Part 1
Lavan Legal have published over 20 bulletins on the basic elements of Personal Property Security Act 2009 (PPSA 2009). We hope that they have assisted you in the transition to the new regime. We now propose to supplement this basic material with more advanced bulletins to be published monthly. We thought of calling this series of bulletins “50 Shades of Grey”, but it appears that “Grey Areas” might be more appropriate.
One of the grey areas in the law of personal property is the fundamental concept of “property”. This uncertainty existed before PPSA 2009 and the Act has done little to clarify the issue. Personal property can be divided into two broad categories: tangible personal property and intangible personal property.
Tangible personal property
In the first bulletin in this series we shall examine tangible personal property. Tangible property includes serial numbered goods such as motor vehicles, aircraft, watercraft and other goods such as computers, refrigeration units, appliances, livestock, crops, extracted gas and minerals and the list goes on.
Definition of personal property
Fixtures are excluded
One type of tangible property that is specifically excluded from PPSA 2009 is fixtures (See section 8(1)(j)). The term “fixture” is defined in section 10 to mean goods, other than crops, that are affixed to land. It does not matter why the goods were attached to the land. If they are affixed to the land, then they are excluded from PPSA 2009. It follows that tenant’s fixtures are excluded from PPSA 2009 even though they are not intended to become part of the land.
Case law on the concept of property
The term “property” has not been adequately defined by the courts. Sometimes it is described as a “legally endorsed concentration of power over things and resources”: Telstra Corporation Ltd v Commonwealth [2008] HCA 7; (2008) 234 CLR 210 at [44]. At the outset, it is important to understand that property is not a thing but rather a relationship based on a bundle of rights in relation to the thing. See KJ Vandevelde, “The New Property of the Nineteenth Century: The Development of the Modern Concept of Property” (1980) 29 Buffalo Law Review 325 and K Gray, Elements of Land Law (1st edn, Butterworths, London 1987) p8.
The property relationship is responsive to change in social and economic conditions and it can adapt to new forms and new types of interest as they emerge¹.
Basic elements of a property right
There are some basic requirements that must be satisfied before an interest can be recognised as a proprietary right. As Lord Wilberforce pointed out in National Provincial Bank Ltd v Ainsworth [1965] AC 1175 at 1247-1248:
Before a right or an interest can be admitted into the category of property, or of a right affecting property, it must be definable, identifiable by third parties, capable in its nature of assumption by third parties, and have some degree of permanence or stability.
This definition has been applied in Australian decisions. See for example: R v Toohey; Exparte Meneling Station Proprietary Ltd at 342-343 and Sonenco (No77) Pty Ltd v Silvia [1989] FCA 402 at 445 and 457.
Dynamic concept
The definition of “personal property” in section 10 of PPSA 2009 and the definitions of the specific components of personal property covered by PPSA 2009 ensure that it will not be hamstrung by traditional concepts of personal property but will be able to adapt to new forms of personal property. For example, the definition of “investment instrument”, in section 10 provides a list of financial products, including “any other financial product that is prescribed by the regulations”.
Grantor must have rights in collateral
PPSA 2009 applies to personal property only if the grantor has rights in the collateral, or the power to transfer rights in the collateral to the secured party (PPSA 2009, section 19). This is one of the requirements for attachment of a security interest. If the security interest is not attached to the collateral, then it is not enforceable between the grantor and the secured party and it cannot be perfected under PPSA 2009.
Lavan Legal comment
PPSA 2009 covers most forms of tangible personal property but there are some notable exceptions.
