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Organisation
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Section
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Issue
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Example
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Recommendations
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Queensland Law Society and Piper Alderman
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Part 1.3, Divisions 4 & 5
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There are two different concepts of 'control' used in the Bill
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While having two different concepts seems to be causing
some confusion, we believe 'control' is the appropriate term to be used in
both contexts and suggest any confusion may be overcome by the inclusion of a
note at the start of each Divisions 4 & 5 in Part 1.3 of the Bill
highlighting that there are two different concepts and briefly stating the
purpose of each of them
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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6
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Application of Act to interests
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The term 'interests' should be clarified as to whether or
not it applies only to security interests or if it applies more broadly
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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6(1)(f)(vi)
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Query why this provision only excludes assignments of
accounts rather than assignments of chattel paper made to facilitate
collection as well
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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6(1)(j)
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Query whether this is intended to exclude
"crops" as defined in section 26
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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6
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Relationship with other laws – overriding provisions in
the Corporations Act do not completely match the relevant State laws.
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Inconsistent State legislation should be repealed, if not,
Commonwealth PPS Bill should cover the field.
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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26
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Definition of 'Account'
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Should be limited to actual debt. This would prevent
assignments of corporate bonds being registered twice.
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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26
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Definition of ADI Account
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Needs to be a concept of account with a bank or deposit
taking entity which is not Australian
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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26
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Definition of Bankruptcy and Insolvency
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Would be preferable to not use the constitutional concept
and needs more specific definitions referring to voluntary administration,
liquidation and bankruptcy under the Bankruptcy Act.
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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26
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Definition of Chattel Paper
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Recommend this term be deleted as it will generate
significant uncertainty and confusion
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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26
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Definition of Clearing and Settlement Facility
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This is made unnecessarily complex as it incorporates a
Corporations Act definition which can only be understood by a very time
consuming exercise. This is one example of difficulties that arise when
definitions are imported from other statutes
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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26
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Definition of Consumer Property
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Query why it is not limited to property acquired for
personal, domestic or household purposes and wonder whether this definition
is necessary due to its minimal use in the legislation and over-broad
definition.
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Consumer Action Law Centre
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26
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Definition of Consumer Property
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Should be amended to provide that it covers personal
property held by an individual, other than personal property held predominantly
in the course or furtherance of carrying on an enterprise
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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26
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Definition of Controllable Property
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Definition appears to be unduly restrictive and query why
it does not also cover performance bonds and bank guarantees
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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Definition of Control
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Legislation difficult to follow because there are two
different sets of definitions
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Suggest that where additional concepts are necessary in
the context of circulating assets, they are expressed in terms of
restrictions, rather than control
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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Definition of Future Advance
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Given our view that section 60 would be better served
saying that a security interest may secure any obligation, present or future,
actual contingent, this current definition of ‘future advance’ unduly narrows
what obligations can be secured
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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Definition of Grantor
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Definition is some what counter-intuitive in paragraphs
(a) and (f) (and paragraph (e) to the extent it picks up those paragraphs)
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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Definition of Investment Instrument
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May be too limited. Should generally be extended to
tradable investments and securities
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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Definition of Licence
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Would be better to have a separate provision to explicitly
state that licences are property, and may be the subject of a security
interest and dealt with by the secured party in accordance with the security
interest unless otherwise provided by the Act creating the licence or
regulations made under it. It is also not clear the why definition should be
limited to licences that are transferable.
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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Definition of Negotiable Instrument
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Definition includes things that are not negotiable in the
legal sense (paragraphs (d) and (e)). The intention behind section 41(2)(c)
is unclear: does it include transfers of mortgages?
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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Definition of New Value
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It is not clear why this definition should exclude value
that is provided by way of reducing or discharging an existing debt or
liability
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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Definition of Perfection
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Differing uses of the word in sections 80 to 83 compared
to section 64.
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This definition, when it relates to foreign jurisdictions,
should relate to the perfection of that security interest under that
particular law
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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Definition of Signed
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There should be provision allowing other parties to rely
on the assumptions in ss128 and 129 of the Corporations Act, and other rules
as to ostensible authority
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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Section 19
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Unclear wording
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This section and Sub-division C should make it clear that
no formality or requirements for granting security under any state law apply.
