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Personal Property Securities Bill 2009 by xiuliliaofz

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									                                                    Personal Property Securities Bill 2009

                                                 Comments and Responses - September 2009

                                                      Comments & Reponses Tables – All

Version 5: 6th November 2009

The Table below contains the comments made to the Legal and Constitutional Affairs Committee Inquiry into Personal Property Securities Bill
2009 and also those comments forwarded to the Department by the 30th September 2009 as well as the Departmental responses to both sets of
comments.

The Table is broken down into Section 1 where comments which relate to specific sections or parts of the PPS Bill are listed, Section 2 – where
comments 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                                           85

                  Section 3 – Comments & Responses - Consequential Amendments - Corporations Act & Other Legislation          100




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                                                         Responses to comments received on
                                             Personal Property Securities Bill 2009 during September 2009
Table – Comments and Responses General



Clause/Issues         Sub no.        Submitter                    Issue                AGD Comment

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

                                                      To call the Act 'Securities'     The short title of the corresponding New Zealand legislation 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.
1                       AG7       David Brown         The plural 'securities' is of
                                                      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 of the Personal Property Securities (Consequential Amendments)
                                                                                       Bill 2009 extends the application of the Bill to investment entitlements.
                                                                                       The substantive rules concerning investment entitlements included in the Bill were
                                  Australian          Need to include investment
                                                                                       developed having regard to work sponsored by UNIDROIT to develop a convention on
6                        21       Financial Markets   entitlement in the scope of
                                                                                       intermediated securities. The UNIDROIT Convention on Substantive Rules for
                                  Association         the bill
                                                                                       Intermediated Securities, known as the ‗Geneva Securities Convention‘, was adopted in
                                                                                       Geneva, Switzerland on 9 October 2009 by the diplomatic Conference to adopt a
                                                                                       Convention on Substantive Rules regarding Intermediated Securities: for further
                                                                                       information see
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                                                                  Responses to comments received on
                                                      Personal Property Securities Bill 2009 during September 2009
Clause/Issues         Sub no.        Submitter                  Issue                AGD Comment
                                                                                     http://www.unidroit.org/english/conventions/2009intermediatedsecurities/main.htm. The
                                                                                     Department will consider whether the Bill should be amended to harmonise its effect with
                                                                                     the substantive rules in the convention concerning security interests.

6                                                    The term investment             Item 1 of Schedule 4 of the Personal Property Securities (Consequential Amendments)
                                                     entitlement is used in a        Bill 2009 extends the application of the Bill 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
                        AG1       DLA Phillips Fox   property'. The terms
                                                     '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 example clauses 15,
                                                     21(2), 26 and 49). We do
                                                     not understand why there
                                                     are provisions in the Act
                                                     which relate to investment
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                                                                 Responses to comments received on
                                                     Personal Property Securities Bill 2009 during September 2009
 Clause/Issues       Sub no.        Submitter                Issue               AGD Comment
                                                  entitlements given that
                                                  clause 6(1) indicates that
                                                  the Act does not apply to
                                                  such forms of property.

                                                  The reference to               Clause 6(2)(c) achieves the intended policy effect, but will refer this drafting comment to
                                                  "intangible property"          the Office of Parliamentary Counsel.
6(2)(c)                AG2       Clayton Utz      should be replaced with a
                                                  reference to the "security
                                                  interest".

                                                  Clarification of               The Department will consider this matter in the course of its work on regulations to be
                                 Australian       extinguishment of              made under clause 8(1)(l) of the Bill.
8(1)(f)                 18       Securitisation   beneficial interests of a
                                 Forum            transferee back to a
                                                  transferor.

                                                  Mortgage backed                The Department 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 clause 8(3) of the Bill.
                                                  included in the bill

8(1)(f)(vi) and                                   In each of these clauses,      Clauses 8(1)(f)(vi) and (vii) reflect the intended policy intent.
8(1)(f)(vii)                                      there is a reference to
                                                                                 Clause 8(1)(f)(vi) corresponds to section 23(e)(viii) of the New Zealand PPS Act and
                                                  assignments of accounts
                                                                                 section 4(h) of the Saskatchewan PPS Act.
                                                  being made "solely" for a
                       AG2       Clayton Utz      particular purpose. This is
                                                  too prescriptive. It should
                                                  be sufficient if the primary
                                                  purpose of the assignment
                                                  is the relevant purpose.
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                                                              Responses to comments received on
                                                  Personal Property Securities Bill 2009 during September 2009
 Clause/Issues       Sub no.        Submitter               Issue                AGD Comment
                                                For example, as those
                                                clauses are currently
                                                drafted, where assignment
                                                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.



                                                We understand that it is         The Explanatory Memorandum to the PPS Bill has been amended to clarify and display a
                                                intended to exclude an           clear legislative intention that ‗irrigation rights‘ are excluded from the operation of the
                                                ―irrigation right‖ as            Bill.
                                                defined in the Water Act
                                                2007 (Cth), being "a right
                                                that a person has against
                                                an irrigation infrastructure
8(1)(i)                AG3       Deacons        operator to receive water"
                                                (that is not a ―water access
                                                right‖ or a ‖water delivery
                                                right‖), from the operation
                                                of the PPSB. However, it is
                                                unclear whether irrigation
                                                rights are within the
                                                meaning of subparagraph
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                                                            Responses to comments received on
                                                Personal Property Securities Bill 2009 during September 2009
 Clause/Issues       Sub no.        Submitter               Issue                AGD Comment
                                                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 from the
                                                operation of the PPSB. In
                                                addition, we recommend
                                                that the Explanatory
                                                Memorandum to the PPSB
                                                be amended to note that
                                                irrigation rights are
                                                excluded from 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 Bill 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 from clause
                                                                                 While the Bill includes transitional provisions for security interests that exist at the
                                                8(1)(k). If a provision that
                                                                                 registration commencement time, it would not be practical for the Bill to include similar
                                                a statutory right is not to be
8(1)(k)                AG2       Clayton Utz                                     arrangements when the application of the Bill to an interest changes because of clause
                                                personal property for the
                                                                                 8(1)(k).
                                                purposes of the legislation
                                                is repealed, indicating a
                                                statutory intention that the
                                                PPS legislation is to apply,
                                                that legislative intention
                                                should be given effect to,

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                                                            Responses to comments received on
                                                Personal Property Securities Bill 2009 during September 2009
Clause/Issues          Sub no.        Submitter               Issue               AGD Comment
                                                   from the time of the repeal.



                                                                                  The Department has noted this comment. The existing definition provides greater
                                                                                  certainty for registrants. The Department notes that in other contexts the Bill refers to
                                   Australian
                                                   Definition of consumer         personal property that is intended to be used predominantly for personal, domestic or
10                        15       Privacy
                                                   property.                      household purposes. The Bill reinforces this approach in the amendments proposed by
                                   Foundation
                                                                                  Items 11 and 49 of Schedule 4 of the Personal Property Securities (Consequential
                                                                                  Amendments) Bill 2009.

                                                   Consumer property;             Holding an ABN provides an objective test for whether an individual is carrying on a
                                   Combined four   reference to businesses        business.
10                        17
                                   law firms       should include those
                                                   without an ABN.

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

                                   Insolvency                                     The terms ‗bankruptcy‘ and ‗insolvency‘ are defined by reference to section 51 of the
                                                   Definition of 'insolvency'
10                        10       Practitioners                                  Constitution to ensure that the provisions in the Bill that use the terms are within
                                                   and 'bankruptcy'.
                                   Australia                                      Commonwealth constitutional power.

                                   Combined four   Provisions relating to ADI     The Department considers that this matter raises a broader question concerning the policy
10                        17
                                   law firms       accounts should extend to      rationale for allowing security interests taken in an ADI account to be perfected by

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                                                               Responses to comments received on
                                                   Personal Property Securities Bill 2009 during September 2009
Clause/Issues          Sub no.        Submitter                   Issue               AGD Comment
                                                      accounts with other             control. The Department notes that submissions to the Senate Committee on Legal and
                                                      financial institutions.         Constitutional Affairs have expressed different views on whether it should be possible to
                                                                                      perfect a security interest in an account by control.
                                                                                      The Department has discussed this question with experts in Canada and the USA.
                                                                                      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.
                                                                                      The Department considers that allowing an ADI to take a security interest in accounts
                                                                                      held with the ADI supports the prudential regulation of ADI‘s.
                                                                                      However, the Department will consider whether a person who has taken a security
                                                                                      interest in an ADI account, who is not the ADI with whom the ADI account is held,
                                                                                      should be able to perfect the security interest by control.

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

                                                                                      The Department considers that the Bill achieves the intended policy effect.
                                                      Clarify that the definition
                                   Independent Film   of license includes a partial   An assignment of copyright (whether partial or complete) would not be a security
10                        25       & Television       assignment of intellectual      interest. However, a security interest would include copyright that secures payment or
                                   Alliance           property operating like an      performance of an obligation (for example, an obligation to pay the purchase price for the
                                                      exclusive license.              copyright). In this respect, the Bill provides the same treatment for copyright as other
                                                                                      kinds of personal property.

                                   Consumer Action    We agree that most              The Bill employs the definition of consumer property to provide registrants with certainty
10                       AG5                          substantive protections for     concerning when the name and date of birth of an individual grantor must be included in
                                   Law Centre
                                                      consumers in the Bill are
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                                                                  Responses to comments received on
                                                      Personal Property Securities Bill 2009 during September 2009
Clause/Issues       Sub no.     Submitter               Issue              AGD Comment
                                            not affected by the            the registration and when the 7 year maximum registration period applies.
                                            definition of ‗consumer
                                                                           The Department will consider whether clause 178(3) should be amended so that a secured
                                            property‘, which we
                                                                           party must not require payment for compliance with an amendment demand in relation to
                                            support. However, this
                                                                           collateral that the grantor intends to use the collateral predominantly for personal,
                                            does not change the fact
                                                                           household or domestic purposes.
                                            that three important
                                            consumer protections are
                                            dependent on the collateral
                                            being registered as
                                            ‗consumer property‘,
                                            being: the critical privacy
                                            protections preventing
                                            inappropriate registration
                                            of grantor details; the more
                                            appropriate maximum end
                                            time for the registration of
                                            7 years rather than 25 years
                                            or indefinite; and the
                                            prohibition on the secured
                                            party demanding payment
                                            for compliance with an
                                            amendment demand.

                                            The current definition of
                                            ‗consumer property‘ may
                                            provide certainty for
                                            security holders but the
                                            purpose of having a
                                            separate collateral category
                                            of consumer property is
                                            supposed to be to provide
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                                                        Responses to comments received on
                                            Personal Property Securities Bill 2009 during September 2009
Clause/Issues       Sub no.     Submitter                Issue               AGD Comment
                                            additional protections for
                                            grantors of this sort of
                                            property (Explanatory
                                            Memorandum §5.33).
                                            Thus, the success of the
                                            definition should be judged
                                            against whether it delivers
                                            this protection, not whether
                                            it is easier for security
                                            holders to manage. At
                                            present, even if collateral 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
                                            definition 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
                                            personal, domestic or
                                            household purposes; or the
                                            three protections dependent
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                                                        Responses to comments received on
                                            Personal Property Securities Bill 2009 during September 2009
 Clause/Issues         Sub no.        Submitter               Issue              AGD Comment
                                                  on registration as consumer
                                                  property should be
                                                  redrafted to apply where
                                                  personal property is used
                                                  predominantly for
                                                  personal, domestic or
                                                  household purposes.

                                                  The example given in the       The Department considers that the example given under the definition of ‗account‘ is
                                                  note under the definition of   correct. It notes that the same example is used in relation to similar words appearing in
                                                  "account" is incorrect. We     clause 340(5)(a), but not in relation to the words in clause 81(b)(ii) (which the
                                                  understand that the defined    Department considers are materially different).
                                                  term is to be restricted to
                                                                                 The definition of account includes the following words: ‗a monetary obligation that arises
                                                  accounts which are in the
                                                                                 from … granting a right, or providing services, in the ordinary course of a business of
                                                  nature of accounts
                                                                                 granting rights or providing services of that kind (whether or not the account debtor is the
                                                  receivable or book debts at
                                                                                 person to whom the right is granted or the services are provided)‘
                                                  general law.
10                                                                               When John Smith uses his credit card to buy stationery at a newsagent, a monetary
                                                  It is assumed that the
                                                                                 obligation arises in the form of the debt owed by John Smith to the credit card provider.
Definition of            AG2       Clayton Utz    reference to "credit card
                                                                                 The monetary obligation arises in the ordinary course of the credit card provider‘s
"account"                                         receivable" in the example
                                                                                 business of providing financial services to its customers (such as John Smith). The
                                                  is a reference to the amount
                                                                                 amount owed by John Smith to the credit card provider is therefore an account for the
                                                  owing by the holder of a
                                                                                 purposes of the Bill.
                                                  credit card to the person
                                                  that provides the credit       Similarly, the amount owed by the credit card provider to the newsagent arises in the
                                                  card, though this is not       ordinary course of the credit card provider‘s business of providing financial services to its
                                                  clear from the wording         customers (such as the newsagent). The amount owed by the credit card provider to the
                                                  used in the example. For       newsagent is therefore an account for the purposes of Bill.
                                                  example, if John Smith
                                                                                 Clause 81(b)(ii) expressly excludes ‗financial services‘, and so excludes the amount owed
                                                  used his Visa card to buy
                                                                                 by John Smith to the credit card provider, and by the credit card provider to the
                                                  stationary at a news agent,
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                                                              Responses to comments received on
                                                  Personal Property Securities Bill 2009 during September 2009
 Clause/Issues         Sub no.        Submitter              Issue               AGD Comment
                                                  the reference to "credit       newsagent.
                                                  card receivable" would be
                                                  to the amount 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 example
                                                  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.

                                                  Given that it is likely that   The Department will consider whether the definition of ‗ADI account‘ can be simplified.
                                                  the definition of "protected
10                                                                               The Bill reflects the intended policy outcome. The definition is consistent with the
                                                  account" under the
                                                                                 corresponding definitions in the New Zealand and Saskatchewan PPS legislation.
Definition of                                     Banking Act 1959 may
"ADI account"                                     change from time to time
                         AG2       Clayton Utz    (in light of the underlying
                                                  purpose for which that
                         AG2       Clayton Utz
10                                                definition is used in the
                                                  Banking Act), it would be
Definition of                                     preferable to have a
"advance"                                         separate definition of ADI
                                                  account in the PPS
                                                  legislation that would
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                                                              Responses to comments received on
                                                  Personal Property Securities Bill 2009 during September 2009
 Clause/Issues         Sub no.        Submitter               Issue             AGD Comment
                                                  continue to apply,
                                                  irrespective of changes to
                                                  the Banking Act.




