PERSONAL PROPERTY SECURITIES (CORPORATIONS AND OTHER AMENDMENTS) BILL 2010 Explanatory Memorandum
PERSONAL PROPERTY SECURITIES (CORPORATIONS AND OTHER AMENDMENTS) BILL 2010
2008-2009-2010
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
PERSONAL PROPERTY SECURITIES (CORPORATIONS AND OTHER AMENDMENTS) BILL 2010
EXPLANATORY MEMORANDUM
(Circulated by the authority of the Attorney-General,
the Honourable Robert McClelland MP)
table of contents
table of contents 2
1. OUTLINE 3
2. FINANCIAL impact statement 4
3. FORMAL clauses 5
SCHEDULE 1 6
4. AMENDING terminology to incorporate the functional approach 6
5. EXTENDING the ca concept of property to include PPSA retention of title
property 9
6. REPEAL Chapter 2K (registration of company charges) but retain the
effect of sections 266 and 267 13
7. APPROPRIATE TRANSITIONAL AND APPLICATION ARRANGEMENTS 17
8. MAINTAIN EXISTING RIGHTS 19
SCHEDULE 2 20
9. personal property securities act 2009 20
10. Transitional Provisions 44
SCHEDULE 3 49
11. AMENDMENT OF OTHER ACTS 49
1. OUTLINE
1. The Personal Property Securities (Corporations and Other Amendments)
Bill 2010 (the Bill) contains three schedules:
a. Schedule 1: Corporations Act 2001;
b. Schedule 2: Personal Property Securities Act 2009; and
c. Schedule 3: Amendment of other Acts.
Schedule 1
2. Schedule 1 makes changes to Corporations Act 2001(Cth) to align it
with the Personal Property Securities Act 2009 ('PPS Act'). Schedule 1
would:
a. amend terminology used in the Corporations Act to apply the
functional approach of the PPS Act to those sections of the
Corporations Act that deal with charges;
Currently, only transactions which create charges or mortgages
are security agreements under the Corporations Act. But the PPS
Act uses a functional approach of treating alike transactions
which have the same effect of securing the payment or
performance of an obligation. These security interests would,
therefore, also be included as PPSA security interests in the
Corporations Act.
b. extend the Corporations Act concept of property to include PPSA
retention of title property;
c. replace Chapter 2K (Registration of company charges) because the
PPS Act provides for the registration of security interests in
personal property but retain provisions equivalent to sections
266 and 267 in Chapter 2K (which provide that charges are void
against an administrator or liquidator in certain
circumstances);
d. apply appropriate transitional and application provisions; and
e. change references to floating and fixed charges to circulating
and non-circulating charges respectively but with the intention
of maintaining existing rights, for example, employee
preferences under CA, section 561.
Schedule 2
3. Schedule 2 would amend the PPS Act to simplify the transitional
provisions.
4. Schedule 2 would also make the PPS Act consistent with existing State
and Territory provisions on the enforcement of security interests in
agricultural products (Chapter 6).
Schedule 3
5. Schedule 3 would make minor consequential amendments to other
Commonwealth legislation (Chapter 7).
2. FINANCIAL IMPACT STATEMENT
2 The Bill will not have a financial impact on the operations of
Government
3. FORMAL clauses
Clause 1 - Short title
3.1 The Short title of the Bill is defined here.
Clause 2 - Commencement
3.2 This clause provides for the commencement of the various proposed
amendments. More details are provided in the notes on items.
Clause 3 - Schedules
3.3 The amendments made to legislation by the Bill are set out in three
Schedules.
SCHEDULE 1
4. AMENDING terminology to incorporate the functional approach
1. Under existing Personal Property Securities and Corporations law,
transactions creating security interests are treated differently
depending on the legal form of the transaction concerned. However,
under the functional approach of the PPS Act, they will all be treated
as security transactions where they perform the same function of
securing payment or performance of an obligation.
2. The existing terminology of the CA, including charges, mortgages,
liens, pledges and floating charges and fixed charges is based on the
form of the transaction which creates the security interest. Schedule
1 would therefore, where appropriate, replace this terminology with
terminology based on the functional approach of the PPS Act.
3. To harmonise the CA and the PPS Act:
a. all references to charge and chargee would be replaced with
security interest and secured party (items 28-39 and 42-84);
b. all references to mortgage and mortgagee would be replaced with
security interest and secured party (items 116-124);
c. all references to floating charges would be replaced with
circulating security interests and fixed charges with non-
circulating security interests (items 86-87 and 89-100);
d. all references to security would be replaced with security
interests (items 101-114);
e. all references to chargee, lienee and pledgee (or holder of lien
or pledge) would be replaced with secured party and all
references to charge, lien and pledge with security interest
(items 125-134, and 136-137);
4. Schedule 1 would also introduce the concepts described in paragraphs
4.5-4.9 below.
5. A new omnibus concept of security interest (items 9-10) would include
the concept of PPSA security interests (items 4 and 10) in personal
property together with the existing CA concepts of charges, mortgages,
liens and pledges; (items 56; 85; 115 and 143-5 replace charge with
security interest).
Example: Under subsection 442CB(1), an administrator only has a
duty to act reasonably in exercising a power of sale over
property that is subject to a pledge or a lien. This obligation
to act reasonably would be extended to all secured property
(item 135).
Example: Under subsection 443F(2), an administrator's lien has
priority over any charges in so far as the administrator's
indemnity has priority over the debts. This priority would be
extended to all secured property (items 138-139).
6. A new omnibus concept of secured creditor (items 7 and 10) which would
include PPSA secured creditors under the PPS Act and secured creditors
under the Corporations Act;
7. A new omnibus concept of secured party (items 8 and 10) which would
include PPSA secured parties and the existing concepts of chargees,
mortgagees, lienees and pledgees in the Corporations Act as they apply
to property to which the PPS Act does not apply (items 148-151 replace
chargee with secured party);
Example: The disqualification of mortgagees under section 448C,
would apply to all secured parties and not only to mortgagees
(item 117).
8. A new omnibus concept of circulating security interest (items 1 and
10) which would include the PPS Act concept of circulating security
interest together with the existing CA concept of floating charge;
Example: Under section 442B, administrators would continue to
have the power to treat property, subject to a non-circulating
security interest (previously a fixed charge), as subject to a
circulating security interest (previously a floating charge)
(item 88).
9. A new omnibus concept of possessory security interest (items 9-10)
which would include PPSA security interests perfected by possession or
control together with the existing concepts of liens and pledges in
the Corporations Act.
Example: Where the company is under administration and the
administrator is entitled to dispose of the property, the
pledgee, lienee or secured party in possession or control
(possessory secured parties) would all have to allow potential
purchasers to inspect the property (items 133-134).
Example: Where the company is under administration and the
pledgee, lienee or secured party in possession or control
(possessory secured parties) have possession of the property,
they would all be permitted to continue in possession of the
property (item 156).
Example: The rules for the distribution of proceeds would be the
same for all possessory security interests where the original
property was subject to a lien, a pledge or a security interest
perfected by possession or control (items 136-137).
Example: Section 441JA currently makes provision for the sale of
property subject to a lien or pledge. Section 441JA would be
replaced with proposed section 441EA which refers to the sale of
property subject to possessory security interests (proposed
section 441EA would also amend the Corporations Act in line with
the PPS Act to remove the requirement that the security interest
can only be enforced if there is no higher-priority security
interest in the same property) (items 40-41).
5. EXTENDING the ca concept of property to include PPSA retention of title
property
1. The PPS Act concept of security interests includes transactions where
the secured party, not the grantor, retains title over the property.
This includes:
a. agreements to sell subject to retention of title;
b. romalpa clause agreements;
c. conditional sale agreements;
d. hire-purchase agreements; and
e. leases and consignments that secure the payment or performance
of an obligation.
2. Some transactions which do not secure the payment or performance of an
obligation, but which have that effect, are deemed to be security
interest under the PPS Act. These include:
a. commercial consignments; and
b. leases and bailments of greater than one year (or ninety days in
the case of serial numbered goods) (i.e. PPS leases).
3. In order to align the Corporations Act with the PPS Act, property
subject to these new PPSA security interests would be included in the
Corporations Act as PPSA retention of title property (items 3 and 10)
(the existing definition of lease in the Corporations Act would,
however, exclude PPSA security interests (item 2) except in subsection
419(1) (item 151).
4. The Corporations Act currently defines retention of title clause
property. This definition would be retained to account for any
existing retention of title property but qualified to exclude PPSA
retention of title property (items 3 and 10).
5. Therefore, there would be two classes of retention of title property:
a. PPSA retention of title property (which includes most personal
property that is subject to a retention of title clause) (items
3 and 10); and
b. Retention of title clause property as defined in the
Corporations Act (to the extent that it is not PPSA retention of
title property). This could include retention of title
property:
i) that is not personal property within the meaning of the PPS
Act;
ii) where the retention of title clause does not secure payment
or performance of an obligation; or
iii) where the relevant property interest is excluded by PPS
Act, section
6. In those cases where it would not prejudice existing rights, property
of the company for the purposes of the Corporations Act would include
PPSA retention of title property so that PPSA retention of title
secured parties could enforce their security interests as secured
parties.
7. CA, Part 5.2 would not apply to PPSA retention of title property and
therefore under subsection 419A(1), a controller would not be liable
for PPSA retention of title property (item 152).
8. A secured party with a security interest over substantially the whole
of the property would be able to appoint an administrator to enforce
their security interest (CA, section 436C) (item 142, definition of
enforce, item 154, definition of property in Part 5.3).
9. CA, subsection 441A(3) enables a chargee or receiver with a charge in
the whole or substantially the whole of the property to enforce the
charge. Property in this context would include PPSA retention of
title property and where a company is under administration, the
chargee with a charge over the whole or substantially the whole of a
company's property could enforce the security interest before or after
the decision period (items 140-141, definition of decision period,
item 154, definition of property in Part 5.3).
10. Where an administrator incurs debts in the exercise of his or her
duties, the administrator is personally liable for the debts (CA,
section 443A), and this would include for property hired, leased, used
or occupied that gives rise to PPSA security interests (item 162).
11. An administrator may only withdraw from security agreements, entered
into prior to the administration, where the property is owned or
leased from another person (CA, section 443B) but this would exclude
property giving rise to PPSA retention of title security interests
(items 164-165). An administrator would therefore only be able to
withdraw from transactions involving true operational leases or real
property.
