Value under the PPSA means consideration past and present. Value includes consideration sufficient to support a contract, and importantly, can include past debts or liabilities¹. If a secured party has advanced money or extended credit in the past, then that will remain good value for any security interests taken in the future. This is important because under pre-PPSA law, there may not have been good consideration to support the grant of a new security interest for a past (existing) debt or liability, unless other circumstances give rise to consideration to support the security agreement contract.

The issue of whether granting a new security interest to secure an existing debt is a preference or other voidable transaction is a separate issue, and does not change under the PPSA. New PPSA security interests granted for existing debts are good as a matter of contract, but remain on risk of being set aside as preferences or other voidable transactions if no (or inadequate) new value is given².

To ensure that they have provided value and also to prove that value has been provided, secured parties may in some circumstances elect to make their advance of money directly to the source instead of to the debtor³.

For example, in acquisition transactions (often involving PMSIs), a secured party may elect to pay the seller of (for example) a truck being acquired with funds loaned by the secured party instead of advancing to the grantor/debtor and leaving the grantor/debtor to pay the seller of the truck.

If the secured party advances directly to the seller of the truck in the example and keeps a record of the payment, they will be able easily to prove that they have provided new value (see immediately below) to support the attachment of their security interest (PMSI) over the truck.

Value and PMSIs

PMSIs secure money advanced to pay, or credit extended, for all or part of the purchase price of a new asset. Consistent with PMSIs being security interests over newly acquired assets, PMSI cannot be granted for pre-existing debts. To this extent, value for PMSIs means new value⁴. A PMSI secured party must extend new funds or credit to fund the new asset being acquired.

Practically, proof of provision of new value by a PMSI secured party will be important to establish a PMSI security interest. This may further encourage PMSI secured parties to (as above) pay sellers of property being acquired on PMSI finance directly and keep a record of the payment, so they can more easily prove provision of new value⁵.

Confusingly, the PPSA includes a definition of “new value” in section 10, but does not seem to use that for PMSIs.