , 2009

Part 4.4--Rules applying after enforcement

139 Guide to this Part

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;

security agreements, before disposal;

(d) when certain enforcement notices are not required.

140 Distribution of proceeds received by secured party

Scope

(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).

Order of application

(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)).

Enforcement of security interests Chapter 4

Rules applying after enforcement Part 4.4

Section 140

Personal Property Securities Bill 2009 No. , 2009 141

(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)).

collateral that have a higher priority (whether under this Act

or otherwise) than the interest of the secured party;

(d) obligations to the secured party that are secured by the

security interest in the collateral;

(e) obligations to persons holding interests or security interests

in the collateral that have a lower priority (whether under this

Act or otherwise) than the interest of the secured party;

(f) to the grantor.

Note:

Sections 102 and 103 affect the operation of this section in relation to

commingled property.

(3) An amount, personal property or proceeds must be applied against

interests to which paragraph (2)(a), (c) or (e) applies in the order of

their priority (whether under this Act or otherwise).

(4) This section applies in relation to a security interest in collateral

even if a person takes the collateral free of the security interest

under section 133.

(5) An amount paid, or personal property or proceeds applied, in

accordance with subsection (2) discharges an obligation secured by

an interest in the collateral to the extent of the amount paid or the

value of the proceeds or property applied.

(6) To avoid doubt, any amount paid by the higher priority party to an

enforcing party in accordance with section 127 is, for the purposes

of this section, an expense incurred by the higher priority party in

relation to the enforcement of the security interest in the collateral.

(7) A secured party is not liable to an action, suit or proceeding in

relation to an application of proceeds in accordance with this

section if:

(a) the secured party applied the proceeds honestly; and

Chapter 4 Enforcement of security interests

Part 4.4 Rules applying after enfo rcement

Section 141

142 Personal Property Securities Bill 2009 No. , 2009

(b) the secured party applied the proceeds in a commercially

reasonable manner.

141 Secured party may take steps to reflect transfer of title

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, if the

grantor could take those steps to reflect a transfer of title to the

collateral.

142 Entitled persons may redeem collateral

(1) At any time before a secured party disposes of collateral under

section 128, any other person with a security interest in the

collateral, or the grantor, may redeem the collateral:

(a) by paying the amounts required to discharge the obligations,

or by performing the obligations, secured by security

interests in the collateral; and

(b) by paying the amount of any expenses in relation to the

enforcement of the security interest, the payment of which is

secured by the security interest.

Note:

Reasonable expenses in relation to the enforcement of a security

interest are taken to be secured by a security interest unless the

parties agree otherwise (see subsection 18(5)).

(2) However, a person must not redeem collateral under subsection (1)

if the person agrees in writing after the default not to do so.

(3) The grantor's right to redeem the collateral has priority over any

other person's right to redeem the collateral.

143 Entitled persons may reinstate security agreement

(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);

Enforcement of security interests Chapter 4

Rules applying after enforcement Part 4.4

Section 144

Personal Property Securities Bill 2009 No. , 2009 143

(ii) the amount of any expenses, in relation to the

enforcement of the security interest, the payment of

which is secured by the security interest; and

Note:

Reasonable expenses in relation to the enforcement of a security

interest are taken to be secured by a security interest unless the

parties agree otherwise (see subsection 18(5)).

(b) remedying any other default as a result of which the secured

party proposes to dispose of, or retain, the collateral.

(2) A security agreement may be reinstated only once during the

period in which the security agreement is in force.

144 When certain enforce ment notices are not required

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

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.

Chapter 5 Personal Property Securities Reg ister

Part 5.1 Gu ide to this Chapter

Section 145

144 Personal Property Securities Bill 2009 No. , 2009

Chapter 5--Personal Property Securities

Register

Part 5.1--Guide to this Chapter

145 Guide to this Chapter

This Chapter provides for the establishment and maintenance of a

prescribed personal property.

Part 5.2 deals with the establishment of the register and what it

contains.

Registrations consist of financing statements, and are amended by

the registration of financing change statements. Part 5.3 deals

with the registration of these statements, including the data to be

included and the issue of verification statements confirming their

registration.

