Div 4deals with situations where collateral or a grantor of a security interest is relocated from a foreign jurisdiction to Australia. The security interest in the collateral is temporarily perfected if certain conditions are met.

Division 4 deals with situations where collateral or a grantor of a security interest is relocated from a foreign jurisdiction to Australia. The security interest in the collateral is temporarily perfected if certain conditions are met. > proceeds of collateral to which a security interest is (or is to be) attached means identifiable or traceable personal property of the following types, subject to subsections (2) and (3): (a) personal property that is derived directly or indirectly from a dealing with the collateral (or proceeds of the collateral); (b) a right to an insurance payment or other payment as indemnity or compensation for loss of, or damage to, the collateral (or proceeds of the collateral); (c) a payment made in total or partial discharge or redemption of the collateral (or proceeds of the collateral), if the collateral (or proceeds) consists of any of the following: (d) if the collateral is intellectual property (or an intellectual property licence)—in addition to any other proceeds, the right of a licensor of the property (whether or not the property is itself a licence) to receive payments under any licence agreement in relation to the collateral; > Note: In section 140 (distribution of proceeds received by secured party) proceeds has its ordinary meaning, so this definition does not apply. (2) Proceeds are traceable whether or not there is a fiduciary relationship between the person who has a security interest in the proceeds, as provided in section 32, and the person who has rights in or has dealt with the proceeds. (ii) the grantor has the power to transfer rights in the proceeds to the secured party (or to a person nominated by the secured party); and Note: Paragraph 140(2)(f) provides for the distribution of an amount or proceeds to the grantor upon the enforcement of a security interest. (4) The proceeds of collateral that is crops include the harvested produce of the crops, if the produce is identifiable or traceable. (5) The proceeds of collateral that is livestock include products of the livestock (for example, meat or wool), if the products are identifiable or traceable. (6) However, livestock are not the proceeds of collateral merely because they are the unborn young, or the offspring, of livestock that are collateral. (ii) the secured party expressly or impliedly agreed that a dealing giving rise to the proceeds would extinguish the security interest; and > Note 1: The effect of paragraph (a) is to extinguish the security interest in the collateral if the secured party expressly or impliedly authorised the dealing mentioned. > Note 2: A transferee can also take the collateral free of the security interest because of the operation of another provision of this Act (for example, under Part 2.5). (2) If the secured party enforces a security interest against both collateral (other than an investment instrument or an intermediated security) and proceeds, the amount secured by the security interest in the collateral and proceeds is limited to the market value of the collateral immediately before the collateral gave rise to the proceeds. > Note: For the enforceability of a security interest against a third party in relation to proceeds, see also subsection 20(6). (3) However, subsection (2) does not apply if, at the time of the transfer of the collateral, the transferee has actual or constructive knowledge that the transfer was in breach of a security agreement that provides for the security interest in the collateral. (4) To avoid doubt, subsection (2) does not affect any right the secured party may have to recover the amount secured without enforcing the security interest. (5) For the purposes of section 55 (default priority rules), the time of registration or possession in relation to original collateral, or the time of perfection of a security interest in original collateral, is also the time of registration, possession or perfection in relation to the proceeds of the original collateral. > Note: The effect of subsection (5) is that the security interest in the proceeds has the same default priority as the security interest in the original collateral. (1) A security interest in proceeds is perfected if the security interest in the original collateral is perfected by a registration that: (a) describes the proceeds, if the description complies with any regulations made for the purposes of paragraph (d) of item 4 of the table in section 153 (financing statements with respect to security interests); or (b) covers the original collateral, if the proceeds are of a kind that are within the description of the original collateral; or (c) covers the original collateral, if the proceeds consist of currency, cheques or an ADI account, or a right to an insurance payment or any other payment as indemnity or compensation for loss or damage to the collateral or proceeds. (2) If a security interest in original collateral is perfected, but a security interest in the proceeds is not perfected under subsection (1), the security interest in the proceeds is temporarily perfected for the period starting at the time the security interest in the original collateral attaches to the proceeds and ending at the end of 5 business days afterwards. (3) However, the security interest in the proceeds under subsection (2) becomes unperfected at the end of the period mentioned in that subsection, unless the security interest in the proceeds is perfected otherwise than under the subsection before the end of the period. (1) If collateral is transferred, and at the time of the transfer a secured party held a perfected security interest in the collateral, the security interest is temporarily perfected for the period starting at the time of the transfer and ending at the earliest of the