                                                  Paragraph (a) should also
                                                  refer to the performance of
                                                  an obligation.
                                                  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 Bill.
                                                  "goods" (which is a narrow
                                                                                The Bill was changed from ‗tangible property‘ to ‗goods‘ in response to a
10                                                concept) to mean any type
                                                                                recommendation by the Senate Committee on Legal and Constitutional Affairs.
                         AG2       Clayton Utz    of tangible property, which
Definition of
                                                  extends far beyond goods,     The Department has noted the comments concerning Commissioner of Inland Revenue v
"goods"
                                                  is inaccurate and is likely   Northshore Taverns Ltd (in liquidation) [2009] NZCCLR 5. It notes that the PPS Bill
                                                  to cause confusion and        does not use the expression ‗accounts receivable‘ as it is defined in the New Zealand
                                                  problems with the
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                                                              Responses to comments received on
                                                  Personal Property Securities Bill 2009 during September 2009
Clause/Issues       Sub no.     Submitter                Issue            AGD Comment
                                            interpretation and            legislation.
                                            application of the
                                            legislation.
                                            We also draw your
                                            attention to the case of
                                            Commissioner 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
                                            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
                                            definition 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
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                                                        Responses to comments received on
                                            Personal Property Securities Bill 2009 during September 2009
 Clause/Issues         Sub no.        Submitter               Issue              AGD Comment
                                                   Zealand.

                                                                                 The Department considers that extending the definitions in the way proposed has merit on
                                                   Intellectual property:
                                   Combined four                                 a conceptual or in-principle level. However, it would add additional complexity to the
10                        17                       should extend to forms of
                                   law firms                                     Bill, and raise difficult issues about which rights should be counted as intellectual
                                                   property under general law.
                                                                                 property.

                                                   Expressions in the            The Department considers that the treatment of promissory notes in the context of the
                                                   definition of "investment     definition of ‗investment instrument‘ is not unintended.
                                                   instrument" should be
                                                                                 The Department notes that the definition of ―investment instrument‖ specifically excludes
                                                   defined without relying on
                                                                                 a negotiable instrument (see para (n) of the definition of ―investment instrument‖, and
                                                   particular Corporations Act
                                                                                 negotiable instrument is defined to include a promissory note. It follows that promissory
                                                   definitions. How particular
                                                                                 notes are carved out of the definition of investment instrument, regardless of the value of
                                                   instruments are categorised
                                                                                 the value of the promissory note, and regardless of whether promissory notes are also
                                                   under the PPS legislation
                                                                                 debentures for the purposes of the Corporations Act 2001.
                                                   should not be affected by
10                                                 how these instruments are
                                                   categorised under
Definition of            AG2       Clayton Utz     Australian corporations
"investment                                        legislation.
instrument"
                                                   Reliance on particular
                                                   Corporations Act
                                                   definitions may have
                                                   unintended consequences.
                                                   For example, the definition
                                                   of "investment instrument"
                                                   refers to debentures within
                                                   the meaning of the
                                                   Corporations Act. The
                                                   Corporations Act definition
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                                                               Responses to comments received on
                                                   Personal Property Securities Bill 2009 during September 2009
 Clause/Issues         Sub no.        Submitter                Issue               AGD Comment
                                                  excludes (amongst other
                                                  instruments) promissory
                                                  notes having a face value
                                                  of at least $50,000. Under
                                                  the Corporations
                                                  Legislation Amendment
                                                  (Financial Services
                                                  Modernisation) Bill 2009 it
                                                  is proposed that the
                                                  definition 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 to the
                                                  proposed PPS regime.

                                                  The reference in paragraph       The Bill 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 credit 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 payment should
Definition of                                     also include presentation to
                         AG2       Clayton Utz
"negotiable                                       claim performance to
instrument"                                       ensure consistency with the
                                                  other provisions of the
                                                  legislation dealing with
                                                  letters of credit.

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                                                              Responses to comments received on
                                                  Personal Property Securities Bill 2009 during September 2009
 Clause/Issues         Sub no.        Submitter                   Issue                AGD Comment
                                                                                       The definition 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 definition of security
                                                                                       to implement an economic or functional approach to security interests. The Bill
                                                       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 from the
                                                                                       matter of 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).

                                                                                       The Department 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
                                   Combined four                                       equivalent to clause 12(1) and (2), despite the express reference in their equivalent in
12(2)                     17                           respect of leases as security
                                   law firms                                           clause 12(3).‘ Nevertheless, the Department considers that clause°12(2)(i) makes it clear
                                                       interests
                                                                                       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 clause 8(2) as an interest to which the PPS Bill will not apply.
                                                       is inconsistent with            However, the exception in clause 80 is a specific exclusion to this.
                                                       provision relating to
                                                                                       A transaction that includes a flawed asset that, in substance, secures payment or
                                                       set-off.
                                                                                       performance of an obligation would be a security interest under the Bill. The Department
                                                       Set-off is expressly            is not aware of any policy justification for excluding from security interests a flawed
                         AG1       DLA Phillips Fox    excluded from the               asset that meets this criterion. It notes that the approach taken in relation to flawed assets
                                                       operation of the Act.           by clause 12(2) is consistent with the both the New Zealand and Saskatchewan PPS
                                                       Clause 8(2) (at item 2)         legislation.
                                                       provides that
                                                                                       The fact that a flawed asset may later be set off against a liability does not result in any
                                                       notwithstanding this,
                                                                                       inconsistency between clause 12(2)(l) and clause 8(1)(d).
                                                       clause 80 of the Act
                                                       applies. Clause 80

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 Clause/Issues      Sub no.       Submitter                    Issue               AGD Comment
                                                   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 acknowledges
                                                   the validity of the
                                                   incorporation of such terms
                                                   which 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.



                               Combined four                                       An interest in a flawed asset provided for by a transaction that, in substance, secures
                      17       law firms;                                          payment or performance of an obligation would be a security interest under the Bill.
                                                   Should not treat flawed
12(2)(l)                       Australian                                          The Department is not aware of any policy justification for excluding interests in flawed
                                                   assets as security interests.
                      21       Financial Markets                                   assets from the definition of security interest.
                               Association
                                                                                   It notes that the approach taken in relation to flawed assets by clause 12(2) is consistent
             th
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                                                               Responses to comments received on
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 Clause/Issues         Sub no.        Submitter                  Issue                AGD Comment
                                                                                      with the both the New Zealand and Saskatchewan PPS legislation.

                                                      Querying why a transferee       Clause 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 Phillips Fox
                                                      interest is taken to have a     equivalent outcomes.
                                                      security interest.

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

                                                                                      The Bill‘s uses the term ‗consumer property‘ principally in the context of the registration
                                                                                      provisions. The requirement that consumer property be used exclusively for personal,
                                                      Amend definition of
                                                                                      domestic or household use enhances certainty for registrants about whether the collateral
                                   Consumer Action    consumer property to
13                         5                                                          should be described as ‗consumer property‘ or ‗commercial property‘ in the registration.
                                   Law Centre         ensure protections properly
                                                                                      In other places, where the Bill affects the substantive rights of consumers, the Bill uses
                                                      apply to consumers.
                                                                                      the expression ‗individual‘ (see clause 172) or ‗predominantly for personal, domestic or
                                                                                      household purposes‘ (see clauses 42, 47, 52 and 109).

                                                      Complexity of priority          The Department has responded to these concerns in this table.
                                                      rules. In relation to this
                                                      topic, the schedule to our
13                       AG1       DLA Phillips Fox   31 July submission to the
                                                      Standing Committee on
                                                      Legal & Constitutional
                                                      Affairs contains specific
                                                      questions in relation to this
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                                                                  Responses to comments received on
                                                      Personal Property Securities Bill 2009 during September 2009
Clause/Issues          Sub no.        Submitter                   Issue               AGD Comment
                                                      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 unsecured 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 recommendation
                                                      made by the Committee
13                       AG1       DLA Phillips Fox
                                                      after conclusion of its first
                                                      Inquiry. In particular,
                                                      Recommendation 10
                                                      provided that:
                                                      'The Committee
                                                      recommends that
                                                      consideration be given to
                                                      improving the priority of
                                                      an unperfected lessor
                                                      against unsecured or other
                                                      unperfected interests in the
                                                      goods.'

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Clause/Issues          Sub no.        Submitter                   Issue             AGD Comment
                                                      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 Department considers that clause 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 numbered 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. This provision was omitted in response to
13                       AG1       DLA Phillips Fox   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).

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                                                      Personal Property Securities Bill 2009 during September 2009
Clause/Issues          Sub no.        Submitter                  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 determining the effective registration 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
                                                      moment 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,
13                       AG1       DLA Phillips Fox
                                                      the name of the grantor 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

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                                                                  Responses to comments received on
                                                      Personal Property Securities Bill 2009 during September 2009
Clause/Issues          Sub no.        Submitter                   Issue                AGD Comment
                                                      party.

                                                      PMSI issue.                      See entries below.
                                                      In relation to this topic, the
                                                      schedule to our 31 July
                                                      submission to the Standing
                                                      Committee on Legal &
14                       AG1       DLA Phillips Fox   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 provision more
                                                      12-13 in the Schedule.           consistent with the corresponding provision in the Canadian PPS legislation (for example,
                                                                                       see s.2(jj) of the Saskatchewan Act (s2(jj)), which refers to ‗a security interest taken in
                                                      [PMSI] is defined in clause
                                                                                       collateral, …, to the extent that it secures all of part of its purchase price‘. The provision
                                                      14. It means a security
                                                                                       now makes it clear that it applies when the obligation secured is the purchase price, so
                                                      interest taken in collateral
                                                                                       that it is unnecessary to consider whether the person taking the security interest is a seller.
                                                      to the extent that it secures
                                                      all or part of its purchase      Clause 14(1)(b) will allow a debtor‘s financier to obtain a purchase money security
14                       AG1       DLA Phillips Fox   price. Previously, it was        interest in the collateral. The obligation owed by the debtor to its financier will not be the
                                                      indicated that the security      purchase price (because the purchase price will have already been paid).
                                                      interest was taken by the
                                                      seller, however these
                                                      words have been removed.
                                                      A security interest taken in
                                                      collateral by a person who
                                                      gives value for the
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Clause/Issues         Sub no.       Submitter                    Issue               AGD Comment
                                                    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. Importantly, the
                                                    interest of a lessor or bailor
                                                    of goods under a PPS
                                                    Lease is a purchase money
                                                    security interests and
                                                    therefore provides (if
14                     AG1       DLA Phillips Fox   perfected) superior priority
                                                    over other security holders
                                                    (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
               th
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                                                                Responses to comments received on
                                                    Personal Property Securities Bill 2009 during September 2009
 Clause/Issues       Sub no.        Submitter                Issue            AGD Comment
                                                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 Department considers that the provision achieves the intended policy effect. The Bill
                                                all or part of the purchase   employs 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 clause 14(1)(a) the same as that of
14(1)                  AG2       Clayton Utz    should be a reference to      paragraph (a)(i) of the definition of purchase money security interest in the New Zealand
                                                securing the obligation to    PPS Act. The Department 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.

                                                Clause 14(2)(c) should be     The Department considers that clause 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 of the
                                                in collateral that, at the    Personal Property Securities (Consequential Amendments) Bill 2009 proposes the
14(2)(c)               AG2       Clayton Utz    time of attachment, the       insertion of a clause 14(2A) intended to reduce the complexity of the Bill.
                                                grantor intends to use
                                                predominantly for
                                                personal, domestic or
                                                household purposes should

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                                                            Responses to comments received on
                                                Personal Property Securities Bill 2009 during September 2009
 Clause/Issues       Sub no.        Submitter                 Issue               AGD Comment
                                                   not be excluded from the
                                                   PMSI provisions.
                                                   To retain clause 14(2)(c)
                                                   may have a negative
                                                   impact on (for example)
                                                   motor vehicle financing.
                                                   Under the current law, a
                                                   financier would expect to
                                                   obtain a first ranking
                                                   security interest over a
                                                   motor vehicle that the
                                                   financier financed. If
                                                   clause 14(2)(c) is retained,
                                                   financiers may need to
                                                   seek specific releases of
                                                   motor vehicles from 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.

                                                   The word ‗seller‘ has been     Removal of seller makes the paragraph more consistent with the corresponding
14(1)(a)                19       Mr David Turner
                                                   removed.                       Saskatchewan provision (section 2(1)(jj)(i))).


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                                                               Responses to comments received on
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 Clause/Issues       Sub no.        Submitter                  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 clause 12(5)(a)). However, a security
                                 Independent Film                                  interest would include an interest in licenced intellectual property granted by a licensee
                                 & Television       Ensure that this clause
                                                                                   that secures payment of the royalties. The security interest would be purchase money
14(1)(b)                25       Alliance           allows a PMSI for
                                                                                   security interest under clause 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 licenced 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 Department considers that the provision achieves the intended policy effect.
14(2)(b)                 6       Clayton Utz
                                                    broad.

                                 Piper Alderman;                                   Clause 14(2)(c) represents a policy choice preferring all-assets security granted to secure
                        2,                          Whether the clause will        commercial finance over consumer purchase money security interest (which the
                                 Mr David Turner;
                                                    increase the cost of           Department understands are rarely enforced).
14(2)(c)                19
                                 Australian         consumer finance of non-
                        20       Finance            serial numbered goods.
                                 Conference

                        14       Australian
                                 Bankers'           Retention of provision will
14(2)(c)                         Association        diminish choice in finance
                                 Queensland Law     for consumer.
                        23       Society

14(3), (4) and                                      Suggests the bill consider     Clauses 14(3) and (6) of the Bill prevent the tacking of obligations with PMSI priority.
                        19       Mr David Turner    the Canadian Chrysler
(5)
                                                    decision, reconsiders notice

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                                                                Responses to comments received on
                                                    Personal Property Securities Bill 2009 during September 2009
 Clause/Issues         Sub no.        Submitter                 Issue                AGD Comment
                                                      requirements.

