Critical Analysis of the Personal Property Security Act 2009 (PPSA)

This essay provides a comprehensive overview of the Personal Property Security Act 2009 (PPSA), a nationwide act in Australia governing personal property and security interests. It contrasts the pre-PPSA era, characterized by creditor hostage rights and unlawful property transfers, with the current framework established by the PPSA. The essay details key concepts such as personal property, security interests, attachment, and collateral, explaining how the PPSA regulates the creation and registration of security interests. It highlights the increased transparency in business transactions due to the PPSA and discusses the Hamersley v Forge case to illustrate the act's implications on liquidation and set-off rights. The essay concludes that the PPSA has modernized and clarified property law, replacing outdated rules and promoting transparent transactions. Desklib offers a variety of resources including past papers and solved assignments for students.

ESSAY

Table of Contents
THE PERSONAL PROPERTY SECURITY ACT 2009................................................................3
Introduction..................................................................................................................................3
Pre-PPSA.....................................................................................................................................3
Implication of PPSA....................................................................................................................3
Conclusion...................................................................................................................................7
REFERENCES................................................................................................................................8

THE PERSONAL PROPERTY SECURITY ACT 2009
Introduction
PPSA act 2009 is one of the major act in association with personal property and security
interest in the context of personal property. It is a nation-wide act that is applicable to the entire
nation and Australia. It is applicable with respect to every type of property and transactions that
is related with the securing of payment or performance of obligations, the PPSA act will be
applicable.
Pre-PPSA
Before the introduction of PPSA, i.e. during the period of pre- PPSA there was a rule that
creditors have right of hostage in case of performance of default by debtor with respect to
agreement. It leads to creates many issues as to lose the property interest or make transfer of
property without the existence of legal rights and laws. This means that if any default in terms of
making non-payment of the amount with regard to the taken loan is being performed by the
debtor then it lead to result in hostage of property and as a result debtor will not secured any
further right with the property.
Likewise, it may also sometime also lead to performance of unlawful transfer when
actually the debtor is not in the position of holding an interest in the property. This result in
persistence of defaults and unlawful transfers. The same aspect also observed in the case of C&F
Nominees Mortgage Securities Ltd V Karbotli & Ors [2020] under which with the persistence of
mistakes with respect to mortgage the loss of property and occurrence of fraud occurs1.
Earlier there was an existence of trust receipt, pledge, transfer of title, assignment,
consignment, lease and various other mode. Through these modes the acts of property transfer
and related transactions were performed. Because before the introduction of PPSA transactions
with regard to property was performed through the mode of Australian Pledge agreement,
Leasing property act, transfer of Land act 1958 and various other.
Earlier it was a rule of thumb that the creditor will take hostage or right against the
personal property in case of any default is being made with respect to debtor in the context of
1 A mortgagee is required to take reasonable steps to verify the identity of a mortgagor (2020) <
https://lplc.com.au/resources/lij-article/establishing-identity>

pledge. This was being existed because there was a lack of adequate laws and regulations in
earlier time that could govern the aspect of property transfer or the rights and duties of the
respected parties.
Implication of PPSA
In accordance with the PPSA 2009, which is a nation-wide applicable act many new
regulations and rules with regard to the property come into effect 2.
Personal property:
It refers to any tangible or intangible property other than land or any other right, license,
entitlement, authority which was declared by law as not to be treated as personal property3. This
means if mortgage is being given on real property then PPSA will not apply.
Hostage:
It is an agreement through which bank, building society lend money with the exchange
for taking the title of the debtor’s property, with the inclusion of condition that the conveyance of
the title will be void on the payment of debt.
Security interest:
As per Personal property security act 2009, security interest is an interest in respect to
personal property which is being provided by transaction that will secure payment or
performance of obligation4.
This means now it is not necessary that to own a property in order to acquire interest
towards it i.e. leasing or in-process of acquiring title will also amount of security interest5. This
means that the old rule with respect to pledge or lease and others are being now replaced with the
provisions and security interest concept of the PPSA act.
2
Loxton, Diccon, Sheelagh McCracken, and Andrew Boxall. "PPSA models: A minimalist approach."
(2018) Commercial Law Quarterly: The Journal of the Commercial Law Association of Australia 32.1 :
3-31.
3 Rasheed, Ayesha. "'Personal'Property: Fourth Amendment Protection for Genetic Information." (2021)
23(3) University of Pennsylvania Journal of Constitutional Law 547.
4 PERSONAL PROPERTY SECURITIES ACT 2009: OVERVIEW AND IMPLICATIONS FOR
COMMODITIES TRADING (2021) <https://www.hfw.com/Personal-Property-Securities-Act-2009>
5 Armit, Paul. "Legal update: Enforcement of security interests by insiders." (2019) 31(4) Australian
Restructuring Insolvency & Turnaround Association Journal 32-35.

