Michael Keenan (Stirling, Liberal Party, Shadow Minister for Justice and Customs) Share this | Link to this | Hansard source

I rise to speak on the Personal Property Securities (Corporations and Other Amendments) Bill 2010. The initial suite of personal property securities legislation was passed with coalition support in 2009. The various states and territories have long had their own mechanisms for the registration and management of securities given over personal property to secure financial obligations. Familiar examples include fixed and floating charges, bills of sale, chattel mortgages and registers of hire-purchase agreements. It has also long been recognised that there is a need for national harmonisation of these arrangements to provide greater certainty for borrowers and lenders and to increase efficiency within the sector. The former Attorney-General, the honourable member for Berowra, Philip Ruddock, gave this issue particular priority during the term of the previous, Howard government.

In October 2008 COAG signed an intergovernmental agreement to effect the proposed legislation as part of the National Partnership Agreement to Deliver a Seamless National Economy between the Commonwealth and the states and territories. The principal act applies, with very limited exceptions, to all types of personal property, including motor vehicles, contractual rights, intellectual property rights and uncertified shares. It provides for rules for the creation, priority and enforcement of security interests and establishes a national register of them. There are detailed specific provisions in relation to certain classes of property.

The principal purpose of this bill is to make amendments to the Corporations Act 2001 to harmonise the language and to ensure conceptual consistency between the two acts. These amendments comprise terminological changes to the provisions referring to charges and other security interests. References to charges, mortgages, liens and pledges in the Corporations Act will be replaced with ‘security interests’. ‘Floating charges’ will become ‘circulating security interests’. ‘Fixed charges’ will become ‘non-circulating security interests’. Similar changes will be made in the references to holders of security interests. The old terms will be retained to refer to security interests to which the Personal Property Securities Act does not apply.

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

Concerning the repeal of chapter 2K of the Corporations Act, chapter 2K provides for the registration of company charges. That function will be subsumed by the personal properties security act regime. The provisions as to charges void against an administrator or liquidator will be retained. The bill further goes to the retention of existing rights in the Corporations Act. Examples include provisions regulating priority in the distribution of proceeds, administrators’ rights of indemnity and the priority payment of certain unsecure creditors. The bill also provides for streamlined transitional provisions.

This bill wisely reflects the recommendations made by the Senate Standing Committee on Legal and Constitutional Affairs, which has reported several times on the proposed legislative regime. We in the opposition understand the benefits and importance of establishing a simplified, national personal property securities regime and, as I said, that was something pursued by the previous Attorney-General and by the previous government. Therefore the opposition supports the passage of the bill through the parliament.

Shayne Neumann (Blair, Australian Labor Party) Share this | Link to this | Hansard source

I speak in support of the Personal Property Securities (Corporations and Other Amendments) Bill 2010. When I was training to be a lawyer at the University of Queensland in the late 1970s and early to mid-eighties I did not quite understand, when doing constitutional law, the travails and troubles that the Federation actually caused us. You read section 51 of the Australian Constitution and recognise that the Commonwealth has jurisdiction in respect of certain aspects. But there are areas in which business goes across jurisdictions.

I remember the first day I started practising as an articled law clerk and someone walked into the office with all their tax returns and a big box of receipts et cetera. I asked where they had business interests and they said, ‘In the Lockyer Valley just outside of Ipswich, and interstate I have got farming interests.’ I asked, ‘What about your securities? Are you secured on any properties, debentures, companies et cetera?’ They wanted me to check all this out. I remember distinctly contacting my then master, as they called it, and finding out that you had to go interstate to check so much with respect to mortgages, liens and debentures. You really realised then—and I realised as a very young lawyer—what stupidity it was in this country to have all these different systems with different charges and different registries, and I recognised there and then what a shocking impediment and obstacle to a seamless national economy it was—though I did not quite use that expression in those days.

When I got into business for myself and built up a law practice which dealt with a lot of commercial clients interstate and overseas, it was an endless frustration to me, particularly in the commercial section. So the creation of this new registry, the idea of personally being able to be searched online and across the country, whether you are living in Queensland or Tasmania, is a great national reform of the reformist Rudd Labor government. I think this is a great initiative.

The amendments here are consequential; they are about making sure there is consistency with the Corporations Law and that definitions of property are the same. This is about making improvements to the system, and of course there are going to be changes—that is what happens when you establish a new registry. I noted what the Attorney-General, who is here in the chamber, said on 26 November 2009 when the personal property securities law was passed. I read what he said at the time because I thought it was very important in that the passage of that bill was a major achievement in reforming Australia’s personal property securities system. I say amen to that; I think it was a major achievement. It is a demonstration once again of the Rudd Labor government’s commitment to small to medium sized businesses. We saw that in the budget with the reduction in corporate tax rates and the write-off of $5,000 upfront for small businesses. There is a myth in this chamber, perpetrated and perpetuated by those opposite, that they alone are the friends of small business. It is simply a nonsense. The legislation here is consequential, but it makes the system work better. It is necessary. The COAG implementation timetable requires the personal property securities reform to be implemented in May 2011.