                                                      There may be unintended        Any undesirable unintended consequences could be addressed through regulations made
                                                      consequences if the            under clauses 8(1)(l), 8(3) and 12(5)(b).
                                                      definition of investment
15                         6       Clayton Utz                                       The substantive rules concerning investment entitlements, including the definition of
                                                      entitlement is linked to the
                                                                                     investment entitlement, included in the Bill were developed having regard to work
                                                      corporations legislation
                                                                                     sponsored by UNIDROIT to develop a convention on intermediated securities. The
                                                      definition.
                                                                                     UNIDROIT Convention on Substantive Rules for Intermediated Securities, known as the
                                                                                     ‗Geneva Securities Convention‘, was adopted in Geneva, Switzerland on 9 October 2009
                                                      The reference to an            by the diplomatic Conference to adopt a Convention on Substantive Rules regarding
                                                      investment entitlement         Intermediated Securities: for further information see
                                                      being the "rights" of the      http://www.unidroit.org/english/conventions/2009intermediatedsecurities/main.htm. The
                                                      specified person is too        Department will consider whether the Bill should be amended to harmonise its effect with
                                                      broad. We understand that      the substantive rules in the convention concerning security interests, including in relation
                                                      the definition is only         to the definition of investment entitlements.
15(1)                    AG2       Clayton Utz        intended to include the
                                                      rights of ownership of the
                                                      financial products to which
                                                      the investment entitlement
                                                      account relates, not
                                                      ancillary rights. This
                                                      should be clearly specified.

                                                      Complexity of priority         This is a drafting matter that does not affect the Bill‘s legal effect.
                                                      rules.
                                                                                     Chapter 3 of the Bill 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
Chapter 2 and 3          AG1       DLA Phillips Fox
                                                      Schedule. In addition to       Department considers that separating them in this way provides additional transparency
                                                      the priority rules contained   for these rules.
                                                      in Chapter 2, further
                                                      priority rules are contained
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                                                                  Responses to comments received on
                                                      Personal Property Securities Bill 2009 during September 2009
 Clause/Issues       Sub no.        Submitter                    Issue              AGD Comment
                                                    in Chapter 3 in relation to
                                                    accessions and processed
                                                    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
                                                    difficult to get a clear
                                                    picture of the priority
                                                    outcomes applicable in
                                                    various circumstances.

                                                    Security Agreements             This is a drafting matter that does not affect the Bill‘s legal effect. The explanatory
                                                    generally do not provide        memorandum for the Bill 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 draft of the Bill referred to securing future advances, the language was changed in
                                                    The ability of a financier to
                                                                                    response to the recommendation of the Senate Standing Committee on Legal and
                                                    provide future advances is
                                                                                    Constitutional Affairs that the Bill should use overseas provisions as often as possible to
                                                    normally dealt with in
                                                                                    allow overseas experience to provide guidance for the Australian model.
                                                    facility documentation
18(4)                  AG1       DLA Phillips Fox   (other than the security
                                                    document itself). The
                                                    Security Agreement will
                                                    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

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                                                                Responses to comments received on
                                                    Personal Property Securities Bill 2009 during September 2009
 Clause/Issues         Sub no.        Submitter                   Issue               AGD Comment
                                                       securing future advances.

                                                                                      The existing language is the same as that in New Zealand and Saskatchewan. The
                                                                                      version of the Bill previously considered by the Committee referred to ‗secure future
18(4)                      6       Clayton Utz         Unintended ambiguity           advances‘. The language was changed to implement the Committee‘s recommendation
                                                                                      that the Bill should employ language based on the New Zealand the Saskatchewan
                                                                                      legislation.

                                                       Needs to be expanded –         The Bill provides that the Bill 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 ordinarily acquire rights in after-
                                                       property.                      acquired property when the grantor acquires the collateral.

                                                       The reference to PPS lease     The Department will consider whether clause 19(5) should also refer to goods that are
                                                       should be replaced with        bailed to the grantor under a PPS lease.
                                                       any lease or bailment.
                                                       There are other types of
                                                       lease that are within the
                                                       operation of the PPS
                                                       legislation. Therefore, if
                                                       this change is not made,
19(5)                    AG2       Clayton Utz
                                                       there is no mechanism to
                                                       determine when the grantor
                                                       will be deemed to have
                                                       obtained rights to the
                                                       leased goods under leases
                                                       that are regulated under the
                                                       legislation but which are
                                                       not PPS leases.


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                                                                   Responses to comments received on
                                                       Personal Property Securities Bill 2009 during September 2009
Clause/Issues          Sub no.        Submitter                   Issue              AGD Comment
                                                                                     It is intended that a security interest will be enforceable against a third party despite it not
                                                      Enforceability of security     being perfected by registration (or being perfected in another way). Perfection of a
                                                      interests re: third parties,   security interest is relevant to priority among competing security interests. Priority
20                        13       DLA Phillips Fox
                                                      even when not perfected        between unperfected security interests in the same collateral is to be determined by the
                                                      with registration.             order of attachment of the security interests (clause 55(2). Perfection is also relevant to
                                                                                     whether the security interest survives the grantor‘s insolvency (clause 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 classes of personal property‘ (clauses
                                                                                     20(2)(b)(ii) and (iii)). In other cases, when the collateral relates to particular collateral, a
                                                                                     security agreement must include ‗a description of the particular collateral‘ (clause
                                                                                     20(2)(b)(i)). If particular collateral is described using the terms ‗consumer property‘,
                                                                                     ‗commercial property‘ or ‗equipment‘ the description must go on to more particularly
                                                      Insufficient precision of
                                   Combined four                                     describe the collateral by reference to item or class (clause°20(4)).
20                        17                          what description should
                                   law firms
                                                      suffice.                       Apart from this, a security agreement will be effective according to its terms (clause
                                                                                     18(1)) (including in relation to the property described in the security agreement).
                                                                                     Guidance is provided on when a description will be sufficient at clause 8 (definition of
                                                                                     ‗description‘): a description of a particular item must identify the item or the class to
                                                                                     which it belongs, and a description of a class must identify the class. The Department
                                                                                     considers that to require collateral to be more precisely defined in a security agreement
                                                                                     would unnecessarily restrict contractual freedom.

                                                      Certain terms used which       The Bill uses a number of concepts that are not defined. It is not feasible to define every
                                                      are no longer defined.         term used by the Bill.
20                       AG1       DLA Phillips Fox
                                                      Clause 20(4) refers to a       Omitting the reference to equipment in clause 20(4) would mean that it would be
                                                      number of concepts which       sufficient to describe the collateral as ‗equipment‘. The overseas PPS legislation
                                                      are no longer defined. In      provides that it is not sufficient to describe collateral as ‗equipment‘. This provision is

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                                                                  Responses to comments received on
                                                      Personal Property Securities Bill 2009 during September 2009
 Clause/Issues       Sub no.        Submitter                    Issue             AGD Comment
                                                    particular the reference to    retained in part because of the recommendation of the Senate Standing Committee on
                                                    equipment should be            Legal and Constitutional Affairs that the Bill should use overseas provisions as often as
                                                    deleted. In addition           possible to allow overseas experience to provide guidance for the Australian model. It is
                                                    reference is made to           also retained because of concern that a description of the collateral as ‗equipment‘ might
                                                    personal property more         not 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 from the Bill.



                                                                                   The Bill has the intended effect. The Department notes that clause 20(2) contrasts
                                                                                   ‗particular collateral‘ with ‗all of the grantor‘s present and after-acquired property‘.
                                 Combined four      'particular collateral' –
20(2)                   17                                                         The Department will consider whether the reference in clause 20(2)(b)(iii) to ‗specified
                                 law firms          requires clarification.
                                                                                   items or classes of personal property‘ should be replaced with a reference to ‗particular
                                                                                   collateral‘.

                                                                                   Consistent with the functional approach to security interests taken by the Bill, all security
                                                    Allow intellectual property    interests will be registrable in the single national online Personal Property Securities
                                 Independent Film   interests subject to a         Register. The policy objective is to harmonise the law on security interest regardless of
21(2)                   25       & Television       specialised register to be     the nature of the collateral. In recognition of the fact that some kinds of collateral are
                                 Alliance           perfected by registration in   ordinarily identified by a serial number, the Bill allows security interest in serial-
                                                    the specialised register.      numbered collateral to be registered by serial number. This facility will be available to
                                                                                   intellectual property that has a serial number allocated by IPAustralia. This will provide
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                                                                Responses to comments received on
                                                    Personal Property Securities Bill 2009 during September 2009
 Clause/Issues       Sub no.        Submitter                 Issue                AGD Comment
                                                                                   functional equivalence to registration on the separate intellectual property register.

                                                   There should be a               The Department 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 which makes it
                                                   clear that, for "control" to
                                                   be held over satellites or
                                                   other space objects, a
                                                   person will need to
                                                   establish that it has control
21(2)(c)(vi)           AG2       Clayton Utz       at general law. Currently,
                                                   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)(vi).

                                                   It should be made clear         The Department has noted this comment.
                                                   that the references in the
                                                   paper to "control" are for
                                                   the purposes of
                                 Consumer Action   determining whether or not
Part 2.3               AG5
                                 Law Centre        an asset is a circulating
                                                   asset and not for the
                                                   purposes of determining
                                                   the manner in which
                                                   perfection of the security

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                                                               Responses to comments received on
                                                   Personal Property Securities Bill 2009 during September 2009
 Clause/Issues       Sub no.        Submitter                   Issue                 AGD Comment
                                                     interest over the assets
                                                     occurred.

                                                     It is not appropriate to         The Department notes that only personal property of the kind covered by clause°340(5) is
                                                     provide that, where a            not a circulating asset if (among other things) an effective registration with respect to the
                                                     security interest is taken       property discloses that the secured party has control of the personal property (see clause
                                                     over all or substantially all    340(2)(a)).
                                                     of the assets of a grantor, it
                                                     is not possible to describe
                                                     that some portion of that
                                                     property is subject to
                                                     control. For example, if a
                                                     company granted a
                                                     security interest over all of
                                                     its assets in favour of a
Part 2.3               AG2       Clayton Utz
                                                     financier that financier
                                                     may have control over
                                                     certain of those assets
                                                     which would otherwise be
                                                     considered to be
                                                     circulating 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.

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                                                                 Responses to comments received on
                                                     Personal Property Securities Bill 2009 during September 2009
 Clause/Issues         Sub no.        Submitter                   Issue               AGD Comment
                                                       Concerned about                The Department will review the provisions about perfection of ADI accounts by control.
Part 2.3                  19       Mr David Turner     perfection by control in       It will consider whether only the ADI with whom the ADI account is held should be able
                                                       relation to ADIs.              perfect a security interest in the ADI account by control.

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

                                                       As reflected in separate       The Department 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 Amendments) Bill 2009.
                                                       had with the Attorney-
                                                       General's Department we
                                                       support the amendment of
                                                       clause 26 to:
                                                       (a) omit 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 become
                                                           alternatives.

26(1)(a)                   6       Clayton Utz         Clause does not deal with      The Bill will allow the same person to contract in their different capacities of secured

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                                                                   Responses to comments received on
                                                       Personal Property Securities Bill 2009 during September 2009
 Clause/Issues         Sub no.        Submitter                Issue                 AGD Comment
                                                    all circumstances.               party and investment entitlement intermediary.
                                                                                     The substantive rules concerning investment entitlements, including when a control
                                                                                     agreement would effect control of an intermediated security, included in the Bill were
                                                                                     developed having regard to work sponsored by UNIDROIT to develop a convention on
                                                                                     intermediated securities. The UNIDROIT Convention on Substantive Rules for
                                                                                     Intermediated Securities, known as the ‗Geneva Securities Convention‘, was adopted in
                                                                                     Geneva, Switzerland on 9 October 2009 by the diplomatic Conference to adopt a
                                                                                     Convention on Substantive Rules regarding Intermediated Securities: for further
                                                                                     information see
                                                                                     http://www.unidroit.org/english/conventions/2009intermediatedsecurities/main.htm. The
                                                                                     Department will consider whether the Bill 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.

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

                                                                                     Clause 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
                                                    problematic in
                                   Forum                                             control to whom they may become 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.

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                                                                Responses to comments received on
                                                    Personal Property Securities Bill 2009 during September 2009
 Clause/Issues         Sub no.        Submitter                  Issue               AGD Comment
                                                      The reference to the           Clause 24(6)(c)(ii) allows a person to take possession of the investment instrument for the
                                                      "proceeds" on the last line    purposes of clause 27(3)(a) when another person (other than the grantor or the debtor) has
                                                      of clause 28 should be         possession of the certificate on behalf of the possessor.
                                                      amended to refer to the
                                                      "benefit" of the letter of
28                       AG2       Clayton Utz        credit given that the letter
                                                      of credit may (as
                                                      acknowledged earlier in the
                                                      clause) provide for the
                                                      performance of an
                                                      obligation.

                                                                                     The Department will consider whether clause 44(2)(a) should be amended to replace the
                                                                                     knowledge test (‗the buyer or lessee has actual knowledge that the sale or lease
                                                                                     constitutes a breach of the security agreement that provides for the security interest‘) with
                                                                                     a test that ‗the security interest was created or provided for by a transaction to which the
                                                      Clauses 31-52 –                buyer or lessee is a party‘, for consistency with clause 43(2).
                                   Combined four
Part 2.4-2.5              17                          inconsistent language and
                                   law firms                                         The remaining provision in Part 2.5 that include a knowledge test refer to actual or
                                                      tests of knowledge.
                                                                                     constructive knowledge, apart from apart from clause 46. Clause 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.

                                                      Complexity of priority         The Bill provides greater transparency concerning priority than the existing
                                                      rules.                         arrangements, and has brought to light the complexity inherent in priority rules.
Part 2.4 – 2.7           AG1       DLA Phillips Fox   Paragraph 28 in the
                                                      Schedule. In general, the
                                                      rules relating to security
                                                      interests (starting at the
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                                                                  Responses to comments received on
                                                      Personal Property Securities Bill 2009 during September 2009
 Clause/Issues       Sub no.        Submitter                    Issue              AGD Comment
                                                     specific rules for
                                                     attachment and perfection
                                                     (clause 30) and ending at
                                                     clause 77) provide for an
                                                     extremely complex regime
                                                     for determining the priority
                                                     of security interests. This
                                                     complexity is added to by
                                                     the substantial number of
                                                     scenarios for which rules
                                                     have been developed.

