Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2008-2009
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
PERSONAL PROPERTY SECURITIES (CONSEQUENTIAL AMENDMENTS) BILL 2009
EXPLANATORY MEMORANDUM
(Circulated by the authority of the Attorney-General, the Honourable
Robert McClelland MP)
Table of Contents
Outline 1
Financial impact statement 2
Abbreviations 3
Formal Clauses 4
Explanation of items 5
Schedule 1 - Fisheries legislation 5
Amendment of the Fisheries Management Act 1991 5
Amendment of the Torres Strait Fisheries Act 1984 8
Schedule 2 - Intellectual property legislation 9
Amendment of the Designs Act 2003 9
Amendment of the Patents Act 1990 11
Amendment of the Plant Breeder's Rights Act 1994 13
Amendment of the Trade Marks Act 1995 13
Schedule 3 - Maritime legislation 16
Amendment of the Admiralty Act 1988 16
Amendment of the Marine Navigation Levy Collection Act 1989 17
Amendment of the Marine Navigation (Regulatory Functions)
Levy Collection Act 1991 17
Amendment of the Navigation Act 1912 17
Amendment of the Protection of the Sea (Civil Liability) Act 1981
19
Amendment of the Protection of the Sea (Harmful Anti-fouling
Systems) Act 2006 19
Amendment of the Protection of the Sea (Prevention of Pollution
from Ships) Act 1983 19
Amendment of the Protection of the Sea (Shipping Levy
Collection) Act 1981 20
Amendment of the Shipping Registration Act 1981 20
Schedule 4 - Personal Property Securities Act 2009 24
Schedule 5 - Other legislation 41
Amendment of the Air Services Act 1995 42
Amendment of the Bankruptcy Act 1966 42
Amendment of the Commonwealth Inscribed Stock Act 1911 44
Amendment of the Corporations (Aboriginal and Torres Strait
Islander) Act 2006 45
Amendment of the Health Insurance Act 1973 45
Amendment of the Insurance Act 1973 46
Amendment of the Privacy Act 1988 46
Amendment of the Quarantine Act 1908 47
Amendment of the Wool International Act 1993 48
1. Outline
1. Personal Property Securities (PPS) reform aims to address the
complexity of over 70 Commonwealth, State and Territory laws, common
law rules and rules of equity currently governing security interests
in personal property. PPS reform would provide a modern and efficient
personal property securities framework, which is essential for any
modern financial system.
2. The Personal Property Securities Bill 2009 was introduced into
Parliament on 24 June 2009. By harmonising existing laws, the Bill
will reduce the complexity of the existing arrangements for secured
lending using personal property as collateral. The Bill will also
increase consistency in the arrangements for creating, dealing with
and enforcing security interests in personal property.
3. The PPS (Consequential Amendments) Bill 2009 (the Consequential Bill)
represents the next stage in the Government's harmonisation of
Australia's law on secured financing using personal property.
4. Personal property is any form of property other than land or
buildings. The PPS Bill will apply to transactions which have the
effect of securing a payment or other obligation by taking an interest
in personal property, regardless of the form of the transaction, the
nature of the debtor or the jurisdiction in which the personal
property or parties are located. This is known as the functional
approach.
5. The Consequential Bill will amend 25 Commonwealth Acts that deal with
the creation, registration, priority, extinguishment or enforcement of
interests in personal property. The amendments proposed by this Bill
will also clarify the operation of legislation that will operate
concurrently with the PPS Bill. This will facilitate the
establishment of a single national regime for personal property
securities.
6. The Consequential Bill contains measures designed to:
. harmonise language and concepts with the PPS Bill where
appropriate;
. support a seamless transition to the PPS Register to be established
by the PPS Bill, including removing provisions providing for the
registration of security interests on a separate Commonwealth
register;
. resolve conflicts between the PPS Bill and other Commonwealth
legislation that provides for security interests or other interests
in personal property;
. determine the priority between Commonwealth statutory interests in
personal property, other than security interests, and security
interests in the same property;
. clarify the rights of secured parties and other parties in
particular situations including statutory detention of personal
property that may be subject to a security interest; and
. ensure that current rights are preserved on implementation of the
amendments.
7. The Consequential Bill will not amend the Corporations Act 2001, which
will be amended by a separate Bill following a public consultation
process.
2. Financial impact statement
1. The Consequential Bill will not have a financial impact on the
operations of Government.
3. Abbreviations
The following abbreviations are used in this explanatory memorandum.
AFMA - Australian Fisheries Management Authority
AMSA - Australian Maritime Safety Authority
ARS - Australian Register of Ships
ASIC - Australian Securities and Investments Commission
Consequential Bill - Personal Property Securities (Consequential
Amendments) Bill 2009
IP - Intellectual Property
PPSA or PPS Act - the proposed Personal Property Securities Act
2009
PPS - Personal Property Securities
4. Formal Clauses
Clause 1 - Short title
1. The Short Title of the Consequential Bill is defined here.
Clause 2 - Commencement
4.2 This clause provides for the commencement of the various proposed
amendments. More details are provided in the notes on items relating
to the respective Schedules. The provisions of the Consequential Bill
will not commence at all if the Personal Property Securities Act 2009
does not commence.
Clause 3 - Schedule(s)
4.3 The amendments made to legislation by the Consequential Bill are
set out in five schedules.
Explanation of items
5. Schedule 1 - Fisheries legislation
Schedule 1 amends the Fisheries Management Act 1991 and the Torres
Strait Fisheries Act 1984 to ensure that enforcement action taken under
that legislation against goods would not be frustrated by a secured
party enforcing against the same goods under the PPS Act. This will
ensure that the PPS Act does not circumvent the seizure, detention or
forfeiture of property by the Commonwealth as a result of contravention
of the Fisheries Management Act or Torres Strait Fisheries Act. The
amendments also set out the priority between statutory interests and
PPS Act security interests. Interests currently registered under the
Fisheries Management Act that are PPS Act security interests will be
migrated to the PPS Register.
Commencement
1. Schedule 1 will commence on the registration commencement time (the
PPS Act registration commencement time) within the meaning of the PPS
Act. The PPS Act registration commencement time is the first day of
the month that is 26 months after the month in which the PPS Bill is
given Royal Assent, or an earlier time determined by the Minister.
The Government expects the registration commencement time will be in
May 2011.
Amendment of the Fisheries Management Act
Definition of PPSA security interest
Item 1
2. This item inserts a definition of a 'PPSA security interest' into the
interpretation section (subsection 4(1)) of the Fisheries Management
Act. A PPSA security interest is a security interest to which the PPS
Act applies or a transitional security interest to which Division 4 of
Part 9.4 of the PPS Act applies (being an interest subject to the PPS
Act as a result of a bankruptcy or insolvency, or where an existing
secured party has assented to the PPS Act by voluntarily registering
their interest on the PPS Register).
3. The definition has been included to clarify references to 'PPSA
security interests' in the amendments to the Fisheries Management Act.
Definition of statutory fishing rights option
Items 2-4
4. These items provide for technical amendments to the Fisheries
Management Act to include a reference in the interpretation section
(subsection 4(1)) to the definition of 'statutory fishing rights
option' in section 31A.
Registration of PPSA security interests
Items 5, 10 and 17
5. These items recognise that from the PPS Act registration commencement
time, PPSA security interests will be registered on the PPS Register.
6. The amendments will end the requirement for dealings giving rise to a
PPSA security interest in a 'statutory fishing rights option' or a
'fishing right', to be registered on the Register of Statutory Fishing
Rights, and will consequently mean that such dealings are effective
despite not being registered on that register.
7. From the PPS Act registration commencement time, interests that are
PPSA security interests can be registered on the PPS Register. The
requirements to register under section 31F and section 46 of the
Fisheries Management Act will cease to apply to PPSA security
interests at the PPS Act registration commencement time.
Repeal of subsection 31F(9) and subsection 46(6)
Items 6 and 11
8. These items repeal subsection 31F(9) and subsection 46(6) of the
Fisheries Management Act. These provisions allow a party to a dealing
to lodge with AFMA the document relating to a charge over corporate
property required to be lodged with ASIC under section 263 of the
Corporations Act 2001, instead of the documents required under the
Fisheries Management Act.
9. From the PPS Act registration commencement time, a charge over
corporate property will be a PPSA security interest and these types of
interests will no longer be required to be registered with ASIC.
Priority between statutory fishing rights options or fishing rights and
PPSA security interests
Items 7 and 12
10. These items set out the priority between (i) section 31F interests in
statutory fishing rights options or section 46 interests in fishing
rights and (ii) PPSA security interests.
11. Interests under section 31F or section 46 will have priority over
unperfected PPSA security interests in the same property.
12. Where an interest under section 31F or section 46 is registered on the
Register of Statutory Fishing Rights before a PPSA security interest
in the same property is perfected under the PPS Act, the interest
under section 31F or section 46 will have priority over the PPSA
security interest.
13. Where a PPSA security interest is perfected under the PPS Act before
an interest under section 31F or section 46 is registered on the
Register of Statutory Fishing Rights, the PPSA security interest will
have priority over the interest under section 31F or section 46.
14. These items also apply subsection 73(2) of the PPS Act to interests
under section 31F and section 46 of the Fisheries Management Act.
Applying subsection 73(2) ensures the priority between a section 31F
interest or section 46 interest and a security interest in the same
property is determined in accordance with the Fisheries Management Act
after the PPS Act registration commencement time (under the rules set
out in these items).
Dealing with a statutory fishing rights option
Items 8-9
15. These items maintain current rights by ensuring that the holder of a
statutory fishing rights option may deal with the option subject to
any rights or interests in that option that are PPSA security
interests or that appear on the Register of Statutory Fishing Rights.
Dealing with a fishing right
Items 13-14
16. These items maintain current rights by ensuring that, except where a
condition of a fishing right provides otherwise, the holder of a
fishing right may deal with the fishing right subject to any rights or
interests in the fishing right that are PPSA security interests or
that appear on the Register of Statutory Fishing Rights.
Repeal of subsection 50(3)
Items 15 and 18
17. These items remove the requirement that AFMA must notify parties with
an interest in a fishing right under section 46 of the Fisheries
Management Act when a notation is made on the Register of Statutory
Fishing Rights in relation to the cancellation, suspension, revocation
or rectification of a registration of a fishing right. This reflects
the fact there is no similar requirement under the PPS Act.
18. The amendment will have a transitional effect to ensure that where the
AFMA makes the notation giving rise to the requirement to notify
parties before the PPS Act registration commencement time, AFMA must
comply with the requirement to notify the relevant parties.
Enforcement
Item 16
19. This item ensures that the seizure, detention or forfeiture of a boat
or any other property under the Fisheries Management Act has effect
despite any enforcement action taken against the property under the
PPS Act. Enforcement under the Fisheries Management Act will have
effect regardless of whether the seizure, detention or forfeiture
under that Act occurred before or after a secured party commences
enforcement action under the PPS Act.
Amendment of the Torres Strait Fisheries Act
Definition of PPSA security interest
Item 19
20. This item inserts a definition of a 'PPSA security interest' into the
interpretation section (subsection 3(1)) of the Torres Strait
Fisheries Act. A PPSA security interest is a security interest to
which the PPS Act applies or a transitional security interest to which
Division 4 of Part 9.4 of the PPS Act applies (being an interest
subject to the PPS Act as a result of a bankruptcy or insolvency, or
where an existing secured party has assented to the PPS Act by
voluntarily registering their interest on the PPS Register).
21. The definition has been included to clarify references to 'PPSA
security interests' in the amendments to the Torres Strait Fisheries
Act.
