- 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
A buyer or lessee of property for new value who intends (at the time of acquisition) to use the property mainly for personal, domestic or household purposes, takes free of security interests if the market value is $5,000 or less1, unless2
(a) the consumer property in question is serial numbered property. The rule does not protect a buyer/lessee of serial-numbered consumer property.
Motor vehicles have their own extinguishment rules (paragraphs 21.5.1 to 21.7.8). Practically that leaves watercraft since few aircraft cost less than $5,000! This rule offers no protection to buyers of small watercraft valued below $5,000, but realistically few watercraft are priced below $5,000; or
(b) the buyer or lessee has actual or constructive knowledge that the sale or lease would breach the terms of a security agreement granted by the seller/lessor which prohibits the sale or lease.
It is unclear but presumably this extinguishment rule applies only to individuals, given that the property in question must be purchased for personal, domestic or household purposes.
The low value ($5,000) consumer property (except serial numbered property) extinguishment rule will be useful in some circumstances because it extinguishes all (including past or historical) security interests, not just those granted by the immediate seller or lessor.