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

                                                                                    Clause 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 grantor has
                                                                                    transferred the collateral. When the secured party acquires actual or constructive
                                                     Fixing constructive
                                 Combined 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 perfection. The provision requires only the secured party act in
                                                                                    the way that an honest and prudent person would act.


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                                                                 Responses to comments received on
                                                     Personal Property Securities Bill 2009 during September 2009
 Clause/Issues         Sub no.        Submitter                   Issue                AGD Comment
                                   Combined four       'Gap' between foreign           The Department notes that this issue is addressed in Items 17, 18 and 19 of Schedule 4 of
39(2)(a)                  17
                                   law firms           registration and perfection.    the Personal Property Securities (Consequential Amendments) Bill 2009.

                                                       Clause 43 is confusing and      The Department notes that this issue is addressed in Item 21 of Schedule 4 of the
43                        19       Mr David Turner     policy reasoning is not         Personal Property Securities (Consequential Amendments) Bill 2009.
                                                       clear.

                                                       Clause 44 does not classify     The Bill refers to personal property in clause 44(1), but goes on to exclude inventory in
                                                       personal property by            clause 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 David Turner     same way as New Zealand
                                                                                       The Department notes that this issue is addressed in Items 22 and 23 of Schedule 4 of the
                                                       PPS section 55 and also
                                                                                       Personal Property Securities (Consequential Amendments) Bill 2009.
                                                       adds a requirement for new
                                                       value.

                                                       The clause introduces the       The Bill reflects the preferred policy outcome, and is consistent with the position in New
                                                       concept that a dealing in       Zealand (section 53) and Saskatchewan (section 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
46                        26       The Victorian Bar   is a fixed and specific
                                                       charge, or, even a legal
                                                       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
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                                                                   Responses to comments received on
                                                       Personal Property Securities Bill 2009 during September 2009
Clause/Issues          Sub no.        Submitter                   Issue               AGD Comment
                                                       charge property (with
                                                       provision for legal
                                                       mortgage).

                                                       Second, it is not clear what   The Department 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
                                                       idea of ‗ordinary 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
                                                       leasing personal property
                                                       of that kind‘ in clause 46.
                                                       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
46                        26       The Victorian Bar   of the entire undertaking of
                                                       a company, ―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
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                                                                   Responses to comments received on
                                                       Personal Property Securities Bill 2009 during September 2009
Clause/Issues          Sub no.        Submitter                     Issue             AGD Comment
                                                       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.

                                                       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 the   would extend to the sale of intangibles (such as intellectual property) or financial
                                                       sale of goods. What other      products (such as shares) made in the ordinary course of the seller‘s business of selling
                                                       personal property is clause    intangibles or financial products of that kind.
46                        26       The Victorian Bar
                                                       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 Department 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 restriction
                                                       in it) cannot be registered.


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                                                                   Responses to comments received on
                                                       Personal Property Securities Bill 2009 during September 2009
 Clause/Issues         Sub no.        Submitter                   Issue               AGD Comment
                                                       Wording different from the     The Bill reflects the intended policy outcome.
46                        19       Mr David Turner
                                                       NZ legislation.

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

                                                       Taking of personal             The Bill reflects the intended policy outcome.
                                   Australian
                                                       domestic or household
47(1)                     14       Bankers'
                                                       property free of security
                                   Association
                                                       should be at arms length.

                                                       There should be an             The Bill reflects the intended policy outcome. Because of the anonymous nature of
                                                       exception that the rule does   CHESS purchases (i.e. the purchaser does not know the identity of the seller) it is
                                                       not apply if the buyer has     difficult to see how a buyer could ever have actual knowledge that the purchase is in
                                                       actual knowledge that the      breach of a security agreement. The seller‘s secured party should protect its security
                                                       purchase is in breach of a     interest by taking control of the investment instruments
                                                       security agreement.
                                                       ―Ordinary course of
49                        26       The Victorian Bar   trading‖ can include large
                                                       and exceptional
                                                       transactions. Clause 49
                                                       would postpone the interest
                                                       of legal mortgage of shares
                                                       and that of a person having
                                                       some other fixed security
                                                       interest notwithstanding
                                                       that the interest was noted
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                                                                   Responses to comments received on
                                                       Personal Property Securities Bill 2009 during September 2009
Clause/Issues          Sub no.        Submitter                   Issue              AGD Comment
                                                       on the register or in the
                                                       CHESS system.

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

                                                       The inclusion of a            The Bill 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 registration
                                                       the definition of             made on the Personal Property Securities Register (clause 300).
                                                       ―purchaser‖ in clause
                                                       50(3), and the use of the
                                                       wide term ―transferee‖ in
                                                       clause 51, means that these
                                                       clauses regulate priorities
                                                       between competing
                                                       security interests
                                                       (otherwise dealt with in
50 & 51                   26       The Victorian Bar   Part 2.6). Although
                                                       provision is made in part
                                                       8.4 for obtaining
                                                       information 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

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                                                                   Responses to comments received on
                                                       Personal Property Securities Bill 2009 during September 2009
Clause/Issues          Sub no.        Submitter                     Issue             AGD Comment
                                                       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 registered
                                                       charges given by
                                                       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 ambiguity about        The Department 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 intermediary maintains the
                                   Association         investment entitlement.        investment entitlement account‘.

                                                       The words of limitation,       The Bill reflects the preferred policy outcome. It is based on Chattel Securities Act 1987
53                        26       The Victorian Bar
                                                       ―in relation to the            (Vic) section 7(7).

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                                                                   Responses to comments received on
                                                       Personal Property Securities Bill 2009 during September 2009
 Clause/Issues      Sub no.       Submitter                   Issue              AGD Comment
                                                  property‖, will prevent a
                                                  security holder who is
                                                  ousted under clause 50 and
                                                  51 from being subrogated
                                                  to the whole of the
                                                  property secured in favour
                                                  of the competing
                                                  successful security holder.
                                                  The successful security
                                                  holder have executed
                                                  against the personal
                                                  property and satisfied its
                                                  claims out of that fund. In
                                                  those circumstances the
                                                  ousted security holder
                                                  should be entitled to be
                                                  subrogated (on a
                                                  subordinate basis) to the
                                                  rights of the successful
                                                  security holder against
                                                  other property securing the
                                                  monies owing to the
                                                  successful security holder.

                                                  Does not include               The Department notes that this issue is addressed in Item 25 of Schedule 4 of the
55(5)(b)               6       Clayton Utz
                                                  'perfection by control'.       Personal Property Securities (Consequential Amendments) Bill 2009.

                                                  Priority time in relation to   Clause 57(1) provides that a security interest in collateral which is perfected by control at
55(5)(b)             AG1       DLA Phillips Fox   perfection by control.         any particular time takes priority over another security interest in the same collateral
                                                                                 perfected by another means.
                                                  If the Department amends
             th
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                                                              Responses to comments received on
                                                  Personal Property Securities Bill 2009 during September 2009
 Clause/Issues         Sub no.        Submitter                     Issue              AGD Comment
                                                       clause 55(5)(b) to also         The amendment to clause 55(5)(b) is required to address a case where the security
                                                       refer to control of the         interest has been continuously perfected, and that the security interest was first perfected
                                                       collateral, clause 57(1) will   by control.
                                                       also require amendment to
                                                       account for the priority
                                                       time.

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

                                                                                       The Department notes that the New Zealand Act (section 70(2)) refers only to an
                                                                                       agreement, despite section 70(1) referring to ‗in a security agreement or otherwise‘; while
                                                       Subordination as opposed        the Saskatchewan Act (section 40(2)) refers to ‗agreement or undertaking‘ and ‗security
61                        13       DLA Phillips Fox                                    agreement or otherwise‘ (section 40(1)).
                                                       to priority deeds.
                                                                                       The Department will consider amending clause 70(2) to refer to a deed in addition to a
                                                                                       security agreement.

                                                       Change clause to                The Bill 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, not
                                   Conference
                                                       within 10 days of the
                                                       grantor taking possession.

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


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                                                                   Responses to comments received on
                                                       Personal Property Securities Bill 2009 during September 2009
 Clause/Issues         Sub no.         Submitter                    Issue                AGD Comment
                                                         Should clarify that holder      The Department 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 particular, that the
64(1)                     18       Securitisation        effect registration referring   class referred to in the definition of ‗description‘ may include after-acquired or future
                                   Forum                 to future property of           property.
                                                         grantor.

                                                         Recommends that the first       Applying the first in time priority rule would in effect involve omitting clause 64 from
                                   Australian            in time priority rule should    the Bill. Extending the notice period to 10 days may delay the provision of new finance
64                        12       Institute of Credit   apply, or the period for        to businesses with liquidity problems.
                                   Management            notice be extended to 10
                                                         business days.

                                                         Complexity of priority          The Department notes that this issue is addressed in Item 29 of Schedule 4 of the
                                                         rules.                          Personal Property Securities (Consequential Amendments) Bill 2009.
                                                         Paragraph 30 in the             The Department is considering whether clause 64(1)(b)(i) should be amended so that the
                                                         Schedule.                       notice need only be given to the interests over which priority is claimed. Consequently, a
                                                                                         failure to give notice to one registrant will not defeat priority over other registrants to
                                                         Clause 64 provides that a
                                                                                         whom notice has been given. The priority interest would be subordinate to interests to
                                                         non-purchase money
                                                                                         whom notice was not given.
                                                         security interest in an
64                       AG1       DLA Phillips Fox      account (as original            A conditional sale (or retention of title arrangement) or finance lease are examples of
                                                         collateral) has priority over   purchase money security interests. There is no existing legislative obligation for grantors
                                                         a purchase money security       under a conditional sale or finance lease to give notice of the sale or lease to an existing
                                                         interest in the account as      security interest holder (such as the holder of a floating charge over the grantor‘s
                                                         proceeds of inventory. This     property). The Canadian PPS legislation does require a notice to be given in these
                                                         priority requires the           circumstances, which New Zealand does not. Not including a requirement to give a
                                                         secured party that holds the    notice maintains the existing position concerning notice to existing security interest
                                                         prior security interest to      holders and avoids imposing additional compliance costs in relation purchase money
                                                         give notice to each secured     security interests.
                                                         party holding a purchase
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                                                                     Responses to comments received on
                                                         Personal Property Securities Bill 2009 during September 2009
Clause/Issues       Sub no.     Submitter              Issue                AGD Comment
                                            money security interest in      The priority under clause 64 does require a purchaser of accounts to give notice to the
                                            the account.                    holder of the earlier registered security interest. The purchase of the accounts will be
                                                                            able to identify the holders of earlier registered security interests by searching the PPS
                                            There is no requirement on
                                                                            register.
                                            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 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.

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                                                        Responses to comments received on
                                            Personal Property Securities Bill 2009 during September 2009
 Clause/Issues         Sub no.        Submitter                  Issue                AGD Comment
                                                      Complexity of priority          Clause 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 determining that priority‘: (see
                                                                                      clause 55(1)).
                                                      Paragraph 32 in the
                                                      Schedule. Division 4 of         Division 4 of Part 2.6 provides specific rules regarding priority of security interest in
                                                      Part 2.6 of the 2009 Bill       transferred collateral. The default priority rules in clause 55 do not apply because the Act
                                                      (dealing with priority of       does set out a way of determining priority in the circumstances to which those provisions
Div 4 of Part                                         security interests in           apply.
                         AG1       DLA Phillips Fox
2.6                                                   transferred collateral)
                                                      appears to override the
                                                      default priority rules in
                                                      clause 55 (other than where
                                                      one of the security interests
                                                      referred to is perfected by
                                                      control).

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

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

                                                      Complexity of priority          Clause 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             Clause 299 is an evidentiary provision providing that in certain circumstances a person
69                       AG1       DLA Phillips Fox
                                                      Schedule. Clause 69             will be taken to have actual knowledge of certain matters unless the contrary is proved
                                                      (which is carried over from     beyond reasonable doubt. In the relevant circumstances, clause 299 will facilitate proof
                                                      the 2008 Bill) has the          of the actual knowledge required by clause 69. There is no inconsistency between clause
                                                      effect of giving an
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                                                                  Responses to comments received on
                                                      Personal Property Securities Bill 2009 during September 2009
Clause/Issues       Sub no.     Submitter                Issue               AGD Comment
                                            unsecured creditor priority      69 and clause 299 so that one needs to be made subject to the other.
                                            over a secured creditor
                                            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.

                                            Complexity of priority           This is a drafting matter that does not affect the Bill‘s legal effect.
                                            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. This requires
                                            correction.

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                                                        Responses to comments received on
                                            Personal Property Securities Bill 2009 during September 2009
Clause/Issues          Sub no.        Submitter                    Issue                AGD Comment
                                                       The reference to                 The Department will consider whether the reference in clause 72(b)(ii) to ‗negotiable
                                                       "negotiable instrument" in       instrument‘ should be changed to ‗negotiable document of title‘.
72                       AG2       Clayton Utz         clause 72(b)(ii) should be
                                                       reference to "negotiable
                                                       document of title".

                                   Insolvency                                           Clauses 73(1) and (2) provide a mechanism for liens and statutory liens to have priority
                                                       Insolvency administrators'
73                        10       Practitioners                                        over a security interest.
                                                       liens
                                   Australia

                                                       Clarify the priority position    The secured party in relation to a security interest in intellectual property may protect its
                                                       of execution creditor who        position by registering its security interest on the PPS Register. An execution creditor
                                                       obtains a transfer of            should be able to rely on the PPS Register to identify any security interests attached to the
                                   Independent Film    intellectual property rights.    collateral.
74                        25       & Television
                                   Alliance            Should be contingent on          Clause 74(4)(a) makes it clear that the secured party has until seizure by the execution
74                        26
                                   The Victorian Bar   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 implemented the Bill.
                                                       and the rule should be
                                                       limited to goods.

