Personal Property Securities Reform Melissa Tracey-Patte Principal Legal Officer Personal Property Securities Branch Attorney-General’s Department 29 September 2011

Basic elements of the PPS regime Definitions and terminology Transitional security interests Data migration PPS Register Presentation overview

Current PPS laws in Australia Liens On Crops Of Sugar Cane Act 1931 (Qld) Major Sports Facilities Act 2001 (Qld) Circuit Layouts Act 1989 (Cth) Manufactured Homes (Residential Parks) Act 2003 (Qld) Motor Vehicles and Boats Securities Act 1986 Partnership Act 1891 (Qld) Police Powers and Responsibilities Act 2000 (Qld) Property Agents and Motor Dealers Act 2000 (Qld) Property Law Act 1974 (Qld) Sale Of Goods Act 1896 (Qld) Second-Hand Dealers and Pawnbrokers Act 2003 (Qld) Storage Liens Act 1973 (Qld) Transport Operations (Road Use Management) Act 1995 (Qld) Bills Of Sale Act 1886 (SA) Consumer Credit (South Australia) Act 1995 (SA) Co-operatives Act 1997 (SA) Criminal Law (Clamping, Impounding and Forteiture of Vehicles) Act 2002 (Vic) Natural Resources Management (Water Management and Other Matters) Amendment Act 2007 (SA) Partnership Act 1891 (SA) Second-Hand Vehicle Dealers Act 1995 (SA) South Australian Meat Corporation Act 1936 (SA) )Stock Mortgages And Wool Liens Act 1924 (SA) Unclaimed Goods Act 1987 (SA) Plant Breeders’ Rights Act 1994 (Cth) Workers’ Liens Act 1893 (SA) Commercial Arbitration Act 1984 (Vic) Consumer Credit (Victoria) Act 1995 (Vic) Warehouse Liens Act 1990 (SA) Bills Of Sale Act 1899 (WA) Bulk Handling Act 1967 (WA) Consumer Affairs Act 1971 (WA) Consumer Credit (Western Australia) Act 1996 Cooperative and Provident Societies Act 1903 (WA) Chattel Securities Act 1987 (WA) Disposal of Uncollected Goods Act 1970 (WA) Hire Purchase Act 1959 (WA) Motor Vehicles Dealers Act 1973 (WA) Partnership Act 1895 (WA) Pawnbrokers and Secod-Hand Dealers Act 1994 (WA) Property Law Act 1969 (WA) Road Traffic Act 1974 (WA) Goods Act 1958 (Vic) Goods Securities Act 1986 (SA) Sale Of Goods Act 1895 (WA) Settlement Agents Act 1981 (WA) Trustees Act 1962 (WA) Warehousemans’ Liens Act 1952 (WA) Bills Of Sale Act 1900 (Tas)

