Australia: PPSA and agribusiness: What you should know about priorities and enforcement

The Personal Property Securities Act 2009 (Cth) (PPSA) has provisions on priorities and enforcement which are particularly relevant to agribusiness.


Special priorities apply to security interests over the products of agribusiness - crops and livestock - when granted to enable crops to be produced, or livestock to be fed or developed.

A perfected security interest in crops has priority over any other security interest granted by the same grantor in the crops if the perfected security interest is granted for value to enable the crops to be produced, and the security agreement providing for the perfected security interest is made while the crops are growing, or the crops are planted within 6 months after the security agreement is made: PPSA s85.

Similarly, a perfected security interest in livestock has priority over any other security interest (other than a purchase money security interest) granted by the same grantor in the same livestock if the perfected security interest is granted for value to enable the livestock to be fed or developed, and the livestock are held by the grantor at the time the security agreement is made, or acquired by the grantor within 6 months after the security agreement is made: PPSA s86.

These priorities extend to the proceeds of crops and livestock.

Despite the special priority for some security interests over crops, the PPSA provides that a security interest in crops does not prejudicially affect the rights of a lessor or mortgagee of the land where the crops are growing, if their rights existed when the security interest in the crops was created, and the lessor or mortgagee has not consented in writing to the security interest: PPSA s84(1). However, a perfected security interest in crops is not prejudicially affected by a later sale, lease or mortgage of the land: s84(2). A perfected PPSA security interest in crops will therefore take priority over a subsequent mortgage over the land on which the crops are growing.

Interests in land excluded from the PPSA include a right to payment in connection with an interest in land, where the writing evidencing the interest specifically identifies that land (PPSA s8(1)(f)(ii)), such as a right to receive rent under a land mortgage that specifically identifies the mortgaged land. These interests have priority over a PPSA security interest in the same collateral: PPSA s73(6). Under this rule a secured party with a general security interest over all assets of the grantor that does not specifically identify any charged land would lose out in priority to a mortgagee of land, if both securities covered rights to payments from the land.


There are also special rules in the PPSA dealing with enforcing a security interest over crops or livestock. These will apply unless the parties to the security agreement have contracted out of them. The PPSA allows contracting out when the collateral is not used predominantly for personal, domestic or household use: s115.

A secured party can seize crops or their proceeds by taking possession of them or by cutting, gathering or harvesting them. To exercise these powers, the secured party may enter the land or water source where the crops are or were growing, even if the land is not owned by the grantor of the security interest. However the right of entry only applies to the extent that the grantor would be entitled to enter the land or water source for the same purpose: PPSA s138B.

Livestock and its proceeds may be seized by taking possession of the livestock or proceeds wherever they are located, by slaughtering the livestock there, by extracting products from livestock (for example, shearing sheep), and in the case of fish, by taking them. For this purpose, the secured party may enter the land or water source where the livestock or proceeds are located: PPSA s138C. Unlike the case with crops, this right of entry for livestock is not limited to the rights of the grantor.

The PPSA does not regulate interests in land or water rights, which are often the most important assets of an agribusiness. Nonetheless a secured party acting reasonably can enforce its PPSA security interest under land laws when the obligations secured are also secured by land, if the secured party's interest in the personal property has the highest priority, or if all the higher ranked secured parties have agreed in writing: PPSA s117. Using this option, the secured party would not have to pursue two separate enforcement processes, one under the land laws and the other under the PPSA. This may have benefits in relation to an agribusiness when land is a substantial component of the property charged as security.

New subchapter and practical checklists: Agribusiness – PPSA

Patrick Dwyer of Kemp Strang has authored a new subchapter on the implications of the PPSA for the agribusiness industry, in consultation with the authors of CCH's Australian Personal Property Securities Law Reporter.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Kemp Strang has received acknowledgements for the quality of our work in the most recent editions of Chambers & Partners, Best Lawyers and IFLR1000.

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