Part 5.4 contains rules about the timing of registrations and when a

registration becomes ineffective, including the defects that make a

registration ineffective.

Part 5.5 is about searching the register.

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.

Personal Property Securities Reg ister Chapter 5

Establishment of the reg ister Part 5.2

Section 146

Personal Property Securities Bill 2009 No. , 2009 145

Part 5.2--Establishment of the register

146 Guide to this Part

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

The register contains the following:

(a) data in registrations with respect to security

interests and related data;

(b) prescribed data in relation to personal property.

147 Personal Prope rty Securities Register

(1) The Registrar must establish and maintain a register to be known

as the Personal Property Securities Register.

(2) Data in the register is the property of the Commonwealth.

(3) The Registrar may keep the register in any form that he or she

considers appropriate.

(4) The Registrar must ensure that the register is operational at all

times, except:

(a) while access is refused, or its operation is suspended, under

subsection (5); or

(b) in other circumstances prescribed by the regulations.

(5) If the Registrar considers that it is not practical to provide access to

the register, the Registrar may:

(a) refuse access to the register; or

(b) otherwise suspend the operation of the register, in whole or in

part.

Chapter 5 Personal Property Securities Reg ister

Part 5.2 Establishment of the reg ister

Section 148

146 Personal Property Securities Bill 2009 No. , 2009

(6) If the Registrar refuses access to the register, or otherwise suspends

the operation of the register in whole or in part, under

subsection (5), the Registrar must publish a notice giving details of

the refusal or other suspension of operation (including the period of

refusal or suspension):

(a) in a way prescribed by the regulations; or

(b) if regulations are not made for the purposes of

paragraph (a)--in the Gazette.

Note:

The office of the Registrar of Personal Property Securities is

established under Part 5.9.

148 What the register contains

The register is to contain the following data:

(a) data in registrations;

(b) data (if any) prescribed by regulations made for the purposes

of this paragraph in relation to registrations, or possible

registrations;

by regulations made for the purposes of this paragraph.

Note:

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)).

Personal Property Securities Reg ister Chapter 5

Registration Part 5.3

Section 149

Personal Property Securities Bill 2009 No. , 2009 147

Part 5.3--Registration

149 Guide to this Part

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.

150 Registration--on application

(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).

(2) A person may apply to the Registrar to register a financing change

statement to amend a registered financing statement.

(3) The Registrar must register the financing statement or financing

change statement in accordance with the application, but only if:

Chapter 5 Personal Property Securities Reg ister

Part 5.3 Registration

Section 151

148 Personal Property Securities Bill 2009 No. , 2009

(a) the application is in the approved form; and

(b) the fee (if any) determined under section 190 has been paid;

and

(i) frivolous, vexatious or offensive, or contrary to the

public interest; or

(ii) made in contravention of section 151 (belief that

collateral secures obligation); 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).

151 Registration--belief that collateral secures obligation

Requirements for collateral to secure obligation etc.

(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 collateral secures,

or will secure, an obligation (including a payment) owed by a

debtor to the person described in the statement as the secured party.

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).

(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

Personal Property Securities Reg ister Chapter 5

Registration Part 5.3

Section 151

Personal Property Securities Bill 2009 No. , 2009 149

amend the registration to end its effect with respect to the

collateral, if:

(a) the collateral has never, since the statement was registered,

secured an obligation (including a payment) owed by a

debtor to the person stated in the registration to be the

secured party; and

(b) there are no reasonable grounds (or there are no longer any

reasonable grounds) for believing that the collateral secures,

or will secure, such an obligation.

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).

(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 believing that the collateral secures,

or will secure, an obligation mentioned in paragraph (2)(a)--

the day of the registration time, or the amendment time, for

the financing statement or financing change statement; or

(b) if there are no longer any reasonable grounds for that

belief--the day when there stopped being reasonable grounds

for the belief.

Note:

The period of 5 business days may be extended by a court under

section 293.

(4) A person who wishes to establish that there were reasonable

grounds for the belief mentioned in subsection (1) or

paragraph (2)(b) (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

(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

Chapter 5 Personal Property Securities Reg ister

Part 5.3 Registration

Section 152

150 Personal Property Securities Bill 2009 No. , 2009

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

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.