                                                       Complexity of priority           Accounts are defined as excluding ADI accounts (clause 10). Consequently, clause°64
                                                       rules.                           (which relates to accounts) does not impact on the operation of clause 75 (which relates
                                                                                        to ADI accounts).
                                                       Paragraph 31 in the
75                       AG1       DLA Phillips Fox    Schedule.
                                                       It is unclear how clause 75
                                                       (which deals with the
                                                       priority of security interests
                                                       held by ADIs in an ADI
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                                                                   Responses to comments received on
                                                       Personal Property Securities Bill 2009 during September 2009
Clause/Issues          Sub no.        Submitter                  Issue                AGD Comment
                                                      account) works together
                                                      with clause 64.

                                                      Priority of unregistered        The Department will consider whether clause 77(3) should apply to investment
                                                      foreign security interests      entitlements in the same way that it applies to financial property.
                                                      should extend to
                                   Combined four                                      It is not clear to the Department why clause 77 should also apply to security interests in
77                        17                          investment entitlements,
                                   law firms                                          an ADI account or other intangible that is governed by the law of a jurisdiction that does
                                                      ADI accounts and other
                                                                                      not provide for the giving of public notice of security interests.
                                                      forms of intangible
                                                      property.

                                                      'Perfection' doesn't exist in   It is not a prerequisite to the operation of clause 77 that the law of the relevant
                                   Combined 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 clause 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 Bill deal with the effect of the transfer
                                                      grantor and the transferee      on the security interest (eg clause 32(1)(a) and Div 4 of Part 2.6)
                                                      to consent to a transfer of
                                                      collateral even if the
79                       AG1       DLA Phillips Fox   security interest prohibits
                                                      the transfer of the
                                                      collateral.
                                                      The amendment which
                                                      should be considered by
                                                      the Department is the
                                                      amendment to
                                                      clause 79(1)(a) by deleting
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                                                                  Responses to comments received on
                                                      Personal Property Securities Bill 2009 during September 2009
 Clause/Issues         Sub no.        Submitter                  Issue                AGD Comment
                                                      the reference to 'transferee'
                                                      and replacing it with a
                                                      reference to 'secured party
                                                      under the security
                                                      agreement'.

                                                      Should this clause apply        The Department notes that this issue is addressed in Item 34 of Schedule 4 of the
                                   Clayton Utz;
                                                      only to agreements              Personal Property Securities (Consequential Amendments) Bill 2009.
79                       6, 17     Combined four
                                                      between the grantor and a
                                   law firms
                                                      secured party?

                                                      It is not appropriate that an   The onus would ordinarily be on the account debtor to establish the matters in
                                                      account debtor (who has         clause°80(1)(a) & (b), and clause 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
80(4)                    AG1       DLA Phillips Fox
                                                      be necessary for a
                                                      transferee (who has
                                                      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
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                                                                  Responses to comments received on
                                                      Personal Property Securities Bill 2009 during September 2009
 Clause/Issues         Sub no.        Submitter                   Issue             AGD Comment
                                                      Australian Securitisation
                                                      Forum 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.
                                   Forum                                            material adverse affect on the transferee‘s rights under the contract.
                                                                                    An account debtor who has been asked to pay a third party should be entitled to proof that
                                   Australian                                       payment to the third party will discharge their liability.
                                                      Requiring proof of transfer
80(7)(b)                  18       Securitisation
                                                      is unwieldy.
                                   Forum

                                                      Should clause apply to all    The Department will consider whether the reference to ‗collateral‘ should be omitted
80(7)                      6       Clayton Utz        transfers of an account or    from clause 80(1).
                                                      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 prohibitions 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 Phillips Fox   in the same way as
                                                      clause 79. What is the
                                                      policy reason for this?
                                                      Indeed, why is clause 81
                                                      included at all?

                                   Combined four      Delimitation of rights on     Clause 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.

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                                                                  Responses to comments received on
                                                      Personal Property Securities Bill 2009 during September 2009
 Clause/Issues         Sub no.        Submitter                   Issue               AGD Comment
                                                       Include language with          Clause 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.

                                                       Basis for a pro rata           Clause 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                                   Clause 105(1) is required to ensure that the Bill will apply in the same way to both goods
105(1)                    25       & Television        Remove                         and intellectual property rights that secure the same obligations.
                                   Alliance

                                   Independent Film    Amend to reflect               Clause 105(2) is consistent with UNCITRAL Recommendation 243.
105(2)                    25       & Television        UNCITRAL
                                   Alliance            Recommendation 243.

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

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                                                                   Responses to comments received on
                                                       Personal Property Securities Bill 2009 during September 2009
 Clause/Issues       Sub no.        Submitter                Issue              AGD Comment
                                                At a minimum, Chapter 4
                                                should be amended so that
                                                the consumer protection
                                                provisions apply in the
                                                same circumstances in
                                                which the new National
                                                Consumer Code will
                                                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, domestic 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 from the existing
                                                The new enforcement
                         6       Clayton Utz                                    provisions. It is something that could be considered by the review mentioned in clause
107-144                                         regime is too complex.
                                                                                343.

109                      7       Motor Trades   Requests that the bill          This is not necessary as the one registration will apply in the same way to each supply.

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                                                            Responses to comments received on
                                                Personal Property Securities Bill 2009 during September 2009
 Clause/Issues       Sub no.        Submitter                  Issue               AGD Comment
                                 Association of    explicitly provides that
                                 Australia         multiple registrations will
                                                   not be needed. Consider
                                                   with operation of clauses
                                                   59, 67(1) and (2).

                                                   Should delete 'that does        This issue has been addressed through the inclusion of clause 109(1)(b) in the Bill.
                                 Australian
                                                   not' and substitute 'the
109(1)(a)               18       Securitisation
                                                   primary purpose of which
                                 Forum
                                                   is not to'.

                                                   Concern that clause 126         Refine existing approach.
                                 Consumer Action
109(5)                   5                         and 142(2) should not
                                 Law Centre
                                                   apply to consumers.

                                                   Clause 109(5) of the Bill       Clause 123 allows collateral to be seized by any method permitted b law. If the law
                                                   excludes certain                prohibits seizure by apparent possession, then the Bill would not be authorise seizure by
                                                   enforcement rights and          apparent possession.
                                                   remedies in the Bill from
                                                                                   Clause 142(2) allows a person to waive their right to redeem the collateral. This would
                                                   applying to collateral used
                                                                                   be subject to another law prohibiting a person waiving their right to redeem the collateral.
                                                   by a grantor predominantly
                                 Consumer Action   for personal, domestic or
109(5)                 AG5                         household purposes,
                                 Law Centre
                                                   reflecting the intention that
                                                   consumer credit laws
                                                   remain the primary source
                                                   of rights relating to
                                                   consumer debts and
                                                   mortgages. However, it
                                                   does not exclude clauses
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                                                               Responses to comments received on
                                                   Personal Property Securities Bill 2009 during September 2009
Clause/Issues       Sub no.        Submitter                  Issue              AGD Comment
                                                  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             Clause 111 will not apply in relation to provision 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 commercially reasonable manner.
                                Combined four
111                    17                         possible to contract out;
                                law firms
                                                  should at least not require
                                                  party to disregard its own
                                                  commercial interests.

                                                  Concerns about the             The language used in the Bill reflects the intended policy outcome.
111                    19       Mr David Turner   commercially reasonable
                                                  manner test.

112                    14       Australian        Uncertainty over proceeds      The Department considers that the Bill will not affect the arrangements for the payment
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                                                              Responses to comments received on
                                                  Personal Property Securities Bill 2009 during September 2009
 Clause/Issues       Sub no.        Submitter                  Issue               AGD Comment
                                 Bankers'            when security interest in a   of dividends and other rights to shareholders. It notes that clause 112(1) of the Bill
                                 Association         company.                      provides that ‗[i]n exercising rights and remedies provided by this Chapter, a secured
                                                                                   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 Bill reflects the intended policy outcome.
115                     26       The Victorian Bar   requirement of not being
                                                     "manifestly unreasonable".

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

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

                                                     Clause 123 notice should      This suggestion is addressed, in part, by clause 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".

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

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

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

143                     17                           Reinstatement provisions       Clause 111 will apply in these circumstances.
                                 Combined four
                                                     cause significant difficulty
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                                                                 Responses to comments received on
                                                     Personal Property Securities Bill 2009 during September 2009
 Clause/Issues       Sub no.        Submitter                 Issue               AGD Comment
                                 law firms         when a party has to undo
                                                   acceleration.

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

                                 Combined four                                    The Department will consider amending the Bill to avoid contraventions by assignees and
                                                   Could be breached by
                                 law firms,                                       consignors.
                                                   assignees or consignors
151                   17, 18     Australian
                                                   attempting to perfect
                                 Securitisation
                                                   interest.
                                 Forum

                                                   The drafting of clause 151     The Department will consider whether clause 151(1) should be amended so that the
                                                   should reflect the earlier     person described in the statement as the secured party must has a reasonable belief that
                                                   exposure draft of the PPS      the secured party is, or will become, a secured party in relation to the collateral
                                                   Bill. For example, clause      (otherwise than by virtue of the registration itself).
                                                   151(1) should be amended
                                                   to state:
151                    AG2       Clayton Utz
                                                   "A person must not apply
                                                   for registration of personal
                                                   property as collateral
                                                   unless the person believes
                                                   on reasonable grounds that
                                                   a security interest in the
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                                                               Responses to comments received on
                                                   Personal Property Securities Bill 2009 during September 2009
Clause/Issues       Sub no.        Submitter                   Issue               AGD Comment
                                                   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 registration
                                                   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 Phillips Fox   Registration                    Registrar will not have the grantor‘s address (see clause 153, Table Item 3, and the
                                                                                   Regulations Paper).

                                                   There are categories of
                                Consumer Action
153                   AG5                          assets which are unclear.
                                Law Centre
                                                   For example:

                                                   (a) in the list of types of     The Department will be undertaking further consultations on the regulations prescribing
                                                       Consumer Property,          classes of collateral for the purposes of clause 153 Item 4(c) of the Bill.
                                Consumer Action        there are 3 classes of
153                   AG5
                                Law Centre             agricultural assets,
                                                       namely, "Agriculture",
                                                       "Agriculture - Crops"
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                                                               Responses to comments received on
                                                   Personal Property Securities Bill 2009 during September 2009
Clause/Issues       Sub no.        Submitter                 Issue               AGD Comment
                                                     and "Agriculture -
                                                     Livestock". For
                                                     Commercial Property
                                                     there is only one class,
                                                     which is "Agriculture".
                                                     Only "Agriculture -
                                                     Crops" and
                                                     "Agriculture -
                                                     Livestock" should be
                                                     used;

                                                  (b) for Commercial             The Department will be undertaking further consultations on which classes of collateral
                                                      Property there is a        may or must be described by serial number in accordance with clause 153 Table Item
                                                      category of asset          4(b).
                                                      referred to as
                                                      "Aircraft". This is not
                                                      replicated for
                                                      Consumer Property. It
                                                      is not clear what this
                                                      separate category is
                                Consumer Action       intended to refer to and
153                   AG5
                                Law Centre            why it would not be
                                                      available for consumer
                                                      property. For example,
                                                      if a larger aircraft was
                                                      acquired for personal
                                                      use and security was
                                                      granted over that
                                                      aircraft, how would that
                                                      be registered? Further,
                                                      in any event, separate
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                                                              Responses to comments received on
                                                  Personal Property Securities Bill 2009 during September 2009
 Clause/Issues       Sub no.        Submitter                  Issue             AGD Comment
                                                      registration numbers
                                                      are not allocated for
                                                      aircraft. 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 multiple engines,
                                                      the serial numbers for
                                                      the multiple engines).

                      AG 6                         Well stated. When             The Department has noted this comment.
                                                   ‗approved form‘ is
                                                   referenced will a template
                                                   of the approved form be
                                                   made available on a
                                                   website. We had a Service
155 and 156                      Phyllis Raymond   Provider who provided
                                                   verification statements to
                                                   Secured Parties alleging
                                                   that they were produced by
                                                   the Register when, in fact,
                                                   they were not in the form
                                                   provided by the Register.


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                                                               Responses to comments received on
                                                   Personal Property Securities Bill 2009 during September 2009
Clause/Issues       Sub no.        Submitter                  Issue              AGD Comment
                                                   Provision of information      The information that must be supplied should be readily available to the secured party.
157                    13       DLA Phillips Fox   by secured parties –
                                                   timeframe unreasonable.

                                                   Believes proposed penalty     This question could be reconsidered in the review proposed by clause 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 Bill 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                          This is the only way in
                                Law Centre
                                                   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 civil
                                                   penalty regime in
                                                   recognition that the
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                                                   Personal Property Securities Bill 2009 during September 2009
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                                                 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
                                                 amendment would not
                                                 change the substantive
                                                 obligations of security
                                                 holders under the Bill in
                                                 any way, it would merely
                                                 provide a better guarantee
                                                 of compliance.

                                                 Only individuals can make     This has been corrected by the PPS (Consequential Amendments) Bill – Item 40 of
                                 Office of the
                                                 a complaint to the Privacy    Schedule 4.
157(4)                   8       Privacy
                                                 Commission, not all
                                 Commissioner
                                                 grantors.


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                                                             Responses to comments received on
                                                 Personal Property Securities Bill 2009 during September 2009
 Clause/Issues       Sub no.        Submitter                    Issue                AGD Comment
                      AG 6                           This clause is well stated.      The Department has noted this comment.
165                              Phyllis Raymond     It clarifies what is seriously
                                                     misleading.

                                                     Temporary effectiveness of       The clause does not require continuous checking. It requires that the secured party act
                                 Combined four       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 initiate the removal of registrations
168                     26       The Victorian Bar   charge on the secured            that are no longer needed.
                                                     property.

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

                                                     We do not agree with the         As stated in the Privacy Impact Assessment report for the PPS Register, permitted
                                                     Department 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          marketing activities.
                                                     table of authorised
                                 Consumer Action     purposes under clause
172                    AG5                           172(2) do not permit
                                 Law Centre
                                                     searching the register for
                                                     general credit assessment
                                                     or marketing purposes.
                                                     Item 7 clearly states that a
                                                     person can search for an
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Clause/Issues      Sub no.    Submitter               Issue               AGD Comment
                                          individual on the register to
                                          ‗establish whether to
                                          provide credit to, or obtain
                                          a guarantee or an
                                          indemnity from, a person‘,
                                          not merely to establish
                                          whether to provide credit
                                          or obtain a guarantee or
                                          indemnity secured against
                                          a particular item of
                                          personal property.

