Explanatory Memorandum
Circulated By the Authority of the Attorney-General, the Honourable Robert Mcclelland Mp9. Schedule 5 - Other legislation
Schedule 5 amends nine pieces of Commonwealth legislation as follows:
Amendments to the Air Services Act 1995 to protect the priority of statutory liens held by Air Services Australia over aircraft and ensure concepts under that Act and the PPS Bill are harmonised.
Amendments to the Bankruptcy Act 1966 will ensure there are no inconsistencies with the PPS Bill. This will be done by aligning the definition of secured creditor in the Bankruptcy Act with the definition of secured party in the PPS Bill. This will mean that secured parties under the PPS Bill are also secured for the purposes of the Bankruptcy Act and that, provided they have perfected their PPSA security interests (interests to which the PPS Bill applies), their PPSA security interest would not vest in a bankrupt estate and they retain the right to enforce without having to prove in the bankruptcy with unsecured creditors.
The amendment to the Commonwealth Inscribed Stock Act 1911 will amend a regulation making power which provides for the establishment of a register of equitable interests in stock so that it does not apply to security interests. The amendment will support the transition to the PPS Register.
The amendment to the Corporations (Aboriginal and Torres Strait Islander) Act 2006 will ensure that charges created under that Act continue to have the same priority following commencement of the PPS Act.
The Health Insurance Act 1973 will be amended to prohibit the creation of a security interest in a right to payment that has been assigned to a medical practitioner.
An amendment to the Insurance Act 1973 will preserve the Federal Court's power to determine the priority of a charge in relation to other interests in the same property.
Amendments to the Privacy Act 1988 will alert readers of that legislation to the fact that unauthorised uses of data under the PPS Bill are 'interferences with privacy' under the Privacy Act and subject to the Privacy Commissioner's powers of investigation.
Amendments to the Quarantine Act 1908 will give priority to statutory interests over PPSA security interests. The amendments will also ensure that enforcement action taken under the Quarantine Act against goods will not be frustrated by a secured party enforcing against the same goods under the PPS Bill.
The Wool International Act 1993 will be amended to support the transition from the register established under that Act to the PPS Register. Charges would no longer be required to be registered on the register established under that Act.
Commencement
9.1 Items 1-18 and 21-50 of Schedule 5 will commence on the PPS Act registration commencement time. The PPS Act registration commencement time is the first day of the month that is 26 months after the month in which the PPS Bill is given Royal Assent, or an earlier time determined by the Minister. The Government expect the registration commencement time will be in May 2011.
9.2 Items 19 and 20 of Schedule 5 will commence on the later of (1) the start of the day the Consequential Bill receives Royal Assent, and (2) immediately after the commencement of the PPS Act.
Amendment of the Air Services Act
Amendment of subsection 60(3)
Items 1 and 4
9.3 Item 1 removes the term 'floating charge' from paragraph 60(3)(a), as the concept has been superseded by the term 'security interest that has attached to a circulating asset' under the PPS Act.
9.4 Under item 4, this amendment will not apply in relation to a floating charge if the floating charge was created before the PPS Act registration commencement time.
Item 2
9.5 This item adds a note specifying the relevant provision in the PPS Act which deals with security interests that attach to circulating assets.
Item 3
9.6 Section 60 sets out the effect of a statutory lien, including that it applies in spite of any encumbrance in respect of the aircraft, and sets out the priority between competing interests over the aircraft.
9.7 Section 60 provides that a statutory lien is subject to security interests created in the aircraft before the statutory lien is registered, where the security interest covers a debt incurred before that time.
9.8 This item applies subsection 73(2) of the PPS Act to a statutory lien imposed under section 60. Applying subsection 73(2) ensures the priority between the statutory lien and a security interest in the same property is determined in accordance with the Air Services Act after the PPSA registration commencement time.
Amendment of the Bankruptcy Act
Definition of PPSA grantor or debtor
Item 5
9.9 This item inserts a definition of a 'PPSA grantor or debtor' into the interpretation section (subsection 5(1)) of the Bankruptcy Act. This item imports the definition of a PPS Act grantor or debtor from the PPS Act to apply in amended sections 301 and 302.
Definition of PPSA secured party
Item 6
9.10 This item inserts a definition of a 'PPSA secured party' into the interpretation section of the Bankruptcy Act. This item imports the definition of a PPS Act secured party from the PPS Act to apply in amended sections 301 and 302.
