Chapter 21
The Extinguishment Rules
- 21.1 The Extinguishment Rules – Introduction
- 21.2 Table Summarising the Extinguishment Rules by Class of Collateral
- 21.3 The Extinguishment Rules - Commentary
- 21.4 Buyer or lessee of personal property subject to unperfected security interests – section 43
- 21.5 Sales or leases of serial-numbered property – motor vehicles, watercraft, aircraft/engines and intellectual property (patents, trade marks, designs and plant breeder’s rights) – section 44
- 21.6 Private sales or leases of motor vehicles – sections 45(1) - (2)
- 21.7 Buying motor vehicles from licensed dealers – sections 45(3) - (4)
- 21.8 Buying or leasing from a seller/lessor in the ordinary course of business – section 46
- 21.9 Low value (below $5,000) consumer property (except serial numbered property) – section 47
- 21.10 Currency – section 48
- 21.11 Prescribed financial markets – investment instruments and intermediated securities – section 49
- 21.12 Investment instruments – section 50
- 21.13 Intermediated securities – section 51
- 21.14 Temporarily perfected security interests – section 52
- 21.15 Returned goods following sale or lease
- 21.16 Subrogation by extinguished secured parties to rights in relation to collateral sold or leased
21.4 Buyer or lessee of personal property subject to unperfected security interests – section 43
Buyers or lessees of collateral for value will defeat unperfected security interests attached to the collateral bought or leased, whether the security interests are granted by the seller or lessor themselves, or by another1.
Knowledge is irrelevant to this extinguishment rule. Even a buyer or lessee who knows about an unperfected security interest can give value and buy or take a lease of collateral subject to that unperfected security interest and extinguish the security interest.
This extinguishment rule shows the importance of promptly perfecting security interests. Otherwise, secured parties are at significant risk of having their unperfected security interests extinguished by a mere sale or lease for value
Notes:
1 PPSA section 43 (link)
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