Article 23 - Circumstances in which purchaser or lessee takes free of Security Interest

Unperfected security interests

(1) A buyer or lessee of Personal Property, for value, takes the Personal Property free of an unperfected Security Interest in the Personal Property unless the unperfected Security Interest was created or provided for by a transaction to which the buyer or lessee is a party.

Serial number defects

(2) A purchaser or lessee of Equipment of a type prescribed by the Minister pursuant to Article 138(6) of the Companies Regulations with a Unique Identifying Number who obtains possession of that Equipment takes free of any Security Interest in that Equipment which is perfected by filing if:
(A) the purchaser or lessee bought or leased the Goods without knowledge of the Security Interest; and
(B) the Goods were not described by Unique Identifying Number in the filing of a Finance Statement relating to the Security Interest, unless
(C) the purchaser or lessee holds the Equipment as inventory or on behalf of another person who would hold the Equipment as inventory; or
(D) the Security Interest was created or provided for by a transaction to which the purchaser or lessee is a party.

Goods below a prescribed value

(3) A purchaser or lessee of Goods with a value of no more than US$2,000 (or its equivalent), or such other amount prescribed by the Minister from time to time, takes the Goods free of a Security Interest in the Goods if the purchaser or lessor
(A) acquires the Goods for value; and
(B) takes possession of the Goods, unless
(C) the purchaser or lessee purchased or leased the Goods with actual or constructive knowledge that the sale or lease constituted a breach of the Security Agreement that provides for the Security Interest.

Taking in the ordinary course of business

(4) A purchaser or lessee of Personal Property takes the Personal Property free of a security interest given by the seller or lessor, or that arises under Article 19 (proceeds), if the Personal Property was sold or leased in the ordinary course of the seller's or lessor's business of selling or leasing Personal Property of that kind, unless:
(A) in the case of Equipment of a type prescribed by the Minister pursuant to Article 138(6) of the Companies Regulations with a Unique Identifying Number, the purchaser or lessee holds the Equipment as inventory or on behalf of another person who would hold the Equipment as inventory; or
(B) the purchaser or lessee purchases or leases the Personal Property with actual knowledge that the sale or lease constitutes a breach of the Security Agreement that provides for the Security Interest.

Currency

(5) A holder of currency takes the currency free of a Security Interest in the currency if the holder acquires the currency with no actual or constructive knowledge of the Security Interest.

Instruments or intermediated Securities taken in the ordinary course of trading

(6) A person who buys an Instrument or an intermediated Security in the ordinary course of trading on a recognised financial market takes the Instrument or intermediated Security free of a Security Interest in the Instrument or intermediated Security.

Instruments

(7) A person, other than a Secured Party, who takes an interest in an Instrument by sale, lease, discount, assignment, negotiation, mortgage, pledge, lien, issue, reissue or any other consensual transaction that creates an interest in the Instrument, takes the Instrument free of a Security Interest in the Instrument if
(A) the person gives value for the Instrument; and
(B) the person takes possession or control of the Instrument,
unless
(C) the person takes the Instrument with actual or constructive knowledge that the taking constitutes a breach of the Security Agreement that provides for the Security Interest.

Intermediated securities

(8) A person who takes an interest in an intermediated security takes the interest free of a Security Interest in the intermediated Security if:
(A) the person gives value for the interest (unless the interest acquired is itself a Security Interest); and
(B) the credit of the interest in the financial product in relation to which the intermediated Security arises is made in accordance with a consensual transaction,
unless,
(C) at the time the interest is taken, the person has actual or constructive knowledge that crediting the interest in the financial products constitutes a breach of a Security Agreement that provides for a Security Interest in any intermediated Security or financial product.

Temporarily perfected security interests

(9) A person acquires an interest in Personal Property over which a Security Interest has been temporarily perfected under Article 20 (Temporary perfection of Personal Property brought into the QFC) takes the Personal Property free of the Security Interest if the person acquires the interest
(A) after the Personal Property has been brought into the QFC;
(B) without actual or constructive knowledge of the Security Interest; and
(C) before the Security Interest is perfected under these Regulations.

Financial Collateral

(10) A Secured Party taking a Security Interest in Financial Collateral (whether or not by way of title transfer) takes free of a pre-existing Security Interest in the Financial Collateral, even if the pre-existing Security Interest is perfected and the Secured Party knows of its existence.
(11) Paragraph (10) is without prejudice to any rights of the Secured Party under the pre-existing Security Interest against the Debtor (including without limitation in the Proceeds of the Financial Collateral received by the Debtor).