Enforcement
Item 20
22. This item ensures that the seizure, detention or forfeiture of a boat
or any other property under the Torres Strait Fisheries Act has effect
despite any enforcement action taken against the property under the
PPS Act. Enforcement under the Torres Strait Fisheries Act will have
effect regardless of whether the seizure, detention or forfeiture
under that Act occurred before or after a secured party commences
enforcement action under the PPS Act.
Explanation of items
6. Schedule 2 - Intellectual property legislation
Schedule 2 amends the Designs Act 2003, Trade Marks Act 1995 and
Patents Act 1990 to remove the effect of security interests registered
on the registers established under those Acts. The amendments will
continue to allow PPSA security interests to be registered under the
relevant intellectual property legislation after the PPS Act
registration commencement time, but will provide that such registration
may have no effect on the rights of the registered owner.
Schedule 2 also amends the Plant Breeder's Rights Act 1994 to
acknowledge that a security interest can be granted over a plant
breeder's right.
Commencement
1. Schedule 2 will commence on the PPS Act registration commencement time.
The PPS Act registration commencement time is the first day of the month
that is 26 months after the month in which the PPS Bill is given Royal
Assent, or an earlier time determined by the Minister. The Government
expect the registration commencement time will be in May 2011.
Amendment of the Designs Act 2003
Definition of a PPSA security interest
Item 1
2. This item inserts a definition of a 'PPSA security interest' into the
definitions section (section 5) of the Designs Act. The definition
includes a security interest to which the PPS Act applies and a
transitional security interest to which Division 4 of Part 9.4 of the PPS
Act applies.
3. The definition has been included to clarify references to PPSA security
interests in the amendments to the Designs Act.
Amendment of section 12
Item 2
4. Subsection 12(1) of the Designs Act provides that the rights of a
registered owner of a design are subject to any rights appearing in the
Register of Designs.
5. PPSA security interests will continue to be recordable on the Register
of Designs. This is to enable such registrants to receive notifications,
given an opportunity to be heard, or given the opportunity to make
submissions under subsections 50(2), 52(3) and (5), 67(2) and (3), 68(2)
and 68(4) of the Designs Act.
6. However, item 2 will have the effect that interests that appear on the
Register of Designs and meet the definition of a PPSA security interest,
will not have any effect on the rights of the registered owner after the
PPS Act registration commencement time (see item 7 for the application of
this rule). This amendment will encourage registration of PPSA security
interests on the PPS Register after the PPS Act registration commencement
time and will assist in ensuring that priority issues between PPSA
security interests registered on either the Register of Designs or the
PPS Register are avoided.
Item 3
7. Subsection 12(3) of the Designs Act currently provides that equities, in
relation to a registered design may be enforced against the registered
owner, except to the prejudice of a purchaser in good faith for value.
8. Item 3 will have the effect that the rule in subsection 12(3) will not
apply in relation to a PPSA security interest. This is because the PPS
Act will govern dealings with PPSA security interests over registered
designs, including enforcement and taking a registered design free of an
existing PPSA security interest (taking-free). The note to be added
further assists readers in identifying the relevant provisions in the PPS
Act relating to enforcement and taking-free of an existing PPSA security
interest.
Amendment of section 118
Items 4
9. Section 118 of the Designs Act currently provides that the Register of
Designs is prima facie evidence of any particulars entered in it.
10. This item amends section 118 of the Designs Act so that this section
does not apply in relation to any particulars recorded in the Register of
Designs in relation to a PPSA security interest. This amendment is
required because whilst PPSA security interests are registrable on the
Register of Designs, such interests will not have any effect on the
rights of the registered owner after the PPS Act registration
commencement time (see item 2). Consequently, from the PPS Act
registration commencement time onwards, the Register of Designs will not
be prima facie evidence of PPSA security interests registered in it.
Amendment of section 119
Items 5 and 6
11. Section 119 of the Designs Act currently provides that a document, in
relation to which particulars have not been entered in the Register of
Designs, is not admissible in any proceedings as proof of the title to a
design or to an interest in a design, unless circumstances outlined in
paragraphs (a) or (b) of section 119 exist.
12. These items amend section 119 so that this section would not apply to
PPSA security interests. This amendment will allow for the operation of
section 174 of the PPS Act, which provides that certain particulars
relating to registrations on the PPS Register are admissible as evidence.
Application of amendments
Item 7
13. This item clarifies that parties with a dealing, enforcement action, or
court proceedings in relation to a registered design (or an interest in a
registered design) which have already started (but not yet finished) as
at the PPS Act registration commencement time, should be able to rely on
the rules which apply prior to the PPS Act registration commencement
time.
14. A practical application of this amendment may be in relation to an
interest holder that has a registration on the Register of Designs prior
to the PPS Act registration commencement time. That interest holder
would consider that their interests recorded on the Register of Designs
would constrain the registered owner's rights and that such recordings
would be admissible as evidence. Item 7 will ensure that this
understanding remains valid.
Amendments to the Patents Act
Definition of a PPSA security interest
Items 8 and 14
15. These items insert the term 'PPSA security interest' into the list of
expressions in section 3 for the term to be defined in the Dictionary in
Schedule 1 of the Patents Act. The definition includes a security
interest to which the PPS Act applies and a transitional security
interest to which Division 4 of Part 9.4 of the PPS Act applies.
16. The definition has been included to clarify references to 'PPSA
security interests' in the amendments to the Patents Act.
Amendment of section 189
Item 9
17. Subsection 189(1) of the Patents Act provides that the rights of a
registered owner of a patent are subject to any rights appearing in the
Register of Patents.
18. PPSA security interests will continue to be recordable on the Register
of Patents. However, item 9 will have the effect that interests that
appear on the Register of Patents, and meet the definition of a PPSA
security interest, will not have any effect on the rights of the
registered owner after the PPS Act registration commencement time (see
item 15 for the application of this rule). This amendment will encourage
registration of PPSA security interests on the PPS Register after the PPS
Act registration commencement time, and will assist in ensuring that
priority issues between PPSA security interest registered on either the
Register of Patents and PPS Register are avoided.
Item 10
19. Subsection 189(3) of the Patents Act currently provides that equities,
in relation to a patent may be enforced against the registered owner,
except to the prejudice of a purchaser in good faith for value.
20. Item 10 will have the effect that the rule in subsection 189(3) would
not apply in relation to a PPSA security interest. This is because the
PPS Act will govern dealings with PPSA security interests over patents,
including enforcement and taking-free of an existing PPSA security
interest. The note to be added further assists readers in identifying
the relevant provisions in the PPS Act relating to enforcement and taking-
free of an existing PPSA security interest.
Amendment of section 195
Item 11
21. Section 195 of the Patents Act currently provides that the Register of
Patents is prima facie evidence of any particulars entered in it.
22. This item amends section 195 of the Patents Act so that this section
will no longer apply to PPSA security interests. This amendment is
required because whilst PPSA security interests will continue to be
recordable on the Register of Patents, such interests that appear on the
Register of Patents will not have any effect on the rights of the
registered owner after the PPS Act registration commencement time (see
item 9). Consequently, from the PPS Act registration commencement time
onwards, the Register of Patents will not provide prima facie evidence
when it comes to PPSA security interests over patents.
Amendment of section 196
Items 12-13
23. Section 196 of the Patents Act currently provides that a document, of
which particulars have not been entered in the Register of Patents, is
not admissible to any proceedings as proof of title to a patent or to an
interest in a patent, unless circumstances outlined in paragraphs (a) or
(b) of section 196 exists.
24. These items amend section 196 so that this section would not apply to
PPSA security interests. This amendment will allow for the operation of
section 174 of the PPS Act, which provides that certain particulars
relating to registrations on the PPS Register are admissible as evidence.
Application of amendments
Item 15
25. This item clarifies that parties with a dealing, enforcement action, or
court proceedings in relation to a patent (or an interest in a patent)
which have already started (but not yet finished) as at the PPS Act
registration commencement time, should be able to rely on the rules which
apply prior to the PPS Act registration commencement time.
26. A practical application of this amendment may be in relation to an
interest holder that has a registration on the Register of Patents prior
to the PPS Act registration commencement time. That interest holder
would consider that their interests recorded on the Register of Patents
would constrain the registered owner's rights and that such recordings
would be admissible as evidence. Item 15 will ensure that this
understanding remains valid.
Amendment of the Plant Breeder's Rights Act
Application of the PPS Act
Item 16
27. Section 20 of the Plant Breeder's Rights Act provides that the plant
breeder's right is personal property.
28. This item inserts notes after section 20. Note 1 clarifies that the
PPS Act applies to the plant breeder's right, and any licence in the
plant breeder's right, as intellectual property. Note 2 informs readers
that section 106 of the PPS Act corresponds to subsection 20(3) of the
Plant Breeder's Rights Act.
Item 17
29. Section 25 of the Plant Breeder's Rights Act provides that the right to
apply for the plant breeder's right is personal property.
30. This item inserts a note after section 25 informing readers that the
PPS Act deals with security interests in personal property, including a
right to apply for the plant breeder's right.
31. The PPS Act will apply of its own force over personal property. The
inclusion of items 16 and 17 should not be used to support the argument
that the PPS Act does not apply to personal property provided under
certain legislation if similar notes are not inserted in those pieces of
legislation.
Amendment of the Trade Marks Act
Definition of a PPSA security interest
Item 18
32. This item inserts a definition of a 'PPSA security interest' into the
definitions section (section 6) of the Trade Marks Act. The definition
includes a security interest to which the PPS Act applies and a
transitional security interest to which Division 4 of Part 9.4 of the PPS
Act applies.
33. The definition has been included to clarify references to PPSA security
interests in the amendments to the Trade Marks Act.
Amendment of section 22
Item 19
34. Subsection 22(1) provides that the trade mark owner can deal with the
trade mark as absolute owner and give good discharges subject only to any
rights appearing on the Register of Trade Marks.
35. PPSA security interests will continue to be recordable on the Register
of Trade Marks. This is to enable such registrants to receive
notifications, given an opportunity to be heard, or given the opportunity
to make submissions under sections 84(2), 84A(4), 84A (5) and 111 of the
Trade Marks Act.
36. However, item 19 will have the effect that interests that appear on the
Register of Trade Marks and meet the definition of a PPSA security
interest, will not have any effect on the rights of the registered owner
after the PPS Act registration commencement time (see item 24 for the
application of this rule). This amendment will encourage registration of
PPSA security interests on the PPS Register after the PPS Act
registration commencement time, and will assist in ensuring that priority
issues between PPSA security interests registered on either the Register
of Trade Marks and the PPS Register are avoided.
Item 20
37. Subsection 22(3) of the Trade Marks Act currently provides that
equities, in relation to a registered trade mark may be enforced against
the registered owner, except to the prejudice of a purchaser in good
faith for value.
38. This item will have the effect that the rule in subsection 22(3) would
not apply in relation to a PPSA security interest. This is because the
PPS Act will govern dealings with PPSA security interests over registered
trade marks, including enforcement and taking-free of an existing PPSA
security interest. The note to be added further assists readers in
identifying the relevant provisions in the PPS Act relating to
enforcement and taking-free of an existing PPSA security interest.
39. It should be noted that although subsection 21(2) is somewhat similar
to subsection 22(3) - in that both subsections are concerned with
enforcement of equities - the former has not been amended whereas the
latter has. The reason for this is that subsection 21(2) recognises that
there are different types of equities and that these equities will have
their own enforcement rules. This does not contradict the operation of
the enforcement rules in the PPS Act.
40. If the equity is a PPSA security interest, then under subsection 21(2)
the PPS Act enforcement rules will operate in relation to that equity.