12. Currently, under the CA, sections 443D-E, an administrator is
indemnified and has a lien over all property of the company for debts
arising during the administration. The administrator's lien would not
have priority over PPSA retention of title because it is not company
property (items 162-165). In future, an administrator would be
indemnified out of, and have a lien over, all property of the company
including unperfected PPSA retention of title property but excluding
non-PPSA retention of title property (item 166).
13. CA, subsection 444D(1) provides that a deed of company arrangement
binds secured creditors but that this does not affect their rights to
realise their collateral
except to the extent that they voted for the deed and the deed stops
them doing so. In future, PPSA retention of title property holders
would be subject to CA, section 444D(2) and would therefore be able to
deal in the PPSA retention of title property unless they voted in
favour of a deed of company arrangement which prevents them from
dealing in the property (items 167-8).
14. However, there would be circumstances where it would be important to
preserve existing rights by not including PPSA retention of title
property within the definition of company property. Where a company
is insolvent and the property of the company is insufficient to meet
the payment of unsecured creditors, employee entitlements would have
preference over floating charges (CA, section 561). If PPSA retention
of title property were included as company property, it would be
subordinate to employee preferences and PPSA retention of title
property holders would lose their property. Therefore, property of
the company would exclude PPSA retention of title property in this
context.
15. In the following situations, property of the company would only
include PPSA retention of title property where those security
interests are vested in the company through either PPS Act, sections
267 or 267A or proposed section 588FL (items 171, 174 182).
16. Where a company is being wound up, a person cannot proceed against the
company's property (CA, section 471B). This would include PPSA
retention of title property vested in the company (item 171).
17. In determining the remuneration for a liquidator, the Court is
required to take into account, among other things, the value and
nature of the property which the liquidator was required to deal with
(CA, section 473(10)). This would include PPSA retention of title
property vested in the company (item 171).
18. When a company is being wound up, the liquidator is required to take
custody of the property to which the company is entitled (CA, section
474). This would include PPSA retention of title property vested in
the company (item 172).
19. The liquidator can commission a report on the affairs of the company
(CA, section 53) and property of the company (CA, section 475(8)).
This would include PPSA retention of title property vested in the
company (item 171).
20. The powers of the liquidator include selling or disposing of property
and doing all things necessary for the winding up of the company and
distributing its property (CA, section 477). This would include PPSA
retention of title property (item 171).
21. After the Court orders a company to be wound up, the liquidator must
collect the company's property (CA, section 478). The Court may also
require a person to deliver property, (item 171), to which the company
is prima facie entitled, to the liquidator (CA, section 483). This
would include PPSA retention of title property vested in the company
(item 171).
22. Where the property is insufficient to satisfy all creditors, the Court
may make an order on the priority of payments from the property (CA,
section 485(3)). This would include PPSA retention of title property
vested in the company (item 171).
23. In reviewing the liquidator's remuneration, the Court must take into
account, the value and nature of the property, dealt with by the
liquidator (CA, section 504(2)). This would include PPSA retention of
title property vested in the company (item 174).
6. REPEAL Chapter 2K (registration of company charges) but retain the
effect of sections 266 and 267
1. Most charges currently subject to the registration requirements of
Chapter 2K would be covered by the PPS Act. These existing charges
would be migrated to the PPS Register to be established by the PPS Act
and in future such charges would be registered on the PPS Register.
Chapter 2K would be repealed (item 18) and consequential amendments
would be made throughout the Corporations Act (items 11-17 and 19-27)
with effect from the time the PPS Act comes into effect (expected to
be May 2011).
2. Although Chapter 2K would be repealed, section 266 would be retained
to prevent security interests being granted fraudulently with
knowledge of an imminent administration, liquidation or deed of
company arrangement and to avoid property falling into the trustee's
or administrator's estate or being claimed by unsecured creditors.
3. For security interests entered into after the commencement time, the
proposed section 588FL (item 183) would replace section 266. Section
588FL would provide that where a company is being wound up, an
administrator appointed, or a deed of company arrangement executed:
a. any PPSA security interest which was not continuously perfected
for six months prior to that event; or
b. any PPSA security interest not continuously perfected at 20 days
(or a later day ordered by the Court) after the agreement was
made until the day the winding up or the administration begins,
would vest in the company and the secured party would be unable
to enforce the security agreement (item 183).
4. Despite the operation of proposed new provisions replacing sections
266 and 267, a transferee of property which was subject to a security
interest to which the new provisions apply, would take the property
free of the security interest provided that they had no knowledge of
the security interest (item 54). However, the onus of proving this
lack of knowledge would be with the transferee. This reversal of onus
is required because the relevant matters requiring proof would usually
be within the knowledge of the transferee and it would be
unduly onerous to require the secured party to prove the transferee's
state of mind. This provision would protect bona fide purchasers
for value and render ineffective fraudulent transactions designed to
frustrate payments to creditors.
5. Proposed section 588FL would vary section 266, which requires that a
security interest be registered within 45 days of being created or
registered within 6 months of the administration, liquidation, or deed
of company arrangement. Section 588FL(2) would instead provide that
when a company is being wound up, an administrator appointed, or a
deed of company arrangement executed (the critical time), any PPSA
security interest which was perfected, registered or enforceable
against a third party after the latest of:
a. six months before the critical time; or
b. 20 days after the security agreement came into force;
c. a later time ordered by the Court under proposed section 588FM;
would vest in the company (item 183, proposed section 588FL(4)).
Proposed section 588FL(4) would only apply if a security interest is
perfected at the specified times by registration and it would not
apply if the security interest is perfected by possession, control or
temporary perfection (even if the security interest is also perfected
by registration).
Example:
CompanyA grants FinanceA a security interest in its all present
and after acquired property. FinanceA registers its security
interest 15 days after the creation of the security interest.
CompanyA becomes insolvent 30 days after the security interest
is granted. FinanceA would retain their security interest,
because FinanceA registered the security interest within the
required 20 day period.
Example:
CompanyA grants FinanceA a security interest in its all present
and after acquired property. FinanceA registers its security
interest 25 days after the creation of the security interest.
CompanyA becomes insolvent 30 days after the security interest
is granted. The security interest would vest in CompanyA
because FinanceA did not register the security interest within
the required 20 day period or within the six month period prior
to the critical time.
Example:
CompanyA grants FinanceA a security interest in its all present
and after acquired property. FinanceA registers its security
interest 25 days after the creation of the security interest.
CompanyA becomes insolvent eight months after the security
interest is granted. FinanceA would retain its security
interest because it registered its security interests prior to
the six month period before the critical time.
Example:
CompanyA grants FinanceA a security interest in its all present
and after acquired property. FinanceA registers its security
interest 15 days after the creation of the security interest.
CompanyA becomes insolvent 5 months and 25 days after the
security interest is granted. The security interest would not
vest in CompanyA because FinanceA registered the security
interest within the required 20 day period (despite the fact
that the registration was also made within 6 months before the
insolvency).
6. If the law of another jurisdiction governs the enforceability of the
security interest, and also provides for its registration, proposed
subsection 588FL(3) would provide that the PPS Act security interest
would vest in the company where the perfection, registration or
enforceability against third parties occurs after the latest of:
a. six months before the critical time; or
b. 20 days after the security agreement came into force;
c. a later time ordered by the Court under proposed section 588FM.
7. As deemed security interests (transfers of accounts and chattel paper;
PPS leases and commercial consignments) are not true security
interests, it would operate unfairly to subject them to the rule in
proposed subsection 588FL(4) and they are therefore excluded from this
rule by proposed section 588FN) (item 183). Subordinated debts
(turnover trusts) would also be excluded from this rule (proposed
subsection 588FN(2)).
8. Proposed subsection 588FL(4) would also not apply if the secured party
agreed to the transfer of the collateral and the PPSA security
interest is perfected at the end of 5 business days after the transfer
or where the secured party did not agree to the transfer, the PPSA
security interest was continuously perfected until 5 business days
after the day the secured party acquired the knowledge required to
perfect their interest by registration (item 183, proposed subsection
588FN(3)).
9. Under PPS Act, section 266, an unperfected security interest will vest
in the grantor and as a result, property that is currently exempt from
liquidation would, if subject to an unperfected security interest,
vest in the company and be available for distribution to unsecured
creditors. The property could, however, subsequently be transferred
free of the PPSA security interest, provided that the transferee
provides new value for the property and has no actual or constructive
knowledge of the winding up, deed of company arrangement or
administration (item 183, proposed subsection 588FL(5)).
10. Existing section 267, which prevents the enforcement of a security
interest granted by a company to a person associated with the company
within six months after the granting of the interest, would be
replaced by proposed section 588FP (item 183). The new provision
would be designed to prevent a company granting security interests to
persons associated with the company (which would enable those persons
to appoint receivers and take control) and would apply to PPSA
security interests and other charges to which section 267 currently
applies.
11. Proposed section 588FP retains CA, section 267. Where a security
interest was granted to an officer of a company and associated persons
and the secured party purports to take steps to enforce the security
interest, within six months after the security interest is created,
without the leave of the Court, then the security interest would be
void. The six month period after the security agreement refers to six
months after the time the security agreement is made and not to six
months after the attachment of the security interest.
12. This would not affect the title of a transferee who takes the personal
property for value and without actual or constructive knowledge of the
seller's security interest. Proposed section 588FN provides that a
transferee of property, which was subject to a security interest in
proposed sections 588FL and FM, takes the property free of the
security interest provided that they had no knowledge of the security
interest.
13. Proposed section 588FN would place the evidential burden
on the defendant, who acquires property subject to a security interest
under proposed sections 588FL and 588FM, to prove that the defendant
had no actual or constructive knowledge of the matters set out
in proposed sections 588FL and 588FM. The reason for reversing the
onus is that the matters requiring proof would usually be peculiarly
within the knowledge of the defendant and it would be unduly onerous
to require the plaintiff to prove the state of the defendant's
knowledge (item 183, proposed subsection 588FL(6)). This provision is
intended to protect bona fide purchasers for value while ensuring that
fraudulent transactions designed to frustrate the payment of funds to
creditors are void.
7. APPROPRIATE TRANSITIONAL AND APPLICATION ARRANGEMENTS
1. Schedule 1 would commence when the PPS Register starts to operate
(that is, when the PPS Act starts to apply). Because most amendments
require the alignment of existing categories of security interests in
the Corporations Act and related concepts to the PPS Act, they would
only apply to PPSA security interests that arise under agreements made
after the new PPS Act scheme starts to operate.