Current PPS laws in Australia Building Act 2000 (Tas) Consumer Credit (Tasmania) Act 1996 Cooperatives Act 1999 (Tas) Disposal Of Uncollected Goods Goods Act 1968 (Tas) Factors Act 1891 (Tas) Homes Act 1935 (Tas) Motor Vehicle Securities Act 1984 (Tas) Building and Construction Industry Security of Payments Act 1999 (NSW) Payments Act 1999 (NSW) Tribunal Act 1998 (Vic) Warehousemens’ Liens Act 1958 (Vic) Agricultural Chemicals Distribution Patents Act 1990 (Cth) Credit Act 1984 (NSW) Consumer Credit (New South Wales) Act 1995 (NSW) Duties Act 2000 (Vic) Fair Trading Act 1999 (Vic) Fisheries Act 1995 (Vic) Conversion of Securities Adjustment Act 1931 (NSW) Conveyancing Act 1919 (NSW) Duties Act 1997 (NSW) Factors (Mercantile Agents) Act 1923 (NSW) Partnership Act 1892 (NSW) )Payments Act 2002 (Vic) Chattel Securities Act 1987 (Vic) Pawnbrokers And Second-Hand Dealers Act 1996 (NSW) Petroleum (Onshore) Act (NSW) Building And Construction Industry Security Of Credit Act 1984 (Vic) Sale Of Goods Act 1895 (SA) Second-Hand Dealers and Pawnbrokers Act 1996 (SA) Co-operatives Act 1996 (Vic) Fines Act 1996 (NSW) Impounding Act 1993 (NSW) Confiscation Act 1997 (Vic) Disposal Of Uncollected Goods Act 1961 (Vic) Domestic (Refal and Nuisance) Animals Act 1994 (Vic) Co-operatives Act 1992 (NSW) Co-operatives Housing and Starr-Bowkett Societies Act 1998 (NSW) Forestry Rights Act 1996 (Vic) Legal Practitioners Act 1968 (SA) Finance Brokers Control Act 1975 (WA) Fines, Penalties and Infringement Notices Partnership Act 1891 (Tas) Penalty Unites and Other Penalties Act 1987 Motor Car Traders Act 1986 (Vic) Partnership Act 1958 (Vic) Property Law Act 1958 (Vic) Road Safety Act 1986 (Vic) Sale of Goods (Vienna Convention) Act 1987 (Vic) Second-Hand Dealers and Pawnbrokers Act 1989 (Vic)

Current PPS laws in Australia Transport Act 1983 (Vic) Trustee Act 1958 (Vic) Designs Act 2003 (Cth) Victorian Civil and Administration Control Act 1966 (Qld) Bills of Sale and Other Instruments Act 1955 (Qld) Legal Aid Commission Act 1979 (NSW) Mining Act 1992 (NSW) Offshore Minerals Act 1999 (NSW) Warehousemans’ Liens Act 1935 (NSW) Water Management Act 2000 (NSW) Cooperatives Act 1997 (QLD) Credit (Rural Finance) Act 1996 (Qld) Pharmacy Practice Act 2006 (NSW) Sale Of Goods Act 1896 (Tas) Second-Hand Dealers and Pawnbrokers Act 1994 (Tas) Corporations Act 2001 (Cth) Consumer Credit Act 1995 (ACT) Cooperatives Act 2002 (ACT) Credit Act 1985 (ACT) Instruments Act 1933 (ACT) Hemp Fibre Industry Facilitation Act 2004 (ACT) Pawnbrokers Act 1902 (ACT) Conversion Act 1921 (Cth) Loans Securities Act 1919 (Cth) Public Trustee Act 1985 (ACT) Road Traffic Act (NT) Uncollected Goods Act 2004 (NT) Offshore Petroleum Act 2006 (Cth) Shipping Registration Act 1981 (Cth) Warehouseman's Liens Regulations 2007 Chattel Securities Regulations 1997 Copyrights Act 1968 (Cth) Co-operatives Regulations 1997 Instruments (Fees) Regulations Bills of Sale (Fees) Regulations 1995 Bills of Sale (Requirements as to Instruments) Regulations 1995 Co-operatives Regulations 1997 Public Trustee Act 1941 (WA) Rights in Water and Irrigation act 1914(WA) Goods Securities Regulations 1997 Registration Of Interests In Motor Vehicles And Other Goods Act 1983 (NT) Sale Of Goods Act 1972 (NT) Cooperatives Regulationsa 2003 Co-operatives Regulations and Admiralty Act 1988 (Cth) Trade Marks Act 2995 (Cth) Air Navigation Act 1920 (Cth) Australian Industry Development Corporation Act 1970 (Cth) Commonwealth Inscribed Stock Act 1911 (Cth) Mercantile Law Act 1962 (ACT) Partnership Act 1963 (ACT) Fisheries Management Act 1991 (Cth)

Current PPS laws in Australia Loans Securities Redemption and Offshore Minerals Act 1994 (Cth) Warehousemen's Liens Act (NT) Motor Dealers Regulations Taxation Administration Act 1953 (Cth) Treasury Bills Act 1914 (Cth) Wool International Act 1993 (Cth) Traffic Act (NT) Bills of Sale (Fees) Regulations 1983