41. Subsection 22(3) on the other hand authorises enforcement of an equity
in a trade mark, subject to a restriction stated in terms of a general
principle. The PPS Act adequately authorises the enforcement of PPS Act
equities in trade marks, subject to particular rules (not the general
principle) that do not necessarily apply in relation to equities that are
PPSA security interests. Therefore, equities that are PPSA security
interests are expressly excluded from the operation of subsection 22(3)
to avoid any inconsistency between subsection 22(3) and the PPS Act.
Amendment of section 113
Item 21
42. Section 113 of the Trade Marks Act currently provides that if a person
(other than the registered owner) claims to have an interest that is not
recordable under Part 10 of the Trade Marks Act 1995 (i.e. not an
assignment or transmission of title), the person and the registered owner
may together apply to have the interest recorded on the Register of Trade
Marks.
43. This item amends section 113 so that any person can apply to the
Registrar of Trade Marks to have the particulars of a claim to an
interest that is not recordable under Part 10 to be recorded in the
Register of Trade Marks. The application must contain evidence of the
claim asserted.
44. This item will allow a security interest holder to apply to have their
interest recorded on the Trade Marks Register without the joinder of the
registered owner of the trade mark.
Amendment of section 117
Item 22
45. Section 117 of the Trade Marks Act currently provides that if a person
has applied for the registration of a trade mark, and another person
claims to have an interest in, or a right in respect of, the trade mark,
they may together apply to the Registrar of Trade Marks for a record to
be kept of the other person's claim.
46. This item amends section 117 so that any person can apply to the
Registrar of Trade Marks to have the particulars of a claim to an
interest recorded on the Register of Trade Marks without the joinder of
the applicant for the trade mark. Consequently, a security interest
holder can apply to have their interest recorded on the Trade Marks
Register without the joinder of the person who has applied for the
registration of the trade mark.
Amendment of section 210
Item 23
47. Section 210 of the Trade Marks Act currently provides that the Register
of Trade Marks is prima facie evidence of any particulars entered in it.
48. This item amends sections 210 so that this section would no longer
apply to PPSA security interests. This amendment is required because
whilst PPSA security interests are registrable on the Register of Trade
Marks, such interests would not have any effect on the rights of the
registered owner after the PPS Act registration commencement time (see
item 19). Consequently, from the PPS Act registration commencement time
onwards, the Register of Trade Marks will not be prima facie evidence of
PPSA security interests registered on it.
Application of amendments
Item 24
49. This item clarifies that parties with a dealing, enforcement action, or
court proceedings in relation to a registered trade mark (or an interest
in a registered trade mark) which have already started (but not yet
finished) as at the PPS Act registration commencement time, should be
able to rely on the rules which apply prior to the PPS Act registration
commencement time.
50. A practical application of this amendment may be in relation to an
interest holder that has a registration on the Register of Trade Marks
prior to the PPS Act registration commencement time. That interest
holder would consider that their interests recorded on the Register of
Trade Marks would constrain the registered owner's rights and that such
recordings would be admissible as evidence. Item 24 would ensure that
this understanding remains valid.
Explanation of items
7. Schedule 3 - Maritime legislation
Schedule 3 amends the Shipping Registration Act 1981 to restrict the
application of the Act so that it no longer applies to mortgages over
ships. The amendments will prevent the registration on the Australian
Register of Ships (ARS) of mortgages over ships and the lodgement of
caveats in relation to PPSA security interests. Existing mortgages on the
ARS will be migrated to the PPS Register. The result will be that the PPS
Register will be the sole register for the registration of mortgages and
other PPSA security interests in ships. The PPS Act will govern the
creation, enforceability and priority of security interest in ships,
including mortgages. The power of the Supreme Courts to rectify the ARS
will be extended to the PPS Register to ensure the Court's power is not
restricted when PPSA security interests currently registered on the ARS are
migrated to the PPS Register. Under the Admiralty Act 1988, the Federal
Court is able to exercise the same power as the Supreme Courts under the
Shipping Registration Act to rectify the ARS. Schedule 3 includes a minor
amendment to the Admiralty Act 1988 to enable the Federal Court to also
rectify the PPS Register.
This schedule also amends the Marine Navigation Levy Collection Act 1989,
Marine Navigation (Regulatory Functions) Levy Collection Act 1991,
Protection of the Sea (Civil Liability) Act 1981, Protection of the Sea
(Civil Liability for Bunker Oil Pollution Damage) Act 2008, Protection of
the Sea (Harmful Anti-fouling Systems) Act 2006, Protection of the Sea
(Prevention of Pollution from Ships) Act 1983 and the Protection of the Sea
(Shipping Levy Collection) Act 1981 to ensure that enforcement action taken
under this legislation against goods will not be frustrated by a secured
party enforcing against the same goods under the PPS Act.
Schedule 3 amends the Navigation Act 1912 to ensure that a number of
statutory liens and charges under that Act have priority over PPSA security
interests while preserving the current priority as between non-PPSA
security interests.
Commencement
7.1 Schedule 3 will commence on the PPS Act registration commencement
time. The PPS Act registration commencement time is the first day of
the month that is 26 months after the month in which the PPS Bill is
given Royal Assent, or an earlier time determined by the Minister. The
Government expect the registration commencement time will be in May
2011.
Amendment of the Admiralty Act
Amendment of section 32
Item 1
2. Section 32 of the Admiralty Act provides that in proceedings in the
Federal Court on a proprietary maritime claim, the orders that the court
may make include orders of the kind that a court may make under section
59 of the Shipping Registration Act.
3. This item inserts a reference to section 59A of the Shipping
Registration Act into section 32 of the Admiralty Act. Section 59A will
be inserted into the Shipping Registration Act by item 25 of schedule 3.
Item 1 is intended to give the Federal Court the same powers with respect
to rectification of the PPS Register as section 59A will grant to the
State and Territory Supreme Courts.
Amendment of the Marine Navigation Levy Collection Act
Enforcement
Items 2-3
4. These items insert a new subsection into section 10 of the Marine
Navigation Levy Collection Act. Section 10 provides that an officer of
Customs may detain a ship for an unpaid levy, until the levy is paid.
5. The amendment will ensure that a secured party does not have the power
to enforce its PPSA security interest (by seizing the detained property
under section 123 of the PPS Act) while a ship is detained pursuant to
section 10 of the Marine Navigation Levy Collection Act.
Amendment of the Marine Navigation (Regulatory Functions) Levy
Collection Act
Enforcement
Items 4-5
6. These items insert a new subsection into section 9 of the Marine
Navigation (Regulatory Functions) Levy Collection Act. Section 9
provides that an officer of Customs may detain a ship for an unpaid levy,
until the levy is paid.
7. The amendment will ensure that a secured party does not have the power
to enforce its PPSA security interest (by seizing the detained property
under section 123 of the PPS Act) while a ship is detained pursuant to
section 9 of the Marine Navigation (Regulatory Functions) Levy Collection
Act.
Amendment of the Navigation Act
Definition of a PPSA security interest
Item 6
8. This item inserts a definition of a 'PPSA security interest' into the
interpretation section (subsection 6(1)) of the Navigation Act. A PPSA
security interest is a security interest to which the PPS Act applies or
a transitional security interest to which Division 4 of Part 9.4 of the
PPS Act applies (being an interest subject to the PPS Act as a result of
a bankruptcy or insolvency, or where an existing secured party has
assented to the PPS Act by voluntarily registering their interest on the
PPS Register).
9. The definition has been included to clarify references to PPSA security
interests in the amendments to the Navigation Act.
Amendment of section 83
Items 7-8
10. Section 83 recognises and gives statutory effect to the common law
position that unpaid seamen have a lien over the ship for their wages.
This lien is given priority over other liens by virtue of subsection
83(2).
11. These items amend subsection 83(2) of the Navigation Act to clarify the
position of the seamen's lien, by continuing its priority over all other
liens and giving it priority over all PPSA security interests.
12. These items also apply subsection 73(2) of the PPS Act to a lien under
section 83 of the Navigation Act. Applying subsection 73(2) ensures the
priority between a lien under section 83 and a security interest in the
same property is determined in accordance with the Navigation Act after
the PPS Act registration commencement time.
Amendment of section 128
Item 9
13. Section 128 of the Navigation Act provides that amounts outstanding to
an authority in relation to expenses incurred in attending to sick or
injured seamen are a charge over the vessel. This item inserts new
subsections 128(2A) and 128(2B) of the Act.
14. The amendment will clarify the position of the charge, by giving it
priority over PPSA security interests.
15. These items also apply subsection 73(2) of the PPS Act to a charge
under section 128 of the Navigation Act. Applying subsection 73(2)
ensures the priority between a charge under section 128 and a security
interest in the same property is determined in accordance with the
Navigation Act after the PPS Act registration commencement time.
Amendment of section 298
Item 10
16. Section 298 of the Navigation Act provides for a charge over a wreck
for damage to land occasioned in attending to the wreck, which is
recoverable as salvage.
17. The amendments will clarify the position of the charge, by giving it
priority over PPSA security interests.
18. This item applies subsection 73(2) of the PPS Act to a charge under
section 298. Applying subsection 73(2) ensures the priority between a
charge under section 298 and a security interest in the same property is
determined in accordance with the Navigation Act after the PPS Act
registration commencement time.
Amendment of the Protection of the Sea (Civil Liability) Act
Enforcement
Item 11
19. This item inserts a new subsection into section 22 of the Protection of
the Sea (Civil Liability) Act. Where AMSA incurs expenses under the
Protection of the Sea (Powers of Intervention) Act 1981, the amount is a
charge over the ship (sections 20 and 21 of the Protection of the Sea
(Civil Liability) Act). Under section 22, this gives rise to a power to
detain a ship until the amount is paid or security for payment of the
amount is provided.
20. The amendment will ensure that a secured party does not have the power
to enforce its security interest (by seizing the detained property under
section 123 of the PPS Act) while a ship is detained pursuant to section
22 of the Protection of the Sea (Civil Liability) Act.
Amendment of the Protection of the Sea (Harmful Anti-fouling Systems)
Act
Enforcement
Item 12
21. This item inserts a new subsection into section 18 of the Protection of
the Sea (Harmful Anti-fouling Systems) Act. Section 18 gives AMSA the
power to detain a ship if there are reasonable grounds for believing that
an offence against this Act has been committed in respect of the ship.
22. The amendment will ensure that a secured party does not have the power
to enforce its security interest (by seizing the detained property under
section 123 of the PPS Act) while a ship is detained pursuant to section
18 of the Protection of the Sea (Harmful Anti-fouling Systems) Act.
Amendment of the Protection of the Sea (Prevention of Pollution from
Ships) Act
Enforcement
Item 13
23. This item inserts a new subsection into section 27A of the Protection
of the Sea (Prevention of Pollution from Ships) Act. Section 27A gives
AMSA power to detain a foreign vessel in connection with pollution
breaches.
24. The amendment will ensure that a secured party does not have the power
to enforce its security interest (by seizing the detained property under
section 123 of the PPS Act) while a ship is detained pursuant to section
27A of the Protection of the Sea (Prevention of Pollution from Ships)
Act.
Amendment of the Protection of the Sea (Shipping Levy Collection) Act
Enforcement
Item 14
25. The item inserts a new subsection into section 12 of the Protection of
the Sea (Shipping Levy Collection) Act. Section 12 provides that a
Collector, within the meaning of the Customs Act 1901, or another
authorised person, may detain a ship for an unpaid levy, until the levy
is paid.
