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Personal Property Securities Bill 2009

VIEWS: 16 PAGES: 131

									                                                         Personal Prope rty Securities Act 2009

                                                  Comments and Responses – to 30 September 2009

                                                          Comments & Reponses Tables – All

Version 6: 10th March 2010

The Table below contains the comments on Personal Property Securities reform made to the Legal and Constitutional Affairs Committee Inquiry
into Personal Property Securities Bill 2009, those further comments on the PPS reform forwarded to the Department by the 30th September 2009
and the Department‘s responses to those comments. These Departmental responses take into account the Personal Property Securities
(Consequential Amendments) Act 2009 and the Personal Property Securities (Corporations and Other Amendments) Bill.

The Table is broken down into Section 1 where comments which relate to specific sections or parts of the PPS Act are listed, Section 2 where
comments which relate to various PPS topics are listed alphabetically and Section 3 where comments relating to other legislation are listed.

                      Contents                                                                                                Page

                      Table 1 – Comments and Responses – All                                                                  2

                      Section 1 – Comments & Responses by Section & Part of the PPS Act                                       2

                      Section 2 – Comments & Responses by further topics – Alphabetical                                       107

                      Section 3 – Comments & Responses - Consequential Amendments - Corporations Act & Other Legislation      124


Ve rsion 6: 10 th March 2010                                                                                                         1 of 131

                                                             Responses to comments recei ved on
                                                  Personal Property Securities Bill 2009 to 30 September 2009
Table – Comments and Responses General



Section/Issues          Sub no.      Submi tter                   Issue                AGD Comment

Section 1 – Comments & Responses by Section & Part of the PPS Act

                                                      To call the Act 'Securit ies'    The short title of the corresponding New Zealand leg islation is also ‗Personal Property
                                                      in the plural could be           Securities‘.
                                                      inaccurate and misleading.
                                                      It is about 'security
                                                      interests', as the definitions
                                                      clauses in the Bill testify.
                                                      The plural 'securities' is of
1                        AG7      David Bro wn
                                                      course used for an entirely
                                                      different meaning, shares
                                                      etc. e.g. in the
                                                      Corporations Act, so it is
                                                      not clear why you have
                                                      chosen to use the plural
                                                      here.

                                                                                       Item 1 of Schedule 4 o f the Personal Property Securities (Consequential Amendments)
                                                                                       Act 2009 extends the application of the Act to investment entitlements.

                                  Australian          Need to include                  The substantive rules concerning investment entitlements included in the Act were
6                          21     Financial Markets   investment entitlement in        developed having regard to work sponsored by UNIDROIT to develop a convention on
                                  Association         the scope of the bill            intermediated securities. The UNIDROIT Convention on Substantive Rules for
                                                                                       Intermediated Securit ies, known as the ‗Geneva Securities Convention‘, was adopted in
                                                                                       Geneva, Swit zerland on 9 October 2009. For fu rther info rmation see
                                                                                       http://www.unidro it.org/english/conventions/2009intermediatedsecurities/main.htm. The
                                                                                       Depart ment will consider whether the Act should be amended to harmonise its effect with

Ve rsion 6: 10 th March 2010                                                                                                                                          2 of 131

                                                                  Responses to comments recei ved on
                                                       Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                   Issue                AGD Comment
                                                                                       the substantive rules in the convention concerning security interests.

6                                                      The term investment             Item 1 of Schedule 4 o f the Personal Property Securities (Consequential Amendments)
                                                       entitlement is used in a        Act 2009 extends the application of the Act to investment entitlements.
                                                       number of provisions
                                                       throughout the Bill
                                                       notwithstanding clause 6
                                                       indicates investment
                                                       entitlements are not
                                                       covered by the Bill.

                                                       Clause 6(1) specifically
                                                       provides that the Act
                                                       applies to security interests
                                                       in 'goods' or 'financial
                                                       property'. The terms
                         AG1      DLA Ph illips Fo x   'goods' and 'financial
                                                       property' are defined in
                                                       such a way as to exclude
                                                       investment entitlements.
                                                       Notwithstanding this, there
                                                       are various provisions of
                                                       the Act which deal with
                                                       investment entitlements
                                                       (for examp le clauses 15,
                                                       21(2), 26 and 49). We do
                                                       not understand why there
                                                       are provisions in the Act
                                                       which relate to investment
                                                       entitlements given that
                                                       clause 6(1) indicates that
                                                       the Act does not apply to

Ve rsion 6: 10 th March 2010                                                                                                                                      3 of 131

                                                                   Responses to comments recei ved on
                                                        Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.       Submi tter              Issue                AGD Comment
                                                    such forms of property.
                                                                                   Item 4 of Schedule 2 o f the Personal Property Securit ies (Corporat ions and Other
                                                    The reference to
                                                                                   Amend ments) Bill 2010 amends paragraph 6(2)(c) such that it refers to the interest of a
                                                    "intangible property"
                                                                                   transferor. This would achieve the same policy effect but with more accuracy.
6(2)(c)                  AG2       Clayton Utz      should be replaced with a
                                                    reference to the "security
                                                    interest".

                                                    Combination of accounts.       Item 3 of Schedule 4 o f the Personal Property Securities (Consequential Amendments)
                                                    Please clarify that            Act 2009 clarifies that in paragraph 8(1)(d) ‗accounts‘ has its general law meaning and not
                                   Co mbined four   "accounts" in this context     that defined in section 10.
8(1)(d)                  AG 7
                                   law firms        has its general law
                                                    mean ing, not the defined
                                                    mean ing in clause 10.

                                                    Clarification of               The Depart ment will consider this matter in the course of its work on regulations to be
                                   Australian       extinguishment of              made under paragraph 8(1)(l) of the Personal Property Securities Act 2009 (‗the Act‘).
8(1)(f)                    18      Securitisation   beneficial interests of a
                                   Foru m           transferee back to a
                                                    transferor.

                                                    Mortgage backed                The Depart ment will consider this matter in the course of its work on regulations to be
8(1)(f)(ii)                    6   Clayton Utz      securitisations should be      made under subsection 8(3) of the Act.
                                                    included in the bill
                                                    Interaction of PPS
                                                                                   The October 2009 paper on Regulations to be made under the Act invites stakeholders to
                                                    register and Torrens tile
                                                                                   provide details of the regulations that could be made under paragraph°8(1)(j) and
                                                    register. Clarification is
                                                                                   subsection 8(3) of the Act addressing this issue.
                                   Co mbined four   required of the relationship
8(1)(f)(ii)              AG 7
                                   law firms        between:
                                                         transfers of payments
                                                          derived fro m land
Ve rsion 6: 10 th March 2010                                                                                                                                      4 of 131

                                                                   Responses to comments recei ved on
                                                        Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter               Issue                AGD Comment
                                                        where the transfer
                                                        does not transfer the
                                                        transferor‘s interest in
                                                        the land (eg transfer of
                                                        lease payments); and

                                                       transfers of interests
                                                        in land which include
                                                        payments derived
                                                        fro m land.
                                                  As currently drafted we
                                                  believe there is potential
                                                  for significant conflict
                                                  between the application of
                                                  the Bill to assignments or
                                                  rights to payment
                                                  connected with land and
                                                  the Torrens system.
8(1)(f)(vi) and                                   In each of these clauses,        Paragraphs 8(1)(f)(vi) and (vii) reflect the intended policy intent.
8(1)(f)(vii)                                      there is a reference to
                                                  assignments of accounts          Paragraph 8(1)(f)(v i) corresponds to paragraph 23(e)(v iii) of the New Zealand PPS Act
                                                  being made "solely" for a        and paragraph 4(h) of the Saskatchewan PPS Act.
                                                  particular purpose. This is
                         AG2      Clayton Utz     too prescriptive. It should
                                                  be sufficient if the primary
                                                  purpose of the assignment
                                                  is the relevant purpose.
                                                  For examp le, as those
                                                  clauses are currently
                                                  drafted, where assignment
Ve rsion 6: 10 th March 2010                                                                                                                                    5 of 131

                                                                 Responses to comments recei ved on
                                                      Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                 Issue             AGD Comment
                                                   is made to a third party
                                                   and the third party is
                                                   entitled to receive some
                                                   share of the proceeds of
                                                   the account following that
                                                   third party taking action to
                                                   collect it, this arrangement
                                                   would not fall within the
                                                   exclusions provided for in
                                                   these clauses.

                                                   Scope of "trust-back"          Item 10 o f Schedule 2 of the Personal Property Securities (Corporations and Other
                                                   exclusion. As the term         Amend ments) Bill 2010 amends subparagraph 8(1)(f)(x) to reinstate the effect this section
                                                   "account" is now more          had when an account was defined to be a monetary obligation.
                                                   limited, we reco mmend
                                  Co mbined four   that this clause refer
8(1)(f)(x)               AG 7
                                  law firms        instead to an assignment of
                                                   the beneficial interest in a
                                                   "monetary obligation" (the
                                                   term used, for examp le, in
                                                   clause 14(2)(b)).

                                                   We understand that it is       The Explanatory Memorandum to the PPS Act has been amended to clarify and display a
                                                   intended to exclude an         clear legislative intention that ‗irrigation rights‘ are excluded fro m the operation of the
                                                   ―irrigation right‖ as          Act.
                                                   defined in the Water Act
                                                   2007 (Cth), being "a right
8(1)(i)                  AG3      Deacons          that a person has against
                                                   an irrigation
                                                   infrastructure operator to
                                                   receive water" (that is not
                                                   a ―water access right‖ or a
                                                   ‖water delivery right‖),
Ve rsion 6: 10 th March 2010                                                                                                                                      6 of 131

                                                               Responses to comments recei ved on
                                                    Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter               Issue               AGD Comment
                                                  fro m the operation of the
                                                  PPSB. Ho wever, it is
                                                  unclear whether irrigation
                                                  rights are within the
                                                  mean ing of subparagraph
                                                  8(1)(i) of the PPSB.

                                                  We recommend that
                                                  subparagraph 8(1)(i) of the
                                                  PPSB be amended so that
                                                  irrigation rights are clearly
                                                  excluded fro m the
                                                  operation of the PPSB. In
                                                  addition, we reco mmend
                                                  that the Explanatory
                                                  Memorandu m to the PPSB
                                                  be amended to note that
                                                  irrigation rights are
                                                  excluded fro m the
                                                  operation of the PPSB.

                                                  The words "(no matter           The inclusion of the words ‗(no matter whether the provision remains in force)‘ reflects
                                                  whether the provision           the intended policy outcome. Applying the Act to security interests created before it
                                                  remains in force)" should       begins to apply to that kind of security interest raises complex transitional issues.
                                                  be deleted fro m clause
                                                  8(1)(k). If a provision that    While the Act includes transitional provisions for security interests that exist at the
8(1)(k)                  AG2      Clayton Utz     a statutory right is not to     registration commencement time, it would not be practical for the Act to include similar
                                                  be personal property for        arrangements when the application of the Act to an interest changes because of paragraph
                                                  the purposes of the             8(1)(k).
                                                  legislation is repealed,
                                                  indicating a statutory
                                                  intention that the PPS
                                                  legislation is to apply, that
Ve rsion 6: 10 th March 2010                                                                                                                                    7 of 131

                                                              Responses to comments recei ved on
                                                   Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.       Submi tter                Issue               AGD Comment
                                                    legislative intention should
                                                    be given effect to, fro m the
                                                    time of the repeal.

                                                                                    The Depart ment has noted this comment. The existing definit ion provides greater
                                                                                    certainty for reg istrants. The Depart ment notes that in other contexts the Act refers to
                                   Australian
                                                    Definition of consumer          personal property that is intended to be used predominantly for personal, do mestic or
10                         15      Privacy
                                                    property.                       household purposes. The Act reinforces this approach in the amend ments proposed by
                                   Foundation
                                                                                    Items 11 and 49 of Schedule 4 of the Personal Property Securities (Consequential
                                                                                    Amendments) Act 2009.

                                                    Consumer property;              Holding an A BN p rovides an objective test for whether an individual is carry ing on a
                                   Co mbined four   reference to businesses         business.
10                         17
                                   law firms        should include those
                                                    without an ABN.

                                                                                    This is a drafting matter. The Act was amended to its present form in light of co mments
                                                                                    made by the Co mmittee at in its first report on the Act (see Recommendation 1, 3rd bullet
                                                                                    point). The Act provides ‗goods means personal property that is tangible property,
10                             6   Clayton Utz      Definition of goods.            including …‘. The version of the Act previously consider by the Committee provided
                                                                                    ‗tangible property means goods, including …‘. The definit ion of ‗goods‘ in the present
                                                                                    version has the same mean ing as the definition of ‗tangible property‘ in the earlier
                                                                                    version.

                                                    Definition of "grantor".        The corresponding provision in the New Zealand PPS Act refers to ‗the person who owns
                                                    We suggest that the words       or has other rights in the collateral‘ (see s ection 16, defin ition of ‗debtor‘, paragraph
                                                    "owns the personal              (vi)(A)).
                                   Co mbined four   property, or" be deleted
10                       AG 7
                                   law firms        fro m the start of paragraph    The corresponding provision in the Saskatchewan PPS Act refers to ‗the person who has
                                                    (a) of this definit ion.        an interest in the collateral‘ (see subsection 2(1) & paragraph (m)(v i)(A)).
                                                    These words are redundant
                                                    and could cause confusion       The Act is based on the NZ form of words.

Ve rsion 6: 10 th March 2010                                                                                                                                        8 of 131

                                                                Responses to comments recei ved on
                                                     Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.       Submi tter                Issue               AGD Comment
                                                     – a full ownership interest
                                                                                    Item 17 o f Schedule 2 of the Personal Property Securities (Corporations and Other
                                                     would be covered by the
                                                                                    Amend ments) Bill 2010 amends the definit ion of ‗grantor‘ by o mitting the reference to
                                                     reference to ‗interest‘ in
                                                                                    ownership of personal property as distinct from an ‗interest‘ in the property. The
                                                     the following wo rds.
                                                                                    reference to ownership is redundant and could cause confusion because the reference to
                                                                                    an ‗interest‘ in the property also includes a full ownership interest.



                                  Insolvency                                        The terms ‗bankruptcy‘ and ‗insolvency‘ are defined by reference to section 51 of the
                                                     Definition of 'insolvency'
10                         10     Practit ioners                                    Constitution to ensure that the provisions in the Act that use the terms are within the
                                                     and 'bankruptcy'.
                                  Australia                                         Co mmonwealth‘s constitutional powers.

                                                     Definition of "chattel         The Depart ment considers that the Act achieves the intended policy effect. Writings that
                                                     paper". Should ", or lease     evidence a monetary obligation and a lease will be chattel paper. This is consistent with
                                                     of," be deleted fro m line 1   the definition in the New Zealand and Saskatchewan PPS Acts.
                                  Co mbined four
10                       AG 7                        of paragraph (a) of this
                                  law firms
                                                     definit ion? If not, every
                                                     lease will be chattel paper
                                                     – is this intended?

                                                     Definition of purchase         This is a drafting matter that does not affect the Act‘s legal effect.
                                                     price and value re credit
10                         19     Mr Dav id Turner
                                                     charges and interest
                                                     payable is confusing.

                                                     Clarify that the definit ion   The Depart ment considers that the Act achieves the intended policy effect.
                                                     of license includes a
                                  Independent Film
                                                     partial assignment of          An assignment of copyright (whether partial or co mp lete) would not be a security interest.
10                         25     & Telev ision
                                                     intellectual property          However, a security interest would include copyright that secures payment or
                                  Alliance
                                                     operating like an exclusive    performance of an obligation (fo r examp le, an obligation to pay the purchase price for the
                                                     license.                       copyright). In this respect, the Act provides the same treat ment for copyright as other

Ve rsion 6: 10 th March 2010                                                                                                                                       9 of 131

                                                                 Responses to comments recei ved on
                                                      Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                Issue                AGD Comment
                                                                                    kinds of personal property.

                                                    We agree that most              The Act employs the definition of consumer property to provide registrants with certainty
                                                    substantive protections for     concerning when the name and date of birth of an individual grantor must be included in
                                                    consumers in the Bill are       the registration and when the 7 year maximu m reg istration period applies.
                                                    not affected by the
                                                    definit ion of ‗consumer
                                                    property‘, which we             Item 84 o f Schedule 2 of the Personal Property Securities (Corporations and Other
                                                                                    Amend ments) Bill 2010 amends subsection 178(3) by replacing the reference to
                                                    support. However, this
                                                                                    ‗consumer property‘ with a test of whether the grantor uses, or intends to use at the time
                                                    does not change the fact
                                                    that three important            the security interest attaches, collateral predo minantly for personal, do mestic or household
                                                                                    purposes. The effect is to give equal protection to consumers who use or intend
                                                    consumer protections are
                                                                                    occasionally to use collateral for business purposes.
                                                    dependent on the collateral
                                                    being registered as
                                  Consumer Action
10                       AG5                        ‗consumer property‘,
                                  Law Centre
                                                    being: the crit ical privacy
                                                    protections preventing
                                                    inappropriate registration
                                                    of grantor details; the more
                                                    appropriate maximu m end
                                                    time fo r the registration of
                                                    7 years rather than 25
                                                    years or indefinite; and the
                                                    prohibition on the secured
                                                    party demanding payment
                                                    for co mpliance with an
                                                    amend ment demand.

                                                    The current definit ion of
                                                    ‗consumer property‘ may
                                                    provide certainty for
                                                    security holders but the
                                                    purpose of having a
Ve rsion 6: 10 th March 2010                                                                                                                                       10 of 131

                                                                Responses to comments recei ved on
                                                     Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.   Submi tter                Issue               AGD Comment
                                               separate collateral
                                               category of consumer
                                               property is supposed to be
                                               to provide additional
                                               protections for grantors of
                                               this sort of property
                                               (Exp lanatory
                                               Memorandu m §5.33).
                                               Thus, the success of the
                                               definit ion should be
                                               judged against whether it
                                               delivers this protection,
                                               not whether it is easier for
                                               security holders to
                                               manage. At present, even
                                               if co llateral is used
                                               overwhelmingly by an
                                               individual for personal
                                               purposes, the individual
                                               will not have access to the
                                               intended protections if the
                                               collateral is used to even
                                               the tiniest degree in
                                               carrying on a business
                                               enterprise. Either the
                                               definit ion of ‗consumer
                                               property‘ should be
                                               amended to align with the
                                               other consumer protections
                                               in the Bill by stating that it
                                               means personal property
                                               held by an individual that
                                               is used predominantly for
Ve rsion 6: 10 th March 2010                                                                                  11 of 131

                                                           Responses to comments recei ved on
                                                Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter              Issue               AGD Comment
                                                  personal, do mestic or
                                                  household purposes; or the
                                                  three protections
                                                  dependent on registration
                                                  as consumer property
                                                  should be redrafted to
                                                  apply where personal
                                                  property is used
                                                  predominantly for
                                                  personal, do mestic or
                                                  household purposes.

                                                  The exa mple given in the      The Depart ment considers that the example given under the definition of ‗account‘ is
                                                  note under the definition      correct. It notes that the same examp le is used in relation to similar words appearing in
                                                  of "account" is incorrect.     paragraph 340(5)(a), but not in relat ion to the words in paragraph 81(b)(ii) (which the
                                                  We understand that the         Depart ment considers are materially different).
                                                  defined term is to be
                                                  restricted to accounts         The definit ion of account includes the following words: ‗a monetary obligation that arises
                                                  which are in the nature of     fro m … granting a right, or provid ing services, in the ordinary course of a business of
                                                  accounts receivable or         granting rights or providing services of that kind (whether or not the account debtor is the
10                                                book debts at general law.     person to whom the right is granted or the services are provided)‘

                         AG2      Clayton Utz     It is assumed that the         When John Smith uses his credit card to buy stationery at a newsagent, a monetary
Definition of
"account"                                         reference to "credit card      obligation arises in the form of the debt owed by John Smith to the credit card provider.
                                                  receivable" in the examp le    The monetary obligation arises in the ordinary course of the credit card provider‘s
                                                  is a reference to the          business of providing financial services to its customers (such as John Smith). The
                                                  amount owing by the            amount owed by John Smith to the credit card provider is therefore an account for the
                                                  holder of a cred it card to    purposes of the Act.
                                                  the person that provides
                                                  the credit card, though this   Similarly, the amount owed by the credit card provider to the newsagent arises in the
                                                  is not clear fro m the         ordinary course of the credit card provider‘s business of providing financial services to its
                                                  wording used in the            customers (such as the newsagent). The amount owed by the credit card pro vider to the
                                                  example. For example, if
Ve rsion 6: 10 th March 2010                                                                                                                                    12 of 131

                                                              Responses to comments recei ved on
                                                   Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                Issue              AGD Comment
                                                   John Smith used his Visa       newsagent is therefore an account for the purposes of Act.
                                                   card to buy stationary at a
                                                   news agent, the reference      Paragraph 81(b)(ii) exp ressly excludes ‗financial services‘, and so excludes the amount
                                                   to "credit card receivable"    owed by John Smith to the credit card provider, and by the credit card provider to the
                                                   would be to the amount         newsagent.
                                                   owing by John Smith to
                                                   Visa, not the news agent.
                                                   This is not in the nature of
                                                   a book debt or account
                                                   receivable.

                                                   Therefore the examp le
                                                   should be removed. If it is
                                                   included then there will be
                                                   confusion as to whether
                                                   other types of financing
                                                   products are included in
                                                   the definition, for example,
                                                   loans. This is clearly not
                                                   intended.

                                                                                  The Depart ment considers that this matter raises a broader question concerning the policy
                                                                                  rationale fo r allo wing security interests taken in an ADI account to be perfected by
                                                                                  control. The Depart ment notes that submissions to the Senate Co mmittee on Legal and
                                                                                  Constitutional Affairs have expressed different views on whether it should be possible to
                                                   Provisions relating to ADI
                                                                                  perfect a security interest in an account by control.
                                  Co mbined four   accounts should extend to
10                         17
                                  law firms        accounts with other
                                                                                  The Depart ment has discussed this question with experts in Canada and the USA.
                                                   financial institutions.
                                                                                  It notes that in Canada it is not possible to perfect a security interest in an ADI account by
                                                                                  control, but that this is possible in the USA. However, in the USA it is not possible to
                                                                                  perfect by registration a security interest in an account held with an ADI.

Ve rsion 6: 10 th March 2010                                                                                                                                      13 of 131

                                                               Responses to comments recei ved on
                                                    Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter              Issue               AGD Comment
                                                                                 The Depart ment considers that allowing an ADI to take a security interest in accounts
                                                                                 held with the ADI supports the prudential regulation of A DI‘s.

                                                                                 However, the Depart ment will consider whether a person who has taken a security interest
                                                                                 in an ADI account, who is not the ADI with who m the ADI account is held, should be
                                                                                 able to perfect the security interest by control.




                                                  Given that it is likely that   The Depart ment will consider whether the definition of ‗ADI account‘ can be simp lified.
                                                  the definition of "protected
                                                  account" under the             The Act reflects the intended policy outcome. The definition is consistent with the
                                                  Banking Act 1959 may           corresponding definitions in the New Zealand and Saskatchewan PPS legislat ion.
                                                  change from t ime to t ime
10
                                                  (in light of the underlying
                                                  purpose for which that
Definition of
                                                  definit ion is used in the
"ADI account"
                                                  Banking Act), it would be
                         AG2      Clayton Utz
                                                  preferable to have a
                                                  separate definition of ADI
                         AG2      Clayton Utz     account in the PPS
10                                                legislation that would
                                                  continue to apply,
Definition of                                     irrespective of changes to
"advance"                                         the Banking Act.

                                                  Paragraph (a) should also
                                                  refer to the performance of
                                                  an obligation.

Ve rsion 6: 10 th March 2010                                                                                                                                  14 of 131

                                                              Responses to comments recei ved on
                                                   Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter              Issue               AGD Comment
                                                  In paragraph (b) the
                                                  references to "the
                                                  advance" should be
                                                  replaced with references to
                                                  any type of transaction
                                                  referred to in
                                                  paragraph°(a).

                                                  Using the defined term         This is a drafting matter that does not affect the legal effect of the Act.
                                                  "goods" (which is a narro w
                                                  concept) to mean any type      The Act was changed from ‗tangible property‘ to ‗goods‘ in response to a
                                                  of tangible property, wh ich   recommendation by the Senate Committee on Legal and Constitu tional Affairs.
                                                  extends far beyond goods,
                                                  is inaccurate and is likely    The Depart ment has noted the comments concerning Co mmissioner of Inland Revenue v
                                                  to cause confusion and         Northshore Taverns Ltd (in liquidation) [2009] NZCCLR 5. It notes that the PPS Act
                                                  problems with the              does not use the expression ‗accounts receivable‘ as it is defined in the New Zealand
                                                  interpretation and             legislation.
                                                  application of the
10                                                legislation.
                         AG2      Clayton Utz
Definition of                                     We also draw your
"goods"                                           attention to the case of
                                                  Co mmissioner of Inland
                                                  Revenue v Northshore
                                                  Taverns Ltd (in
                                                  liquidation) [2009]
                                                  NZCCLR 5 handed down
                                                  by the New Zealand High
                                                  Court on 27 August 2008.
                                                  In that case the New
                                                  Zealand High Court read
                                                  down the broad meaning
Ve rsion 6: 10 th March 2010                                                                                                                                   15 of 131

                                                              Responses to comments recei ved on
                                                   Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                Issue             AGD Comment
                                                   given to "account
                                                   receivable" to include only
                                                   intangibles that at general
                                                   law would be considered
                                                   to be accounts receivable.
                                                   This narrow interpretation
                                                   was adopted
                                                   notwithstanding that the
                                                   definit ion of that term in
                                                   the New Zealand PPS
                                                   legislation is much
                                                   broader. There is therefore
                                                   ongoing confusion as to
                                                   the scope of the meaning
                                                   of that defined term in
                                                   New Zealand.