2. Transitional provisions would be enacted to retain certain aspects of
the registration scheme for existing registrable charges. At the
commencement time, the ASIC Register would be closed to further
registrations. However, ASIC would be required to retain existing
records on its Register for seven years after the commencement time.
This would enable chargees, lienees and pledgees of registrable
charges to continue to obtain information relating to their charges,
liens or pledges.
3. The repeal of CA, Chapter 2K (item 17) would not immediately apply to
registrable charges under the CA (except to the extent necessary to
close the CA register to new registrations, and to limit the effect of
CA, section 266 (the voiding of registrable charges)). Despite the
repeal of Chapter 2K, the following provisions would continue to apply
after the commencement time for a period of seven years (item 187,
proposed section 1502):
a. CA, subsection 265(1), in relation to registrable charges
entered on the Register before the commencement time (item 186,
definition of commencement time);
b. CA, subsection 266(4), in relation to notices that are required
to be lodged before the commencement time;
c. CA, section 272, in relation to registrable charges entered on
the Register before the commencement time;
d. CA, section 274, in relation to registrable charges arising
before the commencement time;
e. the existing exemptions from CA, sections 266 and 267 would
continue to apply.
4. The priority rules for existing registrable charges would apply
indefinitely (item 187, proposed section 1506).
5. It is also proposed that registrable charges, notified before the
commencement time (including provisional charges), would be migrated
across to the PPS Register and (as transitional security interests)
would retain the priority they had prior to migration.
6. Registrable charges not notified before the commencement time, could
be registered anytime on the PPS Register (but would have priority
dating to that day), unless they obtain a Court order under CA,
section 274 to retain their pre-commencement time priority (item 187,
proposed section 1502).
7. CA, subsection 266(4) would continue to apply to registrable charges
which became void under CA, section 266 before the commencement time.
This would maintain the existing rights of secured creditors to apply
to a court for relief and a declaration that the registrable charge
never was void (item 187, proposed section 1504).
8. MAINTAIN EXISTING RIGHTS
1. Schedule 1 would maintain the status quo in a number of respects.
2. Firstly, Schedule 1 would amend CA, section 283BG and 283CD to exclude
borrowers and guarantors respectively from the obligation to report to
the Trustees on charges they create while under administration (items
146 and 147).
3. Schedule 1 would retain the restrictions on the exercise of third
party rights under administration (items 156; 158-159).
4. PPS Act, s 140 specifies the order for the distribution of proceeds
when enforcing security interests. Several provisions of the
Corporations Act require certain payments to be made out of property
that is subject to security interests. For example, CA, section 433
provides that a receiver who is appointed on behalf of the holders of
debentures of a company that are secured by a floating charge, and who
takes possession or control of property of the company that is secured
by the floating charge, must pay certain debts in priority to any
claim for debentures and CA, section 1311 makes it an offence for the
receiver not to do so. Therefore, PPS Act, section 140 would not
apply when a receiver has been appointed to property of the company
(see PPS Act, section 116).
5. CA, section 443E provides that an administrator's right of indemnity
under CA, section 443D has priority over certain debts of the company
secured by a floating charge on property of the company. CA, section
443F provides that the administrator's indemnity is secured by a lien
and that the lien has priority over a charge to the extent that the
right of indemnity has priority over debts secured by the charge. It
is proposed that the Minister would make a declaration under PPS Act,
section 73(3) determining that the administrator's lien has priority
over a security interest to the extent that the right of indemnity has
priority over debts secured by the security interest.
6. CA, section 561 provides that if the property of a company available
to pay unsecured creditors is insufficient to make certain payments,
then the payment of those amounts must be made in priority to floating
charges. PPS Act, section 254 provides that laws which are capable of
operating concurrently with the PPS Act may do so. While the PPS Act,
section 140 sets out the order for distributing proceeds to those with
interests in the property, persons entitled to payments under CA,
section 561 do not have interests in the property. Therefore, CA,
section 561 and PPS Act, section 140 are capable of operating
concurrently, because CA section 561 requires certain payments to be
made before the property is put towards those with interests in the
property.
SCHEDULE 2
9. personal property securities act 2009
Amendment of section 3
Items 1-3
1. Items 1-3 are amendments to the Guide to the PPS Act. They describe
changes made to the PPS Act by other items. In particular, item 1
describes a change made by item 38 (includes the additional
requirement for perfection of enforceability against third parties);
item 2 the change made by item 79 (removes the reference to assignment
of interests for greater accuracy); and item 3 describes a change made
by item 92 (specifies the registration commencement time which is now
known because the PPS Act has received Royal Assent).
2. The rationale for these changes is discussed in the individual items
below.
Amendment of section 6(2)(c)
Item 4
3. Section 6(2) of the PPS Act identifies when the PPS Act will apply to
a security interest in intangible property. Subsection 6(2)(c)
provides that the PPS Act applies to a security interest in intangible
property if the intangible property is an assignment of an account or
chattel paper.
4. Item 4 would clarify that the intangible property is the interest of a
transferee under a transfer of an account or chattel paper, and not
the assignment of the account or chattel paper.
Amendment of section 8(1)(f)(v)
Item 5
5. The PPS Act does not apply to certain interests, one of which is a
transfer of an interest or claim in, or under, a contract of annuity
or policy of insurance. This reflects exclusions found in both the
New Zealand and Saskatchewan PPS Acts.
6. However, section 31(1)(b) provides that proceeds can include a right
to an insurance payment or other payment as indemnity or compensation
for loss of, or damage to, the collateral (or proceeds of collateral).
7. This amendment would maintain the general exclusion of insurance
policies from the PPS Act but include insurance payments that are
proceeds under the PPS Act.
8. Without this amendment, it would be possible for a secured party's
security interest to become worthless when the collateral is
destroyed. If the security interest were not able to attach to the
resulting insurance payment as proceeds, the secured party
would be left without an interest in the insured property. Allowing
the secured party's security interest to attach to the insurance
payout allows them to maintain a security interest in an asset that
has a substantially similar value. This would be consistent with the
policy behind the general exclusion on insurance policies because
permitting the security interest to continue in the insurance payment
as proceeds is not the same as permitting a security interest in the
insurance proceeds as original collateral.
Example: A bank takes a security interest in a car which has
been insured by its owner. The car is written off after being
involved in an accident. The owner receives the right to an
insurance payment as a result. Because the right to the
insurance payout is a right as compensation for the loss of the
car, it would be included as proceeds under the PPS Act and the
bank would have a security interest in the right to the
insurance payment as proceeds of its security interest in the
car. In effect, the bank's security interest in the car is
replaced by a security interest in the payment. As a result,
the bank is placed in a substantially similar position to the
one in which it was prior to the car being written off.
Amendment of section 237
Items 6, 7, 8 and 9
9. See the discussion under item 79.
Amendment of subsection 8(1)(f)(x)
Item 10
10. Subsection 8(1)(f)(x) provides that the Act does not apply to an
assignment of the beneficial interest in an account where, after the
assignment, the assignee holds the account on trust for the assignor
('trust-back' exclusion).
11. The Personal Property Securities Bill 2008 (Exposure Draft) defined an
account to mean a monetary obligation. The definition of account in
the PPS Act was narrowed without a corresponding change to subsection
8(1)(f)(x) to retain the broader exclusion from the Act.
12. This amendment would reinstate the effect that subsection 8(1)(f)(x)
had in the Exposure Draft.
Water Rights
Items 11 and 14
13. Subsection 8(1)(i) provides that the PPS Act does not apply to a
right, entitlement or authority, whether or not exclusive, that is
granted by or under the general law or a law of the Commonwealth, a
State or a Territory in relation to the control, use or flow of water.
14. Item 14 proposes to define a right in relation to the control, use or
flow of water as including a right that a person has against another
person to receive (or otherwise gain access to) water.
15. This amendment would ensure that the Act would not apply to rights
held in water that are derived from contract. This commonly occurs
where an intermediary such as an operator of irrigation infrastructure
has the licence to the water and is responsible for distributing it to
producers.
16. Item 11 includes a note which refers to the substantive amendment.
17. This amendment is intended to ensure that the PPS Act would not apply
to any rights in water regardless of the source or basis of those
rights.
Pawnbrokers, Superannuation and Commonwealth Debt Acts
Items 12 and 14
18. Items 12 and 14 would insert subsections 8(1)(ja) and 8(6) to exclude
certain security interests taken by pawnbrokers from the PPS Act.
Pawnbrokers are extensively regulated by State and Territory
legislation. The amendments would exclude security interests taken by
regulated pawnbrokers from the PPS Act, provided a security interest
is taken in the ordinary course of the pawnbroker's business as a
pawnbroker, is taken in accordance with State and Territory
legislation and the market value of the obligation secured and the
market value of the collateral is less than the threshold established
by section 47 of the PPS Act for low-value consumer transactions. The
pawnbroker would have to believe that the market value of the
collateral is less than this threshold. The property could also not
be of a kind that the regulations require or allow to be described by
serial number (for example, motor vehicles and watercraft).
19. Item 12 would also insert subsection 8(1)(jb), which would exclude
members' interests in superannuation entities from the PPS Act:
a. as members of a superannuation fund (within the meaning of the
Superannuation Industry (Supervision) Act 1993); or
b. as members of an approved deposit fund (within the meaning of
the Superannuation Industry (Supervision) Act 1993); or
c. as holders of retirement savings accounts (within the meaning of
the Retirement Savings Accounts Act 1997); or
d. in accounts kept under the Small Superannuation Accounts Act
1995 in the name of the person; or
e. as holders of superannuation annuities (within the meaning of
the Income Tax Assessment Act 1997).
20. The exclusion implements the Government's retirement income policy,
which prevents holders of interests in superannuation funds from using
those interests as security for loans and other obligations not
related to retirement income.
21. Item 12 would also insert subsection 8(1)(jc), which would clarify
that the PPS Act would not apply to charges created by section 6 of
the Commonwealth Inscribed Stock Act 1911 or section 5 of the Loans
Redemption and Conversion Act 1921. These provisions create charges
over the Consolidated Revenue Fund which secure payment of Treasury
bonds and other Commonwealth debt instruments.
Amendment of section 237
Item 13
22. See the discussion under item 79.
Amendment of section 10 - definition of description
Items 15 and 76
23. Subsection 10(b) currently provides that a description which
identifies a class of personal property is a description of that class
for the purposes of the Act.
