The Queensland Court Just Exposed a Serious PPSA Gap. Is Your Business Protected?
A recent Queensland Supreme Court decision has sent a warning to secured creditors, lenders and business owners across the state: standard PPSA security deeds may not protect future property the way you think they do.
If your business holds a Personal Property Securities Act (PPSA) security interest — or if you’ve granted one — this decision matters. A gap in how “future property” is captured in security deeds could leave first-ranking creditors exposed, and directors facing unexpected personal liability in an insolvency scenario.
At Boss Lawyers, we act for directors, business owners and creditors across Brisbane and Queensland on insolvency, debt recovery and commercial disputes. This article explains what the PPSA is, what the court found, and what you should do now.
What Is the PPSA?
The Personal Property Securities Act 2009 (Cth) (PPSA) is the federal law that governs security interests in personal property — that is, property other than land. This includes:
- Business equipment, plant and machinery
- Inventory and stock
- Accounts receivable and book debts
- Motor vehicles
- Intellectual property
- Financial instruments
- Crop, livestock and primary production assets
A security interest under the PPSA is a right granted by a debtor to a creditor over personal property as security for the performance of an obligation — usually repayment of a debt. To be enforceable against third parties (including a liquidator), a security interest must be:
- Attached to the collateral (the security interest has legally arisen)
- Perfected — typically by registration on the Personal Property Securities Register (PPSR)
Critically, if a security interest is not properly perfected before a company enters administration or liquidation, the security interest vests in the company — meaning the creditor loses their priority and their secured position entirely. This is known as the “vesting” rule and it is one of the most commercially devastating outcomes in Australian insolvency law.
What Is “Future Property” Under the PPSA?
Many security deeds extend not just to property a company owns today, but also to property it will acquire in the future — called after-acquired property or “future property.”
For example, a bank lending to a manufacturing business may take a security interest over:
- All current machinery and equipment
- All inventory, now and in the future
- All book debts arising in the course of business
The words “now and in the future” are critical. Without them — or without clear language capturing after-acquired assets — the security interest may only attach to property existing at the time the security deed was signed.
Under s 20(1) of the PPSA, a security agreement must describe the collateral in a way that allows it to be identified. For future property to be captured, the agreement must clearly indicate that it extends to property acquired after the agreement is made.
What Did the Queensland Supreme Court Find?
The Queensland Supreme Court recently examined a security deed that purported to cover all of a company’s personal property — including future property. The court identified a significant drafting gap: the security deed’s description of collateral did not clearly and unambiguously capture after-acquired property in the way required by the PPSA.
The practical consequence: a first-ranking secured creditor — a party who had taken and registered a security interest believing they had priority over all the debtor’s assets — may in fact have had no perfected security interest over property acquired after the agreement was signed.
In an insolvency context, this matters enormously. A liquidator’s job is to maximise the return to unsecured creditors. If a first-ranking secured creditor’s interest is found to be defective over future property, that property may fall into the general asset pool — reducing the secured creditor’s recovery and potentially changing the entire priority waterfall.
Why This Matters for Queensland Business Owners and Directors
This isn’t just a concern for banks and large lenders. It has direct implications across a wide range of business relationships:
1. If You’re a Creditor Holding a PPSA Security Interest
If your business has lent money or supplied goods to another business on terms that include a PPSA security interest, you should immediately review:
- Whether your security deed/agreement clearly describes collateral that extends to after-acquired property
- Whether your PPSR registration correctly reflects the scope of your security interest
- Whether your registration is still current (PPSR registrations expire — an expired registration is an unperfected interest)
A gap in any of these areas means your security interest could be worthless in a debtor insolvency.
2. If You’re a Director or Business Owner Who Has Granted a Security Interest
If your company has granted a PPSA security interest to a financier, bank, or supplier, you need to understand:
- Exactly what assets are captured by that security interest
- Whether future assets (including business income, new equipment, or stock) are within the scope of the security
- How this affects your company’s balance sheet, especially if you’re approaching financial distress
If your company enters voluntary administration or liquidation, the scope of any PPSA security interests held over your assets will directly affect what creditors are paid — and in what order.
3. If You’re Involved in a Business Acquisition or Due Diligence
Before acquiring a business, conducting a PPSR search is critical. But as this decision shows, even a clean PPSR search isn’t enough if the underlying security agreement has drafting gaps. Legal due diligence must include reviewing the actual security documents — not just the register.
