The review of Personal Property Securities legislation is a part of the

national business and regulatory law reform agenda agreed to by the

Council of Australian Governments.

The Bill I am bringing forward now replaces a similarly named Bill tabled

in this House in November 2009 but was not dealt with prior to

Parliament rising.

While having the same effect as the 2009 Bill this Bill has had to be

redrafted to take into account amending legislation passed by the

Commonwealth in November 2009 and June 2010.

The Commonwealth legislation will allow for a uniform system of

registration and regulation of security interests in personal property

across all States and Territories.

The commitment by the States to refer legislative power to the

Commonwealth is reflected in the Intergovernmental Personal Property

Securities Law Agreement signed by the Council of Australian

Governments on 2 October 2008.

By way of background, Personal Property Securities reform had been

considered in some detail in the early 1990s but there was at that stage

little interest from the finance sector who would be the main users of

the registration scheme.

In 1999 a New Zealand Personal Property Securities system was

introduced which subsequently received positive responses from New

Zealand business stakeholders when it was reviewed a few years after it

commenced. Those stakeholder views were taken up by Australian

financiers and banks who raised the question of uniform or national laws

to cover securities over personal property in Australia.

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As a result the Standing Committee of Attorneys-General reinstated

Personal Property Securities law reform on the national law reform

agenda and established an officers working group to progress the

matter.

In 2007, the Council of Australian Governments elevated the Personal

Property Securities reform to become one of its national regulation

reform priorities and provided in-principle support for establishing a

single national system based on a referral of legislative power from the

States to the Commonwealth.

Personal Property Securities can be broadly defined to mean interests in

personal property by which a creditor has the right to take or keep

possession of, or otherwise deal with that property, on the default of a

debtor.

Personal property can mean any type of property that is not land or

buildings.

Examples of tangible personal property include goods such as motor

vehicles, boats, aeroplanes, office furniture, artworks, business

machinery and equipment, stock-in-trade, crops and livestock, and

financial property such as currency, chattel paper, and letters of credit.

Examples of intangible personal property include intellectual property

rights (such as trademarks, copyright and patents), contract rights,

uncertificated shares and transferable statutory rights created under

Commonwealth, State and Territory laws.

Security interests in personal property include mortgages, bills of sale,

charges and pledges as well as financing leases, hire-purchase

agreements and retention of title agreements where a sale does not

transfer ownership until full payment is received.

There are approximately 70 Commonwealth, State and Territory Acts

governing various types of Personal Property Securities interests with a

number of registers in each jurisdiction established under different Acts

examples in Tasmania include the Bills of Sale Act and the Motor

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Vehicle Securities Act as well as legislation dealing with rights over

stock, crops, water, mining and marine resources.

The creation, notification and enforcement of a security interest in

personal property is currently dependent on the type of personal

property being offered as collateral, the jurisdiction in which the

property is located or the different laws under which the financing

transaction occurs, the availability, or lack of availability, of registers on

which these interests can be notified to the 'world at large' and in some

instances, the use of outmoded systems of registration.

Related to these matters are some requirements for multiple

registrations of security interests on different registers in relation to a

single financing transaction (for instance bills of sale and motor vehicle

securities), the payment of multiple sets of fees and often cumbersome

registration and notification requirements for lenders, borrowers and

consumers generally.

An Access Economics report commissioned by the Standing Committee

of Attorneys-General in 2006 noted that the establishment of a single

national law to govern Personal Property Securities interests with a

single national online register would reduce the costs involved with the

payment of various fees for multiple registrations and also reduce the

hidden transaction costs associated with ensuring compliance with

different laws, compliance with different registration requirements and,

where necessary, the need to search different registers before

determining whether the personal property in question is the subject of

a security interest.

The report noted that implementing reforms in this area would increase

certainty for lenders and borrowers and facilitate greater confidence in,

and access to, secured lending that is characteristic of a competitive

modern economy.

To that end, the Standing Committee of Attorneys-General and the

Ministerial Council on Consumer Affairs have worked over the past

three to four years to develop the scheme.

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The Personal Property Securities Bill was introduced into the

Commonwealth Parliament on 24 June 2009 and was passed in late

November 2009. On the same day in November the Commonwealth

also passed an Amendment Bill which dealt with a number of matters

many of which resulted from the Senate’s consideration of the original

Bill and suggestions which were taken up by the Commonwealth

Government.

