FOUNDATIONS OF PROPERTY LAW EXAM NOTES 2017 PREVIEW VERSION

FOUNDATIONS OF PROPERTY LAW EXAM NOTES 2017 PREVIEW VERSION 1

Contents Topic 1 The Concept of Property 3 Topic 2 Some Key Land Concepts 14 Topic 3 - Original Acquisition of Goods 35 Topic 4 Transfer of Title 47 Topic 5 - Bailment 58 Topic 6 - Person Property Securities 63 Topic 7 - Person Property Priorities 78 2

TOPIC 6 - PERSONAL PROPERTY SECURITIES WHAT IS A SECURITY INTEREST A security interest is a property right in an asset granted by the owner of the asset to another person for the purpose of securing the performance of a personal obligation owed to that other person. Main types of property rights used as security: Possession o The pledge and the legal or common law lien Ownership Encumbrance o Equitable Lien PRE-PPSA FORMS OF SECURITIES INTERESTS Possession (creditor is in actual possession of security interest) 1. Pledge 2. Lien Creditor gets possession of goods belonging to the debtor for security of the debt. But the debtor is still the owner of the goods Debtor = pledger = bailor; Creditor = pledgee = bailee The creditor merely has right to retain possession until debt is paid in full. If the pledger defaulted on repayment of the debt, then the pledgor would have the right to sell the goods. o However the pledger would have to hand over the proceeds of the sale if the debt has been recovered For a pledge to be created, there must be a transfer of possession of goods from the pledgor to the pledgee (delivery); Wrightson v McArthur and Hutchinsons Is the same as a pledge, but arises out of operation of law. There are two types of liens: 1. Common Law Lien (e.g. mechanic s or repairer s lien) 2. Statutory Lien (e.g. unpaid seller s lien: Goods Act 1958 (Vic) ss45-49 & 54) Ownership (Ownership is transferred to creditor) 1. Common Law Mortgage Person with legal title to property transfers the title to creditor with proviso that title will be transferred back when debt owing to creditor is repaid. Property transferor (debtor or third party guarantor) = mortgagor; Creditor = mortgagee. Pending repayment of the secured debt, mortgagor had an equitable interest in the mortgaged property called an equity of redemption. 3

2. Equitable mortgage Transfer of equitable property interest to creditor with proviso for retransfer on repayment of debt; or Entry into specifically enforceable contract to grant legal or equitable mortgage Encumbrance (The creditor gain ownership with the debtor defaults) 1. Fixed Charge Arose from agreement between owner of property and creditor giving creditor the right to sell the property and recover the amount owed from proceeds upon default in repayment of debt. Property owner (debtor or third party guarantor) = chargor; Creditor = chargee. 2. Floating Charge A floating charge is a security interest over a fund of changing assets of a company or other artificial person, which 'floats' or 'hovers' until the point at which it is converted into a fixed charge, at which point the charge attaches to specific assets of the business Creditor s floating charge (crystalizes on default) Used in situations over a company s assets, creditor s floating charge PRE-PPSA FORMS OF QUASI SECURITY Retention of Title Clauses Seller retains title to goods until the buyer pays for them However, buyer is allowed to use the goods as if the buyer owns them Gives false appearance to owning goods may increase individual asset value falsely Also known as Romalpa clauses after the case which made them famous Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd Hire Purchase Agreements In substance, this transaction is a way of enabling a buyer of goods to pay the purchase price by instalments with the seller retaining title to the goods as security until the full amount is paid Think of Good Guys agreements Example: o Cash price of car = $40,000 o Hire total cost (over 48 month period) = $36,000 o End of 48 month period, car value = $12,000 o Customer purchase (residual value) minus value of car (cash price) = $8,000 excess (gain for hirer, extra for purchaser/hirer) PERSONAL PROPERTY (S 10) AND JURISDICITON (S 6) Section 10 of the PPSA personal property means property (including a licence [see s10]) other than: land [see s10]; or 4