Definition of PPSA security agreement
Item 7
9.11 This item inserts a definition of a 'PPSA security agreement' into the interpretation section of the Bankruptcy Act. This item imports the definition of a PPS Act security agreement from the PPS Act to apply in amended sections 301 and 302.
Definition of a PPSA security interest
Item 8
9.12 This item inserts a definition of a 'PPSA security interest' into the interpretation section of the Bankruptcy Act. The definition of a PPSA security interest in this item will include a security interest to which the PPS Act applies but excludes a transitional security interest under the PPS Act. This item imports the definition of a PPS Act security interest from the PPS Act to apply in amended sections 301 and 302.
Definition of a secured creditor
Item 9
9.13 This item amends the definition of a 'secured creditor' in the interpretation section of the Bankruptcy Act. The definition of secured creditor is amended to include secured parties under the PPS Act who have perfected their security interests and also creditors who are not secured parties under the PPS Act (this will include future holders of charges in land).
9.14 The definition of a secured party under the PPS Act means the holder of an interest in personal property (excluding land) provided by any of the following transactions which in substance secure the payment or performance of an obligation: a fixed charge; a floating charge; a chattel mortgage; a conditional sale agreement; a hire purchase agreement; a pledge; a trust receipt; a consignment; a lease of goods; an assignment; a transfer of title; a flawed asset arrangement and the following transactions which may not secure payment or the performance of an obligation: transfers of accounts or chattel paper, commercial consignments and PPS leases.
9.15 Therefore, the inclusion of PPS Act secured parties within the definition of secured creditors will increase the category of secured creditors under the Bankruptcy Act in respect of security agreements entered into after the PPS Act registration commencement time. These secured creditors will be able to realise or deal with the secured property, which will not vest in the bankrupt estate, provided they have perfected their security interest.
Example
Lessor A leases a front loader washing machine to Person A for a term of two years (i.e. this is a PPS lease under section 13 of the PPS Act and a PPS lease is a security interest under section 12 of the PPS Act). Person A enters into a deed of arrangement under the Bankruptcy Act. Lessor A does not prove in bankruptcy and instead follows the enforcement procedures under the PPS Act. Lessor A is entitled to do this because, following the amendments to the Bankruptcy Act and the amended definition of secured creditor, Lessor A is now a secured creditor under the Bankruptcy Act.
Amendment of section 301
Items 10-13
9.16 These items amend section 301 of the Bankruptcy Act to include PPS Act security agreement provisions entitling the PPS Act secured party to terminate or modify the agreement or re-possess the property, when the PPS Act grantor or debtor becomes a bankrupt, commits an act of bankruptcy or enters into a deed of assignment or arrangement under the Bankruptcy Act, as void provisions.
Amendment of section 302
Items 14-17
9.17 These items amend section 302 of the Bankruptcy Act to include PPS Act security agreement provisions which entitle the PPS Act secured party to exercise any power or remedy or modify the agreement if the PPS Act grantor or debtor becomes a bankrupt, commits an act of bankruptcy or executes a deed of assignment or arrangement, as void provisions.
Application of amendments
Item 18
9.18 This item provides that item 9 amending the definition of 'secured creditor' in the Bankruptcy Act, in line with the PPS Act, will only apply to bankruptcies where the date of the bankruptcy arises after the PPS Act registration commencement time.
Amendment of the Commonwealth Inscribed Stock Act
Amendment of section 24B
Items 19-20
9.19 Section 24B of the Commonwealth Inscribed Stock Act allows for the making of regulations which would require the operator of a clearing and settlement facility, an incorporated company or other body corporate to keep a record of equitable interests in stock, and to comply with requirements in relation to the keeping of such a record.
9.20 These items have the effect of limiting the regulation making power so that it does not apply to security interests in stock within the meaning of the PPS Act and to which the PPS Act applies. This is consistent with the PPS Register being the principal register of security interests in personal property in Australia.
9.21 These items will commence on the later of (1) the start of the day the Consequential Amendments Bill receives Royal Assent, and (2) immediately after the commencement of the PPS Act. This will prevent regulations being made before the PPS Act registration commencement time to have effect after that time with the result that PPS Act security interests could be registered on two registers.