Key features of the Commonwealth Personal Property Securities Act

are that:

exceptions where for public policy reasons those types of property

will continue to be governed by existing schemes or are not able to

be used as collateral in the same way as other property;

personal property regardless of the form of the transaction, who the

grantor of the interest is, or which State or Territory in which the

transaction takes place;

enforcement of security interests in personal property such as when

an interest is enforceable between parties and against third parties,

how these rules can be enforced, and when security interests are

extinguished;

and establishes rules relating to the lodgement of security interests

on the register, the amendment of data on the register and

notification requirements for relevant parties;

individual debtors who have granted security interests in personal

property and whose details are recorded on the Personal Property

Securities register;

State laws and specifies certain circumstances where State laws will

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prevail and certain circumstances where the Bill will prevail over

State laws;

created by that State law, such as a lien, to be a 'priority interest'

which places that interest ahead of any competing Personal Property

Securities interests where a secured party seeks to enforce the

interest;

and Territory courts to hear and determine any disputes arising

under the Personal Property Securities scheme;

government to review the scheme within three years after the date

of commencement.

In June this year the Commonwealth passed further amendments to the

related to the transition to the new scheme and made consequential

amendments to the Corporations Act and other Commonwealth laws.

The Referral Bill reflects model referral legislation prepared by the

Standing Committee of Attorneys-General and the Parliamentary

Counsels Committee. Because the Commonwealth has now passed its

legislation the terminology of this Bill differs a little from the Bills in

Victoria, NSW and the other States which have passed their Referral

Acts. Western Australia is developing a Bill similar to the Tasmanian

Bill.

As the Commonwealth Act has now been passed the Tasmanian Bill

refers to it in terms of “adoption” rather than “referral” although the

legal effect will be the same – the Commonwealth will have the power

to legislate to regulate the field of personal property securities.

All of the State Referral Bills provide an amendment reference to allow,

with State approvals, the Commonwealth to make future legislative

amendments to the PPS Act concerning a range of matters including

security interests in personal property, the recording of security

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interests or information with respect to security interests in personal

property on a register, the recording of other information with respect

to personal property on that register, and the enforcement of security

interests in personal property. Consultation with the States and

Territories on proposed changes to PPS law will be run through the

Standing Committee of Attorneys General.

There are two additional matters in the State Referral Bills in relation to

security interests in fixtures and tradeable water rights.

This reflects an agreement between jurisdictions that the Personal

Property Securities regime will not apply to security interests taken

over tradeable water rights and over fixtures at this time. They may be

taken under PPS at a later stage.

Fixtures

Whilst the results of consultation with industry stakeholders supported

allowing security interests in fixtures to be recorded on a national

Personal Property Securities register there are matters that need to be

addressed when attempting to designate fixtures as 'personal property'

for the purposes of this scheme.

First, this would necessitate a substantive revision of current legal

principles around the treatment of fixtures as real property under

common law and under statute law as fixtures in effect become part of

the land to which they have been attached.

The inclusion of fixtures on the Personal Property Securities register

has significant potential to undermine the operation of the Torrens land

titles system by affecting the indefeasibility of registered land titles on

State land titles registers.

As a result, the Standing Committee of Attorneys-General has sought a

detailed review of the current laws on fixtures and the implications of

treating fixtures as personal property for the purposes of Personal

Property Securities prior to any decision being taken over the future

inclusion of fixtures in the national scheme.

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The review is to be undertaken by the Australian Law Reform

Commission in consultation with some of the State Law Reform

Commissions. Terms of Reference for the Review are currently being

finalised and the Commission is expected to report in by 30 June 2011.

Tradeable Water Rights

Stakeholders had expressed an interest in the ability of financiers to

register security interests in tradeable water rights on the Personal

Property Securities register.

It is noted that currently certain water rights are used as collateral for

lending under Bills of Sale registered under Tasmanian law. They are

also recorded and the interests of creditors are to some extent

protected by registers of water interests maintained by the Department

of Primary Industry, Parks, Water and Environment.

