Below is a suggested approach or “framework” to think about PPSA matters. The PPSA is a comprehensive secured transactions system that comprises over 300 pages of text. There is unfortunately no alternative to a “tick boxes” approach, to make sure all the conditions to its application and all its rules have been considered.
This need not be too tiresome. Once we all get the hang of what to look for and become more acquainted with how the PPSA works, many of the boxes can be ticked very quickly, leaving just the more important issues to consider in any particular PPSA matter.
The suggested framework to tackle PPSA problems is to think about the following issues in the following order.
First, to determine whether the PPSA applies to a secured transaction under consideration, ask the four “SPAA” questions:
(a) Security Interest?
(b) Personal property?
(c) Attachment?
(d) Australian connection?
The SPAA questions are threshold questions - if all of the above SPAA questions are not satisfied, then there is unlikely to be an attached security interest for PPSA purposes. The PPSA is unlikely to regulate the transaction. The PPSA has a very broad application but it does not apply to all secured transactions. That is why the four “SPAA” questions should be asked at the outset to determine whether the PPSA applies.
If all of the SPAA questions are answered “yes”, then there is an attached security interest for PPSA purposes, which is at the very least enforceable against the grantor. The “PPSA switch” has been clicked “on” – the PPSA applies to the transaction. The following issues then need to be considered to ascertain the strength and value of that security interest under the PPSA:
(a) Class of collateral?
(b) Enforceable against third parties? This means:
Is the security agreement evident in writing and is the collateral adequately described?; or
Has the secured party take possession or control of the collateral?
(c) Perfection?
(d) Priority?
(e) Following collateral value upon disposals, or collateral value into proceeds?
The acronyms that emerge are “SPAA” for the threshold conditions to PPSA application, and “CEPP-F” to solve PPSA issues. These acronyms may or may not be helpful as a reminder of the suggested steps to go through when thinking about PPSA matters.