following times: (b) if the security interest was perfected by registration at the time of the transfer—the end time for the registration (as registered at the time of the transfer); (c) if another security interest attaches to the collateral at or after the time of the transfer, and the other security interest is perfected: (i) in a case in which the original secured party consented to the transfer—the end of 5 business days after the day of the transfer; or (ii) in a case in which the original secured party otherwise acquires the actual or constructive knowledge required to perfect the original secured party’s interest by registration (or to re‑perfect the interest by an amendment of a registration)—the end of 5 business days after the day the original secured party acquires the knowledge. > Note: The knowledge required is the knowledge of the transferee’s (the new grantor’s) details. Unless these are registered, the original secured party’s registration may be ineffective under section 165. (2) However, the security interest becomes unperfected immediately after the earliest time mentioned in subsection (1), unless, at or before that time, the security interest is perfected otherwise than under subsection (1). (3) This section does not apply in relation to a transfer of collateral if the transferee takes the collateral free of the security interest. (1) A security interest in goods that is perfected by possession of the goods or a negotiable document of title to the goods under subsection 22(1) is temporarily perfected for the period covered by subsection (2) of this section if possession of the goods or document is given to the grantor or the debtor at a particular time (the action time) for the purpose of any of the following actions in relation to the goods: (2) This subsection covers the period starting at the action time and ending at the end of 5 business days after the day the action time occurs. (3) However, the security interest in the goods or document becomes unperfected at the end of the period covered by subsection (2), unless the security interest is perfected otherwise than under subsection (1) before the end of the period. (1) A security interest in a negotiable instrument or an investment instrument that is perfected by possession or control is temporarily perfected for the period covered by subsection (2) if possession or control of the instrument is given to the grantor or the debtor at a particular time (the action time) for the purpose of any of the following actions in relation to the instrument: (2) This subsection covers the period starting at the action time and ending at the end of 5 business days after the day the action time occurs. (3) However, the security interest in the instrument becomes unperfected at the end of the period covered by subsection (2), unless the security interest in the instrument is perfected otherwise than under subsection (1) before the end of the period. (1) If a grantor or debtor sells or leases goods that are subject to a security interest, and the buyer or lessee takes the goods free of the security interest because of the operation of this Act, the security interest reattaches to the goods at a particular time (the repossession time) if, at that time, the goods come into the possession of the grantor or debtor, or of a transferee of chattel paper created by the sale or lease, in any of the following circumstances: (d) the grantor or debtor repossesses the goods in the exercise of a right in enforcing the contract of sale or the lease; (2) The perfection of the security interest, and the time of registration or perfection of the security interest, are to be determined as if the goods had not been sold or leased, if: (1) If a sale or lease of goods creates an account or chattel paper, and the account or chattel paper is transferred to another person, the transferee is taken to have a security interest (the deemed goods security interest) in the goods if, at a particular time (the repossession time) the goods come into the possession of the transferor, or of the transferee, in any of the following circumstances: (3) If the transferee has a security interest in the account or chattel paper that is perfected by possession or registration at the repossession time, the deemed goods security interest is temporarily perfected for the period starting at the possession time and ending at the end of 5 business days after the day the repossession time occurs. (4) However, the deemed goods security interest becomes unperfected at the end of the period mentioned in subsection (3), unless the deemed goods security interest is perfected otherwise than under subsection (3) before the end of the period. (1) A security interest in collateral that has been located in a jurisdiction (the foreign jurisdiction) outside Australia, and is relocated to Australia, is taken to have been continuously perfected for the period covered by subsection (2) if, immediately before the collateral became located in Australia, and at the time it became so located: (i) if the law of the foreign jurisdiction provides for the perfection (and the effect of perfection or non‑perfection) of the security interest—when the security interest last became perfected under that law; (ii) if subparagraph (i) does not apply to the law of the foreign jurisdiction, but that law provides for the public registration or recording of the security interest, or of a notice relating to the security interest—when the security interest, or such a notice, was so registered or recorded (or was last so registered or recorded); (iii) if neither subparagraph (i) nor (ii) applies to the law of the foreign jurisdiction—when the security interest last became enforceable against third parties under that law; and (2A) However, a security interest in collateral is not taken to have been continuously perfected under subsection (1) if, immediately before the collateral became located in Australia: (a) in a case in