In competitions between two or more perfected “normal” (non-PMSI, not perfected by control) security interests, the security interest with the earliest priority time wins¹.

A priority time arises from the time of perfection of a security interest. Perfection can be in one of three ways: (A) by registration, (B) temporary perfection by force of the PPSA, which applies, for example, to pre-PPSA (transitional) security interests, or (C) the secured party taking possession or control over the collateral.

Knowledge is generally not relevant to priority disputes between two perfected PPSA security interests. It does not matter that one security interest may have attached first, and the other security interest is perfected first with knowledge of the first attached (but unperfected) security interest.

Security interests perfected by control, and PMSIs, will defeat other perfected security interests regardless of priority time. In that sense priority by priority time is not absolute or indefeasible, but is merely the general rule. Security interests perfected by control will not defeat perfected transitional security interests – section 322A. 

Turning to a priority example by diagram, let us return to diagram 3 (reproduced below). This time both Bank A and Bank B lend to and take security from the debtor/ grantor D. Bank A’s security interest is granted before the commencement of the PPSA, but will be migrated to the PPS Register since it is registered on the ASIC company charges register.

Bank B lends and takes security on 1 July 2012, after the commencement of the PPSA. Bank B must, and does, perfect its all-assets security interest by registration.

After Bank B lends to D and takes security, Bank A makes a further advance to D on 1 August 2012 with actual knowledge of Bank B and its lending and security interests.

In priority contests between the security interests held by Bank A and Bank B, Bank A will win (including in relation to the ADI account because, despite Bank B being the account bank and perfected by control over the ADI account, Bank A holds a transitional security interest over the ADI account) for all advances. Bank A is perfected under the PPSA before Bank B and therefore has an earlier priority time. The principle that prohibits tacking of further advances is abolished by the PPSA². Bank A’s security interest has the same priority for all advances – see paragraph 18.203 and below for further discussion of tacking and the treatment of further advances.