House of Representatives

Explanatory Memorandum

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

7. Schedule 3 - Maritime legislation

Schedule 3 amends the Shipping Registration Act 1981 to restrict the application of the Act so that it no longer applies to mortgages over ships. The amendments will prevent the registration on the Australian Register of Ships (ARS) of mortgages over ships and the lodgement of caveats in relation to PPSA security interests. Existing mortgages on the ARS will be migrated to the PPS Register. The result will be that the PPS Register will be the sole register for the registration of mortgages and other PPSA security interests in ships. The PPS Act will govern the creation, enforceability and priority of security interest in ships, including mortgages. The power of the Supreme Courts to rectify the ARS will be extended to the PPS Register to ensure the Court's power is not restricted when PPSA security interests currently registered on the ARS are migrated to the PPS Register. Under the Admiralty Act 1988, the Federal Court is able to exercise the same power as the Supreme Courts under the Shipping Registration Act to rectify the ARS. Schedule 3 includes a minor amendment to the Admiralty Act 1988 to enable the Federal Court to also rectify the PPS Register.

This schedule also amends the Marine Navigation Levy Collection Act 1989, Marine Navigation (Regulatory Functions) Levy Collection Act 1991, Protection of the Sea (Civil Liability) Act 1981, Protection of the Sea (Civil Liability for Bunker Oil Pollution Damage) Act 2008, Protection of the Sea (Harmful Anti-fouling Systems) Act 2006, Protection of the Sea (Prevention of Pollution from Ships) Act 1983 and the Protection of the Sea (Shipping Levy Collection) Act 1981 to ensure that enforcement action taken under this legislation against goods will not be frustrated by a secured party enforcing against the same goods under the PPS Act.

Schedule 3 amends the Navigation Act 1912 to ensure that a number of statutory liens and charges under that Act have priority over PPSA security interests while preserving the current priority as between non-PPSA security interests.

Commencement

7.1 Schedule 3 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.

Amendment of the Admiralty Act

Amendment of section 32

Item 1

7.2 Section 32 of the Admiralty Act provides that in proceedings in the Federal Court on a proprietary maritime claim, the orders that the court may make include orders of the kind that a court may make under section 59 of the Shipping Registration Act.

7.3 This item inserts a reference to section 59A of the Shipping Registration Act into section 32 of the Admiralty Act. Section 59A will be inserted into the Shipping Registration Act by item 25 of schedule 3. Item 1 is intended to give the Federal Court the same powers with respect to rectification of the PPS Register as section 59A will grant to the State and Territory Supreme Courts.

Amendment of the Marine Navigation Levy Collection Act

Enforcement

Items 2-3

7.4 These items insert a new subsection into section 10 of the Marine Navigation Levy Collection Act. Section 10 provides that an officer of Customs may detain a ship for an unpaid levy, until the levy is paid.

7.5 The amendment will ensure that a secured party does not have the power to enforce its PPSA security interest (by seizing the detained property under section 123 of the PPS Act) while a ship is detained pursuant to section 10 of the Marine Navigation Levy Collection Act.

Amendment of the Marine Navigation (Regulatory Functions) Levy Collection Act

Enforcement

Items 4-5

7.6 These items insert a new subsection into section 9 of the Marine Navigation (Regulatory Functions) Levy Collection Act. Section 9 provides that an officer of Customs may detain a ship for an unpaid levy, until the levy is paid.

7.7 The amendment will ensure that a secured party does not have the power to enforce its PPSA security interest (by seizing the detained property under section 123 of the PPS Act) while a ship is detained pursuant to section 9 of the Marine Navigation (Regulatory Functions) Levy Collection Act.

Amendment of the Navigation Act

Definition of a PPSA security interest

Item 6

7.8 This item inserts a definition of a 'PPSA security interest' into the interpretation section (subsection 6(1)) of the Navigation Act. A PPSA security interest is a security interest to which the PPS Act applies or a transitional security interest to which Division 4 of Part 9.4 of the PPS Act applies (being an interest subject to the PPS Act as a result of a bankruptcy or insolvency, or where an existing secured party has assented to the PPS Act by voluntarily registering their interest on the PPS Register).

7.9 The definition has been included to clarify references to PPSA security interests in the amendments to the Navigation Act.

Amendment of section 83

Items 7-8

7.10 Section 83 recognises and gives statutory effect to the common law position that unpaid seamen have a lien over the ship for their wages. This lien is given priority over other liens by virtue of subsection 83(2).

7.11 These items amend subsection 83(2) of the Navigation Act to clarify the position of the seamen's lien, by continuing its priority over all other liens and giving it priority over all PPSA security interests.

7.12 These items also apply subsection 73(2) of the PPS Act to a lien under section 83 of the Navigation Act. Applying subsection 73(2) ensures the priority between a lien under section 83 and a security interest in the same property is determined in accordance with the Navigation Act after the PPS Act registration commencement time.

