UPDATE 19
JULY 2013
PERSONAL PROPERTY SECURITIES LAW
IN AUSTRALIA
J O’Donovan
Highlights

Commentary in chapters 5, 10, 12, 14, 15, 20, 25, 35, 40, 45, 50, 52,
55, 62, 63 and 65 has been extensively reviewed and amended
consequent upon recent international case law.
Material Code 30175725
 Thomson Reuters (Professional) Australia Limited 2013
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COMMENTARY
The commentary in the service has been amended consequent upon the
commencement of case developments overseas. Chapters which have been
reviewed and amended by the author include chapters 5, 10, 12, 14, 15, 20, 25,
35, 40, 45, 50, 52, 55, 62, 63 and 65. Commentary on the following
developments are noteworthy.
Chapter 5: The PPS Regime
[5.1780] Extension of the period for registration
New commentary has been inserted regarding the effect of Corp Act, s 588FM.
The author notes that, if the secured party does not register its security interest
within the prescribed time, it can apply for an extension under Corp Act,
s 588FM but in some cases the secured party may find it easier to execute a
new security agreement rather than face the risk that the grantor will become
insolvent within the next six months. Adopting this course of action affects the
secured party’s priority but avoids the impact of the vesting rules.
Chapter 10: The scope of the Act
[10.1010] Deemed security interests
Commentary regarding “pooling arrangements” has been added. Section
13(2)(d) contemplates that a PPS lease does not include certain leases or
bailments prescribed by the PPS Regulations 2010, regardless of the length of
the term of the lease or bailment. Regulation 1.9 provides that “pooling
arrangements” are not PPS leases. A pooling arrangement is one or more lease
or hire arrangements in which interchangeable personal property, such a pallets
or aircraft engines, is passed between a number of users and then returned to
the owner, in circumstances where none of the arrangement has the effect of
securing payment or the performance of an obligation. Hence, pooling
arrangements are neither security interests under s 12(1) nor deemed security
interests under s 12(3).
Chapter 12: Transitional provisions
[12.1070] The perfection rule
New commentary has been inserted regarding:

when a transitional security interest can arise; and
 the rules determining perfection.
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Chapter 14: Drafting issues
[14.1710] Clauses for general security agreements
It is noted that, six major Australian law firms have drafted PPSA model clauses
for a General Security Agreement. It is hoped that these standard clauses will
be widely adopted to minimise disputes over documentation. The firms have
provided helpful footnotes to explain the background to the model clauses.
Chapter 15: The PPS Register
[15.4000] Reviewing the register
This is a new heading and addresses the review of the PPS Register
businesses should undertake periodically to check what registrations have been
recorded against their assets.
[15.4610] Releases and discharges
This is another new heading and addresses the situation where there is a
partial release of a security interest.
Chapter 20: Enforceability
[20.2290] Control of intermediated securities
The further test for control introduced in s 26(3A) of the PPSA is also the
subject of new commentary. It is explained that, this provision overcomes the
difficulties that arose with the original definition of control because the
intermediary was technically the ASX Settlement and Transfer Corporation Pty
Ltd. If the definition of control had not been expanded, the ASX would have
been inundated with notices from financiers asserting control of securities
accounts. Section 26(3A) allows for perfection by control to be achieved by
entering into tripartite CHESS sponsorship agreements between a secured
party, the debtor and its broker intermediary. The agreements provide that
CHESS securities may not be dealt with without the secured party’s consent.
[20.9010] Discharge of Security Interests
Commentary under this heading has been extensively expanded. The author
notes that, where the collateral is consumer goods or registered by serial
number, the secured party is required to register a financing change statement
to discharge any relevant registration within 5 business days of the repayment
of all outstanding amounts. There is no similar requirement in relation to
security interests in other collateral. Accordingly, the author in turn addresses
sales of land and personal property, mergers and acquisitions and the court’s
role in these situations.
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Chapter 35: Priorities between security interests
[35.1630] Transitional security interests
This is a new heading within the chapter. The author addresses the special
priority rules that apply to transitional security interests, the cessation of
temporary perfection, cases where PPSA 2009 does not govern priorities and
the general situation where transitional security interests trump interests
perfected by control.
Chapter 40: Agricultural interests, accessions and commingling
[40.20] Definitions and collateral classes
The author explores the meaning of “crops” and “livestock”. Interestingly he
notes that, despite the inclusive definition of “livestock” in s 10 of PPSA 2009, it
should be possible for a grantor to grant one security interest in livestock and
another security interest in their unborn young because they are separate items
of personal property. The unborn young would be treated as after-acquired
property of the grantor and the security interest would attach when the progeny
are born.
[40.535] Right to receive rent from land
A right to receive rent under a land mortgage that specifically indentifies the
land is excluded from PPSA 2009. However, there is a specific priority rule in
s 73(6) recognising the priority of such an interest in land over a PPSA security
interest in the right to receive the rent. This issue is addressed in this new
paragraph.
Chapter 50: Procedural matters
[50.110] Information to be provided to the secured party
The author has included new guidance concerning s 275 of the PPSA 2009 and
the right of interested persons to request a secured party to send or make
available to specified persons certain information. He notes that, it is advisable
for secured parties to ensure that, any commercially sensitive data is not
contained in the security agreement because the secured party cannot avoid
disclosing this information if the grantor is in default, even if there is a
confidentiality obligation under the security agreement. In particular, franchisors
and mining companies need to take steps to segregate commercially sensitive
data from the security agreement.
Index and Tables
Both the Table of Cases and Statutes and the Index have been updated and
reissued in this update.
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