When ownership is not enough: Gaining and losing proprietary rights under the Personal Property Securities Act
5 August 2014
The following article appears in Vol 11 (2014), Issue 4 of International Corporate Rescue.
A fundamental common law concept is the rule that you cannot give a greater title than what you have. But if you are transacting in a jurisdiction that embraces personal property security legislation, such as the United States, Canada, New Zealand or Australia, a proprietary right of ownership may not be enough of a basis for you to stake a claim on your asset.
Since its induction into Australian law, the PersonalProperty Securities Act 2009 (Cth) (PPSA) has courted controversy by disregarding traditional notions of ownership in favour of a system that revolves around the recognition of security interests created in personal property. In a dispute between competing security interests, what is relevant is not who has a true claim to ownership of the personal property, but which security interest is entitled to greater priority. The PPSA assigns priority by a regime which focuses on the ‘perfection’ of a security interest, most commonly by registration on a central search register, the Personal Property Securities Register (PPSR). Until a security interest is perfected, it is vulnerable as a third party may be granted a security interest by the person in possession of the collateral, and that security interest may have a higher priority than the security interest of the owner. If the appropriate mechanisms are not in place to preserve and protect the security interest, the lessor’s right to deal with or recover its leased asset may be lost.
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About McCullough Robertson
McCullough Robertson is a leading Australian independent law firm with industry specialists combining legal expertise with deep industry knowledge and foresight. The firm provides innovative, relevant and commercial legal solutions to major corporate, government and high net worth individuals across Australia and internationally. Established in 1926 the firm’s major focus areas are the resources (mining and energy), food and agribusiness, technology, telecommunications, health and life sciences (pharmaceuticals), real estate and financial services sectors.
This article covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.