26. The amendment will ensure that a secured party does not have the power
to enforce its security interests (by seizing the detained property under
section 123 of the PPS Act) while a ship is detained pursuant to section
12 of the Protection of the Sea (Shipping Levy Collection) Act.
Amendment of the Shipping Registration Act
Amendment of subsection 3(1) and heading of Part III
Items 15-17
27. These items repeal the definition of mortgage, insert a definition of
PPSA security interest and substitute 'mortgages' with 'security
interests and other dealings' in the heading of Part III of the Shipping
Registration Act.
28. The definition of a PPSA security interest inserted by item 16 will
include a security interest to which the PPS Act applies but exclude a
transitional security interest under the PPS Act. In combination with
the relevant operative rules, the exclusion of transitional security
interests from the definition will ensure that parties who enter into a
security agreement before the PPS Act registration commencement time have
the same rights after that time. For example, the right to lodge a
caveat under section 47A in respect of their interest.
29. The amendments support the repeal of the Shipping Registration Act's
comprehensive regime for ship mortgages and align the terminology used by
the Act with the functional approach taken by the PPS Act.
Repeal of sections 38 to 44A
Item 18
30. Sections 38 to 44A of the Shipping Registration Act establish a
comprehensive regime for creation, registration, priority, transfer,
enforcement and discharge of ship mortgages.
31. Item 18 is intended to repeal the comprehensive ship mortgage regime
established by sections 38 to 44A. Ship mortgages will be PPSA security
interests, which could be registered on the PPS Register.
Amendment of section 47A
Item 20
32. Section 47A of the Shipping Registration Act permits a person who
claims an interest in a ship or a share in a ship under an unregistered
instrument to lodge a caveat with the Registrar of Ships. The lodging of
a caveat forbids entry in the ARS of any instrument relating to any
dealing with that ship or share of the ship until notice is given to the
caveator.
33. This item will have the effect that a person claiming an interest in a
ship or share in a ship which is a PPSA security interest may not lodge a
caveat with the Registrar of Ships with respect to that interest. By
virtue of the definition of PPSA security interest excluding transitional
security interests, parties will be entitled to continue to lodge caveats
in respect of security interests that arise out of a security agreement
created before the PPS Act registration commencement time.
34. This item supports the functional approach taken by the PPS Act and the
character of the PPS Register, which is intended to be the principal
Australian register of security interests. It is intended that a person
wishing to protect a PPSA security interest in a ship could protect that
interest by perfecting it under the PPS Act.
Amendment of paragraph 47B(1)(a) and (b)
Item 21
35. Item 21 removes the requirement on the Registrar of Ships to notify
mortgagees in respect of caveats entered on the ARS. From the PPS Act
registration commencement time, ship mortgages will be registered on the
PPS Register instead of the ARS.
Item 35
36. This item will ensure that the amendment under item 21 does not apply,
and the obligation on the Registrar of Ships to notify mortgagees
continues, where a caveat is lodged on the ARS before the PPS Act
registration commencement time.
Amendment of subsection 47D(3)
Item 22
37. Except to the extent that a caveat specifies otherwise, subsection
47D(3) of the Shipping Registration Act allows for the Registrar of Ships
to enter into the ARS (1) the transmission of a ship, or a share in a
ship, to a person if the person becomes entitled to the transmission by
operation of law, and (2) a dealing by a mortgagee of a ship or share of
a ship, under the mortgage, where the caveator has consented or the
caveat has lapsed.
38. This item amends that subsection to remove the reference to the
Registrar of Ships registering a dealing of a mortgagee.
Amendment of subparagraph 58(1)(b)(i), paragraphs 58(3)(a) and
66(3)(a), subsections 66(4) to (9) and (11), and section 79
Items 23, 24, 26, 27 & 30
6.36 These items remove references to mortgages in the Shipping
Registration Act which are redundant because of the repeal of the ship
mortgage scheme in sections 38 to 44A.
Insertion of s 59A
Item 25
39. With one exception, section 59A is intended to grant substantially the
same power to the Supreme Courts of the States and Territories with
respect to rectification of the PPS Register as section 59 grants those
courts with respect to rectification of the ARS. The amendment will
preserve the power of the courts to rectify ship mortgage registrations
after those registrations are migrated from the ARS to the PPS Register,
and extend their power to include the power to rectify PPS registrations
of PPSA security interests in ships which are not ship mortgages.
40. Unlike section 59, section 59A is not intended to grant power to the
courts to rectify omitted entries where the omitted entry relates to
something that was required to be registered. Unlike the Shipping
Registration Act, the PPS Act does not impose obligations to register.
Item 36
41. This item provides that item 25 applies in relation to a registration
under the PPS Act with respect to a security interest regardless of when
the security interest arises.
Amendments of section 47, subsections 74(1) and 74(2), section 81 and
subsection 82(1) of the Act
Items 19, 28, 29, 31 & 32
42. These items remove references to provisions which are repealed by this
Schedule or which will not have a relevant affect after the PPS Act
registration commencement time (the commencement time for items in this
Schedule).
Application of amendments
Item 33
43. This item will clarify that items 15, 17 to 19 and 22 to 24 apply in
relation to the interest of a mortgagor in a mortgage of a ship, or of a
share in a ship, regardless of when the interest arose. This ensures
that at the PPS Act registration commencement time, the Shipping
Registration Act no longer provides for mortgages over ships.
44. Any mortgages that are registered on the ARS before the PPS Act
registration commencement time will continue to have the same priority
they had between themselves before the PPS Act registration commencement
time, subject to Chapter 9 (transitional provisions) of the PPS Act. For
example, a registered mortgage in a ship will continue to have priority
over a later registered mortgage in the same ship where both mortgages
were registered on the ARS before the PPS Act registration commencement
time.
45. The transitional provisions of the PPS Act can only alter the existing
priorities between competing interests where one of the parties becomes
bankrupt or insolvent, or where an existing secured party has assented to
the PPS Act by voluntarily registering their interests on the PPS
Register.
Item 34
46. This item will ensure that item 20 does not affect the validity or
effectiveness of caveats lodged prior to the PPS Act registration
commencement time.
Item 37
47. This item provides that the requirement in subsection 66(4) of the
Shipping Registration Act (as in force immediately before this Schedule
commences at the PPS Act registration commencement time) to give notice
to a mortgagee stops applying when this Schedule commences.
Item 38
48. This item provides that items 28 and 29 do not apply to breaches of
subsections 74(1) and 74(2) (as in force immediately before this Schedule
commences at the PPS Act registration commencement time) that occurred
before items 28 and 29 commence. The contravention of sections of the
Shipping Registration Act listed in subsections 74(1) and 74(2) is an
offence under that Act.
Explanation of items
8 Schedule 4 - Personal Property Securities Act 2009
Schedule 4 makes minor technical amendments in response to submissions
made to the Senate Legal and Constitutional Affairs Committee's inquiry
into the provisions of PPS Bill and subsequently to the Attorney-
General's Department. The PPS Bill is being amended through the
Consequential Bill, rather than by way of parliamentary amendments, to
avoid the need for States who have given a referral of power to give a
further referral of power in respect of the amendments.
Commencement
1. Items 1-7, 9-35 and 37-64 of Schedule 4 will commence on the later of
(1) the start of the day the Consequential Bill receives Royal Assent,
and (2) immediately after the commencement of the PPS Act.
2. Items 8 and 36 of Schedule 4 will commence on the latest of (1) the
start of the day the Consequential Bill receives Royal Assent, (2)
immediately after the commencement of the PPS Act, and (3) the start of
the day on which section 3 of the National Consumer Credit Protection Act
2009 commences.
Amendment of section 6
Item 1
3. Section 6 of the PPS Act sets out the connection that a PPSA security
interest (an interest in relation to personal property provided for by a
transaction that, in substance, secures payment or performance of an
obligation (section 12 of the PPS Act)) in goods (tangible property that
is not financial property or investment entitlements (section 10 of the
PPS Act)), financial property (chattel paper, currency, a document of
title, an investment entitlement or a negotiable instrument (section 10
of the PPS Act)) or intangible property (personal property which is not
financial property, goods or an investment entitlement (section 10 of the
PPS Act) must have with Australia for the PPS Act to apply.
4. Section 6(1) of the PPS Act applies the Act to a security interest in
goods or financial property if the location of the goods or property is
in Australia or the grantor is an Australian entity.
5. Section 6(2) of the PPS Act applies the Act to security interests in
intangible property if the grantor is an Australian entity.
6. This item inserts a new subsection 6(1A) extending the application of
the PPS Act to a PPSA security interest in an 'investment entitlement' if
the investment entitlement intermediary is located in Australia or the
grantor of the security interest is an Australian entity. An 'investment
entitlement' is the rights of a person in whose name an investment
entitlement intermediary maintains an investment entitlement account
(section 15(1) of the PPS Act). An investment entitlement account is an
account to which interests in financial products (within the meaning of
the Corporations Act 2001) may be credit or debited, or an account
maintained by a CS facility license holder (within the meaning of the
Corporations Act) (section 15(7) of the PPS Act).
7. This item would align the application of investment entitlements with
that of financial property under section 6(1).
Item 2
8. Section 6(2)(e) of the PPS Act currently applies the Act to PPSA
security interests in intangible property that are created, arise or are
provided for by a law of the Commonwealth, a State or a Territory. A law
of the Commonwealth, a State or a Territory means, (a) an Act of the
Commonwealth, the State or the Territory; or (b) an instrument made under
such an Act. For example, it applies the Act to licences created by a
law of a State or Territory and intellectual property created by a law of
the Commonwealth (section 6(2) of the PPS Act).
9. This item amends section 6(2)(e) of the PPS Act so that the Act also
applies to a PPSA security interest in intangible property that is
created, arises or is provided for under the general law of the
Commonwealth, a State or a Territory. The general law of the
Commonwealth, a State or a Territory means the principles and rules of
the common law and equity (section 10 of the PPS Act). For example, it
applies the Act to a right to damages in tort.
Amendment of section 8
Items 3 and 4
10. Section 8(1) of the PPS Act provides that the Act does not apply to a
number of interests (including interests prescribed by regulations).
11. Section 8(1)(d) provides that the PPS Act does not apply to any right
of set-off or right of combination of accounts.
12. Item 3 adds the words '(within the ordinary meaning of the term
"accounts")' to the end of section 8(1)(d). The amendment is necessary
because the term 'account' is defined in section 10, while the term
'right of combination of accounts' is a term of art in banking law.
'Right of combination of accounts' generally means the right of a banker
to combine several accounts held by a person with a bank (which may have
debit or credit balances) into a single account with a single net
balance.
13. The table in section 8(2) lists a number of interests to which the PPS
Act does apply to despite section 8(1).
14. Item 4 amends the table in section 8(2) by inserting an Item 6 at the
end of the table. This amendment permits regulations to apply provisions
of the PPS Act, specified in those regulations, to security interests
that would otherwise be excluded from coverage because they are specified
in section?8(1).
15. The effect will be to allow regulations to be made under section 8(2)
providing that the Act does apply (to the extent provided for by the
regulations) to interests excluded by section 8(1). In particular,
regulations made under section 8(1)(l) of the Act may exclude certain
matters from the application of the Act, while the regulations made under
section 8(2) would provide limited exceptions to those regulations.
Amendments to section 10
Item 5
16. Section 10 is the Dictionary or the interpretative section of the PPS
Act.
17. This item amends the definition of an ADI Account to an account that is
maintained with an approved deposit-taking institution (for example, a
banks or credit union) that is payable on demand or at some time in the
future. This amendment was required as the previous definition of an ADI
Account was defined as a protected account within the meaning of the
Banking Act 1959. While the Banking Act definition is apt for
specialised prudential regulation purposes, it was criticised as being
too complex for use in relation to the PPS Act that will be used by a
broad cross-section of the community.