Work is being undertaken on the development of a national registration

scheme for water interests under the auspices of the Council of

Australian Governments. The COAG Working Group on Climate

Change and Water has agreed that security interests in water rights

should be excluded from the Personal Property Securities scheme at

least for the time being.

The inclusion of the amendment reference in the State Referral Bill with

respect to tradeable water rights, which can if necessary be activated at

a later date, will allow for the Personal Property Securities regime to

cover such rights should Governments agree in future that the Personal

Property Securities register is the best mechanism by which security

interests in those rights should be regulated.

The State Referral Bill includes separate commencement provisions for

both tradeable water rights and fixtures through proclamation by

Governor in Council which can be activated when these matters are

resolved.

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As a means of ensuring that the coverage of the Personal Property

Securities scheme captures most personal property of particular

commercial value, jurisdictions have agreed that generally statutory

licences, rights, entitlements, or authorities created by Commonwealth,

State or Territory laws can be dealt with as 'personal property' to

enable security interests to be lodged against them on the Personal

Property Securities register.

There are a number of commercial licences issued under statute by the

Commonwealth and the States - for example, intellectual property

licences, fisheries licences or taxi licences, which are currently used as

collateral by the licence-holders in order to obtain financing for their

business.

The State Referral Bill makes clear, however, that the referral of powers

to the Commonwealth does not include provision for the

Commonwealth to make laws in a manner that would exclude or limit

the operation of a State law that deals with the creation, holding,

transfer, assignment, disposal or forfeiture of a State statutory right.

Statutory licences and entitlements are a creation of the State legislation

used primarily for regulatory purposes and for the good governance of

the State and in many cases such as marine resources and water for the

proper husbanding of those resources.

Other Departments are working with the Department of Justice to

examine whether specific licences should be excluded from the national

scheme and whether any existing provisions relating to securities over

or transfer of licences need to be strengthened. Many licences already

have safeguards built in about transfers but any licences identified for

exclusion or in need of additional safeguards will the subject of

consequential amendments before the national Personal Property

Securities scheme comes into effect to prevent inappropriate dealings

with licences.

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To ensure the State’s ability to continue to control its own licences the

Referral Bill does not extend to providing the Commonwealth with

power to exclude or limit a State law that limits, restricts or prohibits

the kinds of interests that may be created or held in such statutory

rights or the type of person or body that may create or hold interests in

those rights.

Parties to financing transactions using such licences or entitlements as

collateral will not be able to circumvent the effective regulation of these

licences merely by registering or enforcing security interests under the

national Personal Property Securities scheme.

The Referral Bill provides that where a Tasmanian law expressly

excludes a licence, right, entitlement or authority from the application

of the Personal Property Securities legislation the Tasmanian legislation

will prevail and, as a consequence, the purported lodgement of security

interests in those excluded matters would be ineffective.

This provision recognises that not all statutory licences or entitlements,

even if transferable and of commercial value, should be the subject of

registered security interests under the Personal Property Securities

scheme where there are countervailing public policy reasons to restrict

the interests associated with those statutory rights.

Over the next few months the Tasmanian government will be

developing the consequential amendments legislation to various Acts as

part of the Personal Property Securities law reform implementation

process that will include provisions to clarify which transferable licences

and entitlements created by Tasmanian statutes will be expressly

excluded from the Personal Property Securities scheme.

That legislation will also provide for appropriate transitional safeguards

in relation to Tasmanian registers that currently record security

interests that will be modified or closed down as a result of this referral

to the Commonwealth.

The Referral Bill does not refer power to the Commonwealth regarding

State laws that provide for the confiscation, seizure, extinguishment or

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other forfeiture of property or interests in property in connection with

the enforcement of State laws.

Finally, the State Referral Bill provides for the termination of any, or all,

of the initial and amendment references on twelve months notice

through a Proclamation.

The passage of this Referral Bill is an important step towards

implementing a landmark law reform measure. The establishment of a

single national law and an electronic register by which security interests

can be recognised will be conducive to greater levels of secured

financing of businesses and business activities in Australia.

However, as with any new major reform, the proper implementation

and the ongoing monitoring of the Personal Property Securities scheme

is critical to the scheme's success.

Under the Personal Property Securities agreement, the States and

Territories will play an important role in scrutinising policy

developments and ensuring that the Commonwealth provides a scheme

that appropriately meets the needs of, and is responsive to, businesses,

consumers and other users of the system.