which the law of the foreign jurisdiction provides for the perfection (and effect of perfection or non‑perfection) of the security interest—the security interest was not perfected under that law; or (b) in a case in which paragraph (a) does not apply to the law of the foreign jurisdiction, but that law provides for the public registration or recording of the security interest, or of a notice relating to the security interest—the security interest, or such a notice, was not so registered or recorded. (3) If a security interest in collateral is continuously perfected under subsection (1), the security interest in the collateral is temporarily perfected for the period: (ii) the end of 5 business days after the day the secured party has actual knowledge that the collateral has become located in Australia. (4) However, the security interest in the collateral becomes unperfected at the end of the period mentioned in subsection (3), and is taken never to have been temporarily perfected, unless the security interest is perfected otherwise than under subsection (3) before the end of the period. (1) If the law of a foreign jurisdiction has governed a security interest in intangible property, or financial property, the security interest is taken to have been continuously perfected for the period covered by subsection (2) if: (c) as a result of the occurrence of the relocation event, the perfection (and the effect of perfection or non‑perfection) of the security interest becomes governed by the law of Australia. (i) if the law of the foreign jurisdiction provides for the perfection (and the effect of perfection or non‑perfection) of the security interest—when the security interest last became perfected under that law; (ii) if subparagraph (i) does not apply to the law of the foreign jurisdiction, but that law provides for the public registration or recording of the security interest, or of a notice relating to the security interest—when the security interest, or such a notice, was so registered or recorded (or was last so registered or recorded); (iii) if neither subparagraph (i) nor (ii) applies to the law of the foreign jurisdiction—when the security interest last became enforceable against third parties under that law; and (2A) However, a security interest is not taken to have been continuously perfected under subsection (1) if, immediately before the relocation event: (a) in a case in which the law of the foreign jurisdiction provides for the perfection (and effect of perfection or non‑perfection) of the security interest—the security interest was not perfected under that law; or (b) in a case in which paragraph (a) does not apply to the law of the foreign jurisdiction, but that law provides for the public registration or recording of the security interest, or of a notice relating to the security interest—the security interest, or such a notice, was not so registered or recorded. (3) If a security interest in collateral is continuously perfected under subsection (1), the security interest in the collateral is temporarily perfected for the period: (4) However, the security interest in the collateral becomes unperfected at the end of the period mentioned in subsection (3), and is taken never to have been temporarily perfected, unless the security interest is perfected otherwise than under subsection (3) before the end of the period. > Note: The property mentioned in paragraph (5)(a) is intangible property; negotiable instruments are financial property (see section 10). Rules are set out for when personal property may be bought or leased free of a security interest in relation to the following: If a transferee takes personal property (or an accession) free of a security interest by the operation of this Part, the secured party’s rights are subrogated to the rights of the transferor. Payment of the purchase price before the transferee receives notice of subrogation discharges the transferee’s obligation (to the extent of the payment). (i) whether or not the security interest is perfected (except in sections 43 (unperfected interests) and 52 (temporarily perfected interests)); and (b) does not apply to the acquisition of an interest in personal property free of a security interest if the interest that is taken is itself a security interest (except in sections 50 (investment instruments) and 51 (intermediated securities)). Note: Some acquisitions to which section 50 applies, and all acquisitions to which section 51 applies, consist of the taking of security interests (see subsections 50(3) and 51(1)). (1) A buyer or lessee of personal property, for value, takes the personal property free of an unperfected security interest in the property. (2) Subsection (1) does not apply if the unperfected security interest was created or provided for by a transaction to which the buyer or lessee is a party, unless the personal property concerned is of a kind prescribed by the regulations for the purposes of this subsection. (a) the regulations provide that personal property of that kind may, or must, be described by serial number in a registration; and (b) searching the register, immediately before the time of the sale or lease, by reference only to the serial number of the property, would not disclose a registration that perfected the security interest. (b) the security interest was created or provided for by a transaction to which the buyer or lessee is a party, unless the personal property concerned is of a kind prescribed by regulations for the purposes of this paragraph. (3) Within the period of 24 months after the registration commencement time, subsection (1) does not apply if the security interest is a transitional security interest, other than: (1) A buyer or lessee, for new value, of a motor vehicle of a kind prescribed by the regulations for the purpose of this section, takes the motor vehicle free of a security interest in the motor vehicle if: (b) there is a time during the period between the start of the previous