Item 6
18. This item fixes a cross-referencing error in the definition of
'Australia' in section 10 of the PPS Act. It replaces the reference to
'subsection 7(4)' with a reference to 'section?7'. This does not
substantively alter the definition of Australia in the PPS Act.
Item 7
19. This item inserts a definition of 'jurisdiction' into section 10 of the
PPS Act. The operation of this definition of jurisdiction works in
conjunction with subsection?235(6) of the PPS Act, which is discussed
below.
Item 8
20. This item inserts a definition for the National Credit Code in the PPS
Act. Item 36 of this Schedule omits references the Consumer Credit Code
and substitutes references to the National Credit Code proposed under the
National Consumer Protection Bill 2009. Items 8 and 36 of the Schedule
will commence at the later of the commencement of balance of the Schedule
and the commencement of section 3 of the National Consumer Credit
Protection Act 2009.
Item 9
21. This item amends a punctuation error in the definition of
'registration' in section 10 of the PPS Act. It changes the ';' at the
end of paragraph (b) of the definition to of registration to '.' This
amendment does not alter the definition of 'registration'.
Amendment to section 12
Item 10
22. Section 12 of the PPS Act defines the term 'security interest'.
23. Section 75 of the PPS Act recognises that an ADI can take security
interests in an ADI account held with the ADI.
24. For consistency with section 75, this item inserts a new section 12(4A)
providing that an ADI may take a PPSA security interest in an ADI account
that is kept with the ADI.
Insertion of subsection 14(2A)
Item 11
25. Section 14 of the PPS Act provides the definition of a 'purchase money
security interest' (PMSI). A PMSI is a PPSA security interest in
collateral created by a seller who secures the obligation to pay the
purchase price or a person who provides the value to purchase the
collateral.
26. Section 14(2)(c) excludes from the definition of PMSI a PPSA security
interest in collateral that (at the time of the interest attaching to the
collateral) the grantor intends to use predominantly for personal,
domestic or household purposes. Section 14(2)(c) is intended to promote
that availability of finance to small business, by ensuring that general
PPSA security interests are not eroded by later PMSIs granted to acquire
personal use assets.
27. This item inserts a new subsection 14(2A) having the effect that a
security interest in collateral that is required or permitted by the
regulations to be described by serial numbered may be a PMSI (regardless
of the purpose for which the serial numbered good was acquired). This
provision maintains the priority that PPSA security interests in serial
number numbered goods (such as motor vehicles) would otherwise have over
earlier general PPSA security interests.
Amendment of section 23
Item 12
28. Section 23 of the PPS Act provides the Guide Statement for Part 2.3 of
the PPS Act (Possession and control of personal property). Possession
generally meaning under the Act being possession by one party exclusive
of possession by others (section 24 of the PPS Act) and control being
variously defined under sections 25, 26, 27, 28 and 29 according to the
collateral involved.
29. This item corrects an error in the Guide Statement by omitting 'goods
in the possession of a common carrier' and substituting it with the
phrase 'goods transported by a common carrier'. This correction ensures
that the Guide Statement is consistent with section 24(3) of the PPS Act,
which sets out when a grantor or debtor to whom goods are transported by
a common carrier acquires possession of the goods.
Amendments of section 26
Items 13-15
30. Section 26 of the PPS Act establishes when a secured party has control
of an investment entitlement that is credited to an investment
entitlement account. A secured party would have control of an investment
entitlement while there is an agreement between the secured party, the
grantor and the intermediary to the effect that any instructions issued
by the grantor are subject to approval by the secured party and
permitting the secured party to deal in the entitlement without the
consent of the grantor (section 26(1) of the PPS Act). The secured party
would have control of an investment entitlement even if the person in
whose name the intermediary maintains the account retains the right to
make substitutions for the instrument, to originate instructions to the
issuer or to otherwise deal with the instrument (section 26(2)).
31. An 'investment entitlement' is the rights of a person in whose name an
investment entitlement intermediary maintains an investment entitlement
account (section 15(1) of the PPS Act).
32. An investment entitlement intermediary is a person who maintains
investment entitlement accounts on behalf of others, or a person who
operates securities transfer and settlement facilities under an
Australian CS facility licence (within the meaning of the Corporations
Act) (section 15(2) of the PPS Act).
33. An investment entitlement account is either an account to which
interests in financial products may be credited or debited or, in the
case of an account maintained by a CS facility licence holder, writing
that records holdings and transfers maintained by the CS facility license
holder in the course of operating the facility (section?15(7) of the PPS
Act).
34. These items amend section 26 such that the definition of control in
section 26 now reflects a more simplified approach to defining control as
provided in the definition of 'control agreement' in Article 1 of the
draft 'Convention on Substantive Rules regarding Intermediated
Securities'.
35. The amended section 26 would define control with the effect that a
secured party would have control of an investment entitlement where there
is an agreement between the secured party, the grantor and the
intermediary to the effect either: (i) that any instructions issued by
the grantor to the intermediary are subject to approval by the secured
party, or (ii) permitting the secured party to deal in the entitlement
without the consent of the grantor in one or more specified
circumstances.
Amendment of subsection 32(2)
Item 16
36. Section 32(2) of the PPS Act caps the amount available to a secured
party enforcing against both collateral and proceeds to the market value
of the collateral immediately before the collateral gave rise to the
proceeds. This cap does not apply to collateral which is an investment
instrument.
37. This item amends section 32(2) to extend the exclusion of the cap to
investment entitlements.
Amendments of section 39
Items 17 and 18
38. Section 39 of the PPS Act deals with the continuous perfection of a
PPSA security interest when the collateral is relocated from a foreign
jurisdiction to Australia. It allows the period of continuous perfection
to begin before the collateral is relocated to Australia. This is
important because the priority of the PPSA security interest may depend
upon when it began to be continuously perfected.
39. Section 39(2) provides the period from which the PPSA security interest
in the intangible property or financial property will be taken to have
been continuously perfected under section 39(1).
40. These items substitute a new subsection 39(2) which allows the period
of continuous perfection of the PPSA security interest to start at the
beginning of the period during which the PPSA security interest was
continuously perfected, registered, recorded or otherwise became
effective against third parties under the law of the foreign jurisdiction
before the collateral was relocated to Australia.
41. These items also insert a new subsection 39(2A) preventing secured
parties under subsection 39(2) from taking the benefit of continuous
perfection under Australian law where the PPSA security interest was not
perfected, registered, recorded or otherwise enforceable under the law of
a foreign jurisdiction immediately before relocation to Australia.
Amendment of section 40
Item 19
42. Section 40 of the PPS Act provides the rules for continuously
perfecting a PPSA security interest in intangible property or financial
property which was governed by the law of a foreign jurisdiction but
begins to be governed by the law of Australia.
43. Subsection 40(2) provides the period from which the security interest
in the intangible property or financial property will be taken to have
been continuously perfected under subsection 40(1).
44. This item substitutes subsections 40(1) and (2) with the effect that
the period of continuous perfection of the PPSA security interest in the
collateral under subsection 40(1) starts at the beginning of the period
during which the PPSA security interest was continuously perfected,
registered, recorded or otherwise became effective against third parties
under the law of the foreign jurisdiction before the collateral was
relocated to Australia.
45. This item also inserts a new subsection 40(2A) preventing secured
parties from taking the benefit of continuous perfection under the
Australian law when the PPSA security interest was not perfected,
registered, recorded or otherwise enforceable under the law of a foreign
jurisdiction immediately before relocation.
Amendment of section 41
Item 20
46. Section 41 of the PPS Act provides the Guide Statement for Part 2.5 of
the PPS Act (Taking personal property free of security interests). This
Guide Statement provides the rules for when personal property may be
bought or leased free of a PPSA security interest.
47. Paragraphs (a) to (j) in the Guide Statement are a list of the
circumstances and related rules further defined in Part 2.5 where
personal property may be bought or leased free of a PPSA security
interest. These paragraphs are:
470B(a) unperfected security interests;
471B(b) personal, domestic or household property;
472B(c) serial number defects;
473B(d) certain motor vehicles;
474B(e) currency;
475B(f) taking in the ordinary course of business;
476B(g) taking investment interests or entitlements in the
ordinary course of trading;
477B(h) investment instruments;
478B(i) investment entitlements.
479B(j) temporarily perfected security interests;
48. This item omits the reference to 'certain motor vehicles' and
substitutes 'motor vehicles' in order to reflect section 45 of Part 2.5
of the PPS Act, which provides the rules for acquiring motor vehicles
free of a PPSA security interest.
49. This item also changes the order of paragraphs (b) to (f) to reflect
the order these rules are dealt with in Part 2.5. This new order is
given as:
(b) serial number defects;
(c) motor vehicles;
(d) taking in the ordinary course of business;
(e) personal, domestic or household property;
(f) currency;
50. This item also rectifies punctuation errors in paragraphs (i) and (j).
The '.' at the end of paragraph (i) is substituted with a ';' and the ';'
at the end of paragraph (j) is substituted with a '.'
Amendment of section 43
Item 21
51. Section 43 provides that a person who acquires personal property that
is subject to an unperfected PPSA security interest acquires it free of
the PPSA security interest if they provide 'new value' (meaning value
other than value provided to reduce or discharge an earlier debt or
liability (section 10 of the PPS Act) and are not a party to the
transaction that provides for the PPSA security interest.
52. This item amends subsection 43(1) by omitting the words 'new value' and
substituting 'value'. This will make the PPS Act more consistent with
the approach taken in both the Personal Properties Securities Act (New
Zealand) (section 52) and Personal Properties Securities Act
(Saskatchewan) (section 20(3)), which both refer to 'value' and not 'new
value'.
Amendment of section 44
Item 22
53. Section 44 of the PPS Act provides that a buyer or lessee would take
property free of a PPSA security interest where (i) the buyer/lessee
provides 'new value', (ii) the property is required to be registered by
reference to a serial number, and (iii) a search by reference to the
serial number immediately before the sale/lease would not have disclosed
the PPSA security interest.
54. This item amends section 44(1) by removing the reference to new value,
and substituting 'value'. This will make the PPS Act more consistent
with the approach taken in both the Personal Properties Securities Act
(New Zealand) (section 55) and Personal Properties Securities Act
(Saskatchewan) (sections 30(6) and (7)), which both refer to 'value' and
not 'new value'.
Item 23
55. Subsection 44(2) establishes an exception to the taking free rule in
subsection 44(1). This exception applies when the purchaser/lessee had
actual knowledge that the sale or lease constitutes a breach of the
relevant security agreement at the relevant time. Under paragraph
44(3)(a) the relevant time in respect of property bought or leased to be
used for personal, domestic or household purposes is the time new value
is first given for the sale or lease.
56. This item amends paragraph 44(3)(a) so that the timing rule in that
provision applies when personal property is bought or leased for new
value.
57. This item also rectifies a typographical error by amending the heading
of section 49 of the PPS Act by omitting 'investment interest' and
substituting it with 'investment instrument'.
Amendment of section 51
Item 24
58. This item corrects a typographical error by omitting a reference to 'an
investment intermediary' and substituting a reference to 'the investment
intermediary'.
Amendment of section 55
Item 25
59. Section 55 of the PPS Act sets out the default priority rules which
apply when the PPS Act provides no other way of determining priority
between competing PPSA security interest in the same collateral.
60. Subsection 55(4) provides that the priority between two or more PPSA
security interests in collateral that are currently perfected is to be
determined by the order in which the priority time (subsection 55(5) of
the PPS Act) for each PPSA security interest occurs.