                                                   Intellectual property:        The Depart ment considers that extending the definit ions in the way proposed has merit on
                                  Co mbined four   should extend to forms of     a conceptual or in-principle level. However, it would add additional co mplexity to the
10                         17
                                  law firms        property under general        Act, and raise difficult issues about which rights should be counted as intellectual
                                                   law.                          property.

                                                   Exp ressions in the           The Depart ment considers that the treatment of promissory notes in the context of the
                                                   definit ion of "investment    definit ion of ‗investment instrument‘ is not unintended.
                                  Co mbined four   instrument" should be
10                       AG 7                      defined without relying on    The Depart ment notes that the definition of ―investment instrument‖ specifically excludes
                                  law firms
                                                   particular Corporat ions      a negotiable instrument (see para (n) of the defin ition of ―investment instrument‖, and
Definition of                                      Act definitions. Ho w         negotiable instrument is defined to include a pro missory note. It follows that promissory
"investment                                        particular instruments are    notes are carved out of the definition of investment instrument, regardless of the value of
instrument"              AG2                       categorised under the PPS     the value of the promissory note, and regardless of whether promissory notes are also
                                  Clayton Utz
                                                   legislation should not be     debentures for the purposes of the Corporations Act 2001.
                                                   affected by how these
                                                   instruments are
Ve rsion 6: 10 th March 2010                                                                                                                                  16 of 131

                                                               Responses to comments recei ved on
                                                    Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.   Submi tter               Issue               AGD Comment
                                               categorised under
                                               Australian corporations
                                               legislation.

                                               Reliance on particular
                                               Corporations Act
                                               definit ions may have
                                               unintended consequences.
                                               For examp le, the definit ion
                                               of "investment instrument"
                                               refers to debentures within
                                               the meaning of the
                                               Corporations Act. The
                                               Corporations Act
                                               definit ion excludes
                                               (amongst other
                                               instruments) promissory
                                               notes having a face value
                                               of at least $50,000. Under
                                               the Corporations
                                               Legislat ion Amend ment
                                               (Financial Serv ices
                                               Modernisation) Bill 2009
                                               it is proposed that the
                                               definit ion of debenture in
                                               the Corporations Act will
                                               be amended to include
                                               such promissory notes.
                                               The reasons for the initial
                                               exclusion of such
                                               promissory notes, and the
                                               proposed inclusion of
                                               those notes, are unrelated
Ve rsion 6: 10 th March 2010                                                                                  17 of 131

                                                           Responses to comments recei ved on
                                                Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter               Issue                 AGD Comment
                                                   to the proposed PPS
                                                   regime.

                                                   The reference in paragraph       The Act reflects the preferred policy outcome. It is not intended that a negotiable
                                                   (e) to a letter of credit that   instrument would include a letter of cred it that states that it must be presented on
                                                   must be presented on             requiring the performance of an obligation (other than making a payment).
10
                                                   claiming pay ment should
                                                   also include presentation
Definition of            AG2      Clayton Utz
                                                   to claim performance to
"negotiable
                                                   ensure consistency with
instrument"
                                                   the other provisions of the
                                                   legislation dealing with
                                                   letters of credit.

                                                   Definition of "negotiable        Item 25 o f Schedule 2 of the Personal Property Securities (Corporations and Other
                                                   instrument". Clauses             Amend ments) Bill 2010 amends section 10 to extend the defin ition of negotiable
                                                   24(4) and 29 indicate that       instrument to take into account work done by UNCITRA L. The proposed extended
                                                   it should be possible for        definit ion of negotiability is consistent with the approach taken by the UNCITRA L
                                                   the purposes of the Bill to      Legislat ive Gu ide on Secured Transactions. It means that ‗dematerialised securities‘ and
                                                   have a negotiable                other interests that are not evidenced by a certificate, including instruments that are
                                                   instrument that is               evidenced by an electronic record, will still fall within the definit ion. The effect of this
                                  Co mbined four   evidenced by an electronic       extension will be that electronic negotiability will be possible.
                                  law firms        record, rather than a
10                       AG 7                      certificate. Is this intended
                                                   to cover interests such as
                                                   dematerialised securities in
                                                   Austraclear? If so, it is
                                                   difficult to see which
                                                   category of the definition
                                                   of "negotiable instrument"
                                                   would capture
                                                   dematerialised securities –
                                                   even paragraph (d), as it
Ve rsion 6: 10 th March 2010                                                                                                                                        18 of 131

                                                               Responses to comments recei ved on
                                                    Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                   Issue             AGD Comment
                                                      contemplates that there be
                                                      a writing that is of a kind
                                                      that can be transferred by
                                                      "delivery". Can th is be
                                                      clarified?

                                                      Definition of "new value".    The Depart ment notes that this issue is addressed in Item 26 of Schedule 2 of the Personal
                                                      We suggest that the words     Property Securit ies (Corporations and Other Amend ments) Bill 2010. This item amends
                                                      "owed to the person           the definition of new value with the qualification owed to the person providing the value.
                                                      providing the value" be       The effect of this amend ment is that new value would not include the refinancing of a loan
                                                      added at the end of this      fro m an existing lender. New value would continue to include any financing provided by
                                                      definit ion. Otherwise, a     a lender to a borrower in order to refinance an existing loan fro m another lender.
                                  Co mbined four      lender who provides
                                  law firms           financing to a borrower in
10                       AG 7
                                                      order to refinance an
                                                      existing loan fro m another
                                                      lender would not be
                                                      providing "new value",
                                                      even though the value is
                                                      clearly "new" fro m the
                                                      perspective of the
                                                      incoming lender.

                                                                                    The definit ion of ‗security interest‘ corresponds to the definitions used in the New
                                                                                    Zealand and Saskatchewan legislation. The breadth of the definition is required in order
                                                      The definit ion of security
                                                                                    to implement an economic or functional approach to security interests. The Act
                                                      interest is too broad,
                                                                                    represents a departure from ‗[t]he traditional Anglo-Australian approach … to determine
                                                      Associated Alloys Case
12                         26     The Victorian Bar                                 the character of a transaction by reference to it legal nature, not its economic effect‘
                                                      trust arrangements should
                                                                                    (submission, paragraph 13). It rejects the view proposed by the Victorian Bar that ‗[a]s a
                                                      be excluded fro m the
                                                                                    matter o f policy the Act should confine its operation to transactions where the debtor has
                                                      operation of the Act
                                                                                    beneficial ownership or has an opportunity under the security agreement to acquire it‘
                                                                                    (submission, paragraph 14).

Ve rsion 6: 10 th March 2010                                                                                                                                      19 of 131

                                                                  Responses to comments recei ved on
                                                       Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                  Issue               AGD Comment
                                                                                     The Depart ment cannot comment on the observation that ‗[w]e understand that the view
                                                                                     in New Zealand is that leases would not be regarded as security interest under their
                                                       Confuses position in
                                  Co mbined four                                     equivalent to subsections 12(1) and (2), despite the express reference in their equivalent in
12(2)                      17                          respect of leases as
                                  law firms                                          subsection 12(3).‘ Nevertheless, the Department considers that paragraph°12(2)(i) makes
                                                       security interests
                                                                                     it clear that a security interest includes a lease of goods (whether or not a PPS lease) that,
                                                                                     in substance, secures payment or performance of an obligation.

12(2)(1)                                               Inclusion of flawed assets    Set off is listed in subsection 8(2) as an interest to which the PPS Act will not apply.
                                                       is inconsistent with          However, the exception in section 80 is a specific exclusion to this.
                                                       provision relating to
                                                       set-off.                      A transaction that includes a flawed asset that, in substance, secures payment or
                                                                                     performance of an obligation would be a security interest under the Act. The Depart ment
                                                       Set-off is expressly          is not aware of any policy justification for excluding fro m security interests a flawed asset
                                                       excluded fro m the            that meets this criterion. It notes that the approach taken in relation to flawed assets by
                                                       operation of the Act.         subsection 12(2) is consistent with the both the New Zealand and Saskatchewan PPS
                                                       Clause 8(2) (at item 2)       legislation.
                                                       provides that
                                                       notwithstanding this,         The fact that a flawed asset may later be set off against a liability does not result in any
                                                       clause 80 of the Act          inconsistency between paragraphs 12(2)(l) and 8(1)(d).
                         AG1      DLA Ph illips Fo x   applies. Clause 80
                                                       provides that the rights of
                                                       the transferee of an
                                                       account are subject to the
                                                       terms of the contract
                                                       between the account
                                                       debtor and the transferor.
                                                       If the account terms
                                                       provide that moneys in the
                                                       account cannot be paid
                                                       until all moneys owing to
                                                       the account debtor are
                                                       satisfied, clause 80
Ve rsion 6: 10 th March 2010                                                                                                                                          20 of 131

                                                                   Responses to comments recei ved on
                                                        Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                    Issue               AGD Comment
                                                       acknowledges the validity
                                                       of the incorporation of
                                                       such terms wh ich would
                                                       make the account a flawed
                                                       asset. Accordingly, to
                                                       include flawed assets when
                                                       set-off (including
                                                       associated flawed asset
                                                       provisions) are
                                                       acknowledged as being
                                                       excluded, is inconsistent.



                                                                                       An interest in a flawed asset provided for by a transaction that, in substance, secures
                                  Co mbined four                                       payment or performance of an obligation would be a security interest under the Act.
                           17
                                  law firms;
                                                       Should not treat flawed         The Depart ment is not aware of any policy justification for excluding interests in flawed
12(2)(l)
                                  Australian           assets as security interests.   assets from the definit ion of security interest.
                                  Financial Markets
                           21
                                  Association                                          It notes that the approach taken in relat ion to flawed assets by subsection 12(2) is
                                                                                       consistent with the both the New Zealand and Saskatchewan PPS legislation.

                                                       Querying why a transferee       Paragraph 12(3)(a) is intended to ensure that the same outcome is achieved by a security
                                                       of an unsecured monetary        interest taken in an account and a transfer of an account: as they provide economically
12(3)                      13     DLA Ph illips Fo x
                                                       interest is taken to have a     equivalent outcomes.
                                                       security interest.

                                                       An amend ment or                The Depart ment will consider whether a regulation should be made under paragraph
                                  Co mbined four       regulation should be            12(5)(b) to the effect that, for the avoidance of doubt, a novation of a monetary obligation
12(3)                    AG 7
                                  law firms            passed under this clause        is not a security interest.
                                                       which provides that, for

Ve rsion 6: 10 th March 2010                                                                                                                                           21 of 131

                                                                   Responses to comments recei ved on
                                                        Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.       Submi tter                    Issue             AGD Comment
                                                        the avoidance of doubt,
                                                        novations of accounts are
                                                        not security interests for
                                                        the purposes of clause
                                                        12(3)(a). This will ensure
                                                        that novations of loans and
                                                        other debts arising fro m
                                                        financial services are not
                                                        deemed security interests.

                               6   Clayton Utz;                                       The Depart ment considers that the Act allows an ADI to take a security interest in an ADI
                                                                                      account held with it (see section 75): but agrees that this could be made clearer.
                           17      Co mbined four
                                                        Does not apply to ADI –
12(4)                              law firms;
                                                        suggests amending to fix.
                                   Queensland Law
                           23      Society

                                                                                      The Act‘s uses the term ‗consumer property‘ princ ipally in the context of the reg istration
                                                        Amend defin ition of          provisions. The requirement that consumer property be used exclusively for personal,
                                                        consumer property to          domestic or household use enhances certainty for registrants about whether the collateral
                                   Consumer Action
13                             5                        ensure protections            should be described as ‗consumer property‘ or ‗co mmercial property‘ in the reg istration.
                                   Law Centre
                                                        properly apply to             In other places, where the Act affects the substantive rights of consumers, the Act uses the
                                                        consumers.                    expression ‗individual‘ (see section 172) o r ‗predo minantly for personal, do mestic or
                                                                                      household purposes‘ (see sections 42, 47, 52 and 109).

                                                        Co mplexity of priority       The Depart ment has responded to these concerns in this table.
                                                        rules. In relat ion to this
13                       AG1       DLA Ph illips Fo x   topic, the schedule to our
                                                        31 July submission to the
                                                        Standing Co mmittee on
                                                        Legal & Constitutional

Ve rsion 6: 10 th March 2010                                                                                                                                       22 of 131

                                                                    Responses to comments recei ved on
                                                         Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                    Issue               AGD Comment
                                                       Affairs contains specific
                                                       questions in relation to this
                                                       issue (see points 28, 30-
                                                       34). Please provide
                                                       answers to those specific
                                                       issues if possible.

                                                       Priority of unperfected         The comments were intended to indicate that consideration has been given to the priority
                                                       lessor - apparently no          of an unperfected lessor against uns ecured or other unperfected interests in the goods, and
                                                       changes to Bill.                to set out the reasons for the outcomes reached by those provisions.

                                                       Although we note your
                                                       comments that the
                                                       arrangements applying to
                                                       lessor are a feature of the
                                                       functional approach to
                                                       security interests, this
                                                       would not appear to deal
                                                       with the reco mmendation
13                       AG1      DLA Ph illips Fo x   made by the Co mmittee
                                                       after conclusion of its first
                                                       Inquiry. In particular,
                                                       Reco mmendation 10
                                                       provided that:

                                                       'The Co mmittee
                                                       recommends that
                                                       consideration be given to
                                                       improving the priority of
                                                       an unperfected lessor
                                                       against unsecured or other
                                                       unperfected interests in the

Ve rsion 6: 10 th March 2010                                                                                                                                         23 of 131

                                                                   Responses to comments recei ved on
                                                        Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                   Issue              AGD Comment
                                                       goods.'

                                                       In our view, this would
                                                       include the interest of the
                                                       lessee or grantor of the
                                                       security interest. Does
                                                       your response to this issue
                                                       indicate that you have
                                                       rejected this
                                                       recommendation?

                                                       Lack of guidance - when a     The Depart ment considers that paragraph 12(2)(i) makes it clear that a security interest
                                                       lease secures payment or      includes a lease of goods (whether or not a PPS lease) that, in substance, secures payment
                                                       performance of an             or performance of an obligation. A lease for a period of less than 12 months (or 90 days
                                                       obligation.                   in the case of serial nu mbered goods) will be a security interest if the transaction, in
                                                                                     substance, secures payment or performance of an obligation. As mentioned, short term
                                                       Given the functional          leasing arrangements would not ordinarily, in substance, secures payment or performance
                                                       approach adopted, it is       of an obligation.
                                                       unclear to us whether any
                                                       lease would be regarded as    Clause 30 of the former Bill (Exposure Draft, 2008 version) covered when a lease would
                                                       not securing payment of       secure payment or performance of obligation. Th is provision was omitted in response to
13                       AG1      DLA Ph illips Fo x   performance of an             stakeholder comments that it was unnecessary, and that it is sufficiently clear when a
                                                       obligation. In the absence    security interest secures a payment or performance of an obligation.
                                                       of the guidelines on this
                                                       issue, it would appear that
                                                       all leases will need to be
                                                       registered on the PPS
                                                       Register (other than
                                                       perhaps pure hiring
                                                       arrangements such as car
                                                       rental and similar
                                                       transactions).

Ve rsion 6: 10 th March 2010                                                                                                                                     24 of 131

                                                                   Responses to comments recei ved on
                                                        Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                   Issue               AGD Comment
                                                       Clarification is required as   The registration time needs to refer to when the registration becomes available for search
                                                       to when registration time      in respect of the secured party.
                                                       commences.
                                                                                      A grantor may have granted more than one security interest over a particular item of
                                                       Under clause 160,              collateral. The time for determin ing the effective reg istration of any one of those security
                                                       reference is made to the       interests needs to be when the relevant secured party has registered their security interest,
                                                       registration time              and not when any one of the secured parties has registered their security interest.
                                                       commencing at the
                                                       mo ment when the
                                                       description becomes
                                                       available for searching on
                                                       the register in relation to
                                                       the secured party. The
                                                       register will be noting the
                                                       name of the secured party,
                                                       the name of the grantor
13                       AG1      DLA Ph illips Fo x
                                                       and details of the
                                                       collateral. When
                                                       searching the register,
                                                       most people will not be
                                                       searching against the name
                                                       of the secured party but,
                                                       rather, the grantor of the
                                                       security interest.
                                                       Accordingly, the
                                                       registration time referred
                                                       to in clause 160(1) needs
                                                       to be amended to refer to
                                                       being able to search the
                                                       register in relation to the
                                                       grantor, not the secured
                                                       party.

Ve rsion 6: 10 th March 2010                                                                                                                                          25 of 131

                                                                   Responses to comments recei ved on
                                                        Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                   Issue                 AGD Comment
                                                       Business of leasing goods.       The Depart ment notes that adding the words ‗of that kind‘ as proposed would narrow the
                                                       We suggest that the words        exception to the definition of ‗pps lease‘ established by paragraphs 13(2)(a) and (b), and
                                                       "of that kind" be inserted       therefore broaden the scope of leases that are pps leases.
                                                       after "goods" at the end of
                                  Co mbined four
13(2)                    AG 7                          each of clauses 13(2)(a)         The effect would be that a pps lease would include a lease by a person who does not
                                  law firms
                                                       and 13(2)(b). Th is is           regularly lease goods, or a lease by a person who does regularly lease goods of a
                                                       consistent, for examp le,        particular kind but the lease in question is not of that kind. However, a pps lease would
                                                       with the draft ing approach      not include a lease by a person who does regularly lease goods of the leased kind.
                                                       adopted in clause 46.

                                                       PMSI issue.                      See entries below.

                                                       In relation to this topic, the
                                                       schedule to our 31 July
                                                       submission to the Standing
                                                       Co mmittee on Legal &
14                       AG1      DLA Ph illips Fo x
                                                       Constitutional Affairs
                                                       contains specific questions
                                                       in relation to this issue (see
                                                       points 13-15). Please
                                                       provide answers to those
                                                       specific issues if possible.

                                                       PMSI issue. Paragraphs           The omission of the reference to ‗the seller‘ is intended to make the provisio n more
                                                       12-13 in the Schedule.           consistent with the corresponding provision in the Canadian PPS legislat ion (for examp le,
                                                                                        see paragraph 2(jj) of the Saskatchewan Act (paragraph 2(jj)), which refers to ‗a security
                                                       [PMSI] is defined in             interest taken in collateral, …, to the extent that it secures all o f part of its purchase price‘.
14                       AG1      DLA Ph illips Fo x   clause 14. It means a            The provision now makes it clear that it applies when the obligation secured is the
                                                       security interest taken in       purchase price, so that it is unnecessary to consider whether the person taking the security
                                                       collateral to the extent that    interest is a seller.
                                                       it secures all or part of its
                                                       purchase price. Previously,      Paragraphs 14(1)(b) will allow a debtor‘s financier to obtain a purchase money security
Ve rsion 6: 10 th March 2010                                                                                                                                                26 of 131

                                                                   Responses to comments recei ved on
                                                        Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                    Issue              AGD Comment
                                                       it was indicated that the      interest in the collateral. The obligation owed by the debtor to its financier will not be the
                                                       security interest was taken    purchase price (because the purchase price will have already been paid).
                                                       by the seller, however
                                                       these words have been
                                                       removed.

                                                       A security interest taken in
                                                       collateral by a person who
                                                       gives value for the
                                                       purposes of enabling the
                                                       grantor to acquire rights in
                                                       the collateral is also a
                                                       purchase money security
                                                       interest to the extent that
                                                       the value is applied to
                                                       acquire those rights. It is
                                                       unclear what rights this
                                                       refers to.

                                                       These matters should be
                                                       clarified.

                                                       PMSI issue.                    The intended policy outcome is that only purchase money security interests that are
                                                                                      perfected by registration will have purchase money security interest priority.
                                                       Paragraphs 14-15 in the
                                                       Schedule. Impo rtantly, the
                                                       interest of a lessor or
14                       AG1      DLA Ph illips Fo x   bailor o f goods under a
                                                       PPS Lease is a purchase
                                                       money security interests
                                                       and therefore provides (if
                                                       perfected) superior priority
                                                       over other security holders
Ve rsion 6: 10 th March 2010                                                                                                                                          27 of 131

                                                                   Responses to comments recei ved on
                                                        Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                 Issue               AGD Comment
                                                     (although it is important to
                                                     note it does not provide
                                                     protection to the holder of
                                                     such security interest
                                                     which is unperfected at the
                                                     time of insolvency).

                                                     If a purchase money
                                                     security interest is not
                                                     perfected, it provides no
                                                     additional benefits to the
                                                     holder of such security
                                                     interest relative to the
                                                     holder of non-purchase
                                                     money security interests.
                                                     This appears to be
                                                     inconsistent with the logic
                                                     which provides such
                                                     security interests super
                                                     priority if they are
                                                     perfected.

                                                     The reference to "secures"     The Depart ment considers that the provision achieves the intended policy effect. The Act
                                                     all or part of the purchase    emp loys the language in the corresponding provision of the Saskatchewan PPS Act. It
                                                     price in clause 14(1)(a)       notes that the suggestion would make the text of paragraphs 14(1)(a) the same as that of
14(1)                    AG2      Clayton Utz        should be a reference to       paragraph (a)(i) o f the defin ition of purchase money security interest in the New Zealand
                                                     securing the obligation to     PPS Act. The Depart ment considers that both forms of words have the same effect, and
                                                     pay all or part of the         that the Saskatchewan form has the advantage of brevity.
                                                     purchase price.

                                                     The word ‗seller‘ has been     Removal o f seller makes the paragraph more consistent with the corresponding
14(1)(a)                   19     Mr Dav id Turner
                                                     removed.                       Saskatchewan provision (subparagraph 2(1)(jj)(i))).

Ve rsion 6: 10 th March 2010                                                                                                                                     28 of 131

                                                                 Responses to comments recei ved on
                                                      Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.       Submi tter                 Issue              AGD Comment
                                                                                    A licence of intellectual property rights that is revocable for failure to pay royalties under
                                                                                    the licence will not be a security interest (see paragraph 12(5)(a)). However, a security
                                   Independent Film
                                                                                    interest would include an interest in licenced intellectual p roperty granted by a licensee
                                   & Telev ision      Ensure that this clause
                                                                                    that secures payment of the royalties. The security interest would be purchase money
14(1)(b)                   25      Alliance           allo ws a PMSI for
                                                                                    security interest under paragraph 14(1)(b) to the extent to that a lender (or licensor in a
                                                      intellectual property.
                                                                                    related contract) provides value to enable the licensee to acquire the licensed intellectual
                                                                                    property (eg by making the royalty payments). The secured parties‘ rights would be
                                                                                    subject to the rights held by the licensee under the licence agreement.

                                                      Amended clause is too         The Depart ment considers that the provision achieves the intended policy effect.
14(2)(b)                       6   Clayton Utz
                                                      broad.

                                                      Clause 14(2)(c) should be     The Depart ment considers that paragraph 14(2)(c) achieves the intended policy effect in
                                                      deleted. Security interests   relation to motor vehicle financing. However, it notes that Item 11 of Schedule 4 o f the
                                                      in collateral that, at the    Personal Property Securities (Consequential A mendments) Act 2009 proposes the
                                                      time of attach ment, the      insertion of a subsection 14(2A) intended to reduce the complexity of the Act.
                                                      grantor intends to use
                                                      predominantly for
                                                      personal, do mestic or
                                                      household purposes should
                                                      not be excluded fro m the
14(2)(c)                 AG2       Clayton Utz        PMSI p rovisions.

                                                      To retain clause 14(2)(c)
                                                      may have a negative
                                                      impact on (for examp le)
                                                      motor vehicle financing.
                                                      Under the current law, a
                                                      financier would expect to
                                                      obtain a first ranking
                                                      security interest over a
                                                      motor vehicle that the
Ve rsion 6: 10 th March 2010                                                                                                                                        29 of 131

                                                                  Responses to comments recei ved on
                                                       Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                   Issue              AGD Comment
                                                      financier financed. If
                                                      clause 14(2)(c) is retained,
                                                      financiers may need to
                                                      seek specific releases of
                                                      motor vehicles fro m pre-
                                                      existing general security
                                                      interests prior to providing
                                                      financing, which would
                                                      not be required if clause
                                                      14(2)(c) was removed.
                                                      We also note that there is
                                                      no equivalent of clause
                                                      14(2)(c) in the New
                                                      Zealand PPS legislation.

                                                      PMSIs for consumer             Paragraph 14(2)(c) represents a policy choice preferring all-assets security granted to
                                  Co mbined four      purposes. Appears              secure commercial finance over consumer purchase money security interest (which the
14(2)(c)                 AG 7
                                  law firms           anomalous and should be        Depart ment understands are rarely enfo rced).
                                                      removed.

                                  Piper A lderman;
                           2,
                                                      Whether the clause will
                                  Mr Dav id Turner;
                                                      increase the cost of
14(2)(c)                   19
                                                      consumer finance of non-
                                  Australian
                                                      serial nu mbered goods.
                           20     Finance
                                  Conference

                           14     Australian          Retention of provision will
14(2)(c)                          Bankers'            dimin ish choice in finance
                                  Association         for consumer.


Ve rsion 6: 10 th March 2010                                                                                                                                     30 of 131

                                                                  Responses to comments recei ved on
                                                       Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.       Submi tter                 Issue                AGD Comment
                                   Queensland Law
                                   Society
                           23

                                                      Suggests the bill consider      Subsections 14(3) and (6) of the Act prevent the tacking of obligations with PMSI
14(3), (4) and                                        the Canadian Chrysler           priority.
                           19      Mr Dav id Turner
(5)                                                   decision, reconsiders
                                                      notice requirements.