                                          Further, pre-screening of
                                          marketing offers could also
                                          be encompassed in the
                                          overly broad authorised
                                          purposes under items 7-10,
                                          as explained in the context
                                          of the extensive review of
                                          general credit reporting
                                          laws conducted last year.
                                          This would be clearly
                                          inappropriate and we do
                                          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
            th
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Clause/Issues       Sub no.     Submitter               Issue              AGD Comment
                                            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 credit direct
                                            marketing purposes
                                            including pre-screening,
                                            and are only permitted for
                                            assessment of whether to
                                            lend against an item of
                                            personal property held by
                                            the grantor. There is no
                                            reason to wait three years
                                            for a review of the new law
                                            before making these
                                            amendments given there
                                            appears to be general
                                            agreement that searches
                                            should not be permitted for
                                            credit assessment and
                                            marketing purposes, and
                                            the disagreement here
                                            relates merely to the
                                            drafting not to the
                                            underlying policy
                                            intention. The drafting
                                            could therefore be clarified
                                            given legitimate concerns.

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Clause/Issues          Sub no.      Submitter                   Issue               AGD Comment
                                                     The coverage of the            This has been dealt with by the PPS (Consequential Amendments) Bill – Items 25-30 of
                                 Office of the
                                                     Privacy Act in relation to     Schedule 5.
173                8             Privacy
                                                     'interferences with privacy'
                                 Commissioner
                                                     will need to be addressed.

                                                     Include a legislative          The Department 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
                                                     information for the            information be held for the minimum time possible once a registration is no longer active.
                                                     minimum amount of time,        The Department considers this sufficient.
                                                     include a provision to
                                                                                    As stated in the Privacy Impact Assessment report for the PPS Register, permitted
                                 Office of the       prohibit the use of
                                                                                    searches as set out in the June 2009 PPS Bill would not include searches for direct
173                      9       Victorian Privacy   information for pre-
                                                                                    marketing activities.
                                 Commissioner        screening and direct
                                                     marketing, any extension       Any extension of the use of PPS register will need to be authorised by legislation, either
                                                     of the use of the register     by amending the Act or under regulations. Any proposals to include additional personal
                                                     should require legislative     information in the PPS Register will be subject to a published Privacy Impact Assessment
                                                     amendment or a further         before a decision is made to amend the legislation.
                                                     privacy impact assessment.

                                                                                    The Department does not agree that the Bill allows this conduct. This question could be
                                                                                    reconsidered in the review proposed by clause 343 in light of the practical operation of
                                 Consumer Action     Requests that items 7-10 in    the Bill.
                                 Law Centre          the table under clause 172
172                      5                                                          As stated in the Privacy Impact Assessment report for the PPS Register, permitted
                                                     be amended to restrict the
                                 Office of the                                      searches as set out in the June 2009 PPS Bill would not include searches for direct
173                      8                           use of the PPSR for data
                                 Privacy                                            marketing activities.
                                                     mining for consumer credit
182                     AG 6     Commissioner
                                                     assessment and marketing       The court order will be kept by the Registrar. The registration will show that the
                                 Phyllis Raymond     purposes.                      Registrar amended the registration in response to a court order.


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                                                                 Responses to comments received on
                                                     Personal Property Securities Bill 2009 during September 2009
Clause/Issues       Sub no.        Submitter                 Issue                AGD Comment

                                                  Could clarify the
                                                  Registrar's ability to lodge
                                                  complaints in 173(2), is 3rd
                                                  party misuse covered, plus
                                                  changes to the Explanatory
                                                  Memorandum.


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

                                                  We agree with Legal Aid         Clause 184 will allow the Registrar to address systemic behaviour of the kind mentioned
                                                  Queensland that the             in clause 184(1)(a).
                                                  Registrar should be able to
                                                  identify and address
                                                  systemic conduct engaged
                                                  in by a security holder in
                                                  breach of their obligations
                                Consumer Action   under the new Act. One
184                   AG5
                                Law Centre        way to help deal with this
                                                  issue might be to clarify in
                                                  the Explanatory
                                                  Memorandum to the Bill
                                                  that the Registrar‘s powers
                                                  under clause 184 to
                                                  remove registrations from
                                                  the register at the
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                                                              Responses to comments received on
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 Clause/Issues       Sub no.        Submitter                   Issue              AGD Comment
                                                   Registrar‘s own initiative if
                                                   they are satisfied that the
                                                   retention of the data in the
                                                   register is contrary to the
                                                   public interest, might apply
                                                   where the Registrar has
                                                   concerns about systemic
                                                   unfair conduct by a
                                                   registrant, including
                                                   registering security
                                                   interests in personal
                                                   property that are not valid,
                                                   for example because such
                                                   security interests are void
                                                   under consumer credit laws
                                                   regardless of registration.
                                                   The regulations to be made
                                                   under clause 184 could
                                                   also address the Registrar‘s
                                                   power to remove data from
                                                   the register due to this sort
                                                   of systemic conduct.

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

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

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 Clause/Issues       Sub no.        Submitter                 Issue               AGD Comment
                                                   and before the correction
                                                   was done.

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

Part 7.2                                           General comments:              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 are being considered
                                                      no reason for the PPS       separately by the Government in the context of the Hague Conference Convention on
                                                      legislation to be           Choice of Laws for Intermediated Securities.
                                                      consistent
                                                                                  The Bill reflects the intended policy outcome. Allowing choice of law in relation to the
                                                      with conventions not
                                                                                  validity, perfection and effect of perfection or non-perfection of a security interest would
                                                      adopted by Australia.
                                                                                  result in uncertainty for third parties. 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
                       AG2       Clayton Utz
                                                     Entitlements: 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
                                                     provisions in respect of     would not know that they should search the New Zealand PPS Register instead of the
                                                     investment entitlements.     Australian PPS Register.
                                                     Investment entitlements
                                                                                  Clause 237(2) has the effect that all assignments of accounts by a grantor, and security
                                                     should be dealt with in
                                                                                  interests in accounts held by a grantor, will be governed by the same law. This will
                                                     the same manner as
                                                                                  provide certainty for third parties contemplating taking an assignment of an account,
                                                     financial property.
                                                                                  because it will allow them to determine the law that would have applied to any earlier
                                                   (c) Clause 237 should          assignment of the account (and therefore any disclosure that might have been made in
                                                      allow the parties to a
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                                                               Responses to comments received on
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Clause/Issues       Sub no.     Submitter              Issue               AGD Comment
                                              security agreement to        relation to that earlier assignment).
                                              select a non-Australian
                                                                           The Department will consider whether clause 237(2) should be amended to refer to
                                              law to govern their
                                                                           ‗transfer‘ rather than ‗assignment‘, for consistency with clause 12(3)(a) (and whether a
                                              security agreement. If
                                                                           corresponding amendment should be made to clauses 6(2)(c) (the chapeau), 6(2)(c)(i),
                                              the grantor is an
                                                                           8(1)(vi), (vii) and (viii) and 8(1)(x)).
                                              Australian entity at the
                                              time the security interest   The Department will consider whether clause 241(1) and (2) should be amended so that
                                              attaches to the collateral   proceeds that are an account would be governed by the same law as the security interest
                                              and the parties to the       that gave rise to the account only when the account arises from the dealing that gave rise
                                              security interest select a   to the proceeds.
                                              law other than
                                              Australian law to apply
                                              in circumstances where
                                              this would not be
                                              manifestly contrary to
                                              public policy, Australian
                                              courts should permit that
                                              law to determine
                                              questions of validity,
                                              perfection and the effect
                                              of perfection and non-
                                              perfection.
                                            (d) Clause 237(2) should
                                               be deleted. There is no
                                               compelling reason for
                                               the exclusions that are
                                               provided for in that
                                               clause.
                                            (e) Clause 238(2) relies on
                                               the reasonable belief of
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Clause/Issues       Sub no.     Submitter               Issue              AGD Comment
                                              the secured party and
                                              this is impractical. The
                                              rule should be changed
                                              to look at the question of
                                              whether objectively it
                                              was likely that the goods
                                              would be moved to a
                                              particular jurisdiction.
                                              Alternatively, the rule
                                              could simply 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 from
                                              one jurisdiction to
                                              another.
                                            (f) The Explanatory
                                               Memorandum 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
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                                                        Responses to comments received on
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 Clause/Issues       Sub no.        Submitter               Issue               AGD Comment
                                                   transfer of the collateral
                                                   that gave rise to the
                                                   accounts should be
                                                   excluded.

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

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

                                                 Bill should outline a clear    The Department notes clause 267 and 268 of the Bill.
                                                 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.

                                                 Should not apply to leases,    Unsecured creditors are entitled to rely on the register to provide notice of security
                                                 bailments or commercial        interests that would survive the grantor‘s insolvency.
                                                 consignments – why
                                                 should the interest of the
267                      6       Clayton Utz
                                                 legal owner be defeated
                                                 where there is no
                                                 competing perfected
                                                 security interest.


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                                                             Responses to comments received on
                                                 Personal Property Securities Bill 2009 during September 2009
 Clause/Issues       Sub no.         Submitter                  Issue              AGD Comment
                                 Combined four                                     The Department will consider whether clause 267 should be amended so that unperfected
                                                     Vesting of unperfected
                                 law firms,                                        property which vests in the grantor after the insolvency event will vest in the grantor.
                                                     security interests on
267                   17, 18     Australian
                                                     insolvency; drafting
                                 Securitisation
                                                     problems.
                                 Forum

                                 Insolvency                                        The Department will consider an appropriate amendment to the Bill.
                                                     Note 2 should refer to s267
267                     10       Practitioners of
                                                     of Corporation Act.
                                 Australia

                                                     Unnecessary and should be     The provision reflects the policy in relation 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 relation to this matter.
                                 Combined four
268(2)                  17                           successfully excluded from
                                 law firms
                                                     vesting provisions.

                                                     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.

                                                     Definition of 'constructive   The provision reflects the policy in relation to this matter.
297                     13       DLA Phillips Fox
                                                     knowledge'.


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                                                                 Responses to comments received on
                                                     Personal Property Securities Bill 2009 during September 2009
 Clause/Issues       Sub no.        Submitter                  Issue               AGD Comment
                                                    Given the importance of        Clause 297 is based on the existing general law about when a person will have knowledge
                                                    constructive knowledge for     of matters. It is not intended that the Bill should seek to further codify these general law
                                                    the operation of the Bill,     principles.
                                                    we believe it is important
                                                    to clarify when a person
                                                    should have to make
                                                    enquiries. At the moment,
                                                    clause 297 is unclear as to
                                                    the circumstances in which
                                                    a person would be deemed
                                                    to have constructive
                                                    knowledge as this depends
                                                    on a view being taken as to
297                    AG1       DLA Phillips Fox   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
                                                    circumstances where a
                                                    person should make such
                                                    enquiries. Alternatively,
                                                    regulations should deal
                                                    with this matter. See also
                                                    our comment below on
                                                    clause 300.

299(1)(a)              AG1       DLA Phillips Fox   Clause 299 should apply to     An interest in personal property may itself be personal property to which clause 299
                                                    any transaction where a
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                                                                Responses to comments received on
                                                    Personal Property Securities Bill 2009 during September 2009
 Clause/Issues       Sub no.        Submitter                   Issue             AGD Comment
                                                    person acquires not only      would apply. For example, a beneficial interest in a motor vehicle is personal property.
                                                    personal property but an
                                                    interest in personal
                                                    property.
                                                    Comments have been made
                                                    that this clause should
                                                    apply where a person
                                                    acquires not only personal
                                                    property in full but an
                                                    interest in personal
                                                    property. Presumably, 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)      Clause 299(1)(a) reflects the intended policy effect. The Department would welcome
299(1)(a)                6       Clayton Utz        should refer to an interest   comment on which provision inappropriately refer to an interest in personal property.
                                                    in personal property.

                                                    Parties should be on notice   Clause 300 is based on provision in the Saskatchewan (section 47) and New Zealand
                                                    of the contents of the        (section 20) PPS legislation, which also provide that registration of a financing statement
300                    AG1       DLA Phillips Fox   register.                     in the registry is not constructive knowledge of its existence or contents to any person.
                                                    In response to Clayton        Clause 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 clause 297, an

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                                                                Responses to comments received on
                                                    Personal Property Securities Bill 2009 during September 2009
Clause/Issues       Sub no.     Submitter               Issue                AGD Comment
                                            clause 267, the Department       honest and prudent person would not as a matter of usual business practice routinely
                                            advises that 'unsecured          search the PPS register, as this would undermine the effect of clause 300 that a person
                                            creditors are entitled to rely   does not have actual or constructive knowledge of the data in PPS registration. Before
                                            on the register to provide       clause 297 could apply to confer constructive knowledge of a registration on an honest
                                            notice of security interests     and reasonable person, the person would need to have a reason to search the register.
                                            that would survive the
                                                                             One legislative strategy would be to provide that a purchaser takes the collateral free of
                                            grantor's insolvency'.
                                                                             the security interest when they do so without notice of the security interest. The Bill
                                            Clause 300 provides that 'a
                                                                             could then have gone on to deem people to have constructive notice of registrations.
                                            person does not have
                                            notice, or actual or             The Bill avoids the artificiality of deeming by providing directly that a purchaser takes
                                            constructive knowledge,          collateral subject to a registered security interest (see clause 32(1)(a)).
                                            about the existence or
                                            contents of a registration       The Bill also avoids the compliance costs associated with requiring people to search the
                                            merely because data in the       register and obtain a certificate. Whether a person takes free of a registered security
                                                                             interest will depend on whether the security interest was registered at the relevant time.
                                            registration is available for
                                                                             Whether the purchaser incurred the expense of undertaking a search will be irrelevant.
                                            search on the register'.
                                            Given the objective of the
                                            reform to provide a single
                                            national register which 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
                                            property which is dealt
                                            with on financial markets
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Clause/Issues       Sub no.     Submitter               Issue              AGD Comment
                                            and consumer property
                                            valued below a particular
                                            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 particular
                                            circumstances 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 title to the
                                            vehicle. In the absence of
                                            obtaining such certificate
                                            or purchasing the vehicle
                                            from a licensed dealer,
                                            there is no guarantee of
                                            such title.

