- 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
Another way to represent the priority order in which security interests rank under the PPSA as discussed in the preceding priority waterfall is through the following priority waterfall diagram.
The priority waterfall diagram is not a conclusive statement of the priority that will apply to all security interests in every situation. Rather, it is an indicative summary of the priority hierarchy that applies to certain interests and security interests under the PPSA. Specific and careful consideration needs to be given to each particular priority dispute.
| Priority | PPSA | Note |
|
Creditors |
section 69 |
creditors receiving payment of debts by transfer or debit order from ADI accounts, or by negotiable instrument |
|
Liens |
section 73 |
liens for amounts owing from provision of goods or services in the ordinary course of business |
|
Chattel Paper, Instrument & Documents |
sections 70, 71 & 72 |
interests in chattel paper, negotiable instruments and negotiable documents of title |
|
Control |
section 57 |
security interests perfected by control over certain "financial collateral" |
|
Accounts |
section 64 |
security interests over future accounts generated |
|
Strong PMSIs |
section 63 |
perfected PMSIs of sellers, lessors and commercial consignors if they comply with the "PMSI Rules" |
|
PMSIs |
section 62 |
other PMSIs if they comply with the "PMSI Rules" |
|
Priority Time |
section 55(4) & 55(5) |
in priority contests between two "normal" (non-PMSI, not perfected by control) perfected security interests, first to perfect |
|
Perfected defeats Unperfected |
section 55(3) |
in priority contests between a perfected and an unperfected security interest, the perfected security interest wins |
|
Execution Creditors |
section 74 |
execution creditors defeat unperfected security interests if they seize collateral or obtain court orders to enforce against personal property before security interests are perfected |
|
Time of Attachment |
section 55(2) |
in priority contests between two unperfected security interests (outside of bankruptcy, administration or liquidation) the first to attach wins |
