Liberal Senators' Dissenting Report
Liberal senators support the objectives of the Personal Property
Securities Exposure Draft Bill, and agree that overall they should boost
efficiency and provide cost savings for stakeholders. While acknowledging these
potential advantages, Liberal senators are concerned by particular aspects of
Liberal senators highlight the committee's concern about the length,
complexity and prolixity of the exposure draft bill. Despite the Department's
intention to increase certainty of the law, the new provisions will actually
significantly increase uncertainty about the effect of the law;
Furthermore, the bill suffers from significant drafting issues making it
difficult to understand the proposed law.
The main failures of drafting have been identified as the detailed cross-referencing,
unnecessarily complex terminology and verbose provisions which seriously affect
the comprehensibility of the provisions.
The majority report
Liberal senators wholly support recommendations 1, 2, 3 and 10 of the
Although differing in degrees of emphasis and detail, Liberal senators
also support in principle the majority recommendations except recommendation 7
(in relation to the commercially reasonable manner test).
Particular aspects of the proposed reform of concern to Liberal senators
consultation and education;
- interim review of the reform;
- privacy protections and the Privacy Impact Assessment;
- the section 235(1)(b) commercially reasonable manner test;
- international conflict of laws provisions;
- enforcement; and
More effective consultation and education
Liberal senators support committee recommendation 2 that commencement of
any PPS reform should be deferred for at least 12 months. This time should be
used first to undertake new consultations with stakeholders, including
educating those who will be affected by the reform but who are not yet engaged
in its development. The time should then be used to redraft the bill and to
continue to consult stakeholders about it so that a final draft version of the
bill can be settled.
Although the Department has undertaken consultation with stakeholders, Liberal
senators are particularly concerned that significant business sectors that will
be affected by the reform are not yet engaged with its development. As Mr Peter Faludi, Special Counsel for DLA Phillips Fox, informed the committee:
...the number of people who are focused on the legislation is a
lot less than the number of people who are not. So it is often difficult to
engage people in discussions because it is something they have not really
This reform is of such significance that it is essential that all
affected stakeholders are involved first in the development of the legislation
and then in a widespread education campaign. To ensure that the extra time
taken is used effectively, Liberal senators advocate a planned program of
consultation, education and government response.
In relation to consultation and education Liberal senators recommend
(a) the government uses the committee report and the Liberal
senators' additional recommendations to undertake new consultation about the
(b) the government should particularly identify stakeholders who are
not yet engaged with the reform and educate them about the scope and
significance of the proposals;
(c) a considerably revised draft bill should be publicly released
within six months of the date of this report;
(d) stakeholders should be extensively educated and consulted about
the revised exposure draft for three months from the release of the draft; and
(e) a final exposure draft bill should be referred to the Senate within
six months of the release of the revised draft bill requesting that the final
exposure draft is referred to this committee for consideration accompanied by:
(i) the proposed draft regulations; and
(ii) a report that outlines the key concerns raised with the
government by stakeholders and the government's response to those concerns and that
identifies the differences between the newly referred bill and the November
2008 exposure draft bill.
Review of the reform
Liberal senators agree that it is critical to check that the final
legislation is effective by reviewing its operation. The committee has
recommended that it be reviewed within three years of its commencement
(committee recommendation 3). However, the scope and complexity of this reform
is of such magnitude that Liberal senators believe that an interim assessment
of the reform should be made. To do this government should table a report on
the first year of operation of the reform within 15 months of the commencement
of the Act. The report should include the views of all stakeholder groups and
the government's response to these views.
Liberal senators recommend that the government table a report in
Parliament on the first year of operation of the reform within 15 months of the
commencement of the Act. The report should include the views of stakeholders,
including representatives of industry, governments, lawyers, consumers and
academics and the government's response to these views.
An area of particular concern to some submitters, and to Liberal
senators, relates to privacy protections for the proposed national online PPS register. The committee has made an important recommendation that key privacy protections be
included in primary legislation and not left to regulations (majority recommendation 4).
The committee recommendation specifically refers to a prohibition on
making the address details of any individual public. Liberal senators agree
with this, but also seek to ensure that other key privacy safeguards are
included in the primary legislation. To make certain that this occurs, Liberal
senators recommend that the Privacy Impact Assessment identifies key privacy
protections that should be contained in the primary legislation.
Liberal senators recommend that the Privacy Impact Assessment identify
key privacy protections which should be contained in the primary legislation.
Privacy Impact Assessment
In relation to the Privacy Impact Assessment, Liberal senators believe
that it is not enough for the Department to conduct its own Assessment. Without
impugning the integrity of the Department's staff, this is a matter of such
importance that it should be conducted by an independent person or organisation
with direct experience in undertaking such assessments.
Moreover, not only should the Assessment be made public, but
stakeholders are entitled to be told directly of the government's response to
If any other privacy issues raised by the Office of the Privacy
Commission are considered separately (as per majority recommendation 6) this
consideration and the government's view should also be made public.
Liberal senators recommend that:
(a) a Privacy Impact Assessment be undertaken by a person or
organisation that is independent from the government and who has experience in
undertaking such assessments; and
(b) the Privacy Impact Assessment and the government's response to it
should be tabled in Parliament within 2 months of the date the Assessment is
Liberal senators recommend that any issues considered in accordance
with majority recommendation 6 and the government's response to them should be
tabled in a report to Parliament within 2 months of the date that the Privacy
Impact Assessment is completed.