Amendment of section 128

Item 9

7.13 Section 128 of the Navigation Act provides that amounts outstanding to an authority in relation to expenses incurred in attending to sick or injured seamen are a charge over the vessel. This item inserts new subsections 128(2A) and 128(2B) of the Act.

7.14 The amendment will clarify the position of the charge, by giving it priority over PPSA security interests.

7.15 These items also apply subsection 73(2) of the PPS Act to a charge under section 128 of the Navigation Act. Applying subsection 73(2) ensures the priority between a charge under section 128 and a security interest in the same property is determined in accordance with the Navigation Act after the PPS Act registration commencement time.

Amendment of section 298

Item 10

7.16 Section 298 of the Navigation Act provides for a charge over a wreck for damage to land occasioned in attending to the wreck, which is recoverable as salvage.

7.17 The amendments will clarify the position of the charge, by giving it priority over PPSA security interests.

7.18 This item applies subsection 73(2) of the PPS Act to a charge under section 298. Applying subsection 73(2) ensures the priority between a charge under section 298 and a security interest in the same property is determined in accordance with the Navigation Act after the PPS Act registration commencement time.

Amendment of the Protection of the Sea (Civil Liability) Act

Enforcement

Item 11

7.19 This item inserts a new subsection into section 22 of the Protection of the Sea (Civil Liability) Act. Where AMSA incurs expenses under the Protection of the Sea (Powers of Intervention) Act 1981, the amount is a charge over the ship (sections 20 and 21 of the Protection of the Sea (Civil Liability) Act). Under section 22, this gives rise to a power to detain a ship until the amount is paid or security for payment of the amount is provided.

7.20 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 ship is detained pursuant to section 22 of the Protection of the Sea (Civil Liability) Act.

Amendment of the Protection of the Sea (Harmful Anti-fouling Systems) Act

Enforcement

Item 12

7.21 This item inserts a new subsection into section 18 of the Protection of the Sea (Harmful Anti-fouling Systems) Act. Section 18 gives AMSA the power to detain a ship if there are reasonable grounds for believing that an offence against this Act has been committed in respect of the ship.

7.22 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 ship is detained pursuant to section 18 of the Protection of the Sea (Harmful Anti-fouling Systems) Act.

Amendment of the Protection of the Sea (Prevention of Pollution from Ships) Act

Enforcement

Item 13

7.23 This item inserts a new subsection into section 27A of the Protection of the Sea (Prevention of Pollution from Ships) Act. Section 27A gives AMSA power to detain a foreign vessel in connection with pollution breaches.

7.24 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 ship is detained pursuant to section 27A of the Protection of the Sea (Prevention of Pollution from Ships) Act.

Amendment of the Protection of the Sea (Shipping Levy Collection) Act

Enforcement

Item 14

7.25 The item inserts a new subsection into section 12 of the Protection of the Sea (Shipping Levy Collection) Act. Section 12 provides that a Collector, within the meaning of the Customs Act 1901, or another authorised person, may detain a ship for an unpaid levy, until the levy is paid.

7.26 The amendment will ensure that a secured party does not have the power to enforce its security interests (by seizing the detained property under section 123 of the PPS Act) while a ship is detained pursuant to section 12 of the Protection of the Sea (Shipping Levy Collection) Act.

Amendment of the Shipping Registration Act

Amendment of subsection 3(1) and heading of Part III

Items 15-17

7.27 These items repeal the definition of mortgage, insert a definition of PPSA security interest and substitute 'mortgages' with 'security interests and other dealings' in the heading of Part III of the Shipping Registration Act.

7.28 The definition of a PPSA security interest inserted by item 16 will include a security interest to which the PPS Act applies but exclude a transitional security interest under the PPS Act. In combination with the relevant operative rules, the exclusion of transitional security interests from the definition will ensure that parties who enter into a security agreement before the PPS Act registration commencement time have the same rights after that time. For example, the right to lodge a caveat under section 47A in respect of their interest.

7.29 The amendments support the repeal of the Shipping Registration Act's comprehensive regime for ship mortgages and align the terminology used by the Act with the functional approach taken by the PPS Act.

Repeal of sections 38 to 44A

Item 18

7.30 Sections 38 to 44A of the Shipping Registration Act establish a comprehensive regime for creation, registration, priority, transfer, enforcement and discharge of ship mortgages.

7.31 Item 18 is intended to repeal the comprehensive ship mortgage regime established by sections 38 to 44A. Ship mortgages will be PPSA security interests, which could be registered on the PPS Register.

Amendment of section 47A

Item 20

7.32 Section 47A of the Shipping Registration Act permits a person who claims an interest in a ship or a share in a ship under an unregistered instrument to lodge a caveat with the Registrar of Ships. The lodging of a caveat forbids entry in the ARS of any instrument relating to any dealing with that ship or share of the ship until notice is given to the caveator.