Amendment of the Corporations (Aboriginal and Torres Strait Islander) Act
Amendment of sections 453-10 and 511-1
Items 21-22
9.22 Paragraph 453-10(4)(b) of the Corporations (Aboriginal and Torres Strait Islander) Act provides that the Registrar of Aboriginal and Torres Strait Islander Corporations may charge some or all of the remuneration, charges or expenses of an authorised officer who examines the books of an Aboriginal and Torres Strait Islander corporation or related body corporate on the property of the corporation or related body corporate. It also provides that the Registrar may give the charge any priority in relation to existing charges on the charged property that the Registrar sees fit.
9.23 Paragraph 511-1(4)(b) provides that the Registrar may charge some or all of the remuneration, charges or expenses of a special administrator of an Aboriginal and Torres Strait Islander corporation on the property of the corporation or related body corporate. It also provides that the Registrar may give the charge any priority in relation to existing charges on the charged property that the Registrar sees fit.
9.24 These items apply subsection 73(2) of the PPS Act to charges created under paragraphs 453-10(4)(b) and 511-1(4)(b). Applying subsection 73(2) ensures the priority between a charge under one of these paragraphs and a security interest in the same property is determined in accordance with the Corporations (Aboriginal and Torres Strait Islander) Act after the PPS Act registration commencement time.
9.25 The amendments are intended to preserve the power of the Registrar to give any priority that the Registrar sees fit to charges created by the Registrar under these two provisions, after the PPS Act registration commencement time.
Amendment of the Health Insurance Act
Insertion of section 20AA
Item 23
9.26 Section 20A of the Health Insurance Act provides that a person entitled to receive a medicare benefit may assign that benefit to their practitioner. This provision facilitates bulk billing.
9.27 This item is intended to prevent a person from creating a valid PPS Act security interest in a medicare benefit that has been assigned to a practitioner under section 20A.
9.28 The amendments made by this item also ensure that subsection 20A(5) will continue to have effect after the PPS Act registration commencement time. That provision requires an assignment of a medicare benefit to be made in accordance with section 30A.
9.29 This item includes a definition of a 'PPSA security interest' which includes a security interest to which the PPS Act applies but excludes a transitional security interest under the PPS Act. This ensures that security agreements entered into before the PPS Act registration commencement time are not retrospectively voided.
Amendment of the Insurance Act
Amendment of section 62S
Item 24
9.30 Section 62S of the Insurance Act provides that the Federal Court may give directions about the remunerative and allowances for a judicial manager (a manager of a general insurer appointed by the Court) and determine who is liable to pay the remuneration and allowances. The judicial manager's remuneration and allowances may be charged against the property of the relevant general insurer. That charge will take priority in relation to existing charges on that property as the Court thinks fit.
9.31 This item applies subsection 73(2) of the PPS Act to charges created under section 62S. Applying subsection 73(2) ensures the priority between a charge under section 62S and a security interest in the same property is determined in accordance with the Insurance Act after the PPS Act registration commencement time.
9.32 The amendments are intended to preserve the power of the Federal Court to give any priority that the Court sees fit to charges created under section 62S, after the PPS Act registration commencement time.
Amendment of the Privacy Act
Amendment of section 13
Items 25-26
9.33 The note added by these items to section 13 of the Privacy Act will flag that subsection 157(4) and subsection 173(2) of the PPS Act make the following interferences with privacy under section 13 of the Privacy Act:
- •
- the failure of secured parties to provide notice of verification statements (written statements confirming the registration of their security interest financing statements) to the grantors;
- •
- the conduct of an unauthorised or prohibited search;
- •
- the use of personal information obtained through unauthorised or prohibited searches.
Insertion of section 28B
Items 27-29
9.34 These items expand the Privacy Commissioner's existing powers to include the power to investigate acts or practices which may be interferences with privacy under the PPS Act.
Insertion of section 49A
Item 30
9.35 Section 49A provides, as in the case of suspected tax file number and credit reporting offences, that where the Commissioner during the course of an investigation forms the opinion that subsection 172(3) of the PPS Act may have been contravened, the Commissioner must cease dealing with the complaint and inform the Registrar of PPS of his opinion. If the Registrar of PPS notifies the Commissioner that the Registrar has decided not to continue under section 222 of the PPS Act (obtaining an order for a civil penalty), the Commissioner may continue his investigation.
