It was revealed last week that IT issues may result in a further delay in the start date of the PPSR. This news comes despite that fact that the start date has already been pushed back on a number of occasions. We will continue to monitor this point and provide you with more information as it comes to hand.
We are commonly asked questions relating to the enforcement of security interests, particularly where various parties have competing interests in the same asset. Similar to interests in land, secured parties will have to meet certain requirements to ensure that they maintain the highest priority.
Priority rules are relevant when the same personal property is subject to two or more security interests. If the debtor defaults, certain rules determine the order of priority in which the various secured parties can enforce their security interests under the PPSA.The priority time for a security interest in collateral is the earliest of the following times to occur in relation to the security interest:
- The registration time of the security interest;
- The time the secured party first perfects the security interest by taking possession or control of the asset;
- The time the security interest is temporarily perfected, or otherwise perfected by force of the Act.
An example of determining priority is as follows:
John Smith grants a security interest in a motor vehicle to West Bank, and later grants a security interest in the same motor vehicle to East Bank. East Bank registers the security interest, while West Bank does not. Consequently, the security interest held by East Bank would have a higher priority than the security interest granted by West Bank, despite John Smith having granted the first security interest to West Bank.
The transitional provisions in the PPSA provide for the migration of data from existing registers to the PPS Register and priority rules for security interests existing prior to the PPSA coming into force. The transitional provisions will be discussed later on in our series.
In Part 4 of our series we will discuss Purchase Money Security Interests, which are commonly referred to as PMSI.
At Atkinson Vinden we understand the importance of your business becoming PPSA compliant. Please contact Special Counsel, Anne Goodrick on (02) 9411 4466 if you would like assistance in this area.