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Australian Securitisation Forum
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28
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Transfer of assets under a trust-back or seller trust
arrangement
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The transfer of these accounts, where they will continue
to be held on bare trust for the transferor, should not be deemed to be a
security interest in accordance with section 28(3)(a) of the Act
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Australian Securitisation Forum
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28
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Extinguishment of SPV's interest. The operation of the
Act is not clear in these circumstances and raises a number of issues
including enforceability issues
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The extinguishment of a securitisation vehicle's interest
in the securitised assets in favour of the seller should not be deemed a
security interest for the purposes of the Act in accordance with section
28(3)(a) of the Act. In our view, in these circumstances the records retained
by the seller and/or the securitisation vehicle should be the conclusive
register of the beneficial owner of the relevant collateral
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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Section 28(1)
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Meaning of "security interest"
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The breadth of the definition undermines certainty for the
PPS register and legislation in a number of ways. First, in reference to
arrangements that "in substance" secure payment or performance of
an obligation will generate uncertainty. Unless the PPS Bill provides
greater clarity about how "substance" is to be assessed, the
current definition of "security interest" is likely to unsettle
negotiated allocations of contractual risk. Second, in view of the sanctions
that apply if something is a security interest but is not registered, parties
will be inclined to register everything they could remotely consider as a
security interest
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Would be useful to clarify what is meant by "in
substance" and exclude particular arrangements that might arguably be
included in the definition, but (a) are not generally regarded as security
interests, or (b) should not be included as security interests, for policy
reasons.
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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Section 28(3)(a)
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Why an assignment which is not a security interest be
regarded as a security interest, particularly given the width of the
definition of "account" and "chattel paper"
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Can give rise to unforeseen consequences, in terms of
unwritten and voluntary assignments, it will no longer be possible to have an
unwritten assignment enforceable against third parties and may add to the
complexity and cost of securitisation
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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Section 28(3)(a)
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Relationship with extinguishment provisions
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Query why a different policy regime seems to apply with
respects to accounts as extinguishment provisions are in many ways more
favourable to the holders of security interests than the priority provisions
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Suggest there should be a similar concept as provided in
subsection (5) so that the secured party is taken to have
"possession" of investment entitlements, investment instruments,
and negotiable instruments that are evidenced by an electronic record if they
are registered in the name of the secured party. At the moment that appears
to have been left out of the definition of "control"
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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Section 28(3)(a)
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Transfers and novations
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We assume that a "transfer" does not include a
simple declaration of trust.
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Further clarification needed
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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Section 28(3)(a)
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Absolute assignments and control
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If absolute assignments are retained as security
interests, we suggest that where a notice is given to the party that owes the
account, and it is an absolute transfer, that is, of the type referred to in
s12 of the Conveyancing Act 1919 (NSW) and its equivalents, or its
equitable analogue, then that should be regarded as "control" or
"possession" for the purpose of the provisions of the legislation.
In other words, no registration should be necessary
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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Section 28(3)(a)
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Chattel Paper
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Recommend that a legal assignment of an account of chattel
paper (that is an absolute assignment where notice has been given to the
account debtor) be excluded.
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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Section 28(3)(c)
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Definition of "commercial consignment" will
include arrangements which are not functionally security interests
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While the example of the auctioneer has been correctly
excluded, it leaves in arrangements such as artists leaving their paintings with
a gallery for exhibition and sale.
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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28(5)
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This sub-section appears to be designed to overcome the
risk that a person cannot take a valid security interest over the benefit of
obligations that the person itself owes to the grantor
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If the legislature is to take this step, it would be
appropriate to extend it to apply to all obligations, rather than just
obligations under an account
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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Section 30(1)
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Seems to serve no purpose. Should it be deleted?
