The Debtor's Interest in Personal Property under the PPSA

Abstract

The PPSA legislation in this country allows various individuals to hold interests in personal property without having possession of that property. In this way it negates the traditional principle of equating an interest strictly with possession. In this article, the author explores the interests established by the PPSAs specifically in relation to the debtor. One problem noted is the tendency of the PPSAs to use the terms "interest" and "right" interchangeably with respect to the debtor in some areas, and to draw a distinction between the terms in others. The author examines the distinction between these terms at length, and suggests that "interest" would be a more appropriate term to use in the legislation. Also discussed is what factors are necessary in order for the debtor to create a "sufficient" interest in the personal property in question. Information here comes largely from case law, as the legislation itself is not specific. As a result, some uncertainty exists as to which factors create a sufficient interest for the debtor, particularly as to whether or not certificates of title or production quotas or licences held by the debtor will create a sufficient interest. Lastly, the effect of the PPSAs on the derivation principle is examined and the resulting limitations are discussed. The author concludes that in spite of some uncertainty, the legislation achieves the laudable goal of creating as many individual interests as possible in the same personal property, thereby generating wealth for the maximum number of people.