day and the time of the sale or lease by reference to which a search of the register (by reference otherwise only to the serial number of the motor vehicle) would not disclose a registration that perfected the security interest; and (ii) if the person who granted the security interest has lost the right to possess the motor vehicle, or is estopped from asserting an interest in the motor vehicle—another person who is in possession of the motor vehicle. (3) A buyer or lessee, for new value, of a motor vehicle of a kind prescribed by the regulations for the purpose of this section takes the motor vehicle free of a security interest in the motor vehicle if: (d) the buyer or lessee buys or leases the motor vehicle with actual or constructive knowledge that the sale or lease constitutes a breach of the security agreement that provides for the security interest. (1) A buyer or lessee of personal property takes the personal property free of a security interest given by the seller or lessor, or that arises under section 32 (proceeds—attachment), if the personal property was sold or leased in the ordinary course of the seller’s or lessor’s business of selling or leasing personal property of that kind. (a) in a case in which personal property of that kind may, or must, be described by serial number—the buyer or lessee holds the personal property: (b) in any case—the buyer or lessee buys or leases the personal property with actual knowledge that the sale or lease constitutes a breach of the security agreement that provides for the security interest. (1) A buyer or lessee of personal property, for new value, that the buyer or lessee intends (at the time of purchase or lease) to use predominantly for personal, domestic or household purposes takes the personal property free of a security interest in the property if the market value (worked out at the time each part of the total new value is given) of the total new value given for the personal property is not more than: (a) the personal property is of a kind that the regulations provide may, or must, be described by serial number in a registration; or (b) the buyer or lessee buys or leases the personal property with actual or constructive knowledge that the sale or lease constitutes a breach of the security agreement that provides for the security interest; or (c) at the time the contract or agreement providing for the sale or lease is entered into, the buyer or lessee believes, and it is actually the case, that the market value of the personal property is more than: A holder of currency takes the currency free of a security interest in the currency if the holder acquires the currency with no actual or constructive knowledge of the security interest. #### 49 Taking investment instrument or intermediated security free of security interest in the ordinary course of trading A person who buys an investment instrument or an intermediated security in the ordinary course of trading on a declared financial market (within the meaning of the Corporations Act 2001) takes the instrument or intermediated security free of a security interest in the instrument or intermediated security. (1) A purchaser (see subsection (3)) of an investment instrument, other than a secured party, takes the instrument free of a security interest in the instrument if: (2) Subsection (1) does not apply if the purchaser takes the instrument with actual or constructive knowledge that the taking constitutes a breach of the security agreement that provides for the security interest. > purchaser, in relation to an investment instrument, means a person who takes the instrument by sale, lease, discount, assignment, negotiation, mortgage, pledge, lien, issue, reissue or any other consensual transaction that creates an interest in personal property. (1) A person (the transferee) who takes an interest in an intermediated security takes the interest free of a security interest in the intermediated security if: (b) the credit of the interest in the financial product in relation to which the intermediated security arises is made in accordance with a consensual transaction. (2) Subsection (1) does not apply if, at the time the interest is taken, the transferee has actual or constructive knowledge that crediting the interest in the financial product constitutes a breach of a security agreement that provides for a security interest in any intermediated security or financial product. (1) A buyer or lessee, for new value, of the proceeds of personal property, or of goods or a negotiable document of title, takes the proceeds, goods or document free of a security interest that is temporarily perfected by force of this Act (other than a transitional security interest perfected by force of section 322) immediately before the time of the sale or lease, if the security interest is not otherwise perfected at that time. (2) Subsection (1) does not apply if the buyer or lessee has actual knowledge that the sale or lease constitutes a breach of the security agreement that provides for the security interest at: (a) the time new value is first given for the sale or lease, if the personal property is bought or leased with the intention of using it predominantly for personal, domestic or household purposes; or (b) as a result, the transferee takes the personal property, or an accession to the property, free of a secured party’s security interest because of the operation of this Part. (2) The rights of the secured party are subrogated, in relation to the property, to the rights (if any) of the transferor and any predecessor of the transferor (including the right to receive any part of the purchase price for the property which has not been paid). (3) If a person who is liable to pay the purchase price of personal property makes a payment before receiving notice of a secured party’s right under subsection (2), the payment discharges the obligation of the person to the extent of the payment. This Part deals with how to work out the