LAWS3306 Midterm: Notes
LAWS3306 - Finance Law:
Topic One – Personal Property Securities:
PPSA: Applies to security interests in collateral that is personal property. The PPSA
applies where there is a ‘’collection with Australia” (s6 – a critical threshold). The
sufficiency of a connection for the purposes of the PPSA depends on the location of
personal property over which the security interest is taken or whether the grantor of
that interest is an Australian entity.
Grantor: a person who has the interest in the personal property to which a security
interest is attached. Example: a lessee under certain types of leases and a transferor
of certain types of debts.
Collateral: The property to which a security interest is attached.
Security interest [s12(1)]: A security interest means an interest in personal property
provided for by a transaction that, in substance, secures payment or performance of
an obligation. Also referred to as in-substance security interest.
Deemed security interests [s12(3)]: Interests in property that may or may not secure
payment or performance of an obligation. The following arrangements are deemed
security interests:
• Interest of a transferee under a transfer of account (e.g. transfer of accounts
receivable) or chattel paper (e.g. transfer of a hire purchase agreement)
• Interest of a consignor who delivers goods to a consignee under a commercial
consignment
• Interest of a lessor or bailor of goods under a PPS lease
Personal property (s10): Property other than land or rights expressly declared by
statute not to be personal property for the purposes of the Act.
Categories of personal property (s10):
• Goods (cars, machinery, crops, livestock)
• Financial property (currency, documents of title, negotiable instruments like
cheques, investment instruments like shares)
• Intermediated security (uncertificated shares)
• Intangible property (intellectual property like patents)
Meaning of ‘an interest in personal property’: Interest, as per s10, is a right in the
personal property. S12(2) offers examples of transactions providing for an interest in
personal property.
Meaning of ‘a transaction that secures payment or performance’: ss12(2) – (3)
offers examples of transactions which potentially give rise to security interest. Such
transactions include:
• A mortgage
• A charge
• A pledge
• A conditional sale agreement
• A hire purchase agreement
• An assignment
• A lease
• A commercial consignment
• A transfer of an account or chattel paper
The term indicates that the agreement must be consensual and implies the existence
of a valid agreement.
White v Spiers Earthworks Pty Ltd: WA Supreme Court held that an equipment hire
arrangement was a security interest, as it was a transaction which in substance
secured payment or performance of an obligation:
PPS lease (s13): Includes a lease of bailment for more than two years. But a PPS
lease does not include;
• A lease where the lessor is not regularly engaged in the business of leasing of
goods, or
• A bailment by a bailor who is not regularly engaged in the business of bailing
goods or where the Bailee has not given value
Bredenkamp v Gas Sensing Technology Corp, Re Welldog Pty Ltd: A bailment comes
into existence upon a delivery of goods of one person, the bailor, into the possession
of another person, the Bailee, upon a promise, express or implied that they will be re-
delivered to the bailor or dealt with in a stipulated way.”
Forge Group Power Pty Limited (in liquidation) (receivers and managers appointed) v
General Electric International Inc [2016] NSWSC 52: ‘‘regularly engaged in the
business of leasing goods’ – more than just entry into leases; frequency or
repetitiveness is a relevant factor; not abnormal in the context of the lessor’s business;
regardless of where the person's activity
Re Arcabi Pty Ltd (Receivers and Managers Appointed (in liq) [2014] WASC 310: The
Court held that rare coins and notes owned by investors under bailment and
consignment arrangements with Arcabi did not amount to security interests as the
bailors (i.e., the investors) were not ‘regularly engaged in the business of bailing
goods’.
Purchase money security interest (PMSI): As per s14(1); A purchase security
means any of the following
(a) A security interest taken in collateral, to the extent that it secures all or part of
its purchase price;
(b) A security interest taken in collateral by a person who gives value for the
purpose of enabling the grantor to acquire rights in collateral, to the extent that
the value is applied to acquire those rights;
(c) The interest of a lessor or bailor of goods under a PPS lease;
(d) The interest of a consignor who delivers goods to a consignee under a
commercial consignment
Attachment of security interest: Under s19(1) a security interest is made
enforceable against the grantor ‘only if the security interest has attached to the
collateral.’ A security interest is said to ‘attach to collateral’ on the satisfaction of two
Document Summary
Ppsa: applies to security interests in collateral that is personal property. The ppsa applies where there is a "collection with australia (s6 a critical threshold). The sufficiency of a connection for the purposes of the ppsa depends on the location of personal property over which the security interest is taken or whether the grantor of that interest is an australian entity. Grantor: a person who has the interest in the personal property to which a security interest is attached. Example: a lessee under certain types of leases and a transferor of certain types of debts. Collateral: the property to which a security interest is attached. Security interest [s12(1)]: a security interest means an interest in personal property provided for by a transaction that, in substance, secures payment or performance of an obligation. Deemed security interests [s12(3)]: interests in property that may or may not secure payment or performance of an obligation.