                                                      There may be unintended         The Depart ment notes that this issue is primarily addressed in Item 33 of Schedule 2 of
                                                      consequences if the             the Personal Property Securit ies (Co rporations and Other Amend ments) Bill 2010. This
                                                      definit ion of investment       and other amendments of the rules regarding investment entitlements (now defined as
15                             6   Clayton Utz
                                                      entitlement is lin ked to the   ‗intermed iated securities‘) has meant that the Act is now more effect ively harmonised
                                                      corporations legislation        with the UNIDROIT Convention on Substantive Rules for Intermed iated Securit ies,
                                                      definit ion.                    known as the ‗Geneva Securit ies Convention‘, wh ich was adopted in Geneva, Swit zerland
                                                                                      on 9 October 2009 by the diplo matic Conference to adopt a Convention on Substantive
                                                      The reference to an             Rules regarding Intermediated Securities: for further in formation see
                                                      investment entitlement          http://www.unidro it.org/english/conventions/2009intermediatedsecurities/main.htm.
                                                      being the "rights" of the
                                                      specified person is too         Any undesirable unintended consequences could be addressed through regulations made
                                                      broad. We understand that       under paragraphs 8(1)(l), 8(3) and 12(5)(b).
                                                      the definition is only
                                                      intended to include the
15(1)                    AG2       Clayton Utz
                                                      rights of ownership of the
                                                      financial products to which
                                                      the investment entitlement
                                                      account relates, not
                                                      ancillary rights. This
                                                      should be clearly
                                                      specified.



Ve rsion 6: 10 th March 2010                                                                                                                                     31 of 131

                                                                  Responses to comments recei ved on
                                                       Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                    Issue                AGD Comment
                                                       Co mplexity of priority          This is a drafting matter that does not affect the Act‘s legal effect.
                                                       rules.
                                                                                        Chapter 3 of the Act is intended to highlight that special rules apply to security interests
                                                       Paragraph 34 in the              involving accessions and commingled goods. Rather than adding to complexity, The
                                                       Schedule. In addit ion to        Depart ment considers that separating them in this way p rovides additional transparency
                                                       the priority ru les contained    for these rules.
                                                       in Chapter 2, further
                                                       priority rules are contained
                                                       in Chapter 3 in relation to
                                                       accessions and processed
Chapter 2 and 3          AG1      DLA Ph illips Fo x
                                                       and commingled goods.
                                                       The appearance of priority
                                                       rules in different parts of
                                                       the Bill only adds to the
                                                       complexity of the
                                                       proposed legislation and
                                                       makes it d ifficult to get a
                                                       clear p icture of the priority
                                                       outcomes applicable in
                                                       various circu mstances.

                                                       Security Agreements              This is a drafting matter that does not affect the Act‘s legal effect. The explanatory
                                                       generally do not provide         memo randum for the Act will be amended to reflect this. The drafting reflects the
                                                       for future advances.             corresponding provisions in the Saskatchewan and New Zealand legislation. While an
                                                                                        earlier d raft of the Act referred to securing future advances, the language was changed in
                                                       The ability of a financier       response to the recommendation of the Senate Standing Co mmittee on Legal and
18(4)                    AG1      DLA Ph illips Fo x   to provide future advances       Constitutional Affairs that the Act should use overseas provisions as often as possible to
                                                       is normally dealt with in        allo w overseas experience to provide guidance for the Australian model.
                                                       facility documentation
                                                       (other than the security
                                                       document itself). The
                                                       Security Agreement will
Ve rsion 6: 10 th March 2010                                                                                                                                            32 of 131

                                                                   Responses to comments recei ved on
                                                        Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.       Submi tter                   Issue             AGD Comment
                                                       normally be an 'all
                                                       moneys' document. It will
                                                       not 'provide for future
                                                       advances'. We believe it is
                                                       more appropriate to refer
                                                       to a Security Agreement
                                                       securing future advances.

                                                                                     The existing language is the same as that in New Zealand and Saskatchewan. The version
                                                                                     of the Act previously considered by the Co mmittee referred to ‗secure future advances‘.
18(4)                          6   Clayton Utz         Unintended ambiguity
                                                                                     The language was changed to imp lement the Co mmittee‘s reco mmendation that the Act
                                                                                     should emp loy language based on the New Zealand the Saskatchewan legislation.

                                                       Needs to be expanded –        The Act provides that the Act attaches to collateral (which includes after-acquired
                                                       how does 19(2) operate on     property) when the grantor has rights in the collateral, or the power to transfer rights in
19                         26      The Victorian Bar
                                                       after-acquired future         the collateral to the secured party. The grantor would ord inarily acquire rights in after-
                                                       property.                     acquired property when the grantor acquires the collateral.

                                                       The reference to PPS lease    The Depart ment notes that this issue is addressed in Item 34 of Schedule 2 of the Personal
                                                       should be replaced with       Property Securit ies (Corporations and Other Amend ments) Bill 2010. This item clarifies
                                                       any lease or bailment.        that a grantor has rights in goods that are bailed to the grantor under a PPS lease when the
                                                       There are other types of      grantor obtains possession of the goods for the purposes of paragraph 19(2)(a). Th is
                                                       lease that are within the     would extend the rule that currently applies to leases, to bailments.
                                                       operation of the PPS
19(5)                    AG2       Clayton Utz         legislation. Therefore, if
                                                       this change is not made,
                                                       there is no mechanis m to
                                                       determine when the
                                                       grantor will be deemed to
                                                       have obtained rights to the
                                                       leased goods under leases
                                                       that are regulated under

Ve rsion 6: 10 th March 2010                                                                                                                                         33 of 131

                                                                   Responses to comments recei ved on
                                                        Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                    Issue              AGD Comment
                                                       the legislation but which
                                                       are not PPS leases.

                                                                                      It is intended that a security interest will be enforceable against a third party despite it not
                                                       Enforceab ility of security    being perfected by registration (or being perfected in another way). Perfect ion of a
                                                       interests re: third parties,   security interest is relevant to priority among competing security interests. Priority
20                         13     DLA Ph illips Fo x
                                                       even when not perfected        between unperfected security interests in the same collateral is to be determined by the
                                                       with reg istration.            order of attachment of the security interests (section 55(2). Perfection is also relevant to
                                                                                      whether the security interest survives the grantor‘s insolvency (section 267).

                                                                                      It will be sufficient for the a security agreement to describe the collateral as ‗all of the
                                                                                      grantor‘s present and after-acquired property‘ or ‗all of the grantor‘s present and
                                                                                      after-acquired property except specified items or class es of personal property‘
                                                                                      (subparagraph 20(2)(b)(ii) and (iii)). In other cases, when the collateral relates to
                                                                                      particular co llateral, a security agreement must include ‗a description of the particular
                                                                                      collateral‘ (subparagraph 20(2)(b)(i)). If particular collateral is described using the terms
                                                                                      ‗consumer property‘, ‗co mmercial property‘ or ‗equip ment‘ the description must go on to
                                                       Insufficient precision of      more particularly describe the collateral by reference to item or class (subsection°20(4)).
                                  Co mbined four
20                         17                          what description should
                                  law firms
                                                       suffice.                       Apart fro m this, a security agreement will be effect ive according to its terms (subsection
                                                                                      18(1)) (including in relation to the property described in the security agreement).

                                                                                      Gu idance is provided on when a description will be sufficient at section 8 (defin ition of
                                                                                      ‗description‘): a description of a part icular item must identify the item o r the class to
                                                                                      which it belongs, and a description of a class must identify the class. The Depart ment
                                                                                      considers that to require collateral to be more precisely defined in a security agreement
                                                                                      would unnecessarily restrict contractual freedo m.

                                                       Certain terms used which       The Act uses a number of concepts that are not defined. It is not feasible to define every
20                       AG1      DLA Ph illips Fo x   are no longer defined.         term used by the Act.

                                                       Clause 20(4) refers to a       Omitting the reference to equip ment in section 20(4) would mean that it would be

Ve rsion 6: 10 th March 2010                                                                                                                                            34 of 131

                                                                   Responses to comments recei ved on
                                                        Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                 Issue            AGD Comment
                                                   number of concepts which      sufficient to describe the collateral as ‗equip ment‘. The overseas PPS legislat ion provides
                                                   are no longer defined. In     that it is not sufficient to describe collateral as ‗equip ment‘. This provision is retained in
                                                   particular the reference to   part because of the recommendation of the Senate Standing Co mmittee on Legal and
                                                   equipment should be           Constitutional Affairs that the Act should use overseas provisions as often as possible to
                                                   deleted. In addition          allo w overseas experience to provide guidance for the Australian model. It is also
                                                   reference is made to          retained because of concern that a description of the collateral as ‗equip ment‘ might not
                                                   personal property mo re       be sufficient to allow the parties or a third party to determined if a particular item of
                                                   particularly described by     property was covered by the security agreement.
                                                   reference to item or class,
                                                   however the terms 'item' or
                                                   'class' are not defined.

                                                   Clause 22(1)(d) refers to
                                                   the concept of 'negotiable
                                                   document of title',
                                                   however this definition has
                                                   been removed fro m the
                                                   Bill.



                                                                                 The Act has the intended effect. The Depart ment notes that subsection 20(2) contrasts
                                                                                 ‗particular collateral‘ with ‗all o f the grantor‘s present and after-acquired property‘.
                                  Co mbined four   'particular collateral' –
20(2)                      17
                                  law firms        requires clarification.       The Depart ment will consider whether the reference in subparagraph 20(2)(b)(iii) to
                                                                                 ‗specified items or classes of personal property‘ should be replaced with a reference to
                                                                                 ‗particular collateral‘.
                                                                                 The Depart ment notes that this issue is addressed in Item 37 of Schedule 2 of the Personal
                                                   Acceptance of security
                                                                                 Property Securit ies (Corporations and Other Amend ments) Bill 2010. This item permits a
                                  Co mbined four   agreement. Can this clause
20(2)(a)(ii)             AG 7                                                    grantor to accept a security agreement by performing an act (or o mission) that, while not
                                  law firms        be amended as marked
                                                                                 specified in the writing, reasonably appears to be done with the intention of adopting or
                                                   below?
                                                                                 accepting the writing. The amend ment also makes it clear that whether the person
Ve rsion 6: 10 th March 2010                                                                                                                                     35 of 131

                                                               Responses to comments recei ved on
                                                    Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.   Submi tter              Issue               AGD Comment
                                                                              intended to adopt or accept the writ ing is to be assessed objectively.
                                               2) A security agreement
                                                  covers collateral in        The item also recognises that in certain circu mstances, an omission could be taken to
                                                  accordance with this        constitute adoption or acceptance of an agreement.
                                                  subsection if:
                                                 (a) the security
                                                      agreement is
                                                      evidenced by writing
                                                      that is:
                                                    (i)signed by the
                                                       grantor (see
                                                       subsection (3)); or
                                                    (ii)otherwise binding
                                                       on the grantor
                                                       because of an act by
                                                       which it becomes
                                                       bound by the
                                                       writing; and
                                               The requirement that the
                                               mode of acceptance be
                                               specified in writing is too
                                               inflexible (and may trouble
                                               SME's who would be less
                                               likely to be aware of the
                                               need to specify the
                                               requirement) and the
                                               intention requirement is
                                               too uncertain. The test
                                               should also facilitate
                                               reliance on the
                                               assumptions available
                                               under section 128 of the
Ve rsion 6: 10 th March 2010                                                                                                                               36 of 131

                                                           Responses to comments recei ved on
                                                Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                 Issue                AGD Comment
                                                     Corporations Act. The
                                                     suggestions above are
                                                     intended to achieve that.

                                                     Relevance of clause 20 to       The Depart ment notes that this issue is addressed in Item 38 of Schedule 2 of the Personal
                                                     perfection. This clause         Property Securit ies (Corporations and Other Amend ments) Bill 2010. This item adds a
                                                     appears to contemplate          new requirement that a security interest must be enforceable against third parties before it
                                                     that a security interest can    is perfected. This would provide greater certainty in the grantor‘s insolvency, because a
                                  Co mbined four
21(1)(b)                 AG 7                        be perfected, even if it is     security agreement would generally need to be evidenced in writ ing signed or adopted by
                                  law firms
                                                     not enforceable against         the grantor to survive the grantor‘s insolvency.
                                                     third parties in accordance
                                                     with clause 20. Is this
                                                     intended?

                                                                                     Consistent with the functional approach to security interests taken by the Act, all security
                                                                                     interests will be reg istrable in the single national online Personal Property Securities
                                                     Allow intellectual property
                                                                                     Register. The policy object ive is to harmonise the law on security interest regardless of
                                  Independent Film   interests subject to a
                                                                                     the nature of the collateral. In recognition of the fact that some kinds of collateral are
21(2)                      25     & Telev ision      specialised register to be
                                                                                     ordinarily identified by a serial number, the Act allows security interest in serial-
                                  Alliance           perfected by registration in
                                                                                     numbered collateral to be registered by serial nu mber. This facility will be available to
                                                     the specialised register.
                                                                                     intellectual property that has a serial nu mber allocated by IPAustralia. Th is will provide
                                                                                     functional equivalence to registration on the separate intellectual property register.

                                                     There should be a               The Depart ment has noted this comment. Whether a person has control of satellites and
                                                     provision in clause 21 or in    other space objects will be a matter for the general law.
                                                     Part 2.2 wh ich makes it
                                                     clear that, for "control" to
21(2)(c)(v i)            AG2      Clayton Utz        be held over satellites or
                                                     other space objects, a
                                                     person will need to
                                                     establish that it has control
                                                     at general law. Currently,

Ve rsion 6: 10 th March 2010                                                                                                                                        37 of 131

                                                                 Responses to comments recei ved on
                                                      Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                 Issue                AGD Comment
                                                    there is no concept of
                                                    control for the purposes of
                                                    creating a security interest
                                                    over such assets and it is
                                                    confusing not to specify
                                                    what is required to satisfy
                                                    control under clause
                                                    21(2)(c)(v i).

                                                    It should be made clear          The Depart ment has noted this comment.
                                                    that the references in the
                                                    paper to "control" are for
                                                    the purposes of
                                                    determining whether or
                                  Consumer Action   not an asset is a circulat ing
Part 2.3                 AG5
                                  Law Centre        asset and not for the
                                                    purposes of determining
                                                    the manner in wh ich
                                                    perfection of the security
                                                    interest over the assets
                                                    occurred.

                                                    It is not appropriate to         The Depart ment notes that only personal property of the kind covered by
                                                    provide that, where a            subsection°340(5) is not a circu lating asset if (among other things) an effective
                                                    security interest is taken       registration with respect to the property discloses that the secured party has control of the
                                                    over all or substantially all    personal property (see paragraph 340(2)(a)).
                                                    of the assets of a grantor,
Part 2.3                 AG2      Clayton Utz       it is not possible to
                                                    describe that some portion
                                                    of that property is subject
                                                    to control. For examp le, if
                                                    a company granted a
                                                    security interest over all of
Ve rsion 6: 10 th March 2010                                                                                                                                         38 of 131

                                                                Responses to comments recei ved on
                                                     Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                   Issue               AGD Comment
                                                      its assets in favour of a
                                                      financier that financier
                                                      may have control over
                                                      certain of those assets
                                                      which would otherwise be
                                                      considered to be
                                                      circulat ing assets. It
                                                      seems unreasonable to
                                                      require that financier to
                                                      separately register its
                                                      security interest to record
                                                      over the relevant assets to
                                                      indicate that it has control.

                                                      'Control' as a method of        Control is recognized in Canada and the USA as a method of perfecting certain security
Part 2.3                   26     The Victorian Bar
                                                      perfection is problematic.      interests.

                                                                                      The Depart ment notes that this issue is addressed in Items 39 & 48 of Schedule 2 o f the
                                                                                      Personal Property Securities (Corporations and Other Amend ments) Bill 2010. Item 39
                                                                                      will have the effect that only an ADI with who m 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
                                                      Concerned about                 would not need to incur the expense of perfecting by control in order to ensure they
Part 2.3                   19     Mr Dav id Turner    perfection by control in        maintain their first prio rity as against other secured parties. Rather, the ordinary principal
                                                      relation to ADIs.               of first to register would apply (subject to the interest of the ADI with who m the ADI
                                                                                      account is held).

                                                                                      The ADI with who m the account is held would be able to perfect a security interest in an
                                                                                      ADI account by control. The A DI 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
Ve rsion 6: 10 th March 2010                                                                                                                                           39 of 131

                                                                  Responses to comments recei ved on
                                                       Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                  Issue               AGD Comment
                                                                                     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 relat ion to the ADI account.

                                                                                     Item 48 (the Gu ide to Part 2.6 - Priority between security interests) also includes a
                                                                                     paragraph that explains the effect if this change.



                                                                                     Section 26 provides that a secured party has control of an investment entitlement if it can
                                                      Should deal with
                                  Australian                                         require the investment intermed iary to debit the relevant account without seeking the
                                                      investment instruments
26                         21     Financial Markets                                  grantor‘s consent. The section focuses on the extent of the secured party‘s power to
                                                      registered in the name o f a
                                  Association                                        control dealings in the investment entitlement without regard to legal formalit ies such as
                                                      3rd party as per clause 27.
                                                                                     in whose name the investment entitlements are registered.

                                                      As reflected in separate       The Depart ment notes that this proposal is taken up in Items 13, 14 and 15 of Schedule 4
                                                      discussions that we have       of the Personal Property Securities (Consequential A mendments) Act 2009.
                                                      had with the Attorney-
                                                      General's Depart ment we
                                                      support the amendment of
                                                      clause 26 to:

                                                      (a) o mit clause 26(2); and
26                       AG2      Clayton Utz
                                                      (b) amend clause
                                                          26(1)(b)(i) by
                                                          substituting "or" for
                                                          "and" at the end of that
                                                          clause — with the
                                                          effect that the tests in
                                                          clauses 26(1)(b)(i) and
                                                          (ii) would beco me

Ve rsion 6: 10 th March 2010                                                                                                                                         40 of 131

                                                                  Responses to comments recei ved on
                                                       Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.       Submi tter               Issue              AGD Comment
                                                       alternatives.

                                                                                  The Act will allow the same person to contract in their different capacities of secured
                                                                                  party and investment entitlement intermed iary.

                                                                                  The substantive rules concerning investment entitlements, including when a control
                                                                                  agreement would effect control of an intermed iated security, included in the Act were
                                                                                  developed having regard to work sponsored by UNIDROIT to develop a convention on
                                                                                  intermediated securities. The UNIDROIT Convention on Substantive Rules for
                                                    Clause does not deal with
26(1)(a)                       6   Clayton Utz                                    Intermediated Securit ies, known as the ‗Geneva Securities Convention‘, was adopted in
                                                    all circu mstances.
                                                                                  Geneva, Swit zerland on 9 October 2009 by the dip lo matic Conference to adopt a
                                                                                  Convention on Substantive Rules regarding Intermed iated Securities: for fu rther
                                                                                  informat ion see
                                                                                  http://www.unidro it.org/english/conventions/2009intermediatedsecurities/main.htm. The
                                                                                  Depart ment will consider whether the Act should be amended to harmonise its effect with
                                                                                  the substantive rules in the convention concerning security interests, including in relation
                                                                                  to when a control agreement would effect control of an intermediated security.
                                                    Control of investment
                                                                                  The Depart ment notes that this issue is addressed in Item 41 of Schedule 2 of the Personal
                                                    entitlements. Clause
                                                                                  Property Securit ies (Corporations and Other Amend ments) Bill 2010. This item allo ws a
                                                    26(1) should be expanded
                                                                                  secured party to have control of an intermed iated security where the secured party is also
                                                    by making the
                                                                                  registered as the holder of the intermed iated security. In such a situation, the secured
                                                    amend ments marked
                                                                                  party would not need an agreement with the grantor and the intermediary in order to
                                                    below:
                                                                                  exercise effective control of the instrument. Th is approach would be consistent with the
                                                     A secured party has
                                   Co mbined four                                 treatment of investment instruments in section 27, whereby investment instruments could
26                       AG 7                        control of an investment
                                   law firms                                      be controlled by the controller registered as the owner, by possession or by agreement. It
                                                     entitlement that is
                                                                                  would also be consistent with the approach to security interests in intermediated securities
                                                     credited to an investment
                                                                                  set out in the Geneva Securities Convention (see
                                                     entitlement account if,
                                                                                  http://www.unidro it.org/english/conventions/2009intermediatedsecurities/main.htm).
                                                     and only if:
                                                     (a) the investment           The current section 26 provides that for an agreement to be effective, it must be between
                                                         entitlement account is   the secured party, the grantor and the intermed iary. Ho wever, it is also possible for a
                                                         maintained in the        secured party to exercise practical control of an intermediated security if there is an
Ve rsion 6: 10 th March 2010                                                                                                                                    41 of 131

                                                                Responses to comments recei ved on
                                                     Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.   Submi tter                Issue             AGD Comment
                                                     name of the secured      agreement between the grantor and the intermediary, or between the grantor and the
                                                     party; or                secured party of which the intermediary has notice. The new section 26 would provide
                                                 (b) there is an agreement    that such agreements will also be effective to give a secured party control of an
                                                     in force between the     intermediated security for the purposes of the PPS Act.
                                                     secured party, the
                                                     grantor and the          This item also reflects the change in terminology fro m investment entitlements to
                                                     investment               intermediated securities.
                                                     entitlement
                                                     intermediary who         This amend ment would also ensure that the reference to an intermediary in subparagraph
                                                     maintains the account    26(2)(a)(iii) includes a person prescribed under the subsection 26(3) regulations where
                                                     or an agreement          that intermediary is an intermediary under paragraph 15(2)(b). Consequently, a
                                                     between the grantor      subparagraph 26(2)(a)(iii) notice could be provided to someone other than the paragraph
                                                     and the intermediary     15(2)(b) intermediary where the person is prescribed in accordance with the subsection
                                                     or between the grantor   26(3) regulations.
                                                     and the secured party
                                                     of which notice is       This item would also establish a regulation-making power for prescribing people and
                                                     given to the             classes of people in accordance with paragraph 15(2)(b).
                                                     intermediary; and
                                               The proposed new
                                               paragraph (a) is consistent
                                               with Art icle 12 of the
                                               latest draft of the proposed
                                               UNIDROIT Convention
                                               on Substantive Rules
                                               Regarding Intermed iated
                                               Securities which
                                               contemplates that
                                               intermediated securities
                                               may be granted by way of
                                               an absolute transfer. As
                                               such, the Bill should
                                               provide that if investment
                                               entitlement intermediary
Ve rsion 6: 10 th March 2010                                                                                                                               42 of 131

                                                           Responses to comments recei ved on
                                                Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.   Submi tter               Issue             AGD Comment
                                               registers the secured party
                                               as the holder of an
                                               investment entitlement or
                                               maintains the entitlement
                                               in their name, the secured
                                               party has control of that
                                               investment entitlement.
                                               This is comparab le to
                                               clause 27(2) which applies
                                               to investment instruments.
                                               The changes to paragraph
                                               (b) above are necessary
                                               because there will often
                                               not be a tripartite
                                               agreement between the
                                               security party, the grantor
                                               and the investment
                                               intermediary as
                                               contemplated by clause
                                               26(1)(a). The changes,
                                               when read with the
                                               existing provisions of
                                               clause 26 of the Bill, are
                                               consistent with the
                                               definit ion of 'control
                                               agreement' contained in
                                               Article 1(k) subparagraphs
                                               (x) and (y) of the latest
                                               draft of the proposed
                                               UNIDROIT Convention
                                               on Substantive Rules
                                               Regarding Intermed iated
                                               Securities.
Ve rsion 6: 10 th March 2010                                                                                  43 of 131

                                                           Responses to comments recei ved on
                                                Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                Issue                AGD Comment
                                                   Please note that the
                                                   UNIDROIT Convention
                                                   referred to above is not to
                                                   be confused with the
                                                   Hague Convention which
                                                   relates only to choice of
                                                   law not to substantive law.
                                                   We note that the Hague
                                                   Convention will be
                                                   incorporated separately
                                                   into the Bill.

                                                   The reference to "the            For the purposes of paragraph 27(3)(b), a person will have possession of an investment
                                                   controller" in clause            instrument in the circu mstances mentioned in subparagraph 26(4)(c)(ii): that is, the
                                                   27(3)(a) should be               controller will have possession of the instrument when another person (other than the
                                                   replaced with "the               grantor or the debtor) has possession of the certificate on behalf of the possessor.
27(3)(a)                 AG2      Clayton Utz
                                                   controller (or a person who
                                                   has agreed to act on the
                                                   instructions of the
                                                   controller".

                                                                                    Section 28 does not exhaustively set out the requirements for obtaining control of a letter
                                                                                    of credit. Rather, it provides that a secured party does not have control of a right to a
                                                   Relationship between
                                  Australian                                        payment or performance of an obligation unless the obligor has consented to an
                                                   'control' and letter of credit
28                         18     Securitisation                                    assignment of the obligation to the secured party. The provision allows the obligor to
                                                   problemat ic in
                                  Foru m                                            control to whom they may beco me obligated under the letter of credit. The requirement
                                                   securitisation context.
                                                                                    would be satisfied by an at large consent that the obligation may be transferred to any
                                                                                    person.

                                                   The reference to the             Subparagraph 24(6)(c)(ii) allows a person to take possession of the investment instrument
28                       AG2      Clayton Utz      "proceeds" on the last line      for the purposes of paragraph 27(3)(a) when another person (other than the grantor or the
                                                   of clause 28 should be
Ve rsion 6: 10 th March 2010                                                                                                                                      44 of 131

                                                               Responses to comments recei ved on
                                                    Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                    Issue              AGD Comment
                                                       amended to refer to the        debtor) has possession of the certificate on behalf o f the possessor.
                                                       "benefit" of the letter of
                                                       credit given that the letter
                                                       of credit may (as
                                                       acknowledged earlier in
                                                       the clause) provide for the
                                                       performance of an
                                                       obligation.

                                                                                      The Depart ment notes that this issue is addressed in Items 43 and 44 of Schedule 2 of the
                                                                                      Personal Property Securities (Corporations and Other Amend ments) Bill 2010.
                                                                                      Item 43 would mod ify 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 d ifferent tests in the PPS Act. The narro wer exception is also
                                                                                      appropriate given the relative ease with which security interests in serial-numbered goods
                                                                                      can be registered.
                                                       Clauses 31-52 –
                                  Co mbined four
Part 2.4-2.5               17                          inconsistent language and
                                  law firms                                           Under the amended test, it would not be necessary to determine the actual knowledge of
                                                       tests of knowledge.
                                                                                      the buyer or lessee as item 44 would repeal subsection 44(3).