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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Section 30(2)(a)
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Meaning of the words "is an obligation for the term
of the lease" is quite unclear
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Further clarification needed
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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Section 30(9)(a)
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In most lease transactions, the implicit interest rate
will not be "specified"
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Recommend that the discount be determined by the implicit
yield in the lease, and that the section only rely on a specified interest
rate where a rate is specified expressly for this purpose
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Australian Securitisation Forum
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32
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Deferred Purchase Price Arrangements
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The assets in connection with a securitisation transaction
may sometimes be assigned to the securitisation vehicle on a deferred
purchase price basis
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security interests arising in connection with deferred
purchase arrangements in relation to the transfer of receivables should be
excluded from paragraph (a) of the definition of a purchase money security
interest
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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Section 32(1)
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Unclear what is meant by "the collateral" when
more than one asset is bought under the one arrangement
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Example: if one borrows $100,000 to buy 10 cows at $10,000
per cow, do the cows as a group constitute the collateral, or does each cow
secure $10,000
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Further clarification needed
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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Section 32(1)(b)
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It is not uncommon in financing transactions for value to
pass through the hands of a number of parties before it is ultimately applied
to acquire an asset.
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Similarly, value could be paid to one party, in
consideration for that party separately providing funding to the party that
ultimately acquires the asset. It is also possible for the value to be
provided in a structured financing after the asset has been acquired.
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It is important that this section be sufficiently flexible
to accommodate all these types of arrangements
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Australian Finance Conference
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32(2)
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A sale and leaseback arrangement is excluded from being a PMSI
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The AFC recommends a security taken by the financier will
be a PMSI where the parties have agreed that, prior to the grantor acquiring
personal property, the financier will ‘reimburse’ the grantor for the
purchase price and take a security interest over the property. The AFC also recommends PMSI priority should apply if the secured party registers on the PPSR within
a specified period after it advances the finance
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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Section 32(4)
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This section may cause confusion
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Does it mean that the same security interest has to secure
the refinancing or consolidation, even if the secured parties can be
different?
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Would be easier if the definition "purchase money
obligation" was broader
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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Section 32(5)
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It is not clear how a refinancing would fit into the
definition of "purchase money obligation"
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In a refinancing, money is provided to repay money which
was used to enable the grantor to acquire its interest. The value given by
the refinancing lender does not assist the grantor acquire collateral, it has
already acquired the collateral
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|
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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Section 34(1)
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Meaning of Accession
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This should be expressed as the separate identity of the
other tangible property being lost. The identity of the improved property
will continue
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Australian Securitisation Forum
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36
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One of the primary concerns with the current treatment of
chattel paper in the Bill is that if chattel paper is in a physical paper
form, a person with a security interest having possession of that paper will
have priority under the default priority rules over a person that has a
registered security interest but does not have possession of the paper
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Only chattel paper evidenced electronically should fall
within the ambit of the regime. If the definition is to be limited to
chattel paper evidenced electronically consideration will be required as to
how a determination is made that the chattel paper is evidenced
electronically
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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Section 36
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The meaning of Chattel Paper is not familiar in Australian
law and will cause confusion.
|
We understand that the concept of chattel paper was
originally developed in the US to facilitate floor plan financing and
instalment financing. It was then extended to lease financing. By
comparison, under the current law in Australia, if a financier takes
collateral over assets and receivables it does so without "chattel
paper". Under current Australian law, there is not the existing legal
basis for the operation of chattel paper. The Bill does not seem to change
that, so that the concept will not be able to be used in practice.
|
|
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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Section 42(1)
|
The reference to a "dealing" is perhaps
over-broad
|
Does not specify if it includes granting a new security
interest, or letting the property for hire
|
Needs further clarification
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques ques
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Section 42(2)
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Unclear what this section is designed to achieve
|
If it was possible to have a security interest over
non-transferable property, then why should it not be possible to obtain a
security interest over proceeds (e.g. compensation for termination of a
licence)?