This act regulates the creation and registration of security interest with respect to personal
property within respective jurisdiction. As per this act a single national regime that will help in
the regulation of security interest with regard to personal property is established6. This means
that the property and its respective interest is not need to be registered in any other law because
with the introduction of PPSA act every property and its concern interest is implied with the
rules and regulations of PPSA.
With the implementation of PPSA the aspect with respect to security interest and hostage
was completely changed. This means that as per PPSA, security interest is effective only when
these conditions will be meet:
 It will be effective, when it will be attached to collateral. And it will be attached to
collateral if the grantor has right in collateral7. This means it is mandatory that the grantor
must hold the right in collateral or it can also be applicable if grantor make transferred it
to secured party.
 Likewise, security interest will be enforceable against the third party in case if it is
attached the collateral and secured party possess the collateral8. In addition, of this it is
also mandatory that the collateral will be perfected by making a control over the
collateral or an agreement is being entered under which collateral is described.
 Moreover, this act also describe the perfected interest and make it continuously perfected.
Also, perfected interest will always kept on priority over the un-perfected interest.
 Perfection will only occur when security interest is attached to collateral or any steps that
is needed to make the security interest effective against third party have been taken9.
Thus, with the implication of these regulations of the PPSA the old rule of thumb with
regard to the security interest in the personal property is being changed and evacuated. Likewise,
it can be right to said that PPSA act and its scope is very wide. This is applicable towards goods,
securities, money, document of title, intangible, securities, chattel papers and instruments.
Concept of attachment, collateral:
6 Personal Property Securities Act 2009 (2021) <https://www.legislation.gov.au/Details/C2014C00273>
7 Personal Property Securities Act 2009 (2021) <https://www.legislation.gov.au/Details/C2014C00273>
8 McCracken, Cheelagh, and Greg Tolhurst. "Shifting Roles in Dealings with Artwork as Collateral: An
Australian Perspective." (2017) Art Antiquity & L. 22 : 221.
9 Sheehan, Duncan. (2017)The principles of personal property law. Bloomsbury Publishing.

Along with the new concept of security interest, various other concepts including
attachment, collateral and various other come into existence10.
In short, it would also right to state that in order to create security there must be an
existence of attachment which need to be followed up by perfection. Here, attachment will occur
when value is being given, a right of debtor exist in the collateral a when it will be enforceable
against the third party. Likewise, perfection will occur if there is a possession which can either
be attained either by collateral or by registration11. In certain cases possession can be treated as
higher form of perfection. Similarly, it is also to be noted that before the existence of PPSA act
there were various registers including aircraft register and ship register. And in case if someone
granted fixed or floating charge over someone's assets, then registration need to be made in all
the register. But with the implementation of the PPSA act, registration become easy and all the
personal property and charge need to be registered only in PPSA.
PPSA raised business transparency:
With the introduction of PPSA act, transparency with regard to business i.e. consumer
and business become easy. This is because search with respect to PPSR with regard to any
property would be easy with the opening of just one register and getting details about the
registered securities interest12.
Thus, with the introduction of the PPSA act drawbacks of the previous rule of thumb was
overcomes and enabled a transparent and free transfer. With this act not only the transparency
but the legal aspects with respect to secured interest has also improvised.
Also with the execution of PPSA act, the register details of every interest will be easily
disclosed and fraud would be able to take place13. This is a clear explanation wherein old rule
and fraud will be captured and replaced with the PPSA act.
Hamersley v Forge case:
10 L Widdup, “The PPSA and the General Law: How Do They Work Together?” (2019) 46(4) Brief 30
11 PERSONAL PROPERTY SECURITIES ACT 2009: OVERVIEW AND IMPLICATIONS FOR
COMMODITIES TRADING (2021) <https://www.hfw.com/Personal-Property-Securities-Act-
2009#:~:text=The%20Personal%20Property%20Securities%20Act,'%20in%20'personal%20property'.>
12 Cuming, Ronald CC, et al. "Proposals for Changes to the Canadian Personal Property Security
Acts." (2017) 59 Can. Bus. LJ 145.
13 Castellano, Giuliano G., and Marek Dubovec. "Credit Creation: Reconciling Legal and Regulatory
Incentives." (2018) Law & Contemp. Probs. 81 : 63.