                                                                                      The remain ing provisions in Part 2.5 that include a knowledge test refer to actual or
                                                                                      constructive knowledge, apart fro m section 46. Section 46 reflects the intended policy
                                                                                      outcome that a person acquiring personal property in the ordinary course of the seller‘s
                                                                                      business should not have to make inquiries, and should be able to rely on their actual
                                                                                      knowledge.



Part 2.4 – 2.7           AG1      DLA Ph illips Fo x   Co mplexity of priority        The Act provides greater transparency concerning priority than the existing arrangements,

Ve rsion 6: 10 th March 2010                                                                                                                                       45 of 131

                                                                   Responses to comments recei ved on
                                                        Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                  Issue              AGD Comment
                                                      rules.                        and has brought to light the complexity inherent in priority rules.

                                                      Paragraph 28 in the
                                                      Schedule. In general, the
                                                      rules relat ing to security
                                                      interests (starting at the
                                                      specific ru les for
                                                      attachment and perfection
                                                      (clause 30) and ending at
                                                      clause 77) provide for an
                                                      extremely co mplex reg ime
                                                      for determining the
                                                      priority of security
                                                      interests. This comp lexity
                                                      is added to by the
                                                      substantial number o f
                                                      scenarios for which ru les
                                                      have been developed.

                                  DLA Ph illips                                     This provision has the practical effect of giv ing the purchaser of the collateral either (a)
                                  Fo x;                                             the benefit of any increase in the value of the collateral since the transaction that gave rise
                           13
                                                      Unclear restriction re:       to the proceeds; or (b) the benefit of any proceeds held by the grantor.
32(2)
                                  Australian          market value of collateral.
                           21
                                  Financial Markets
                                  Association

                                                      Proceeds from dealings        The Depart ment notes that this issue is addressed in Item 42 of Schedule 2 of the Personal
                                                      with collateral. This         Property Securit ies (Corporations and Other Amend ments) Bill 2010. The item would
                                  Co mbined four      clause should apply to        provide that a dealing in collateral which gives rise to proceeds would only extinguish a
32                       AG 7                         proceeds arising fro m a      security interest if the secured party has agreed that the dealing would extinguish the
                                  law firms
                                                      disposal of collateral        security interest. This change draws a distinction between a dealing with and a disposal
                                                      rather than a dealing with    of the collateral.
                                                      collateral. Under the
Ve rsion 6: 10 th March 2010                                                                                                                                         46 of 131

                                                                  Responses to comments recei ved on
                                                       Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                   Issue             AGD Comment
                                                     current drafting, if a         This amend ment would min imise the risk that a secured party would have their security
                                                     security agreement             interest ext inguished simp ly because they authorised a grantor to deal with the collateral
                                                     authorises the grantor to      and would therefore allow g rantors more freedo m to deal with collateral. A disposal of
                                                     lease collateral (even on a    collateral where there is express or implicit authorisation fro m the secured party would
                                                     short term basis), the         continue to be an exception to the rule that the security interest continues in the collateral.
                                                     secured party will lose
                                                     their security interest in
                                                     the collateral and, arguably
                                                     only have a security
                                                     interest in the proceeds
                                                     (clause 32(1)(a)). Th is is
                                                     not appropriate in this
                                                     context.

                                                                                    Paragraph 34(1)(c)(ii) does not impose a duty to monitor whether or not a grantor transfer
                                                                                    the collateral. Rather, the secured party loses the deemed perfection of the security
                                                                                    interest shortly after acquiring actual or constructive knowledge that the gran tor has
                                                                                    transferred the collateral. When the secured party acquires actual or constructive
                                                     Fixing constructive
                                  Co mbined four                                    knowledge of the transfer, a secured party who wishes to preserve their position should
34(1)(c)(ii)               17                        knowledge on transfer is
                                  law firms                                         register against the transferee. A person has constructive knowledge if they make the
                                                     more harsh than overseas.
                                                                                    inquiries that an ordinary or prudent person would make. In other words, the provision
                                                                                    prevents the secured party turning a deliberate blind eye to the matter in order to obtain
                                                                                    the benefit of the deemed perfect ion. The provision requires only the secured party act in
                                                                                    the way that an honest and prudent person would act.

                                  Co mbined four     'Gap' between foreign          The Depart ment notes that this issue is addressed in Items 17, 18 and 19 of Schedule 4 o f
39(2)(a)                   17
                                  law firms          registration and perfection.   the Personal Property Securit ies (Consequential Amend ments) Act 2009.

                                                     Clause 43 is confusing and     The Depart ment notes that this issue is addressed in Item 21 of Schedule 4 of the Personal
43                         19     Mr Dav id Turner   policy reasoning is not        Property Securit ies (Consequential Amend ments) Act 2009.
                                                     clear.


Ve rsion 6: 10 th March 2010                                                                                                                                         47 of 131

                                                                 Responses to comments recei ved on
                                                      Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                  Issue                AGD Comment
                                                      Clause 44 does not classify     The Act refers to personal property in subsection 44(1), but goes on to exclude inventory
                                                      personal property by            in subsection 44(2). It has much the same coverage as New Zealand PPS section 55 in its
                                                      reference to its use in the     application to consumer goods and equipment.
44                         19     Mr Dav id Turner    same way as New Zealand
                                                      PPS section 55 and also         The Depart ment notes that this issue is addressed in Items 22 and 23 of Schedule 4 of the
                                                      adds a requirement for          Personal Property Securities (Consequential A mendments) Act 2009.
                                                      new value.

                                                      The clause introduces the       The Act reflects the preferred policy outcome, and is consistent with the position in New
                                                      concept that a dealing in       Zealand (section 53) and Saskatchewan (subsection 30(2)).
                                                      the ordinary course of
                                                      business gives good title,
                                                      not only in the case of a
                                                      floating charge security,
                                                      but also where the charge
                                                      is a fixed and specific
                                                      charge, or, even a legal
46                         26     The Victorian Bar
                                                      mortgage. …. where
                                                      certain classes of assets are
                                                      charged by way of fixed
                                                      charge on the basis that the
                                                      grantor ought not to be
                                                      able to dispose of the fixed
                                                      charge property (with
                                                      provision for legal
                                                      mortgage).

                                                      Second, it is not clear what    The Depart ment agrees that the expression ―if the personal property was sold or leased in
                                                      is comprehended by the          the ordinary course of the seller‘s or lessor‘s business of selling or leasing personal
46                         26     The Victorian Bar   idea of ‗o rdinary course of    property of that kind‖ is less intrusive than merely ―the ordinary course of the seller‘s or
                                                      the seller‘s or lessor‘s        lessor‘s business‖.
                                                      business of selling or
Ve rsion 6: 10 th March 2010                                                                                                                                         48 of 131

                                                                  Responses to comments recei ved on
                                                       Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.   Submi tter                Issue            AGD Comment
                                               leasing personal property
                                                                             The wording of this section represents a policy decision by the Department limit ing the
                                               of that kind‘ in clause 46.
                                                                             application of the taking free exception.
                                               The ―ordinary course of
                                               business‖ is an idea of
                                               wide import. It may
                                               extend to a transaction of
                                               an exceptional nature and
                                               might extend to a transfer
                                               of the entire undertaking
                                               of a co mpany, ―if for
                                               example, the company
                                               were proposing to sell the
                                               business with a view to
                                               starting another business,
                                               or of carrying on of the
                                               same business in another
                                               place‖, but not if, ―The
                                               company was hard up for
                                               money, and instead of a
                                               mortgage of the assets the
                                               defendant this arrangement
                                               is made with him, the
                                               effect of which is to
                                               transfer to him … the
                                               whole undertaking‘. The
                                               expression ―the ordinary
                                               course of the buyer‘s or
                                               lessee‘s ordinary business
                                               of selling or leasing
                                               personal property of that
                                               kind‘, if still uncertain,
                                               would be less intrusive.

Ve rsion 6: 10 th March 2010                                                                                                                              49 of 131

                                                           Responses to comments recei ved on
                                                Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                  Issue                AGD Comment
                                                      Clause 46 applies to            The provisions in Part 2.5 are not intended to operate in a mutually exclusive manner.
                                                      property other than goods.      One transaction may be affected by more than one provision in Part 2.5. The provision
                                                      It should be confined to        would extend to the sale of intangibles (such as intellectual property) or financial products
                                                      the sale of goods. What         (such as shares) made in the ordinary course of the seller‘s business of selling intangibles
                                                      other personal property is      or financial p roducts of that kind.
46                         26     The Victorian Bar
                                                      clause 46 meant to deal
                                                      with in the ordinary course
                                                      of business and which is
                                                      not dealt with by other
                                                      provisions in Part 2.5?

                                                      The exception in clause         The Depart ment has noted the comment.
                                                      46(2)(b) where the buyer
                                                      or seller has actual
46                                                    knowledge will be of
                                                      limited use if the security
                                                      agreement (or a restrict ion
                                                      in it ) cannot be registered.

                                                      Wording different fro m the     The Act reflects the intended policy outcome.
46                         19     Mr Dav id Turner
                                                      NZ legislation.

                                                      The personal property           The Act reflects the intended policy outcome, and is consistent with the approach taken in
                                                      ought to be of a kind           New Zealand (section 54) and Saskatchewan (subsection 30(3)).
47                         26     The Victorian Bar   usually used for personal,
                                                      domestic or household
                                                      purposes.

                                  Australian          Taking of personal              The Act reflects the intended policy outcome.
47(1)                      14     Bankers'            domestic or household
                                  Association         property free of security

Ve rsion 6: 10 th March 2010                                                                                                                                         50 of 131

                                                                  Responses to comments recei ved on
                                                       Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                  Issue              AGD Comment
                                                      should be at arms length.

                                                      There should be an            The Act reflects the intended policy outcome. Because of the anonymous nature of
                                                      exception that the rule       CHESS purchases (i.e. the purchaser does not know the identity of the seller) it is difficu lt
                                                      does not apply if the buyer   to see how a buyer could ever have actual knowledge that the purchase is in breach of a
                                                      has actual knowledge that     security agreement. The seller‘s secured party should protect its security interest by
                                                      the purchase is in breach     taking control of the investment instruments
                                                      of a security agreement.
                                                      ―Ordinary course of
                                                      trading‖ can include large
                                                      and exceptional
49                         26     The Victorian Bar   transactions. Clause 49
                                                      would postpone the
                                                      interest of legal mo rtgage
                                                      of shares and that of a
                                                      person having some other
                                                      fixed security interest
                                                      notwithstanding that the
                                                      interest was noted on the
                                                      register or in the CHESS
                                                      system.

                                                      'Consensual' transactions;    The extinguishment of security interests through a compulsory acquisition follo wing a
                                  Co mbined four
50                         17                         impact on efficacy of         takeover or a scheme of arrangement has policy imp lications beyond the scope of the
                                  law firms
                                                      takeovers.                    review of personal property securities.

                                                      The inclusion of a            The Act reflects the preferred policy outcome, and is based on Saskatchewan (section
                                                      ―mortgage, pledge, lien‖ in   30(9)). It is not intended that a person should have constructive notice of a reg istration
50 & 51                    26     The Victorian Bar   the definition of             made on the Personal Property Securit ies Register (section 300).
                                                      ―purchaser‖ in clause
                                                      50(3), and the use of the
                                                      wide term ―transferee‖ in

Ve rsion 6: 10 th March 2010                                                                                                                                        51 of 131

                                                                  Responses to comments recei ved on
                                                       Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.   Submi tter               Issue             AGD Comment
                                               clause 51, means that these
                                               clauses regulate priorities
                                               between competing
                                               security interests
                                               (otherwise dealt with in
                                               Part 2.6). Although
                                               provision is made in part
                                               8.4 fo r obtaining
                                               informat ion about security
                                               interests which are wide
                                               enough to identify any
                                               negative restriction on
                                               dealing in a security
                                               agreement, there is no
                                               provision for registering a
                                               copy of the security
                                               agreement or a précis of a
                                               negative restriction. This
                                               undermines the utility of
                                               the constructive
                                               knowledge (constructive
                                               notice) exceptions in
                                               clauses 50 and 51 (which
                                               might include transactions
                                               conducted at great speed
                                               with limited opportunity
                                               for actual inquiry) and
                                               thereby weakens the
                                               protection currently
                                               afforded by the
                                               Corporations Act 2001 in
                                               relation to reg istered
                                               charges given by
Ve rsion 6: 10 th March 2010                                                                                  52 of 131

                                                           Responses to comments recei ved on
                                                Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                   Issue              AGD Comment
                                                      companies. Inclusion of
                                                      provision for registering
                                                      the security agreement or a
                                                      précis of any restriction on
                                                      dealing would enhance the
                                                      operation of the proposed
                                                      legislation.

                                  Australian          Clarify amb iguity about       The Depart ment does not agree that the provision is ambiguous. The knowledge must be
51                         21     Financial Markets   knowledge of interest in       held by ‗the person in whose name an investment entitlement intermed iary maintains the
                                  Association         investment entitlement.        investment entitlement account‘.

                                                      The words of limitation,       The Act reflects the preferred policy outcome. It is based on Chattel Securities Act 1987
                                                      ―in relation to the            (Vic) subsection 7(7).
                                                      property‖, will prevent a
                                                      security holder who is
                                                      ousted under clause 50 and
                                                      51 fro m being subrogated
                                                      to the whole of the
                                                      property secured in favour
                                                      of the competing
                                                      successful security holder.
53                         26     The Victorian Bar   The successful security
                                                      holder have executed
                                                      against the personal
                                                      property and satisfied its
                                                      claims out of that fund. In
                                                      those circu mstances the
                                                      ousted security holder
                                                      should be entitled to be
                                                      subrogated (on a
                                                      subordinate basis) to the
                                                      rights of the successful
Ve rsion 6: 10 th March 2010                                                                                                                                     53 of 131

                                                                  Responses to comments recei ved on
                                                       Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.       Submi tter                   Issue                AGD Comment
                                                        security holder against
                                                        other property securing the
                                                        monies owing to the
                                                        successful security holder.

                                                        Does not include                The Depart ment notes that this issue is addressed in Item 25 of Schedule 4 of the Personal
55(5)(b)                       6   Clayton Utz
                                                        'perfection by control'.        Property Securit ies (Consequential Amend ments) Act 2009.

                                                        Priority t ime in relation to   Subs 57(1) provides that a security interest in collateral which is perfected by control at
                                                        perfection by control.          any particular time takes priority over another security interest in the same collateral
                                                                                        perfected by another means.
                                                        If the Depart ment amends
                                                        clause 55(5)(b) to also         The amend ment to paragraph 55(5)(b) is required to address a case where the security
55(5)(b)                 AG1       DLA Ph illips Fo x
                                                        refer to control of the         interest has been continuously perfected, and that the security interest was first perfected
                                                        collateral, clause 57(1)        by control.
                                                        will also require
                                                        amend ment to account for
                                                        the priority time.

                                                        Concerns about the effect       The Act reflects the preferred policy outcome, and is consistent with New Zealand
58                         26      The Victorian Bar
                                                        of the clause.                  (section 72) and Saskatchewan (subsection 35(5)).

                                                                                        The Depart ment notes that the New Zealand Act (s ubsection 70(2)) refers only to an
                                                                                        agreement, despite subsection 70(1) referring to ‗in a security agreement or otherwise‘;
                                                                                        while the Saskatchewan Act (subsection 40(2)) refers to ‗agreement or undertaking‘ and
                                                                                        ‗security agreement or otherwise‘ (subsection 40(1)).
                                                        Subordination as opposed
61                         13      DLA Ph illips Fo x
                                                        to priority deeds.              The Depart ment notes that this issue is addressed in Items 27 & 28 of Schedule 4 o f the
                                                                                        Personal Property Securities (Consequential A mendments) Act 2009.


                                                                                        Item 33 o f Personal Property Securities (Consequential Amend ments) Act 2009 amends
                                                                                        subsection 61(2) o mitting ‗An agreement to subordinate a security interest‘ and replaces it
Ve rsion 6: 10 th March 2010                                                                                                                                           54 of 131

                                                                    Responses to comments recei ved on
                                                         Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.        Submi tter                   Issue                AGD Comment
                                                                                         with ‗The subordination‘. This amendment improves the consistency between
                                                                                         subsections 61(1) and 61(2) by acknowledging that a subordination need not be by
                                                                                         agreement, but could be by deed or other instrument. The amend ment makes the Act
                                                                                         more consistent with the approach taken in the Personal Property Security Act 1993
                                                                                         (Saskatchewan) (subsection 40(1)).

                                                                                         Item 34 o f Personal Property Securities (Consequential Amend ments) Act 2009 amends
                                                                                         paragraph 61(2)(b) by o mitting ‗the agreement‘ and substituting ‗the subordination‘,
                                                                                         consistently with the amend ment to s ubsection 61(1) made by Item 33.



                                                         Change clause to                The Act reflects the preferred policy outcome. The proposed change would increase
                                                         requirement to register         uncertainty for other financiers.
                                   Australian
                                                         within 10 days of the
62(3)(b)(i)                20      Finance
                                                         finance being provided,
                                   Conference
                                                         not within 10 days of the
                                                         grantor taking possession.

                                                         Requirement that                This provision has been renumbered subparagraph 20(2)(a)(i). The Act now includes an
                                   Motor Trades
                                                         'evidenced by writ ing,         alternative that the writ ing be ‗adopted or accepted by the grantor by an act specified in
63(3)                          7   Association of
                                                         signed by the grantor' is       the writ ing that is done with the intention of adopting or accepting the writing‘
                                   Australia
                                                         impractical.                    (subparagraph 20(2)(a)(ii).

                                                         Should clarify that holder      The Depart ment considers that is sufficiently clear that a registration may describe both
                                   Australian            of security interest can        the grantor‘s present property and after-acquired or future property: in particu lar, that the
64(1)                      18      Securitisation        effect registration referring   class referred to in the definition of ‗description‘ may include after -acquired or future
                                   Foru m                to future property of           property.
                                                         grantor.

                                                         Reco mmends that the first      Applying the first in time priority rule would in effect involve o mitting section 64 fro m
64                         12      Australian
                                                         in time priority rule should    the Act. Extending the notice period to 10 days may delay the provision of new finance to
                                   Institute of Credit
                                                         apply, or the period for
Ve rsion 6: 10 th March 2010                                                                                                                                             55 of 131

                                                                     Responses to comments recei ved on
                                                          Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.     Submi tter                    Issue                AGD Comment
                                  Management           notice be extended to 10        businesses with liquid ity problems.
                                                       business days.

                                                       Co mplexity of priority         The Depart ment notes that this issue is addressed in Item 29 of Schedule 4 of the Personal
                                                       rules.                          Property Securit ies (Consequential Amend ments) Act 2009.

                                                       Paragraph 30 in the             The Depart ment notes that this issue is addressed in Item 29 of Schedule 4 of the Personal
                                                       Schedule.                       Property Securit ies (Consequential Amend ments) Act 2009. This item amends the notice
                                                                                       provision in subparagraph 64(1)(b)(i) so that the secured party seeking priority will only
                                                       Clause 64 provides that a       be required to provide notice to the purchase money security interest holder over whom
                                                       non-purchase money              priority is sought (not to all other purchase money security interest holders).
                                                       security interest in an
                                                       account (as original
                                                       collateral) has priority over
                                                       a purchase money security
                                                       interest in the account as
                                                       proceeds of inventory.
64                       AG1      DLA Ph illips Fo x   This priority requires the
                                                       secured party that holds
                                                       the prior security interest
                                                       to give notice to each
                                                       secured party holding a
                                                       purchase money security
                                                       interest in the account.

                                                       There is no requirement on
                                                       a holder of a purchase
                                                       money security interest to
                                                       give notice of the creation
                                                       of its security interest to
                                                       any existing security
                                                       holder and it is therefore
                                                       difficult to see how a
Ve rsion 6: 10 th March 2010                                                                                                                                        56 of 131

                                                                   Responses to comments recei ved on
                                                        Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                     Issue              AGD Comment
                                                       holder of a non-purchase
                                                       money security interest in
                                                       an account would ever be
                                                       on notice of the existence
                                                       of a subsequent purchase
                                                       money security interest in
                                                       the proceeds of inventory
                                                       placed in the account. On
                                                       this basis, the rule will not
                                                       have the priority intended
                                                       to be provided by the
                                                       clause. The 2008 Bill
                                                       required notice of a
                                                       purchase money security
                                                       interest to be provided
                                                       where it was in relation to
                                                       inventory. This
                                                       requirement has been
                                                       removed.

                                                       Co mplexity of priority         Section 55 is a default priority rule that ‗sets out the priority between security interests in
                                                       rules.                          the same collateral if this Act provides no other way of determin ing that priority‘: (see
                                                                                       subsection 55(1)).
                                                       Paragraph 32 in the
                                                       Schedule. Div ision 4 of        Div ision 4 of Pa rt 2.6 provides specific rules regard ing priority of security interest in
Div 4 of Part                                          Part 2.6 of the 2009 Bill       transferred collateral. The default priority rules in section 55 do not apply because the Act
                         AG1      DLA Ph illips Fo x   (dealing with priority of       does set out a way of determin ing priority in the circu mstances to which those provision s
2.6
                                                       security interests in           apply.
                                                       transferred collateral)
                                                       appears to override the
                                                       default priority ru les in
                                                       clause 55 (other than
                                                       where one of the security
Ve rsion 6: 10 th March 2010                                                                                                                                            57 of 131

                                                                   Responses to comments recei ved on
                                                        Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                    Issue              AGD Comment
                                                       interests referred to is
                                                       perfected by control).

                                                       Clause 69 and related rules    This is a drafting matter that does not affect the Act‘ effect.
                                  Co mbined four
69                         17                          on negotiable instruments;
                                  law firms
                                                       should be moved.

                                  Co mbined four       'Obligor' and not 'debtor'     The Act uses the expression ‗debtor‘ rather than ‗obligor‘.
69                         17
                                  law firms            suggested.

                                                       Co mplexity of priority        Section 69 requires actual knowledge that the payment was made in breach of the security
                                                       rules.                         agreement that provides for the security interest.

                                                       Paragraph 33 in the            Section 299 is an evidentiary provision providing that in certain circu mstances a person
                                                       Schedule. Clause 69            will be taken to have actual knowledge of certain matters unless the contrary is proved
                                                       (which is carried over         beyond reasonable doubt. In the relevant circu mstances, section 299 will facilitate proof
                                                       fro m the 2008 Bill) has the   of the actual knowledge required by section 69. There is no inconsistency between
                                                       effect of g iving an           sections 69 and 299 so that one needs to be made subject to the other.
                                                       unsecured creditor priority
                                                       over a secured creditor
69                       AG1      DLA Ph illips Fo x
                                                       unless the unsecured
                                                       creditor has actual
                                                       knowledge that the
                                                       payment it has received is
                                                       in breach of a security
                                                       agreement that provides
                                                       for security. In order to
                                                       avoid fraud, it should be
                                                       clear that this clause is
                                                       subject to clause 299.

                                                       Co mplexity of priority        This is a drafting matter that does not affect the Act‘s legal effect.

Ve rsion 6: 10 th March 2010                                                                                                                                       58 of 131

                                                                   Responses to comments recei ved on
                                                        Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.       Submi tter                Issue              AGD Comment
                                                     rules.

                                                     Paragraph 33 in the
                                                     Schedule.

                                                     In addition, although the
                                                     heading to Division 5
                                                     refers to priority of
                                                     creditors and purchasers of
                                                     negotiable instruments,
                                                     chattel paper and
                                                     negotiable documents of
                                                     title, clause 69 is not so
                                                     qualified and applies to
                                                     any payment received by a
                                                     creditor. Th is requires
                                                     correction.

                                                                                   The Depart ment notes that this issue is addressed in Item 58 of Schedule 2 of the Personal
                                                     The reference to              Property Securit ies (Corporations and Other Amend ments) Bill 2010. This item would
                                                     "negotiable instrument" in    amend subparagraph 72(b)(ii) by replacing negotiable instrument with document of title.
72                       AG2      Clayton Utz        clause 72(b )(ii) should be   This would rectify the inconsistency in the current section and clarify that section 72
                                                     reference to "negotiable      applies to negotiable documents of title.
                                                     document of title".


                                  Insolvency                                       Subsections 73(1) and (2) provide a mechanis m for liens and statutory liens to have
                                                     Insolvency administrators'
73                         10     Practit ioners                                   priority over a security interest.
                                                     liens
                                  Australia

74                         25     Independent Film   Clarify the priority          The secured party in relation to a security interest in intellectual property may protect its
                                  & Telev ision      position of execution         position by registering its security interest on the PPS Reg ister. An execution creditor

Ve rsion 6: 10 th March 2010                                                                                                                                       59 of 131

                                                                 Responses to comments recei ved on
                                                      Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.       Submi tter                   Issue              AGD Comment
                                  Alliance             creditor who obtains a         should be able to rely on the PPS Register to identify any security interests attached to the
74                         26
                                                       transfer of intellectual       collateral.
                                  The Victorian Bar    property rights.

                                                       Should be contingent on        Paragraph 74(4)(a) makes it clear that the secured party has until seizure by the execution
                                                       the execution creditor         creditor to register its security interest. Confining the provision to goods would not be
                                                       having seized the collateral   consistent with the functional approach to security interests imp lemented the Act.
                                                       and the rule should be
                                                       limited to goods.

                                                       Co mplexity of priority        Accounts are defined as excluding ADI accounts (section 10). Consequently, section°64
                                                       rules.                         (which relates to accounts) does not impact on the operation of section 75 (which relates
                                                                                      to ADI accounts).
                                                       Paragraph 31 in the
                                                       Schedule.
75                       AG1      DLA Ph illips Fo x
                                                       It is unclear how clause 75
                                                       (which deals with the
                                                       priority of security
                                                       interests held by ADIs in
                                                       an ADI account) works
                                                       together with clause 64.

