Assignment of contractual position

(both the benefit of rights and the burden of performing obligations) - novations

Novations of contracts are unlikely to be security interests.

Assignment of annuity or insurance contract

Note that assignments of insurance contracts as compensation for damage to collateral can be security interests – PPSA section 8(1)(f)(v).

Assignment of account to someone who will collect it

Assignment of account or negotiable instrument to satisfy existing indebtedness

Assignment of account or chattel paper with sale of business, unless seller remains in apparent control of the business after sale

Assignment of interest in fixture

Combination of bank accounts –

right arising under agreement or at general law

Leases of land

Leases of land are (often) registrable under the Torrens land registration systems. A rule of thumb is – if the interest is Torrens-registrable, then it probably is excluded from the PPSA (to avoid overlap).

Leases of land –

security interests over leases

Security interests over leases of land are not PPSA security interests.

Licences -

contractual (excluding statutory licences)

No – section 12(5)(a)

Contractual licences themselves are not security interests, but will be personal property. Security granted over a contractual licence can be a security interest.

State and Commonwealth legislation has excluded many statutory rights and licences from being personal property, which excludes security interests over them from regulation under the PPSA.

Liens and charges arising by operation of general law or under statute

No – PPSA section 8(1)(b) and (c)

General law liens, and statutory liens and charges, are excluded from being security interests because they arise by operation of law and not by consensual agreement.

Despite these liens and statutory charges not being security interests, section 73 of the PPSA can regulate their priority as against PPSA security interests, unless the lien/statutory charge in question is excluded from priority regulation under the PPSA. See the list of statutory liens and charges the priority of which has been excluded from regulation under section 73 of the PPSA at paragraph 18.5.8 of Chapter 18 (Priority).

Mortgage-backed securities transactions -

re-transfers of accounts or chattel paper from a securitisation purchaser vehicle to the seller (due to, for example, a breach of warranty)

No - section 12(5)(b) and PPS Regulation 1.8

The PPSA describes this as “extinguishment of a beneficial interest” in an account or chattel paper.

It is common for transfers of mortgages or receivables into securitisations to be subject to “eligibility criteria” in the form of representations about the quality of these assets. If assets later fail the eligibility criteria, then they must be re-transferred back to the seller (usually the bank which originated the mortgage loans being transferred into the securitisation).

If the transfer to the securitisation programme buyer vehicle was by way of a declaration of trust, then any re-transfer (for breach of eligibility criteria) will essentially be an extinguishment of a beneficial interest, which will not be a security interest.

The PPSA appears to assume that securitisation structures will always involve the transfer of mortgages or receivables to the buyer vehicle by way of trust. This may not necessarily be the case.

Netting arrangements under the Payment Systems and Netting Act 1998 (Cth)–

approved netting, market netting and close-out netting contracts

No – PPSA section 8(1)(e)

Pawnbroker security interests:

(A) to licensed pawnbrokers

(B) in the pawnbroker’s ordinary course of business

(C) the value of the advance and collateral is $5000 or less, and

(D) where the collateral is not serial numbered property

No – PPSA section 8(1)(ja) and 8(6)

Set-off agreements or rights

No – PPSA section 8(1)(d)

Note that the PPSA rules on how to perfect an assignment of accounts, and when prior equities such as rights of set-off of the account debtor accrued against the seller stop running against the buyer of an account, apply to set-off rights in this context. This is so even though the PPSA does not regulate set- off rights as security interests – section 8(2), Item 2 in the table, and section 80.

See Chapter 25 (Transfers of accounts and invoice finance (factoring)) for discussion.

Subordination arrangements by contract in respect of either debt or security

Superannuation interests –

security interests over

“Trust back” of monetary obligation –

assignment of a monetary obligation to (for example) party A, where party A then holds it on trust back for the assignor

Water –

rights to the control, use or flow of water – security interests over