priority between competing security interests in collateral (and in some cases, other kinds of interests). Priority rules are relevant when the same personal property is subject to 2 or more security interests. If the debtor defaults, the rules determine the order of priority in which the various secured parties can enforce their security interests under Chapter 4. (b) priority between perfected interests amongst themselves, and unperfected interests amongst themselves, is determined on a first‑in‑time basis. The Division contains other rules of general application (such as the priority that applies to the proceeds of collateral). Security interests perfected by control have the highest priority. For example, a security interest held by an ADI in an ADI account with the ADI has priority over any other security interest in the ADI account. An ADI has control over an ADI account held with the ADI (see section 25). Only the ADI with which an ADI account is held may perfect a security interest in the ADI account by control (see section 21). A security interest perfected by control has priority over any other security interest in the same collateral (see section 57). Division 3 deals with the priority rules that apply when one of the security interests is a perfected purchase money security interest. These interests are exceptions to the first‑in‑time rule (except for certain security interests in an account dealt with in section 64). A perfected purchase money security interest that is granted to a seller, lessor or consignor takes priority over a perfected purchase money security interest that is granted to others. Division 4 deals with priority of security interests in transferred collateral where a transferor and a transferee have both granted security interests in the transferred collateral. Provided the transferor‑granted security interest has remained perfected, that security interest will take priority. Division 5 deals with the priority of certain creditors who have their debts repaid. The priority of those who purchase negotiable instruments, chattel paper and negotiable documents of title is also dealt with. Generally, the purchaser’s interest will take priority over a security interest in the negotiable instrument, chattel paper or negotiable document of title. (d) security interests in accounts, financial property or intermediated securities if a foreign law governs their perfection but does not provide for public registration. (1) This section sets out the priority between security interests in the same collateral if this Act provides no other way of determining that priority. (2) Priority between unperfected security interests in the same collateral is to be determined by the order of attachment of the security interests. (3) A perfected security interest in collateral has priority over an unperfected security interest in the same collateral. (4) Priority between 2 or more security interests in collateral that are currently perfected is to be determined by the order in which the priority time (see subsection (5)) for each security interest occurs. (5) For the purposes of subsection (4), the priority time for a security interest in collateral is, subject to subsection (6), the earliest of the following times to occur in relation to the security interest: (b) the time the secured party, or another person on behalf of the secured party, first perfects the security interest by taking possession or control of the collateral; (6) A time is a priority time for a security interest only if, once the security interest is perfected at or after that time, the security interest remains continuously perfected. > Note: A security interest in the proceeds of original collateral has the same default priority as the security interest in the original collateral (see subsection 32(5)). (1) For the purposes of this Act, a security interest is continuously perfected after a particular time if the security interest is, after that time, perfected under this Act at all times. (2) A security interest may be continuously perfected after a particular time even if, after that time, it is perfected in 2 or more different ways: (1) A security interest in collateral that is currently perfected by control has priority over a security interest in the same collateral that is currently perfected by another means. > Note: Only security interests in certain kinds of property can be perfected by control (see paragraph 21(2)(c) and Part 2.3). (2) Priority between 2 or more security interests in collateral that are currently perfected by control is to be determined by the order in which the interests were perfected by control (where the perfection by control has been continuous). (2A) A perfected security interest (the priority interest) in the proceeds of original collateral has priority over any other security interest in the proceeds, except a security interest in the proceeds as original collateral that is perfected by control, if: (a) the security interest in the first‑mentioned original collateral was perfected by control when the collateral gave rise to proceeds; and A security interest provided for by a security agreement has the same priority in respect of all advances (including future advances), and the performance of all obligations, secured by the agreement. A security interest (the first security interest) has priority over another security interest (the last security interest) if, by the operation of this Act (including this section): (a) the first security interest has priority over security interests of a particular kind (the intermediate security interests); and If a security interest in collateral is transferred, the transferred interest has the same priority immediately after the transfer as it had immediately before the transfer. (1) A secured party may (in a security agreement or otherwise) subordinate the secured party’s security interest in collateral to any other interest in the collateral. (b) may be