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Thursday, 17 June 2010
Page: 3642

Senator BRANDIS (1:20 PM) —The initial suite of personal property securities legislation was passed with coalition support in 2009. The acts received royal assent on 14 December 2009. Various states and territories have long had their own mechanisms for the registration and management of securities given over personal property to secure financial obligations. Familiar examples include fixed and floating charges, bills of sale, chattel mortgages and registers of hire purchase agreements. I must say, it is a nostalgic occasion for me because those of us who studied the law of personal securities under Professor Sykes at the University of Queensland were devoted to his great textbook The Law of Securities and its arresting discussion of such exotic personal securities as wool liens, crop liens and even, a peculiarity to Queensland, sugar cane liens—alas, all are gone. It has also been unrecognised that there is a need for national harmonisation of these arrangements to provide greater certainty for borrowers and lenders, and to increase efficiency in this sector, even at the expense of such arcane and exotic legal instruments.

The former Attorney-General, the Hon. Philip Ruddock, gave this issue particular priority during the term of the previous government. In October 2008, COAG signed an intergovernmental agreement to effect the proposed legislation as part of the seamless national economy agreement among the Commonwealth and the states and territories. The principal act applies with very few exceptions to all types of personal property, including motor vehicles, contractual rights, intellectual property rights and uncertificated shares. It provides for rules for the creation, priority and enforcement of security interests and establishes a national register of them. There are detailed specific provisions in relation to certain classes of property.

The principal purpose of the Personal Property Securities (Corporations and Other Amendments) Bill 2010, currently before the chamber, is to make amendments to the Corporations Act 2001 to harmonise the language and to ensure conceptual consistency between the two acts. These amendments comprise terminological changes to the provisions relating to charges and other security interests. Reference to charges, mortgages, liens and pledges in the Corporations Act will be replaced with the omnibus term ‘security interests’. Floating charges will become, sadly and prosaically, ‘circulating security interests’. Fixed charges will become, even more prosaically and perhaps predictably, ‘non-circulating security interests’. It is enough to break my heart, Madam Acting Deputy President. Similar changes will be made in reference to holders of security interests. The old terms will be retained to refer to security interests to which the Personal Property Securities Act does not apply.

The extension of the Corporations Act concept of property to include property subject to a retention of title agreement is also provided for. Currently, the holder of a security interest over the whole or substantially the whole of the property of an insolvent company is entitled to appoint an administrator. Under the amendments, where the whole or substantially the whole of the property of a company comprises property subject to a retention of title agreement the holder of that interest will be entitled to appoint an administrator in the event of insolvency.

Next, the bill effects the repeal of chapter 2K of the Corporations Act. Chapter 2K provides for the registration of company charges, which function will be subsumed by the Personal Property Securities Act regime. Provisions as to charges void against an administrator or liquidator will be retained.

Finally, the bill deals with retention of existing rights in the Corporations Act. Examples include provisions relating to priority in the distribution of proceeds, administrators’ rights of indemnity and the priority payment of certain unsecured creditors, including employees. The bill also provides for streamlined transitional provisions.

The bill reflects recommendations made by the Senate Legal and Constitutional Affairs Legislation Committee, which has reported several times on the proposed legislative regime—this is a very, very substantial piece of law reform. As I previously said, this was a project to which Mr Ruddock, as Attorney-General in the Howard government, devoted particular energy. It will streamline and simplify the regime of personal property securities in this country and it has the coalition’s support.