Registration unaffected by contravention

(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

(7) This section only applies in relation to a registration with respect to

a security interest.

152 Registration--location of personal property and interested

persons outside Australia

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.

Personal Property Securities Reg ister Chapter 5

Registration Part 5.3

Section 153

Personal Property Securities Bill 2009 No. , 2009 151

153 Financing statements with respect to security interests

(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

The secured party The details prescribed by the regulations, in relation to

each secured party, of:

(a) the secured party; or

(b) a person nominated by the secured party who has

authority to act on behalf of the secured party.

The grantor

Whichever of the follo wing 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 p roperty, 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;

prescribed by the regulations.

Giv ing of notices

The following:

(a) an address (including an email address or fax

number) for the giv ing 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.

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) co mmercial property;

Chapter 5 Personal Property Securities Reg ister

Part 5.3 Registration

Section 153

152 Personal Property Securities Bill 2009 No. , 2009

Financing statements with respect to security interests

Item

Data about:

Details of data

(b) the collateral may or must be described by serial

number, if allo wed or required by the regulations;

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.

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 nu mber:

(i) no stated end time; o r

(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 reg istration time;

(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

amend ment time for that amend ment;

(b) for consumer property, or property described by a

serial nu mber:

(i) an end time for the reg istration 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 amend ment time for that

amend ment.

Subordination

An indication of whether the security interest is (or is

to be) subordinated to any other security interest.

Personal Property Securities Reg ister Chapter 5

Registration Part 5.3

Section 154

Personal Property Securities Bill 2009 No. , 2009 153

Financing statements with respect to security interests

Item

Data about:

Details of data

However, this indication need not be included.

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.

Any matter

prescribed by the

regulations

Details of the matter prescribed by the regulations,

whether or not the matter also comes under any of the

other items in this table.

(2) If a person applies to register a financing statement (or a financing

change statement) that would otherwise result in the statement of

an end time in a financing statement not complying with item 5 of

the table in subsection (1), the financing statement is taken to

provide for the relevant default time mentioned in that item as the

stated end time.

(3) A statement of end time does not comply with item 5 of the table in

subsection (1) if it states an end time earlier than the registration

time or amendment time in relation to the financing statement or

financing change statement that provided for that end time.

154 Financing statements with respect to prescribed property

A financing statement with respect to personal property prescribed

by regulations made for the purposes of paragraph 148(c)

(including such a financing statement as amended by the

registration of a financing change statement) consists of data that

complies with the following table:

Financing statements with respect to prescribed property

Item

Data about:

Details of data

The person who

owns or has an

interest in the

property

Details of the person, as prescribed by the regulations.

The property

Details relating to the property in accordance with the

Chapter 5 Personal Property Securities Reg ister

Part 5.3 Registration

Section 155

154 Personal Property Securities Bill 2009 No. , 2009

Financing statements with respect to prescribed property

Item

Data about:

Details of data

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.

Any matter

prescribed by the

regulations

Details of the matter prescribed by the regulations,

whether or not the matter also comes under any of the

other items in this table.

155 Meanings of verification statement and registration event

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) approved by the Registrar for

that form in relation to the registration event, a secured party,

a grantor, or collateral.

156 Verification statements--Registrar to give to secured parties

(1) The Registrar must ensure that a verification statement in relation

to a registration event is given to the following persons:

(a) a person registered as a secured party in the registration

immediately before the time of the registration event;

(b) a person registered as a secured party in the registration

immediately after the time of the registration event.

Note:

This section does not apply in relation to a registration event if the

Registrar publishes a verification statement in relation to the event

under section 158.

(2) If a registration event involves the amendment of a registration to

change an address (including an email address or a fax number) for

Personal Property Securities Reg ister Chapter 5

Registration Part 5.3

Section 157

Personal Property Securities Bill 2009 No. , 2009 155

the giving of notices to a secured party, the Registrar must ensure

that the verification statement is given to the secured party at both

the previously registered address and the address as changed.

