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. on ly e us e pl m C op yr ig ht Le xi sN ex is . Sa Australian Personal Property Securities Law Spi-Duggan and Brown - Australian Personal Property Securities Law Ch.FM.indd i 12/09/2012 02:16:04 pg4865 . on ly e us e pl m Sa is . ex xi sN Le ht ig yr op C Spi-Duggan and Brown - Australian Personal Property Securities Law Ch.FM.indd ii 12/09/2012 02:16:04 pg4865 . on ly Sa m pl e us e Australian Personal Property Securities Law Anthony Duggan xi sN ex is . Honourable Frank Iacobucci Chair in Capital Markets Regulation Faculty of Law, University of Toronto David Brown C op yr ig ht Le Associate Professor Co-Director, Bankruptcy and Insolvency Law Scholarship Unit (BILS) Adelaide Law School University of Adelaide, Professorial Fellow, Melbourne Law School LexisNexis Butterworths Australia 2013 Spi-Duggan and Brown - Australian Personal Property Securities Law Ch.FM.indd iii 12/09/2012 02:16:04 pg4865 . on ly e us e pl m Sa ex ARGENTINA AUSTRIA BRAZIL CANADA CHILE CHINA CZECH REPUBLIC FRANCE GERMANY HONG KONG HUNGARY INDIA ITALY JAPAN KOREA MALAYSIA NEW ZEALAND POLAND SINGAPORE SOUTH AFRICA SWITZERLAND TAIWAN UNITED KINGDOM USA LexisNexis LexisNexis Butterworths 475–495 Victoria Avenue, Chatswood NSW 2067 On the internet at: www.lexisnexis.com.au LexisNexis Argentina, BUENOS AIRES LexisNexis Verlag ARD Orac GmbH & Co KG, VIENNA LexisNexis Latin America, SAO PAULO LexisNexis Canada, Markham, ONTARIO LexisNexis Chile, SANTIAGO LexisNexis China, BEIJING, SHANGHAI Nakladatelství Orac sro, PRAGUE LexisNexis SA, PARIS LexisNexis Germany, FRANKFURT LexisNexis Hong Kong, HONG KONG HVG-Orac, BUDAPEST LexisNexis, NEW DELHI Dott A Giuffrè Editore SpA, MILAN LexisNexis Japan KK, TOKYO LexisNexis, SEOUL LexisNexis Malaysia Sdn Bhd, PETALING JAYA, SELANGOR LexisNexis, WELLINGTON Wydawnictwo Prawnicze LexisNexis, WARSAW LexisNexis, SINGAPORE LexisNexis Butterworths, DURBAN Staempfli Verlag AG, BERNE LexisNexis, TAIWAN LexisNexis UK, LONDON, EDINBURGH LexisNexis Group, New York, NEW YORK LexisNexis, Miamisburg, OHIO is . AUSTRALIA National Library of Australia Cataloguing-in-Publication entry Duggan A.J. Australian personal property securities law. 1st edition. 9780409330328 (pbk). 9780409330335 (ebk). Includes index. Security law — Australia. Personal property — Australia Brown, David. 346.940666 xi sN Author: Title: Edition: ISBN: Le Notes: Subjects: Other Authors/Contributors: Dewey Number: ht © 2012 Reed International Books Australia Pty Limited trading as LexisNexis. yr ig This book is copyright. Except as permitted under the Copyright Act 1968 (Cth), no part of this publication may be reproduced by any process, electronic or otherwise, without the specific written permission of the copyright owner. Neither may information be stored electronically in any form whatsoever without such permission.Inquiries should be addressed to the publishers. Typeset in Myriad Pro and Minion Pro. Printed in China. Visit LexisNexis Butterworths at www.lexisnexis.com.au C op Inquiries should be addressed to the publishers. Spi-Duggan and Brown - Australian Personal Property Securities Law Ch.FM.indd iv 12/09/2012 02:16:04 pg4865 . on ly e Foreword Roy Goode Oxford 28 July 2012 C op yr ig ht Le xi sN ex is . Sa m pl e us The modern law of secured transactions in personal property began, as one would expect, in the United States with the appearance, some 60 years ago, of Article 9 of the Uniform Commercial Code. This was the first formulation of principles and rules to adopt a unitary concept of “security interest” based on function rather than form and abolishing the distinction between security in the traditional sense and title-retention devices serving a security purpose. Brilliant in its conception it became adopted throughout the United States and was imported into Canada in the shape of Personal Property Security Acts, similar legislation being adopted by New Zealand in 1999 and Australia a decade later. New Zealand had the