This case is related with the aspect of liquidation and set off rights. As per this case an
agreement with respect to Hamersely Iron Pty Ltd and Forge Group Power Pty Ltd was come
into effect. With regard to this case, Hamersely contracted Forge Group for engineering,
procurement service14.
Forge entered under General Security Agreement (GSA) with the ANZ fiduciary Services
which is a secured creditor15. Later Forge moved into liquidation and here Hamersely raise a
charge against the Forge for the unpaid payment and non-performed work. Over this the case is
being filed in the court with regard to determination of results. Various judgement are being held
in respect with the case and it was found that when Hamersely made an argument with the Forge
Group, it created a floating rate of charge which needed to be crystallize before it may give right
to legal proprietary interest. Later court made rejected this argument and said that the concept of
fixed and floating charge is no longer relevant with the PPSA act. Other than this a security
interest is granted under the PPSA act which operate in the direction of destroying mutuality
between the contracting party16.
However, with the implication of PPSA act the security interest in the context of property
was clarified. It would also be right to said that the concept of mortgage, pledge and various
other was replaced with the aspect of secured interest. And now the persistence and performance
of transaction was become an easy and transparent affair.
In the same way it can also be noted that the PPSA act is not only applicable to certain
states or territories but it is equally applicable with respect to every physical property and
secured interest in the context of entire nation or Australia. And all the transaction with respect
to secured interest and property is covered under this act.
14 Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd (2017) 52 WAR 90, [342]; [2017] WASC 152.
15 Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd (2018) 53 WAR 325; [2018] WASCA 163.
16 Hamersley v Forge: the limitations of set-off rights in a liquidation scenario (June 2017)
<https://www.kwm.com/en/au/knowledge/insights/hamersley-forge-limitations-set-off-rights-liquidation-
scenario-20170627#:~:text=The%20Hamersley%20v%20Forge%20case,have%20had%20against%20the
%20transferor.>

Conclusion
Thus, from the above discussion it would be right to conclude that PPSA has replaced the
old rule of thumb and make more clarity with respect to personal property and secured interest.
Likewise, it was also noted that with the introduction of PPSA the aspects and concepts of
mortgage, pledge or various other got a new transformation and now they got replaced with the
aspect of secured interest towards the personal property.

REFERENCES
Books and journals
Armit, Paul. "Legal update: Enforcement of security interests by insiders." (2019) 31(4)
Australian Restructuring Insolvency & Turnaround Association Journal 32-35.
Castellano, Giuliano G., and Marek Dubovec. "Credit Creation: Reconciling Legal and
Regulatory Incentives." (2018) Law & Contemp. Probs. 81 : 63.
Cuming, Ronald CC, et al. "Proposals for Changes to the Canadian Personal Property Security
Acts." (2017) 59 Can. Bus. LJ 145.
Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd (2017) 52 WAR 90, [342]; [2017] WASC
152.
Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd (2018) 53 WAR 325; [2018] WASCA
163.
L Widdup, “The PPSA and the General Law: How Do They Work Together?” (2019) 46(4) Brief
30
Loxton, Diccon, Sheelagh McCracken, and Andrew Boxall. "PPSA models: A minimalist
approach." (2018) Commercial Law Quarterly: The Journal of the Commercial Law
Association of Australia 32.1 : 3-31.
McCracken, Cheelagh, and Greg Tolhurst. "Shifting Roles in Dealings with Artwork as
Collateral: An Australian Perspective." (2017) Art Antiquity & L. 22 : 221.
Rasheed, Ayesha. "'Personal'Property: Fourth Amendment Protection for Genetic Information."
(2021) 23(3) University of Pennsylvania Journal of Constitutional Law 547.
Sheehan, Duncan. (2017)The principles of personal property law. Bloomsbury Publishing.
Online references
Hamersley v Forge: the limitations of set-off rights in a liquidation scenario (June 2017)
<https://www.kwm.com/en/au/knowledge/insights/hamersley-forge-limitations-set-off-
rights-liquidation-scenario-20170627#:~:text=The%20Hamersley%20v%20Forge
%20case,have%20had%20against%20the%20transferor.>
Personal Property Securities Act 2009 (2021)
<https://www.legislation.gov.au/Details/C2014C00273>
PERSONAL PROPERTY SECURITIES ACT 2009: OVERVIEW AND IMPLICATIONS FOR
COMMODITIES TRADING (2021) <https://www.hfw.com/Personal-Property-
Securities-Act-2009#:~:text=The%20Personal%20Property%20Securities
%20Act,'%20in%20'personal%20property'.>

PERSONAL PROPERTY SECURITIES ACT 2009: OVERVIEW AND IMPLICATIONS FOR
COMMODITIES TRADING (2021) <https://www.hfw.com/Personal-Property-
Securities-Act-2009>
A mortgagee is required to take reasonable steps to verify the identity of a mortgagor (2020) <
https://lplc.com.au/resources/lij-article/establishing-identity>