Chapter 4 - Consideration of broad issues
This chapter discusses some broad concerns with the proposed bill raised
in evidence, including drafting issues and the timetable for finalising and
implementing the reform. This discussion is predicated on the government
proceeding with the bill as drafted, in line with the committee's obligation to
examine the exposure draft as referred.
The committee was cognisant of the many criticisms of the actual
drafting of the bill. If a form of the existing draft bill is going to be
implemented, it is particularly important that the drafting criticisms be
considered further and addressed.
The overall theme of the drafting concerns raised with the committee is
that this is already a difficult and complex area of law and that the drafting
needs to be as clear and concise as possible. The main perceived failures of
drafting have been identified as the detailed cross‑referencing,
unnecessarily complex terminology and verbose provisions and that these seriously
affect the comprehensibility of the provisions.
In response to these concerns the Department asserts that much work has
been done to make the bill as simple as possible.
However, on balance the Department's approach is to give primacy to transparency
(providing as much detail as possible to explain each provision) over
straightforward simplicity in outlining each provision.
The Department explained that the exact drafting of the provisions was also
affected by Commonwealth drafting requirements.
The committee understands the position put by the Department. However, it
is concerned that in pursuing its objectives of 'certainty' and 'transparency' –
and possibly also constrained by Commonwealth drafting practice – in some
respects the Department has sacrificed access to the law. Provisions are frequently
convoluted, and the committee believes that the draft could be simplified
without a deleterious effect to the bill as a whole.
Terminology used in the exposure
One of the particular concerns raised was the use of unnecessarily
complex or obscure terminology. Some submissions pointed out that the use of
the term goods instead of tangible property assists to simplify
the concepts in provisions that are already complex in other ways. This concern
was identified to apply to other provisions in the bill, including grantor.
Articulating the concern about this approach, Professor Duggan noted:
The Bill throughout uses the expression "tangible
property" in place of "goods"...This idiosyncracy may not have
substantive implications, but it does affect the comprehensibility of the
legislation because the reader must make a mental note to substitute
"goods" every time she reads "tangible property".
The Department's argument for its approach is that although a benefit of
the term 'goods' is that it is in common use and is readily understood, in the PPS context it has a slightly different meaning than when it is used in everyday language. The
Department argues that using the simpler term would not alert a reader of the
legislation to the fact that the meaning of the word is wider than is generally
The danger of using terms that already have a well-understood
meaning to mean something slightly different is that they may not be alerted to
the fact that, for example, trees are included, when they might not be included
in a normal definition of ‘goods’.
Professor Duggan suggested that this is also the case in other
jurisdictions where it is overcome by defining the simpler term to include the
broader meaning required for the circumstances.
Ultimately it is a question of policy as to which approach is taken. The
committee is not convinced that the reasons for using less familiar terms
outweigh the added difficulty in accessing the meaning of the provisions
through the use of the unfamiliar terms. The committee's view is that even
basic legal practice would involve checking the definition of terms in an act
you are seeking to apply. Additionally, appropriate education, including
relevant information in the explanatory memorandum and the development of
secondary material such as textbooks should be enough to ensure that this
approach does not undermine the goals of certainty and transparency.
Length of the exposure draft bill
A further drafting concern raised with the committee is that of the
wordiness of the exposure bill. Again, it appears that this is as a result of
the approach taken in the draft bill to value certainty over simplicity. This
approach reflects a deliberate policy choice:
Elegance is a virtue. But then you go home and reflect on it
for a bit and you realise that, while [overseas legislation] is written very
well, there is a lot of subtlety and complexity masked by that very clear
language and some of the concepts within that language that rolls well off the
tongue are quite difficult to understand. If our bill has a sin, it is that it
is transparent in what those concepts are. We have sought to make it clear and
to bring to the forefront some of those underlying concepts that are masked by
the sweet-rolling language used overseas.
However, the concern raised with the committee is that the approach might
actually decrease certainty and comprehensibility:
...while the Bill may improve legal certainty at one level, it
increases uncertainty at another level and the statement in the [Department's
Revised] Commentary fails to acknowledge this trade-off. The Bill reflects a strong commitment to drafting precision with a view to ensuring that the
legislation provides for every possible contingency. It is in this sense that
the claim to improved legal certainty is presumably to be understood. However,
a commitment to precision is not cost-free. The inevitable by-product is
longer, more complex legislation.
Mr David C. Turner, a barrister at the Victorian Bar with extensive
experience in retail and wholesale secured lending, noted:
Striving for precision can only result in errors and a
failure to deal with issues in a simple and clear way with a clear and
underlying policy objective.