61. Subsection 55(5) sets out a number of events that can become the
'priority time', subject to the subsection 55(6) requirement that
perfection must be continuous. Subsection 55(5) provides that an event
listed in paragraphs?55(5)(a) to (c) becomes the 'priority time' if that
time occurs earlier than any other such event in relation to a competing
PPSA security interest.
62. The event in paragraph 55(5)(b) occurs when a secured party, or another
person on their behalf, takes possession of the collateral.
63. This item amends paragraph 55(5)(b) so that the priority time may also
be when the secured party first perfects the security interest by taking
control of the collateral.
Item 26
64. This item amends a cross-referencing error in the note to section 55 of
the PPS Act by omitting the reference to 'subsection?33(5)' and
substituting it with a reference to 'subsection 32(5)'.
Amendment of section 61
Item 27
65. Section 61 of the PPS Act provides that a secured party may voluntarily
subordinate their PPSA security interests in collateral to any other
interest in the collateral. This can sometimes be necessary as a prior
perfected PPSA security interest can limit further finance being
available to a debtor.
66. Subsection 61(2) determines how an agreement to subordinate a PPSA
security interest may be effective and enforceable.
67. This item amends subsection 61(2) by omitting 'An agreement to
subordinate a security interest' and replacing it with 'The
subordination'. This amendment improves the consistency between
subsections 61(1) and 61(2) by acknowledging that a subordination need
not be by agreement, but could be by deed or other instrument. The
amendment makes the Act more consistent with the approach taken in the
Personal Property Security Act 1993 (Saskatchewan) (section 40(1)).
Item 28
68. This item amends paragraph 61(2)(b) by omitting 'the agreement' and
substituting 'the subordination', consistently with the amendment to
subsection 61(1) made by item 33.
Amendment of section 64
Item 29
69. Section 64 provides that a secured party with a non-PMSI in an account
can claim priority over secured parties with a PMSI in the account as
proceeds of inventory. There are two situations, outlined in
paragrpahs?64(1)(a) and (b), where a non-PMSI in accounts can have
priority over a PMSI.
70. Subparagraph 64(1)(b)(i) requires notice to be given under subsection
64(2) to each secured party in account of which a registration is
effective at the time the priority interest (the interest to which
subsection 64(1) applies) is perfected by registration.
71. This item amends the notice provision in subparagraph 64(1)(b)(i) so
that the secured party seeking priority will only be required to provide
notice to the PMSI holder over whom priority is sought (not to all other
PMSI holders).
Amendment of section 73
Item 30
72. Section 73 of the PPS Act determines the priority between PPSA security
interests under the Act and interests (other than security interests)
which may arise under a law of the Commonwealth, a State or a Territory
or through operation of the general law.
73. This item inserts subsections 73(7), (8) and (9) to allow the Minister
to alter the priority of a PPSA security interest relative to an interest
in the collateral that has arisen through the operation of the general
law (when the interest is not of a kind affected by subsection 73(1)).
Example
A lien over a personal property arises by operation of the general law.
The priority of the lien relative to PPSA security interests in the
collateral is not determined by subsection 73(1). The priority between
the lien and a PPSA security interest in a personal property will be
determined in accordance with an instrument made under subsection
73(8), if, and only if, no law of the Commonwealth (other than the PPS
Act and that instrument) provides for priority between the lien and the
PPSA security interest, the instrument provides that subsection 73(7)
applies to the lien, and the lien arises after the instrument comes
into effect.
If the priority between the lien and a PPSA security interest in the
personal property is not determined in accordance with an instrument
made under subsection 73(8), then paragraphs 8(1)(b) and (c),
subsection 8(2), paragraph 140(2)(a) and subsection 254(1) will have
the effect that priority between the lien and the PPSA security
interest will be determined in accordance with the general law.
Amendment of section 77
Items 31-33
74. Section 77 of the PPS Act sets out priority rules for security
interests in 'accounts' or 'financial property', where the law of the
foreign jurisdiction that governs perfection, and the effects of
perfection or non-perfection does not provide for the public registration
or recording of interests, or a notice relating to the interest.
75. These items insert a reference to 'investment entitlement' into
subsections 77(1), (2) and (3).
76. These amendments increase the scope of section 77 to apply its priority
rules to PPSA security interests in investment entitlements.
Amendment of section 79
Item 34
77. Section 79 has the effect that collateral may be transferred despite a
provision in an agreement (whether or not a security agreement)
prohibiting the transfer or declaring a transfer to be a default of the
security agreement.
78. This item amends subsection 79(1) to confine its effect to prohibitions
on the transfer of the collateral that a security agreement. The effect
is that third party may take good title to collateral despite a provision
in a security agreement prohibiting the transfer. Other provisions of
the PPS Act, particularly those in Part 2.5, address whether the person
will take the collateral free of the PPSA security interest.
Amendment of section 80
Item 35
79. Section 80 of the PPS Act establishes that the rights of a transferee
of an account or chattel paper are subject to certain other rights.
80. This item amends subsection 80(7) to remove the phrase 'collateral that
is'. This amendment would allow subsection 80(7) to apply when the
account or chattel paper is not collateral before the transfer.
Amendment of section 119
Item 36
81. Subsection 119(1) of the PPS Act sets out how Chapter 4 of the PPS Act
(Enforcement of security interests) applies to collateral to which the
Consumer Credit Code of a State or Territory applies.
82. Subsection 119(2) provides that the regulations made under the PPS Act
can provide that when a specified provision of the Consumer Credit Code
of a State or Territory has been complied with that a specified provision
of the PPS Act it is considered under the PPS Act to have been complied
with.
83. This item amends both subsections 119(1) and (2) so that instead of
referring to the 'Consumer Credit Code of a State or Territory' it refers
to the 'National Credit Code'. This amendment ensures that the PPS Act
is concordant with the National Credit Code introduced under the National
Consumer Protection Bill 2009.
Amendment of sections 128 and 129
Items 37 and 38
84. Paragraph 128(2)(b) and subsection 129(1) refer to the term 'commercial
property', which is defined under section 10 to mean property other than
'consumer property' (property held by an individual other than property
held in the course or furtherance (to any degree) of carrying on an
enterprise to which an ABN has been allocated).
85. These items amend paragraph 128(2)(b) and subsection 129(1) so that
they apply to collateral that is not used predominately for personal,
domestic or household purposes (rather than to commercial property). The
amendment is intended to align the PPS Act more closely with consumer
credit laws.
Amendment of subsection 151(1)
Item 39
86. Subsection 151(1) of the PPS Act states that a person must not apply to
register a 'financing statement', or a 'financing change statement', in
relation to a PPSA security interest unless that the secured party named
in the application believes on reasonable grounds that the collateral
secures, or will secure, an obligation (including a payment) owed to the
secured party named in the application.
87. A 'financial statement' means data registered (or that is to be
registered) pursuant to an application for registration under subsection
150(1) (section 10 of the PPS Act).
88. A 'financing change statement' means data amending a registered
financing statement (section 10 of the PPS Act).
89. This amendment extends the effect of subsection 151(1) to PPSA security
interests of the kinds specified in subsection 12(3) of the PPS Act which
do not secure an obligation owed to the secured party named in the
application. The amended subsection 151(1) would allow a person to
register a financing statement, or financial change statement if they
believe on reasonable grounds that the secured party holds, or will hold,
a PPSA security interest of the kind mentioned in subsection 12(3).
Amendment of section 157
Item 40
90. Section 157 of the PPS Act sets out when a secured party is required to
give a verification statement to a grantor. Verifications statement
means a written statement in the approved form as defined in section 155
of the PPS Act.
91. Subsection 157(4) provides that a contravention of subsection 157(1)
constitutes an act or practice involving interference with the privacy of
the individual for the purposes of section?13 of the Privacy Act 1988.
92. This item amends subsection 157(4) so that a contravention of the
Privacy Act will only apply where notice was required to be given to an
individual. This amendment is required as only individuals have a right
to privacy under the Privacy Act.
Insertion of subsection 171(1)
Item 41
93. Section 171 of the PPS Act sets out the criteria by which a person may
search the register.
94. This item inserts paragraph 171(1)(da) providing for a person to search
the register by the unique identifier allocated by the PPS Registrar to a
registered financing statement.
Amendment of section 235
Items 42 and 43
95. Section 235 of the PPS Act sets out where personal property and persons
are located for the purposes of the Act.
96. Subsection 235(1) provides that personal property is located in the
particular jurisdiction (whether the jurisdiction of Australia or a
foreign jurisdiction) in which the personal property is situated.
97. Item 42 amends subsection 235(1) by omitting '(whether the jurisdiction
of Australia or a foreign jurisdiction)' in order to allow the term
'jurisdiction', as it appears in subsection 235(1) to be affected by
subsections 235(6) and (7) proposed to be inserted by item 43.
98. Item 43 amends section 235 to insert subsections 235(6) and (7).
99. This item introduces a definition of 'jurisdiction' for the purposes of
the PPS Act. To avoid confusion between the geographical and legal
meaning of the term, the new subsection refers separately to the
'jurisdiction' (the geographical sense) and 'laws of the jurisdiction'.
100. In the case of personal property located in Australia, subsection
235(6) provides that the jurisdiction in which the personal property is
located is the State or Territory in which it is situated. In the case
of a person located in Australia, subsection 235(6) provides that the
jurisdiction in which the person is located is the State or Territory in
which the individual's principal place of residence is situated.
101. In a foreign country with a federal character (that is, one which is
divided into territorial units with separate rules of law), Item 43
provides that the jurisdiction in which an item of personal property is
located is the territorial unit in which it is situated. In the case of
a person located in a foreign country, this item provides that the
jurisdiction is the territorial unit in which the individual's principal
place of residence is situated (subsection 235(7)).
Example
The State of California is a territorial unit of the United States of
America that has its own rules of law as distinct from those that apply
to the United States of America generally. If property were situated
in a place in California, the effect of subsection 235(7) is that a
reference to the laws of the jurisdiction would be a reference to
Californian law, and US federal law as it applies in California.
Amendment of section 238
Item 44
102. Section 238 provides the main rule for determining which
jurisdiction's laws apply to a PPSA security interest in goods. Section
238 currently has the effect that the perfection, and the effect of
perfection or non-perfection, of a PPSA security interest in goods will
be governed by the law of the place in which they are located when the
PPSA security interest attaches to the goods, even if the goods are later
moved to another jurisdiction.
103. This item amends subsection 238(1) so that only the validity of a PPSA
security interest will be governed by the law of the place where the
goods were located when the PPSA security interest attached to the goods.
When goods are moved to another jurisdiction, the applicable law for
validity will continue to be the jurisdiction where the goods were
located when the PPSA security interest attached.
Item 45
104. This item omits a reference to 'property' and substitutes 'goods', in
order to make it clear that subsection 238(1) is concerned only with
goods.
Item 46
105. This item inserts a new subsection 238(1A) for determining the
applicable law for the perfection, and effect of perfection or non-
perfection of a PPSA security interest in goods. The applicable law
would be the jurisdiction in which the goods are located at the time it
becomes necessary to consider the perfection of the PPSA security
interest.
106. This would mean that, in determining whether there is a perfected PPSA
security interest in the goods, it would be necessary to apply the law of
the place where the goods were located at the relevant time, and if
necessary to search the PPS Register of that place, and not the place
where the goods were located when the PPSA security interest attached to
the goods.
107. This item retains an exception in subsection 238(2) for goods which
are about to be moved between jurisdictions. The law of the jurisdiction
to which the goods are moved will apply where it is reasonable to believe
that the goods will be moved to the jurisdiction.