24. This amendment responds to stakeholder concerns that, for example, a
description of fruit would not be sufficient to describe oranges.
This amendment clarifies that a description may identify a class of
personal property by identifying a larger class of personal property
that includes the class. This would make it clear that a more general
collateral description such as fruit would be sufficient to describe a
more specific class of collateral such as oranges.
25. Item 76 adds a note to section 151 which explains how this definition
of description would work in the context of section 151.
Definition of Financial Product
Item 16
26. Section 10 currently provides that the term financial product has the
same meaning as it has in the Corporations Act. This amendment would
maintain that reference for the purposes of the definition of
investment instrument.
27. However, the term financial product is also used in relation to
intermediated securities.
28. This amendment would have the effect that, for the purposes of the
definition of intermediated security at section 15 of the PPS Act, a
financial product is any of the following (or an interest in any of
them):
a. shares;
b. bonds;
c. any other financial instrument; or
d. any other financial asset.
29. This definition is based on the definitions used in the Geneva
Securities Convention, which is also known as the UNIDROIT Convention
on Substantive Rules for Intermediated Securities.
Definition of grantor
Item 17
30. This item amends the definition of grantor by omitting the reference
to ownership of personal property as distinct from an interest in the
property. The reference to ownership is redundant and could cause
confusion because an interest in the property also includes a full
ownership interest. The amendment would also make the definition
consistent with the definition of debtor at section 2(1) of the
Personal Property Security Act 1993 (Saskatchewan).
Amendment of section 10 - Definition of Intellectual Property
Item 18
31. Section 10 currently defines intellectual property by reference to
Australian legislation. However, this definition does not allow for
intellectual property that arises under similar legislation in other
countries to fall within the definition. As a result, the PPS Act
applies to intellectual property differently depending on whether it
is granted by Australian or foreign legislation.
32. This amendment would clarify that a right under a law of a foreign
country that corresponds to one mentioned in the definition is also to
be defined as intellectual property. This change would mean that the
PPS Act is consistent in its application to intellectual property,
wherever it originates.
Intermediated Security
Items 19 to 23
33. The amendments made by these items are consequential on the amendment
to the definition of intermediated security proposed by item 34.
Definition of livestock
Items 24 and 36
34. Item 24 amends the definition of livestock to make it clear that
livestock includes the products of livestock. For example, a
reference to livestock would also include a reference to wool while
still on the sheep's back. This means that livestock in the PPS Act
would include a security interest in a product of the livestock even
if the security interest was not held in the complete animal.
35. Item 36 inserts a note to section 19 of the PPS Act that is
consequential to this amendment.
Amendment of section 10 - Definition of Negotiable Instrument
Item 25
36. Section 10 currently defines negotiable instrument to include a range
of instruments, as follows:
a. a bill of exchange (within the meaning of the Bills of Exchange
Act 1909); or
b. a cheque (within the meaning of the Cheques Act 1986); or
c. a promissory note (within the meaning of section 89 of the Bills
of Exchange Act 1909).
37. This item extends the definition with the effect that dematerialised
negotiable instruments (that is, instruments that are evidenced by an
electronic record) would fall within the definition. The proposed
extended definition of negotiability is consistent with the approach
taken by the UNCITRAL Legislative Guide on Secured Transactions.
Definition of new value
Item 26
38. This item amends the definition of new value with the qualification
owed to the person providing the value. The effect of this amendment
is that new value would not include the refinancing of a loan from an
existing lender. New value would continue to include any financing
provided by a lender to a borrower in order to refinance an existing
loan from another lender.
Definition of registration time
Item 28
39. Item 28 amends the definition of registration time as a result of the
amendment to the transitional provisions at item 123.
Intermediated security
Item 29
40. The amendment made by this item is a result of the amendment to the
definition of intermediated security proposed by item 34.
Enforcement provisions - agricultural products
Items 30 and 31
41. Items 30 and 31 are a result of the amendment to the provisions on
enforcement over agricultural products at item 72.
Amendment of section 12
Item 32
42. Section 12 provides for the definition of security interest. In
particular, subsection 12(4) currently provides that an account
debtor, in relation to an account or chattel paper, may take a
security interest in the account or chattel paper and
subsection 12(4A) provides that an ADI may take a security interest in
an ADI account that is kept with the ADI.
43. The amendment proposed by item 32 would establish a general principle
for which subsections 12(4) and 12(4A) are specific examples.
Definition of PPS lease
Item 33
44. Section 13 sets out the meaning of PPS lease, which includes certain
bailments of goods. The current subsection 13(3) provides that
section 13 only applies to a bailment if the bailor provides value for
the bailment to the bailee.
45. A bailment is the delivery of tangible personal property to another
party who acquires possession of it. A bailment does not transfer
ownership rights and the bailor has the right to take possession at
any time or in accordance with the terms of the bailment.
46. This item repeals the requirement that the bailor must provide value
for the bailment to the bailee and includes the requirement that the
bailee (not the bailor) must provide the value. This change reflects
the typical bailment situation as one in which the person who obtains
possession of the property (the bailee) provides the value. Under
item 25, a bailment would only be a PPS lease under section 13 if the
bailee provides value but it would not be necessary for the bailee to
provide the value to the bailor (the bailee and bailor could agree
that the bailee provide value to another person).
Intermediated securities
Item 34
47. Section 15 currently deals with investment entitlements and a number
of related terms. This terminology is, however, different from that
used in other parts of the world to describe the same thing. In
particular, work undertaken by the Hague
Conference (to develop the Convention on the Law Applicable to Certain
Rights in Respect of Securities Held with an Intermediary) and
UNIDROIT (to develop the Convention on Substantive Rules regarding
Intermediated Securities) relies on terminology such as intermediated
securities and intermediary.
48. This item amends the PPS Act so that the language used in relation to
intermediated securities is consistent with that used in other
countries and in international law.
49. A number of consequential changes have been made to the PPS Act as a
result of this change. These include items 19-23 and 29 (which add
and repeal definitions in Section 10), item 55 (which alters the
wording in section 77(3)) as well as the bulk amendments (items 101-
121).
50. This item amends the definition of intermediary to ensure that only
persons holding an Australian financial services license, an
Australian clearing and settlement facility licence or a license
issued by a foreign jurisdiction permitting them, in the course of
business or other regular activities, to maintain securities on the
behalf of themselves and/or others could be an intermediary under the
PPS Act. This clarifies and broadens the application of the PPS Act
to intermediated securities to include foreign licensed
intermediaries.
PPS leases
Item 35
51. The PPS Act provides that a security interest that is a PPS lease
(subsection 12(3)) may be a bailment (subsection 13(1)). Subsection
19(5) does not currently establish when a grantor has rights in goods
that are bailed to the grantor. Item 35 would clarify that a grantor
has rights in goods that are bailed to the grantor when the grantor
obtains possession of the goods for the purposes of subsection
19(2)(a). This would extend the rule that currently applies to
leases, to bailments.
Definition of livestock
Item 36
52. The amendment made by this item is consequential on the amendment to
the definition of livestock proposed by item 24.
Written security agreements
Item 37
53. Section 20 of the PPS Act sets out when a security interest is
enforceable against a third party in respect of particular
collateral. Subsection 20(2)(a) provides that a written security
agreement will be enforceable against a third party if it is adopted
or accepted by the grantor by an act specified in the writing that is
done with the intention of adopting or accepting the writing.
54. The requirement for the writing to specify exactly what must be done
can be an onerous one, especially for small and medium businesses.
This item permits a grantor to accept a security agreement by
performing an act (or omission) that, while not specified in the
writing, reasonably appears to be done with the intention of adopting
or accepting the writing. The amendment also makes it clear that
whether the person intended to adopt or accept the writing is to be
assessed objectively.
55. The item also recognises that in certain circumstances, an omission
could be taken to constitute adoption or acceptance of an agreement.
Requirements for perfection
Item 38
56. Section 20 of the PPS Act sets out when a security interest is
enforceable against third parties. Section 21 sets out when a
security interest is perfected. The current requirements for
perfection are that a security interest has both attached and that the
secured party has control or possession of the collateral, or made a
registration in relation to the security interest. However, section
21 currently does not require that the security interest be
enforceable against third parties.
57. Item 38 would add a new requirement that a security interest must be
enforceable against third parties before it is perfected. This would
provide greater certainty in the grantor's insolvency, because a
security agreement would generally need to be evidenced in writing
signed or adopted by the grantor to survive the grantor's insolvency.
Control of an ADI account
Items 39 and 48
58. Subsection 21(2)(c)(i) currently allows any secured party to control
an ADI account. Item 39 would have the effect that only an ADI with
whom the account is held would be able to perfect a security interest
in the ADI account by control. All other secured parties would have
to register in order to perfect a security interest in an ADI account.
The practical effect of this change is that a secured party that has
a security interest in an ADI account would not need to incur the
expense of perfecting by control in order to ensure they maintain
their first priority as against other secured parties. Rather, the
ordinary principal of first to register would apply (subject to the
interest of the ADI with whom the ADI account is held).
59. The ADI with whom the account is held would be able to perfect a
security interest in an ADI account by control. The ADI would
therefore have the highest priority (because perfection by control
would also have a higher priority than perfection by registration).
This means that the ADI would not be vulnerable to other secured
parties claiming the ADI account, so that the ADI account would be
available to the
ADI for prudential regulation purposes. Allowing the ADI to perfect
the security interest by control, and obtain the highest priority
would also be consistent with the ADI's right of set-off and
combination of accounts in relation to the ADI account.
60. Item 48 (the Guide to Part 2.6 - Priority between security interests)
also includes a paragraph that explains the effect if this change.
Amendment of sections 24(5)(b) and (d)
Item 40
61. The rationale for this change is discussed under item 79.
Amendment of section 26 - control of intermediated securities
Item 41
62. Under subsection 21(2)(c), security interests over certain classes of
property can be perfected by control. Section 26 sets out when a
secured party has control of an intermediated security that is
credited to an intermediated securities account. Item 41 would
replace section 26 with a new section conferring control of an
intermediated security on the secured party where there is an
effective agreement between various parties or if the intermediated
security account is maintained.
63. This item would allow a secured party to have control of an
intermediated security where the secured party is also registered as
the holder of the intermediated security. In such a situation, the
secured party would not need an agreement with the grantor and the
intermediary in order to exercise effective control of the instrument.
