Personal Properties Securities Act

Ordinary course of business examples

A paper presented at the National Commercial Law Seminar Series
Personal Property Securities Act: beyond the transitional period, Melbourne

David C Turner 18 March 2014

Barrister and Mediator, Victorian Bar
Senior Fellow, Monash University

PowerPoint PowerPoint

Rule 3

If a cut off exception applies then T gets clear title even if SP has a perfected SI  and whether or not SP has authorised the dealing

S 46

Mainly as consumer protection provision.

G is a furniture retailer.  SP has a perfected SI in its inventory.  Authorisation in  the security agreement permits G to sell in the ordinary course of business.

SP serves a notice on G withdrawing  authority

G sells an armchair ton T, a retail  customer.

Does T get clear title?

If Rule 3 applied the answer is no.

SP is perfected and has not authoried the  dealing.

But s 46 displaces the rule provided that  T did not know that the sale was in breach the Security agreement.

T should not be at risk of unpublished  restrictions on the right to sell.


G is a furniture retailer and SP1 has an  SI in G’s inventory.

G gives SP2 a security interest in one of  its armchairs

If SP2 is a purchaser (includes a SP) he  wins.

Hence use of term buyer which does not  include a secured party s 42

Priority dispute between SP1 And SP2 is  resolved by the priority rules in s 55(4) – first in time wins

  • If  T is a retail customer and rents a computer from G, s 46 also applies because  it includes a lessee.

Interest  given by the seller

Interest given by the seller or lessee

G is   lawyer.  SP has a perfected SI in  his office furniture and equipment

G sells the furniture and  equipment to a secondhand dealer X.  X  resells it to T.

X takes subject to SP’s SI

S 46 doesn’t apply because not in the OCB  of G’s business.

T bought from X but SI give by G.

Motor  car

If G a lawyer and SP has a perfected SI  in G’s car.  G sells car to T.

T needs to search by VIN and/or ABN of  business

If no SI reveled by he search from the  time commencing at the start of the day before and the time of payment, T takes  free of SP’s SI.

Also if VIN incorrect or error in G’s  ABN.