(3) If a registration event involves the amendment of a registration to

omit a secured party, the Registrar must ensure that the verification

statement in relation to the event is given to the secured party at the

previously registered address for the secured party.

157 Verification statements--secured parties to give notice to

grantors

Requirement to provide verification statement

(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.

(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.

Exception--waiver by interested person of right to receive notice

(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

Chapter 5 Personal Property Securities Reg ister

Part 5.3 Registration

Section 158

156 Personal Property Securities Bill 2009 No. , 2009

(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

(4) If the statement holder contravenes subsection (1), 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.

158 Verification statements--publication as alternative

(1) The Registrar may publish, in a way prescribed by the regulations,

a single verification statement in relation to a number of

registration events if:

(b) the events affect a number of persons registered as secured

parties (whether before or after the events); and

(b) the Registrar considers that it would be inconvenient for

verification statements to be given to each registered (or

formerly registered) secured party.

(2) Sections 156 and 157 do not apply in relation to a registration

event if the Registrar publishes a verification statement in relation

to the event under this section.

Personal Property Securities Reg ister Chapter 5

When a registration is effective Part 5.4

Section 159

Personal Property Securities Bill 2009 No. , 2009 157

Part 5.4--When a registration is effective

159 Guide to this Part

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

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.

160 Registration time--general

(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).

Chapter 5 Personal Property Securities Reg ister

Part 5.4 When a registration is effective

Section 161

158 Personal Property Securities Bill 2009 No. , 2009

Note 2:

A registration may stop being effective even if it is available for

search in the register (for example, because of a defect--see

section 164).

Note 3:

If 2 or more registrations describe the same collateral in relation to the

same secured party, there may be different registration times for the

collateral in relation to each of the registrations.

(2) The amendment time for an amendment to a registration is the

moment when the amended registration becomes available for

search in the register.

161 Registration time--security agreements and interests

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.

162 Registration time--transfers

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.

163 Effective registration

(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;

registration stops being available for search in the register (by

reference to that time) in respect of the secured party.

Note:

For the registration time for collateral, see section 160.

(2) This section is subject to sections 164, 165 and 166 (defects in

registration).

Personal Property Securities Reg ister Chapter 5

When a registration is effective Part 5.4

Section 164

Personal Property Securities Bill 2009 No. , 2009 159

164 Defects in registration--general rule

(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; or

(b) a defect mentioned in section 165.

(2) In order to establish that a defect is seriously misleading, it is not

necessary to prove that any person was actually misled by it.

(3) A registration that describes particular collateral is not ineffective

only because the registration is ineffective with respect to other

collateral described in the registration.

165 Defects in registration--particular defects

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;

indicates that the security interest in relation to 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 relation to the collateral;

(d) in any case--circumstances in relation to the data related to

the registration that are prescribed by the regulations.

Chapter 5 Personal Property Securities Reg ister

Part 5.4 When a registration is effective

Section 166

160 Personal Property Securities Bill 2009 No. , 2009

166 Defects in registration--te mporary effectiveness

Scope

(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

(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

(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;

acquires actual or constructive knowledge of the defect.

Note:

The period mentioned in paragraph (c) may be extended by a

court under section 293.

Personal Property Securities Reg ister Chapter 5

When a registration is effective Part 5.4

Section 167

Personal Property Securities Bill 2009 No. , 2009 161

Registration becomes ineffective

(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.

167 Security interest in certain property becomes unperfected

Scope

(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

business days after the day the unperfection time occurs.

Requirement to end effective registration

(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

(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.

Chapter 5 Personal Property Securities Reg ister

Part 5.4 When a registration is effective

Section 168

162 Personal Property Securities Bill 2009 No. , 2009

168 Maintenance fees

(1) The Registrar may give a secured party in respect of a registration

with respect to a security interest a written notice requiring the

secured party to pay the fee (determined under section 190) stated

in the notice within 28 days after the notice is given in order to

maintain the effectiveness of the registration.

(2) If the fee is not paid within 28 days after the notice is given, the

Registrar may register a financing change statement amending the

registration to end its effect.

Note 1:

The Registrar must give a verification statement to each secured party

after the registration of a financing change statement (see section 156).