advantage of being a unitary jurisdiction, whereas the other three countries had to produce legislation that would replace a myriad of State or Provincial laws. Each jurisdiction, though following the Article 9 template, has reworked the text to fit its own conditions, an unsurprising development given that the amount of detail now loaded into Article 9 has made it almost impenetrable for all but the specialist. If Article 9 is unrivalled for its complexity, the Australian PPSA is unmatched for its length, running to an amazing 343 sections, incorporating numerous amendments since it was first enacted. The adoption of the Act is in no small measure due to the dogged and Herculean efforts of the late Professor David Allan, who alas did not live to see the culmination of his endeavours. Faced with such a massive piece of legislation practising lawyers, banks and others involved with personal property security will find themselves in need of an up-to-date fully comprehensive guide through the statutory provisions. Happily one is at hand. Australian Personal Property Securities Law, available in both book and electronic form, is a work of astonishing erudition. Written by two outstanding scholars, Professors Anthony Duggan, of the University of Toronto Faculty of Law, and David Brown of the University of Adelaide Law School, it takes the reader step by step through what are often complex, and sometimes controversial, provisions, noting significant departures from comparable legislation elsewhere and combining rigorous legal analysis with a deep understanding of secured transactions practice and of the economic rationale of personal property security. Instead of plunging the reader straight into an examination of the Act the book takes time to explain the pre-Act state of the law and the forms of security then in use, following the example of Grant Gilmore in his great two-volume work Security Interests in Personal Property. The two authors are equally at home with the New Zealand and Canadian legislation, which enables them to identify all the more readily the strengths and weaknesses of the Australian PPSA. Replete with helpful examples this work, in explaining the statutory provisions with great clarity, addresses typical problems and offers practical solutions. In short, it is a book which caters equally for the needs of the scholar and the practising lawyer. It is an indispensable vade mecum for those involved or interested in the subject and I have no doubt that it will enjoy great success. v Spi-Duggan and Brown - Australian Personal Property Securities Law Ch.FM.indd v 12/09/2012 02:16:04 pg4865 . on ly e us e pl m Sa is . ex xi sN Le ht ig yr op C Spi-Duggan and Brown - Australian Personal Property Securities Law Ch.FM.indd vi 12/09/2012 02:16:04 pg4865 on ly . Contents v xix xxi xxv us e Foreword Preface Table of Cases Table of Statutes Introduction 1 Chapter 2 Personal Property and its Classifications Chapter 3 The Scope of the Statute Chapter 4 Attachment and Writing Requirements Chapter 5 Perfection Chapter 6 Registration Chapter 7 The Default Priority Rules Chapter 8 Purchase Money Security Interests 161 Chapter 9 Accessions, Commingled Goods, and Crops 181 Chapter 10 Transfers of Collateral 193 Chapter 11 Proceeds 21 43 75 95 113 145 235 Enforcement of Security Interests 255 Insolvency Law and the PPSA 289 Conflict of Laws 305 Chapter 15 Transitional Matters 329 Chapter 16 International Developments 351 Chapter 12 Chapter 13 ht Le Chapter 14 xi sN ex is . Sa m pl e Chapter 1 Conclusion 361 ig Chapter 17 365 C op yr Index vii Spi-Duggan and Brown - Australian Personal Property Securities Law Ch.FM.indd vii 12/09/2012 02:16:04 pg4865 . on ly e us e pl m Sa is . ex xi sN Le ht ig yr op C Spi-Duggan and Brown - Australian Personal Property Securities Law Ch.FM.indd viii 12/09/2012 02:16:04 pg4865 . on ly e Detailed Contents e pl Introduction Introduction Secured and Unsecured Credit Unsecured credit Secured credit The function of security Pre-PPSA