AUSTRALIA Law and Practice Contributed by: Alastair Gourlay, Lewis Grimm, Joanne Dwyer and Kathryn Sutherland-Smith, Jones Day
• a deed poll of release, executed by the secured party in favour of the grantor. Further, deregistration of the security from the register on which it was recorded should take place. Where security interests over personal property have been registered on the PPSR and a full release is to occur, a financing change statement must be registered. In contrast, security over real property (created by a real property mortgage) is released when the relevant state/territory mortgage discharge form is provided by the secured party and sub - sequently lodged at the relevant land titles office. 5.7 Rules Governing the Priority of Competing Security Interests and/or Claims In Australia, multiple liens over the same asset are permitted and occur where multiple creditors hold a security interest. The priority of compet - ing security interests over personal property and real property are governed by different statutory rules and general law principles. The rules governing priority of personal property are set out in the PPSA and determined by order of perfection, where the first interest to be per - fected (through registration, possession or con - trol) takes priority. An exception to this is where a secured party has a perfected PMSI. afford - ing “super priority” over all other interests in the same collateral. Similarly, the Real Property Acts of Australian states and territories regulate the registration of interests over real property, with priority over competing interests generally deter - mined by order of registration. Secured parties can subordinate their inter - ests and alter the priority contractually through amendments to the security agreement or via
other agreements (ie, specific subordination agreements or intercreditor agreements). These permit the secured parties to negotiate and agree upon the priority of competing interests. Such agreements have a binding effect, and can be enforced (but must not be in conflict with the mandatory provisions of the PPSA or the real property laws). Contractual subordination pro - visions will survive the insolvency of a borrower provided they do not violate any statutory rights or provisions under the CA. 5.8 Priming Liens and/or Claims Certain security interests can prime another interest despite being perfected. These can include PMSIs and interests in “authorised deposit-taking institutions” (ADI) accounts per - fected by control. A PMSI is a security interest in personal property, securing the lender’s assistance towards a bor - rower’s acquisition of specific assets. As noted, PMSIs enjoy “super priority” status, provided that they are properly registered. Separately, an ADI which takes a security interest over a bank account held with it (“charge-back”) will, by virtue of the PPSA (section 341A(1)(a) (i)), be perfected by control, without the need to register a financing statement. Given perfection by control affords greater priority over a security interest in the same collateral which has been perfected via an alternate manner (section 57 PPSA), interest in an ADI account perfected by control will rank higher in priority over an interest in the same ADI account that has been perfected by registration, despite the order of perfection, with common practice including registration on the PPSR to disclose its control to avoid being a circulating asset (section 340(2) PPSA).
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