4. In Director Disputes and Shareholder Disputes
Security interests over company assets can become flashpoints in director disputes and shareholder disputes. A contested security interest — particularly one where the scope is in doubt — can affect the value of a company being wound up or sold, and can expose directors to claims if they have allowed assets to be encumbered without proper board authority.
Common PPSA Mistakes That Cost Businesses Dearly
The Queensland court decision is a timely reminder of the most common PPSA errors we see when advising creditors and directors:
- No PPSR registration at all — the security interest exists contractually but is unperfected. In insolvency, it vests in the company. The creditor becomes unsecured.
- Late registration — a security interest registered after the company has entered administration may vest regardless. Time matters.
- Incorrect collateral description — a description that doesn’t clearly identify the collateral (including future property) can render the interest unenforceable over those assets.
- Expired registrations — PPSR registrations have end dates. If not renewed, the perfected interest lapses. Many businesses don’t monitor their PPSR registrations.
- Wrong grantor details — registering against the wrong entity (e.g., the trading name rather than the ACN) can defeat the registration entirely.
- Failure to perfect purchase money security interests (PMSIs) within time — a PMSI (such as a supplier who retains title to goods until paid) must be registered within strict time limits (5 business days for inventory, 15 business days for other goods) to achieve “super priority.”
What Should You Do Right Now?
Whether you’re a creditor holding security interests or a director whose company has granted them, the Queensland court’s findings are a prompt to act:
- Review your security agreements — Do they clearly and unambiguously capture after-acquired/future property? If in doubt, obtain legal advice.
- Check your PPSR registrations — Are they current? Do they accurately describe the collateral and the grantor? Have they expired?
- Seek advice early if your company is in financial distress — If insolvency is a possibility, the timing and scope of PPSA security interests will directly affect your options and obligations. Directors who understand their company’s security position early have more tools available, including safe harbour protections.
- Conduct PPSR searches before acquiring businesses or assets — And review the underlying agreements, not just the register.
Frequently Asked Questions
What happens to an unperfected PPSA security interest in a company liquidation?
Under s 267 of the PPSA, an unperfected security interest vests in the grantor (the company) immediately before a liquidator is appointed, or immediately before the company enters voluntary administration. This means the secured creditor loses their security interest — they become an unsecured creditor with no priority over those assets.
Does a PPSR search tell me everything about a security interest over a business?
No. A PPSR search shows registered interests, but it does not tell you the content or scope of the underlying security agreement. As the Queensland court found, the agreement itself may have gaps — particularly around future property — that are not apparent from the register alone. Always obtain and review the actual security documents.
What is a PMSI and why does it matter?
A Purchase Money Security Interest (PMSI) is a security interest taken by a seller or financier in collateral to secure the payment of the purchase price of that collateral. PMSIs are important because, if properly perfected within the required time limits, they have “super priority” over other security interests — even earlier-registered ones. Suppliers who deliver goods on retention-of-title terms should ensure they register PMSIs promptly.
Can I fix a defective PPSA security interest after the fact?
In some circumstances, yes — but there are strict limits. If the security interest has already vested because the company has entered administration or liquidation, it is generally too late. Prevention is essential. Reviewing and correcting defective security agreements and registrations must happen before insolvency.
Our company has received a statutory demand — does this affect our PPSA security interests?
A statutory demand is a formal demand for payment and is often the first step toward a winding-up application. If your company is facing a statutory demand, you have 21 days to respond. During this period, taking stock of all security interests — those you hold and those held over your company’s assets — is a critical part of your strategic response.
Boss Lawyers: PPSA, Insolvency and Commercial Dispute Advice in Brisbane
Boss Lawyers is a Brisbane insolvency and commercial litigation firm focused on helping directors, business owners and creditors navigate complex financial and corporate disputes. We regularly advise on PPSA security interests, statutory demand responses, voluntary administration, director liability and creditor enforcement.
If the Queensland Supreme Court’s warning about future property gaps in PPSA security deeds is relevant to your business — whether you’re a creditor reviewing your security or a director trying to understand your exposure — contact Boss Lawyers today.
📞 1300 267 711 | Level 27, Santos Place, 32 Turbot Street, Brisbane QLD 4000
This article is general information only and is not legal advice. You should obtain professional advice specific to your circumstances. For expert advice on PPSA, insolvency or commercial law matters, contact Boss Lawyers Brisbane on 1300 267 711.