enforced by a third party if the third party is the person, or one of a class of persons, for whose benefit the subordination is intended. (1) This section sets out when a perfected purchase money security interest that is granted by a grantor in collateral or its proceeds has priority over a perfected security interest that is granted by the same grantor in the same collateral, but that is not a purchase money security interest. (i) for inventory that is goods—the grantor, or another person at the request of the grantor, obtains possession of the inventory; or (c) the registration that perfects the purchase money security interest states, in accordance with item 7 of the table in section 153, that the interest is a purchase money security interest. > Note: This subsection is subject to sections 64 (non‑purchase money security interest in accounts) and 71 (chattel paper). (b) the purchase money security interest is perfected by registration before the end of 15 business days after whichever of the following days applies: (c) the registration that perfects the purchase money security interest states, in accordance with item 7 of the table in section 153, that the interest is a purchase money security interest. A perfected purchase money security interest (the priority interest) that is granted by a grantor in collateral or its proceeds to a seller, lessor or consignor of the collateral has priority over any other perfected purchase money security interest that is granted by the same grantor in the same collateral if the priority interest is perfected: (a) if the collateral is inventory that is goods—at the time the grantor, or another person at the request of the grantor, obtains possession of the collateral; or (c) if the collateral is not inventory, and is goods—before the end of 15 business days after the day the grantor, or another person at the request of the grantor, obtains possession of the collateral; or (d) if the collateral is not inventory, and is not goods—before the end of 15 business days after the day the priority interest attaches to the collateral. Non‑purchase money security interest in account as original collateral has priority over purchase money security interest in account as proceeds of inventory (1) Despite subsection 62(2), a non‑purchase money security interest (the priority interest) granted for new value in an account as original collateral and perfected by registration has priority over a perfected purchase money security interest that is granted by the same grantor in the account as proceeds of inventory, if: (i) the secured party holding the priority interest gives a notice in accordance with subsection (2) to the secured party holding the purchase money security interest; (ii) the notice is given at least 15 business days before the earlier of the day on which the registration time for the account occurs and the day the priority interest attaches to the account. (3) If a person has a purchase money security interest in an account as proceeds of inventory that is subordinate to a non‑purchase money security interest under subsection (1): (a) the person is taken to have a purchase money security interest in both the proceeds of the inventory and in the new value mentioned in subsection (1); and (b) the purchase money security interest in the new value is taken to be perfected by the registration that perfected the purchase money security interest in the proceeds; and (c) the new value is taken to be an account for the purposes of this Act (except for the purposes of this section or paragraph 12(3)(a) (account transferee’s interest taken to be security interest)). (4) However, if the new value mentioned in paragraph (3)(c) would be an account for the purposes of this Act in the absence of that paragraph, the paragraph does not prevent the new value from being an account for the purposes of this section or paragraph 12(3)(a). For the purposes of this Division, if goods are shipped by common carrier to a grantor, or to a person designated by the grantor, the grantor does not obtain possession of the goods until the grantor, or a third party at the request of the grantor, obtains actual possession of the goods or a document of title to the goods, whichever is earlier. (1) This Division sets out the priority between 2 security interests (a transferor‑granted interest and a transferee‑granted interest) if: (b) immediately before the transfer, a security interest (the transferor‑granted interest) is attached to the collateral; and (c) the transferee grants (whether before or after the transfer) a security interest (the transferee‑granted interest) in the transferred collateral; and > Note 1: If either or both of the interests are currently perfected by control under paragraph 21(2)(c), section 57 applies. > Note 2: If the priority between a transferor‑granted interest and a transferee‑granted interest is not covered by this section, then section 55 applies. (2) This Division does not prevent a secured party from perfecting a security interest in any way in order to have priority over another security interest. (1) The transferor‑granted interest in the transferred collateral has priority (except as mentioned in subsection (2)) if: Note: See subsection 34(3) for one situation in which a security interest may become unperfected following a transfer of collateral. (e) a notice is given (whether before or after the interest is re‑perfected as mentioned in paragraph (d)) to all other secured parties who have a registration that describes the transferred collateral; and (b) the transferee‑granted interest is perfected immediately before the transferor‑granted security is re‑perfected as mentioned in paragraph (1)(d); and (c) the transferee acquires the collateral without actual or constructive knowledge that the acquisition constitutes a breach of the security agreement that provides for the transferor‑granted interest; and (d) the transferee‑granted interest secures performance of