                                                                                      The Depart ment notes that this issue is addressed in Items 31, 32 & 33 of Schedule 4 o f
                                                       Priority of unregistered       the Personal Property Securit ies (Consequential Amend ments) Act 2009 as well as in It em
                                                       foreign security interests     59 of Schedule 2 of the Personal Property Securities (Corporations and Other
                                                       should extend to               Amend ments) Bill 2010.
                                  Co mbined four
77                         17                          investment entitlements,
                                  law firms
                                                       ADI accounts and other
                                                                                      These items work in concert to effectively increase the scope of section 77 to apply its
                                                       forms of intangible
                                                                                      priority rules to security interests in intermed iated securities.
                                                       property.


Ve rsion 6: 10 th March 2010                                                                                                                                         60 of 131

                                                                   Responses to comments recei ved on
                                                        Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                   Issue                AGD Comment
                                                       'Perfection' doesn't exist in   It is not a prerequisite to the operation of section 77 that the law of the relevant
                                  Co mbined four
77                         17                          all international               jurisdiction provide for perfection of security interests.
                                  law firms
                                                       jurisdictions

                                                       The concern raised by           The reference to ‗the transferee‘ in paragraph 79(1)(a) is correct. The intention is that the
                                                       Clayton Utz and the             grantor and the transferee should be able to transfer the collateral despite contrary
                                                       combined four law firms         provision in the security agreement. The effect is that the security agreement does not
                                                       relates to the ability of a     affect the grantor‘s title. Other provisions of the Act deal with the effect of the transfer on
                                                       grantor and the transferee      the security interest (eg paragraph 32(1)(a) and Div 4 of Part 2.6)
                                                       to consent to a transfer of
                                                       collateral even if the
                                                       security interest prohibits
                                                       the transfer of the
                                                       collateral.
79                       AG1      DLA Ph illips Fo x
                                                       The amend ment wh ich
                                                       should be considered by
                                                       the Department is the
                                                       amend ment to
                                                       clause 79(1)(a) by deleting
                                                       the reference to 'transferee'
                                                       and replacing it with a
                                                       reference to 'secured party
                                                       under the security
                                                       agreement'.

                                                       Should this clause apply        The Depart ment notes that this issue is addressed in Item 34 of Schedule 4 of the Personal
                                  Clayton Utz;
                                                       only to agreements              Property Securit ies (Consequential Amend ments) Act 2009.
79                       6, 17    Co mbined four
                                                       between the grantor and a
                                  law firms
                                                       secured party?



Ve rsion 6: 10 th March 2010                                                                                                                                            61 of 131

                                                                   Responses to comments recei ved on
                                                        Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                   Issue                AGD Comment
                                                       It is not appropriate that an   The onus would ordinarily be on the account debtor to establish the matters in
                                                       account debtor (who has         paragraphs°80(1)(a) & (b), and subsection 80(3).
                                                       been notified of a transfer)
                                                       can still agree with the
                                                       transferor to modify the
                                                       contract.

                                                       Although we understand
                                                       the Department's response
                                                       to this issue, it should not
                                                       be necessary for a
                                                       transferee (who has
80(4)                    AG1      DLA Ph illips Fo x
                                                       provided notice to the
                                                       account debtor) to have to
                                                       establish that the
                                                       requirements of
                                                       clause 80(3) have not been
                                                       satisfied in order to protect
                                                       its position. Accordingly
                                                       we agree with the
                                                       Australian Securitisation
                                                       Foru m that subparagraph
                                                       (b) of clause 80(4) should
                                                       be deleted.

                                  Australian                                           The transferee‘s interests are adequately protected by the requirements that the account
                                                       subparagraph b should be
80(4)                      18     Securitisation                                       debtor and transferor have acted honestly, and that the modification does not have a
                                                       deleted.
                                  Foru m                                               material adverse affect on the transferee‘s rights under the contract.

                                  Australian                                           An account debtor who has been asked to pay a third party should be entitled to proof that
                                                       Requiring proof of t ransfer    payment to the third party will discharge their liability.
80(7)(b)                   18     Securitisation
                                                       is unwieldy.
                                  Foru m
Ve rsion 6: 10 th March 2010                                                                                                                                        62 of 131

                                                                   Responses to comments recei ved on
                                                        Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.       Submi tter                   Issue               AGD Comment
                                                                                       The Depart ment notes that this issue is addressed in Items 35 of Schedule 4 of the
                                                                                       Personal Property Securities (Consequential A mendments) Act 2009. This item amends
                                                        Should clause apply to all
                                                                                       subsection 80(7) to remove the phrase ‗collateral that is‘. This amend ment is made to
80(7)                          6   Clayton Utz          transfers of an account or
                                                                                       ensure that this rule applies when the account or chattel paper is not collateral.
                                                        chattel paper?



                                                        Unclear as to what is          This provision acknowledges that it is impractical for transferees of accounts and chattel
                                                        policy reason for including    paper to examine each contract for prohib itions on assignment. It is intended to reduce
                                                        clause 81.                     the transaction costs associated with dealings in accounts and chattel paper.

                                                        Clause 81 is not qualified
81                       AG1       DLA Ph illips Fo x
                                                        in the same way as
                                                        clause 79. What is the
                                                        policy reason for this?
                                                        Indeed, why is clause 81
                                                        included at all?

                                   Co mbined four       Delimitation of rights on      Section 81(1) applies only to the transfer of the account, and not to other terms of the
81                         17
                                   law firms            transfer of account.           contract.

                                                        Include language with          Section 81 is based on Article 9-406(d), which does not provide for notice to the account
                                                        respect to the account         debtor.
81                         26      The Victorian Bar
                                                        debtor contained in Article
                                                        9-406.

                                                        Co mpetition between           The Depart ment considers that priority between more than one priority interest would be
                                                        agricultural PM SIs. Can       determined in accordance with the default priority ru les in the Act.
                                   Co mbined four       clauses 85 and 86 be
85, 86                   AG 7
                                   law firms            expanded to explain how
                                                        priority is to be determined
                                                        where there is more than
Ve rsion 6: 10 th March 2010                                                                                                                                          63 of 131

                                                                    Responses to comments recei ved on
                                                         Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter               Issue                 AGD Comment
                                                   one priority interest over
                                                   the same crops or
                                                   livestock?

                                                   Limit on value of priority       As per parliamentary co mmittee response, this will be considered during the proposed
                                                   of goods that become part        statutory review of the PPS Act.
                                                   of processed or
                                                   commingled goods. A
                                                   secured creditor may
                                                   suffer unnecessarily if the
                                                   value of goods increases.
                                                   Harsh results can occur
                                                   particularly in re lation to a
                                                   mass of fungibles, but it
                                                   can also apply where the
                                  Co mbined four   value of the contributed
101                      AG 7
                                  law firms        asset (and thus often the
                                                   product or mass) can
                                                   fluctuate, e.g. where the
                                                   original goods are precious
                                                   metals. Fungibles should
                                                   be dealt with by their own
                                                   provision (see below) and
                                                   priority in products and
                                                   other masses seem to be
                                                   dealt with by 102. We
                                                   wonder whether this clause
                                                   is necessary.
                                                   Priority where more than
                                                                                    As per parliamentary co mmittee response, this will be considered during the proposed
                                  Co mbined four   one security interest
102                      AG 7                                                       statutory review of the PPS Act.
                                  law firms        conti nues in processed or
                                                   commingled goods. The
Ve rsion 6: 10 th March 2010                                                                                                                                   64 of 131

                                                               Responses to comments recei ved on
                                                    Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.   Submi tter               Issue               AGD Comment
                                               provision may provide
                                               significantly unfair results,
                                               particularly here there
                                               goods are fungibles
                                               There should be a separate
                                               provision for fungibles
                                               (which should apply other
                                               commingled fungib le
                                               property (including
                                               investment entitlements
                                               and interests and
                                               intangibles)not just goods).
                                               Under that provision
                                               holders of security
                                               interests should participate
                                               in the mass and its
                                               proceeds according to a
                                               relative proportion of the
                                               property contributed to the
                                               mass rather than the value
                                               of the amount secured.
                                               For examp le if X had
                                               security over 5 bottles of
                                               wine and Y over 20 bottles
                                               of identical wine, and the
                                               bottles were mixed up,
                                               they should be able to
                                               enforce over 5 and 20
                                               bottles respectively, or
                                               share in the proceeds of
                                               the mass in the proportions
                                               of 5/25ths and 20/25ths.
                                               That would then give a
Ve rsion 6: 10 th March 2010                                                                                  65 of 131

                                                           Responses to comments recei ved on
                                                Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.   Submi tter               Issue              AGD Comment
                                               result consistent with what
                                               would have occurred if
                                               there were no
                                               commingling. Th is would
                                               equally apply if we were
                                               talking about 5 tonnes and
                                               20 tonnes of wheat mixed
                                               together
                                               For non-fungibles the
                                               proportions in sub-clause
                                               (5) should be according to
                                               the value of the goods
                                               contributed to the product
                                               or mass as at the relevant
                                               date of assessment of
                                               priority (see the comment
                                               on 109 above). For
                                               example where gold is
                                               supplied and mixed with
                                               silver and then the price of
                                               gold rises. Equally it
                                               would prevent prejudice
                                               when the value of the
                                               goods contributed has
                                               fallen.
                                               Each of the above
                                               recommendations would
                                               gave a fairer result where
                                               contributions to the mass
                                               or product were provided
                                               by several different
                                               grantors.

Ve rsion 6: 10 th March 2010                                                                                  66 of 131

                                                           Responses to comments recei ved on
                                                Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                  Issue               AGD Comment
                                                      Basis for a pro rata           Subsection 102(4) limits the value used in pro-rata outcome to the lesser of the obligations
102                        26     The Victorian Bar   outcome should be cost of      secured or the cost of the goods.
                                                      goods not the sum secured.

                                  Independent Film                                   Subsection 105(1) is required to ensure that the Act will apply in the same way to both
105(1)                     25     & Telev ision       Remove                         goods and intellectual p roperty rights that secure the same obligations.
                                  Alliance

                                  Independent Film    Amend to reflect               Subsection 105(2) is consistent with UNCITRA L Reco mmendation 243.
105(2)                     25     & Telev ision       UNCITRAL
                                  Alliance            Reco mmendation 243.

                                                      In our submission to the       The Act reflects the intended policy outcome. The Act does not allow contracting out of
                                                      Senate Standing                enforcement provisions when the collateral is used predominantly for personal, domestic
                                                      Co mmittee, we included        or household purposes: regardless of the purposes of the finance.
                                                      detailed co mments in
                                                      relation to the operation of
                                                      Chapter 4. Those
                                                      comments should be taken
                                                      into account in
Chapter 4                                             implementing the Senate
(Enforcement             AG2      Clayton Utz         Standing Co mmittee
Issues)                                               recommendation that
                                                      Chapter 4 is simplified.

                                                      At a minimu m, Chapter 4
                                                      should be amended so that
                                                      the consumer protection
                                                      provisions apply in the
                                                      same circu mstances in
                                                      which the new National
                                                      Consumer Code will
Ve rsion 6: 10 th March 2010                                                                                                                                      67 of 131

                                                                  Responses to comments recei ved on
                                                       Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.       Submi tter                Issue                AGD Comment
                                                    initially apply. In
                                                    particular, clause 115(1)
                                                    should be amended so that
                                                    it applies in relation to a
                                                    security interest that
                                                    secures amounts owing
                                                    under a financing
                                                    arrangement where that
                                                    financing is provided
                                                    predominantly for
                                                    personal, do mestic or
                                                    household purposes. In
                                                    other words, the purpose
                                                    for which the relevant
                                                    financing is provided, not
                                                    the nature of the collateral,
                                                    should be relevant.

Part 4                                                                               Implementing this proposal would involve a substantial change fro m the existing
                                                    The new enforcement
                               6   Clayton Utz                                       provisions. It is something that could be considered by the review mentioned in section
                                                    regime is too complex.
107-144                                                                              343.

                                                    Requests that the bill           This is not necessary as the one registration will apply in the same way to each supply.
                                                    explicit ly provides that
                                   Motor Trades
                                                    mu ltip le reg istrations will
109                            7   Association of
                                                    not be needed. Consider
                                   Australia
                                                    with operation of clauses
                                                    59, 67(1) and (2).

                                   Australian       Should delete 'that does         This issue has been addressed through the inclusion of paragraph 109(1)(b ) in the Act.
109(1)(a)                  18      Securitisation   not' and substitute 'the
                                   Foru m           primary purpose of which
Ve rsion 6: 10 th March 2010                                                                                                                                      68 of 131

                                                                Responses to comments recei ved on
                                                     Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.       Submi tter                   Issue             AGD Comment
                                                     is not to'.

                                                                                     The Depart ment notes that this issue is addressed in Items 64, 66 and 69 of Schedule 2 of
                                                                                     the Personal Property Securit ies (Co rporations and Other Amend ments) Bill 2010.

                                                                                     Items 70, 66 and 69 amend the PPS Act so that it is not possible to take apparent
                                                                                     possession of consumer property.

                                                                                     Item 70 would include a new paragraph 109(5)(ba), which wou ld ensure that section 126
                                                                                     would not apply to collateral that is used by a grantor predominantly for personal,
                                                     Concern that clause 126         domestic or household purposes.
                                   Consumer Action
109(5)                         5                     and 142(2) should not
                                   Law Centre
                                                     apply to consumers.             Since section 126 will no longer apply to consumer p roperty, subsection 115(4), which
                                                                                     allo ws the parties to exclude the operation of section 126 by contract, is redundant. Item
                                                                                     72 repeals the subsection.
                                                                                     As a result of the amendment made by item 64, section 126 would not apply to consumer
                                                                                     property. Item 75 inserts a note that draws attention to this amendment and refers to
                                                                                     paragraph 109(5)(ba).




                                                     Clause 109(5) of the Bill       Section 123 allows collateral to be seized by any method permitted b law. If the law
                                                     excludes certain                prohibits seizure by apparent possession, then the Act would not be authorise seizure by
                                                     enforcement rights and          apparent possession.
                                                     remedies in the Bill fro m
                                   Consumer Action   applying to collateral used     Subsection 142(2) allows a person to waive their right to redeem the collateral. This
109(5)                   AG5
                                   Law Centre        by a grantor predominantly      would be subject to another law proh ibiting a person waiv ing their right to redeem the
                                                     for personal, domestic or       collateral.
                                                     household purposes,
                                                     reflecting the intention that
                                                     consumer credit laws

Ve rsion 6: 10 th March 2010                                                                                                                                       69 of 131

                                                                 Responses to comments recei ved on
                                                      Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                  Issue              AGD Comment
                                                     remain the primary source
                                                     of rights relating to
                                                     consumer debts and
                                                     mortgages. Ho wever, it
                                                     does not exclude clauses
                                                     126 (seizure by apparent
                                                     possession) or 142(2)
                                                     (ability of debtor to waive
                                                     right to redeem seized
                                                     property before disposal),
                                                     even though these clauses
                                                     provide for new
                                                     enforcement rights that do
                                                     not currently apply in
                                                     relation to household
                                                     property. These two
                                                     clauses should therefore be
                                                     included in the list of
                                                     clauses that do not apply to
                                                     household property under
                                                     clause 109(5).

                                                     Contracting out of             Section 111 will not apply in relation to provisions that the parties have contracted out of.
                                                     commercial                     The party‘s own commercial interests will be relevant to determining whether the person
                                                     reasonableness; still not      has acted in a co mmercially reasonable manner.
                                  Co mbined four
111                        17                        possible to contract out;
                                  law firms
                                                     should at least not require
                                                     party to disregard its own
                                                     commercial interests.

111                        19     Mr Dav id Turner   Concerns about the             The language used in the Act reflects the intended policy outcome.
                                                     commercially reasonable

Ve rsion 6: 10 th March 2010                                                                                                                                       70 of 131

                                                                 Responses to comments recei ved on
                                                      Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                 Issue               AGD Comment
                                                      manner test.

                                                                                    The Depart ment considers that the Act will not affect the arrangements for the payment of
                                  Australian          Uncertainty over proceeds     dividends and other rights to shareholders. It notes that subsection 112(1) of the Act
112                        14     Bankers'            when security interest in a   provides that ‗[i]n exercising rights and remedies provided by this Chapter, a secured
                                  Association         company.                      party may deal with collateral only to the same extent as the grantor would be entitled to
                                                                                    so deal with the collateral‘.

                                                      Should be subject to a        The language used in the Act reflects the intended policy outcome.
115                        26     The Victorian Bar   requirement of not being
                                                      "manifestly unreasonable".

                                                      Where governed by             The Act does not allow the parties to contract that the security agreement be governed by
                                  Co mbined four      foreign law, parties should   a foreign law (apart fro m security interest in an ADI account: see subsection 239(4)).
115(2)                     17
                                  law firms           be taken to have
                                                      'contracted out'.

                                  Australian          Corporations Act              Implementing this proposal would involve a substantial change fro m the existing
116                        14     Bankers'            continues to apply – dual     provisions. It is something that could be considered by the review mentioned in section
                                  Association         regimes.                      343.

                                                      Clause 123 notice should      This suggestion is addressed, in part, by section 119.
123                        26     The Victorian Bar   also satisfy other notice
                                                      requirements.

                                                      The reference to the          This is a drafting matter that does not affect the legal effect of the provision.
                                                      "secured party" in the note
127(2)                   AG2      Clayton Utz         under clause 127(2) should
                                                      be a reference to the
                                                      "enforcing party".



Ve rsion 6: 10 th March 2010                                                                                                                                            71 of 131

                                                                  Responses to comments recei ved on
                                                       Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                  Issue               AGD Comment
                                  Australian          'Reasonable expenses paid      The Depart ment considers that in determining ‗the amount of any reasonable expenses
127(6)                     14     Bankers'            or incurred' should be         paid or incurred by the enforcing party‘ it would be necessary to determine whether the
                                  Association         payable                        expenses were ‗reasonably paid or incurred‘.

                                                      The clause needs more          Section 111 provides an effective additional safeguard.
136                        26     The Victorian Bar   safeguards as it is
                                                      effectively a foreclosure.

                                                      There may be categories of     The Depart ment notes that section 140 does not apply when a receiver is appointed to the
                                                      persons who by operation       grantor (see section 116), and therefore does not affect the priority of emp loyees with
                                                      of law have priority in        respect to circulat ing assets in the receivership.
                                                      respect of the proceeds of
                                                      enforcement of a security      The Depart ments notes that Corporations Act 2001 section 561 p rovides that certain
                                                      interest but who do not        amounts owing the emp loyees must be paid out of property that is subject to a floating
                                                      actually hold interests in     charge before the amount secured by the floating charge is paid to the chargee. Section
                                                      the relevant collateral. For   561 does not establish a security interest or an interest of any kind in the property.
                                                      example, emp loyees of a
140(2)(a)                AG2      Clayton Utz
                                                      corporation with respect to
                                                      a security interest granted
                                                      by that corporation over
                                                      circulat ing assets.

                                                      The drafting of clause
                                                      140(2)(a) should be
                                                      amended to cater for these
                                                      categories of persons.

                                                      The right of reinstatement     There does not appear to be any good reason why a third party should not be able to pay
142                        26     The Victorian Bar   should be limited to the       the amount required to reinstate the agreement.
                                                      debtor.



Ve rsion 6: 10 th March 2010                                                                                                                                     72 of 131

                                                                  Responses to comments recei ved on
                                                       Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                 Issue               AGD Comment
                                                     Reinstatement provisions       Section 111 will apply in these circu mstances.
                                  Co mbined four     cause significant difficulty
143                        17
                                  law firms          when a party has to undo
                                                     acceleration.

                         AG 6                        Electronic notice of           The Depart ment has noted this comment.
                                                     suspension of operation of
                                                     the register is the most
                                                     efficient means. If
147 (6) (b)                       Phyllis Ray mond
                                                     possible notice should be
                                                     given in sufficient time for
                                                     registrants to be able to
                                                     save work in p rogress.

                                                                                    The Depart ment notes that this issue is addressed in Items 15and 82 in of Schedule 2 of
                                                                                    the Personal Property Securit ies (Co rporations and Other Amend ments) Bill 2010. This
                                                                                    amend ment responds to stakeholder concerns that, for example a description of ‗fru it‘
                                                                                    would not be sufficient to describe oranges. This amend ment clarifies that a description
                                  Co mbined four                                    may identify a class of personal property by identifying a larger class of personal property
                                                     Could be breached by
                                  law firms,                                        that includes the class. As a result, it would be clear that a more general collateral
                                                     assignees or consignors
151                      17, 18   Australian                                        description such as fruit would be sufficient to describe a more specific class of collateral
                                                     attempting to perfect
                                  Securitisation                                    such as oranges.
                                                     interest.
                                  Foru m
                                                                                    Item 82 adds a note to section 151 which exp lains how this definition of description
                                                                                    would work in the context of section 151.



                                                     The drafting of clause 151     The Depart ment notes that this issue is addressed in Item 39 of Schedule 4 of the Personal
151                      AG2      Clayton Utz        should reflect the earlier     Property Securit ies (Consequential Amend ments) Act 2009. Th is amendment extends the
                                                     exposure draft of the PPS      effect of subsection 151(1) to PPSA security interests of the kinds specified in subsection
                                                     Bill. Fo r examp le, clause    12(3) of the PPS Act wh ich do not secure an obligation owed to the secured party named
Ve rsion 6: 10 th March 2010                                                                                                                                       73 of 131

                                                                 Responses to comments recei ved on
                                                      Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                  Issue                 AGD Comment
                                                       151(1) should be amended        in the application. The amended subsection 151(1) would allow a person to register a
                                                       to state:                       financing statement, or financial change statement if they believe on reasonable grounds
                                                                                       that the secured party holds, or will hold, a PPSA security interest of the kind mentioned
                                                       "A person must not apply        in subsection 12(3).
                                                       for reg istration of personal
                                                       property as collateral
                                                       unless the person believes
                                                       on reasonable grounds that
                                                       a security interest in the
                                                       property is, or will be, held
                                                       by a person (who may or
                                                       may not be the applicant)
                                                       stated in the application to
                                                       be a secured party."

                                                       If changes of this nature
                                                       are not made throughout
                                                       the clause then it will be a
                                                       breach of the PPS
                                                       legislation for reg istration
                                                       of security interests which
                                                       do not secure payment or
                                                       performance of an
                                                       obligation to occur. We
                                                       assume this is not
                                                       intended.

                                                                                       The Registrar will not be able to give the verification statement to the grantor because the
153                        13     DLA Ph illips Fo x   Registration                    Registrar will not have the grantor‘s address (see section 153, Tab le Item 3, and the
                                                                                       Regulations Paper).

153                      AG5                           There are categories of
                                  Consumer Action
                                                       assets which are unclear.
Ve rsion 6: 10 th March 2010                                                                                                                                         74 of 131

                                                                   Responses to comments recei ved on
                                                        Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter               Issue                AGD Comment
                                  Law Centre        For examp le:

                                                    (a) in the list of types of    The Depart ment will be undertaking further consultations on the regulations prescribing
                                                        Consumer Property,         classes of collateral for the purposes of section 153 Item 4(c) of the Act.
                                                        there are 3 classes of
                                                        agricultural assets,
                                                        namely, "Agriculture",
                                                        "Agriculture - Crops"
                                                        and "Agriculture -
                                  Consumer Action       Livestock". For
153                      AG5
                                  Law Centre            Co mmercial Property
                                                        there is only one class,
                                                        which is "Agriculture".
                                                        Only "Agriculture -
                                                        Crops" and
                                                        "Agriculture -
                                                        Livestock" should be
                                                        used;

                                                    (b) for Co mmercial            The Depart ment will be undertaking further consultations on which classes of collateral
                                                        Property there is a        may or must be described by serial nu mber in accordance with section 153 Table Item
                                                        category of asset          4(b). Th is will be considered in the course of settling the Regulations.
                                                        referred to as
                                                        "Aircraft". Th is is not
                                                        replicated for
                                  Consumer Action       Consumer Property. It
153                      AG5
                                  Law Centre            is not clear what this
                                                        separate category is
                                                        intended to refer to and
                                                        why it would not be
                                                        available for consumer
                                                        property. For example,
                                                        if a larger aircraft was
Ve rsion 6: 10 th March 2010                                                                                                                                    75 of 131

                                                                Responses to comments recei ved on
                                                     Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                Issue             AGD Comment
                                                      acquired for personal
                                                      use and security was
                                                      granted over that
                                                      aircraft, how would
                                                      that be registered?
                                                      Further, in any event,
                                                      separate registration
                                                      numbers are not
                                                      allocated for airc raft.
                                                      Those numbers are
                                                      allocated for aircraft
                                                      engines and aircraft
                                                      frames. Accordingly it
                                                      should be possible to
                                                      register an aircraft and
                                                      provide for serial
                                                      numbers for both an
                                                      engine and airframe
                                                      (and, if there are
                                                      mu ltip le engines, the
                                                      serial nu mbers for the
                                                      mu ltip le engines).

                                                   End time for registration     The Depart ment considers that the maximu m registration period fo r different kinds of
                                                   for property descri bed       serial nu mbered property could be considered in the review o f the Act required by section
                                                   by a serial number. Item      343 of the Act.
                                                   5 of th is clause requires
                                  Co mbined four   that a registration for       The Act indicates this it is not mandatory to include informat ion about subordination
153(1)                   AG 7
                                  law firms        property described by a       agreement (see section 154, Table Item 6).
                                                   serial nu mber have an end
                                                   time of no mo re than seven
                                                   years. Whilst this may be
                                                   adequate for motor
Ve rsion 6: 10 th March 2010                                                                                                                                  76 of 131

                                                               Responses to comments recei ved on
                                                    Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                  Issue             AGD Comment
                                                     vehicles, it is unlikely to
                                                     be sufficient for other
                                                     potential categories of
                                                     property with serial
                                                     numbers, such as ships or
                                                     aircraft. Can this be
                                                     reconsidered?
                                                     Need to register
                                                     subordinati on
                                                     arrangements? Is the
                                                     intention behind item 6 in
                                                     the table that a financing
                                                     statement will need to
                                                     disclose any subordination
                                                     arrangements for it to
                                                     comply with the clause, or
                                                     is disclosure of
                                                     subordination
                                                     arrangements only
                                                     optional?