a statutory right, entitlement or authority that is declared by that statute not to be personal property for PPSA purposes. consumer property means personal property held by an individual, other than personal property held in the course or furtherance, to any degree, of carrying on an enterprise to which an ABN has been allocated. commercial property means personal property other than consumer property. ABN means commercial property Section 6 of the PPSA Does the property fall within the Australian jurisdiction? s 6 o (1) Is the property located within Australia, or o (2) Is the grantor of an Australian entity SCOPE SECTION 12, 8, 13 & 18 Section 12 (1) and (2) A security interest means: o An interest in personal property (see above s 10) o Provided for by a transaction that, in substance, secures payment or performance of an obligation o See examples in 12(2) Section 12 (3) If the transaction did not secures payment or performance of an obligation, it can still be a security interest if it is: o (c) an interest under a PPS lease (Bailment) see s 13 5

Section 12 Meaning of a security interest: (1) A security interest means an interest in personal property provided for by a transaction that, in substance, secures payment or performance of an obligation (without regard to the form of the transaction or the identity of the person who has title to the property). (2) For example, a security interest includes an interest in personal property provided by any of the following transactions, if the transaction, in substance, secures payment or performance of an obligation: (a) a fixed charge; (b) a floating charge; (c) a chattel mortgage; (d) a conditional sale agreement (including an agreement to sell subject to retention of title); (e) a hire purchase agreement; (f) a pledge; (i) a lease of goods [s10] (whether or not a PPS lease [s13]); (j) an assignment; (k) a transfer of title;. (3) A security interest also includes the following interests, whether or not the transaction concerned, in substance, secures payment or performance of an obligation: (a) the interest of a transferee under a transfer of an account or chattel paper (b) the interest of a consignor who delivers goods to a consignee under a commercial consignment; (c) the interest of a lessor or bailor of goods under a PPS lease Section 8 General Exceptions An interest is not an SI when: o It is created by statute law (s 8(1)(b)) o It is created by common law (s 8(1)(c)) e.g. mechanics lien o When the creditor is a pawnbroker Section 8 (1) (b) a lien, charge, or any other interest in personal property, that is created, arises or is provided for under a law of the Commonwealth (other than this Act), a State or a Territory, unless the person who owns the property in which the interest is granted agrees to the interest; (c) a lien, charge, or any other interest in personal property, that is created, arises or is provided for by operation of the general law; (ja) a security interest in personal property taken by a pawnbroker, if subsection (6) applies to the security interest; Section 13 Lease of goods or Bailment S 13(1) - A PPS lease means: o A bailment or lease 6

o For more than two years (or intended to be greater than two years) S 13(2) However a PPS lease does not include: o A lease by a lessor (or a bailment by a bailor) who does not regularly engage in the business of leasing (or bailing goods.) Section 13 (1) A PPS lease means a lease or bailment of goods: (a) for a term of more than 2 years ; or (c) for a term of up to 2 years that is automatically renewable, or that is renewable at the option of one of the parties, for one or more terms if the total of all the terms might exceed 2 years; or (d) for a term of up to 2 years, or a lease for an indefinite term, in a case in which the lessee or bailee, with the consent of the lessor or bailor, retains uninterrupted (or substantially uninterrupted) possession of the leased or bailed property for a period of more than 2 years after the day the lessee or bailee first acquired possession of the property (but not until the lessee's or bailee's possession extends for more than 2 years). (2) However, a PPS lease does not include: (a) a lease by a lessor who is not regularly engaged in the business of leasing goods; or (b) a bailment by a bailor who is not regularly engaged in the business of bailing goods; or (c) a lease of consumer property as part of a lease of land where the use of the property is incidental to the use and enjoyment of the land; or (d) a lease or bailment of personal property prescribed by the regulations for the purposes of this definition, regardless of the length of the term of the lease or bailment. Section 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 Note: s 18 is subject to Commonwealth, State or Territory, and general laws s 257 7

ATTACHMENT SECTION 19 If a security interest does fall within the scope of the PPSA, it must have attached to collateral in order for the security interest to be enforceable against the grantor. (s 19(1)) o i.e. Attachment means to have rights/ownership over the security interest Section 19 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). (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 8