an advance made, or an obligation incurred, by the transferee’s secured party before: (4) For the purposes of this section, the transferred collateral is registered with a serial number at a particular time only if a 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. ### Division 5—Priority of creditors, and purchasers of negotiable instruments, chattel paper and negotiable documents of title (1) The interest of a creditor who receives payment of a debt owing by a debtor through a payment covered by subsection (3) has priority over a security interest (whether perfected or unperfected) in: > Note: Example: A bank account from which the funds were paid is an example of an intangible that was the source of the payment. (2) Subsection (1) does not apply if, at the time of the payment, the creditor had actual knowledge that the payment was made in breach of the security agreement that provides for the security interest. (b) a debit, transfer order, authorisation, or similar written payment mechanism executed by the debtor when the payment was made; or (2) The interest of the person in the negotiable instrument has priority over a perfected security interest in the negotiable instrument if: (i) in the case of a person who acquired the interest in the ordinary course of the person’s business of acquiring interests of that kind—acquired the interest without actual or constructive knowledge that the acquisition constitutes a breach of the security agreement that provides for the security interest; or (2) The interest of the person in the chattel paper has priority over the following security interests in the chattel paper: (a) if the person took possession of the chattel paper without actual or constructive knowledge of a perfected security interest in the chattel paper—the perfected security interest; The interest of a holder of a negotiable document of title has priority over a perfected security interest in the document of title if: (i) in the case of a holder who acquired the document of title in the ordinary course of the holder’s business of acquiring documents of title of that kind—acquired the interest without actual or constructive knowledge that the acquisition constitutes a breach of the security agreement that provides for the security interest; or (i) under a law of the Commonwealth, a State or a Territory, unless the person who owns the collateral in which the priority interest is granted agrees to the interest; or (d) no law of the Commonwealth, a State or a Territory provides for the priority between the priority interest and the security interest; and Example: A law of the Commonwealth, a State or a Territory to which subsection (2) applies is a law that provides for the priority between the priority interest and the security interest. (e) the person who holds the priority interest acquired the interest without actual knowledge that the acquisition constitutes a breach of the security agreement that provides for the security interest. (2) The priority between an interest in collateral (the statutory interest) that arises, by being created, arising or being provided for, under a law of the Commonwealth, a State or a Territory (the relevant jurisdiction) and a security interest in the same collateral is to be determined in accordance with that law if, and only if: (4) The Minister may make a legislative instrument containing a declaration, or determining priority, or both, for the purposes of subsection (3). (6) An interest (the priority interest) in collateral has priority over a security interest in the collateral if the priority interest is an interest of a kind mentioned in subparagraph 8(1)(f)(ii) (certain rights to payment in respect of land). (7) The priority between an interest in collateral (the general law interest) that arises by operation of the general law and a security interest in the same collateral is to be determined in accordance with an instrument made under subsection (8) if, and only if: (a) no law of the Commonwealth (other than this Act and that instrument) provides for the priority between the general law interest and the security interest; and > Note: This section does not apply to priorities in relation to interests that arise before the registration commencement time (within the meaning of section 306). Priorities in relation to such interests are unaffected by this Act (see section 312). (1) The interest of an execution creditor in collateral has priority over any security interest in the same collateral that is not perfected at the time covered by subsection (4) (even if such a security interest is later perfected). (a) if the collateral is seized by the execution creditor or by another person on behalf of the execution creditor—the time of seizure; To avoid doubt, a perfected security interest, held by an ADI, in an ADI account with the ADI has priority over any other perfected security interest in the ADI account. > Note 1: A security interest that is held by an ADI in an ADI account is perfected by control (see paragraph 21(2)(c) and section 25). > Note 2: This provision does not affect any right of set‑off the grantor might have in relation to the account (see paragraph 8(1)(d)). (1) A perfected security interest in goods that has reattached to the property under subsection 37(1) has priority over a security interest in the goods that is granted by the operation of subsection 38(1) to a transferee of an account. > Note: Section 37 deals with security interests that reattach when goods are returned. Section 38 provides for a security interest in an account or chattel paper to arise automatically when goods are returned. (2) A security interest in goods that is granted by the operation of subsection 38(2) to a transferee of chattel paper has priority over the following perfected security interests: (a) a perfected security interest in the goods that is granted by the operation of subsection 38(2) to a transferee of an account; (b) if the transferee takes