                         AG 6                        Well stated. When             The Depart ment has noted this comment.
                                                     ‗approved form‘ is
                                                     referenced will a template
                                                     of the approved form be
                                                     made available on a
155 and 156                       Phyllis Ray mond   website. We had a Serv ice
                                                     Provider who provided
                                                     verification statements to
                                                     Secured Parties alleg ing
                                                     that they were produced by
                                                     the Register when, in fact,

Ve rsion 6: 10 th March 2010                                                                                                 77 of 131

                                                                 Responses to comments recei ved on
                                                      Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.       Submi tter                  Issue               AGD Comment
                                                        they were not in the form
                                                        provided by the Register.

                                                        Provision of informat ion     The informat ion that must be supplied should be readily available to the secured party.
157                        13      DLA Ph illips Fo x   by secured parties –
                                                        timeframe unreasonable.

                                                        Believes proposed penalty     This question could be reconsidered in the review proposed by section 343 in light of the
                                   Consumer Action      is insufficient & should be   practical operation of the Bill.
157                            5
                                   Law Centre           strengthened to provide for
                                                        civil penalties.

                                                        There is no effective         The Act reflects the intended policy outcome.
                                                        incentive for security
                                                        holders to comply with
                                                        clause 157, which requires
                                                        security holders to provide
                                                        notice of changes to
                                                        registration details to
                                                        grantors, including the
                                                        initial registration or
                                   Consumer Action      removal of a registration.
157                      AG5
                                   Law Centre           This is the only way in
                                                        which the Bill attempts to
                                                        ensure grantors are
                                                        informed of registrations
                                                        that affect them, meaning
                                                        that grantors are wholly
                                                        reliant on security holders
                                                        in this regard. The Bill
                                                        now provides for a civ il
                                                        penalty regime in

Ve rsion 6: 10 th March 2010                                                                                                                                       78 of 131

                                                                    Responses to comments recei ved on
                                                         Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.       Submi tter                Issue             AGD Comment
                                                    recognition that the
                                                    compliance provisions in
                                                    previous drafts of the Bill
                                                    were inadequate. Clause
                                                    157 should be included in
                                                    this civil penalty regime
                                                    for the same reasons,
                                                    which would significantly
                                                    improve the effectiveness
                                                    of the sanction for non-
                                                    compliance with what is
                                                    one of the most important
                                                    protections for grantors
                                                    under the Bill. There is no
                                                    reason to wait three years
                                                    for a review of the new
                                                    law before making this
                                                    improvement, as this
                                                    amend ment would not
                                                    change the substantive
                                                    obligations of security
                                                    holders under the Bill in
                                                    any way, it would merely
                                                    provide a better guarantee
                                                    of comp liance.

                                                    Only individuals can make     This has been corrected by the PPS (Consequential A mendments) Act – Item 40 of
                                   Office o f the
                                                    a comp laint to the Privacy   Schedule 4.
157(4)                         8   Privacy
                                                    Co mmission, not all
                                   Co mmissioner
                                                    grantors.
                                                    References to ' particul ar
163, 164 and             AG 7      Co mbined four                                 The Act in subparagraphs 20(2)(b)(ii) and (iii) already allows for a description to be ―all
                                                    collateral'. This should be
Ve rsion 6: 10 th March 2010                                                                                                                                     79 of 131

                                                                Responses to comments recei ved on
                                                     Personal Property Securities Bill 2009 to 30 September 2009
 Section/Issues         Sub no.      Submi tter                   Issue              AGD Comment
165                               law firms           clarified, so that, for        present and after acquired property‖ or ―all present and after acquired property except…‖
                                                      example, all assets charges
                                                      are not invalidated, or        Further, the Regulat ions Discussion Paper at paragraph 166 envisages that that ―All
                                                      charges over or assets in a    Present and After Acquired Property‖ and ―All Present and After Acquired Property
                                                      particular location or of a    except…‖ will be a class of collateral for the purposes of a registration pursuant to section
                                                      particular class. See          153.
                                                      comment above on
                                                      descriptions.                  The combined effect of this will be to clarify that a description of collateral that properly
                                                                                     describes an all assets charge as all present and after acquired property will be sufficient
                                                                                     to be a description of particular co llateral.



                         AG 6                         This clause is well stated.    The Depart ment has noted this comment.
165                               Phyllis Ray mond    It clarifies what is
                                                      seriously misleading.

                                                      Temporary effect iveness       The section does not require continuous checking. It requires that the secured party act
                                  Co mbined four      of defective registration –    when they become aware of the transfer.
166(2)(c)                  17
                                  law firms           onerous on secured parties;
                                                      continuous checking.

                                                      Fee should accrue as a         The maintenance fee is intended as a mechanism to in itiate the removal o f reg istrations
168                        26     The Victorian Bar   charge on the secured          that are no longer needed.
                                                      property.

                         AG 6                         Will copies of search          Copies of search results will be kept on the Register.
                                                      result reports be kept on
169                               Phyllis Ray mond    the Register electronically
                                                      for use to refute or support
                                                      future allegations.

172                      AG5      Consumer Action     We do not agree with the       As stated in the Privacy Impact Assessment report for the PPS Register, permitted
Ve rsion 6: 10 th March 2010                                                                                                                                         80 of 131

                                                                  Responses to comments recei ved on
                                                       Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter               Issue              AGD Comment
                                  Law Centre      Depart ment that item 7        searches as set out in the June 2009 PPS Bill would not include searches for direct
                                                  (and items 8-10) in the        market ing activities.
                                                  table of authorised
                                                  purposes under clause
                                                  172(2) do not permit
                                                  searching the register for
                                                  general credit assessment
                                                  or marketing purposes.
                                                  Item 7 clearly states that a
                                                  person can search for an
                                                  individual on the register
                                                  to ‗establish whether to
                                                  provide credit to, or obtain
                                                  a guarantee or an
                                                  indemn ity fro m, a person‘,
                                                  not merely to establish
                                                  whether to provide credit
                                                  or obtain a guarantee or
                                                  indemn ity secured against
                                                  a particular item of
                                                  personal property.

                                                  Further, pre-screening of
                                                  market ing offers could
                                                  also be encompassed in the
                                                  overly broad authorised
                                                  purposes under items 7-10,
                                                  as explained in the context
                                                  of the extensive review o f
                                                  general credit reporting
                                                  laws conducted last year.
                                                  This would be clearly
                                                  inappropriate and we do
Ve rsion 6: 10 th March 2010                                                                                                                                  81 of 131

                                                              Responses to comments recei ved on
                                                   Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.   Submi tter               Issue              AGD Comment
                                               not accept that there is any
                                               justification to leave this
                                               unaddressed for three
                                               years when it could be
                                               clarified now.

                                               Items 7-10 in the table
                                               under clause 172(2) should
                                               be amended to clarify that
                                               searches by reference to
                                               the details of a grantor are
                                               not permitted for general
                                               credit assessment purposes
                                               nor for cred it direct
                                               market ing purposes
                                               including pre-screening,
                                               and are only permitted for
                                               assessment of whether to
                                               lend against an item o f
                                               personal property held by
                                               the grantor. There is no
                                               reason to wait three years
                                               for a review of the new
                                               law before making these
                                               amend ments given there
                                               appears to be general
                                               agreement that searches
                                               should not be permitted for
                                               credit assessment and
                                               market ing purposes, and
                                               the disagreement here
                                               relates merely to the
                                               drafting not to the
Ve rsion 6: 10 th March 2010                                                                                  82 of 131

                                                           Responses to comments recei ved on
                                                Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues            Sub no.      Submi tter                   Issue              AGD Comment
                                                        underlying policy
                                                        intention. The drafting
                                                        could therefore be clarified
                                                        given legitimate concerns.

                                                        The coverage of the            This has been dealt with by the PPS (Consequential A mend ments) Act 2009 – Items 25-
                                    Office o f the
                                                        Privacy Act in relation to     30 of Schedule 5.
173                   8             Privacy
                                                        'interferences with privacy'
                                    Co mmissioner
                                                        will need to be addressed.

                                                        Include a leg islative         The Depart ment is developing a records management framework as required by the
                                                        principle to retain personal   Archives Act 1983 for the PPS Register, which will include as a principle that personal
                                                        informat ion for the           informat ion be held for the min imu m t ime possible once a registration is no longer active.
                                                        minimu m amount of time,       The Depart ment considers this sufficient.
                                                        include a provision to
                                    Office o f the      prohibit the use of            As stated in the Privacy Impact Assessment report for the PPS Register, permitted
173                            9    Victorian Privacy   informat ion for pre -         searches as set out in the June 2009 PPS Bill would not include searches for direct
                                    Co mmissioner       screening and direct           market ing activities.
                                                        market ing, any extension
                                                        of the use of the register     Any extension of the use of PPS reg ister will need to be authorised by legislation, either
                                                        should require legislative     by amending the Act or under regulations. Any proposals to include additional personal
                                                        amend ment or a further        informat ion in the PPS Register will be subject to a published Privacy Impact Assessment
                                                        privacy impact assessment.     before a decision is made to amend the legislation.




Ve rsion 6: 10 th March 2010                                                                                                                                           83 of 131

                                                                    Responses to comments recei ved on
                                                         Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.       Submi tter                 Issue                AGD Comment
                                                                                      The Depart ment does not agree that the Act allows this conduct. This question could be
                                                                                      reconsidered in the review p roposed by section 343 in light of the practical operation of
                                                      Requests that items 7-10 in     the Act.
                                                      the table under clause 172
                                                      be amended to restrict the      As stated in the Privacy Impact Assessment report for the PPS Register, permitted
                                                      use of the PPSR for data        searches as set out in the June 2009 PPS Bill would not include searches for direct
                                                      mining for consumer credit      market ing activities.
                                                      assessment and marketing
                                                      purposes.                       The court order will be kept by the Registrar. The reg istration will show that the
                                   Consumer Action
                                                                                      Registrar amended the registration in response to a court order.
                                   Law Centre
172                            5
                                   Office o f the
173                            8                      Could clarify the
                                   Privacy
                                   Co mmissioner      Registrar's ability to lodge
182                      AG 6                         complaints in 173(2), is 3rd
                                   Phyllis Ray mond   party misuse covered, plus
                                                      changes to the Exp lanatory
                                                      Memorandu m.


                                                      Will copies of court orders
                                                      be scanned an maintained
                                                      electronically as part of the
                                                      record of reg istration
                                                      history.

                                                      We agree with Legal Aid         Section 184 will allow the Reg istrar to address systemic behaviour of the kind mentioned
                                                      Queensland that the             in paragraph 184(1)(a).
                                   Consumer Action    Registrar should be able to
184                      AG5
                                   Law Centre         identify and address
                                                      systemic conduct engaged
                                                      in by a security holder in
Ve rsion 6: 10 th March 2010                                                                                                                                        84 of 131

                                                                  Responses to comments recei ved on
                                                       Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.   Submi tter                Issue               AGD Comment
                                               breach of their obligations
                                               under the new Act. One
                                               way to help deal with this
                                               issue might be to clarify in
                                               the Exp lanatory
                                               Memorandu m to the Bill
                                               that the Registrar‘s powers
                                               under clause 184 to
                                               remove registrations fro m
                                               the register at the
                                               Registrar‘s own init iative
                                               if they are satisfied that the
                                               retention of the data in the
                                               register is contrary to the
                                               public interest, might
                                               apply where the Reg istrar
                                               has concerns about
                                               systemic unfair conduct by
                                               a registrant, including
                                               registering security
                                               interests in personal
                                               property that are not valid,
                                               for examp le because such
                                               security interests are void
                                               under consumer cred it
                                               laws regard less of
                                               registration. The
                                               regulations to be made
                                               under clause 184 could
                                               also address the
                                               Registrar‘s power to
                                               remove data fro m the
                                               register due to this sort of
Ve rsion 6: 10 th March 2010                                                                                  85 of 131

                                                           Responses to comments recei ved on
                                                Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                Issue                AGD Comment
                                                     systemic conduct.

                         AG 6                        Will the removal of data 7     Yes.
                                                     years after the effective
185                               Phyllis Ray mond
                                                     date be electronically
                                                     done.

                         AG 6                        What affect will this          This is a matter that the Registrar will need to take into account in exercising the
                                                     clause have on                 discretion under subsection 188(1).
188 (2)                           Phyllis Ray mond   registrations made after the
                                                     error was made and before
                                                     the correction was done.

                         AG 6                        There is nothing in this       The Depart ment notes section 272 of the Act.
                                                     clause which states that the
                                                     Registrar, Deputy
Part 5.9                          Phyllis Ray mond   Registrar or agent will not
                                                     be held liable for any
                                                     actions done when acting
                                                     in good faith.

Part 7.2                                             General co mments:             (a) Consistency with conventions facilitates international transactions and adoption of the
                                                                                    convention by Australia.
                                                     (a) Adoption of
                                                        Conventions: There is       The conflict of laws rules relating to investment entitlements (now called intermediated
                                                        no reason for the PPS       securities) are being considered separately by the Govern ment in the context of the Hague
                         AG2      Clayton Utz           legislation to be           Conference Convention on Choice of Laws for Intermed iated Securit ies.
                                                        consistent
                                                        with conventions not        The Act reflects the intended policy outcome. A llo wing choice of law in relation to the
                                                        adopted by Australia.       validity, perfection and effect of perfection or non-perfect ion of a security interest would
                                                                                    result in uncertainty for third part ies. Consider the case where a person grants a security
                                                     (b) Investment                 interest in a motor vehicle, but the parties agree that the law of New Zealand (for

Ve rsion 6: 10 th March 2010                                                                                                                                        86 of 131

                                                                 Responses to comments recei ved on
                                                      Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.   Submi tter              Issue                AGD Comment
                                                 Entit lements: Part 7.2       example) should govern the validity, perfection and effect of perfection or non-perfection
                                                 does not include any          of the security interest. A person contemplating acquiring an interest in the vehicle wou ld
                                                 provisions in respect of      not know that they should search the New Zealand PPS Reg ister instead of the Australian
                                                 investment entitlements.      PPS Reg ister.
                                                 Investment entitlements
                                                 should be dealt with in       (b), (c) & (d) subsection 237(2) has the effect that all assignments of accounts by a
                                                 the same manner as            grantor, and security interests in accounts held by a grantor, will be governed by the same
                                                 financial property.           law. Th is will p rovide certainty for third parties contemplat ing taking an assignment of
                                                                               an account, because it will allow them to determine the law that would have applied to
                                               (c) Clause 237 should           any earlier assignment of the account (and therefore any disclosure that might have been
                                                  allo w the parties to a      made in relation to that earlier assignment).
                                                  security agreement to
                                                  select a non-Australian      (e) The Depart ment notes that this issue is addressed in Item 46 of Schedule 4 of the
                                                  law to govern their          Personal Property Securities (Consequential A mendments) Act 2009. This item inserts a
                                                  security agreement. If       new subsection 238(1A) for determin ing the applicable law for the perfection, and effect
                                                  the grantor is an            of perfection or non-perfection of a PPSA security interest in goods. The applicable law
                                                  Australian entity at the     would be that of the jurisdiction in wh ich the goods are located at the time it beco mes
                                                  time the security            necessary to consider the perfection of the PPSA security interest.
                                                  interest attaches to the
                                                  collateral and the parties
                                                  to the security interest     This would mean that, in determining whether there is a perfected PPSA security interest
                                                  select a law other than      in the goods, it would be necessary to apply the law of the place where the goods were
                                                  Australian law to apply      located at the relevant time, and if necessary to search the PPS Register of that place, and
                                                  in circu mstances where      not the place where the goods were located when the PPSA security interest attached to
                                                  this would not be            the goods.
                                                  man ifestly contrary to
                                                  public policy,               This item retains an exception in subsection 238(2) for goods which are about to be
                                                  Australian courts should     moved between jurisdictions. The law of the jurisdiction to which the goods are moved
                                                  permit that law to           will apply where it is reasonable to believe that the goods will be moved to the
                                                  determine questions of       jurisdiction.
                                                  validity, perfection and
                                                  the effect of perfection     The amend ment replaces the existing reference to the reasonable belief of secured party
                                                                               with an objective test. The effect is that a person with knowledge of all the circu mstances
Ve rsion 6: 10 th March 2010                                                                                                                                  87 of 131

                                                           Responses to comments recei ved on
                                                Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues       Sub no.   Submi tter             Issue                 AGD Comment
                                               and non-perfection.          should be able to determine wh ich law will apply to the PPSA security interest, and that
                                                                            this should not depend on the reasonableness of the secured party‘s belief.
                                            (d) Clause 237(2) should
                                                                            (f) The Depart ment notes that this issue is addressed in Items 87 and 88 of Schedule 2 of
                                               be deleted. There is no
                                                                            the Personal Property Securit ies (Co rporations and Other Amend ments) Bill 2010. These
                                               compelling reason for
                                                                            items clarify that the only accounts that are proceeds that should be exempt fro m the
                                               the exclusions that are
                                                                            general rule in section 241 are those that do not arise fro m a dealing with the collateral.
                                               provided for in that
                                                                            This change will mean that accounts that do arise fro m a dealing with the collateral will
                                               clause.
                                                                            be governed by the same law as originally governed the security interest. It will only be
                                                                            other accounts that will be governed by the rules as set out in section 239. This will
                                            (e) Clause 238(2) relies on
                                                                            continue to facilitate transfers of accounts whilst protecting the interests of the secured
                                               the reasonable belief of     party who should not find themselves subject to a different law merely because an item of
                                               the secured party and
                                                                            collateral has been sold with the result being that the proceeds, in the form o f an account,
                                               this is impractical. The
                                                                            is suddenly governed by a different law.
                                               rule should be changed
                                               to look at the question
                                               of whether objectively it          Example
                                               was likely that the
                                                                                  A secured party has a security interest in an apple. The grantor sells the apple on
                                               goods would be moved
                                                                                  credit. The receivable owed to the grantor is an account. The security interest
                                               to a particular
                                                                                  extends to the account as proceeds arising fro m a dealing in the collateral that gave
                                               jurisdiction.
                                                                                  rise to the proceeds. The security interest in the account should be governed by the
                                               Alternatively, the rule
                                                                                  same law that governs the security interest in the apple.
                                               could simp ly be to
                                               apply the law of the
                                               place where the grantor
                                               is located at the time the
                                               security interest
                                               attached (under that
                                               law) to the collateral in
                                               the case where goods
                                               move fro m one
                                               jurisdiction to another.

                                            (f) The Exp lanatory
            th
Ve rsion 6: 10 March 2010                                                                                                                                  88 of 131

                                                        Responses to comments recei ved on
                                             Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.       Submi tter               Issue               AGD Comment
                                                      Memorandu m states
                                                      that the exclusions in
                                                      clauses 241(1) and
                                                      241(2) for accounts
                                                      which are proceeds is
                                                      intended to facilitate
                                                      transfers of accounts.
                                                      To reflect this intention,
                                                      only transfers of
                                                      accounts that occur
                                                      separately from the
                                                      transfer of the collateral
                                                      that gave rise to the
                                                      accounts should be
                                                      excluded.

Part 7.2                                                                           The complexity reflects the complexity inherent in the subject matter.
                                                    The provisions are too
                               6   Clayton Utz
                                                    complex.
233-241

                                   Co mbined four   Types of property should       Subsection 237(2) is intended to facilitate certainty for 3rd parties (particularly later
237(2)                     17
                                   law firms        not be quarantined.            purchasers) concerning the law governing these transactions.

                                                    Bill should outline a clear    The Depart ment notes sections 267 and 268 o f the Act.
                                                    process for a security
                                   Legal Aid
267-268                    11                       interest when the holding
                                   Queensland
                                                    company goes into
                                                    liquidation.

                                                    Unsecured creditors can        The secured party can protect its position by perfecting its security interest.
267                            6   Clayton Utz
                                                    receive a windfall gain.


Ve rsion 6: 10 th March 2010                                                                                                                                         89 of 131

                                                                Responses to comments recei ved on
                                                     Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.        Submi tter                Issue               AGD Comment
                                                       Should not apply to leases,   Unsecured creditors are entitled to rely on the register to provide notice of security
                                                       bailments or co mmercial      interests that would survive the grantor‘s insolvency.
                                                       consignments – why
                                                       should the interest of the
267                            6   Clayton Utz
                                                       legal o wner be defeated
                                                       where there is no
                                                       competing perfected
                                                       security interest.

                                                                                     The Depart ment notes that this issue is addressed in Item 110 of Schedule 2 of the
                                                                                     Personal Property Securities (Corporations and Other Amend ments) Act 2010.

                                                                                     The current effect of the legislation is that a security interest that attaches after the event
                                                                                     would not vest in accordance with the section. As a matter of policy, there is no reason
                                                                                     why a security interest that attaches after the event should not vest in the grantor if it is
                                                                                     unperfected.
                                   Co mbined four
                                                       Vesting of unperfected
                                   law firms,
                                                       security interests on         This amend ment would have the effect that an unperfected security interest that attaches
267                      17, 18    Australian
                                                       insolvency; drafting          to the collateral after the event referred to in paragraph 267(1)(a), in accordance with a
                                   Securitisation
                                                       problems.                     security agreement made before that event, would vest in the grantor in the same way that
                                   Foru m
                                                                                     security interests that attach before the relevant time.

                                                                                     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).



                                   Insolvency                                        The Depart ment notes that this issue is addressed in Items 107, 108 & 109 of Schedule 2
                                                       Note 2 should refer to s267
267                        10      Practit ioners of                                 of the Personal Property Securities (Corporations and Other Amend ments) Bill 2010.
                                                       of Corporat ion Act.
                                   Australia

Ve rsion 6: 10 th March 2010                                                                                                                                           90 of 131

                                                                   Responses to comments recei ved on
                                                        Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                  Issue               AGD Comment

                                                                                     Item 107 amends Note 2 to draw attention to the interaction between section 267 of the
                                                                                     PPS Act and both sections 266 and 267 o f the Corporations Act 2001.

                                                                                     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 2001, which is inserted by
                                                                                     Part 9 in Schedule 1 of this Act. Th is item co mmences at the registration commencement
                                                                                     time.
                                                                                     Item 109 brings the note into line with the standard note used for this purpose of the PPS
                                                                                     Act.



                                                      Unnecessary and should be      The provision reflects the policy in relat ion to this matter.
                                                      omitted as it expropriates
                                                      the property of the secured
267                        26     The Victorian Bar   party in favour of the
                                                      unsecured creditors and
                                                      incorporates notions of
                                                      reputed ownership.

                                                      Turnover trusts not            The provision reflects the policy in relat ion to this matter.
                                  Co mbined four
268(2)                     17                         successfully excluded
                                  law firms
                                                      fro m vesting provisions.
                                                      Entit lement to damages.       Providing co mpensation in all cases would minimise the incentive to register, which
                                                      Clause should be wider in      would undermine its efficacy and accuracy. The current result reflects the policy choice
                                                      covering all circu mstances    made to adopt a functional approach to security interests, including those where the
                                  Co mbined four
269                      AG 7                         where the secured party        secured party retains title. Co mpensation in all cases where the secured party had title and
                                  law firms
                                                      had title and lost it by the   lost it would undermine th is policy choice.
                                                      vesting. The Depart ment
                                                      has asked why we think

Ve rsion 6: 10 th March 2010                                                                                                                                       91 of 131

                                                                  Responses to comments recei ved on
                                                       Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.       Submi tter                Issue            AGD Comment
                                                   that the clause should
                                                   apply to all circu mstances
                                                   where the secured party
                                                   has title to the asset and
                                                   lost it by the vesting.
                                                   However, it is not clear to
                                                   us why the clause does not
                                                   so apply. Any person who
                                                   has their rights vested in
                                                   the grantor should be
                                                   entitled to compensation.
                                                   The only qualification on
                                                   that should be that where
                                                   the right confiscated
                                                   secures another obligation
                                                   it should not entitle them
                                                   to additional compensation
                                                   over and above the other
                                                   obligation. As drafted the
                                                   section is too narrow and
                                                   risks a situation where
                                                   property of a kind not
                                                   specifically identified is
                                                   confiscated without
                                                   appropriate compensation
                                                   being in place.



                                                   Time at which knowledge       These provisions now more closely reflect the New Zealand and Saskatchewan
Part 8.6                       6   Clayton Utz     tested – now unclear in       provisions.
                                                   many provisions.


Ve rsion 6: 10 th March 2010                                                                                                                            92 of 131

                                                               Responses to comments recei ved on
                                                    Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                   Issue               AGD Comment
                                                       Definition of 'constructive    The provision reflects the policy in relat ion to this matter.
297                        13     DLA Ph illips Fo x
                                                       knowledge'.

                                                       Given the importance of        Section 297 is based on the existing general law about when a person will have
                                                       constructive knowledge         knowledge of matters. It is not intended that the Act should seek to further codify these
                                                       for the operation of the       general law princip les.
                                                       Bill, we believe it is
                                                       important to clarify when a
                                                       person should have to
                                                       make enquiries. At the
                                                       mo ment, clause 297 is
                                                       unclear as to the
                                                       circu mstances in which a
                                                       person would be deemed
                                                       to have constructive
                                                       knowledge as this depends
                                                       on a view being taken as to
297                      AG1      DLA Ph illips Fo x
                                                       when enquiries would
                                                       ordinarily be made by an
                                                       honest and prudent person.
                                                       This will lead to litigation
                                                       and accordingly the clause
                                                       should be modified to refer
                                                       to the specific
                                                       circu mstances where a
                                                       person should make such
                                                       enquiries. Alternatively,
                                                       regulations should deal
                                                       with this matter. See also
                                                       our comment belo w on
                                                       clause 300.


Ve rsion 6: 10 th March 2010                                                                                                                                       93 of 131

                                                                   Responses to comments recei ved on
                                                        Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.       Submi tter                   Issue              AGD Comment
                                                        Clause 299 should apply to    An interest in personal property may itself be personal property to which section 299
                                                        any transaction where a       would apply. For example, a beneficial interest in a motor vehicle is personal property.
                                                        person acquires not only
                                                        personal property but an
                                                        interest in personal
                                                        property.

