BILLS DIGEST NO. 64, 2011–12, 19 October 2011

Personal Property Securities Amendment (Registration Commencement) Bill 2011

Paula Pyburne
Law and Bills Digest Section

Date introduced:  12 October 2011

House:  House of Representatives

Portfolio:  Attorney-General

Commencement:  On the day of Royal Assent

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill's home page, or through http://www.aph.gov.au/bills/. When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the ComLaw website at http://www.comlaw.gov.au/.

Purpose

The purpose of the Personal Property Securities (Registration Commencement) Bill 2011 (the Bill) is to amend the Personal Property Securities Act 2009 (PPS Act) to ensure that the operative provisions do not commence before the single national online register is available for public use.

Background

The purpose of the PPS Act was to establish a register of personal property securities—the Personal Property Securities Register (the PPS Register)—in place of separate registers tracking whether there is any mortgage or loan or other financial encumbrance over assets.[1]  The PPS Act establishes rules governing the priority of competing security interests by reference to the PPS Register.

In its current form, the PPS Act provides that the migration of existing security interests on to the PPS Register is to be completed no later than 1 January 2012; and that registration of new security interests on the PPS Register will commence from no later than 1 February 2012.

When the Bill in respect of the PPS Act was introduced, the Explanatory Memorandum accompanying the Bill indicated that it was ‘expected’ that the PPS Register would be operational before that date (1 February 2012).[2] Consistent with that expectation, the Attorney-General stated, as recently as May 2011, that it was anticipated that the national PPS Register would operate from October 2011.[3]

This no longer appears to be the case and this Bill will amend the PPS Act to allow the Minister to provide for a later, unspecified, commencement date.

It has been reported that the delay is due to ‘issues recently experienced during system testing by industry volunteers including National Australia Bank and GE Capital’.[4]

Basis of policy commitment

In June 1990, the then Attorney-General referred a review of the adequacy of personal property securities to the Australian Law Reform Commission (the Commission). In its 1993 Report, the Commission recommended the establishment of a single regime to apply in all jurisdictions for the regulation of priorities between personal property security interests; and for the determination of competition between security interest holders and purchasers.[5]

However, it was not until April 2006 that the Standing Committee of Attorneys-General prepared and issued an options paper gauging the level of support for personal property securities reform.[6] The Council of Australian Governments (COAG) meeting of 13 April 2007 gave in-principle agreement to the establishment of a national system for registration of personal property securities by 2009.[7]  The Commonwealth and state governments signed the Personal Property Securities Law Agreement on 2 October 2008, to:

… establish a national system for the registration of personal property securities to be implemented by Commonwealth legislation, supported by a State text-based referral of certain matters to the Commonwealth Parliament, in accordance with subsection 51 (xxxvii) of the Constitution.[8]

Committee consideration

At its meeting of 13 October 2011, the Senate Selection of Bills Committee deferred consideration of the Bill until its next meeting.[9]

Financial implications

According to the Explanatory Memorandum accompanying the Bill, there is no direct impact on Government revenue from this Bill.[10] 

Key provisions

The PPS Act provides for the transition from current law governing the creation, enforcement and priorities of security interests in personal property. Part of this transition requires the migration of data from existing state, territory and Commonwealth registers recording security interests in personal property to the PPS Register.

The PPS Act applies to security interests existing before the Act was enacted subject to the transitional provisions. Those transitional provisions generally allow security holders to maintain their existing priority and preserve their rights for 24 months from the time the PPS Register commences operation.

The transitional provisions in the PPS Act, which received the Royal Assent on 14 December 2009, contain two key concepts—‘migration time’ and ‘registration commencement time’.

‘Migration time’ is the period during which data from existing state, territory and Commonwealth registers recording security interests in personal property is to be migrated to the PPS Register. Existing subsection 306(1) provides that this is from the start of the month that is 25 months after Royal Assent to the Bill or an earlier time determined by the Minister.

Under existing subsection 306(6) a determination of an earlier time is a legislative instrument, but section 42 (disallowance) of the Legislative Instruments Act 2003 does not apply to the determination.