Note 2:

Application may be made to the Administrative Appeals Tribunal for

review of certain decisions of the Registrar about registration (see

section 191).

Note 3:

The requirement to pay a fee is satisfied if an arrangement for its

payment has been approved under subsection 190(4).

Personal Property Securities Reg ister Chapter 5

Searching the register Part 5.5

Section 169

Personal Property Securities Bill 2009 No. , 2009 163

Part 5.5--Searching the register

169 Guide to this Part

This Part is about searching and accessing data on the register.

Anyone may search the register for data with respect to a security

interest or personal property. Searches can only be undertaken by

reference to certain criteria, for example the details of a grantor, or

a serial number.

A search by reference to an individual grantor's details, and the use

of data obtained by a search, is only authorised if the search is

undertaken for a purpose stated in this Part.

A civil penalty applies in respect of unauthorised searches, and

damages may be available (under section 271). In addition, an

unauthorised search may be investigated under the Privacy Act

1988.

The written search results may be used as evidence in a court or

tribunal.

A person may apply to obtain:

(a) copies of registered financing statements and

verification statements; and

(b) reports of certain matters relating to registered data

in relation to the person.

170 Search--general

(1) A person may apply to the Registrar to search the register for data

with respect to:

(a) a security interest; or

(b) personal property prescribed by regulations made for the

purposes of paragraph 148(c).

Chapter 5 Personal Property Securities Reg ister

Part 5.5 Searching the register

Section 171

164 Personal Property Securities Bill 2009 No. , 2009

(2) The Registrar must:

(a) give the person access to the register to search for the data, in

accordance with the application; and

(b) if, in the application, the person requests a written search

result in relation to the data--ensure that the person is able to

obtain a written search result in relation to the data, in the

appropriate form under section 174.

(3) However, the Registrar may give the person access to the register

to search for the data only if:

(a) the search is authorised under sections 171 and 172; and

(b) the application is in the approved form; and

(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).

171 Search--criteria

(1) A person may search the register 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;

(d) an earlier nominated time, but only with the consent of the

Registrar;

(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 (e)). However, data removed from the register may not

be available for search by reference to an earlier time (see

Part 5.7).

Personal Property Securities Reg ister Chapter 5

Searching the register Part 5.5

Section 172

Personal Property Securities Bill 2009 No. , 2009 165

(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.

172 Search--by reference to details of grantor who is an individual

Scope

(1) This section applies if a person proposes to search the register by

reference to the details of a grantor (other than that person) who is

an individual.

Restriction on who may search

(2) The following table sets out which persons (searchers) may search

the register, and for what purpose:

Who may search the register, and for what purpose

Item

Searchers

Purpose

A person (the first person), or

another person with the first

person's consent

To disclose any registration in which

the first person is registered as a

grantor or a secured party.

A secured party in relation to a

registration

A purpose that relates to a security

interest attached to collateral

described in the registration.

A grantor in relation to a registration A purpose that relates to a security

interest attached to the collateral

described in the registration.

A person

To disclose any registration in which

the person is registered as a secured

party.

A person

To disclose whether collateral to

which a security interest is attached

is described in a registration.

A person

To disclose whether or not personal

property is described in a

registration, if:

(a) the property is to be purchased or

Chapter 5 Personal Property Securities Reg ister

Part 5.5 Searching the register

Section 172

166 Personal Property Securities Bill 2009 No. , 2009

Who may search the register, and for what purpose

Item

Searchers

Purpose

dealt with by the person; or

(b) the person has an interest in the

property.

A person

To establish whether to provide

credit to, or obtain a guarantee or an

indemn ity fro m, a person named in

the search application or a person

with an interest in the personal

property described in the

application.

A person

To establish whether to provide

credit to, or obtain a personal

guarantee or an indemnity fro m an

associate (within the mean ing 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.

A person

To establish whether to invest in,

with, or through, a person named in

the search application.

A person

To establish whether to invest in,

with, or through, an associate

(within the meaning of section 11 or

subsection 12(2) of the Corporations

Act 2001) of a body corporate

named in the search application or of

a body corporate with an interest in

the personal property described in

the application.