                                                        Co mments have been
                                                        made that this clause
                                                        should apply where a
                                                        person acquires not only
299(1)(a)                AG1       DLA Ph illips Fo x   personal property in fu ll
                                                        but an interest in personal
                                                        property. Presumab ly, the
                                                        policy behind the inclusion
                                                        of clause 299 applies
                                                        equally to all persons who
                                                        acquire an interest in
                                                        personal property and not
                                                        only a person who
                                                        acquires personal property
                                                        in a sale and purchase
                                                        arrangement.

                                                        This clause (and others)      Section 299(1)(a) reflects the intended policy effect. The Depart ment would welco me
299(1)(a)                      6   Clayton Utz          should refer to an interest   comment on wh ich provision inappropriately refer to an interest in personal property.
                                                        in personal property.

                                                        Parties should be on notice   Section 300 is based on provision in the Saskatchewan (section 47) and New Zealand
300                      AG1       DLA Ph illips Fo x   of the contents of the        (section 20) PPS legislat ion, wh ich also provide that registration of a financing statement
                                                        register.                     in the registry is not constructive knowledge of its existence or contents to any person.

Ve rsion 6: 10 th March 2010                                                                                                                                          94 of 131

                                                                    Responses to comments recei ved on
                                                         Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.   Submi tter               Issue                AGD Comment
                                               In response to Clayton           Section 300 has the effect that a person will not have actual or constructive knowledge of
                                               Utz's comments on                the data in a PPS registration. It is intended that, for the purposes of Section 297, an
                                               clause 267, the                  honest and prudent person would not as a matter of usual business practice routinely
                                               Depart ment advises that         search the PPS register, as this would undermine the effect of section 300 that a person
                                               'unsecured creditors are         does not have actual or constructive knowledge of the data in PPS registration. Before
                                               entitled to rely on the          section 297 could apply to confer constructive knowledge of a registration on an honest
                                               register to provide notice       and reasonable person, the person would need to have a reason to search the register.
                                               of security interests that
                                               would survive the grantor's      One leg islative strategy would be to provide that a purchaser takes the collateral free of
                                               insolvency'. Clause 300          the security interest when they do so without notice of the security interest. The Act
                                               provides that 'a person          could then have gone on to deem people to have constructive notice of registrations.
                                               does not have notice, or
                                               actual or constructive           The Act avoids the artificiality of deeming by providing direct ly that a purchaser takes
                                               knowledge, about the             collateral subject to a registered security interest (see paragraph 32(1)(a)).
                                               existence or contents of a
                                               registration merely              The Act also avoids the compliance costs associated with requiring people to search the
                                               because data in the              register and obtain a certificate. Whether a person takes free of a registered security
                                               registration is availab le for   interest will depend on whether the security interest was registered at the relevant time.
                                               search on the register'.         Whether the purchaser incurred the expense of undertaking a search will be irrelevant.

                                               Given the objective of the
                                               reform to provide a single
                                               national register wh ich is
                                               to facilitate dealings with
                                               personal property, and the
                                               clear importance placed on
                                               registration (and its
                                               accuracy), persons dealing
                                               with personal property
                                               (subject to perhaps a
                                               number of exceptions
                                               relating to personal

Ve rsion 6: 10 th March 2010                                                                                                                                    95 of 131

                                                           Responses to comments recei ved on
                                                Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.   Submi tter                 Issue            AGD Comment
                                               property which is dealt
                                               with on financial markets
                                               and consumer property
                                               valued below a part icular
                                               threshold) should be
                                               deemed to have knowledge
                                               of information on the
                                               register. The justification
                                               for such approach is also
                                               highlighted by the ease by
                                               which the register will be
                                               able to be searched.
                                               Alternatively, as
                                               mentioned above,
                                               clause 297 should provide
                                               guidelines or an inclusive
                                               list of part icular
                                               circu mstances in which
                                               searches must be
                                               undertaken. Indeed, this
                                               approach is consistent with
                                               the REVS system in New
                                               South Wales which
                                               provides parties who
                                               search a register and
                                               obtain a REVS certificate
                                               will receive clear t itle to
                                               the vehicle. In the absence
                                               of obtaining such
                                               certificate or purchasing
                                               the vehicle fro m a licensed
                                               dealer, there is no

Ve rsion 6: 10 th March 2010                                                                                  96 of 131

                                                           Responses to comments recei ved on
                                                Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter             Issue                 AGD Comment
                                                  guarantee of such title.

                                                  As currently drafted clause      The Depart ment notes that security agreement is defined broadly to means :
                                                  314 states that Chapter 4
                                                  only applies in relation to      (a) an agreement or act by which a security interest is created, arises or is provided for;
                                                  security interests provided      or (b) writ ing evidencing such an agreement or act. For reasons associated with section
                                                  for by security agreements       51(xxxi.) of the Constitution, it is not possible for the enforcement provisions to apply in
                                                  made at or after the             relation to security interests that arise under security agreements made before the
                                                  registration                     registration commencement time.
                                                  commencement time.
                                                  Chapter 4 will in fact also
                                                  apply to security interests
                                                  created by means other
                                                  than by security
314                      AG2      Clayton Utz     agreements where made at
                                                  or after the reg istration
                                                  commencement time.

                                                  Clause 314 needs to be
                                                  expressed in the negative.
                                                  That is, it should state that
                                                  Chapter 4 does not apply
                                                  in relation to security
                                                  interests provided for by
                                                  security agreements made
                                                  prior to the registration
                                                  time.

                                                  Provisionally registered        The Depart ment notes that section 333(1)(b) requires that ‗registrations in that transitional
332                                               charges should be               register with respect to personal property of that class were effect ive immediately before
                         AG2      Clayton Utz     considered to be                the time the data was given to the Registrar‘.
                                                  effectively registered for
                                                  the purposes of clause          Paragraph 333(1)(b ) does not require that an effective registration have a particular legal
Ve rsion 6: 10 th March 2010                                                                                                                                     97 of 131

                                                              Responses to comments recei ved on
                                                   Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter              Issue               AGD Comment
                                                  332(c) of the PPS Bill.        effect, only that the registration is ‗effective‘. While the registration itself is effective, the
                                                                                 registration does not have the effect of registering the charge.

                                                                                 However, the Depart ment considers that a registration that includes the word ‗provisional‘
                                                                                 is effective as a reg istration on the Register of Co mpany Charges. The fact that the
                                                                                 registration is at risk of being deleted in accordance with subsection 265(5) or paragraph
                                                                                 (7)(b) o f the Co rporations Act 2001 does not detract from its effectiveness as a
                                                                                 provisional registration. The registration is effect ive as a provisional registration despite
                                                                                 that fact that the charge is taken not be registered while it includes he word ‗provisional‘
                                                                                 (see Corporations Act 2001, section 265(9)(a)).

                                                  This could either be done
                                                  by amending the PPS Bill
                                                  or by an appropriate
                                                  transitional provision for
                                                  the Corporations Act. If
                                                  ASIC has issued (or could
                                                  issue) a notice under
                                                  section 265(6)(b) of the
                                                  Corporations Act in
332                                               relation to a provisional
                         AG2      Clayton Utz     registration which does not
                                                  relate to stamp duty that
                                                  notice should be either
                                                  deemed to be issued by the
                                                  PPS registrar or actually
                                                  issued by the PPS
                                                  registrar. A failure to
                                                  respond to the notice
                                                  should result in the charge
                                                  not being considered to be
                                                  a migrated security interest
                                                  where, as a result of the
Ve rsion 6: 10 th March 2010                                                                                                                                        98 of 131

                                                              Responses to comments recei ved on
                                                   Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                 Issue              AGD Comment
                                                   failure to respond, the PPS
                                                   registrar cannot complete
                                                   registration on the PPS
                                                   register. Provisional
                                                   registration arising fro m a
                                                   stamp duty deficiency is
                                                   not relevant under the new
                                                   PPS regime.

                                                   Even though the ASIC            The Depart ment notes that the Registrar‘s capacity to register a financing statement under
                                                   register of co mpany            subsection 333(2) is confined to cases in which data in a transitional register is given to
                                                   charges should be closed        the Registrar. The Registrar is unable to register a financing statement on the basis that
                                                   fro m the reg istration         the admin istrator of a transitional register has taken an admin istrative step prelimin ary to
                                                   commencement time, any          the registration of the data (without having registered the data).
332                                                charge documents lodged
                         AG2      Clayton Utz      with ASIC that are
                                                   assigned an ASIC
                                                   "docimage" number
                                                   should also be considered
                                                   to be effectively reg istered
                                                   for the purposes of clause
                                                   332(c) of the PPS Bill.

                                                   References to fi xed and        The Depart ment notes that fixed and floating charges are addressed in Items 61 & 62 of
                                                   floating charges. Part 9.5      Schedule 4 of the Personal Property Securities (Consequential A mend ments) Act 2009.
                                                   is appropriate where a law
                                                   or a security agreement
                                  Co mbined four                                   Item 61 corrects a drafting error clarify ing that the intended operation of the provisions on
Part 9.5                 AG 7                      refers to a floating charge
                                  law firms        but does not identify the       charges and fixed and floating charges extends to all Co mmon wealth legislation.
                                                   property over which the
                                                   charge is to float.             Item 62 item inserts a new paragraph 339(1)(c), which limits the application of the section
                                                   However, if a security          – ―the charge is a security interest to which this Act applies.‖.
                                                   agreement exp ressly
Ve rsion 6: 10 th March 2010                                                                                                                                        99 of 131

                                                               Responses to comments recei ved on
                                                    Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                  Issue              AGD Comment
                                                     identifies the property over
                                                     which a charge is to float     This amend ment ensures that section 339 applies to refe rences to charges only to the
                                                     rather than be fixed, we       extent that they are security interests.
                                                     can think of no good
                                                     policy reason why the
                                                     statute should re-write the
                                                     commercial arrangement
                                                     that the parties have
                                                     negotiated. Can Part 9.5
                                                     be qualified so that it only
                                                     applies where the law or
                                                     security agreement does
                                                     not identify the property
                                                     over which the charge is to
                                                     float?

                                                     The references in clause       Subsection 339(2)(b) is intended to address a case when a security agreement made after
                                                     339(2)(b) to a t ransfer of    commencement uses the expression ‗charge‘ or ‗floating charge‘, and is intended to make
                                                     an account or chattel paper    it clear that these references do not include a perfected security interest that is provided
                                                     are confusing. A perfected     for by a transfer of an account or chattel paper.
                                                     security interest which is a
339(2)                   AG2      Clayton Utz        transfer of an account or
                                                     chattel paper will not, at
                                                     general law, be considered
                                                     to be a floating charge.
                                                     The intention of the clause
                                                     should be made clearer.

                                                   Section 2 – Comments & Responses by further topics – Al phabetical

                                  Co mbined four     Weakening of asset             The Act has the intended policy effect. The Depart ment has noted this comment. It
Assets Charges             17
                                  law firms          charges and other security.    considers that the question should not be whether a particular security is weakened, but

Ve rsion 6: 10 th March 2010                                                                                                                                     100 of 131

                                                                 Responses to comments recei ved on
                                                      Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.       Submi tter              Issue              AGD Comment
                                                                                 whether the Act strikes an appropriate balance between compet ing parties.

                                                                                 The PPS Act may need to be amended should the Govern ment decide to imp lement the
                                                                                 Convention and Protocol.

                                                                                 In preparation for the possible ratification of the Convention and Protocol, the definition
Cape Town                                          Whether the bill precludes
                                                                                 of 'aircraft', 'aircraft engine', 'airframe' and 'helicopter' to be prescribed under the PPS
Convention &                                       ratification of the Cape
                                                                                 Regulations will mirror the definit ions contain in the Convention and Protocol. The PPS
Aircraft                       3   James Kimpton   Town Convention and
                                                                                 Register has also been designed so that the informat ion on security interest over an
Equip ment                                         Aircraft Equip ment
                                                                                 aircraft mirrors the informat ion required for reg istrations on the Cape Town Convention's
Protocol                                           Protocol.
                                                                                 International Reg ister. (see discussions of sections 43,44 and 153 in PPS Regulations -
                                                                                 updated Regulation Paper - October 2009 [DOC 1.22MB]).



                                                   We also have the              The ‗Describ ing Co llateral paper will not be used as a basis for the PPS Regulations. The
                                                   following additional          paper was made available in May 2009 to members of the PPS Info rmation Technology
                                                   comments in relation to       User Group (PPSITUG) the Depart ment has established to assis t informat ion technology
                                                   the "Describing Collateral"   professionals develop the informat ion technology that will be required to interface with
                                                   paper that the Attorney-      the Personal Property Securit ies Register. The Depart ment advises against relying on the
                                                   General's Depart ment         paper for other purposes. The Depart ment notes that it did not circulate the paper outside
Collateral -
                         AG5       Clayton Utz     released in May 2009. We      the members of the PPSITUG.
Description
                                                   have raised these
                                                   comments in this              A Discussion Paper on Regulations to be made under the Personal Property Securit ies Act
                                                   submission on the basis       was published in October 2009.
                                                   that we assume that paper
                                                   will be the basis of the
                                                   PPS Regulat ions:

Collateral -                                       There are a significant       This is a drafting issue and we do not consider that it will affect the operation of the PPS
Inconsistent use         AG2       Clayton Utz     number of places where        Act.
of the term                                        "collateral" is incorrectly
Ve rsion 6: 10 th March 2010                                                                                                                                   101 of 131

                                                               Responses to comments recei ved on
                                                    Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                     Issue               AGD Comment
                                                       used rather than "personal
                                                       property". For examp le,
                                                       clause 19(1) states that a
                                                       security interest is
                                                       enforceable in respect of
                                                       collateral only if the
                                                       security interest has
                                                       attached to the collateral.
                                                       In light of the definit ion of
                                                       "collateral", the defined
                                                       term used in this clause
                                                       should be "personal
                                                       property".

                                                       These references need to
                                                       be considered throughout
                                                       the PPS Bill.

Equitable and                     Australian           Equitable and legal              The Act does not affect the application of other legislation to legal and equitable
legal                      18     Securitisation       assignment; consistency          assignments of receivables.
assignment                        Foru m               with other legislation.

                                                       Makes suggestions to             The Depart ment has noted this comment.
                                                       ensure that the operation
                                  Women's Legal        of the register especially
Family Issues              22
                                  Service Victoria     protects women and
                                                       children fro m family
                                                       violence.

                                  Director of Public   Requests the ability to be       The Depart ment has noted this comment.
Family Issues              24     Prosecutions         able to register property
                                  Victoria             restraining orders on the
Ve rsion 6: 10 th March 2010                                                                                                                                          102 of 131

                                                                   Responses to comments recei ved on
                                                        Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.       Submi tter                   Issue               AGD Comment
                                                        PPSR.

                                                        Fixtures and fittings          The Standing Co mmittee of Attorney-General‘s is considering how fixtures and fittings
                                  Australian
Fittings &                                              should be reconsidered by      should be addressed by the Act.
                          12*     Institute of Credit
Fixtures                                                the state and territory
                                  Management
                                                        governments.

                                                        Floating charges - no          Negative restrictions do no create a security interest covered by the PPS Act.
Floating
                           26     The Victorian Bar     ability to register negative
Charges
                                                        restrictions.

Gu idance Notes                                         In almost all circu mstances   The Depart ment has referred this co mment to the Office of Parliamentary Counsel, which
                                                        the clauses which are in       has provided the following response:
                                                        "boxes" simplify the other
                                                        provisions of the Bill to an   ‗1.    The examples listed by Clayton Ut z do not contradict the provisions described;
                                                        extent that makes those               they are not wrong. They are simply expressed at a higher level of generality than
                                                        clauses contradictory to              the provisions described. This is the essential nature of an outline.
                                                        the remaining clauses in
                                                        the Bill. Examp les of         2.     OPC would be reluctant to insert an interpretative provision about the effect of the
                                                        where this has occurred               outline material. It is not our standard practice, and there are many instances on
                                                        are as follows:                       the statute book of outline material that is unsupported by any such provision. It is
                         AG2      Clayton Utz                                                 our view that co mmon sense dictates that the actual rule should take precedence
                                                        (a) Clause 3: The third               over an outline describing the rule (in the event of inconsistency), and there is no
                                                            paragraph refers to               need to state this expressly. Again, this is the essential nature of an outline. It
                                                            personal property                 does not prescribe the law; it describes the law.
                                                            including " many
                                                            different kinds" of        3.     The outline material is not included for the benefit of the PPS specialists at Clayton
                                                            tangible and intangible           Utz. It is included as an aid for a co mmercial lawyer who might not use the PPS
                                                            property. In fact, for            Act very often.‘
                                                            the purposes of the
                                                            legislation, personal
                                                            property is all tangible

Ve rsion 6: 10 th March 2010                                                                                                                                         103 of 131

                                                                    Responses to comments recei ved on
                                                         Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.   Submi tter               Issue               AGD Comment
                                                  and intangible property
                                                  other than land and
                                                  specific exceptions.
                                                  The same paragraph
                                                  states that "collateral"
                                                  is personal property
                                                  that is "or is anticipated
                                                  to be" subject to a
                                                  security interest. This
                                                  is not correct. To fall
                                                  within the definit ion of
                                                  collateral, a security
                                                  interest must have
                                                  attached to the personal
                                                  property or, for limited
                                                  purposes, the personal
                                                  property must be
                                                  described in a PPS
                                                  registration. It is not
                                                  sufficient that it is
                                                  "anticipated to be"
                                                  subject to a security
                                                  interest.

                                               (b) Clause 9: The last
                                                   sentence of clause 9
                                                   states that certain
                                                   transactions may give
                                                   rise to a security
                                                   interest even though
                                                   such transactions do
                                                   not secure payment or
                                                   performance of an
Ve rsion 6: 10 th March 2010                                                                                  104 of 131

                                                           Responses to comments recei ved on
                                                Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.   Submi tter                Issue             AGD Comment
                                                  obligation. The list
                                                  given is inaccurate. It
                                                  refers to all
                                                  consignments, however
                                                  clause 12(3) provides
                                                  that it is only interests
                                                  of consignors who
                                                  delivers goods to a
                                                  consignee under a
                                                  commercial
                                                  consignment that are
                                                  security interests
                                                  irrespective of whether
                                                  those transfers secure
                                                  payment or
                                                  performance of an
                                                  obligation. Also,
                                                  clause 9 does not
                                                  include reference to the
                                                  fact that clause 12(3)
                                                  provides for the
                                                  interests of a transferee
                                                  under a transfer of
                                                  chattel paper to be
                                                  security interests.

                                               Unlike the NZ legislat ion,
                                               which uses examp les
                                               throughout the PPS
                                               legislation of how the
                                               legislation will apply in a
                                               practical sense, these
                                               "boxed" clauses are of
Ve rsion 6: 10 th March 2010                                                                                  105 of 131

                                                           Responses to comments recei ved on
                                                Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                    Issue             AGD Comment
                                                     litt le value and are
                                                     confusing.

                                                     Accordingly the boxed
                                                     clauses should either be
                                                     deleted or an interpretation
                                                     provision included stating
                                                     that in the event of any
                                                     inconsistency between a
                                                     boxed clause and any other
                                                     provision of the
                                                     legislation, the other
                                                     provision prevails.

                                                     Implementation phases           The Depart ment has noted this comment.
Implementation                    Co mbined four
                           17                        insufficient; based on NZ
Phases                            law firms
                                                     experience.

                                                                                     The Depart ment notes that this issue is addressed in Item 70 of Schedule 4 of the Personal
                                                     Absolute assignments of
                                                                                     Property Securit ies (Consequential Amend ments) Act 2009. This item amend ment
Insolvency -                                         accounts and chattel paper
                                  Co mbined four                                     expands the exclusion to a security interest of a transferee under a transfer of an account
account or                 17                        should not vest on
                                  law firms                                          or chattel paper, if the transfer does not secure payment or performance of an obligation.
chattel paper                                        insolvency unless when
                                                                                     This ensures a consistent application of the rule in section 267 to interests that are deemed
                                                     they don't secure money.
                                                                                     security interests under subsection 12(3) of the PPS Act.

                                                                                     The Depart ment has noted this comment, and also that the follo wing provisions refer to
Investment                        Co mbined four     Investment entitlements         ‗investment entitlements‘: sections 15, 21, 23, 26, 30, 31, 41 42, 49, 51 and 109. The
                           17
entitlements                      law firms          are absent from Bill            Personal Property Securities (Consequential A mendments) Act 2009 added a reference to
                                                                                     ‗investment entitlements‘ to the following sections of the Act: sections 6, 26, 32 and 77.

Language of                                          The language of this piece      The Depart ment has noted this comment.
                         AG 6     Phyllis Ray mond
Legislat ion                                         of legislat ion is very clear
Ve rsion 6: 10 th March 2010                                                                                                                                       106 of 131

                                                                 Responses to comments recei ved on
                                                      Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter                 Issue                AGD Comment
                                                      and concise.

                                                      Query whether Bill             The Depart ment will consider the position of mortgage backed securities in the context of
                                  Australian
                                                      includes or excludes           regulations made under section 8.
Mortgages                  18     Securitisation
                                                      mortgage backed
                                  Foru m
                                                      securitisation.

                                                      Suggest making bill            The Depart ment has noted this comment.
                                  Australian
Negotiable                                            compatible with other
                           21     Financial Markets
instruments                                           legislation dealing with
                                  Association
                                                      negotiable instruments.

                                                      Bill should include powers     Section 184 will allow the Reg istrar to address systemic behaviour of the kind mentioned
Patterns of                       Legal Aid
                           11                         to address pattern of          in paragraph 184(1)(a).
Behaviour                         Queensland
                                                      behaviour conduct.

                                                      Bill should provide for        The Depart ment considers that the Act achieves the intended policy effect.
                                                      circu mstances where
Registration -                    Legal Aid           volume of requests to
                           11
delays                            Queensland          registrar leads to delay for
                                                      example, expand EDR
                                                      Schemes so they apply.

                         AG 6                         Reference has been made        The Depart ment has noted this comment.
                                                      to the development of
                                                      Regulations. One caution
                                                      is not to ties the
Regulations                       Phyllis Ray mond    Regulations to closely to
                                                      the Register. Names of
                                                      field and screen titles
                                                      should never be reference
                                                      in the Regulat ions in case

Ve rsion 6: 10 th March 2010                                                                                                                                       107 of 131

                                                                  Responses to comments recei ved on
                                                       Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.       Submi tter                  Issue              AGD Comment
                                                       they should change in the
                                                       future. This caution comes
                                                       fro m encountering this in
                                                       past experience with a
                                                       Register.

                                                       Suggest regulation power      The Depart ment notes the regulation making powers in sections 8 and 12.
                                                       with capacity to support
Regulations &                      Australian
                                                       substantive modification
Corporations               21      Financial Markets
                                                       of the act similar to the
Act                                Association
                                                       Corporations Act 2001
                                                       powers.

                                   Co mbined four                                    This will be considered in the course of settling the Regulations.
Repos, credit                                          Repos, credit support
                                   law firms
support                                                annexes, securities loans
annexes,                   17                          and similar should be
                                   Australian
securities loans                                       excluded fro m scope of
                                   Financial Markets
and similar                                            Bill.
                                   Association

                                                                                     The Depart ment notes that this issue is addressed in Items 15, 16 and 17 of Schedule 3 of
                                   Australian          Lack of clarity – impact on
                                                                                     the Personal Property Securit ies (Consequential Amend ments) Act 2009.
Shipping                   14      Bankers'            security interest over
                                   Association         ships.


                                                       Issues raised and             The Depart ment has noted these comments.
                                                       commented on by the
                       16, and                         department: ADI accounts;
                                   Professor Tony
Various issue         additional                       consumer goods, inventory
                                   Duggan
                      comments                         and equipment; low-value
                                                       goods; priority time;
                                                       inventory PMSIs and the

Ve rsion 6: 10 th March 2010                                                                                                                                     108 of 131

                                                                   Responses to comments recei ved on
                                                        Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter               Issue              AGD Comment
                                                   notice requirement; clause
                                                   64 process; and collateral.

                                                                                 The Depart ment:

                                                                                     (a) considers that the obligation owed by a person on an unsecured account is not a
                                                                                         security interest for the purposes of the Act;

                                                                                     (b) considers that a custodial does not hold the investment instrument on behalf of
                                  Australian                                             (ie as agent for) the ult imate owner. Rather, the custodian is an ‗investment
                                                   Minor draft ing matters at
Various issues             18     Securitisation                                         entitlement intermediary‘ with who m the person holds an ‗investment
                                                   p.5.
                                  Foru m                                                 entitlement‘ (see section 15).

                                                                                     (c) notes that the 5 business days provided for by section 38(c) is consistent with
                                                                                         periods generally allowed under the Act.

                                                                                     (d) notes that the grantor‘s details for the purposes of section 153 will be considered
                                                                                         in the context of the Regulations.

                                                   The Explanatory               The Explanatory Memorandum to the PPS Act has been amended to clarify and display a
                                                   Memorandu m to the PPSB       clear legislative intention that ‗irrigation rights‘ are excluded fro m the operation of the
                                                   refers at page 10 to          Act.
                                                   ―tradeable water rights,
                                                   water access
Water Rights -                                     entitlements…‖. That
                         AG3      Deacons          reference appears not to
Irrigation
                                                   have been updated since
                                                   the amend ment to
                                                   subparagraph 6(1)(i) of the
                                                   Exposure Draft.

                                                   At page 15, the

Ve rsion 6: 10 th March 2010                                                                                                                                   109 of 131

                                                               Responses to comments recei ved on
                                                    Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter               Issue              AGD Comment
                                                  Exp lanatory Memorandum
                                                  refers to ―a right under the
                                                  general law or
                                                  Co mmonwealth or State
                                                  and Territory laws wh ich
                                                  apply to the control or use
                                                  of water‖. This expression
                                                  suffers fro m the same
                                                  amb iguity as subparagraph
                                                  8(1)(i) of the PPSB.