7.33 This item will have the effect that a person claiming an interest in a ship or share in a ship which is a PPSA security interest may not lodge a caveat with the Registrar of Ships with respect to that interest. By virtue of the definition of PPSA security interest excluding transitional security interests, parties will be entitled to continue to lodge caveats in respect of security interests that arise out of a security agreement created before the PPS Act registration commencement time.

7.34 This item supports the functional approach taken by the PPS Act and the character of the PPS Register, which is intended to be the principal Australian register of security interests. It is intended that a person wishing to protect a PPSA security interest in a ship could protect that interest by perfecting it under the PPS Act.

Amendment of paragraph 47B(1)(a) and (b)

Item 21

7.35 Item 21 removes the requirement on the Registrar of Ships to notify mortgagees in respect of caveats entered on the ARS. From the PPS Act registration commencement time, ship mortgages will be registered on the PPS Register instead of the ARS.

Item 35

7.36 This item will ensure that the amendment under item 21 does not apply, and the obligation on the Registrar of Ships to notify mortgagees continues, where a caveat is lodged on the ARS before the PPS Act registration commencement time.

Amendment of subsection 47D(3)

Item 22

7.37 Except to the extent that a caveat specifies otherwise, subsection 47D(3) of the Shipping Registration Act allows for the Registrar of Ships to enter into the ARS (1) the transmission of a ship, or a share in a ship, to a person if the person becomes entitled to the transmission by operation of law, and (2) a dealing by a mortgagee of a ship or share of a ship, under the mortgage, where the caveator has consented or the caveat has lapsed.

7.38 This item amends that subsection to remove the reference to the Registrar of Ships registering a dealing of a mortgagee.

Amendment of subparagraph 58(1)(b)(i), paragraphs 58(3)(a) and 66(3)(a), subsections 66(4) to (9) and (11), and section 79

Items 23, 24, 26, 27 & 30

6.36 These items remove references to mortgages in the Shipping Registration Act which are redundant because of the repeal of the ship mortgage scheme in sections 38 to 44A.

Insertion of s 59A

Item 25

7.39 With one exception, section 59A is intended to grant substantially the same power to the Supreme Courts of the States and Territories with respect to rectification of the PPS Register as section 59 grants those courts with respect to rectification of the ARS. The amendment will preserve the power of the courts to rectify ship mortgage registrations after those registrations are migrated from the ARS to the PPS Register, and extend their power to include the power to rectify PPS registrations of PPSA security interests in ships which are not ship mortgages.

7.40 Unlike section 59, section 59A is not intended to grant power to the courts to rectify omitted entries where the omitted entry relates to something that was required to be registered. Unlike the Shipping Registration Act, the PPS Act does not impose obligations to register.

Item 36

7.41 This item provides that item 25 applies in relation to a registration under the PPS Act with respect to a security interest regardless of when the security interest arises.

Amendments of section 47, subsections 74(1) and 74(2), section 81 and subsection 82(1) of the Act

Items 19, 28, 29, 31 & 32

7.42 These items remove references to provisions which are repealed by this Schedule or which will not have a relevant affect after the PPS Act registration commencement time (the commencement time for items in this Schedule).

Application of amendments

Item 33

7.43 This item will clarify that items 15, 17 to 19 and 22 to 24 apply in relation to the interest of a mortgagor in a mortgage of a ship, or of a share in a ship, regardless of when the interest arose. This ensures that at the PPS Act registration commencement time, the Shipping Registration Act no longer provides for mortgages over ships.

7.44 Any mortgages that are registered on the ARS before the PPS Act registration commencement time will continue to have the same priority they had between themselves before the PPS Act registration commencement time, subject to Chapter 9 (transitional provisions) of the PPS Act. For example, a registered mortgage in a ship will continue to have priority over a later registered mortgage in the same ship where both mortgages were registered on the ARS before the PPS Act registration commencement time.

7.45 The transitional provisions of the PPS Act can only alter the existing priorities between competing interests where one of the parties becomes bankrupt or insolvent, or where an existing secured party has assented to the PPS Act by voluntarily registering their interests on the PPS Register.

Item 34

7.46 This item will ensure that item 20 does not affect the validity or effectiveness of caveats lodged prior to the PPS Act registration commencement time.

Item 37

7.47 This item provides that the requirement in subsection 66(4) of the Shipping Registration Act (as in force immediately before this Schedule commences at the PPS Act registration commencement time) to give notice to a mortgagee stops applying when this Schedule commences.

Item 38

7.48 This item provides that items 28 and 29 do not apply to breaches of subsections 74(1) and 74(2) (as in force immediately before this Schedule commences at the PPS Act registration commencement time) that occurred before items 28 and 29 commence. The contravention of sections of the Shipping Registration Act listed in subsections 74(1) and 74(2) is an offence under that Act.

Explanation of items