Amendment of the Quarantine Act
Definition of PPSA security interest
Item 31
9.36 This item inserts a definition of a 'PPSA security interest' into the interpretation section (subsection 5(1)) of the Quarantine Act. The definition includes a security interest to which the PPS Act applies but excludes a transitional security interest under the PPS Act.
9.37 The definition has been included to clarify references to PPSA security interests in the amendments to the Quarantine Act.
Amendment of section 65
Items 32-33
9.38 Sections 64 and 65 of the Quarantine Act provide the Commonwealth with the power to detain items of personal property for unpaid expenses incurred in connection with quarantining animals, plants and other goods.
9.39 The amendment will ensure that a secured party does not have the power to enforce its security interest (by seizing the detained property under section 123 of the PPS Act) while a vessel is detained pursuant to section 65 of the Quarantine Act.
Insertion of subsection 69A(14)
Items 34-36
9.40 Under section 69A of the Quarantine Act, the Minister may approve the payment of compensation for goods or premises that are destroyed under or in accordance with the Quarantine Act. Payment is to be made to the owner(s). Subsection 69A(14) provides that the owner means a person who had an interest in the goods or premises at the time of destruction but does not include a person who has an interest by reason that they are entitled to a benefit of a mortgage, charge or lien in respect of the goods or premises unless they were in possession of the goods or had control of the premises at the time of destruction.
9.41 These items amend section 69A to ensure that for the purposes of determining the owner of the goods or premises, a person who, or a partnerships which, had an interest in goods or premises at the time of their destruction does not include a person or partnership that holds a PPSA security interest in the goods or premises unless that person or partnership has possession or control of the goods or premises at the time of destruction.
9.42 As subsection 69A(14) already excludes persons with an interest under a mortgage, charge or lien, it is not necessary to include transitional security interests in the definition of a 'PPSA security interest'.
Amendment of the Wool International Act
Amendment of subsection 22J
Items 37-40
9.43 Section 22J of the Wool International Act requires that particulars of a charge in a unit of equity in WoolStock Australia Limited are registered in the register of equity holders in order for that charge to have effect. This is inconsistent with the policy in the PPS Act that the fact that a PPSA security interest is not registered does not affect the validity of the security interest.
9.44 These items amend section 22J of the Wool International Act to ensure that a charge on a unit of equity in WoolStock Australia Limited is solely registrable on the PPS Register.
9.45 Item 39 adds a note specifying that a charge over a unit of equity in WoolStock Australia Limited may be the subject of a registration on the PPS Register. In addition, a further note clarifies that the priority between charges over units of equity will be determined in accordance with the PPS Act.
Repeal of section 22K
Item 41
9.46 Section 22K of the Wool International Act sets out the priority of charges over units of equity. The priority provided is similar to the priority rules under the PPS Act, providing priority in the order of registration.
9.47 This item repeals section 22K of the Wool International Act. Charges under the Wool International Act are in the nature of a security interest over personal property to which the PPS Act applies. The priority between competing security interests in personal property will be determined under the PPS Act.
Repeal of paragraph 22L(b)
Items 42 and 50
9.48 Item 42 amends section 22L of the Wool International Act. Subsection 22L(b) provides for the beneficiary of a charge on a unit of equity to, upon request, have access to an entry in the register of equity holders. As charges will be registered on the PPS Register, the Wool International Act will no longer recognise beneficiaries of charges. The consequence of the amendment is that it will be necessary for the grantor to consent to a secured party having access to the register of equity holders under the Wool International Act.
9.49 Item 50 provides that where WoolStock Australia Limited has not complied with a request made by a person under paragraph 22L(b) of the Wool International Act, the requirement to comply with the request stops applying after the PPS Act registration commencement time.
Amendment of section 22R
Item 43
9.50 This item makes a technical amendment. The note in subsection 22R(2) refers to subsection (5) which no longer exists. The amendment repeals the note.
Item 44-45
9.51 These items repeal subsection 22R(4) of the Wool International Act. Section 22R(4) allows for a registered equity holder to notify WoolStock Australia Limited to make payments to beneficiaries of charges on units of equity, in accordance with the priorities established under section 22K of the Wool International Act.
Amendment of section 22S
Items 46 -49
9.52 These items amend section 22S of the Wool International Act to remove the requirement that WoolStock Australia Limited notify beneficiaries of charges in units in equity of amounts available for distribution. This is as a result of the particulars of the charges no longer being registered on the register of equity holders under the Act.