Categories and Forms of Security Interest Consensual and non-consensual security interests Two-party transactions and three-party transactions Real and personal property securities Possessory and non-possessory security interests Mortgages and hypothecations Legal and equitable security interests Transfer-based security interests and title retention arrangements Fixed and floating security interests The History of the Australian PPS Reforms Le xi sN ex is . Sa m Chapter 1 Personal Property and Its Classifications Introduction Goods Financial Property Introduction Chattel paper Currency Documents of title Investment instruments Negotiable instruments Intermediated Security Intangible Property Introduction C op yr ig ht Chapter 2 v xix xxi xxv us Foreword Preface Table of Cases Table of Statutes 1 1 1 1 2 3 4 4 4 5 5 6 7 9 12 14 21 21 22 24 24 24 25 26 26 27 28 30 30 ix Spi-Duggan and Brown - Australian Personal Property Securities Law Ch.FM.indd ix 12/09/2012 02:16:04 pg4865 e Sa is . ex xi sN Attachment and Writing Requirements Introduction General Rules About Security Agreements Security agreement After-acquired property Future advances Enforcement expenses Attachment Introduction Agreement Value Rights in the collateral Postponement of attachment The Writing Requirement C op yr ig ht Le Chapter 4 43 43 44 44 44 46 47 48 49 51 52 52 54 55 58 58 58 59 60 62 67 68 71 72 us e pl The Scope of the Statute Introduction The Substance Test Introduction Title retention arrangements Consignments Trusts Flawed asset arrangements Other cases The interpretation function Deemed Security Interests Accounts and chattel paper Consignments PPS leases Exceptions Licences Subordination agreements Bills of lading Security interests arising by operation of law Set-off Land dealings Insurance contracts and annuities The QuIstclose trust Other exclusions m Chapter 3 30 32 33 34 39 40 on ly Accounts ADI accounts Intellectual property Licences Commercial Property and Consumer Property Inventory and Non-Inventory Personal Property . Australian Personal Property Securities Law 75 75 75 75 76 76 77 77 77 78 78 79 82 83 x Spi-Duggan and Brown - Australian Personal Property Securities Law Ch.FM.indd x 12/09/2012 02:16:04 pg4865 e Perfection Introduction The Function of Perfection Perfection By Possession Introduction Constructive possession Goods possessed by bailee Negotiable instruments Electronic chattel paper Investment instruments Perfection By Registration Perfection By Control Introduction ADI accounts Intermediated securities Investment instruments Uncertificated negotiable instruments and letter of credit rights Temporary Perfection Loss and Continuity of Perfection Access To Details of Security Agreement Consequences of Failure To Perfect 95 95 97 98 98 99 99 101 101 102 103 103 103 103 104 105 107 108 109 110 111 Registration Introduction Pre-PPSA and PPSA Registration Compared Introduction Unification Centralisation Notice filing Computerisation Registration renewals Searching The Register Grantor’s name (grantor details) searches and serial number searches Grantor’s details searches — individual grantor Grantor’s detail searches — corporate grantor Grantor’s details searches — other Serial number searches — consumer property C op yr ig ht Le Chapter 6 xi sN ex is . Sa m pl e us Chapter 5 83 84 85 85 88 89 89 91 on ly Introduction Writing Signature Collateral description Implied references to intellectual property rights Proceeds Consequences of non-compliance Floating Charges . Detailed Contents 113 113 113 113 113 115 117 120 120 121 121 123 126 127 128 xi Spi-Duggan and Brown - Australian Personal Property Securities Law Ch.FM.indd xi 12/09/2012 02:16:04 pg4865 e us The Default Priority Rules Introduction The Section 55 Priority Rules Competing perfected security interests Reperfected security interests Perfected security interest v unperfected security interest Competing unperfected security interests The irrelevance of notice The Section 57 Priority Rules Future