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Meaning of securities account
(7) In this Act:
securities account means:
(a) an account to which interests in financial products may be credited or debited; or
(b) in the case of an intermediary mentioned in paragraph 15(2)(b) — a record of holdings and transfers of interests in financial products.
Chapter 2
General rules relating to security interests
Part 2.1
Guide to this Chapter
16 Guide to this Chapter
This Chapter sets out general rules relating to security interests in personal property.
Part 2.2 contains some general principles relating to these security interests, the agreements that govern them and their enforceability. The Part describes how a security interest is attached to personal property and perfected.
Part 2.3 deals with the concepts of possession and control of personal property.
Part 2.4 contains some rules about attachment and perfection of security interests in particular situations.
Part 2.5 sets out circumstances in which a person takes an interest in personal property free of a security interest in the property.
Part 2.6 sets out how to work out the priority between competing security interests (and in some cases, other sorts of interests) in personal property. If a specific rule does not deal with the priority between security interests, then the priority is determined in accordance with the default rules in section 55.
Part 2.7 contains some rules about transferring and assigning interests in collateral.
Part 2.2
Security interests: general principles
17 Guide to this Part
This Part sets out some general principles about security interests.
These principles relate to the enforceability of security agreements against grantors of security interests and third parties.
A security interest is only effective if it has attached to collateral. A security interest attaches to collateral when the grantor has rights in the collateral, or can transfer it to the secured party, and value is given, or the security interest otherwise arises.
A security interest is only enforceable against a third party if it has attached to collateral and the secured party possesses the collateral, has perfected the security interest by controlling the collateral or has entered into a written security agreement that describes the collateral.
This Part also contains rules about how a security interest is perfected and how it is continuously perfected. A perfected security interest has priority over an unperfected security interest, and the security interest that has been continuously perfected for the longest time generally has the highest priority (see Part 2.6 for priority rules).
Perfection occurs when a security interest has attached to collateral and any further steps needed to make the security interest effective against third parties have been taken.
These steps involve registration on the Personal Property Securities Register or possession or control of the collateral. In certain situations this Act provides for perfection, or temporary perfection, by the operation of the Act itself.
18 General rules about security agreements and security interests
(1) A security agreement is effective according to its terms.
(2) A security agreement may provide for security interests in after-acquired property.
(3) A security interest in after-acquired property attaches without specific appropriation by the grantor.
(4) A security agreement may provide for future advances.
(5) A security interest is taken to secure reasonable expenses in relation to the enforcement of the security interest, unless the parties agree otherwise.
19 Enforceability of security interests against grantors — attachment
Attachment required for enforceability
(1) A security interest is enforceable against a grantor in respect of particular collateral only if the security interest has attached to the collateral.
Attachment rule
(2) A security interest attaches to collateral when:
(a) the grantor has rights in the collateral, or the power to transfer rights in the collateral to the secured party; and
(b) either:
(i) value is given for the security interest; or
(ii) the grantor does an act by which the security interest arises.
Time of attachment
(3) Subsection (2) does not apply if the parties to a security agreement have agreed that a security interest attaches at a later time, in which case the security interest attaches at the time specified in the agreement.
(4) To avoid doubt, a reference in a security agreement to a floating charge is not a reference to an agreement that the security interest created by the floating charge attaches at a time later than provided under subsection (2).
Goods leased, bailed, consigned or sold under a conditional sale agreement.
(5) For the purposes of paragraph (2)(a), a grantor has rights in goods that are leased or bailed to the grantor under a PPS lease, consigned to the grantor, or sold to the grantor under a conditional sale agreement (including an agreement to sell subject to retention of title) when the grantor obtains possession of the goods.
(6) Subsection (5) does not limit any other rights the grantor may have in the goods.
Note: A security interest may attach to crops while they are growing, and to the products of livestock, before they become proceeds of the crops or livestock (for example, wool before it is shorn). See subsections 31(4) and (5) (meaning of proceeds) and section 84A (security interests in crops and livestock).
20 Enforceability of security interests against third parties
General rule
(1) A security interest is enforceable against a third party in respect of particular collateral only if:
(a) the security interest is attached to the collateral; and
(b) one of the following applies:
(i) the secured party possesses the collateral;
(ii) the secured party has perfected the security interest by control;
(iii) a security agreement that provides for the security interest covers the collateral in accordance with subsection (2).
Note: For possession and control of collateral, see Part 2.3.
Written security agreements
(2) A security agreement covers collateral in accordance with this subsection if:
(a) the security agreement is evidenced by writing that is:
(i) signed by the grantor (see subsection (3)); or
(ii) adopted or accepted by the grantor by an act, or omission, that reasonably appears to be done with the intention of adopting or accepting the writing; and
(b) the writing evidencing the agreement contains: