The Role of Trusts in the PPSA

Abstract

The new Australian personal property securities regime has now been brought into force. Under the new system, the concept of a 'security interest' is of paramount importance. Generally speaking, security interests must be registered to give their holders priority over other creditors in respect of the same assets. This article argues that one device often thought to be a security interest – a retention of title proceeds trust – will not be so if constituting the trust can be seen discharging the buyer’s obligation to the seller. The article also comments on the place of constructive trusts under the new regime, given that the PPSA exempts from its scope interests that are created by the operation of law. The problem here is that a plain reading of the legislation would seem to both include and exclude many interests at the same time. Finally, I also make some observations about the role of Quistclose trusts in personal property security regimes. These trusts are expressly excluded from the Australian PPSA, but their status is uncertain in Canada and New Zealand.

Keywords: PPSA (Personal Property Securities Act 2009), security interest, retention of title, proceeds trust, constructive trust, Quistclose trust

JEL Classification: K10, K11, K30