This approach would be consistent with the treatment of investment
instruments in section 27, whereby investment instruments could be
controlled by the controller registered as the owner, by possession or
by agreement. It would also be consistent with the approach to
security interests in intermediated securities set out in the Geneva
Securities Convention.
64. The current section 26 provides that for an agreement to be effective,
it must be between the secured party, the grantor and the
intermediary. However, it is also possible for a secured party to
exercise practical control of an intermediated security if there is an
agreement between the grantor and the intermediary, or between the
grantor and the secured party of which the intermediary has notice.
The new section 26 would provide that such agreements will also be
effective to give a secured party control of an intermediated security
for the purposes of the PPS Act.
65. This item also reflects the change in terminology from investment
entitlements to intermediated securities. This change would be
consistent with the amendment to the definitions in section 15 and
with the bulk amendments made in items 101-121.
66. This amendment would ensure that the reference to an intermediary in
subsection 26(2)(a)(iii) includes a person prescribed under the
subsection 26(3) regulations
where that intermediary is an intermediary under subsection 15(2)(b).
Consequently, a subsection 26(2)(a)(iii) notice could be provided to
someone other than the subsection 15(2)(b) intermediary where the
person is prescribed in accordance with the section 26(3) regulations.
67. This item would also establish a regulation-making power for
prescribing people and classes of people in accordance with subsection
15(2)(b).
Amendment of subsection 32(1)(a)
Item 42
68. Subsection 32(1)(a) provides that a security interest will continue in
collateral if the collateral gives rise to proceeds, unless the
secured party authorised a dealing giving rise to proceeds. This
currently means that any authorised dealing in collateral, even a
short-term lease, would extinguish a security interest. This limits
the extent to which a secured party would allow a grantor to deal with
the property.
69. The item would provide that a dealing in collateral which gives rise
to proceeds would only extinguish a security interest if the secured
party has agreed that the dealing would extinguish the security
interest. This change draws a distinction between a dealing with and
a disposal of the collateral.
70. This amendment would minimise the risk that a secured party would have
their security interest extinguished simply because they authorised a
grantor to deal with the collateral and would therefore allow grantors
more freedom to deal with collateral. A disposal of collateral where
there is express or implicit authorisation from the secured party
would continue to be an exception to the rule that the security
interest continues in the collateral.
Amendment of section 44
Items 43 and 44
71. Section 44 allows a person to take an item of personal property free
of any security interests where that collateral can be, but is not,
registered by serial number. Currently, a person will not take this
property free of a security interest where a person has actual
knowledge that the sale or lease is a breach of the relevant security
agreement. This test is a complicated and potentially uncertain one.
72. Item 43 would modify the test in section 44 to make it consistent with
the test in subsection 43(2) for taking free of an unperfected
security interest. The amended test would allow a person to take the
property free of a security interest unless they were a party to the
transaction that created or provided for the security interest. This
would minimise the number of different tests in the PPS Act. The
narrower exception is also appropriate given the relative ease with
which security interests in serial-numbered goods can be registered.
73. Under the amended test, it would not be necessary to determine the
actual knowledge of the buyer or lessee as item 44 would repeal
subsection 44(3).
Amendment of section 51
Item 45
74. Item 45 would clarify that the rule in subsection 51(1) would not
apply when the transferee, but not any other party, has actual or
constructive knowledge that crediting the interest in the financial
product would constitute a breach of the security agreement.
Amendment of subsection 52(1)
Items 46 and 47
75. Subsection 52(1) determines when a buyer or lessee takes personal
property free of a temporarily perfected security interest and it
currently exempts security interests perfected by section 322. The
amendments made to the transitional provisions have included section
322 within section 321 and a corresponding change has been made to
section 321.
Amendment of section 54
Item 48
76. This item makes an amendment to the Guide to Part 2.6 that is
consequential to the amendment discussed at item 39.
Amendment of section 54
Item 49
77. Section 54 is the Guide to Part 2.6 (Priority between security
interests). Section 54 currently only provides a general example of
the kinds of priority interests governed by Division 6.
78. The amendment to the Guide would set out in a clearer fashion what
priorities the Division regulates. It would refer to all potential
competing priorities and not just by way of example as is currently
the case.
Amendment of section 57
Item 50
79. Section 57 provides a super-priority for security interests that are
currently perfected by control. Subsection 33(2) provides for the
continuous perfection of proceeds of collateral subject to a security
interest for 5 business days after the dealing giving rise to the
proceeds. However, the security interest in the proceeds does not
currently retain the super-priority conferred on the security interest
perfected by control.
80. This item amends section 57 so that a security interest in proceeds of
original collateral that was perfected by control when the collateral
gave rise to proceeds, would have priority over any other security
interest in the proceeds except a security interest in the proceeds as
original collateral perfected by control.
Amendment of sections 62 and 63
Items 51
81. Sections 62 and 63 set out the rules that regulate the priority of
competing purchase money security interests (PMSIs) and the priority
of PMSIs against other security interests.
82. Section 62 of the PPS Act sets out the priority rules applicable to a
perfected PMSI as against a perfected security interest in the same
collateral. Subsection 62(3)(b) currently provides that a PMSI in
personal property other than inventory will have priority if it is
perfected by registration before the end of 10 business days after the
grantor obtains possession of the goods or, for other property, the
day the interest attaches to the property. This item would extend the
deadline for registration to 15 days, allowing secured parties more
time to register and still maintain priority. This amendment
recognises that a secured party will not always know precisely when a
grantor has obtained possession of goods, or when their security
interest has attached to the property.
83. Section 63 sets out the priority rules applicable to competing PMSIs.
Subsection 63(c) currently provides that a PMSI in collateral that are
goods, and not inventory, has priority if the security interest is
perfected before the end of 10 business days after the day the
grantor, or another person at the request of the grantor, obtains
possession of the collateral. This item would extends the deadline
for registration to 15 days, allowing secured parties more time to
register and still maintain priority. This change is consistent with
the amendment to subsection 62(3)(b).
84. Subsection 63(d) provides that a PMSI in collateral that are not
goods, and not inventory, has priority if the security interest is
perfected before the end of 10 business days after the day the
priority interest attaches to the collateral. This item extends the
deadline for registration to 15 days, allowing secured parties more
time to register and still maintain priority. This change is
consistent with the amendments to subsections 62(3)(b) and 63(c).
Amendment of section 64
Item 52
85. Section 64 sets out when a non-PMSI in an account as original
collateral (the priority interest) has priority of over a PMSI in the
account as proceeds of inventory. Subsection 64(1)(b) currently
provides that priority interests have priority where the secured party
holding the priority interest gives notice to each secured party
holding a PMSI in the account and the notice is given at least 5
business days before the earlier of the registration day and the day
the priority interest attaches to the account.
86. This item amends subsection 64(1)(b) by substituting 5 business days
with 15 business days. This amendment would give other secured
parties more time to protect their security interest by altering the
terms of trade for future inventory finance that would become
subordinate to the priority interest.
Amendment of subsection 64(3)
Items 53 and 54
87. Section 64 deals with the priority competition between an inventory
financier and an accounts financier and confers priority in an account
on the accounts financier.
88. The amendment would confer the same priority on the inventory
financier, over the new value provided by the accounts financier, as
it had in the account as proceeds of inventory. This would compensate
the inventory financier for their loss of priority over the security
interest in the account.
89. The amendment would also ensure that the transferee's interest in the
new value would not be a security interest unless it is a security
interest apart from PPS Act, section 12. It would also ensure that
section 64 does not operate to confer priority on the accounts
financier over the new value which they provide.
90. This section would also enable the inventory financier to use
subsection 120(1)(a) (enforcement against an account) to enforce its
security interest.
Example: A manufacturer supplies inventory to a wholesaler on a
purchase money security interest basis and registers this
security interest. The wholesaler sells the inventory on terms
to a retailer and as a result the inventory financier has a PMSI
in the accounts that arise. The wholesaler then sells the
accounts for new value to a factor (the accounts financier) who
does all that is necessary to have priority in the accounts over
the inventory financier. However, the inventory financier would
have first priority over the new value that the accounts
financier provided.
Priority of interests
Items 55- 56
91. Section 68 deals with the priority competition that arises when two
different grantors grant security interests in the same collateral to
different secured parties. This could arise where a grantor sells
property to another person, despite the fact that it is subject to a
security interest, who then grants a security interest in that
property to a secured party of their own. Section 68(2) describes
when the buyer's secured party would have priority and subsection
68(2)(c) provides an exception to that rule based on the buyer's
(transferee's) knowledge. The section currently suggests that the
buyer acquires the security interest which is illogical and does not
achieve the intended policy outcome.
92. This amendment would clarify that the buyer (transferee) must acquire
the collateral without actual or constructive knowledge that the
acquisition constitutes a breach of the security agreement that
provides for the transferor granted interest.
93. Subsection 68(2)(d) sets out one of the conditions for when a
transferee-granted pre-condition has priority. Item 56 would clarify
that the qualification of but only to the extent of the advance or
obligation should qualify the whole subsection 68(2) and not just
subsection 68(2)(d).
Amendment of section 71
Item 57
94. The rationale for this change is discussed under item 79
Amendment of section 72
Item 58
95. Section 72 sets out when the interest of a holder of a negotiable
document of title has priority over a perfected security interest in
the same document of title. Subsection 72(b)(ii) provides that a
holder who has actual or constructive knowledge of the security
interest will not take priority under section 72. This item would
amend subsection 72(b)(ii) by replacing negotiable instrument with
document of title. This would rectify the inconsistency in the
current section and clarify that section 72 applies to negotiable
documents of title.
Amendment of section 77(3)
Item 59 and 60
96. This item is an amendment that is consequential to the amendment made
at item 34.
Amendment of subsection 77(4)
Item 62
97. Subsection 77(4) deals with the relationship between sections 77, 239
and 240. However, the reference to 240(3) is not consistent with the
reference to 239(2) and would be replaced with a reference to sections
240(4) and (5).
Amendment of Heading to Part 2.7 and section 78
Items 63 and 64
98. See the discussion under item 79.
Amendment of section 83
Item 65
99. The changes to the Guide to this part are consequential to amendments
made by items 66-68.
Amendment of sections 84A-86
Items 66-68
100. The Bill would clarify the ability of a security interest to be
created in crops and livestock.
101. Item 66 would create section 84A which would provide that a security
interest could attach to crops while the crops are still growing.
Similarly it would provide that a security interest could attach to
the products of livestock before they became proceeds (for example,
wool derived from livestock or semen extracted for breeding purposes).
