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Wednesday, 24 June 2009
Page: 6960


Mr McCLELLAND (Attorney-General) (10:17 AM) —I move:

That this bill be now read a second time.

This government went to the election with an ambitious deregulation agenda—a promise to reduce the regulatory burden on Australian business and to address impediments to the growth of productivity in this country. In the 18 months since coming to office, the government has amply demonstrated its commitment to that agenda.

In a country such as ours—with a federation of Commonwealth, state and territory governments and a Constitution which divides responsibilities between the jurisdictions—each of the jurisdictions will inevitably have laws which overlap with laws in another jurisdiction. Where the laws between the jurisdictions regulate a similar issue but differ in terms, the practical outcome is that business and other users whose work crosses borders are left to grapple with a range of different legislative regimes and sometimes outcomes.

Single or harmonised laws, where they can be achieved, are the most obvious way to overcome these burdens. Identifying them and working towards single or harmonised laws, with the cooperation of the states and territories, is an important priority for the government and is part of the government’s broader deregulation agenda.

And this brings me to the bill that I introduce into the parliament today.

The Personal Property Securities Bill 2009 implements a significant reform to Australia’s law on secured financing using personal property.

The bill will replace the existing complex, inconsistent and ad hoc web of common law and legislation, involving over 70 Commonwealth, state and territory acts. It will implement a single national law, creating a uniform and functional approach to personal property securities.

Personal property is any form of property other than land. It includes goods such as cars, machinery, even crops and livestock, financial property such as currency and letters of credit and intangibles such as intellectual property rights.

The bill will apply to all transactions which create an interest in personal property that secures a loan or other obligation.

Secured finance using personal property is a major area of business for Australia’s banking and finance sectors. And borrowing using personal property has the potential to assist business to grow—particularly small and medium sized businesses.

The government’s reform in this area recognises the need to make it easier for businesses to use personal property to obtain finance. Given the current uncertainty in the global financial markets, improving the capacity of businesses to borrow is crucial. And, of course, this is bound to have positive flow-on effects in terms of jobs growth and overall productivity.

The bill will more closely align Australia’s secured transactions law with that in other jurisdictions. In doing so, it will increase the confidence of international investors and creditors in Australia’s secured transactions law and should make it easier for Australian businesses to secure finance in international capital markets.

Why reform is necessary

Personal property securities reform is necessary to facilitate investment and to ensure Australia remains a competitive economy both domestically and in the international arena.

The complexity of the existing secured lending arrangements, and the lack of consistency between them, is a major source of uncertainty.

By harmonising existing laws, the bill will reduce that complexity and increase consistency in the arrangements for creating, dealing with and enforcing security interests in personal property.

In streamlining lending arrangements in this way, the bill will provide greater certainty for both lenders and borrowers. It will lower the risk for lenders, improve the efficiency of secured financing and increase competition among providers of finance.

Under the functional approach implemented by the bill, a security interest will be a transaction that ‘in substance’ secures payment or performance of an obligation.

The bill will focus the law on the real or economic effect of the transaction and not on the legal form of the borrower or the financial arrangement or the location or nature of the property.

The reform will be supported by a single national online register of personal property securities, replacing the existing confusing array of both electronic and paper-based national, state and territory registers.

This is 21st century reform for 21st century circumstances.

The bill takes advantage of the technology available to us in this digital age, by creating a real-time online noticeboard of personal property over which a security interest has been, or may be, taken.

Users will be able to search the register via a web browser or, alternatively, via their mobile phone using SMS message connectivity.

This is in stark contrast to some of the registers that are currently used for recording an interest in personal property. There are, for example, paper registers that have been around since the 1920s and 1930s, which continue in use today.

If nothing else, this bill will simplify things—not just from the perspective of convenience but also from a costs perspective.

A telephone contact centre will also be available to facilitate access to the register.

The bill also includes transitional arrangements to transfer the data on the existing registers to the new personal property securities register. The migration of data will take place before the register goes live and is available to the public.

History of PPS reform

I might just say a few words about the history of reform in this area.

It has had a long history in this country, with initial discussions about personal property securities reform commencing in the early 1970s.

In June 1990, the then Attorney-General, Michael Duffy, referred a review of the adequacy of personal property securities law to the Australian Law Reform Commission.

In 1995, Attorney-General Michael Lavarch released a discussion paper on the draft legislation and issues raised in the Australian Law Reform Commission’s report.

This began a process of further development of reform options through several options papers and extensive consultation with stakeholders right across the country.

At this point, I should acknowledge the contribution of my predecessor, the member for Berowra and former Attorney-General, Philip Ruddock, who was genuinely interested in this reform and who made sure it was given the priority that it deserved.