This legislation before the chamber makes amendments in accordance with schedules, as we often do, to amend the Corporations Law and the primary legislation, the Personal Property Securities Act or PPS Act, and also other Commonwealth legislation. It is minor but it improves the system, amending terminology in the Corporations Law to make it consistent with the PPS Act and amending the Corporations Law in relation to the concept of property. Property has a particular concept in law: it is personalty or realty; it is tangible assets or intangible ones. Things like contractual rights and intellectual property rights are intangible. Tangible assets, as we know, are things like livestock, property, crops, cars et cetera. This legislation makes the definition of property consistent. It repeals chapter 2A, which establishes the ASIC register of company charges. That is being replaced by the PPS register. It maintains the existing rights of secured and unsecured creditors such as employees, debtor companies, owners, lessors, lienees, pledgees, controllers, administrators or liquidators. It is minor, as I said, but it is important.

The Ministerial Council for Corporations have approved the changes and the Standing Committee of Attorneys-General have approved the amendments in accordance with the intergovernmental agreement. It makes a difference, clearly, to make sure this system works better. Small businesses will clearly benefit because they will use the registry on a daily basis. It will improve their capacity to get finance and their security. Nothing causes more disputes between parties than a dispute between a third party and two other people involved in a contract. We see that all the time; that is what causes difficulties. That is why there are complicated provisions in the Corporations Law and the Bankruptcy Act in relation to third parties. If people can get access online to a registry and can check it out to see what the situation is with respect to the security, that will enhance their certainty of transaction. When they go to bargain in relation to a good or service it will improve the situation.

I think this legislation is important. It improves the PPS Act. I am very excited about this legislation because it will make a big difference to business and to the many small businesses and farming communities in my regional and rural seat of Blair. It will help business operators in Ipswich but it will also help in the little communities where there are small businesses who need access to that information. It will help people who live in little country places like Kilcoy, Lowood, Minden, Fernvale, Toogoolawah and Esk, as well as the farmers who support the economies in those areas. I support the legislation and I commend the Attorney-General for the work he has done.

Robert McClelland (Barton, Australian Labor Party, Attorney-General) Share this | Link to this | Hansard source

I thank both of the previous speakers for their contribution to this debate on the Personal Property Securities (Corporations and Other Amendments) Bill 2010, in particular the member for Blair, who has just completed his speech. I would like to thank members for their contribution to the debate more generally. Before I turn to some of the specific aspects of the bill, I reiterate the comments that have previously been made that this is a significant reform of Australia’s personal property security regime and will create significant efficiencies, leading to businesses being more likely to lend funds on the basis of identified securities and ultimately making it cheaper for those financial institutions that lend funds to do so more cheaply as a result of a reduction in costs of compliance.

The core elements of the bill are amendments to the Corporations Act 2001 to ensure its consistency with the functional approach of the Personal Property Securities Act, or the PPS Act—an easy acronym. Under this approach to security interests, transactions which have the same effect are treated alike. The bill has received significant support and input from stakeholders, including businesses, consumer advocates, representatives from state and territory governments, lawyers and financiers. I am grateful to all of these people for their comments and feedback and, of course, to officers of the Attorney-General’s Department who, for a long period of time, have been doing some tremendously dedicated work on this bill and the overall structure of the personal property securities scheme.

The amendments to the Corporations Act in schedule 1 will make amendments to the Corporations Act concept of property to apply the functional approach to security interests, particularly in relation to property in which the grantor does not have title. It will repeal chapter 2K, which establishes the ASIC Register of Company Charges, as this will be replaced by the Personal Property Securities Register. It will maintain existing rights, including employee entitlements in insolvency, and apply appropriate transitional and application provisions. The Ministerial Council for Corporations approved the amendments following a six-week consultation period which ended in January of this year. The amendments to the PPS Act in schedule 2 will simplify the transitional provisions, ensure consistency with existing state and territory provisions on the enforcement of security interests in crops and livestock and reflect the terminology used in the international financial industry in relation to intermediated securities. The Standing Committee of Attorneys-General has approved these amendments in accordance with the intergovernmental agreement that supports the PPS reform. Schedule 3 makes minor consequential amendments to other Commonwealth legislation.

The bill was referred to the Senate Legal and Constitutional Affairs Legislation Committee for inquiry. Submissions to the committee raised some possible amendments which would clarify the operation of the bill. To avoid any delays, we are proposing to give appropriate consideration to the issues raised in the Senate committee inquiry and, if necessary, to enact a further amendment bill which will be introduced later in the year.

In conclusion, as I have said before, the PPS Act will replace the existing complex regulatory arrangements, based on artificial distinctions between personal property security transactions, with one national functional approach to personal property securities. PPS reform is a key aspect of the government’s continued commitment to cooperation with the states and territories on the government’s deregulation agenda and the national agreement to deliver a seamless economy. I acknowledge the contribution of the Standing Committee of Attorneys-General in progressing the PPS reform and this particular bill.

As this reform is based on a referral of power from the states to the Commonwealth, I also acknowledge the prompt and cooperative manner in which the states have assisted in this reform. New South Wales, Victoria, Queensland and South Australia have passed referral legislation and Tasmania and Western Australia will be passing their referral legislation in due course. The states and territories will also be making consequential amendments to their legislation dealing with personal property security interests. In closing, PPS reform is essential to making secured financing more accessible and efficient by lowering risk for lenders, by increasing competition between finance providers, by providing greater certainty for both lenders and borrowers and by lowering costs for borrowers. I commend the bill to the House.

Question agreed to.

Bill read a second time.

Ordered that the bill be reported to the House without amendment.