6. The Personal Property Securities Act 1999

Voidable Transactions

Competition and Enterprise Branch

[ Last Updated 24 November 2005 ]

At present, many unregistered charges over personal property, such as a chattel mortgage, are void against the Assignee on the bankruptcy of the owner of the property.⁵⁰ So, on the owner's bankruptcy, the person holding that security will lose it and will instead rank as an unsecured creditor.

However, this situation will change when the Personal Property Securities Act 1999 ("PPSA") comes into force. Under the PPSA, an unperfected security interest (which includes unregistered security interests⁵¹) will not be void as against the Assignee. This change is likely to result in the Assignee challenging more securities over personal property under section 57 of the Insolvency Act.

The PPSA will also change the language used in statutes to refer to many security interests. If section 57 were to be retained in its current form, or left substantially unamended, the wording will need to be brought into line with that used in the PPSA. The same considerations will apply in relation to voidable charges under the equivalent section in the Companies Act, section 293.

Recommendation:

Any amendment made to voidable transactions law will need to be aligned with the PPSA.

⁵⁰This includes charges covered by the Chattels Transfer Act 1924, but not, for example, charges against motor vehicles under the Motor Vehicle Securities Act 1989.

⁵¹Note that there are other ways to perfect a security interest under the PPSA, so an unperfected security interest cannot simply be equated with an unregistered security interest.