Advances Introduction The law Policy considerations Subordination Agreements Circular Priorities The Double Grantor Rules 161 161 162 163 163 165 166 168 170 172 173 175 175 178 179 Accessions, Commingled Goods, and Crops Introduction Accessions 181 181 181 ht ig yr op C Chapter 9 145 145 145 145 148 149 149 150 152 153 153 153 154 155 156 158 Purchase Money Security Interests Introduction Policy Considerations The Meaning of ‘Purchase Money Security Interest’ Seller PMSIs and lender PMSIs Exceptions Mixed PMSIs and non-PMSIs Allocation of payments Refinancings and consolidations PPS leases Requirements For Super-Priority Competing PMSIs PMSI in Accounts As Proceeds Subordination Agreements Security Interests in Crops and Livestock Le Chapter 8 xi sN ex is . Sa m pl e Chapter 7 128 129 130 130 130 135 140 140 141 143 on ly Serial number searches — commercial property Restrictions on access to the register Follow-up inquiries Registering A Financing Statement The mechanics of registration Registration errors Registration Amendments General Transfer of collateral Change in grantor’s details and other particulars . Australian Personal Property Securities Law xii Spi-Duggan and Brown - Australian Personal Property Securities Law Ch.FM.indd xii 12/09/2012 02:16:04 pg4865 e pl m Sa is . ex xi sN Le Proceeds Introduction The Pre-PPSA Position The Meaning of Proceeds Introduction Second and subsequent generation proceeds The dealing requirement The grantor’s interest limitation Identifiable or traceable personal property Attachment of Security Interest to Proceeds Introduction C op yr ig ht Chapter 11 193 193 195 197 197 199 203 212 214 217 218 221 221 us Transfers of Collateral Introduction Unperfected Security Interests Perfected Security Interests Serial-numbered collateral Special rules for motor vehicles Sale or lease in the ordinary course of business Low value transactions Interface with other laws Currency Investment instruments and intermediated securities Temporarily perfected security interests Subrogation Creditor Payments, Negotiable Instruments, Chattel Paper, and Negotiable Documents of Title Creditor payments Negotiable instruments Chattel paper Negotiable documents of title Returned and Repossessed Goods Introduction Returned goods – reattachment of security interest Returned collateral – accounts and chattel paper Priority of security interests in returned goods e Chapter 10 181 182 183 185 186 186 188 189 191 on ly Introduction The meaning of ‘accession’ The priority rules Removal of accession Processed Or Commingled Goods Introduction Continuation and perfection of security interest Priority between competing claims to end product Crop Security Interests . Detailed Contents 222 222 223 224 228 229 229 229 231 232 235 235 235 237 237 238 238 239 240 245 245 xiii Spi-Duggan and Brown - Australian Personal Property Securities Law Ch.FM.indd xiii 12/09/2012 02:16:04 pg4865 Enforcement of Security Interests Introduction Scope of PPSA Chapter 4 Deemed security interests Goods located outside Australia Investment instruments and intermediated securities Consumer transactions Contracting out Receivers Security interests in personal property and land General Rules Commercially reasonable manner Limitation on secured party’s rights Non-merger Cumulative rights and remedies Default Notice requirements Notice Before Enforcement Seizure of Collateral Introduction Methods permitted by law Apparent possession Higher as is and lower-ranking secured parties Disposal of Collateral Timing of disposal Notice before disposal Methods of disposal Statement of account following disposal Purchaser’s title Distribution of collateral disposal proceeds Redemption and reinstatement Retaining Collateral The consequences of the remedy Objections and related matters Collection Rights Introduction 255 255 257 257 259 259 259 261 262 263 264 264 265 266 267 267 267 268 268 268 268 269 270 271 271 271 273 275 276 276 278 279 280 280 281 281 us e on ly 246 248 249 249 250 