If your company has granted an “all present and after-acquired property” security — or you’ve taken one as a lender or creditor — a recent Federal Court decision should prompt you to look more carefully at what that security actually captures.
In Kirk v Moreton Resources, the court held that a general security agreement covering “all present and after-acquired property” did not capture an expectancy that was subject to a prior assignment. The result: a secured creditor who thought it had a broad, all-encompassing security was left with less than expected when it counted.
What is an ALLPAAP Security?
Under the Personal Property Securities Act 2009 (Cth) (PPSA), a security interest in “all present and after-acquired property” — commonly called an ALLPAAP — is the broadest form of personal property security available. It is routinely taken by banks, financial institutions, and sophisticated creditors as a general security over the entire personal property of a company.
When a company enters insolvency, the scope of an ALLPAAP determines what property the secured creditor can access ahead of unsecured creditors. The broader the security, the more the secured creditor recovers. Or so it was assumed.
The Problem: What is an “Expectancy”?
An expectancy is a right to receive property in the future — not a present right, and not a contingent right, but a bare expectation that has not yet been assigned or transferred.
Under the PPSA, a security interest can attach to after-acquired property when the grantor “acquires rights” in it. The question in Kirk v Moreton Resources was whether a grantor’s expectancy — which had been the subject of a prior assignment — constituted property the grantor had “acquired rights” in, and therefore property captured by the ALLPAAP.
The court said no.
The Decision in Kirk v Moreton Resources
The court’s reasoning turned on a fundamental PPSA principle: you cannot give security over property you do not have rights in. Where an expectancy had already been the subject of a prior assignment — meaning someone else already had an interest in that anticipated property — the grantor never truly “acquired rights” in that property in a way that the ALLPAAP could attach to.
The ALLPAAP simply could not reach it.
This creates what practitioners are calling the “expectancy gap”: a class of property that looks like it falls within the scope of an ALLPAAP but legally does not.
Why This Matters for Directors and Business Owners
There are several practical consequences of this decision that directors and business owners need to understand.
1. Granting a General Security Agreement
If you have granted an ALLPAAP to a lender — whether as part of a bank facility, a trade credit arrangement, or a shareholder loan — you may have believed that this gives the secured party rights over everything your company owns or will own. Kirk v Moreton Resources confirms that expectancies subject to prior assignments are outside that umbrella.
For directors, this is relevant to understanding your exposure. An ALLPAAP creditor who thought it had first claim over a particular expected payment or entitlement may find that claim fails if a prior assignment exists.
2. Taking Security as a Lender or Creditor
If you are a lender, investor, or trade creditor taking an ALLPAAP from a counterparty, due diligence now requires you to ask: has the grantor already assigned any expectancies? If so, those expectancies will not be captured by your security interest regardless of how broadly the agreement is drafted.
In distressed situations — where the value of a grantor’s estate is being carefully mapped before or during insolvency — this gap can be significant.
3. Insolvency and Liquidation
For insolvency practitioners and creditors in a liquidation, this decision is directly relevant to the realisation of secured assets. An administrator or liquidator assessing a secured creditor’s claim must now consider whether any of the assets the secured creditor claims to cover are expectancies subject to prior assignments — and therefore outside the ALLPAAP’s reach.
This shifts potential value from secured creditors toward unsecured creditors and the general pool of the insolvent estate.
The Practical Takeaways
- Review your security documentation. If your business has outstanding ALLPAAP security agreements — whether you are the grantor or the grantee — consider whether any expectancies may exist that fall outside the scope of those agreements.
- Conduct PPSR searches. The PPSA requires registration on the Personal Property Securities Register to perfect a security interest. A search of the PPSR will reveal existing registered interests — but will not reveal unregistered prior assignments of expectancies. Additional due diligence is required.
- Document assignments carefully. If your business has assigned any anticipated rights or entitlements, ensure those assignments are properly documented and dated. Priority disputes under the PPSA turn heavily on chronology and documentation.
- Take advice before restructuring. If your company is in financial difficulty and holds assets subject to ALLPAAP security interests, the scope of those interests — and any gaps like the one identified in Kirk v Moreton Resources — should be assessed before any restructuring decisions are made.
PPSA Disputes Require Specialist Commercial Litigation Expertise
The PPSA is technical, unforgiving, and increasingly litigated. Decisions like Kirk v Moreton Resources demonstrate that even sophisticated parties taking the broadest security interests available can find themselves with less protection than anticipated when tested in court.
Boss Lawyers regularly acts in disputes involving security interests, insolvency, and the enforcement of creditor rights. If you have a question about the scope of a PPSA security, a challenge to a secured creditor’s claim, or a dispute arising in a liquidation or administration, call Mark Harley on 1300 267 711.
Need insolvency advice? If your business is facing financial difficulty, early advice from experienced insolvency lawyers is critical. Boss Lawyers’ insolvency lawyers Brisbane help directors, creditors and stakeholders navigate voluntary administration, liquidation and restructuring options. Call us on 1300 267 711 for a confidential discussion.
This is general information only and is not legal advice. You should obtain professional advice specific to your circumstances.
If you need strategic legal advice on PPSA and secured creditor rights, contact the team at Boss Lawyers. Our debt recovery lawyers Brisbane act for clients across Brisbane and Queensland. Call us on 1300 267 711 or use our online contact form to get started.