102. These provisions would clarify that a security interest could be held
in the crops and livestock as distinct from the land or animal from
which these products are derived. Accordingly a financer could take a
security interest in the wool without taking a security interest in
the livestock from which it is derived.
103. Items 67 and 68 would amend sections 85 and 86 respectively to extend
the special priority rules relating to crops and livestock contained
in those sections to also cover security interests held in the
proceeds of crops and livestock.
Amendment of section 108
Item 69
104. Item 69 makes an amendment to the Guide to Part 4.2 to add that Part
4.2 contains provisions on the rules relating to enforcement of
security interests in crops and livestock.
Amendment of subsection 109(5)(b)
Item 70
105. Section 126 allows a secured party to seize collateral by taking
apparent possession. Subsection 115(4) currently allows consumers to
contract out of section 126 where the collateral is predominantly used
for personal, domestic or household purposes. This option to contract
out of the provision does not provide sufficient protection for
consumers and therefore, items 70, 72 and 75 would amend the PPS Act
to make it impossible to take apparent possession of consumer
property.
106. Subsection 109(5) sets out which of the enforcement provisions do not
apply in relation to collateral that is used by a grantor
predominantly for personal, domestic or household purposes. Item 70
would include a new subsection 109(5)(ba), which would ensure that
section 126 would not apply to collateral that is used by a grantor
predominantly for personal, domestic or household purposes.
107. Since section 126 would no longer apply to consumer property,
subsection 115(4), which allows the parties to contract out of section
126, would be redundant. Item 66 repeals subsection 115(4).
108. As a result of the amendment made by item 70, section 126 would not
apply to consumer property. Item 75 inserts a note that draws
attention to this amendment and refers to subsection 109(5)(ba).
Amendment of subsection 115(1)(p)
Item 71
109. Item 72 would amend section 115 of the PPS Act to provide that the
parties to a security agreement in which a security interest was
granted in crops or livestock could contract out the rights of seizure
and disposal provided in the proposed Division 6 of Part 4.3.
Amendment of section 115(4)
Item 72
110. This item makes an amendment to the PPS Act that is consequential to
that discussed at item 70.
Amendment of section 116
Item 73
111. Section 116 provides that the enforcement provisions do not apply in
relation to property in the hands of a receiver, a receiver and
manager, or a controller. The effect of this provision is to disapply
the enforcement provisions where the grantor is an individual. It
would still be possible for a receiver or a receiver and manager to be
appointed to the property of an individual, by order of the Court or
in accordance with a security agreement.
112. This item would amend section 116 by adding subsection 3, which would
apply the enforcement provisions where the grantor is an individual.
The enforcement provisions would not apply to non-individuals.
Amendment of section 122
Item 74
113. This amendment would clarify the Guide to Part 4.3 (Seizure and
Disposal or Retention of Collateral) by including additional
information as to what a secured party must or may do when retaining
or disposing of collateral.
Amendment of section 126
Item 75
114. See Item 70.
Amendment of subsection 135(4)
Item 76
115. Section 135 provides that where a secured party proposes to retain
collateral, they must give notice to certain parties. This item would
amend section 135 to provide that the notice must (not may) be given
in the approved form. The retention of collateral by a secured party
can be significant for the grantor and it is appropriate that any
notice be set out in the approved form.
116. The operation of subsection 135(4) would be tempered by section 25C of
the Acts Interpretation Act 1901, which provides that where an Act
prescribes a form, then, unless the contrary intention appears, strict
compliance with the form is not required and substantial compliance is
sufficient. Accordingly, substantial compliance with the approved
form would be sufficient compliance.
Amendment of section 136
Item 77
117. Section 136 sets out the effect of the retention of collateral by a
secured party on their obligation, on other secured parties and on
other security interests in the collateral. However, it does not
presently provide that the obligation owed to the secured party will
be extinguished as a result of the retention of the collateral.
Further, while it does provide that the secured party takes the
collateral free of the security interests of lower ranked secured
creditors, it is silent on whether the obligations secured or payments
owed to the lower ranked secured parties are extinguished.
118. This item would clarify that the obligations secured or payments owed
to the lower ranked secured parties are not extinguished even if their
security interests in the collateral are ineffective against the
retaining secured party. It would also clarify that the debt or other
obligation owed to the secured party, who retains the collateral, is
extinguished as a result of the retention (even if that debt or
obligation is secured against other collateral that is not retained by
the secured party).
Amendment of sections 138A-138C
Item 78
119. Under the PPS Act, a secured party is able to seize collateral and
exercise various rights to recover the outstanding amount due if the
debtor is in default under the security agreement. An amendment to
the enforcement provisions would ensure
the PPS Act maintains secured parties' rights where the security
interest is held in crops of livestock.
120. The proposed amendments would ensure that a secured party enforcing a
security interest in crops, livestock or fish has a right to do what
is necessary to recover the collateral, including entering the land
where the collateral is located and dealing with the crops or
livestock as necessary.
121. Accordingly, proposed section 138B would provide that a secured party
seizing crops could take possession of the crops or cut, gather or
harvest the crops. This provision would authorise the secured party
to enter the land or water source on which the crops were located or
were growing. This power to enter would however be limited by the
grantor's rights to enter the land or water source.
122. The provision would also permit the secured party to dispose of or
retain of the crops in accordance with Divisions 2, 3, 4 and 5 of
Chapter 4 (Enforcement).
123. Proposed section 138C would provide that a secured party seizing
livestock could take possession of the livestock or its proceeds. It
would also allow the secured party to slaughter the livestock or
extract the proceeds, such as by shearing the wool on the livestock.
Amendment of section 139
Item 79
124. Section 139 provides a Guide to the operation of the rules applying
after enforcement (Part 4.4). Section 111 provides that all rights,
duties and obligations that arise under the enforcement provisions
must be exercised or discharged honestly and in a commercially
reasonable manner. Item 79 would amend the Guide in section 139 to
reinforce that section 111 applies to rights duties and obligations
arising under Part 4.4.
Amendment of section 140
Item 80
125. Section 140 provides for the order in which amounts received from
enforcement action are to be distributed. This order of distribution
relates to those parties that are owed an obligation secured by an
interest in the collateral, not the general order of distribution to
all parties generally. This general order of distribution is provided
for by other legislation which can operate concurrently with the PPS
Act, as provided for by section 254 of the PPS Act.
126. This item would clarify that, where there is a Commonwealth, State or
Territory law that requires the secured party to apply the property
towards another obligation before the obligations referred to in
subsection 140(2), that other law would have effect. However, this
would not be the case where the other law refers to an
obligation that is secured by a security interest in the collateral.
This means that the PPS Act would regulate the order of payments in
relation to secured obligations but that other legislation would
regulate the priority of interests secured by a security interest and
other interests.
Amendment of section 141
Item 81
127. Section 141 allows a secured party who is entitled to dispose of, or
retain, collateral under sections 128 or 134 to take certain steps to
reflect the transfer of title resulting from the disposal or
retention. The section currently allows the secured party to take any
steps that the grantor could take to reflect the transfer of title.
This item would amend section 141 to allow the enforcing secured party
to take any steps that the person whose title is extinguished could
take. This change acknowledges that the grantor may not have title to
the collateral, which may instead lie with another secured party (for
example, the grantor may hold property subject to a retention of title
clause).
Amendment of section 151
Item 82
128. See discussion under item 15.
Amendment of subsection 174(2)(c)
Item 83
129. Section 174 sets out what may be stated in a search result and the use
of a search result as evidence in a court or tribunal. The section
does not oblige the Registrar to make available any particular written
search result in the appropriate form. Subsection 174(2)(c) provides
that the order of certain events mentioned in subsection 174(2)(b) may
be stated in relation to two or more registrations. However, it is
possible that a number of these events may have occurred in relation
to a single registration. This amendment would provide that a search
result could state the time any relevant events occurred in relation
to one or more, instead of two or more, registrations.
Amendment of subsection 178(3)
Item 84
130. Section 178 sets out the process for a person with an interest in
collateral described in a registration to give a written amendment
demand to the secured party. Subsection 178(3) currently provides
that a secured party must not require payment for compliance with an
amendment demand in relation to collateral that is consumer property,
and is designed to provide protection to consumers. Consumer property
is defined in section 10 of the PPS Act as personal property held by
an
individual, other than personal property held in the course or
furtherance, to any degree, of carrying on an enterprise to which an
ABN has been allocated.
131. This item would amend subsection 178(3) by replacing the reference to
consumer property with a test of whether the grantor uses, or intends
to use at the time the security interest attaches, collateral
predominantly for personal, domestic or household purposes. The
effect would be to give equal protection to consumers who use or
intend to occasionally use collateral for business purposes.
Amendment of section 237
Item 85
132. Section 237 provides that a security agreement may not provide for an
Australian law to govern, amongst others, an assignment of an account
or chattel paper. However, the definition of security interest in
subsection 12(3)(a) refers to a transfer of an account or chattel
paper, not an assignment.
133. This item would substitute assignment with transfer to ensure
consistency. Similar changes would also be made by items 6-9
(subsection 8(1)(f)); item 13 (subsection 8(4)); item 40 (subsection
24(5)(b) and (d)); item 57 (note to subsection 71(1)) and items 63-64
(the headings to Part 2.7 and section 78).
Amendment of subsection 239(3)
Item 86
134. This amendment would make the conflict of law rule for intellectual
property more consistent with the conflict of law rule that applies to
other kinds of intangible property. Currently, all issues relating to
a security interest in intellectual property or an intellectual
property licence are governed by the law of the jurisdiction under
which the property or licence is granted.
135. This amendment would mean that the law governing security interests
would generally be the law that applies in the location of the
grantor. However, the law of the location of the intellectual
property would apply to transfers of intellectual property. This
would provide greater certainty for secured parties taking a security
interest in all of the grantor's property, and for persons taking a
transfer of intellectual property.
Amendment of section 241
Items 87 and 88
136. Subsections 241(1)-(2) provide that the validity and perfection of an
interest in proceeds, other than proceeds that are an account, is
governed by the law of the jurisdiction that governed the validity and
perfection of the security interest in the collateral that gave rise
to the proceeds. Section 239 provides that a transfer of an account
is governed by the law of the location of the grantor. As currently
drafted, all proceeds that are accounts are within the exclusion, and
not merely proceeds that are accounts that arise from the transfer of
the collateral.
