North Sydney Commercial Lawyers

PPS – More teething problemsPrint This Post

PPS – More teething problems

Is a bank guarantee a security interest under the PPSA? Arguably yes – the benefit under a bank guarantee is a chose in action, and a chose in action is personal property. But does s8(1)(ii) prevent the PPSA applying to it?

Under s8(1)(ii), the Act does not apply an interest provided for by the creation of a right to payment in connection with an interest in land.

The general view seems to be that s8(1)(ii) was calculated to apply to leases and mortgages, not guarantees, but the position is not clear, and no assistance is gained from looking at the explanatory memorandum.

But even if it was caught by the PPSA, it is not clear that there is any benefit in registering a security interest. The relevant interest is the money held by the bank or the chose in action against the bank. It is difficult to envisage a circumstance where there would be a priority dispute in relation to that chose in action or money short of the insolvency or winding up of the bank.

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