The Registrar

A purpose that relates to the

administration of this Act.

A person who has taken control of

the property of an individual who is

insolvent under administration,

A purpose that relates to the

searcher's control of the property.

Personal Property Securities Reg ister Chapter 5

Searching the register Part 5.5

Section 172

Personal Property Securities Bill 2009 No. , 2009 167

Who may search the register, and for what purpose

Item

Searchers

Purpose

within the mean ing of the

Corporations Act 2001

An Official Receiver in Bankruptcy

within the mean ing of the

Bankruptcy Act 1966

A purpose that relates to the exercise

of a power, or the performance of a

function, of that Official Receiver in

Bankruptcy.

The legal personal representative of

an individual (including a deceased

individual)

A purpose that relates to the exercise

of a power, or the performance of a

function, as legal personal

representative.

A government entity within the

mean ing of the A New Tax System

(Australian Business Number) Act

1999

A purpose that relates to the exercise

of a power, or the performance of a

function, of that entity, unless the

purpose is covered by another

purpose listed in this table.

A government entity within the

mean ing of the A New Tax System

(Australian Business Number) Act

1999

A purpose that relates to the

maintenance of the law, including

the prevention, detection,

investigation or prosecution of

contraventions of laws (whether the

penalty for contravention is criminal

or civil).

The holder of a lien or charge, or a

creditor

A purpose that relates to the

enforcement of the lien o r charge, or

the creditor's rights, as the case may

be.

A bailiff, or sheriff, of a court of the

Co mmonwealth, a State or a

Territory

A purpose that relates to the

enforcement of a court order or

warrant.

A person

To advise another person in

connection with any of the purposes

referred to in this table.

Search otherwise than for authorised purpose

(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) search the register; or

Chapter 5 Personal Property Securities Reg ister

Part 5.5 Searching the register

Section 173

168 Personal Property Securities Bill 2009 No. , 2009

(b) use data obtained as a result of searching 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).

(4) A person who wishes to establish that a searcher mentioned in an

item in the table in subsection (2) did an action mentioned in

paragraph (3)(a) or (b) for the purpose specified in the item bears

an evidential burden in relation to the matter.

Note:

For evidential burden, see section 10.

(5) 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

(6) For the purposes of section 271:

(a) compliance with subsection (3) is taken to be an obligation

imposed on a person who searches the register, or uses data

obtained as a result of searching the register; and

(b) the obligation is taken to be owed to the grantor by reference

to whose details the search is undertaken; and

discharge that obligation.

Note:

Section 271 gives a right to recover damages for any loss or damage in

relation to such a failure.

173 Search--interfe rence with privacy

Scope

(1) This section applies if:

Personal Property Securities Reg ister Chapter 5

Searching the register Part 5.5

Section 174

Personal Property Securities Bill 2009 No. , 2009 169

(a) a person obtains access to the register and searches the

result of an application under section 170); and

(b) as a result of the search, the person obtains personal

information about an individual within the meaning of that

Act.

Unauthorised search or use of personal information is an

interference with privacy

(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.

(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

regulations made for the purposes of paragraph 170(3)(d).

(4) The use of the personal information is unauthorised (unless the

data has been obtained lawfully from another source) if:

(a) the search is not authorised under section 171; or

(b) the use of the personal information is prohibited under

subsection 172(3); or

regulations made for the purposes of paragraph 170(3)(d).

174 Search--written search results and evidence etc.

Search result as evidence

(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.

Chapter 5 Personal Property Securities Reg ister

Part 5.5 Searching the register

Section 174

170 Personal Property Securities Bill 2009 No. , 2009

(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;

times mentioned in paragraph (b) for all the registrations.

Appropriate form of search result

(3) A search result is in the appropriate form if:

(a) it purports to be issued by the Registrar in the approved form;

(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

(i) issued by a person prescribed by the regulations; and

(ii) if the Registrar approves a form for the purposes of this

subparagraph--in the approved form.

(4) The Registrar may include, or may authorise to be included, in a

search result, any data determined by the Registrar in relation to a

secured party, a grantor, or collateral.

Evidence of transient electronic communications etc.