I commend the Bill to the House.

Name of the proposed Act

Provides that the Bill other than proposed

sections 8(2) and 8(3) commences on the day

on which it receives the Royal Assent.

Proposed sections 8(2) (fixtures) and 8(3)

(water rights) will commence on a day or days

appointed by proclamation when the State is

satisfied that they should be dealt with under

the PPS scheme.

It is possible that water rights will not be

referred for some time and whether coverage

of fixtures will be referred will be determined

after the Australian Law Reform Commission’s

examination of the issues

Defines certain terms and expressions used in

the proposed Act, including the following:-

subsequent amendments (two separate

Amendment Acts) to that Act already passed

by the Commonwealth.

Act of the Tasmanian Parliament or any

instrument made under such an Act, whenever

enacted or made and as in force from time to

time. The expression is intended to cover both

existing and future Acts and instruments as

enacted, made and amended from time to time.

to mean a right, entitlement or authority that is

granted by or under a law of the State that is

declared by Tasmanian law not to be personal

property for the purposes of the

Commonwealth PPS Act. As a result of the

ambulatory nature of the definition of “law of

the State” the expression will extend to

declarations that are made in relation to both

existing and future State statutory rights.

the direct amendment of the text of the

Commonwealth PPS Act, but it does not

include the enactment of a provision having

substantive effect otherwise than as part of the

text of that Act. Each of the amendment

references is limited to the express

amendment of the Commonwealth PPS Act.

This means that the matters covered by the

amendment references cannot be the source of

power for other Commonwealth legislation.

entitlements which the Government might

grant to licence holders – the rights conferred

include taxis, mining, fishing, gaming, water and

others. The term licence, however, does not

include any excluded State statutory right (see

above).

property (including a licence) other than land

or an excluded State statutory right. Licences

could be as diverse as taxis and hire cars,

commercial fishing licences and gaming

licences.

is the subject of the different amendment

references under the proposed Act.

The expression is defined to mean:-

• security interests in personal property;

and

• the recording of security interests, or

information with respect to security

interests, in the personal property in a

register;

• the recording of any other information

with respect to personal property

(whether or not there are any security

interests in the personal property)(this

could include information about stolen

and written off motor vehicles

currently recorded in other registers) ;

• the enforcement of security interests in

the personal property (including

priorities to be given as between

security interests, and as between

security interests and other interests).

The definition, excludes from “referred PPS

matters” any powers that might exclude or

limit the operation State laws to the extent

that the State law makes provision with

respect to:-

• the creation, holding, transfer,

assignment, disposal or forfeiture of a

State statutory right (licences etc); or

• limitations, restrictions or prohibitions

concerning the kinds of interests that

may be created or held in, or the kinds

of persons or bodies that may create

or hold interests in, a State statutory

right; or

• the forfeiture of property or interests in

property (or the disposal of forfeited

property or interests) in connection

with the enforcement of the general

law or any law of the State;

• the transfer, by operation of that law of

the State, of property or interests in

property from any specified person or

body to any other specified person or

body (whether or not for valuable

consideration or a fee or other

reward).

The first and second exclusions from the

referred PPS matters limit the power of the

Commonwealth Parliament to use an

amendment reference to exclude or limit the

power of the State to administer, vary or

abrogate any State statutory rights (such as

licences) that the State creates from time to

time.

This means controls over licences such as how

and to whom they may be transferred etc are

not to be displaced by the Commonwealth PPS

Act should a financier need to enforce a

security interest over the licence.

The third exclusion from the referred PPS

matters is intended, among other things, to

preserve the operation of the laws of the State

that provide for the confiscation of the

proceeds of crimes or for the transfer by or

under a law of the State of assets from defunct

bodies.

in personal property.

Generally, a security interest in personal

property is an interest created by a transaction

that secures payment or performance of an

obligation (without regard to the form of the

transaction or the identity of the person who

has title to the property) against the property.

The proposed section also provides that a

security interest may encompass certain other

interests provided for by a transaction

regardless of whether or not the transaction

secures payment or performance of an

obligation. An example of such an interest is

an interest of a lessor or bailor under a lease

or bailment of goods.

