- 18.1 What is priority?
- 18.2 Priority rules under the PPSA
- 18.3 Priority waterfall - summary
- 18.4 First: payments to creditors - section 69
- 18.5 Second: general law liens and statutory liens and charges arising in the ordinary course of business - section 73
- 18.6 Third, takers of interests in negotiable instruments, chattel paper and negotiable documents of title – sections 70, 71 and 72
- 18.7 Fourth: control - section 57
- 18.8 Fifth – accounts – security interests over (future) accounts generated from sales of inventory, as original collateral and granted for new value – section 64
- 18.9 Sixth: “strong PMSIs” – section 63
- 18.10 Seventh: “normal” PMSIs – section 62
- 18.11 Eighth: perfected v’s perfected – earliest priority time wins – section 55(4)
- 18.12 Ninth: execution creditors may defeat unperfected security interests – section 74
- 18.13 Tenth: perfected v’s unperfected – perfected wins – section 55(3)
- 18.14 Eleventh: unperfected v’s unperfected – the first to attach wins outside of the grantor’s bankruptcy, administration or liquidation – section 55(2)
- 18.15 Priority waterfall diagram
- 18.16 Transfers of collateral
- 18.17 Security interests over ADI accounts
- 18.18 Tacking of further advances is permitted
- 18.19 Transitional security intersts – priority disputes
- 18.20 Knowledge and its diminished relevance to priority disputes
- 18.21 Accession, processing and commingling priority rules
- 18.22 Prioirity of security interests in agricultural interests
Upon the grantor entering into bankruptcy, administration or liquidation, most unperfected security interests “vest in the grantor”, which means that they become invalid. Where unperfected security interests vest in the grantor, there is unlikely to be priority competitions between two unperfected security interests because most unperfected security interests would then be invalid (they would have vested in the grantor’s estate).
There are exceptions – many of the “deemed” security interests (transfers of accounts, commercial consignments and PPS Leases) do not vest even if unperfected, provided they do not secure obligations. Likewise, unperfected turnover trusts do not vest in the grantor upon the grantor’s bankruptcy, administration or liquidation. See generally paragraphs 17.2.5 to 17.2.12 of Chapter 17 (Perfection) for discussion.
Notes:
1 PPSA section 55(2)
