This Part   deals with how to work out the priority between competing security interests in collateral (and in some cases, other kinds of interests).

Priority rules are relevant when the same personal property is subject to 2 or more security interests. If the debtor defaults, the rules determine the order of priority in which the various secured parties can enforce their security interests under Chapter   4.

Division   2 sets out the default rules that apply if this Act provides no other way of determining that priority.

Unless otherwise provided:

  (a)   perfected interests have priority over unperfected interests; and

  (b)   priority between perfected interests amongst themselves, and unperfected interests amongst themselves, is determined on a first - in - time basis.

The Division   contains other rules of general application (such as the priority that applies to the proceeds of collateral). Security interests perfected by control have the highest priority.

For example, a security interest held by an ADI in an ADI account with the ADI has priority over any other security interest in the ADI account. An ADI has control over an ADI account held with the ADI (see section   25). Only the ADI with which an ADI account is held may perfect a security interest in the ADI account by control (see section   21). A security interest perfected by control has priority over any other security interest in the same collateral (see section   57).

Division   3 deals with the priority rules that apply when one of the security interests is a perfected purchase money security interest. These interests are exceptions to the first - in - time rule (except for certain security interests in an account dealt with in section   64). A perfected purchase money security interest that is granted to a seller, lessor or consignor takes priority over a perfected purchase money security interest that is granted to others.

Division   4 deals with priority of security interests in transferred collateral where a transferor and a transferee have both granted security interests in the transferred collateral. Provided the transferor - granted security interest has remained perfected, that security interest will take priority.

Division   5 deals with the priority of certain creditors who have their debts repaid. The priority of those who purchase negotiable instruments, chattel paper and negotiable documents of title is also dealt with. Generally, the purchaser's interest will take priority over a security interest in the negotiable instrument, chattel paper or negotiable document of title.

Division   6 deals with priorities in relation to the following:

  (a)   interests that arise under law;

  (b)   interests of execution creditors;

  (c)   security interests in returned goods;

  (d)   security interests in accounts, financial property or intermediated securities if a foreign law governs their perfection but does not provide for public registration.