ENFORCEABILITY AGAINST 3 RD PARTIES section 20 for a security interest to be enforceable against third parties, there must be: (a) attachment (s 19) and; (b) one of the following (i) possession (by the secured party/grantor) or; (iii) a security agreement which covers the collatral In writing (s 20(2)(a)) Signed or adopted by grantor (s 20(2)(a)(i) and (ii)) Describes collateral (s20(2)(b)(i)) Section 20 (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; (see s 24(1) below) (ii) the secured party has perfected the security interest by control [not relevant for LAW2FPL purposes]; (iii) a security agreement that provides for the security interest covers the collateral in accordance with subsection (2). (2) A security agreement covers collateral in accordance with this subsection if: (a) the security agreement is evidenced by writing [s10] 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 [see eg in Duggan & Brown [4.29]]; and (b) the writing evidencing the agreement contains: (i) a description of the particular collateral, subject to subsections (4) and (5); or (ii) a statement that a security interest is taken in all of the grantor's present and after-acquired property; or (iii) a statement that a security interest is taken in all of the grantor's present and after-acquired property except specified items or classes of personal property. PPSA s24 (1) A secured party cannot have possession of personal property if the property is in the actual or apparent possession of the grantor or debtor, or another person on behalf of the grantor or debtor. 9

PERFECTION SECTION 21 & 22 Perfection is a form of protection for a secure party that is stronger than mere attachment. Is the interest perfected? Security interest will be perfected if it is attached to the collateral, enforceable against 3 rd parties and one of the following applies: o Effective registration (financing statement is not defective) (ss 163, 164); or o Possession Perfection of goods possessed by bailee see s 22 Section 21 (1) A security interest in particular collateral is perfected if: (a) [not relevant for LAW2FPL purposes]; or (b) all of the following apply: (2) This subsection applies if: (i) the security interest is attached to the collateral; (ii) the security interest is enforceable against a third party; (iii) subsection (2) applies. (a) for any collateral, a registration is effective [Part 5.4] with respect to the collateral; or (b) for any collateral, the secured party has possession [s24] of the collateral (other than possession as a result of seizure or repossession); or (c) [in the case of some kinds of collateral, secured party has control of collateral - not relevant for LAW2FPL purposes] (3) A security interest may be perfected regardless of the order in which attachment and any step mentioned in subsection (2) occur. (4) A single registration may perfect one or more security interests. 10

If the goods are in the possession of a bailee (where the secured party is the bailor) under s 22 the property is security interesting is still perfected Section 22 - goods possessed by a bailee (1) A security interest that has attached to goods in the possession of a bailee (other than the grantor or the debtor) is perfected if any of the following applies, regardless of when the security interest attached to the goods: (a) the security interest is perfected by registration, as provided by section 21; (b) the security interest is perfected by possession, as provided by section 21, because the bailee possesses the property on behalf of the secured party; (c) the bailee issues a document of title [s10] to the goods in the name of the secured party; (d) [Not relevant for LAW2FPL purposes] REGISTRATION PPS Register contains data in registered financing statements with respect to security interests. Section 153 8 requirements for a complete financing statement Section 14 stipulates requirement for a PMSI (relevant to step 7) Section 163 effective registration (time frame in which registration is effective) Defects in registration: o Section 164 General Rules for defects in registration o Section 165 Particular defects 11

A PMSI occurs when: a. The loan (SI) was taken out to buy the collateral (part or all) b. The loan (SI) was taken to acquire rights in the collateral c. If it is a PPS lease (s 13) Section 14 PMSI Meaning of Purchase Money Security Interest General definition (1) A purchase money security interest means any of the following: (a) a security interest taken in collateral, to the extent that it secures all or part of its purchase price; (b) a security interest taken in collateral by a person who gives value for the purpose of enabling the grantor to acquire rights in the collateral, to the extent that the value is applied to acquire those rights; (c) the interest of a lessor or bailor of goods under a PPS lease; (d) the interest of a consignor who delivers goods to a consignee under a commercial consignment Exception (s14(2)(c) read together with s14(2a)): Interest is in collateral, which is not required or permitted by regs to be described by serial number, that (at the time the interest attaches to the collateral) the grantor intends to use predominantly for personal, domestic or household purposes. *Commercially bought, but is intended to be used for personal, domestic or household purposes. 12

