Commonwealth Consolidated Acts Commonwealth Consolidated Acts(1) The interest of a creditor who receives payment of a debt owing by a debtor through a payment covered by subsection (3) has priority over a security interest (whether perfected or unperfected) in:
(a) the funds paid; and
(b) the intangible that was the source of the payment; and
(c) a negotiable instrument used to effect the payment.
Example: A bank account from which the funds were paid is an example of an intangible that was the source of the payment.
(2) Subsection (1) does not apply if, at the time of the payment, the creditor had actual knowledge that the payment was made in breach of the security agreement that provides for the security interest.
(3) Payments made by a debtor are covered by this subsection if they are made through the use of:
(a) an electronic funds transfer; or
(b) a debit, transfer order, authorisation, or similar written payment mechanism executed by the debtor when the payment was made; or
(c) a negotiable instrument.