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                                                        Responses to comments received on
                                            Personal Property Securities Bill 2009 during September 2009
Clause/Issues       Sub no.        Submitter               Issue                AGD Comment
                                               As currently drafted clause       The Department notes that security agreement is defined broadly to means:
                                               314 states that Chapter 4
                                                                                 (a) an agreement or act by which a security interest is created, arises or is provided for;
                                               only applies in relation to
                                                                                 or (b) writing evidencing such an agreement or act. For reasons associated with section
                                               security interests provided
                                                                                 51(xxxi.) of the Constitution, it is not possible for the enforcement provisions to apply in
                                               for by security agreements
                                                                                 relation to security interests that arise under security agreements made before the
                                               made at or after the
                                                                                 registration commencement time.
                                               registration
                                               commencement time.
                                               Chapter 4 will in fact also
                                               apply to security interests
                                               created by means other
314                   AG2       Clayton Utz    than by security
                                               agreements where made at
                                               or after the registration
                                               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 Department notes that clause 333(1)(b) requires that ‗registrations in that transitional
332                                            charges should be                register with respect to personal property of that class were effective immediately before
                      AG2       Clayton Utz    considered to be effectively     the time the data was given to the Registrar‘.
                                               registered for the purposes      Clause 333(1)(b) does not require that an effective registration have a particular legal
                                               of clause 332(c) of the PPS      effect, only that the registration is ‗effective‘. While the registration itself is effective, the
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                                                           Responses to comments received on
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Clause/Issues       Sub no.        Submitter              Issue                AGD Comment
                                               Bill.                           registration does not have the effect of registering the charge.
                                                                               However, the Department considers that a registration that includes the word
                                                                               ‗provisional‘ is effective as a registration on the Register of Company Charges. The fact
                                                                               that the registration is at risk of being deleted in accordance with clauses 265(5) or (7)(b)
                                                                               of the Corporations Act 2001 does not detract from its effectiveness as a provisional
                                                                               registration. The registration is effective 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
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                                               Personal Property Securities Bill 2009 during September 2009
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                                                result of the failure to
                                                respond, the PPS registrar
                                                cannot complete
                                                registration on the PPS
                                                register. Provisional
                                                registration arising from a
                                                stamp duty deficiency is
                                                not relevant under the new
                                                PPS regime.

                                                Even though the ASIC           The Department notes that the Registrar‘s capacity to register a financing statement under
                                                register of company            clause 333(2) is confined to cases in which data in a transitional register is given to the
                                                charges should be closed       Registrar. The Registrar is unable to register a financing statement on the basis that the
                                                from the registration          administrator of a transitional register has taken an administrative step preliminary to the
                                                commencement time, any         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 registered for
                                                the purposes of clause
                                                332(c) of the PPS Bill.

                                                The references in clause       Clause 339(2)(b) is intended to address a case when a security agreement made after
                                                339(2)(b) to a transfer of     commencement uses the expression ‗charge‘ or ‗floating charge‘, and is intended to make
339(2)                 AG2       Clayton Utz    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
                                                transfer of an account or

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                                                            Responses to comments received on
                                                Personal Property Securities Bill 2009 during September 2009
 Clause/Issues       Sub no.        Submitter                  Issue              AGD Comment
                                                   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 – Alphabetical

                                                                                  The Bill has the intended policy effect. The Department has noted this comment. It
                                 Combined four     Weakening of asset
Assets Charges          17                                                        considers that the question should not be whether a particular security is weakened, but
                                 law firms         charges and other security.
                                                                                  whether the Bill strikes an appropriate balance between competing parties.

Cape Town                                          Whether the bill precludes     The Bill may need to amended the Bill should the Government decide to implement the
Convention &                                       ratification of the Cape       convention.
Aircraft                 3       James Kimpton     Town Convention and
Equipment                                          Aircraft Equipment
Protocol                                           Protocol.

                                                   We also have the following     The ‗Describing Collateral paper will not be used as a basis for the PPS Regulations. The
                                                   additional comments in         paper was made available in May 2009 to members of the PPS Information Technology
                                                   relation to the "Describing    User Group (PPSITUG) the Department has established to assist information technology
                                                   Collateral" paper that the     professionals develop the information technology that will be required to interface with
                                                   Attorney-General's             the Personal Property Securities Register. The Department advises against relying on the
Collateral -                                       Department released in         paper for other purposes. The Department notes that it did not circulate the paper outside
                       AG5       Clayton Utz
Description                                        May 2009. We have raised       the members of the PPSITUG.
                                                   these comments in this
                                                                                  A Discussion Paper on Regulations to be made under the Personal Property Securities
                                                   submission on the basis
                                                                                  Act was published in October 2009.
                                                   that we assume that paper
                                                   will be the basis of the PPS
                                                   Regulations:
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                                                               Responses to comments received on
                                                   Personal Property Securities Bill 2009 during September 2009
 Clause/Issues       Sub no.        Submitter                   Issue               AGD Comment
Collateral -                                        There are a significant         The Department will refer this drafting comment to the Office of Parliamentary Counsel.
Inconsistent use                                    number of places where
of the term                                         "collateral" is incorrectly
                                                    used rather than "personal
                                                    property". For example,
                                                    clause 19(1) states that a
                                                    security interest is
                                                    enforceable in respect of
                                                    collateral only if the
                       AG2       Clayton Utz        security interest has
                                                    attached to the collateral.
                                                    In light of the definition 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 Bill does not affect the application of other legislation to legal and equitable
legal                   18       Securitisation     assignment; consistency         assignments of receivables.
assignment                       Forum              with other legislation.

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

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                                                                Responses to comments received on
                                                    Personal Property Securities Bill 2009 during September 2009
 Clause/Issues       Sub no.         Submitter                     Issue              AGD Comment
                                                       violence.

                                                       Requests the ability to be     The Department has noted this comment.
                                 Director of Public
                                                       able to register property
Family Issues           24       Prosecutions
                                                       restraining orders on the
                                 Victoria
                                                       PPSR.

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

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

Guidance Notes                                         In almost all circumstances    The Department has referred this comment to the Office of Parliamentary Counsel, which
                                                       the clauses which are in       has provided the following response:
                                                       "boxes" simplify the other
                                                                                      ‗1.    The examples listed by Clayton Utz do not contradict the provisions described;
                                                       provisions of the Bill to an
                                                                                             they are not wrong. They are simply expressed at a higher level of generality than
                                                       extent that makes those
                                                                                             the provisions described. This is the essential nature of an outline.
                                                       clauses contradictory to the
                                                       remaining clauses in the       2.     OPC would be reluctant to insert an interpretative provision about the effect of the
                       AG2       Clayton Utz
                                                       Bill. Examples of where               outline material. It is not our standard practice, and there are many instances on
                                                       this has occurred are as              the statute book of outline material that is unsupported by any such provision. It is
                                                       follows:                              our view that common sense dictates that the actual rule should take precedence
                                                                                             over an outline describing the rule (in the event of inconsistency), and there is no
                                                       (a) Clause 3: The third
                                                                                             need to state this expressly. Again, this is the essential nature of an outline. It
                                                           paragraph refers to
                                                                                             does not prescribe the law; it describes the law.
                                                           personal property
                                                           including "many            3.     The outline material is not included for the benefit of the PPS specialists at
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                                                                   Responses to comments received on
                                                       Personal Property Securities Bill 2009 during September 2009
Clause/Issues      Sub no.    Submitter               Issue                AGD Comment
                                             different kinds" of               Clayton Utz. It is included as an aid for a commercial lawyer who might not use
                                             tangible and intangible           the PPS Act very often.‘
                                             property. In fact, for
                                             the purposes of the
                                             legislation, personal
                                             property is all tangible
                                             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 definition 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
            th
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                                                      Responses to comments received on
                                          Personal Property Securities Bill 2009 during September 2009
Clause/Issues       Sub no.     Submitter               Issue              AGD Comment
                                              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
                                              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
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                                                        Responses to comments received on
                                            Personal Property Securities Bill 2009 during September 2009
 Clause/Issues       Sub no.        Submitter               Issue                AGD Comment
                                                    to be security interests.
                                                 Unlike the NZ legislation,
                                                 which uses examples
                                                 throughout the PPS
                                                 legislation of how the
                                                 legislation will apply in a
                                                 practical sense, these
                                                 "boxed" clauses are of little
                                                 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 Department has noted this comment.
Implementation                   Combined four
                        17                       insufficient; based on NZ
Phases                           law firms
                                                 experience.

                                                 Absolute assignments of         The Department will consider whether an assignment of an account or chattel paper that
Insolvency -                                     accounts and chattel paper      does not secure an obligation should vest on the grantor‘s insolvency.
                                 Combined four
account or              17                       should not vest on
                                 law firms
chattel paper                                    insolvency unless when
                                                 they don't secure money.

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                                                             Responses to comments received on
                                                 Personal Property Securities Bill 2009 during September 2009
 Clause/Issues       Sub no.        Submitter                   Issue               AGD Comment
                                                                                    The Department has noted this comment, and also that the following provisions refer to
Investment                       Combined four       Investment entitlements are    ‗investment entitlements‘: clauses 15, 21, 23, 26, 30, 31,41 42, 49, 51 and 109. The
                        17
entitlements                     law firms           absent from Bill               Personal Property Securities (Consequential Amendments) Bill added a reference to
                                                                                    ‗investment entitlements‘ to the following clauses of the Bill: clauses 6, 26, 32 and 77.

                                                     The language of this piece     The Department has noted this comment.
Language of
                      AG 6       Phyllis Raymond     of legislation is very clear
Legislation
                                                     and concise.

                                                     Query whether Bill             The Department will consider the position of mortgage backed securities in the context of
                                 Australian
                                                     includes or excludes           regulations made under clause 8.
Mortgages               18       Securitisation
                                                     mortgage backed
                                 Forum
                                                     securitisation.

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

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

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

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                                                                 Responses to comments received on
                                                     Personal Property Securities Bill 2009 during September 2009
 Clause/Issues       Sub no.        Submitter                   Issue              AGD Comment
                      AG 6                           Reference has been made       The Department has noted this comment.
                                                     to the development of
                                                     Regulations. One caution
                                                     is not to ties the
                                                     Regulations to closely to
                                                     the Register. Names of
                                                     field and screen titles
Regulations                      Phyllis Raymond
                                                     should never be reference
                                                     in the Regulations in case
                                                     they should change in the
                                                     future. This caution comes
                                                     from encountering this in
                                                     past experience with a
                                                     Register.

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

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

Shipping                14       Australian          Lack of clarity – impact on   The Department is considering amendments to the Shipping Registration Act that would
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                                                                 Responses to comments received on
                                                     Personal Property Securities Bill 2009 during September 2009
 Clause/Issues       Sub no.        Submitter                 Issue               AGD Comment
                                 Bankers'         security interest over ships.   require security interests in ships to be registered on the PPS register.
                                 Association

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

                                                                                  The Department:
                                                                                      (a) considers that the obligation owed by a person on an unsecured account is not a
                                                                                          security interest for the purposes of the Bill;
                                                                                      (b) considers that a custodial does not hold the investment instrument on behalf of
                                 Australian                                               (ie as agent for) the ultimate owner. Rather, the custodian is an ‗investment
                                                  Minor drafting matters at
Various issues          18       Securitisation                                           entitlement intermediary‘ with whom the person holds an ‗investment
                                                  p.5.
                                 Forum                                                    entitlement‘ (see clause 15).
                                                                                      (c) notes that the 5 business days provided for by clause 38(c) is consistent with
                                                                                          periods generally allowed under the Bill.
                                                                                      (d) notes that the grantor‘s details for the purposes of clause 153 will be considered
                                                                                          in the context of the Regulations.

                                                  The Explanatory                 The Explanatory Memorandum to the PPS Bill has been amended to clarify and display a
Water Rights -
                       AG3       Deacons          Memorandum to the PPSB          clear legislative intention that ‗irrigation rights‘ are excluded from the operation of the
Irrigation
                                                  refers at page 10 to            Bill.
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                                                              Responses to comments received on
                                                  Personal Property Securities Bill 2009 during September 2009
 Clause/Issues       Sub no.        Submitter              Issue               AGD Comment
                                                ―tradeable water rights,
                                                water access
                                                entitlements…‖. That
                                                reference appears not to
                                                have been updated since
                                                the amendment to
                                                subparagraph 6(1)(i) of the
                                                Exposure Draft.
                                                At page 15, the
                                                Explanatory Memorandum
                                                refers to ―a right under the
                                                general law or
                                                Commonwealth or State
                                                and Territory laws which
                                                apply to the control or use
                                                of water‖. This expression
                                                suffers from the same
                                                ambiguity as subparagraph
                                                8(1)(i) of the PPSB.
                                                The Explanatory
                                                Memorandum should be
                                                amended to reflect the
                                                current drafting of the
                                                PPSB and the intention to
                                                exclude irrigation rights
                                                from the operation of the
                                                PPSB.

Water Rights -         AG3       Deacons        Subparagraph 6(1)(i) of the    See above.

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                                                            Responses to comments received on
                                                Personal Property Securities Bill 2009 during September 2009
 Clause/Issues       Sub no.        Submitter              Issue               AGD Comment
Irrigation                                      Exposure Draft dated
                                                November 2008 excluded
                                                the following water rights
                                                from the operation of the
                                                PPSB:
                                                ―…a tradeable water right,
                                                or a water access
                                                entitlement, within the
                                                meaning of the Water Act
                                                2007…‖.
                                                In the Water Act 2007
                                                (Cth), ―tradeable water
                                                rights‖ include ―irrigation
                                                rights‖.
                                                Therefore, irrigation rights
                                                were clearly excluded from
                                                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
                       AG3       Deacons        under contracts. They are
                                                not granted by or under a
                                                law of the Commonwealth,
                                                a State or a Territory.
                                                Therefore, whether
                                                irrigation rights are
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                                                            Responses to comments received on
                                                Personal Property Securities Bill 2009 during September 2009
Clause/Issues       Sub no.     Submitter                Issue              AGD Comment
                                            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 expression
                                            ―general law‖ is defined in
                                            the PPSB to mean ―the
                                            principles and rules of the
                                            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
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                                                        Responses to comments received on
                                            Personal Property Securities Bill 2009 during September 2009
Clause/Issues       Sub no.     Submitter               Issue             AGD Comment
                                            there are many rules and
                                            principles of the common
                                            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 Furthermore, there are
                                            explicit references
                                            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
                                            example, the definitions 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
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                                                        Responses to comments received on
                                            Personal Property Securities Bill 2009 during September 2009
Clause/Issues      Sub no.    Submitter                Issue             AGD Comment
                                          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 a
                                          State or Territory and
                                          rights directly held under
                                          the general law, such as
                                          riparian rights, are
                                          excluded from 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
            th
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                                                      Responses to comments received on
                                          Personal Property Securities Bill 2009 during September 2009
 Clause/Issues       Sub no.        Submitter               Issue                AGD Comment
                                                significantly less clear than
                                                the position under the
                                                Exposure Draft.