Section 153 Financing Statements with respect to security interests must contain following as elaborated in PPS Regs Sch. 1: 1) Secured party s details 2) Grantor s details, unless collateral is consumer property that is: required by regs to be described by serial number, in which case no grantor details not required by regs to be described by serial number in which case grantor s name and date of birth only 3) An address for giving of notices to the secured party relating to the registration. 4) Collateral description specify whether collateral is consumer property [s10] or commercial property [s10] if commercial property, specify whether may incl. inventory include serial number of collateral if required by regs, o Aircraft and some kinds of intellectual property o Motor vehicles and watercraft (if consumer property) only relate to a single class of collateral as prescribed by the regs prescribed classes are agriculture (i.e. crops or livestock), aircraft, all present and after acquired property, all present and after-acquired property except, financial property [s10], intangible property [s10], motor vehicles, other goods (i.e goods other than agriculture, aircraft, motor vehicles, watercraft), watercraft. 5) End time for registration Consumer property or property described by serial number end time no later than 7 years (default) after the registration time. Other property, choice of: o no stated end time or o end time no later than 25 years (default) after the registration time. If a noncompliant end time is specified in a financing statement (e.g. 8 years after registration time for consumer property), the default end time will apply instead (PPSA s153(2)). 6) Indication of subordination (optional) 7) Indication whether purchase money security interest (section 14) 8) Other prescribed details s150 Registration by application s156 Verification statement given by Registrar to secured party s157 Notice of verification statement given by secured party to grantor 13

Effective Registration s 163 What time period the registration is effective. Section 163 - Effective Registration (1) A registration with respect to a security interest that describes particular collateral, in relation to a secured party, is effective with respect to that collateral from the registration time for the description of the collateral [s160(1)] until the earliest of the following times: (a) the end time (if any) registered for the collateral; (b) if the registration is amended to omit the collateral description--the amendment time [s160(2)]; (c) the time when the description of the collateral in the registration stops being available for search in the register (by reference to that time) in respect of the secured party. (2) This section is subject to sections 164, 165 and 166 (defects in registration). Defective Registration s 164 and 165 As a general rule, registration is defective if there exists a seriously misleading defect in any date relating to the resgistration (s 164(1)(a)) Section 164: Defects in Registration General Rule (1) A registration with respect to a security interest that describes particular collateral is ineffective because of a defect [see s10] in the register if, and only if, there exists: (a) a seriously misleading defect in any data relating to the registration, other than a defect of a kind prescribed by the regulations; or (b) a defect mentioned in section 165. (2) In order to establish that a defect is seriously misleading, it is not necessary to prove that any person was actually misled by it. (3) A registration that describes particular collateral is not ineffective only because the registration is ineffective with respect to other collateral described in the registration. 14

Examples of defective registration are: (a) A search by serial number does not disclose the registration (b) When a search by grantors details does not disclose the registration (c) If the financing statement indicates that the SI is a PMSI when it is not Section 165: Defects in Registration Particular Defects For the purposes of paragraph 164(1)(b), a defect in a registration that describes particular collateral exists at a particular time if any of the following circumstances exist: (a) in a case in which the collateral is required by the regulations to be described by serial number in the register--no search of the register by reference to that time, and by reference only to the serial number of the collateral, is capable of disclosing the registration; (b) in a case in which the collateral is not required by the regulations to be described by serial number in the register--no search of the register by reference to that time, and by reference only to the grantor's details (required to be included in the registered financing statement under section 153), is capable of disclosing the registration; (c) if the registered financing statement (as amended, if at all) indicates that a security interest in the collateral is a purchase money security interest (to any extent)--the security interest is not a purchase money security interest (to any extent) in the collateral; (d) in any case--circumstances in relation to the data related to the registration that are prescribed by the regulations. NB No relevant regulations at present ENFORCEMENT OF SECURITY INTERESTS UNDER THE PPSA 2015 Exam 3a Sample Answer Sharp Financing was therefore able to enforce its security interest against PH. In the absence of information to the contrary, we can only assume that SF is relying on PPSA Part 4 and that there hasn t been contracting out of any Part 4 provisions. Since PH was in default under the security agreement, SF was entitled to seize the scaffolding equipment as a preliminary to realising its SI (s123(1) PPSA) Chapter 4 does not apply to a PPS lease that does not secure payment or performance of an obligation (s109(1)(c)) SIs in goods located outside Australia (s109(2)) Where collateral is used by a grantor predominantly for personal, domestic or household purposes, following provisions do not apply: ss117, 118, 120, 126, 128(2)(b)&(c), 129, 134 (see s109(5)) 15

