House of Representatives

Explanatory Memorandum

Circulated By the Authority of the Attorney-General, the Honourable Robert Mcclelland Mp

1. Outline

1.1 Personal Property Securities (PPS) reform aims to address the complexity of over 70 Commonwealth, State and Territory laws, common law rules and rules of equity currently governing security interests in personal property. PPS reform would provide a modern and efficient personal property securities framework, which is essential for any modern financial system.

1.2 The Personal Property Securities Bill 2009 was introduced into Parliament on 24 June 2009. By harmonising existing laws, the Bill will reduce the complexity of the existing arrangements for secured lending using personal property as collateral. The Bill will also increase consistency in the arrangements for creating, dealing with and enforcing security interests in personal property.

1.3 The PPS (Consequential Amendments) Bill 2009 (the Consequential Bill) represents the next stage in the Government's harmonisation of Australia's law on secured financing using personal property.

1.4 Personal property is any form of property other than land or buildings. The PPS Bill will apply to transactions which have the effect of securing a payment or other obligation by taking an interest in personal property, regardless of the form of the transaction, the nature of the debtor or the jurisdiction in which the personal property or parties are located. This is known as the functional approach.

1.5 The Consequential Bill will amend 25 Commonwealth Acts that deal with the creation, registration, priority, extinguishment or enforcement of interests in personal property. The amendments proposed by this Bill will also clarify the operation of legislation that will operate concurrently with the PPS Bill. This will facilitate the establishment of a single national regime for personal property securities.

1.6 The Consequential Bill contains measures designed to:

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harmonise language and concepts with the PPS Bill where appropriate;

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support a seamless transition to the PPS Register to be established by the PPS Bill, including removing provisions providing for the registration of security interests on a separate Commonwealth register;

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resolve conflicts between the PPS Bill and other Commonwealth legislation that provides for security interests or other interests in personal property;

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determine the priority between Commonwealth statutory interests in personal property, other than security interests, and security interests in the same property;

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clarify the rights of secured parties and other parties in particular situations including statutory detention of personal property that may be subject to a security interest; and

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ensure that current rights are preserved on implementation of the amendments.

1.7 The Consequential Bill will not amend the Corporations Act 2001, which will be amended by a separate Bill following a public consultation process.