One of the examples given of unnecessary length in a provision was that
of sections relating to a 'commingling' of goods question. One overseas model
addresses the issue in six lines of text, one in 40 lines of text, and the
Australian draft bill in approximately 112 lines of text covering four and a
Again, it is a question of policy as to the appropriate balance to be
struck between the two goals of certainty and simplicity. The committee agrees
that it is important to ask the question generated by Professor Duggan's
submission – are the benefits of greater drafting precision worth the cost?
This is another area in which the committee's view is that too much
weight has been given to certainty at the expense of comprehensibility. The
committee acknowledges the point made by the Department that provisions with
simpler drafting may include ideas that need judicial explanation, but is not
persuaded that this outweighs the benefit of simplicity. In addition, the fact
that a concept is outlined in legislation does not necessarily make it immune
from requiring judicial interpretation so that it can be understood and applied
by those using the legislation. In either case, it is open to the government to
include detailed explanation of provisions in the explanatory memorandum that
will accompany the final bill and which will be an important extrinsic aid to its
The approach to cross-referencing taken in the exposure draft was
observed by Professor Duggan as "Byzantine...which forces the reader to skip
between different parts of the legislation to find the answer to particular
Examples are provided by Professor Duggan and others of needing to identify and
refer to many other sections to understand the operation of one section.
It is likely that the overall structure of the bill could be altered to
reduce the necessity for extensive cross-referencing. However, this potentially
could require changes in Commonwealth drafting practice and in any case would
be a significant undertaking.
The committee acknowledges the drafting concerns raised by submitters. On
balance the committee expects that the exposure bill will be significantly
improved if its recommendations in relation to wordiness and the use of simpler
definitions are implemented. The committee favourably notes the Department's
advice that it is currently working with the drafters to include 'readers'
guides' within the bill.
The committee strongly recommends that the Department reconsiders the
balance between certainty of the law and the accessibility of the provisions
with a view to:
- simplifying the language of the exposure draft bill – for
example, wording provisions clearly and limiting them to deal only with common
- simplifying the structure of the exposure draft bill – to
minimise the cross‑referencing needed;
- simplifying the terms used - for example instead of 'tangible
goods' use the term 'goods' appropriately defined to ensure the full meaning
needed for the reform is ascribed to the term; and
- using overseas provisions as often as possible to allow overseas
experience to provide guidance for the Australian model.
The PPS reform project commenced in 2006 and has included considerable
consultation and information exchange such as discussion papers, a Consultative
Group and two exposure draft bills.
Stakeholder appreciation of the government's approach to consultation has been
However, although there has been detailed consultation during the development
process, there is criticism that the magnitude and complexity of the reform have
caused the finalisation and implementation of the bill to be rushed.
For example, the first exposure draft of the bill was released in May
2008. Following substantial amendment the revised bill (the subject of this
inquiry) was released in November 2008. At this point it was referred by the
Attorney‑General to the Senate with a request that it be considered by
this committee with a reporting date in late February 2009. A revised
commentary to accompany the revised exposure draft bill was provided to the
committee on 19 December 2008.
It has been put to the committee that the tight timeframe for the inquiry is
required because the implementation date for the reform has been set at May
2010 and this leaves little time for the referral of powers from the States
The May 2010 deadline for implementation of the reform was set by the
Council of Australian Governments (COAG). Although a COAG deadline is a matter
of importance in itself, it is not clear that there is a substantive need for
the reform to be in place by May 2010.
In evidence to the committee there was marked concern expressed by
submitters about the May 2010 implementation date. This concern came both from
those who support the proposed PPS reform and those who do not.
Some examples of the concern expressed include:
- concern even from experts that they have been unable to consider
the bill in detail and that there may be many unintended consequences, also
that the effect of numerous small variations can, cumulatively, result in
onerous burdens on those required to understand and implement the bill; 
- some submitters anticipate benefits from the reform, but on the
basis that the content of the legislation is 'right';
- a factor which heightened the concern about the proposed timing
of the introduction for some who gave evidence is that the Australian and
international economies are not currently robust;
- the ability for industries to implement this legislation in the
scheduled timeframe is affected by the impact of other government reforms they
are dealing with such as anti-money laundering reform;
- in addition to actually understanding the content of the reform,
business will also need to undertake substantial and expensive preparation (including
creating forms, adapting computer systems and staff training) to work
effectively in the new system;
- although there have been opportunities for consultation with
stakeholders who are actively engaged in the process, there is concern that
many organisations are not aware of, or do not yet understand, the significance
of the reform.