It would also be remiss of me not to acknowledge that this reform is being pursued by all Australian governments through the Council of Australian Governments.

In April 2007, COAG endorsed the need for a national system to deal with the creation and enforcement of security interests in personal property.

COAG signed an intergovernmental agreement in October 2008, making clear its commitment to this issue.

Since then, personal property securities reform has been included as part of the seamless national economy national partnership agreement reached between the Australian government and the states and territories.

In November 2008, a draft bill was referred to the Senate Legal and Constitutional Affairs Committee. That committee considered the bill and consulted with stakeholders over a number of months.

The committee tabled its report on the draft bill in March this year, and made a number of recommendations for improving the bill, and I congratulate and commend the committee on the very detailed work that was undertaken.

I am pleased to say that the government tabled a reply to that report in the Senate last week, accepting or agreeing to give further consideration to all of the committee’s recommendations.

Following from this, the bill has been reviewed to simplify its language and structure. It is more consistent with comparable legislation in Canada, New Zealand and the United States, while taking into account some of the unique circumstances surrounding Australian consumer law, commercial practices and recent technological advances. As far as can be done in this relatively complex area, the bill has been prepared in plain English terms.

Privacy concerns raised by the committee have also been addressed.

In addition, the government has carefully considered the committee’s recommendation to delay implementing the new register to May 2011.

The significance of this reform for business cannot be underestimated and the government is committed to making sure business and the financial sector are prepared for the reform—particularly in view of the realities of the economic situation faced by business in the current climate. There is a need for an orderly transition to the new system.

The government will consult with the states and territories about the most appropriate start date for the reform and should be in a position to make an announcement about this shortly.

I wish to extend my thanks to the members of the Senate Legal and Constitutional Affairs Committee for their work and their recommendations on the bill.

I mentioned before that the bill has been the subject of extensive consultation. In fact, the private sector has been heavily involved in developing the bill right from the start. There will of course be a difference of views among those who have contributed to the process, but we believe overall an appropriate balance has been struck.

The support shown by members of the personal property securities consultative group, the business community, the legal profession and the banking and finance sectors has been invaluable.

And the contribution of the many professionals who have commented on the bill has helped shape this into a bill that meets the needs of Australian businesses.

The cooperation of state and territory governments in advancing this reform has been essential.

The Standing Committee of Attorneys-General has played an important role in the development of this bill, and I am encouraged by the commitment of my state and territory colleagues to the process of legal harmonisation.

The measures contained in the bill not only demonstrate this government’s commitment to deregulation but also demonstrate the continued cooperation between the Commonwealth, the states and territories on regulatory reform.

This bill demonstrates precisely the kind of thing that can be achieved by the simple act of governments working together, consulting with the community to bring about the kind of reform that is absolutely essential to a modern, functional economy.

Given the constitutional arrangements in this country, the Personal Property Securities Bill will be supported by a referral of legislative power by the states and I am pleased to say that the referral process has already begun.

The first of the state referral bills was passed by the New South Wales parliament last week and I commend my colleague the New South Wales Attorney-General, John Hatzistergos, for leading the charge, so to speak, in that respect. I look forward to the remaining states passing their referral legislation shortly.

Specifics of the bill

I turn now to a few specific aspects of the bill to briefly highlight those.

All kinds of personal property will be covered by the bill, subject to some very limited exceptions such as fixtures and water rights.

These kinds of property have been excluded as there are existing schemes in place to deal with security interests in those areas.

The bill will also establish the offices of registrar and deputy registrar to oversee the Personal Property Securities Register and its functions.

The bill provides default rules for the creation, priority and enforcement of security interests in personal property. The bill deals with most aspects of personal property security transactions, such as when they are enforceable between parties and against others, how a priority dispute will be resolved, how they are to be enforced and when security interests will be extinguished.

It goes without saying that having one law in this area will significantly simplify personal property security arrangements and make it easier for parties to establish and arrange the terms of their particular security agreement. We genuinely believe that a significant amount of disputation and litigation will be avoided as a result of these reforms.

Conclusion

In conclusion, as I have said, the Personal Property Securities Bill will increase certainty for all users of secured finance by removing barriers that inhibit businesses and individuals from securing credit over personal property. We believe it will ultimately bring down the cost of obtaining credit at the same time as increasing the propensity of lenders to lend to small business, thereby increasing the availability of credit.

By reducing complexity and introducing greater consistency among the different kinds of secured finance, the bill will generate wide-ranging benefits for all parties who secure personal property to raise finance.

This bill will meet the needs of businesses and other users of secured finance. It will simplify the way they conduct their business and, more importantly, it will contribute to the growth of productivity and jobs in this country.

I commend this very important bill to the House.

Debate (on motion by Mr Billson) adjourned.