Chapter 25 Enforcing security interests

There are specific rules under the PPSA relating to the enforcement of security interests. In particular, these rules concern the seizure, disposal and retention of collateral (ie goods subject to security interests). For further information, refer to Chapter 4 of the PPSA.

Seizure, disposal and retention

If the debtor is in default, the secured party may seize collateral by any method permitted by law. There are special rules for seizing collateral where it is intangible, cannot be readily moved or the secured party already has possession or control of the collateral.

When disposing of collateral, the secured party is subject to certain duties. Most important is the duty to exercise all reasonable care to dispose of the collateral for its market value or, if there is no market value, to obtain the best price. Disposal of collateral must be by private or public sale, or by lease if the security agreement so provides.

For collateral that is not used predominantly for personal, domestic or household purposes, a secured party may retain collateral subject to notice and objection rights.

In most cases, a secured party must give no less than 10 business days notice to ‘interested’ persons before either disposing or retaining collateral.

Chapter 4 of the PPSA does not set out all of the requirements that may relate to the enforcement of a security interest. For example it may still be necessary to consider the National Consumer Credit Protection Act 2009 (Cth) in respect of an enforcement involving consumer goods or the laws of a state or territory where the subject of a security interest is a licence.

Exclusions and contracting out of enforcement provisions

The PPSA has been drafted to cover wide categories of security interests for both consumer and commercial property. It therefore contains a number of consumer protection provisions. In the case of commercial property it is possible to contract out of some of the enforcement provisions in the PPSA. It is common practice for contractual parties in a commercial context to contract out of some of the consumer protection provisions of the PPSA, although the extent of contracting out can be a matter that is negotiated according to the particular circumstances.

In addition some types of security interest are not regulated by Chapter 4 of the PPSA. For example a PPS Lease that does not secure payment or performance of an obligation is not regulated under Chapter 4 of the PPSA (see section 109(1) (c)).

Updated February 2020