                                                  The Explanatory
                                                  Memorandu m should be
                                                  amended to reflect the
                                                  current drafting of the
                                                  PPSB and the intention to
                                                  exclude irrigation rights
                                                  fro m the operation of the
                                                  PPSB.

                                                  Subparagraph 6(1)(i) of        See above.
                                                  the Exposure Draft dated
                                                  November 2008 excluded
                                                  the following water rights
                                                  fro m the operation of the
Water Rights -                                    PPSB:
                         AG3      Deacons
Irrigation
                                                  ―…a tradeable water right,
                                                  or a water access
                                                  entitlement, within the
                                                  mean ing of the Water Act
                                                  2007…‖.

Ve rsion 6: 10 th March 2010                                                                                     110 of 131

                                                              Responses to comments recei ved on
                                                   Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter              Issue               AGD Comment
                                                  In the Water Act 2007
                                                  (Cth), ―tradeable water
                                                  rights‖ include ―irrigation
                                                  rights‖.

                                                  Therefore, irrigation rights
                                                  were clearly excluded
                                                  fro m the operation of the
                                                  PPSB in the Exposure
                                                  Draft.

Water Rights -                                    3.1 Irrigation rights are      See above.
Irrigation                                        rights held by persons
                                                  against irrigation
                                                  infrastructure operators
                                                  under contracts. They are
                                                  not granted by or under a
                                                  law of the Co mmonwealth,
                                                  a State or a Territory.
                                                  Therefore, whether
                                                  irrigation rights are
                         AG3      Deacons         covered by subparagraph
                                                  8(1)(i) of the PPSB
                                                  depends on whether
                                                  irrigation rights can be
                                                  said to be granted ―by or
                                                  under the general law‖.

                                                  3.2 The exp ression
                                                  ―general law‖ is defined in
                                                  the PPSB to mean ―the
                                                  principles and rules of the
Ve rsion 6: 10 th March 2010                                                                                     111 of 131

                                                              Responses to comments recei ved on
                                                   Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.   Submi tter            Issue                 AGD Comment
                                               common law and equity‖.

                                               3.3 On one view, the law
                                               of contract is part of the
                                               principles and rules of the
                                               common law and equity,
                                               and a party‘s rights under a
                                               contract are enforceable in
                                               accordance with the
                                               principles and rules of the
                                               common law and equity.
                                               Therefore, on this view, an
                                               irrigation right could be
                                               said to be a right under the
                                               general law of contract.

                                               3.4 On the other hand,
                                               however, a contract can
                                               itself be described as a
                                               source of

                                               rights and obligations, and
                                               there are many rules and
                                               principles of the co mmon
                                               law that can be excluded
                                               by a contract. Rights under
                                               the general law and rights
                                               under a contract are
                                               frequently pleaded
                                               separately in the courts.

                                               3.5 Fu rthermore, there are
                                               explicit references
Ve rsion 6: 10 th March 2010                                                                                  112 of 131

                                                           Responses to comments recei ved on
                                                Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.   Submi tter               Issue             AGD Comment
                                               elsewhere in the PPSB to
                                               the term ―contract‖ (for
                                               example, ―close-out
                                               netting contract‖ and
                                               ―market netting contract‖
                                               in subparagraph 8(1)(e))
                                               and the term "agreement"
                                               (for examp le, the
                                               definit ions of "commercial
                                               consignment" and
                                               "security agreement").

                                               In addition, the term

                                               "general law" is used
                                               elsewhere in the PPSB to
                                               distinguish from
                                               contractual rights (see
                                               subparagraph 267(3)(a)). If
                                               parliament intends that
                                               irrigation rights be
                                               encompassed by
                                               subparagraph 8(1)(i), it
                                               could use the term
                                               ―contract‖ or "agreement",
                                               or avail itself of the
                                               terminology used in the
                                               Water Act 2007 (Cth) as it
                                               did in the Exposure Draft.
                                               The current drafting of the
                                               PPSB could be taken to
                                               mean that water access
                                               licences under the laws of
Ve rsion 6: 10 th March 2010                                                                                  113 of 131

                                                           Responses to comments recei ved on
                                                Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter               Issue               AGD Comment
                                                  a State or Territory and
                                                  rights directly held under
                                                  the general law, such as
                                                  riparian rights, are
                                                  excluded fro m the
                                                  operation of the PPSB, but
                                                  contractual rights, such as
                                                  irrigation rights, are
                                                  included.



                                                  3.6 In our opinion, there
                                                  are reasonable arguments
                                                  on both sides as to whether
                                                  the expression ―by or
                                                  under the general law‖
                                                  includes rights under a
                                                  contract. The

                                                  position under the PPSB is
                                                  significantly less clear than
                                                  the position under the
                                                  Exposure Draft.

Water Rights -                                    We understand that the          See above.
Exclusion                                         purpose of the amend ment
                                                  to subparagraph 6(1)(i) of
                         AG3      Deacons         the Exposure Draft, now
                                                  contained in subparagraph
                                                  8(1)(i) of the PPSB, was to
                                                  broaden the scope of the

Ve rsion 6: 10 th March 2010                                                                                     114 of 131

                                                              Responses to comments recei ved on
                                                   Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.   Submi tter              Issue                 AGD Comment
                                               exclusion, not to reduce it.

                                               5.2 However, as we have
                                               set out in this submission,
                                               one unintended
                                               consequence of the
                                               amend ment to
                                               subparagraph 6(1)(i) of the
                                               Exposure Draft has been to
                                               cast

                                               doubt on whether
                                               irrigation rights are now
                                               excluded fro m the
                                               operation of the PPSB.

                                               5.3 If it is the intended that
                                               irrigation rights be
                                               excluded fro m the
                                               operation of the

                                               PPSB, subparagraph
                                               8(1)(i) should be amended
                                               to express that intention
                                               clearly.

                                               6. Reco mmendations

                                               6.1 We reco mmend that
                                               subparagraph 8(1)(i) of the
                                               PPSB be amended so that
                                               irrigation rights are clearly
                                               excluded fro m the
Ve rsion 6: 10 th March 2010                                                                                  115 of 131

                                                           Responses to comments recei ved on
                                                Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.        Submi tter                Issue                AGD Comment
                                                      operation of the PPSB.

                                                      6.2 In addit ion, for clarity
                                                      and to assist with
                                                      interpretation of the PPSB,
                                                      we reco mmend that the
                                                      Exp lanatory Memorandum
                                                      to the PPSB clearly state
                                                      that irrigation rights as
                                                      defined in the Water Act
                                                      2007 (Cth) are excluded
                                                      fro m the operation of the
                                                      PPSB.

                                  Section 3 – Comments & Responses - Consequenti al Amendments - Corporations Act & Other Legislation

                                                      Synchronise                     The two Bills will be progressed separately through the Parliament.
National
                                                      commencement of the bill
Consumer                           Legal Aid
                           11                         with the Nat ional
Cred it                            Queensland
                                                      Consumer Credit
Protection Bill
                                                      Protection Bill.

Corporations                                                                          The service provisions of the Bill have been drafted for consistency with the Electronic
                                   Insolvency         Service of documents;
Act 2001                                                                              Transactions Act 1999.
                           10      Practit ioners     consistency with
                                   Australia          Corporations Act.


                                                      Possible conflict with          The Depart ment notes that sections 266 and 267 would be been repealed along with the
Corporations
                                   Australian         section 266 o f                 rest of Chapter 2K fro m the Corporations Act 2001 through Item 18 of Schedule 1 o f the
Act 2001
                           14      Bankers'           Corporations Act– certain       Personal Property Securities (Corporations and Other Amend ments) Bill 2010.
                                   Association        charges void against
                                                      liquidator.                     This noted, the effect of these two sections largely continues as they have been relocated

Ve rsion 6: 10 th March 2010                                                                                                                                      116 of 131

                                                                  Responses to comments recei ved on
                                                       Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.       Submi tter             Issue               AGD Comment
                                                                                 to Chapter 5 of the Corporations Act 2001through new sections 588FL and 588FP
                                                                                 respectively. Sections 588FL and 588FP will be created through Item 183 o f Schedule 1
                                                                                 of the Personal Property Securities (Corporations and Other Amend ments) Bill 2010.

                                                                                 A discussion of these amendments can be found in ‗Closing the Register of Charges under
                                                                                 CA, Chapter 2K‘ in para. 3.1-3.6 of the Corporat ions and Other Amendments Bill 2009 -
                                                                                 Exposure Draft and Co mmentary [DOC 448KB].

Corporations                                                                     The Depart ment will consider, together with the Depart ment of the Treasury, whether
Act 2001                                           Clause 266 and 267            Corporations Act 2001 sections 266 and 267 should be relocated to Chapter 5 of
                               6   Clayton Utz
                                                   Corporations Act              Corporations Act (though amended to reflect the co mmencement of the PPS Act).



                                                   The following is a
                                                   summary of the provisions
                                                   of Chapter 2K that should
                                                   continue to apply after the
                                                   registration
                                                   commencement time. A ll
                                                   other provisions in Chapter
Corporations                                       2K should not apply,
Act 2001                                           except to the extent noted
                         AG2       Clayton Utz     above. Other than in
                                                   relation to section 266, we
                                                   have not provided reasons
                                                   why those other sections
                                                   should cease to apply (this
                                                   is generally self
                                                   explanatory).
                                                                                 (a) section 267 will continue to apply for seven years in respect of registrable charges. It
                                                   (a) Section 267 should        would also continue as section 588FP, wh ich would on ly apply to security interests under
                                                       continue to apply but     the Corporations Act 2001, (excluding ROT property);
Ve rsion 6: 10 th March 2010                                                                                                                                  117 of 131

                                                               Responses to comments recei ved on
                                                    Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.   Submi tter               Issue              AGD Comment
                                                   be relocated to Part
                                                                      (a)
                                                   5.7B of the
                                                   Corporations Act.(b) We
                                                   believe it should apply
                                                   only to "charges" (c)
                                                                      as
                                                                      in
                                                   currently defined (d)the
                                                   Corporations Act, not
                                                                      (e)
                                                   the broader concept of
                                                   "security interest"(f)
                                                   under the PPS Bill.
                                                                      (g)
                                                   For the other types of
                                                   interest caught by the
                                                   broader concept of
                                                   "security interest" the
                                                   other voidable
                                                   preference provisions
                                                   already in Part 5.7B of
                                                   the Corporations Act
                                                   are sufficient.
                                                                      (h)     (b) section 270 will continue to apply to registrable charges for 7 years after the
                                               (c) Section 270 should         Registration Co mmencement Time (except for subsection 270(4) wh ich will cease at the
                                                   cease to apply fro m the   RCT);
                                                   registration       (i)
                                                   commencement time in
                                                   relation to notices(j)
                                                                       that
                                                   should have been (k)
                                                   lodged under section
                                                   268 for registered(l)
                                                   charges before the (m)
                                                   registration
                                                   commencement time. (n)
                                                   As ASIC reg istered(o)
                                                   charges will be
Ve rsion 6: 10 th March 2010                                                                                                                           118 of 131

                                                           Responses to comments recei ved on
                                                Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.   Submi tter              Issue                AGD Comment
                                                  migrated to the PPS
                                                  register, the provisions
                                                  for requiring
                                                  corrections to the PPS
                                                  register contained in
                                                  the PPS Bill should
                                                  simp ly apply fro m that
                                                                      (p)
                                                  time (where relevant).
                                                  Section 270 could(q)
                                                  continue to apply in
                                                  relation to a failure to
                                                  lodge notice of a
                                                  charge created or
                                                  assigned under section
                                                  263 or 264 before the
                                                  registration
                                                  commencement time.
                                                                               (c) section 271 will not apply to registrable charges for 7 years after the RCT but not
                                               (d) Section 271 should          thereafter;
                                                   apply to all charges
                                                                      (r)
                                                   (within the existing
                                                                        the
                                                  definit ion used in (s)
                                                  Corporations Act)
                                                                       (t)
                                                  whether created before
                                                  or after the reg istration
                                                                       (u)
                                                  commencement time.
                                                  The section should   (v)
                                                  however again only be
                                                  limited to charges as
                                                  currently defined in the
                                                  Corporations Act, not
                                                  the broader security (w)
                                                  interests under the PPS
Ve rsion 6: 10 th March 2010                                                                                                                                119 of 131

                                                           Responses to comments recei ved on
                                                Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.   Submi tter              Issue               AGD Comment
                                                  Bill.

                                               (e) Section 272 should  (x)    (d) section 272 would continue to apply to registrable charges for a period of 7 years after
                                                   apply in relation to any   the RCT but not thereafter.
                                                   lodgements made
                                                   under Chapter 2K prior
                                                   to the registration
                                                   commencement time,
                                                   even if this requires
                                                   issue of a certificate
                                                   under that section after
                                                   the registration
                                                   commencement time.

                                               Section 266 should be   (y)    Section 266 will cease to operate after the Registration Co mmencement Time (RCT) but
                                               repealed with effect on and    subsection 266(4) would continue to apply to registrable charges which d become void
                                               fro m the reg istration        prior to the RCT;
                                               commencement time.
                                                                              In the case of registrable interests not registered within the 45 day period, secured parties
                                               As the transitional            would have a two year temporary perfection period during which they would not be
                                               provisions of the PPS Bill     subject to section 267 of the PPSA or sections 266-7 of the Corporations Act 2001.
                                               currently operate, sections
                                               267 to 269 o f the PPS Bill    Section 266 would not continue to apply to registrable charges after the registration
                                               will apply to all              commencement period, but new section 588Fl would.
                                               transitional security
                                               interests if the grantor or
                                               debtor becomes insolvent.
                                               Under the Corporations
                                               Act provisions (or by
                                               amend ment to the PPS
                                               Bill), this could be
                                               extended to circumstances
                                               where the transitional
Ve rsion 6: 10 th March 2010                                                                                                                                 120 of 131

                                                           Responses to comments recei ved on
                                                Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.   Submi tter                Issue               AGD Comment
                                               security interest (if it was a
                                               registrable charge) was not
                                               registered under the ASIC
                                               regime and is not
                                               registered on the PPS
                                               register at the time the
                                               grantor enters
                                               administration. That
                                               would give effectively the
                                               same result in relat ion to
                                               that transitional security
                                               interest as if section 266 of
                                               the Corporations Act
                                               (excluding section 266(5)
                                               which is discussed below)
                                               continued to apply. The
                                               areas of concern are:

                                               (a) registrable charges
                                                   which are transitional
                                                   security interests that
                                                   are registered with
                                                   ASIC after the 45 day
                                                   period fro m creation or
                                                   after the other
                                                   specified event (where
                                                   the registration is
                                                   required as a result of
                                                   an increase in the
                                                   secured money etc)
                                                   and which are
                                                   migrated to the PPS

Ve rsion 6: 10 th March 2010                                                                                  121 of 131

                                                           Responses to comments recei ved on
                                                Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.   Submi tter              Issue                AGD Comment
                                                   register; and

                                               (b) reg istrable charges that
                                                    are transitional
                                                    security interests that
                                                    are not registered with
                                                    ASIC at all but are
                                                    registered voluntarily
                                                    under the PPS reg ime.

                                               It is not practicable for the
                                               ASIC regime in section
                                               266 to continue to apply in
                                               those 2 circu mstances
                                               listed above. This is
                                               particularly the case for
                                               the securities referred to in
                                               paragraph (b). If (as we
                                               have suggested) the ASIC
                                               register is closed, it will
                                               not be possible for the non
                                               registration with ASIC to
                                               be remedied at all and the
                                               application of section 266
                                               of the Corporations Act
                                               will mean that such a
                                               security will always be
                                               void on the insolvency of
                                               the relevant chargor. If
                                               section 266 does not cease
                                               to apply, the ASIC register
                                               will need to remain open

Ve rsion 6: 10 th March 2010                                                                                  122 of 131

                                                           Responses to comments recei ved on
                                                Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.   Submi tter               Issue              AGD Comment
                                               indefinitely.

                                               If there is a constitutional
                                               concern with excluding
                                               section 266 o f the
                                               Corporations Act in
                                               relation to the securities
                                               referred to in paragraph
                                               (a), the approach of
                                               allo wing a separate
                                               voluntary registration with
                                               PPS to remedy the pre-
                                               existing default with
                                               registration under the
                                               ASIC regime could be
                                               adopted.

                                               Adopting our suggested
                                               approach (ie, considering
                                               only perfection under the
                                               PPS regime and allowing
                                               perfection under that
                                               regime to "cure" defects
                                               with ASIC reg istration)
                                               will not create a
                                               disincentive to register
                                               under the ASIC regime
                                               prior to the registration
                                               commencement date. A
                                               failure to reg ister will
                                               mean that, if there are
                                               other competing ASIC
                                               registered charges, those
Ve rsion 6: 10 th March 2010                                                                                  123 of 131

                                                           Responses to comments recei ved on
                                                Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter               Issue              AGD Comment
                                                  would take priority under
                                                  the transitional
                                                  arrangements.

                                                  Section 266(5) could
                                                  continue to apply in
                                                  relation to charges entered
                                                  into prior to the
                                                  registration
                                                  commencement time given
                                                  that it is intended to
                                                  restrict inappropriate
                                                  behaviour. However,
                                                  given there is no 45 day
                                                  period for registration
                                                  under the PPS Bill, it does
                                                  not need to apply to
                                                  security interests entered
                                                  into after the registration
                                                  commencement date.

                                                  We have considered the
                                                  consequential amend ments
                                                  that will need to be made
Corporations                                      to the Corporations Act as
Act 2001                                          a consequence of the PPS
                         AG2      Clayton Utz
                                                  regime. Certain of the
                                                  comments we have made
                                                  below may be mo re
                                                  appropriate for inclusion in
                                                  Chapter 9 of the PPS Bill.


Ve rsion 6: 10 th March 2010                                                                                     124 of 131

                                                              Responses to comments recei ved on
                                                   Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter             Issue               AGD Comment
                                                                                The repeal of Chapter 2K would not apply for a period of seven years after the registration
                                                  The Corporations Act, as it
                                                                                commencement time (except for the requirements in relation to documents).
                                                  now stands, should
                                                  continue to apply to any
                                                                                Furthermore, the priority between registrable charges would continue to be governed by
                                                  registrable charges that
                                                                                the provisions in Chapter 2K o f the Corporations Act 2001 indefinitely.
                                                  come into existence before
                                                  the "registration
                                                  commencement time" (as
                                                  defined in the PPS Bill) in
Corporations
                                                  respect of the period
Act 2001
                         AG2      Clayton Utz     before the registration
                                                  commencement time. This
                                                  would obviously be
                                                  expected (for example, in
                                                  the context of court cases
                                                  dealing with prio rity
                                                  disputes relating to the
                                                  period before the
                                                  registration
                                                  commencement time).




Ve rsion 6: 10 th March 2010                                                                                                                                125 of 131

                                                              Responses to comments recei ved on
                                                   Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter              Issue               AGD Comment

                                                  On and fro m the               The existing requirements in relat ion to documents would cease to apply at the
                                                  registration                   registration commencement time
                                                  commencement time, no
                                                  registration of any
                                                  registrable charge or any
Corporations                                      other registration relating
Act 2001                                          to registrable charges, for
                         AG2      Clayton Utz
                                                  example, increases in
                                                  secured liabilit ies under
                                                  section 268, should occur
                                                  under Chapter 2K of the
                                                  Corporations Act. This
                                                  will result in a nu mber of
                                                  different outcomes:

                                                  (a) in relation to             These registrations would be migrated to the PPSR with the PPS Act transitional
                                                      registrable charges        provisions to apply.
                                                      executed prior to the
                                                      registration
                                                      commencement time
                                                      that have been fully
Corporations                                          registered (that is,
Act 2001                                              including any
                         AG2      Clayton Utz         additional registrations
                                                      under section 264 or
                                                      268) with ASIC either
                                                      within o r after the
                                                      initial 45 day period
                                                      prescribed by the
                                                      Corporations Act, this
                                                      should be straight
                                                      forward (subject to the
Ve rsion 6: 10 th March 2010                                                                                                                                 126 of 131

                                                              Responses to comments recei ved on
                                                   Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter              Issue               AGD Comment
                                                     comments below in
                                                     relation to provisional
                                                     registration and section
                                                     266 of the
                                                     Corporations Act).
                                                     These should be
                                                     migrated under the PPS
                                                     Bill with the
                                                     transitional provisions
                                                     in the PPS Bill to
                                                     apply; and

                                                  (b) in relation to             The Depart ment has noted this comment.
                                                      registrable charges
                                                      executed prior to the
                                                      registration
                                                      commencement time
                                                      that have not been
                                                      registered with ASIC,
Corporations
                                                      or in respect of which
Act 2001
                         AG2      Clayton Utz         particular registrations
                                                      (for examp le under
                                                      section 268) have not
                                                      occurred within the
                                                      prescribed period, the
                                                      position is more
                                                      complex. These "non-
                                                      registered" registrable
                                                      charges are of 2 types:

Corporations                                         (i) creation (ie, and
                         AG2      Clayton Utz             will therefore, as
Act 2001
                                                          the Corporations
Ve rsion 6: 10 th March 2010                                                                                               127 of 131

                                                              Responses to comments recei ved on
                                                   Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter            Issue              AGD Comment
                                                        Act currently
                                                        stands, be void as
                                                        a security interest
                                                        as against a
                                                        liquidator,
                                                        administrator or
                                                        deed of company
                                                        arrangement
                                                        administrator if
                                                        not registered at
                                                        least 6 months
                                                        prior to the
                                                        relevant
                                                        insolvency event)
                                                        or in respect of
                                                        which an
                                                        additional
                                                        registration
                                                        required under
                                                        Chapter 2K (for
                                                        example under
                                                        section 268) did
                                                        not occur within
                                                        the relevant 45 day
                                                        period; and
                                                                              Registrable charges would have a period of t wo years to be registered/ perfected under the
                                                   (ii) registrable charges   new PPS scheme but they will only have priority fro m the date of perfection. Th is retains
Corporations                                           which, as at the       the existing law whereby an unregistered charge loses priority to a registered charge.
Act 2001                                               registration           This would protect those secured parties where the Registration Co mmencement Time
                         AG2      Clayton Utz          commencement           interrupts the 45 day registration period after the creation of the security interest. They
                                                       date, are not          would have a period of t wo years with in wh ich to perfect their registrable charges without
                                                       registered (or in      the charge vesting in the company.
                                                       respect of which a
Ve rsion 6: 10 th March 2010                                                                                                                                128 of 131

                                                             Responses to comments recei ved on
                                                  Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter             Issue               AGD Comment
                                                        registrable change
                                                        is not registered)
                                                        but could have been
                                                        registered within 45
                                                        days of creation or
                                                        the relevant change
                                                        but for the fact that
                                                        ASIC registration is
                                                        no longer possible.

                                                  In each case, for the         The Depart ment has noted this comment.
                                                  reasons outlined below,
                                                  we believe that voluntary     The Depart ment notes that paragraph 51(xxxi.) o f the Constitution constrains the
Corporations
                                                  registration on the PPS       Parliament‘s capacity to ‗cure‘ defects in registrations with ASIC where to do so would
Act 2001
                         AG2      Clayton Utz     register of these "non-       result in an acquisition of property.
                                                  registered" registrable
                                                  charges should "cure" any
                                                  defects in registration
                                                  with ASIC.

                                                  A problem arises if a         The Depart ment will consider whether Regulations made under Item 8 of the Table in
                                                  charge is only                section 153 should require a migrated registration to include the time that the data was
                                                  provisionally registered at   originally registered on the source register.
                                                  the registration
Corporations                                      commencement time. The        The Depart ment will take these comments into account in considering the transitional
Act 2001                                          documents required to be      arrangements applying to the amendments to the Corporations Act 2001.
                         AG2      Clayton Utz     lodged with ASIC for
                                                  registration to be
                                                  completed will not be able
                                                  to be lodged with ASIC
                                                  after the registration
                                                  commencement time if the
                                                  approach we have
Ve rsion 6: 10 th March 2010                                                                                                                                 129 of 131

                                                              Responses to comments recei ved on
                                                   Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.      Submi tter               Issue              AGD Comment
                                                  suggested above is
                                                  adopted. As the PPS Bill
                                                  is currently drafted, it is
                                                  not clear whether
                                                  provisionally registered
                                                  charges will be migrated
                                                  security interests. This is
                                                  because clause 332(c)
                                                  provides that a security
                                                  interest can only be a
                                                  migrated security interest
                                                  where reg istration on the
                                                  relevant transitional
                                                  register (here, the ASIC
                                                  register) was "effective"
                                                  immed iately before the
                                                  data to be migrated is
                                                  given to the PPS reg istrar.

                                                  The date and the time that     The Depart ment will consider whether Regulations made under Item 8 of the Table in
                                                  a charge is taken to have      section 153 should require a migrated registration to include the time that the data was
                                                  been registered under the      originally registered on the source register.
                                                  Corporations Act is
                                                  relevant under the PPS Bill    Security interests migrated to the PPSR would retain the priority that they had under the
Corporations                                      - see in particu lar clause    ASIC Register. The PPSR would retain details fro m the ASIC reg ister including original
Act 2001                                          324(2) of the PPS Bill.        registration dates (although the ASIC Register would be retained for seven years as a
                         AG2      Clayton Utz
                                                  This means that the data       record of all existing charges).
                                                  migrated fro m the ASIC
                                                  register to the PPS register
                                                  should include details of
                                                  the date and time of the
                                                  registration of each
                                                  registered charge.
Ve rsion 6: 10 th March 2010                                                                                                                                  130 of 131

                                                              Responses to comments recei ved on
                                                   Personal Property Securities Bill 2009 to 30 September 2009
Section/Issues          Sub no.   Submi tter              Issue            AGD Comment
                                               Alternatively, this
                                               informat ion will need to
                                               continue to be available
                                               fro m an ASIC search
                                               (which is the least
                                               preferred approach).




Ve rsion 6: 10 th March 2010                                                                                  131 of 131

                                                           Responses to comments recei ved on
                                                Personal Property Securities Bill 2009 to 30 September 2009

								
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