Victorian Consolidated Legislation

Chattel Securities Act 1987 - SECT 7

Extinguishing of security interest

7. Extinguishing of security interest



(1) Subject to section 8, if a secured party has-

   (a)  an unregistered security interest (whether or not over registrable
        goods or interstate registrable goods); or

   (b)  a registered inventory security interest-

in goods but is not in possession of the goods and a purchaser purchases or
purports to purchase an interest in the goods (otherwise than at a sale in
pursuance of a process of execution issued by or on behalf of a judgment
creditor) for value in good faith and without notice when the purchase price
is paid (or, if the price is not paid at one time, when the first part of the
purchase price is paid) of the security interest from a supplier being-

   (c)  the debtor; or







   (d)  another person who is in possession of the goods in circumstances
        where the debtor has lost the right to possession of the goods or is
        estopped from asserting an interest in the goods against the
        purchaser-

the security interest of the secured party is extinguished.

(1A) Subject to section 8, if-

   (a)  a secured party has a registered security interest in goods but is not
        in possession of the goods; and

   (b)  a purchaser purchases or purports to purchase an interest in the goods
        (otherwise than at a sale in pursuance of a process of execution
        issued by or on behalf of a judgment creditor) for value in good faith
        and without notice when the purchase price is paid (or, if the
        purchase price is not paid at one time, when the first part of the
        purchase price is paid) of the security interest from a supplier
        being-

   (i)  the debtor; or

   (ii) another person who is in possession of the goods in circumstances
        where the debtor has lost the right to possession of the goods or is
        estopped from asserting an interest in the goods against the
        purchaser; and

   (c)  on the day of the purchase or purported purchase or on the preceding
        day a certificate was issued under section 24 in respect of the goods;
        and





   (d)  the certificate did not contain the particulars of an entry in the
        register relating to the goods at the time of the issue of the
        certificate-

the security interest of the secured party is extinguished1.

(1B) A reference in subsection (1A)(c) to the day of the purchase or purported
purchase is a reference to the day on which the purchase price is paid or, if
the purchase price is not paid on one day, the day on which the first part of
the purchase price is paid.

(2) Subject to section 8, if a secured party has a security interest in a
motor car within the meaning of the Motor Car Traders Act 1986 but is not in
possession of the motor car and a purchaser purchases or purports to purchase
an interest in the motor car (otherwise than at a sale in pursuance of a
process of execution issued by or on behalf of a judgment creditor) for value
in good faith and without notice when the purchase price is paid (or, if the
price is not paid at one time, when the first part of the purchase price is
paid) of the security interest from a licensed motor car trader within the
meaning of the Motor Car Traders Act 1986, the security interest of the
secured party is extinguished.

(3) The onus of proving that a person has purchased an interest in goods free
from a security interest is on the person asserting that the interest was so
purchased.

(4) A reference in subsection (1), (1A), (1B) or (2) to payment of the
purchase price or to payment of part of the purchase price includes a
reference to the giving of any valuable consideration in satisfaction of the
purchase price or of part of the purchase price.

(5) The provisions of subsection (1) do not apply to or in respect of-

   (a)  a purchase or purported purchase of an interest in unregistrable
        goods, other than a commercial vehicle or farm machinery, if the
        purchase price exceeds $15 000;



* * * * *



(6) Section 31 of the Goods Act 1958 has no effect in relation to the delivery
or transfer of goods or documents of title to goods if-

   (a)  the goods are registrable goods or interstate registrable goods; or



   (b)  the purchase price of the goods does not exceed $15 000; or

   (c)  the goods are a commercial vehicle or farm machinery;



* * * * *



(7) If a security interest is extinguished under subsection (1), (1A) or (2),
the secured party shall be subrogated to the rights (if any) of the supplier
and any predecessor in title of the supplier in and in respect of the goods,
including the right to receive any part of the purchase price for the goods
which has not been paid.



(8) A person liable to pay the purchase price of any goods obtains a good
discharge for any payment made by the person before the person receives notice
of the rights of any secured party under subsection (7).

(9) If, by reason of any purchase of goods, a security interest is
extinguished under subsection (1), (1A) or (2) or under section 9 and a
contract which is or includes the purchase is rescinded, the security interest
shall revive and have effect as if the purchase had not occurred.

(10) A reference in subsection (9) to rescission of a contract includes a
reference to termination of an agreement under section 43 of the
Motor Car Traders Act 1986.