108. The amendment replaces the existing reference to the reasonable belief
of a secured party with an objective test. The effect is that a person
with knowledge of all the circumstances should be able to determine which
law will apply to the PPSA security interest, and that this should not
depend on the reasonableness of the secured party's belief.
Item 47
109. This item amends a cross-reference consequential upon the insertion of
subsection 238(2A).
Items 48 and 49
110. Paragraph 238(3)(b) refers to the term 'commercial property', which is
defined in section 10 to mean property other than 'consumer property.'
Consumer property is property held by an individual other than property
held in the course or furtherance (to any degree) of carrying on an
enterprise to which an ABN has been allocated. PPSA security interests
in commercial property used in more than one jurisdiction is governed by
the law of the jurisdiction in which the grantor is located.
111. These items amend subsection 238(3) so that instead of applying to
'commercial property', it applies to collateral that is not used
predominately for personal, domestic or household purposes (rather than
to commercial property). The result is that PPSA security interests in
collateral that is used predominately for personal, domestic or household
purposes will be governed by the conflict of law rules in subsections
238(1), (1A) and (2).
Item 50
112. This item inserts a new subsection 238(4) that recognises the special
circumstances of international shipping and shipping registration.
Subsection 238(4) has the effect that the perfection and effect of
perfection or non-perfection of a PPSA security interest in a ship is
governed by the law of the country on whose register of ships the ship is
registered (if the ship is registered). Where a ship is registered on a
primary, or chartering-out, register and a secondary, or chartering-in,
register, subsection 238(4) has the effect that the perfection and effect
of perfection or non-perfection of a PPSA security interest in the ship
is governed by the law of the primary register. This item is not
intended to affect the rule in subsection 238(3) about the law that
applies to determine the validity of a PPSA security interest in other
goods that are normally moved between jurisdictions.
Amendment of section 239
Item 51
113. Subsections 239(4) and (5) of the PPS Act provides the conflict of
laws rule for PPSA security interests in an ADI account.
114. A PPSA security interest in an ADI account is governed by the law of
the jurisdiction which governs the ADI account, except where the parties
agree in writing to apply the law of another jurisdiction, providing this
would not be manifestly contrary to public policy.
115. This item amends subsection 239(5) to require the consent of the
relevant ADI before the law of another jurisdiction will govern a PPSA
security interest in an ADI account. This amendment recognises that an
ADI has an interest in which law applies to PPSA security interests in
ADI accounts maintained with it, and accordingly should be given a say in
any decision to apply the laws of another jurisdiction.
Amendment of paragraph 265(e)
Item 52
116. Section 265 of the PPS Act provides a Guide Statement for Chapter 8 of
the Act (Miscellaneous).
117. This item amends paragraph 265(e) to insert the words 'and what
constitutes knowledge'. This corrects an omission in the Guide
statement.
Amendment of paragraph 267(1)(b)
Item 53
118. Section 267 provides for the vesting of an unperfected PPSA security
interest in the grantor on the grantor's winding up or bankruptcy
(subsection 267(2)).
119. This item changes the timing references in paragraph 267(1)(b) to the
particular time at which the relevant insolvency/bankruptcy event occurs-
rather than to the beginning of the day on which it occurs. This ensures
that a PPSA security interest does not vest in the grantor despite being
perfected on the same day but before the insolvency or bankruptcy event.
The effect of this change is that the common law 'zero hour rule' does
not apply to the vesting rule in subsection 267(2). This 'zero hour
rule' deems an insolvency to begin at the instant after midnight of the
day on which the insolvency occurs.
Amendment of subsection 267(2)
Items 54 and 55
120. Subsection 267(2) operates to vest certain unperfected PPSA security
interests in the grantor, if the grantor becomes bankrupt or is wound up.
121. Item 54 amends subsection 267(2) to remove the words 'unless the
security interest is unaffected by this section because of section 268'.
These words are unnecessary, as section?268 will operates on its own to
establish exceptions to subsection 267(2).
122. Item 55 inserts a note after subsection 267(2) alerting the reader to
the exceptions in section 268.
Amendment of section 268
Items 56 and 57
123. Section 268 of the PPS Act sets out certain interests which are
unaffected by the vesting rule in subsection 267(2).
124. Item 56 replaces the current subsection 268(1). The amendment expands
the exclusion to a PPSA security interest of a transferee under a
transfer of an account or chattel paper, if the transfer does not secure
payment or performance of an obligation. It would not be appropriate to
vest a PPSA security interest in the grantor if the secured party has
provided full value to the grantor for the transfer of the account or
chattel paper. To do so would give the insolvent or bankrupt grantor the
benefit of both the value provided on the transfer and also the
transferred account or chattel paper.
125. Item 57 omits subsection 268(3), which is incorporated into the
amended subsection 268(1).
Amendment of subsection 317(1)
Item 58
126. This item omits the current words '(when a non-constitutional security
interest becomes a constitutional security interest)' and replaces it
with '(personal property taken free of security interest when Act starts
to operate)'.
127. This amendment corrects the incorrect reference to the heading of
section 251.
Amendment of subsection 327(1)
Items 59 and 60
128. These items correct a drafting error clarifying the scope of the
following provisions of section 327.
Amendment of section 338
Item 61
129. Section 338 provides the Guide Statement for Part 9.5 of the PPS Act
(Charges and fixed and floating charges).
130. This item corrects a drafting error clarifying that the intended
operation of the provisions on charges and fixed and floating charges
extends to all Commonwealth legislation.
Amendment of subsection 339(1)
Item 62
131. Section 339 of the PPS Act provides that transactions structured as
fixed charges or floating charges would be treated as security interests
under the PPS Act.
132. This item inserts a new paragraph 339(1)(c), which limits the
application of the section by adding a requirement that 'the charge is a
security interest to which this Act applies.'
133. This amendment ensures that section 339 applies to references to
charges only to the extent that they are security interests.
Amendment of subsection 340(5)
Item 63
134. This item corrects a drafting error.
Amendment of section 342
Item 64
135. Item 64 corrects a drafting error.
Explanation of items
9. Schedule 5 - Other legislation
Schedule 5 amends nine pieces of Commonwealth legislation as follows:
Amendments to the Air Services Act 1995 to protect the priority of
statutory liens held by Air Services Australia over aircraft and ensure
concepts under that Act and the PPS Bill are harmonised.
Amendments to the Bankruptcy Act 1966 will ensure there are no
inconsistencies with the PPS Bill. This will be done by aligning the
definition of secured creditor in the Bankruptcy Act with
the definition of secured party in the PPS Bill. This will mean that
secured parties under the PPS Bill are also secured for the purposes of
the Bankruptcy Act and that, provided they have perfected their PPSA
security interests (interests to which the PPS Bill applies), their
PPSA security interest would not vest in a bankrupt estate and they
retain the right to enforce without having to prove in the bankruptcy
with unsecured creditors.
The amendment to the Commonwealth Inscribed Stock Act 1911 will amend a
regulation making power which provides for the establishment of a
register of equitable interests in stock so that it does not apply to
security interests. The amendment will support the transition to the
PPS Register.
The amendment to the Corporations (Aboriginal and Torres Strait
Islander) Act 2006 will ensure that charges created under that Act
continue to have the same priority following commencement of the PPS
Act.
The Health Insurance Act 1973 will be amended to prohibit the creation
of a security interest in a right to payment that has been assigned to
a medical practitioner.
An amendment to the Insurance Act 1973 will preserve the Federal
Court's power to determine the priority of a charge in relation to
other interests in the same property.
Amendments to the Privacy Act 1988 will alert readers of that
legislation to the fact that unauthorised uses of data under the PPS
Bill are 'interferences with privacy' under the Privacy Act and subject
to the Privacy Commissioner's powers of investigation.
Amendments to the Quarantine Act 1908 will give priority to statutory
interests over PPSA security interests. The amendments will also
ensure that enforcement action taken under the Quarantine Act against
goods will not be frustrated by a secured party enforcing against the
same goods under the PPS Bill.
The Wool International Act 1993 will be amended to support the
transition from the register established under that Act to the PPS
Register. Charges would no longer be required to be registered on the
register established under that Act.
Commencement
1. Items 1-18 and 21-50 of Schedule 5 will commence on the PPS Act
registration commencement time. The PPS Act registration commencement
time is the first day of the month that is 26 months after the month in
which the PPS Bill is given Royal Assent, or an earlier time determined
by the Minister. The Government expect the registration commencement
time will be in May 2011.
2. Items 19 and 20 of Schedule 5 will commence on the later of (1) the
start of the day the Consequential Bill receives Royal Assent, and (2)
immediately after the commencement of the PPS Act.
Amendment of the Air Services Act
Amendment of subsection 60(3)
Items 1 and 4
3. Item 1 removes the term 'floating charge' from paragraph 60(3)(a), as
the concept has been superseded by the term 'security interest that has
attached to a circulating asset' under the PPS Act.
4. Under item 4, this amendment will not apply in relation to a floating
charge if the floating charge was created before the PPS Act registration
commencement time.
Item 2
5. This item adds a note specifying the relevant provision in the PPS Act
which deals with security interests that attach to circulating assets.
Item 3
6. Section 60 sets out the effect of a statutory lien, including that it
applies in spite of any encumbrance in respect of the aircraft, and sets
out the priority between competing interests over the aircraft.
7. Section 60 provides that a statutory lien is subject to security
interests created in the aircraft before the statutory lien is
registered, where the security interest covers a debt incurred before
that time.
8. This item applies subsection 73(2) of the PPS Act to a statutory lien
imposed under section 60. Applying subsection 73(2) ensures the priority
between the statutory lien and a security interest in the same property
is determined in accordance with the Air Services Act after the PPSA
registration commencement time.
Amendment of the Bankruptcy Act
Definition of PPSA grantor or debtor
Item 5
9. This item inserts a definition of a 'PPSA grantor or debtor' into the
interpretation section (subsection 5(1)) of the Bankruptcy Act. This
item imports the definition of a PPS Act grantor or debtor from the PPS
Act to apply in amended sections 301 and 302.
Definition of PPSA secured party
Item 6
10. This item inserts a definition of a 'PPSA secured party' into the
interpretation section of the Bankruptcy Act. This item imports the
definition of a PPS Act secured party from the PPS Act to apply in
amended sections 301 and 302.
Definition of PPSA security agreement
Item 7
11. This item inserts a definition of a 'PPSA security agreement' into the
interpretation section of the Bankruptcy Act. This item imports the
definition of a PPS Act security agreement from the PPS Act to apply in
amended sections 301 and 302.
Definition of a PPSA security interest
Item 8
12. This item inserts a definition of a 'PPSA security interest' into the
interpretation section of the Bankruptcy Act. The definition of a PPSA
security interest in this item will include a security interest to which
the PPS Act applies but excludes a transitional security interest under
the PPS Act. This item imports the definition of a PPS Act security
interest from the PPS Act to apply in amended sections 301 and 302.
Definition of a secured creditor
Item 9
13. This item amends the definition of a 'secured creditor' in the
interpretation section of the Bankruptcy Act. The definition of secured
creditor is amended to include secured parties under the PPS Act who have
perfected their security interests and also creditors who are not secured
parties under the PPS Act (this will include future holders of charges in
land).
14. The definition of a secured party under the PPS Act means the holder of
an interest in personal property (excluding land) provided by any of the
following transactions which in substance secure the payment or
performance of an obligation: a fixed charge; a floating charge; a
chattel mortgage; a conditional sale agreement; a hire purchase
agreement; a pledge; a trust receipt; a consignment; a lease of goods; an
assignment; a transfer of title; a flawed asset arrangement and the
following transactions which may not secure payment or the performance of
an obligation: transfers of accounts or chattel paper, commercial
consignments and PPS leases.