Current PPS registers in Australia The Register (Chattel Securities Act 1987 (WA)) Register of Patents (Cth) Register of Co-operative Charges (NSW) Register of Encumbered Vehicles (REVS) (NSW) State Offshore Mining Register (NSW) Australian Register of Ships (Cth) Register of Designs (Cth) The Register (Motor Vehicle Securities Act 1984 (Tas)) Register (Bills Of Sale Act 1886 (SA)) Register of Co-operative Charges (SA) The Register (Goods Securities Act 1986 (SA)) The Register (Liens On Fruit Act 1923 (SA)) Registry Book (Bills Of Sale Act 1899 (WA)) Register of Cooperative Charges (Tas) Register of Trade Marks (Cth) Register of Co-operative Charges (Vic) Register of Cooperative Charges (ACT) The Register (Bills Of Sale Act 1900 (Tas)) Register of Co-operative Charges (NT) Fisheries Act (Vic) Registrar-General to collate (Instruments Act 1933 (ACT)) Land Titles Registry and General Registration Office (NT) Register of Charges for Co-operative housing bodies (NSW) Register of Plant Breeder’s Rights (Cth) The Register (Stock, Wool And Crop Mortgages Act 1930 (Tas)) Register of legal and equitable interests in petroleum titles (NSW) General Register of Deeds (Registration of Deeds Act 1957 (ACT)) Register under Registration of Interests in Goods Act 1986 (NSW) Australian Register of Company Charges (Cth) Register of Interests in Motor Vehicles and Other Goods (NT) Register of Liens (Liens on Crops of Sugar Cane Act 1931 (Qld)) Vehicle Securities Register (Chattel Securities Act 1987 (Vic)) Register of mortgages of mineral development licences (Vic) Register of Security Interests (Bills of Sale and Other Instruments Act 1955 (Qld)) Register of Liens on Crops, Register of Liens on Wool and Mortgages of Stock (Vic) Register of legal and equitable interests in exploration licences, assessment leases and mining leases (NSW) Register of Security Interests (Motor Vehicles and Boats Securities Act 1986 (Qld)) Register of authorisations (Fish Resources Management Act 1994 (WA)) General Register of Deeds (Security Interests in Goods Act 2005 (NSW))

Existing PPS arrangements are too complex PPS law and practice vary according to: –Location of the collateral –Nature of the collateral –Whether the Grantor is a company or individual –Legal form of the transaction charge, pledge, mortgage The case for reform

Increasecertainty Increaseconsistency Reducecomplexity Reducecosts Objectives of PPS reform

Treat like transactions alike Single Commonwealth PPS Act Repeal Commonwealth, State & Territory PPS laws Single national online PPS register Closure of Commonwealth, State and Territory PPS registers Functional approach to reform

The PPS Act treats security interests differently: –only when there are compelling policy reasons to do so –not just because the law has developed in an ad hoc manner Functional approach to reform

‘Security interest’ (s. 12(1)) ‘… an interest in relation to personal property provided for by a transaction that, in substance, secures payment or performance of an obligation (without regard to the form of the transaction or the identity of the person who has title to the property)…’ Functional approach to reform

Deemed security interest A title holder is deemed to be a secured party in certain circumstances by s.12(3) –interest of a consignor under a commercial consignment; –interest of a transferee of accounts; and –interest of a lessor or bailor under a PPS lease or bailment. Functional approach to reform

Grantor Secured party Personal property Security interest Collateral Perfection Some key terms

Fixed and floating charges Abandon idea that charge floats over property and later crystallise Charge will attach to property as per terms of agreement Company charges registrable on PPS Register (not ASIC) Failure to register can lead to a loss of: (i)priority (ii)charge on transfer of collateral (iii)charge on grantor’s insolvency Changes to current financing arrangements