(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

(6) The Registrar may, by written instrument, authorise an officer or

agency for the purposes of subparagraph (3)(b)(i) or (ii).

Personal Property Securities Reg ister Chapter 5

Searching the register Part 5.5

Section 175

Personal Property Securities Bill 2009 No. , 2009 171

(7) The Registrar may, by legislative instrument, determine data for

the purposes of subsection (4).

175 Copy of financing statement

On application by a person in the approved form, accompanied by

the fee (if any) determined under section 190, the Registrar may

give the person:

(a) a copy of any registered financing statement (as amended by

any registered financing change statement) in relation to

which the person is registered as a secured party; or

(b) a copy of a verification statement that relates to such a

registered financing statement.

Note 1:

Application may be made to the Administrative Appeals Tribunal for

review of the Registrar's decision under this section to refuse to give a

person a copy of a registered financing statement or verification

statement (see section 191).

Note 2:

The requirement to pay a fee is satisfied if an arrangement for its

payment has been approved under subsection 190(4).

176 Reports by Registrar

Reports about particular persons

(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).

Note 2:

The requirement to pay a fee is satisfied if an arrangement for its

payment has been approved under subsection 190(4).

(2) The Registrar may, at the Registrar's initiative, give a person a

report of matters relating to registered data in relation to the person

(whether or not the matters are determined under subsection (3)).

(3) The Registrar may, by legislative instrument, determine matters

that may be the subject of reports under this section.

Personal Property Securities Reg ister Chapter 5

Amend ment demands Part 5.6

Introduction Division 1

Section 177

Personal Property Securities Bill 2009 No. , 2009 173

Part 5.6--Amendment demands

Division 1--Introduction

177 Guide to this Part

A person with an interest in collateral may require changes to the

registration, by way of an amendment demand given to the

secured party.

An amendment demand may be made if:

(a) the obligation owed by a debtor to the secured

party is not secured by collateral described in the

registration; or

(b) the particular collateral in which the person has an

interest does not secure any obligation owed by a

debtor to the secured party.

An amendment demand, if not voluntarily complied with, may be

pursued by an administrative process activated by the Registrar, or

by an application to a court. The secured party may also apply to a

court to oppose an amendment demand.

178 How amendme nt demands are given

(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 3.

Chapter 5 Personal Property Securities Reg ister

Part 5.6 A mend ment demands

Division 1 Introduction

Section 178

174 Personal Property Securities Bill 2009 No. , 2009

Authorised amendments

Item

When amendment is authorised

What amendment is authorised

No collateral described in the

registration secures any obligation

(including a pay ment) owed by a

debtor to the secured party.

Amend ment to end effective

registration (including an

amend ment to remove the

registration).

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.

Amend ment to omit the collateral.

(2) Data removed from the register because of an amendment in

compliance with the amendment demand must not be made

available for search in the register by reference to any time before

(or after) the time of removal, if the Registrar so decides for the

purposes of this subsection.

Note 1:

Application may be made to the Administrative Appeals Tribunal for

review of the Registrar's decision that the removed data is not to be

made available for search in the register (see section 191).

Note 2:

Incorrectly removed data may be restored under section 186.

(3) A secured party must not require payment for compliance with an

amendment demand in relation to collateral that is consumer

property.

Personal Property Securities Reg ister Chapter 5

Amend ment demands Part 5.6

Amend ment demands: ad min istrative and judicial process Division 2

Section 179

Personal Property Securities Bill 2009 No. , 2009 175

Division 2--Amendment demands: administrative and

judicial process

Subdivision A--Administrative process

179 Scope of Subdivision

(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

court of appeal), in relation to an application under

section 182, that relate to the amendment demanded.

(2) This Subdivision stops applying if:

(a) a financing change statement is registered in accordance with

the amendment demand; or

(b) proceedings come before a court (including a court of

appeal), in relation to an application under section 182, that

relate to the amendment demanded.

No application to security trust instruments

(3) This Division does not apply in relation to a security interest if the

security agreement providing for the interest is an instrument or

Commonwealth of Australia Bills

PERSONAL PROPERTY SECURITIES BILL 2009