137. This item would clarify that the only accounts (that are proceeds)
that should be exempt from the general rule in section 241 are those
that do not arise from a dealing with the collateral. This amendment
would mean that accounts that do arise from a dealing with the
collateral would be governed by the same law as originally governed
the security interest. It would only be other accounts that would be
governed by the rules in section 239. This would facilitate transfers
of accounts while protecting the interests of the secured party who
should not be subject to a different law merely because an item of
collateral has been sold and the proceeds, in the form of an account,
become governed by a different law
Example: A secured party has a security interest in an apple.
The grantor sells the apple on credit. The receivable owed to
the grantor is an account. The security interest extends to the
account as proceeds arising from a dealing in the collateral
that gave rise to the proceeds. The security interest in the
account should be governed by the same law that governs the
security interest in the apple.
Amendment of section 242
Items 89-91
138. These items divide Part 7.3 into two Divisions and have no substantive
effect.
Amendment of section 252A and 252B
Item 104
139. Part 7.3 deals with the Constitutional operation of the PPS Act. This
item inserts two sections that seek to remove any doubt about the
constitutionality of the PPS Act.
140. The proposed section 252A would clarify that the PPS Act will not
operate in such a way as to give preference to a state (or part of a
state) over another state (or part of another state). Section 260
which currently provides for a similar outcome is repealed by item
106.
141. The proposed section 252B establishes that a provision of the PPS Act
would not apply where it would have the effect of providing for an
acquisition of property otherwise than on just terms.
Amendment of subsection 254(2)(h)
Item 105
142. Section 254 deals with the concurrent operation of the PPS Act with a
number of different Acts. A note following subsection 254(2)(h)
provides a list of sections of the PPS Act that expressly allow for
certain concurrent operation of State and Territory laws.
143. This amendment inserts another section into this list to clarify that
the order of distribution provided for by section 140 (discussed above
at item 80) is another section of the PPS Act that expressly allows
for the concurrent operation of State and Territory laws.
Amendment of section 260
Item 106
144. This item is dealt with at item 104.
Amendment of section 267
Items 107, 108 and 109
145. Sections 267-269 set out when an unperfected security interest will
vest in a grantor. The sections operate in conjunction with other
provisions in the CA and the Bankruptcy Act 1966 (Cth). The
Corporations Act provides that certain unregistered charges are void
as against the liquidator (section 266-267).
146. Item 107 amends Note 2 to draw attention to the interaction between
section 267 of the PPS Act and sections 266-267 of the Corporations
Act.
147. Item 108 amends Note 2 to draw attention to the interaction between
section 267 of the PPS Act and Division 2A of Part 5.7B of the
Corporations Act (Vesting of PPSA security interests if not
continuously perfected), included by item 179 of Schedule 1. This
item would commence at the registration commencement time.
148. Item 109 brings the note into line with the standard note used for
this purpose of the PPS Act.
Amendment of subsection 267(2)
Item 110
149. Subsection 267(2) provides that a security interest vests in the
grantor immediately before an event (such as the winding up of the
company or other events such as those listed in subsection 267(1)(a)
if the security interest is unperfected at a particular time (as
provided for by subsection 267(1)(b)). However, it is possible for a
security interest to be created and/or attach after the event referred
to in the section. The current effect of the PPS Act is that a
security interest that attaches after the event would not vest in
accordance with the section. However, a security interest that
attaches after the event should also vest in the grantor if it is
unperfected by a registration made before the event listed in
subsection 267(1).
150. This amendment would have the effect that an unperfected security
interest that attaches to the collateral after the event referred to
in subsection 267(1)(a), in accordance with a security agreement made
before that event, would vest in the grantor in the same way that
security interests that attach before the relevant time.
151. Subsection 267A(2) would be included to protect an innocent purchaser
of the collateral and would offer them the same protection as is
offered purchasers under the vesting rule in subsection 267(3).
Amendment of subsection 268(1)
Item 111
152. This item updates a reference in subsection 268(1) as a consequence of
the changes made under item 110.
Item 112
153. Section 268 provides that certain security interests are unaffected by
the vesting rules contained in section 267. Section 238 is a choice
of law rule that provides that the perfection, and the effect of
perfection or non-perfection, of a security interest in goods is
governed by the law of the jurisdiction in which the goods are located
at that time. The effect of this amendment is to clarify that the
vesting rule is a rule that relates to the effect of non-perfection by
expressly providing that the vesting rule does not apply to a security
interest for which perfection, and the effect of perfection or non-
perfection, is governed by the law of a foreign jurisdiction. This
means that when goods are located overseas at the vesting time, they
would not be subject to the vesting rules in sections 267 and 267A.
Amendment of section 269
Item 113, 114 and 115
154. The amendments in items 113 and 114 are consequential on the inclusion
of the new section 267A.
155. The amendment in item 115 is consequential to the amendment of
subsection 267(1)(b) in the PPS (Consequential Amendments) Act to
refer to times rather than days in that subsection.
10. Transitional Provisions
General
1. The Bill would make amendments to the Transitional Provisions in
Chapter 9 of the PPS Act.
2. The PPS Act provides for the transition from current law governing
security interests to the PPS Act. The PPS Act would apply to
security interests existing before the PPS Act comes into force
subject to the transitional provisions.
3. The registration commencement time is a key event in the transitional
provisions. It is the time at which the PPS Act and the PPS Register
takes practical effect. The PPS Act makes provision for the
registration commencement time to be determined by the Minister. If
the Minister did not make a determination, the registration
commencement time would be the start of the first day of the month
that is 26 months after the month in which the PPS Act is given Royal
Assent (section 306).
Example:
The PSS Act received Royal Assent on 14 December 2009, the
migration time would be the start of 1 January 2012 and the
registration commencement time would be the start of 1 February
2012. If the Minister determined that the migration time would
instead be 1 March 2010, the Minister may also determine an
earlier time for the registration commencement time to occur but
that time must be after 28 March 2010.
Transitional security agreements
Item 118
4. A security agreement would be a transitional security agreement if the
security agreement was in force immediately before the registration
commencement time and the agreement continues in force at and after
that time
Enforceability of transitional security agreements
Item 119
5. Item 119 proposes the substitution of a new section 311 making it
clear that, for the purposes of the PPS Act, a transitional security
interests would be enforceable against third parties if it would have
been enforceable before the registration commencement time.
Intellectual property
Item 120
6. Item 120 would substitute a new section 106 to ensure that it only
applies in relation to security interests in intellectual property
licences created by security agreements entered into at or after the
registration commencement time.
Transitional application of the PPS Act
Item 121
7. A key outcome of the transitional provisions would be to ensure that
the rights held by a party prior to the registration commencement time
are not prejudiced by the transition to the PPS scheme.
8. This preservation of rights would be achieved by the transitional
provisions through the attachment rule (proposed section 320), the
perfection rule (proposed section 321) and the priority rules of the
PPS Act.
9. The attachment rule provides that a transitional security interest in
collateral would be taken to have attached to the collateral
immediately before the registration commencement time (proposed
section 320).
10. Similarly, the perfection rule (proposed section 321) would provide
that a transitional security interest in collateral would be taken to
have been perfected from immediately before the registration
commencement time until the earliest of the following times:
a. the migration of the transitional security interest;
b. the preparatory registration of the transitional security
interest;
c. the amendment of a registration relating to a transitional
security interest;
d. the perfection of the transitional security interest under the
PPS Act, or
e. the end of the 24th month after the registration commencement
time (proposed subsection 321(2)).
11. The period between immediately prior to the registration commencement
time and the earlier of the events listed in proposed subsection
321(2) is a period of temporary perfection. During this period, two
transitional security interests would have the same priority time for
the purposes of subsection 55(4) of the PPS Act. They would therefore
have the same priority under the priority rules established by the PPS
Act and would have the priority among themselves that they had
immediately before the registration commencement time, as if the PPS
Act had not been enacted (proposed section 322).
12. If none of the events listed in proposed subsection 321(2) occurs and
the 24th month following the registration commencement time expires,
the transitional security interest would lose its temporary perfection
and become an unperfected security interest. As an unperfected
security interest, it would be subordinate to a perfected security
interest in the same collateral (subsection 55(3)). If both security
interests are unperfected, priority would to be determined in
accordance with the order of attachment of the security interests
(subsection 55(2)).
13. If both security interests are transitional security interests, they
would both be taken to have attached immediately before the
registration commencement time (proposed section 320). Proposed
section 322 would then apply so that they would have the priority
among themselves that they had immediately before the registration
commencement time and as if the PPS Act had not been enacted.
14. If the other security interest is not a transitional security
interest, the transitional security interest would have priority,
because it would have an earlier attachment time (see proposed section
320) for the purposes of subsection 55(2) of the PPS Act.
Example:
BankB has a security interest in a car owned by GrantA. This
security interest was registered on the NSW Register of
Encumbered Vehicles and is migrated across to the PPS Register
as a migrated security interest. BankB's security interest
would be taken to be perfected from immediately before the
registration commencement time.
Example:
GrantA is a fruit packer. On 30 August 2009 FinanceA lends
GrantA $5,000 and takes a security interest in GrantA's packing
machine. There is no Register on which FinanceA can register
its interest in the machine. On 1 May 2010, the new PPS
Register commences. On 14 May 2010, FinanceB lends GrantA
$10,000 and takes a security interest in the same machine.
FinanceB registers its interest on the PPS Register on the same
day. On 15 July 2010, GrantA becomes insolvent. The priority
between FinanceA and FinanceB comes to be determined.
FinanceA's interest would be a transitional security interest
and temporarily perfected by the Bill, for a period starting
immediately before 1 May 2010, up until 31 May 2012. FinanceA's
interest in GrantA's machine would therefore have priority over
FinanceB's interest, even though FinanceA's interest is
unregistered.
Amendment of section 333
Item 122 and 123
15. These items amend section 333 to provide that if the PPS Registrar
does not believe a migrated transitional security interest would have
ended at a particular time (proposed subsection 333(4)), the end time
for the registration does not need to be included on the PPS Register
(proposed subsection 333(3)(a)).
Amendment of section 336
Item 124
16. Item 124 would substitute a new section 336 on the preparatory
registration of transitional security interests.
17. The migration provisions in the Bill would allow a non-migrated
transitional security interest to be registered between the migration
time and the registration commencement time (proposed section 336).
This type of registration is referred to as a preparatory registration
in the Bill.
