Enforcement of Security Interests under PPSA 2009

• Author: Frazer Andrew Hunt
• Position: Partner, Piper Alderman. This paper was presented at the Federal Court of Australia National Admiralty Seminar in Sydney Australia on 9 November 2010
• Pages: 130-133

ENFORCEMENT OF SECURITY INTERESTS UNDER THE PERSONAL PROPERTY

SECURITIES ACT 2009

Fra zer Hunt∗

General rules

Following default by a debtor, secured parties, taki ng into account priority rules, will seek to enforce their

security interests. Chapter 4 of the Personal Property Securities Act 2009 (Cth) (‘PPSA’) provides general

enforcement rules dealing with seizure, disposal or retention of collateral, and steps to be taken after a security

interest in collateral has been enforced.

At the outset, s 109 of the PPSA identifies security interests to which the e nforcement provisions do not appl y.

In this regard, security interests that are ‘deemed security interests’ for the purposes of the PPSA, but which do

not secure the payment or performance of an obligation, are outside the scope of security interest enforcement

remedies under the PPSA. In addition, a security interest in an investment instrument that has been perfected by

taking possession o r control, or invest ment entitlement by taking control, are outside the scope of the

enforcement provisi ons. This would, for example, allow the secured party to deal with the collateral in the

official market, wit hout having to comply with enforcement p rocedures under the PPSA.

Finally, a number of specific enforcement provisio ns are identified und er s 109(5) of the PPSA as not being

applicable to collateral that is used predominantly for personal, domestic or household purposes. The distinction

between a security interest over collateral used for consumer purposes, as opposed to other purposes, is

important under the enforcement provisions. For example, contracting out of enforcement provisions will be

significantly curtailed where collateral is used predominantly for consumer purposes, ensuring that consumers

have full protection of enforcement provisions. Note the distinction between ‘consumer property’ as defined in s

10 PPSA1 and goods used for consumer purposes under the enforcement provisions.2

Where collateral is used for consumer purposes, the PPSA and the National Credit Code will operate

concurrently, and, accordingly, a secured party may well need to comply with requirements under both the

PPSA and the National Credit Code.

Whether the National Credit Code will apply depends on the dominant purpose of the credit. In contrast, the

PPSA is concerned with whether a security interest is attached to collateral that is used predominantly for

consumer purposes. Accordingly, there will be overlap when both the credit is provided for consumer purposes,

and is secured against collateral intended for consumer purposes. To assist in resolving the overlap problem

when the National Credit Code and the PPSA both apply and contain similar obligations, the PPS Regulations

may provide that a secured party who has complied with the relevant provision of the Code would be deemed to

have complied with corresponding obligations in the PPSA (see s 119(2)).

In addition, in the context of consumer/non-consumer purposes, the PPSA provides that where collateral is not

used for consumer purposes, the parties to the security agreement may contract out of specified enforcement

provisions listed in s 115 PPSA.

Example :

A bank provides a loan to a grantor to finance the purchase of business assets secured against

his luxury yacht. The grantor uses the yac ht for personal use 90 per cent of the time and

charters the yacht for b usiness functions for 1 0 per cent of the time. The grantor d efaults on

the loan and the bank initiates enforcement action. As a result of the grantor's use of the

yacht predominantly for personal, household or domestic purposes, the bank is unable to

vary or contract out of most of the enforcement provisions, regardless of the fact that the

∗ Partner, Piper Alderman. This paper was presented at the Federal Court of Australia National Admiralty Seminar in Sydney Australia on 9

November 2010.

1 Personal Property Secu rities Act 2009 (Cth) s 10 (definition of ‘consumer property’ means personal property held by an individual, other

than personal property held in the course or furtherance, to any degree, of carrying on an enterprise to which an ABN has been allocated).

2 Personal Property Securities Act 2009 (Cth) s 109(5) indentifies several provisions that do not apply in relat ion to collateral used by a

grantor predominantly for ‘personal, domestic or household purposes’.

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