Even those who are relatively satisfied with the content of the bill as
drafted are worried that they will have insufficient time to prepare for its
implementation. For example, the Australian Bankers' Association (ABA) supports
the proposed reform, but is concerned about timing:
We anticipate it is unlikely that the terms of the
legislation will be finalised until quite late this year, so a commencement
date in May 2010 would be far too soon to allow banks to get all their systems,
compliance arrangements, documentation and everything else redone to take
advantage of the new law. There are other factors also that come into the
timing of the commencement. There is the electoral cycle.
As a result the ABA believes that, taking all of those
factors into account, a commencement date in the third quarter of 2011 would be
an appropriate date for the regime to commence. This would also allow those who
have submitted concerns over certain technical and other aspects of the reforms
to work through and resolve them leaving adequate time at the end of that for
the implementation of this nationally worthwhile project. 
None of the non-government witnesses argued in favour of the proposed
timeframe. The arguments put to the committee by the Department in support of
the May 2010 implementation are that there would be financial implications and
other impact on the States who have already started to prepare for the new
scheme and that stakeholders will probably take the opportunity to keep making
suggested changes to the system.
The committee understands that timing for the project is being driven by
the COAG deadline, but believes that primacy needs to be given to the
importance of getting the detail of the legislation right and for those
affected to have time to prepare for its implementation. The committee was
persuaded by the weight of concern about timeframe and believes that it is
appropriate to extend the process to ensure that the content of the legislation
is appropriate and as clearly and concisely drafted as possible. In addition,
stakeholders should be allowed sufficient time to understand the effect of the
legislation and to have sufficient time to prepare for its implementation.
The committee recommends that the commencement date for the scheme be
extended by at least 12 months to May 2011 for the committee's recommendations
to be implemented and for advice from stakeholders to be taken into account
before the content of the bill is finalised.
In relation to the timing of the commencement of the reforms, the ABA observed that it is desirable to avoid 1 January and 1 July starting dates, with a
preference for March-April or August-September commencement.
Committee inquiry process
There is another factor in relation to timing about which the committee
wishes to comment. The committee is appreciative that the exposure draft bill
was referred to it in advance of the introduction of the final bill into the
Commonwealth parliament. This is especially welcome given that the reform
requires a text-based referral of powers from the States which will fail if the
provisions in the Commonwealth bill are not identical to those referred to it.
However, the relatively short timeframe to the proposed implementation
date significantly affected the Senate inquiry process. Given the significance
and complexity of the proposed legislation and the brevity of the timeframe for
the inquiry – especially as it was over a holiday and shutdown period – the
committee feels that the time period in which to complete the referral was
significantly unsatisfactory. The committee is of the view that the time
allowed for examination of this proposed bill was inadequate, and the timing of
the inquiry was unrealistic and unreasonable.
This criticism notwithstanding, the committee again applauds the
initiative shown in referring the exposure draft bill in advance of its
introduction into Parliament and would welcome the opportunity to consider a
revised bill when it is finalised.
The exposure bill as drafted does not include a requirement for the
legislation to be reviewed. There were a number of calls for the bill to be
reviewed, such as by Professor Duggan.
The Australian Finance Conference also favours a review of the legislation two
years after the legislation commences and the establishment of an expert panel
to immediately consider the impact of the legislation so that ad hoc
recommendations about amendments to its terms can be made as soon as a need for
them becomes apparent.
The Department advised that although the exposure draft does not include
a review of the legislation, the intergovernmental agreement reached between
all Australian jurisdictions last year includes a requirement for the bill to
be reviewed by the Commonwealth in consultation with the states and territories
five years after the legislation commences.
The committee agrees that a review is warranted and is of the view that
it should be required as a provision of the legislation itself.
The committee recommends that the bill include a requirement that the operation
of the bill be reviewed three years after it commences in a process that
includes extensive consultation with industry, governments, lawyers, consumers
Process for amending the Act
The committee notes the Department's advice that the agreement with
States and Territories includes the referral of a power for amendments to the
made to the legislation. Details provided to the committee by the Department
The operation of that amendment power is
governed in a sense by the intergovernmental agreement that we have with the
states and territories, and that involves in all situations that we would
consult with the states and territories about a proposed amendment to the bill
and, in certain circumstances, we would ask for the consent of the states and
territories—consent being able to be given by three jurisdictions, at least two
of whom must be states, I think is the formulation—and that is broadly
consistent with the models in other intergovernmental agreements that use
Given that the scope of this reform is very significant and that a
number of concerns have been raised with the committee about likely unintended
consequences of the proposed approach, the committee endorses the development
of arrangements between the Commonwealth and the other jurisdictions to
facilitate any amendments that need to be made to the final legislation.
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