Where collateral is not used predominantly for personal, domestic or household purposes, parties to security agreement may contract out of following provisions : ss95, 96, 117, 118, 120, 121(4), 123, 125, 126, 128, 129, 130, 132(3)(d), 132(4), 134(1), 135, Part 4.3 Division 6, s142, s143 (see s115(1)). PPSA section 10 predominantly: personal property is intended to be used predominantly for personal, domestic or household purposes if: (a) the personal property: (i) is intended to be used only for those purposes; or (ii) is intended to be used for other purposes as well, but is intended to be mostly used for personal, domestic or household purposes; and (b) the personal property is not acquired as an investment. Example from PPS Bill Replacement Explanatory Memorandum para 4.16 Debtor A obtains a loan from Bank B to finance the purchase of business assets secured against her car. Debtor A uses the car 90% of the time for personal use. For 10% of the time Debtor A uses the car for business purposes. Debtor A defaults on the loan and Bank B initiates enforcement action. As a result of Debtor A s use of the car predominantly for personal, household or domestic purposes, Bank B is unable to vary or contract out of most of the enforcement provisions, regardless of the fact that the loan was obtained to meet business needs. 16

PPSA s110 This Act does not derogate in any way from the rights and remedies the following parties to a security agreement have, apart from this Act, against each other in relation to a default by the debtor under the security agreement: (a) the debtor; (b) the grantor; (c) a secured party. PPSA s111 (1) All rights, duties and obligations that arise under this Chapter must be exercised or discharged: (a) honestly; and (b) in a commercially reasonable manner. (2) A person does not act dishonestly merely because the person acts with actual knowledge of the interest of some other person. PPSA s112(1) In exercising rights and remedies provided by this Chapter, a secured party may deal with collateral only to the same extent as the grantor would be entitled to so deal with the collateral. Duggan & Brown [12.26] Example 5. Trustee holds an art collection on trust for Grantor for life. Grantor, who is in possession of the collection, gives SP a security interest. Grantor defaults and SP seizes the collection and sells it to Buyer. PPSA s123 (1) A secured party may seize collateral, by any method permitted by law, if the debtor is in default under the security agreement. PPSA s125 Obligation to dispose of or retain collateral Whole or part of collateral may be disposed of by private or public sale PPSA s128(1),(2)(a)&(5) However, must first give notice under s130 to grantor and anyone with higher priority security interest in same collateral (exceptions in s130(5) and s144) Secured party has a duty to grantor and any one else with security interest in collateral to exercise all reasonable care to obtain: o market value at time of disposal, if applicable o or otherwise, best price that is reasonably obtainable at the time of disposal, having regard to the circumstances existing at that time (see s131) Secured party may purchase collateral itself under s128(1), provided: o collateral is not used predominantly for personal, domestic or household purposes (see 109(5)) 17