251 C op yr ig ht Le xi sN ex is . Sa m pl e Chapter 12 The secured party’s cumulative entitlements Proprietary and personal claims Perfection and Priorities Introduction Other methods of perfection Priorities . Australian Personal Property Securities Law xiv Spi-Duggan and Brown - Australian Personal Property Securities Law Ch.FM.indd xiv 12/09/2012 02:16:04 pg4865 281 282 282 283 285 285 Chapter 13 Insolvency Law and the PPSA Introduction Insolvency and The Effect of Non-Perfection Introduction The PPSA Provisions The Corporations Act provisions Consequential Amendments to Corporations Act Introduction Circulating security interests PPSA retention of title property Possessory security interests Personal Insolvency 289 289 290 290 290 294 296 296 297 300 302 303 Chapter 14 Conflict of Laws Introduction The Territorial Reach of The PPSA The Scope of PPSA Part 7.2 Security Interest in Goods The main rules Relocation of goods The destination of goods rule The mobile goods rule Security interests in ships Security Interests in Intangible Property The main rules Intellectual property ADI accounts Relocation of grantor Priority of security interest if no foreign register Security Interests in Financial Property and Letter of Credit Rights Introduction Validity rules Perfection rules Proceeds Enforcement of Security Interests 305 305 306 307 310 310 312 313 315 317 317 317 318 319 320 321 322 322 323 325 325 327 C op yr ig ht Le xi sN ex is . Sa m pl e us e on ly Notice requirements Notification and non-notification transactions Recourse and non-recourse arrangements The account debtor’s rights Crops and Livestock Corporations Act 2001 (Cth) Part 5.2 . Detailed Contents xv Spi-Duggan and Brown - Australian Personal Property Securities Law Ch.FM.indd xv 12/09/2012 02:16:04 pg4865 329 329 331 331 331 331 332 332 333 333 334 335 335 336 337 338 338 338 338 339 340 343 343 343 International Developments Introduction International Initiatives ERBD Model Law on Secured Transactions UNCITRAL legislative guide on secured transactions UNIDROIT cape town convention on international interests in mobile equipment 351 351 351 351 352 on ly Transitional Matters Introduction Initial Application of Act Registration Commencement Time Registration Fixed and floating charges Transitional Provisions Introduction Transitional security agreement Transitional security interest Enforceability Attachment Perfection Perfection by possession Enforcement of transitional security interests Migrated Security Interests Introduction Migration time Transitional registers Perfection Errors and deficiencies in migrated data Priorities Introduction Transitional vs non-transitional security interests Perfected transitional vs perfected non-transitional security interests Unperfected transitional vs unperfected non-transitional security interests Perfected security interest vs unperfected transitional security interest Disputes between competing perfected, or competing unperfected, transitional security interests Purchase money security interests Control Insolvency Transfers of Collateral Temporary perfection Serial-numbered goods yr ig ht Le xi sN ex is . Sa m pl e us e Chapter 15 . Australian Personal Property Securities Law C op Chapter 16 344 344 345 345 346 347 348 349 349 349 354 xvi Spi-Duggan and Brown - Australian Personal Property Securities Law Ch.FM.indd xvi 12/09/2012 02:16:04 pg4865 UN convention on the assignment of receivables in international trade UNIDROIT convention on intermediated securities Recent National Initiatives Pacific Islands Vietnam Jersey United Kingdom on ly e Conclusion 361 us Chapter 17 356 357 358 358 358 359 359 . Detailed Contents 365 C op yr ig ht Le xi sN ex is . Sa m pl e Index xvii Spi-Duggan and Brown - Australian Personal Property Securities Law Ch.FM.indd xvii 12/09/2012 02:16:04 pg4865 . on ly e us e pl m Sa is . ex xi sN Le ht ig yr op C Spi-Duggan and Brown - Australian Personal Property Securities Law Ch.FM.indd xviii 12/09/2012 02:16:04 pg4865
