You hold a first-ranking security interest over all of a company’s present and after-acquired property. The security is registered on the PPSR. You are, in theory, the most protected creditor in the room.
Then the company enters liquidation — and you discover that a prior assignment deed has stripped out assets you thought were covered. The property you were counting on never actually belonged to the company in the way you assumed. Your security interest never attached to it.
This is not a hypothetical. It is exactly what happened in Kirk v Moreton Resources, a decision of the Queensland Supreme Court. In our experience reviewing security packages on insolvency appointments in Queensland, this gap catches secured creditors more often than it should — and it is entirely avoidable with proper due diligence at the outset.
The Personal Property Securities Act 2009 (Cth): A Brief Primer
The Personal Property Securities Act 2009 (Cth) (PPSA) introduced a single national framework governing security interests in personal property — that is, any property other than land. It replaced a patchwork of state-based registration regimes with one centralised register (the Personal Property Securities Register, or PPSR).
Under the PPSA, a security interest is enforceable against third parties (including liquidators) only if it has attached to the collateral and the interest has been perfected (usually by registration on the PPSR).
For a security interest to attach, three conditions must be met (s 19 PPSA):
- Value must have been given;
- The grantor must have rights in the collateral (or the power to transfer rights); and
- The security agreement must be in writing (or otherwise evidenced).
The second condition — the grantor must have rights in the collateral — is the one at issue in Kirk v Moreton Resources. It is also the condition that catches secured creditors by surprise more often than any other in the PPSA. If it has not been triggered, registration on the PPSR is irrelevant. You have a perfectly registered security interest over nothing.
General Security Agreements and After-Acquired Property
Most commercial lending in Queensland involves a General Security Agreement (GSA) — a security agreement granting a security interest over all of the grantor’s present and after-acquired property. “After-acquired property” means property the grantor does not yet own at the date of the security agreement but will acquire in the future.
On its face, this is comprehensive protection. Whatever the company acquires in the future — receivables, equipment, intellectual property, inventory — falls within the security the moment it is acquired. That is the theory. Kirk v Moreton Resources is the reality check.
The Facts in Kirk v Moreton Resources
The grantor company had entered into an assignment deed with a third party before the secured creditor’s GSA was executed. Under that assignment deed, certain classes of property — including property that had not yet come into existence — were assigned to the third party.
When new property of the relevant class subsequently arose (for example, a receivable arising from a new contract), two competing claims emerged simultaneously:
- The assignee under the assignment deed claimed the property vested in them at the instant it arose; and
- The secured creditor under the GSA claimed it fell within the after-acquired property security interest.
The Queensland Supreme Court found in favour of the assignee. The reasoning was fundamental: the assignment deed operated so that the property vested in the assignee at the moment it came into existence. At no point in time did the property become part of the grantor’s estate. Because it never became the grantor’s property, the grantor never had “rights in the collateral” sufficient for the security interest under the GSA to attach under s 19 of the PPSA.
The secured creditor’s first-ranking registration on the PPSR was irrelevant. A registered security interest that has not attached to specific collateral cannot be enforced against that collateral. The registration confirmed priority over other security interests — but there was no security interest to prioritise.
Why This Is a Gap — Not an Edge Case
This is not an obscure technicality. Assignment deeds are standard commercial instruments. Practitioners in the Brisbane legal and finance community will encounter them routinely in:
- Receivables financing and invoice factoring — where future receivables are assigned to a financier as they arise;
- IP licensing structures — where future works or developments are assigned to a related entity or third party;
- Supply chain financing — where contract payments are assigned to funders;
- Related party arrangements — where assets are assigned within corporate groups for commercial or tax reasons.
In each of these situations, a subsequent GSA over “all present and after-acquired property” is weaker than it appears. Any category of property subject to a prior assignment deed is outside the reach of the GSA — because that property never passes through the grantor’s hands before being captured by the assignment. The GSA simply does not attach to it.
What Secured Creditors Must Do Now
The implications of Kirk v Moreton Resources for secured creditors are clear. Here is what needs to happen before any GSA is executed.
1. Due Diligence Before Signing
Before relying on a GSA, conduct thorough due diligence on the grantor’s prior contractual arrangements. Identify:
- Any existing assignment deeds — whether of present or future property;
- Any factoring or invoice financing arrangements;
- Any IP assignment agreements;
- Any supply chain or contract payment assignments.
