Personal Property Securities Act - Australia

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arise because of the operation of paragraph 140(2)(f).

      Note: Paragraph 140(2)(f) provides for the distribution of an amount or proceeds to the grantor upon the enforcement of a security interest.

      Crops and livestock

      (4) The proceeds of collateral that is crops include the harvested produce of the crops, if the produce is identifiable or traceable.

      (5) The proceeds of collateral that is livestock include products of the livestock (for example, meat or wool), if the products are identifiable or traceable.

      (6) However, livestock are not the proceeds of collateral merely because they are the unborn young, or the offspring, of livestock that are collateral.

      32 Proceeds — attachment

      Continuation of security interest in collateral, and attachment to proceeds

      (1) Subject to this Act, if collateral gives rise to proceeds (by being dealt with or otherwise), the security interest:

      (a) continues in the collateral, unless:

      (i) the secured party expressly or impliedly authorised a disposal giving rise to the proceeds; or

      (ii) the secured party expressly or impliedly agreed that a dealing giving rise to the proceeds would extinguish the security interest; and

      (b) attaches to the proceeds, unless the security agreement provides otherwise.

      Note 1: The effect of paragraph (a) is to extinguish the security interest in the collateral if the secured party expressly or impliedly authorised the dealing mentioned.

      Note 2: A transferee can also take the collateral free of the security interest because of the operation of another provision of this Act (for example, under Part 2.5).

      Enforcement of security interest against collateral and proceeds

      (2) If the secured party enforces a security interest against both collateral (other than an investment instrument or an intermediated security) and proceeds, the amount secured by the security interest in the collateral and proceeds is limited to the market value of the collateral immediately before the collateral gave rise to the proceeds.

      Note: For the enforceability of a security interest against a third party in relation to proceeds, see also subsection 20(6).

      (3) However, subsection (2) does not apply if, at the time of the transfer of the collateral, the transferee has actual or constructive knowledge that the transfer was in breach of a security agreement that provides for the security interest in the collateral.

      (4) To avoid doubt, subsection (2) does not affect any right the secured party may have to recover the amount secured without enforcing the security interest.

      Priority of proceeds

      (5) For the purposes of section 55 (default priority rules), the time of registration or possession in relation to original collateral, or the time of perfection of a security interest in original collateral, is also the time of registration, possession or perfection in relation to the proceeds of the original collateral.

      Note: The effect of subsection (5) is that the security interest in the proceeds has the same default priority as the security interest in the original collateral.

      33 Proceeds — perfection and temporary perfection

      Perfection by reference to perfection of security interest in original collateral

      (1) A security interest in proceeds is perfected if the security interest in the original collateral is perfected by a registration that:

      (a) describes the proceeds, if the description complies with any regulations made for the purposes of paragraph (d) of item 4 of the table in section 153 (financing statements with respect to security interests); or

      (b) covers the original collateral, if the proceeds are of a kind that are within the description of the original collateral; or

      (c) covers the original collateral, if the proceeds consist of currency, cheques or an ADI account, or a right to an insurance payment or any other payment as indemnity or compensation for loss or damage to the collateral or proceeds.

      Temporary perfection in other situations

      (2) If a security interest in original collateral is perfected, but a security interest in the proceeds is not perfected under subsection (1), the security interest in the proceeds is temporarily perfected for the period starting at the time the security interest in the original collateral attaches to the proceeds and ending at the end of 5 business days afterwards.

      (3) However, the security interest in the proceeds under subsection (2) becomes unperfected at the end of the period mentioned in that subsection, unless the security interest in the proceeds is perfected otherwise than under the subsection before the end of the period.

      34 Transferred collateral — temporary perfection after transfer

      Security interest is temporarily perfected

      (1) If collateral is transferred, and at the time of the transfer a secured party held a perfected security interest in the collateral, the security interest is temporarily perfected for the period starting at the time of the transfer and ending at the earliest of the following times:

      (a) the end of the month that is 24 months after the time of the transfer;

      (b) if the security interest was perfected by registration at the time of the transfer — the end time for the registration (as registered at the time of the transfer);

      (c) if another security interest attaches to the collateral at or after the time of the transfer, and the other security interest is perfected:

      (i) in a case in which the original secured party consented to the transfer — the end of 5 business days after the day of the transfer; or

      (ii) in a case in which the original secured party otherwise acquires the actual or constructive knowledge required to perfect the original secured party’s interest by registration (or to re-perfect the interest by an amendment of a registration) — the end of 5 business days after the day the original secured party acquires the knowledge.

      Note: The knowledge required is the knowledge of the transferee’s (the new grantor’s) details. Unless these are registered, the original secured party’s registration may be ineffective under section 165.

      Security interest becomes unperfected

      (2) However, the security interest becomes unperfected immediately after the earliest time mentioned in subsection (1), unless, at or before that time, the security interest is perfected otherwise than under subsection (1).

      Transfer free of security interest

      (3) This section does not apply in relation to a transfer of collateral if the transferee takes the collateral free of the security interest.

      Division 3

      Collateral returned to grantor or debtor

      35 Returned collateral — from bailee

      Security interest is temporarily perfected

      (1) A security interest in goods that is perfected by possession of the goods or a negotiable document of title to the goods under subsection 22(1) is temporarily perfected for the period covered by subsection (2) of this section if possession of the goods or document is given to the grantor or the debtor at a particular time (the action time) for the purpose of any of the following actions in relation to the goods:

      (a) sale;

      (b) exchange;

      (c) any other action in preparation for sale or exchange, including (but not limited to) the following:

      (i) loading;

      (ii) unloading;

      (iii)

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