Commonwealth Consolidated Acts

PERSONAL PROPERTY SECURITIES ACT 2009 - SECT 140

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).

  (1A)   This section does not prevent the operation of another law of the Commonwealth, or a law of a State or Territory, to the extent that the law requires the amount, personal property or proceeds to be applied towards one or more obligations to persons that do not hold security interests (or any other interests) in the collateral before being applied towards any (or all) of the obligations mentioned in subsection   (2).

Example:   This section does not prevent the operation of section   561 of the Corporations Act 2001 , which gives priority to the satisfaction of certain unsecured obligations over the claims of a secured party holding a circulating security interest in a debtor's property.

Order of application

  (2)   The amount, personal property or proceeds must be applied in the following order:

  (a)   obligations to persons holding interests (other than security interests) in the collateral that have a higher priority (whether under this Act or otherwise) than the interest of the secured party;

Note:   The interests referred to in this paragraph might be interests to which this Act would otherwise not apply (see subsection   8(2)).

  (b)   reasonable expenses incurred in relation to the enforcement of security interests against the collateral, to the extent that the expenses are secured by the security interests;

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

  (c)   obligations to persons holding security interests in the collateral that have a higher priority (whether under this Act or otherwise) than the interest of the secured party;

  (d)   obligations to the secured party that are secured by the security interest in the collateral;

  (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

  (b)   the secured party applied the proceeds in a commercially reasonable manner.