As the PPS Act is currently drafted, the ‘migration time’ must start no later than 1 January 2012. The PPS Act does not allow for the Minister to determine any later time.

‘Registration commencement time’ is from the start of the month, that is 26 months after Royal Assent to the Bill or an earlier time determined by the Minister. The registration commencement time, established in the transitional provisions, would be the day the PPS Register commences operation. Existing subsection 306(2) provides that this is from the start of the month, that is 26 months after Royal Assent to the Bill or an earlier time determined by the Minister.[11]  As the PPS Act is currently drafted, the ‘registration commencement time’ must start no later than 1 February 2012.  The PPS Act does not allow for the Minister to determine any later time.

Items 1, 3, 4 and 6 of the Bill amend various sections in Chapter 9 of the PPS Act (the Transitional Provisions) to repeal the phrase ‘an earlier time’ and replace it with the phrase ‘another time’.  The effect of the amendments is to allow the Minister to determine that the ‘migration time’ and the ‘registration commencement time’ are later than the automatic dates contained in the PPS Act.  The requirement that the determination is a legislative instrument which is not subject to disallowance, remains.

Item 7 of the Bill amends note 2 in subsection 2(1) of the Personal Property Securities (Corporations and Other Amendments) Act 2010 in the same manner.  The effect of the amendment is to make clear, for the avoidance of doubt, that the registration commencement time within the meaning of section 306 of the PPS Act is to start on 1 February 2012 or another time determined by the Minister, by legislative instrument.

Members, Senators and Parliamentary staff can obtain further information from the Parliamentary Library on (02) 6277 2434.

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ISSN 1328-8091

[1].               P Pyburne and D Spooner, Personal Properties Securities Bill 2009, Bills Digest, no. 36, 2009–10, Parliamentary Library, Canberra, 15 October 2009, viewed 17 October 2011, http://www.aph.gov.au/library/pubs/bd/2009-10/10bd036.pdf

[2].               Explanatory Memorandum, Personal Property Securities Bill 2009, p. 15.

[3].               R McClelland (Attorney-General) and N Sherry (Minister for Small Business, Minister Assisting on Deregulation and Public Sector Superannuation), National road show to highlight benefits of person property securities reform, joint media release, 3 May 2011, viewed 17 October 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressrel%2F740360%22

[4].               S Bowers, ‘Securities register hits hitch’, Australian Financial Review, 2 September 2011, p. 21, viewed 17 October 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressclp%2F1050762%22

[5].               The Law Reform Commission, ‘Personal Property Securities’, report no. 64, Sydney, 27 May 1993, p. 10, viewed 17 October 2011, http://www.austlii.edu.au/au/other/alrc/publications/reports/64/

[6].               Standing Committee of Attorneys-General, ‘Review of the law of Personal Property Securities’, options paper, Canberra, April 2006, viewed 17 October 2011, http://www.ag.gov.au/agd/WWW/rwpattach.nsf/VAP/(B60171F51F850FBEA2A49F8C5FEC137E)~Review+of+the+Law+on+Personal+Property+Securities.pdf/$file/Review+of+the+Law+on+Personal+Property+Securities.pdf

[7].               Council of Australian Governments, communiqué, Canberra, 13 April 2007, viewed 17 October 2011, http://www.coag.gov.au/coag_meeting_outcomes/2007-04-13/docs/coag130407.pdf

[8].               Council of Australian Governments, Personal Property Securities Law Agreement, 2 October 2008, viewed 17 October 2011, http://www.coag.gov.au/coag_meeting_outcomes/2008-10-02/docs/personal_property_securities_IGA.pdf

[9].               Selection of Bills Committee, Report no. 14 of 2011, Senate, Canberra, 13 October 2011, viewed 14 October 2011, http://www.aph.gov.au/Senate/committee/selectionbills_ctte/reports/2011/rep1411.pdf

[10].               Explanatory Memorandum, p. 2.

[11].               Subsection 306(6) of the PPS Act provides that the determination of an earlier time is a legislative instrument which is not subject to disallowance under section 42 of the Legislative Instruments Act 2003.