This due diligence must go beyond a PPSR search. Assignment deeds are frequently unregistered on the PPSR — particularly where the deed does not create a security interest under the PPSA’s terms — yet they defeat a GSA all the same. A clean PPSR search does not mean clean title.
2. Obtain Warranties and Representations
Require the grantor to warrant that it has not entered into any assignment deed that could affect the scope of the security interest being granted. Include a covenant against entering into any such arrangement without prior written consent. If the grantor refuses, treat that as a red flag, not a negotiating position.
3. Understand What Your Security Actually Covers
A first-ranking registration on the PPSR gives you first-ranking priority as between competing security interests. It does not determine whether the security interest has attached in the first place. Those are two different questions. Confusing them is how secured creditors lose money in liquidation. Know the difference before you lend.
4. Take a Direct Assignment for Critical Asset Classes
In transactions where receivables financing or future property is critical to the security package, take a direct assignment of those receivables — do not rely solely on a GSA. An earlier assignment defeats a later assignment: that is the rule in Dearle v Hall and its PPSA equivalents governing priority between competing assignments. If the receivables are the asset, take the assignment directly and register it.
What Insolvency Practitioners Need to Know
For liquidators and administrators reviewing security interests on appointment, Kirk v Moreton Resources is a reminder that a first-ranking registration does not mean first-ranking recovery across the board. We have seen this issue arise in Queensland insolvency appointments where the security register looked airtight and the underlying attachment analysis had never been done.
When reviewing the security position of a company in administration or liquidation in Queensland:
- Search for all assignment deeds in the company’s contract documentation — not just registered interests on the PPSR;
- For each class of property claimed by the secured creditor, assess whether any prior assignment deed could have divested the company of the ability to grant security over that class under s 19 PPSA;
- Where the secured creditor’s position is weaker than it appears on the PPSR, this directly affects the amount available for distribution to other creditors — and needs to be disclosed in your report to creditors.
For more on how the PPSA operates in the context of insolvency proceedings, see our overview: What Is the PPSA? and our analysis of PPSA Terms and Conditions. For assistance with insolvency matters, visit our Insolvency Lawyers Brisbane page.
Frequently Asked Questions
What is a general security agreement and does it cover after-acquired property?
A GSA grants a security interest over all of the grantor’s present and after-acquired property. In theory, it covers everything the company owns now and everything it acquires in the future. In practice — as Kirk v Moreton Resources confirms — a GSA only attaches under s 19 PPSA to property in which the grantor actually has rights. If a prior assignment deed captures property at the moment it arises, the grantor never acquires rights in that property and the GSA never attaches. The GSA does not reach it.
What is an assignment deed and how can it affect a security interest?
An assignment deed is an agreement under which a party assigns property — present or future — to another party. A prior assignment deed defeats a later GSA because the assigned property never becomes the grantor’s: the grantor never has sufficient rights in that property for a security interest to attach under s 19 PPSA. The order of execution is critical. Earlier assignment always wins over later security interest, where the attachment condition is not met.
Does registration on the PPSR protect against prior assignment deeds?
No. Registration on the PPSR establishes priority between competing security interests. It does not assist where the problem is that no security interest attached to the collateral in the first place. A registered but unattached security interest cannot be enforced against the collateral. Registration is not a cure for a failure to attach.
What should a secured creditor do before entering into a GSA?
Conduct due diligence that goes beyond a PPSR search: identify all prior assignment deeds (including unregistered ones), factoring arrangements, IP assignments, and supply chain financing arrangements. Require warranties from the grantor about the absence of such arrangements and a covenant against entering into them without consent. For critical receivables or future property, take a direct assignment rather than relying on GSA coverage alone.
How does this affect the distribution of assets in a liquidation?
If a secured creditor’s GSA does not attach to certain property because of a prior assignment deed, that property falls outside the security. It belongs to the assignee, not the secured creditor. Depending on the structure, this can significantly reduce the secured creditor’s recovery. In some circumstances it increases the pool available to unsecured creditors. This analysis must be done — it cannot be assumed away by reference to a clean PPSR registration.
This is general information only and is not legal advice. You should obtain professional advice specific to your circumstances.
Contact Mark Harley at Boss Lawyers on 1300 267 711 or via bosslawyers.com.au
Mark Harley
Principal Solicitor, Boss Lawyers
Level 27, Santos Place, 32 Turbot Street, Brisbane QLD 4000
T: 1300 267 711
If you need strategic legal advice on PPSA and creditor debt recovery, 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.