The clause provides that the PPS Act (as

amended in 2009 and 2010) is adopted by

Tasmania. This provides the power for the

Commonwealth to apply the PPS law to

security transactions in Tasmania.

The Australian Constitution provides for

“adoption” where the Commonwealth

legislation is already in place and a referral of

powers is made after it has been put in place).

The adoption (like a referral) can be

terminated by the State (see section 7).

Covers the termination of the adoption made

under clause 6 by proclamation. The date

specified for termination is to be no earlier

than 12 months and one day from the date the

proclamation is published in the Government

Gazette. Additional references (eg to amend)

can be terminated under section 9.

Subclause 8(1) in effect allows the future

amendment of the Commonwealth PPS Act

concerning security interests in personal

property (other than fixtures or water rights)

by specific amendment to the Commonwealth

PPS Act (and does not allow the referral to be

used for other purposes).

Subclause 8(2) will enable referral of security

interests in fixtures to the Commonwealth

Parliament at some point of time in the future

if Tasmania considers it appropriate (on

Proclamation of commencement of the

subsection). It will allow amendment of the

Commonwealth PPS Act concerning fixtures at

and from that time.

Subclause 8(3) in effect provides for the future

referral of matters to the Commonwealth

Parliament of coverage of security interests in

transferable water rights in the PPS Act. Again

this will only occur when it is considered

appropriate for the subsection to be activated

and is subject any exclusions of dealings with

State statutory rights.

Subclause 8(4) provides that each of the

references is not limited by any of the other

references.

Subclause 8(5) provides that the reference of a

matter has effect only to the extent that the

matter is not otherwise within the legislative

power of the Commonwealth Parliament and

to the extent that the matter is within the

legislative power of the State Parliament. The

intent being that the referral supplements the

Commonwealth’s constitutional powers (eg

Inter-State trade; corporations etc) which

could cover part of the PPS scheme.

Subclause 8(6) specifies the period during

which a reference has effect. Each reference

will begin when the subsection that makes the

reference commences (which may be different

dates) and ends when the period of that

particular reference is terminated under the

proposed section 9.

Covers the termination, by proclamation, of

the amendment references made under clause

8. As agreed between the States and the

Commonwealth the date specified for

termination is to be no earlier than 12 months

and one day from the date the proclamation is

published in the Government Gazette.

Clause 10 is to make it clear that the State

Parliament envisages that the Commonwealth

PPS Act can be amended or affected by

Commonwealth legislation enacted in reliance

the referral or adoption under this Act

(subclause (a)) or enacted on the basis of any

of the Commonwealth’s other Constitutional

powers.

Provisions in the intergovernmental Agreement

on Personal Property Securities Law that

underpin the scheme may require consultation

with and possibly agreement through the

Standing Committee of Attorneys General on

some matters where the Commonwealth

proposes to change the PPS Act.

termination of an amendment reference does

not affect Commonwealth laws already in

place. Accordingly, the amendment reference

continues to have effect to support those laws

until the initial adoption on the PPS scheme is

also terminated.

Provides for the administration of the Act by

the Minister for Justice and the Department of

Justice.

This Bill refers a range of matters relating to security interests in

personal property to the Commonwealth Parliament to enable the

Commonwealth Parliament to make laws about personal property

securities which will apply in Tasmania.

Personal property security interests can be broadly defined to mean

interests in personal property by which a creditor has the right to take

or keep possession of, or otherwise deal with that property, on the

default by a debtor.

Personal property covers a wide range of things – virtually any thing

except land, although some rights in or related to land may also be

treated as personal property. It covers all sorts of goods but also

includes crops, wool, rights, interests in shares, licences and similar

entitlements.

Personal property is used as collateral for loans of various types – the

most common one used to be hire purchase but there are numerous

other securities which are used in consumer and business transactions.

Bills of sale and crop mortgages are examples of other transactions.

The development of the proposed PPS scheme has taken several years.

It has been finalised under the direction of the Council of Australian

Governments as part of the national business and regulatory law reform

agenda and follows the success of similar reforms in New Zealand.

The scheme has been the subject of detailed consultation with the

community at national level and has involved numerous consultation

documents and the circulation of draft legislation and regulations. The

Commonwealth has enacted legislation to give effect to a scheme which

is proposed to come into effect in May 2011.