- 21.1 The Extinguishment Rules – Introduction
- 21.2 Table Summarising the Extinguishment Rules by Class of Collateral
- 21.3 The Extinguishment Rules - Commentary
- 21.4 Buyer or lessee of personal property subject to unperfected security interests – section 43
- 21.5 Sales or leases of serial-numbered property – motor vehicles, watercraft, aircraft/engines and intellectual property (patents, trade marks, designs and plant breeder’s rights) – section 44
- 21.6 Private sales or leases of motor vehicles – sections 45(1) - (2)
- 21.7 Buying motor vehicles from licensed dealers – sections 45(3) - (4)
- 21.8 Buying or leasing from a seller/lessor in the ordinary course of business – section 46
- 21.9 Low value (below $5,000) consumer property (except serial numbered property) – section 47
- 21.10 Currency – section 48
- 21.11 Prescribed financial markets – investment instruments and intermediated securities – section 49
- 21.12 Investment instruments – section 50
- 21.13 Intermediated securities – section 51
- 21.14 Temporarily perfected security interests – section 52
- 21.15 Returned goods following sale or lease
- 21.16 Subrogation by extinguished secured parties to rights in relation to collateral sold or leased
Buyers or lessees of certain limited classes of collateral, being:
(a) goods;
(b) negotiable documents of title, such as negotiable bills of lading; or
(c) proceeds of personal property (generated upon transfers or disposals of any personal property),
take that property free of a temporarily perfected security interest in the property other than a transitional security interest1. The buyer or lessee must give new value, and have no actual knowledge (constructive knowledge is not enough to stop extinguishment) that the transaction may breach the terms of the security agreement which governs the security interest at the time of giving value for the property (if consumer property), or otherwise at the time of entering into the lease or sale.
Security interests over goods, proceeds of original collateral and negotiable documents of title that rely upon temporary perfection are therefore vulnerable to being extinguished by sales or leases of the collateral.
Secured parties should not rely on temporary perfection alone in these circumstances, and should actually perfect by registration or otherwise as soon as possible.
The extinguishment rule in section 52 does not apply to transitional security interests, which may be temporarily perfected for up to two (2) years until 2014.
Notes:
1 PPSA section 52 (link)
