Purchase Money Security Interests (“PMSI”) really do have a super power, according to a Full South Australian Court decision handed down on Friday.
Case name: Samwise Holdings v Allied Distribution Finance  SASCFC 95
The Court granted a PMSI holder a priority over 40 motorcycles above a first-in-time registered general security holder.
The facts were:
- In 2012, BM was bailed 40 motorcycles from CDF
- In 2014, BM granted SH an AllPAAP (ie general security) over all of its assets. Note: SH was a related party of BM
- In 2016, AD acquired ownership of the 40 motorcycles from CDF and granted a new bailment arrangement to BM and validly registered its PMSI
- In mid-2016, BM appointed Voluntary Administrators (who subsequently became Liquidators)
Key question was, does the general security interest granted to SH trump the PMSI granted to AD?
The PMSI took super priority and so AD was clear to take back possession of the 40 motorcycles.
- Section 62(2)(b)(I) PPSA gives a PMSI priority if registration is within the prescribed timeframe “from the time the grantor obtains possession of the inventory.”
- But when does the grantor obtain possession? Either:
- (A) when the grantor obtains possession as grantor of the PMSI (ie when AD loans the motorcycles to BM); or
- (B) when the grantor obtains possession simpliciter (ie when BM first took possession of the motorcycles from CDF)?
- The Court favoured (A) – just because BM had possession of the 40 motorcycles before AD was involved is irrelevant.
Instead, registration of the PMSI within the prescribed timeframes is all that is required.