Hire purchase agreements, vesting and the constitution

By Leith Ayres and Richard Johnson

A recent decision by the Supreme Court of Western Australia has provided confirmation of the purpose and effect of a number of key provisions relating to transitional security interests, perfection, priority and vesting rules under the Personal Property Securities Act 2009 (Cth) (PPSA).

The case, White v Spiers Earthworks Pty Ltd [2014] WASC 139 (Spiers), is the first Australian decision in which the court has been asked to consider whether section 267 of the PPSA, related to the vesting of unperfected security interests in the grantor upon its winding up or bankruptcy, could potentially constitute an acquisition of property other than on just terms. In the decision, the Supreme Court of Western Australia rejected an argument to that effect by the defendants and held that, by operation of section 267(2) of the PPSA, the defendants’ interests in collateral had vested in the grantor company immediately before the appointment of administrators.

It is the first Australian case to give substantial consideration to the interaction between the PPSA and the Western Australian Chattel Securities legislation that applied prior to the commencement of the PPSA. Although the end of the transitional period lessens the importance of some aspects of the decision, the case is important for the guidance that it provides in relation to the treatment of transitional security interests (and, in particular, the primacy of the PPSA over other pre-PPSA legislation that may once have governed issues of security interest registration), the characterisation of security interests and the operation of section 267. It also represents the most recent addition to the slowly expanding body of case law on the Australian PPSA…

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