18. At any stage between the migration time and the registration
commencement time a secured party could apply for a preparatory
registration (proposed section 336(1)). The Registrar would only be
able to accept the application if he/ she were satisfied on reasonable
grounds that a transitional security interest would attach to the
collateral and that it is operationally practicable for the Registrar
to register the financing statement (proposed section 336(2)).
19. A secured party that registers their security interest during this
time would receive the same protection under the PPS Act as a secured
party who registers their security interest within the 24 month
temporary perfection period. The time of registration of a
preparatory registration would be the registration commencement time
(proposed section 336(5)).
Amendment of section 336
Item 125
20. Item 125 would include a new section 337 to determine what constitutes
an effective registration of a transitional security interest.
21. The Registrar would be able to determine that registrations of
transitional security interests are effective despite defects that
would otherwise render them ineffective under the PPS Act (proposed
section 337). This provision is necessary because some transitional
registers do not include information that would be required on the PPS
Register. In the case of other transitional security interests, the
Registrar may decide that secured parties should be given an
opportunity to correct certain details of the registration where they
have perfected their interest.
Example:
State vehicle registers do not include information about the
grantor of an interest. The PPS Act would enable the Registrar
to determine that a migrated State vehicle registration, for a
vehicle that is commercial property, is not ineffective merely
because a search of the PPS Register, by reference only to the
individual or corporate details of the grantor in respect of the
collateral, is not capable of returning the relevant
registration.
22. A registration on the PPS Register would be ineffective because of a
defect if, and only if, there is a seriously misleading defect in the
data or there is a specified defect (sections 164-165).
23. Once the times specified in proposed section 337(4) have lapsed, the
registration would become ineffective unless the registration was
amended to correct the defect before the relevant time lapses.
Concept of control in inventory and accounts
Items 126- 132
24. Items 126-132 clarify the concept of control in relation to inventory
and accounts.
25. Item 128 includes general rules to determine when a secured party has
control of personal property. Proposed section 341(1A) would provide
three tests for whether a secured party has control of personal
property.
26. The first test would provide that a secured party has control of
property if they have control within the ordinary meaning of control.
This is intended to be a reference to general law concepts of control.
27. The second test would provide that a secured party has control of
property if they have control within the meaning of Part 2.3 of the
PPS Act.
28. The third test would provide that a secured party would have control
of inventory or an account if either of the first or second tests
applied or if subsection 341(1), (2), (3) or (4) applied.
29. Items 126 and 127 would include guidance notes to subsection 340(2)
and (5) referring to these general control rules.
30. Items 129 to 132 would amend section 341, consequential to the general
control rules, to clarify that the general control rules apply to
determine whether particular personal property is a circulating asset.
Referral provisions
31. Items 92-103 would provide an additional method for a State to become
a referring State for the purposes of the PPS Act.
32. As an alternative to referral in subsection 244(1)(a) of the PPS Act,
a State would be able to adopt the PPS Act as amended by this Bill
(subsection 244(8)) and refer power to the Commonwealth to make
subsequent amendments to the PPS Act.
33. Existing referrals of power would not be affected by these amendments.
In addition, the existing power for States to refer the PPS Act after
its enactment (in addition to the pre-enactment referrals that have
been made) would be retained.
34. These amendments reflect an approach recently agreed by the
Commonwealth and States for the National Consumer Credit Protection
legislation.
Items 133-153
35. These items replace references to investment entitlements with
references to intermediated securities
SCHEDULE 3
11. AMENDMENT OF OTHER ACTS
Amendment of Designs Act 2003
Item 1
1. This item would amend the definition of a PPS Act security interest in
section 5 of the Designs Act. A PPS Act security interest would be a
security interest to which the PPS Act applies other than a
transitional security interest within the meaning of the PPS Act.
2. This amendment would replace the definition of PPS security interest
inserted by Item 1 of Schedule 2 of the Personal Property Securities
(Consequential Amendments) Act 2009 (PPS (Consequential Amendments)
Act) and commence immediately after that definition takes effect.
Amendment of Fisheries Management Act 1991
Item 2
3. This item would amend the definition of a PPS Act security interest in
section 4(1)) of the Fisheries Management Act. A PPSA security
interest would be a security interest to which the PPS Act applies
other than a transitional security interest within the meaning of the
PPS Act.
4. This amendment would replace the definition of PPS security interest
inserted by Item 1 of Schedule 1 of the PPS (Consequential Amendments)
Act) and commences immediately after that definition takes effect.
Amendment of Navigation Act 1912
Item 5
5. This item would amend the definition of a PPSA security interest in
section 6(1) of the Navigation Act. A PPSA security interest would be
a security interest to which the PPS Act applies other than a
transitional security interest within the meaning of the Act.
6. This amendment would replace the definition of PPS security interest
inserted by Item 6 of Schedule 3 of the PPS (Consequential Amendments)
Act and commence immediately after that definition takes effect.
Amendment of Patents Act 1990
Item 16
7. This item would amend the definition of a PPSA security interest,
listed as an expression in section 3 and defined in the Dictionary in
Schedule 1 of the Patents Act. A PPSA security interest would be a
security interest to which the PPS Act applies other than a
transitional security interest within the meaning of that Act.
8. This amendment would replace the definition of PPSA security interest
inserted by Item 14 of Schedule 2 of the PPS (Consequential
Amendments) Act and this would commence immediately after that
definition takes effect.
Amendment of PPS Act (Consequential Amendments) Act 2009
Item 17
9. This item would repeal item 17 of the PPS (Consequential Amendments)
Act because it would be redundant as a result of the amendment to the
definition of PPS Act security interest in the Fisheries Management
Act in item 2. This item would commence immediately after the
commencement of item 17.
Amendment of Proceeds of Crime Act 2002
Items 18 - 28
10. This item would make various amendments to the Proceeds of Crime Act
to ensure consistency in its operation with the PPS Act.
11. Sections 142, 169 302, 302C and 307 of the Proceeds of Crime Act
provide that amounts owing to the Commonwealth related to action to
recover proceeds of crime are secured by a charge.
12. The amendments would apply subsection 73(2) of the PPS Act to these
charges. This would ensure that the priority between a charge created
under the Proceeds of Crime Act and a security interest in the same
property is determined in accordance with the Proceeds of Crime Act
after the registration commencement time. The amendments clarify that
PPSA, subsection 73(2) does not apply to Proceeds of Crime Act charges
over real property.
13. Sections 133, 143 and 170 of the Proceeds of Crime Act provide for the
Commonwealth Director of Public Prosecutions to register charges
created under the Proceeds of Crime Act. The amendments would ensure
that the Director's power to register is properly aligned with the PPS
Act which provides for regulations to be made to enable charges
created under the Proceeds of Crime Act (among other things) to be
registered on the PPS Register (section 148(c)). Related amendments
to section 338 of the Proceeds of Crime Act would ensure that the
definition of registration authority is broad enough to include the
Registrar of Personal Property Securities.
Amendment of Torres Strait Fisheries Act 1984
Item 29
14. This item would amend the definition of a PPSA security interest in
section 3(1) of the Torres Strait Fisheries Act. A PPSA security
interest would be a security interest to which the PPS Act applies
other than a transitional security interest within the meaning of the
Act.
15. This amendment would replace the definition of PPSA security interest
inserted by Item 19 of Schedule 1 of the PPS (Consequential
Amendments) Act and commence immediately after that definition takes
effect.
Amendment of Trade Marks Act 1995
Item 30
16. This item would amend the definition of a PPSA security interest in
section 6 of the Trade Marks Act. A PPSA security interest would be a
security interest to which the PPS Act applies other than a
transitional security interest within the meaning of the Act.
17. This amendment would replace the definition of PPS security interest
inserted by Item 18 of Schedule 2 of the PPS (Consequential
Amendments) Act and commence immediately after that definition takes
effect.
Amendment of Mutual Assistance in Criminal Matters Act 1987
Items 3 & 4
18. These items make amendments to the Mutual Assistance in Criminal
Matters Act to clarify how it operates in relation to the PPS Act.
19. Section 35J of the Mutual Assistance in Criminal Matters Act provides
that amounts owing to the Commonwealth by virtue of certain foreign
actions to recover proceeds of crime are secured by a charge.
20. Item 3 would apply subsection 73(2) of the PPS Act to charges created
by section 35J. This would ensure that the priority between a charge
created under section 35J and a security interest in the same property
is determined in accordance with the Mutual Assistance in Criminal
Matters Act after the PPS Act registration commencement time. The
amendments are clarify that subsection 73(2) would not apply to
charges over real property.
21. Section 35L of the Mutual Assistance in Criminal Matters Act provides
for the Commonwealth Director of Public Prosecutions to register
charges created under section 35J. Item 4 would amend section 35L to
ensure that it is aligned with the PPS Act regulation-making power to
include these charges on the PPS Register (subsection 148(c) of the
PPS Act).
Amendment of Offshore Petroleum and Greenhouse Gas Storage Act 2006
Item 6
22. The OPGGS Act makes reference to charges and debentures under Chapter
2K of the Corporations Act. The Bill would repeal Chapter 2K and
therefore this item would delete the definition of charge as it is
defined by reference to Chapter 2K of the Corporations Act.
Item 7
23. This item would delete the definition of debenture which is defined by
reference to Chapter 2K of the Corporations Act. In future,
debenture, would have its ordinary meaning. The effect this might
have on the registration of dealings would be dealt with by a
transitional provision (item 15) clarifying that the new definition
would only apply to dealings that occur after the commencement of the
amendment, that is after the registration commencement time.
Item 15
24. Because sections 468 and 520 (which refer to dealings which form part
of the issue of a series of debentures) would be retained but
debenture would be undefined, debenture in these provisions would have
its ordinary meaning. This item would clarify that the new definition
of debenture will only occur at the registration commencement
time (the amendments to the Corporations Act will also occur at this
time).
Item 8, 11 and 14
25. These items would repeal subsections 489(5)-(6); 499(5)-(6); 540(5)
and 549(5) which specify that the registration of dealings which
create charges require the documents specified under section 263 of
the Corporations Act. The lodgement of applications will now be
governed by the OPGGS Regulations.
Item 10 and 13
26. This item would repeal subsections 490(2)(d) and 500(2)(d), which
require that the registration of charges and provisional charges in
respect of referable titles, are to be made to the responsible
Commonwealth Minister.
27. These amendments would only provide consequential amendments to the
repeal of Chapter 2K in Schedule 1 and would not affect the existing
requirements in the OPGGS Act for the validity of dealings.