Water Rights -                                  We understand that the           See above.
Exclusion                                       purpose of the amendment
                                                to subparagraph 6(1)(i) of
                                                the Exposure Draft, now
                                                contained in subparagraph
                                                8(1)(i) of the PPSB, was to
                                                broaden the scope of the
                                                exclusion, not to reduce it.
                                                5.2 However, as we have
                                                set out in this submission,
                                                one unintended
                                                consequence of the
                       AG3       Deacons        amendment to
                                                subparagraph 6(1)(i) of the
                                                Exposure Draft has been to
                                                cast
                                                doubt on whether irrigation
                                                rights are now excluded
                                                from the operation of the
                                                PPSB.
                                                5.3 If it is the intended that
                                                irrigation rights be
                                                excluded from the
                                                operation of the

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                                                            Responses to comments received on
                                                Personal Property Securities Bill 2009 during September 2009
Clause/Issues       Sub no.          Submitter                 Issue                AGD Comment
                                                    PPSB, subparagraph 8(1)(i)
                                                    should be amended to
                                                    express that intention
                                                    clearly.
                                                    6. Recommendations
                                                    6.1 We recommend that
                                                    subparagraph 8(1)(i) of the
                                                    PPSB be amended so that
                                                    irrigation rights are clearly
                                                    excluded from the
                                                    operation of the PPSB.
                                                    6.2 In addition, for clarity
                                                    and to assist with
                                                    interpretation of the PPSB,
                                                    we recommend that the
                                                    Explanatory Memorandum
                                                    to the PPSB clearly state
                                                    that irrigation rights as
                                                    defined in the Water Act
                                                    2007 (Cth) are excluded
                                                    from the operation of the
                                                    PPSB.

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

                                                    Synchronise                     The two Bill will be progressed separately through the Parliament.
National                         Legal Aid
                       11                           commencement of the bill
Consumer                         Queensland         with the National
Credit
                                                    Consumer Credit
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                                                                Responses to comments received on
                                                    Personal Property Securities Bill 2009 during September 2009
 Clause/Issues       Sub no.        Submitter               Issue              AGD Comment
Protection Bill                                  Protection Bill.

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

                                                 Possible conflict with        The Department will consider, together with the Department of the Treasury, whether
                                 Australian      section 266 of                Corporations Act 2001 sections 266 and 267 should be relocated to Chapter 5 of
Corporations
                        14       Bankers'        Corporations Act – certain    Corporations Act (though amended to reflect the commencement of the PPS Bill).
Act
                                 Association     charges void against
                                                 liquidator.

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

                                                 The following is a            The Department will take these comments into account in considering the transitional
                                                 summary of the provisions     arrangements applying to the amendments to the Corporations Act 2001.
                                                 of Chapter 2K that should
                                                 continue to apply after the
                                                 registration
Corporations                                     commencement time. All
Act                    AG2       Clayton Utz     other provisions in Chapter
                                                 2K should not apply,
                                                 except to the extent noted
                                                 above. Other than in
                                                 relation to section 266, we
                                                 have not provided reasons
                                                 why those other sections
                                                 should cease to apply (this
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                                                             Responses to comments received on
                                                 Personal Property Securities Bill 2009 during September 2009
Clause/Issues       Sub no.     Submitter               Issue              AGD Comment
                                            is generally self
                                            explanatory).
                                            (a) Section 267 should
                                                continue to apply but
                                                be relocated to Part
                                                5.7B of the
                                                Corporations Act. We
                                                believe it should apply
                                                only to "charges" as
                                                currently defined in the
                                                Corporations Act, not
                                                the broader concept of
                                                "security interest"
                                                under the PPS Bill. 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.
                                            (c) Section 270 should
                                                cease to apply from the
                                                registration
                                                commencement time in
                                                relation to notices that
                                                should have been
                                                lodged under section
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                                                        Responses to comments received on
                                            Personal Property Securities Bill 2009 during September 2009
Clause/Issues       Sub no.     Submitter              Issue                AGD Comment
                                               268 for registered
                                               charges before the
                                               registration
                                               commencement time.
                                               As ASIC registered
                                               charges will be
                                               migrated to the PPS
                                               register, the provisions
                                               for requiring
                                               corrections to the PPS
                                               register contained in the
                                               PPS Bill should simply
                                               apply from that time
                                               (where relevant).
                                               Section 270 could
                                               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.
                                            (d) Section 271 should
                                                apply to all charges
                                                (within the existing
                                                definition used in the
                                                Corporations Act)
                                                whether created before
                                                or after the registration
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                                                        Responses to comments received on
                                            Personal Property Securities Bill 2009 during September 2009
Clause/Issues       Sub no.     Submitter              Issue                 AGD Comment
                                               commencement time.
                                               The section should
                                               however again only be
                                               limited to charges as
                                               currently defined in the
                                               Corporations Act, not
                                               the broader security
                                               interests under the PPS
                                               Bill.
                                            (e) Section 272 should
                                                apply in relation to any
                                                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
                                            repealed with effect on and
                                            from the registration
                                            commencement time.
                                            As the transitional
                                            provisions of the PPS Bill
                                            currently operate, sections
                                            267 to 269 of the PPS Bill
                                            will apply to all transitional
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                                                        Responses to comments received on
                                            Personal Property Securities Bill 2009 during September 2009
Clause/Issues       Sub no.     Submitter                Issue               AGD Comment
                                            security interests if the
                                            grantor or debtor becomes
                                            insolvent. Under the
                                            Corporations Act
                                            provisions (or by
                                            amendment to the PPS
                                            Bill), this could be
                                            extended to circumstances
                                            where the transitional
                                            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 relation 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
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                                                        Responses to comments received on
                                            Personal Property Securities Bill 2009 during September 2009
Clause/Issues       Sub no.     Submitter               Issue               AGD Comment
                                                ASIC after the 45 day
                                                period from 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
                                                register; and
                                            (b) registrable charges that
                                                are transitional security
                                                interests that are not
                                                registered with ASIC at
                                                all but are registered
                                                voluntarily under the
                                                PPS regime.
                                            It is not practicable for the
                                            ASIC regime in section
                                            266 to continue to apply in
                                            those 2 circumstances
                                            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
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                                                        Responses to comments received on
                                            Personal Property Securities Bill 2009 during September 2009
Clause/Issues       Sub no.     Submitter               Issue               AGD Comment
                                            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
                                            indefinitely.
                                            If there is a constitutional
                                            concern with excluding
                                            section 266 of the
                                            Corporations Act in
                                            relation to the securities
                                            referred to in paragraph (a),
                                            the approach of allowing 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 registration)
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                                                        Responses to comments received on
                                            Personal Property Securities Bill 2009 during September 2009
 Clause/Issues       Sub no.        Submitter                Issue                AGD Comment
                                                will not create a
                                                disincentive to register
                                                under the ASIC regime
                                                prior to the registration
                                                commencement date. A
                                                failure to register will
                                                mean that, if there are other
                                                competing ASIC registered
                                                charges, those 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.

Collateral                                      We have considered the
                       AG2       Clayton Utz    consequential amendments
                                                that will need to be made
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                                                            Responses to comments received on
                                                Personal Property Securities Bill 2009 during September 2009
 Clause/Issues       Sub no.        Submitter              Issue               AGD Comment
                                                to the Corporations Act as
                                                a consequence of the PPS
                                                regime. Certain of the
                                                comments we have made
                                                below may be more
                                                appropriate for inclusion in
                                                Chapter 9 of the PPS Bill.

                                                The Corporations Act, as it    The Department will take this comment into account in developing the transitional
                                                now stands, should             arrangement applying to consequential amendments to the Corporations Act 2001.
                                                continue to apply to any
                                                registrable charges that
                                                come into existence before
                                                the "registration
                                                commencement time" (as
                                                defined in the PPS Bill) in
Corporations                                    respect of the period before
Act                    AG2       Clayton Utz    the registration
                                                commencement time. This
                                                would obviously be
                                                expected (for example, in
                                                the context of court cases
                                                dealing with priority
                                                disputes relating to the
                                                period before the
                                                registration
                                                commencement time).




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                                                            Responses to comments received on
                                                Personal Property Securities Bill 2009 during September 2009
 Clause/Issues       Sub no.        Submitter              Issue                 AGD Comment
                                                On and from the                  The Department will take this comment into account in developing the transitional
                                                registration                     arrangement applying to consequential amendments to the Corporations Act 2001.
                                                commencement time, no
                                                registration of any
                                                registrable charge or any
Corporations                                    other registration relating
Act                                             to registrable charges, for
                       AG2       Clayton Utz
                                                example, increases in
                                                secured liabilities under
                                                section 268, should occur
                                                under Chapter 2K of the
                                                Corporations Act. This
                                                will result in a number of
                                                different outcomes:

                                                (a) in relation to registrable   The Department will refer this comment to the Registrar of Personal Property Securities
                                                    charges executed prior       (when appointed), so that it may be taken into account in preparing the legislative
                                                    to the registration          instrument mentioned in clause 333(1) of the Bill.
                                                    commencement time
                                                                                 The Department considers that it would be open to the Registrar to make an instrument
                                                    that have been fully
                                                                                 under clause 333(1) determining property described in the Register of Company Charges
                                                    registered (that is,
Corporations                                                                     (see section 265(2)(c) of the Corporations Act 2001) immediately before the registration
                                                    including any
Act                    AG2       Clayton Utz                                     commencement time.
                                                    additional registrations
                                                    under section 264 or
                                                    268) with ASIC either
                                                    within or after the
                                                    initial 45 day period
                                                    prescribed by the
                                                    Corporations Act, this
                                                    should be straight
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                                                            Responses to comments received on
                                                Personal Property Securities Bill 2009 during September 2009
 Clause/Issues      Sub no.       Submitter              Issue                 AGD Comment
                                                 forward (subject to the
                                                 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 registrable   The Department has noted this comment.
                                                  charges executed prior
                                                  to the registration
                                                  commencement time
                                                  that have not been
                                                  registered with ASIC,
Corporations                                      or in respect of which
Act                                               particular registrations
                     AG2       Clayton Utz
                                                  (for example 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         AG2       Clayton Utz       (i) creation (ie, and
               th
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                                                          Responses to comments received on
                                              Personal Property Securities Bill 2009 during September 2009
 Clause/Issues       Sub no.        Submitter             Issue                AGD Comment
Act                                                    will therefore, as
                                                       the Corporations
                                                       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

Corporations                                      (ii) registrable charges     The Department will consider whether Regulations made under clause 320(5) of the Bill
Act                    AG2       Clayton Utz          which, as at the         should prescribe a class of transitional security interests are not registered on the Register
                                                      registration             of Company Charges immediately before the registration commencement time, but which
                                                      commencement             could have been registered on the Register of Company Charges more than 45 days

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                                                            Responses to comments received on
                                                Personal Property Securities Bill 2009 during September 2009
 Clause/Issues       Sub no.        Submitter              Issue               AGD Comment
                                                      date, are not            before the registration commencement time.
                                                      registered (or in
                                                      respect of which a
                                                      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 Department has noted this comment.
                                                reasons outlined below,
                                                                               The Department notes that clause 51(xxxi.) of the Constitution constrains the
                                                we believe that voluntary
Corporations                                                                   Parliament‘s capacity to ‗cure‘ defects in registrations with ASIC where to do so would
                                                registration on the PPS
Act                                                                            result in an acquisition of property.
                       AG2       Clayton Utz    register of these "non-
                                                registered" registrable
                                                charges should "cure" any
                                                defects in registration with
                                                ASIC.

                                                A problem arises if a          The Department will consider whether Regulations made under Item 8 of the Table in
                                                charge is only                 clause 153 should require a migrated registration to include the time that the data was
Corporations
                                                provisionally registered at    originally registered on the source register.
Act                    AG2       Clayton Utz    the registration
                                                                               The Department will take these comments into account in considering the transitional
                                                commencement time. The
                                                                               arrangements applying to the amendments to the Corporations Act 2001.
                                                documents required to be
                                                lodged with ASIC for

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                                                            Responses to comments received on
                                                Personal Property Securities Bill 2009 during September 2009
 Clause/Issues       Sub no.        Submitter               Issue             AGD Comment
                                                registration to be
                                                completed will not be able
                                                to be lodged with ASIC
                                                after the registration
                                                commencement time if the
                                                approach we have
                                                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 registration on the
                                                relevant transitional
                                                register (here, the ASIC
                                                register) was "effective"
                                                immediately before the
                                                data to be migrated is
                                                given to the PPS registrar.

                                                The date and the time that    The Department will consider whether Regulations made under Item 8 of the Table in
Corporations                                    a charge is taken to have     clause 153 should require a migrated registration to include the time that the data was
Act                    AG2       Clayton Utz    been registered under the     originally registered on the source register.
                                                Corporations Act is
                                                                              The Department will take these comments into account in considering the transitional
                                                relevant under the PPS Bill
                                                - see in particular clause
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                                                            Responses to comments received on
                                                Personal Property Securities Bill 2009 during September 2009
Clause/Issues       Sub no.     Submitter                Issue             AGD Comment
                                            324(2) of the PPS Bill.        arrangements applying to the amendments to the Corporations Act 2001.
                                            This means that the data
                                            migrated from the ASIC
                                            register to the PPS register
                                            should include details of
                                            the date and time of the
                                            registration of each
                                            registered charge.
                                            Alternatively, this
                                            information will need to
                                            continue to be available
                                            from an ASIC search
                                            (which is the least
                                            preferred approach).




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                                                        Responses to comments received on
                                            Personal Property Securities Bill 2009 during September 2009

								
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