Final Report for Personal Property Securities Act Released for Commonwealth

On 4 April 2014, the Attorney-General announced a review of the Personal Property Securities Act 2009 (Cth) (PPS Act) as required by section 343 of the PPS Act. The Final Report on the review was tabled before Parliament on 18 March 2015.

Background to Review

The PPS Act was an important commercial reform, creating a single national regime for secured finance using personal property. Secured lending against personal property is an important element of the Australian credit market and the broader economy.

The PPS Act replaced a complex and fragmented legal system, including more than 70 Commonwealth, state and territory statutes and general law rules. The Act established a single national regime for the creation, registration, priority and enforcement of security interests in personal property to which it applies.

After more than two years of operation, the review of the Act provided an opportunity to consider, based on practical experience, whether the Act has achieved its objectives.

In addition to reviewing the operation of the Act, the review paid particular attention to the experiences of small businesses. As outlined in the review's terms of reference, feedback was sought on issues such as the impact of the Act on small business, the level of understanding of the Act amongst small business operators and their ability to effectively utilise the Act for their benefit.

An interim report on priority issues raised by small business in the review was delivered to the Attorney-General and Parliamentary Secretary to the Prime Minister on 31 July 2014.

Terms of Reference of Review

The review should consider:

a)      the effects of the reforms introduced by the PPS Act on:

i)        Australian businesses, particularly small business;

ii)      Australian consumers;

iii)    the market for business finance in Australia; and

iv)    the market for consumer finance in Australia;

b)      the level of awareness and understanding of the PPS Act at all levels of business, particularly small business;

c)      the incidence and, where applicable, causes of non-compliance with the requirements of the PPS Act particularly among small businesses;

d)      opportunities for minimising regulatory and administrative burdens, including costs, on businesses, particularly small business, and consumers;

e)      opportunities for further efficiencies in the PPS Act regime including (but not limited to) simplification of the Personal Property Securities Register and its use;

f)       the scope and definitions of personal property covered by the PPS Act;

g)      the desirability of specifying thresholds for the operation of the PPS Act regime in respect of particular types of personal property;

h)      the interaction of the PPS Act with other legislation including the Corporations Act 2001; and

i)        any other relevant matters.

The review must include consultation with relevant stakeholders.

Recommendations Made by the Final Report

In all, there were 394 recommendations made in the Final Report.

Some of the recommendations included:

• Recommendation 2: That the definition of “interest” in s 10 of the Act be deleted.
• Recommendation 10: That the definition of “account” in s 10 of the Act be amended
• Recommendation 11: That Government separately consider, in consultation with the States and Territories, whether the concept of an “account” under the Act should be expanded to include monetary obligations generally.
• Recommendation 13: That the Act be amended to confirm that a novation of an account is not a “transfer” for the purposes of s 12(3)(a) of the Act, unless it is clear that a corporate loan obligation is not an “account”.
• Recommendation 15: That the definition of “chattel paper” in section 10, and all references in the Act to chattel paper (including s 71), be deleted.
• Recommendation 17: That paragraph (e) of the definition of “commercial consignment” in s 10 of the Act be amended to read: (e) a consignee for sale, lease or other disposal if the consignee is or should reasonably be generally known to be selling or leasing goods of others.
• Recommendation 32: That s 8(1) be split into two provisions: one listing interests that are not “security interests” for the purposes of the Act, and the other listing interests that are not “personal property” for the purposes of the Act.
• Recommendation 34: That Government consult further with appropriate experts in real property law to determine whether s 8(1)(f)(ii) of the Act can be recast more simply, and so that it neither overlaps with relevant real property law, nor allows for gaps between the Act and that law.
• Recommendation 37: That s 8(1)(f)(v) be limited in its application to transfers of interests in policies of life insurance that are registrable under ss 200 and 201 of the Life Insurance Act 1995.
• Recommendation 40: That Government explore with the States and Territories whether ss 8(1)(i) and 8(5) could be amended so that water rights are only excluded from the Act if they are able to be recorded under a statutory registration scheme that complies with the expectations set out in the 2005 Intergovernmental Agreement on a National Water Initiative.
• Recommendation 42: That Government explore with the States and Territories whether a regime can be developed, potentially along the lines of the principles applied in the Canadian PPSAs, that would allow fixtures to be brought within the Act.
• Recommendation 43: That ss 8(1)(a) and (b) be deleted, and that s 109 be amended to provide that Chapter 4 does not apply to security interests of the type described in s 8(6).

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Attorney General (CTH) Website and Final Report