o notice is served under s130 and no notice of objection is given under s137(2) (see s129(2)) o purchase is at a public sale and purchase price is at least the market value at time of sale (see s129(3) overrides s128(2) and s131) Grantor or any other person with security interest in collateral may redeem collateral prior to disposal under s128 (s142) Disposal under s128 results in purchaser taking collateral free of interests of grantor, disposing secured party and secured parties with lower priority (s133) PPSA s140 Distribution of proceeds received by secured party Subject to Commonwealth, state or territory law which may give other obligations priority over obligations listed in s140. Order in which proceeds to be distributed: o Pay out, in order of priority, of non-security interests with higher priority than interest of secured party o Payment of reasonable costs of enforcing security interest (unless security agreement provides otherwise) o Pay out, in order of priority, of security interests with higher priority than interest of secured party o Pay out of amount secured by secured party s own security interest o Pay out, in order of priority, of security interests with lower priority than interest of secured party o Remaining proceeds (if any), to grantor. Secured party may take steps to have title in the collateral pass to itself (s134, 136(1)), provided: o collateral is not used predominantly for personal, domestic or household purposes (see 109(5)) o notice has been given under s135 to grantor and certain other secured parties and no notice of objection has been given under s137(2) in the time allowed under 135(3) Assuming s136(1) requirements met, secured party takes collateral free of their own security interest and the interests of the grantor and secured parties with lower priority (s136(2)) If secured party takes collateral free of other interests under s136(2), the debt previously secured by its security interest is extinguished (s136(5)). 18

PPSA s143 ( 1) At any time before a secured party disposes of or retains collateral (whether or not under this Chapter), a person may reinstate the security agreement by: ( a) paying the following amounts: (i) amounts in arrears (disregarding amounts in arrears as a result of an acceleration clause in the security agreement); (ii) the amount of any expenses, in relation to the enforcement of the security interest, the payment of which is secured by the security interest ; and (b) remedying any other default as a result of which the secured party proposes to dispose of, or retain, the collateral. (2) A security agreement may be reinstated only once during the period in which the security agreement is in force. 19

PROBLEM SOLVING GUIDE: APPLYING LEGISLATION (PPSA) TO A PROBLEM Before beginning, map out: Categorise the interest (e.g. bailment, lease, sale etc) Who is the grantor (borrower) Who is the secured party (financer) What is the collateral (secured property) 1. Personal property (s 10) and jurisdiction (s 6) (Preliminary Matters) First it must be determined whether A s security interest (SI) is: Section 10: Does the property fall within the definition of personal property? o Is it a commercial (ABN) or a consumer property? Section 6: Does the property fall within the Australian jurisdiction? 2. Scope (ss 12, 8, 13 & 18) For the PPSA to apply: Section 12: There must be a security interest under the PPSA o 12(1) and (2) definition and examples o 12(3) if no payment or obligation, may still be a PPSA SI (a-c) Then consider - Section 8: Security interests to which the act does not apply (Exceptions) Also consider: Section 13: Definition of PPS lease Section 18: General rules about security interests o Security interest over after-acquired property is valid 20

3. Attachment (s 19) If a security interest does fall within the scope of the PPSA, it must have attached to collateral in order for the security interest to be enforceable against the grantor. (s 19(1)) s 19(2) a SI 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 SI (the grantor has paid); or (ii) The grantor does an act by which the security interest arises. Consider time of attachment (s 19(3) (5)) If there is attachment (s 19), consider s 20 4. Enforceability against third parties (s 20) Section 20 for a security interest to be enforceable against third parties, there must be: (a) attachment (s 19) and; (b) one of the following (i) possession (by the secured party/grantor) or; (iii) a security agreement which covers the collatral In writing (s 20(2)(a)) Signed or adopted by grantor (s 20(2)(a)(i) and (ii)) Describes collateral (s20(2)(b)(i)) If there is attachment (s 19) and enforceability against third parties (s 20), consider s 21. 21

5. Perfection (s 21) Section 21 - Perfection is a form of protection for a secure party that is stronger than mere attachment. Is the interest perfected? Security interest will be perfected if it is attached to the collateral, enforceable against 3 rd parties and one of the following applies: o Effective registration (financing statement is not defective) (Box 6 below); or o Possession if the good is posses by bailee consider s 22 6. Registration (s 153, 163, 164 & 165) 153 (read in accordance with Sch 1 PPSR) sets out what financing statements must contain Is the registration effective i.e. from when is registration effective? (s 163) Is the registration defective (s 164 and 165) 22