15. Therefore, the inclusion of PPS Act secured parties within the
definition of secured creditors will increase the category of secured
creditors under the Bankruptcy Act in respect of security agreements
entered into after the PPS Act registration commencement time. These
secured creditors will be able to realise or deal with the secured
property, which will not vest in the bankrupt estate, provided they have
perfected their security interest.
Example
Lessor A leases a front loader washing machine to Person A for a
term of two years (i.e. this is a PPS lease under section 13 of
the PPS Act and a PPS lease is a security interest under section 12
of the PPS Act). Person A enters into a deed of arrangement under
the Bankruptcy Act. Lessor A does not prove in bankruptcy and
instead follows the enforcement procedures under the PPS Act.
Lessor A is entitled to do this because, following the amendments
to the Bankruptcy Act and the amended definition of secured
creditor, Lessor A is now a secured creditor under the Bankruptcy
Act.
Amendment of section 301
Items 10-13
16. These items amend section 301 of the Bankruptcy Act to include PPS Act
security agreement provisions entitling the PPS Act secured party to
terminate or modify the agreement or re-possess the property, when the
PPS Act grantor or debtor becomes a bankrupt, commits an act of
bankruptcy or enters into a deed of assignment or arrangement under the
Bankruptcy Act, as void provisions.
Amendment of section 302
Items 14-17
17. These items amend section 302 of the Bankruptcy Act to include PPS Act
security agreement provisions which entitle the PPS Act secured party to
exercise any power or remedy or modify the agreement if the PPS Act
grantor or debtor becomes a bankrupt, commits an act of bankruptcy or
executes a deed of assignment or arrangement, as void provisions.
Application of amendments
Item 18
18. This item provides that item 9 amending the definition of 'secured
creditor' in the Bankruptcy Act, in line with the PPS Act, will only
apply to bankruptcies where the date of the bankruptcy arises after the
PPS Act registration commencement time.
Amendment of the Commonwealth Inscribed Stock Act
Amendment of section 24B
Items 19-20
19. Section 24B of the Commonwealth Inscribed Stock Act allows for the
making of regulations which would require the operator of a clearing and
settlement facility, an incorporated company or other body corporate to
keep a record of equitable interests in stock, and to comply with
requirements in relation to the keeping of such a record.
20. These items have the effect of limiting the regulation making power so
that it does not apply to security interests in stock within the meaning
of the PPS Act and to which the PPS Act applies. This is consistent with
the PPS Register being the principal register of security interests in
personal property in Australia.
21. These items will commence on the later of (1) the start of the day the
Consequential Amendments Bill receives Royal Assent, and (2) immediately
after the commencement of the PPS Act. This will prevent regulations
being made before the PPS Act registration commencement time to have
effect after that time with the result that PPS Act security interests
could be registered on two registers.
Amendment of the Corporations (Aboriginal and Torres Strait Islander)
Act
Amendment of sections 453-10 and 511-1
Items 21-22
22. Paragraph 453-10(4)(b) of the Corporations (Aboriginal and Torres
Strait Islander) Act provides that the Registrar of Aboriginal and Torres
Strait Islander Corporations may charge some or all of the remuneration,
charges or expenses of an authorised officer who examines the books of an
Aboriginal and Torres Strait Islander corporation or related body
corporate on the property of the corporation or related body corporate.
It also provides that the Registrar may give the charge any priority in
relation to existing charges on the charged property that the Registrar
sees fit.
23. Paragraph 511-1(4)(b) provides that the Registrar may charge some or
all of the remuneration, charges or expenses of a special administrator
of an Aboriginal and Torres Strait Islander corporation on the property
of the corporation or related body corporate. It also provides that the
Registrar may give the charge any priority in relation to existing
charges on the charged property that the Registrar sees fit.
24. These items apply subsection 73(2) of the PPS Act to charges created
under paragraphs 453-10(4)(b) and 511-1(4)(b). Applying subsection 73(2)
ensures the priority between a charge under one of these paragraphs and a
security interest in the same property is determined in accordance with
the Corporations (Aboriginal and Torres Strait Islander) Act after the
PPS Act registration commencement time.
25. The amendments are intended to preserve the power of the Registrar to
give any priority that the Registrar sees fit to charges created by the
Registrar under these two provisions, after the PPS Act registration
commencement time.
Amendment of the Health Insurance Act
Insertion of section 20AA
Item 23
26. Section 20A of the Health Insurance Act provides that a person entitled
to receive a medicare benefit may assign that benefit to their
practitioner. This provision facilitates bulk billing.
27. This item is intended to prevent a person from creating a valid PPS Act
security interest in a medicare benefit that has been assigned to a
practitioner under section 20A.
28. The amendments made by this item also ensure that subsection 20A(5)
will continue to have effect after the PPS Act registration commencement
time. That provision requires an assignment of a medicare benefit to be
made in accordance with section 30A.
29. This item includes a definition of a 'PPSA security interest' which
includes a security interest to which the PPS Act applies but excludes a
transitional security interest under the PPS Act. This ensures that
security agreements entered into before the PPS Act registration
commencement time are not retrospectively voided.
Amendment of the Insurance Act
Amendment of section 62S
Item 24
30. Section 62S of the Insurance Act provides that the Federal Court may
give directions about the remunerative and allowances for a judicial
manager (a manager of a general insurer appointed by the Court) and
determine who is liable to pay the remuneration and allowances. The
judicial manager's remuneration and allowances may be charged against the
property of the relevant general insurer. That charge will take priority
in relation to existing charges on that property as the Court thinks fit.
31. This item applies subsection 73(2) of the PPS Act to charges created
under section 62S. Applying subsection 73(2) ensures the priority
between a charge under section 62S and a security interest in the same
property is determined in accordance with the Insurance Act after the PPS
Act registration commencement time.
32. The amendments are intended to preserve the power of the Federal Court
to give any priority that the Court sees fit to charges created under
section 62S, after the PPS Act registration commencement time.
Amendment of the Privacy Act
Amendment of section 13
Items 25-26
33. The note added by these items to section 13 of the Privacy Act will
flag that subsection 157(4) and subsection 173(2) of the PPS Act make the
following interferences with privacy under section 13 of the Privacy Act:
- the failure of secured parties to provide notice of verification
statements (written statements confirming the registration of their
security interest financing statements) to the grantors;
- the conduct of an unauthorised or prohibited search;
- the use of personal information obtained through unauthorised or
prohibited searches.
Insertion of section 28B
Items 27-29
34. These items expand the Privacy Commissioner's existing powers to
include the power to investigate acts or practices which may be
interferences with privacy under the PPS Act.
Insertion of section 49A
Item 30
35. Section 49A provides, as in the case of suspected tax file number and
credit reporting offences, that where the Commissioner during the course
of an investigation forms the opinion that subsection 172(3) of the PPS
Act may have been contravened, the Commissioner must cease dealing with
the complaint and inform the Registrar of PPS of his opinion. If the
Registrar of PPS notifies the Commissioner that the Registrar has decided
not to continue under section 222 of the PPS Act (obtaining an order for
a civil penalty), the Commissioner may continue his investigation.
Amendment of the Quarantine Act
Definition of PPSA security interest
Item 31
36. This item inserts a definition of a 'PPSA security interest' into the
interpretation section (subsection 5(1)) of the Quarantine Act. The
definition includes a security interest to which the PPS Act applies but
excludes a transitional security interest under the PPS Act.
37. The definition has been included to clarify references to PPSA security
interests in the amendments to the Quarantine Act.
Amendment of section 65
Items 32-33
38. Sections 64 and 65 of the Quarantine Act provide the Commonwealth with
the power to detain items of personal property for unpaid expenses
incurred in connection with quarantining animals, plants and other goods.
39. The amendment will ensure that a secured party does not have the power
to enforce its security interest (by seizing the detained property under
section 123 of the PPS Act) while a vessel is detained pursuant to
section 65 of the Quarantine Act.
Insertion of subsection 69A(14)
Items 34-36
40. Under section 69A of the Quarantine Act, the Minister may approve the
payment of compensation for goods or premises that are destroyed under or
in accordance with the Quarantine Act. Payment is to be made to the
owner(s). Subsection 69A(14) provides that the owner means a person who
had an interest in the goods or premises at the time of destruction but
does not include a person who has an interest by reason that they are
entitled to a benefit of a mortgage, charge or lien in respect of the
goods or premises unless they were in possession of the goods or had
control of the premises at the time of destruction.
41. These items amend section 69A to ensure that for the purposes of
determining the owner of the goods or premises, a person who, or a
partnerships which, had an interest in goods or premises at the time of
their destruction does not include a person or partnership that holds a
PPSA security interest in the goods or premises unless that person or
partnership has possession or control of the goods or premises at the
time of destruction.
42. As subsection 69A(14) already excludes persons with an interest under a
mortgage, charge or lien, it is not necessary to include transitional
security interests in the definition of a 'PPSA security interest'.
Amendment of the Wool International Act
Amendment of subsection 22J
Items 37-40
43. Section 22J of the Wool International Act requires that particulars of
a charge in a unit of equity in WoolStock Australia Limited are
registered in the register of equity holders in order for that charge to
have effect. This is inconsistent with the policy in the PPS Act that
the fact that a PPSA security interest is not registered does not affect
the validity of the security interest.
44. These items amend section 22J of the Wool International Act to ensure
that a charge on a unit of equity in WoolStock Australia Limited is
solely registrable on the PPS Register.
45. Item 39 adds a note specifying that a charge over a unit of equity in
WoolStock Australia Limited may be the subject of a registration on the
PPS Register. In addition, a further note clarifies that the priority
between charges over units of equity will be determined in accordance
with the PPS Act.
Repeal of section 22K
Item 41
46. Section 22K of the Wool International Act sets out the priority of
charges over units of equity. The priority provided is similar to the
priority rules under the PPS Act, providing priority in the order of
registration.
47. This item repeals section 22K of the Wool International Act. Charges
under the Wool International Act are in the nature of a security interest
over personal property to which the PPS Act applies. The priority
between competing security interests in personal property will be
determined under the PPS Act.
Repeal of paragraph 22L(b)
Items 42 and 50
48. Item 42 amends section 22L of the Wool International Act. Subsection
22L(b) provides for the beneficiary of a charge on a unit of equity to,
upon request, have access to an entry in the register of equity holders.
As charges will be registered on the PPS Register, the Wool International
Act will no longer recognise beneficiaries of charges. The consequence
of the amendment is that it will be necessary for the grantor to consent
to a secured party having access to the register of equity holders under
the Wool International Act.
49. Item 50 provides that where WoolStock Australia Limited has not
complied with a request made by a person under paragraph 22L(b) of the
Wool International Act, the requirement to comply with the request stops
applying after the PPS Act registration commencement time.
Amendment of section 22R
Item 43
50. This item makes a technical amendment. The note in subsection 22R(2)
refers to subsection (5) which no longer exists. The amendment repeals
the note.
Item 44-45
51. These items repeal subsection 22R(4) of the Wool International Act.
Section 22R(4) allows for a registered equity holder to notify WoolStock
Australia Limited to make payments to beneficiaries of charges on units
of equity, in accordance with the priorities established under section
22K of the Wool International Act.
Amendment of section 22S
Items 46 -49
52. These items amend section 22S of the Wool International Act to remove
the requirement that WoolStock Australia Limited notify beneficiaries of
charges in units in equity of amounts available for distribution. This
is as a result of the particulars of the charges no longer being
registered on the register of equity holders under the Act.