Retention of title arrangements Suppliers under retention of title arrangements will no longer be able to rely solely on their title – including in insolvency Will be a security interest under PPS Act To preserve their priority, title holders must register their interest on PPS Register (generally one registration for series of transactions) If registered in accordance with the PPS Act, suppliers maintain current position Changes to current financing arrangements

Long term leases and finance leases PPS Act treats leases as security interests where: Lease for term > 12 months Lease over serial numbered goods >= 90 days Finance leases Lessors of PPS leases should therefore register to protect their interest on the PPS Register Changes to current financing arrangements

‘Purchase money security interest’ (PMSI) A PMSI can provide a ‘super priority’ to a secured party when the security interest: –secures purchase price due to seller (ROT) –secures finance enabling purchase –arises under a PPS lease (lease > 12 months or 90 days for cars and watercraft) (s13) –is the result of a commercial consignment A new kind of security interest

Attachment –Grantor has rights in the collateral –Value is given Perfection –Attachment, Enforceability against 3 rd parties and one of Registration Possession Control Attachment and perfection

The following security interest... has priority over...because of... Perfected security interest Unperfected security interest Subsection 55(3) Perfected by controlPerfected by other means Section 57 Perfected by control (first in time) Perfected by control (later in time) Subsections 55(4) and (5) Unperfected (attached first) Unperfected (attached later) Subsection 55(2) Default priority rules

Register of all security interests in all types of personal property Continuously available Low cost under strict cost recovery rules A consultation draft of the PPSR’s Cost Recovery Impact Statement shows a search fee of $3.70 and a registration fee of $7.40 (for registration up to 7 years) PPS Register

Serial-numbered goods Registrations will be made against the property of a grantor or by serial number Serial numbers that can be used as the basis for a registration are listed in the PPS Regulations (Part 2 of Schedule 1) Includes motor vehicles, boats, aeroplanes and intellectual property PPS Register

What number to use? The PPS Regulations set out the serial number that should be used An extract of regulation 2.2(3)(c), providing the rules for motor vehicles, is shown on the next slide It is important to note that details for migrated registrations on the PPSR will be as they appear on the donor register PPS Register

(2)...a description of collateral by serisl number must include the following information:... (c)for a motor vehicle: (i)the vehicle identification number; or (ii)if it has no vehicle identification number but has a chassis number – the chassis number; or (iii)if it has no vehicle identification number or chassis number – the manufacturer’s number PPS Register

Vehicle information It is intended that whenever a vehicle is searched for or registered on the PPS Register, vehicle information will be provided from NEVDIS Vehicle information includes: make, model, colour, type (body/vehicle), year of manufacture, month/year of compliance, engine number, registration plate number, registration expiry date, write- off details, stolen notifications PPS Register

The PPS Act does not apply to the security interests of pawn brokers where the collateral and the security interest are less than $5000 in value and the collateral cannot be registered by serial number The PPS Act does not change the need to comply with consumer credit laws PPS and consumer lending

For collateral used predominantly for personal domestic and household purposes: –PMSIs are unvailable except for property that can be registered by serial number –There are obligations on the secured party to remove defunct registrations within 5 days. A failure to remove a registration can lead to liability for damages under the PPS Act –There are constraints on the enforcement options that are available PPS and consumer lending

Security interests in personal property worth less than $5000 and bought predominantly for non-commercial purposes will not be enforceable against the purchaser (the ‘garage sale’ rule for taking free) However, this does not apply to collateral that can be registered by serial number including motor vehicles and boats PPS and consumer lending

Pre-existing security interests not currently registrable or not being migrated – transitional security interest If migrated from a ‘transitional register’ – migrated security interest Transitional security interests

Migration of data from existing registers Registrations that provide a priority to a secured party’s interest will be migrated unless the relevant property has been specifically excluded from the reforms Some registers, including REVS registers, will be closed down at registration commencement time Data migration

Questions? More information