possession of the chattel paper in the ordinary course of business of acquiring chattel paper of that kind and for new value: (ii) a perfected security interest in the goods as after‑acquired property that attaches when the goods come into the possession of the grantor or transferee in the circumstances mentioned in paragraph 37(1)(d). (3) A security interest (the priority interest) in goods that is granted by a person who acquires an interest in the property has priority over a security interest in the goods that reattaches under section 37, or is granted by the operation of section 38, if: (b) immediately before the repossession time (referred to in paragraph 37(1)(d) or 38(1)(d)), the priority interest is perfected. (1) This section applies to a security interest (the priority interest) in an account, financial property or an intermediated security if the law of the jurisdiction that governs the perfection, and the effect of perfection or non‑perfection, of the priority interest does not provide for the public registration or recording of the priority interest, or a notice relating to the priority interest. (2) A priority interest in an account has priority, in proceedings in an Australian court, over another interest in the account (whether or not the other interest is a security interest) if the priority interest is perfected by registration under this Act before the other interest attaches to the account. (3) A priority interest in personal property that is financial property or an intermediated security has priority, in proceedings in an Australian court, over another interest in the personal property (whether or not the other interest is a security interest) if: (a) the priority interest is perfected by registration under this Act before the other interest attaches to the personal property; and (4) Subsections (2) and (3) apply in proceedings in an Australian court even if the law of another jurisdiction applies in the proceedings in relation to a security interest in an account or financial property under subsection 239(2) or 240(4) or (5). Collateral may be transferred despite a contrary provision in a security agreement (or a provision declaring the transfer to be a default), if the grantor and transferee consent, or by the operation of law. The rights of a transferee of an account or chattel paper are subject to the contract between the account debtor and the transferor, and certain general law claims the account debtor may have against the transferor. A modification of the contract (or a substituted contract) between the account debtor and the transferor is effective against the transferee except in certain situations (dishonesty, commercial unreasonableness or adverse effects on the transferee’s rights or the transferor’s ability to perform the contract). A term in a contract between an account debtor and a transferor that imposes certain restrictions on the transfer of an account or chattel paper binds the transferor to the extent of making the transferor liable in damages for breach of contract, but is unenforceable against third parties. (1) If collateral would be able to be transferred (including by sale, by creating a security interest or under proceedings to enforce a judgment) but for a provision in a security agreement prohibiting the transfer or declaring the transfer to be a default, the collateral may be transferred, despite the provision: (2) A transfer mentioned in subsection (1) does not prejudice the rights of the secured party under the security agreement or otherwise, including the right to treat a prohibited transfer as an act of default. (a) the terms of the contract between the account debtor and the transferor, and any equity, defence, remedy or claim arising in relation to the contract (including a defence by way of a right of set‑off); and (b) any other equity, defence, remedy or claim of the account debtor against the transferor (including a defence by way of a right of set‑off) that accrues before the first time when payment by an account debtor to the transferor no longer discharges the obligation of the account debtor under subsection (8) to the extent of the payment. (2) Subsection (1) does not apply if the account debtor makes an enforceable agreement not to assert defences to claims arising out of the contract. (3) Unless the account debtor has otherwise agreed, a modification of, or substitution for, the contract between the account debtor and the transferor is effective against the transferee (including a secured party or a receiver) if: (a) to the extent that a transferred right to payment arising out of the contract has not been fully earned by performance; and (5) If a contract has been modified or substituted in the manner described in subsection (3), the transferee obtains rights that correspond to the rights of the transferor under the contract as modified or substituted. (6) Nothing in subsections (3) to (5) affects the validity of a term in a transfer agreement that provides that a modification or substitution mentioned in subsection (3) is a breach of contract by the transferor. (7) If an account or chattel paper is transferred, the account debtor may continue to make payments under the contract to the transferor: (8) Payment by an account debtor to a transferee in accordance with a notice under paragraph (7)(a) (including in the circumstances described in paragraph (7)(b)) discharges the obligation of the account debtor to the extent of the payment. (ii) the whole of an account that arises from granting a right (other than a right granted under a construction contract), or providing services (other than financial services), in the ordinary course of a business of granting rights or providing services of that kind (whether or not the account debtor is the person to whom the right is granted or the services are provided); (a) is binding on the transferor, but only to the extent of making the transferor liable in damages for breach of contract; and