Commercially reasonable manner test - an unnecessary burden on business
As noted in the committee report, proposed section 235 of the bill will
require duties and obligations to be exercised honestly and in a commercially
Liberal senators support the requirement to act honestly, but are not
convinced of the need to introduce a new legal test into Australia to act in a commercially reasonable manner. The committee received evidence from
a number of submitters that this obligation will increase uncertainty, fetter
the contractual ability of parties and increase litigation. In relation to both
tests the combined four big law firms observed that:
These are new tests which will need litigation over many
years to define. These can significantly add to the burden of secured parties,
when the common law and statute law is adequate in its current form. They will
add to uncertainty and the cost of enforcement, and have the potential to give
rise to significant amounts of litigation. It decreases flexibility in a
party's ability to protect its commercial interests. They run counter to the Bill's aim for simplicity and clarity and should be deleted.
Even Professor Duggan, who is a proponent of the Canadian PPS models (which mostly include this obligation) sees it as:
...a non-essential provision. I accept the argument that
because it is open-ended it may produce uncertainty and litigation. My
inclination would be to scrap it.
Furthermore, Clayton Utz, who generally supported the exposure draft
bill, observed that:
There are no compelling policy reasons for Australia to adopt a statutory standard of 'acting in a commercially reasonable manner'.
Also, the inclusion of such a test does not promote commercial certainty.
Liberal senators are also concerned that because the requirement is unclear
and open to different interpretations it is likely to increase red tape: a business
may need to take protective steps to document that it is not acting in a
commercially unreasonable manner and this has the potential for costs to business
In the view of the Liberal senators this provision should not be
included in any PPS reform and dissent from committee recommendation 7 in this
Liberal senators recommend that the requirement to act in a commercially
reasonable manner be removed from proposed section 235 of the bill and be
excluded from any future version of the reform.
International conflict of laws provisions
Evidence to the committee about the need for international conflict of
laws provisions was overwhelming. A clear view was expressed to the committee
that the provisions outlined in Appendix A to the Department's submission
were a marked improvement on earlier draft provisions.
However, there was insufficient time for the committee to explore in detail
exactly what the content of Australian conflict of laws provisions should be.
Liberal senators were interested in the evidence of Ms Flannery of Clayton Utz who observed that:
I definitely support a conflict of laws regime going in...it
would be a missed opportunity to simplify what is currently an unclear area of
the law. But if you compare the regime that is in appendix A with, for example,
the New Zealand regime, it is a lot more complex...I can understand the
rationale, in part, for some of the complexity in appendix A, but I think that
a simpler set of rules would be better.
Liberal senators recommend that the government further considers the
content of international conflict of laws provisions and incorporate into the
(a) a simple and effective model of conflict of laws provisions based
on an existing international model; or
(b) the conflict of laws provisions at Appendix A to the Department's
Discussion in the committee report about enforcement identifies a number
of concerns about the proposed approach. The committee report also noted that
this is an area of the draft bill which deserves significantly more detailed
consideration before the new bill is finalised.
Liberal senators have particularly identified this as an area requiring
detailed consideration by the government and stakeholders.
Liberal senators recommend that the government strengthen the proposed
enforcement provisions with a focus on:
(a) comprehensive and effective sanctions for improper use of the
(b) ensuring the registrar's ability to inquire into suspect
(c) the availability of civil and criminal action with appropriate
Further to the majority recommendation to explain the purpose and effect
of the draft intellectual property provisions (majority recommendation 11),
Liberal senators are keen to ensure that any outstanding concerns about these
provisions are identified and addressed.
This is an area in which the government should target its further
consultation and should report on any concerns.
Liberal senators recommend that the government should identify any
outstanding concerns about the intellectual property provisions of the draft
bill and should outline the concerns and its response in its report to the
Senate (as per Liberal senators' recommendation 1(f)).
Regulations supporting this legislation are expected to be substantial.
The Department released draft regulations in May 2008 and sought feedback on
them. The Department gave evidence that it is currently reviewing comments it
received and expects to issue a revised version in about March 2009.
Because of the extent and importance of the regulations to this reform,
Liberal senators are of the view that they should be independently reviewed.
The purpose of the review would be not only to assess the content of the
proposed regulations, but also to consider whether it is more appropriate for
any aspect to be included in the primary legislation rather than in delegated
The content of any regulations is necessarily informed by the content of
the supporting legislation so it would seem effective if regulations continue
to be developed in parallel with the development of the primary legislation.
Liberal senators recommend that
when the revised draft bill is referred to the Senate for consideration that it
is accompanied by the proposed draft regulations (Liberal senators'
In addition to the education required immediately to engage stakeholders
who are not yet involved in the development of the model (see the More
effective consultation and education section above) substantial education
will be required when a final bill has been settled.
It is often appropriate for legislation to be passed before undertaking education
about it. However, this reform proposes a national scheme that will require a
statutory referral of power from the States through the passage of State
legislation before the Commonwealth legislation can be enacted. Because of the
somewhat cumbersome process required to establish the reform the commencement
date is likely to be quite soon after the passage of the Commonwealth Act.
As a result, it is important that education starts in anticipation of
the commencement of the scheme. All stakeholders will need to understand the
reform and businesses small and large will particularly need to know what they
need to do to prepare for the introduction of the system. Once the bill is
ready for passage through a State parliament, Liberal senators strongly support
a comprehensive education campaign in preparation for implementation of the
|Senator Guy Barnett
|Senator Mary Jo Fisher
||Senator Russell Trood
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