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|
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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Section 43(5)
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Meaning of Possession
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We presume that possession has been used because special
priority is given to acquirers of chattel paper who take possession of it
under section 118. It may also be helpful to set out when non-electronic
chattel paper is possessed. Chattel paper may be executed in counterparts.
|
Bill should make it clear whether it is possible to
possess such chattel paper and, if so, which copy the acquirer must take
possession of to perfect its security interest
|
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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Section 47
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Drafting of this section is somewhat unclear
|
Not sure why the definition of "controllable
property" only includes a "letter of credit" and does not
extend to similar contingent instruments, such as bank guarantees or
performance bonds
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|
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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48
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There should be a provision similar to section 45(4)
covering the position where someone on the secured party's behalf is
registered as owner of the investment entitlement.
|
Does not seem to be any provision covering the position
where the secured party is actually registered as owner of the investment
entitlement
|
That, we suggest, should be regarded as possession
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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49
|
Unclear how this section deals with a negotiable
instrument that is itself an instrument and is not evidenced by a
certificate, for instance, a promissory note, letter of credit or a bill of
exchange
|
As negotiable instruments are defined by reference to an
instrument, in what circumstances would it be represented by a certificate
that is not the instrument itself?
|
|
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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51(1)(a)
|
|
Current protection of the holder of a floating charge
against execution creditors and also against the Australian Tax Office and
similar provisions, should continue.
|
We suggest that control would be sufficient, but also
there should be a new test as to dealing with the asset being restricted.
This would more accurately reflect current law.
|
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
51(2)
|
Under current law, an absolute assignment of accounts
could not be a floating charge, and thus would not be available for
preferential creditors
|
If there is an absolute assignment, there is no
requirement for the proceeds to be paid into a proceeds account. It should
be sufficient if the register indicates that it is an absolute assignment
|
The same principle should also apply to a transfer to
chattel paper (if that concept is retained)
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
51(2)(b)
|
Definition of "control"
|
|
Only applies to a band of assets, and not all possible
current assets. This points to the need for a wider definition of
restricting dealing. There is, it appears, no definition of control for
currency, or a negotiable instrument that is evidenced by a certificate (or
is an instrument)
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
52
|
Wording in the Annexure
|
Tests should not be "controlled" which is
already used in a different context in relation to what is or is not
controlled in the context of "controllable property"
|
It should be whether dealing with the asset is restricted,
with the requirement (as per recent English cases) that proceeds be paid into
an account in which there are some restrictions.
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
52(1)
|
Control of a non-ADI Account that is the proceeds of
inventory
|
|
The same principles should apply to an account with an
offshore bank as apply to an ADI account. Equally in subsection (2), the
money should be able to be paid into an account with a non-ADI offshore which is under control. This is not uncommon in foreign currency transactions
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
52(2)(b)
|
The reference to a person's "usual practice" is
unduly restrictive
|
|
It may be clearer if the section were expressed the other
way around: namely, that the secured party had control unless it is shown
that the grantor's usual practice, with the express or implicit consent of
the secured party, is to pay the proceeds elsewhere
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
53(2)
|
Control of inventory
|
The current relevant test as to whether or not there is a
floating charge or a fixed charge over what otherwise might be stock-in-trade,
is whether there is a restriction on dealing.
|
This section should be deleted, there should be no
separate test in respect of inventory
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
59
|
Question the purpose of Section 59
|
This section merely states that the agreement may provide
for the security interest in after-acquired property – it does not deal in
any way with the consequence of the agreement having done so
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
60
|
There is no need to clarify that secure interests can
secure any liability, as that is the current position
|
|
This section could more easily do its job and preserve the
existing position by simply stating that a security interest may secure any
obligation of any type, whether or not existing or contemplated at the time
the security interest is created.
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
61
|
When a security interest attaches to a personal property
|
|
Would be better for the section to say that security
interest attaches to the grantor's interest or right in the property.
Alternatively it should include a separate subsection that the security
interest extends no further than the interest of the grantor in the personal
property
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
61(1)
|
Change of text
|
|
Would be clearer if "both of the following have been
satisfied" was inserted after "when" in the introduction
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
63(3)(a)
|
Problem with the requirement of writing
|
|
Question whether or not this should be required
|
|
Queensland Law Society and Piper Alderman
|
63(3)(b)(iii)
|
|
|
The current wording of sub-section 63(3)(b)(iii) could be
more clearly expressed to achieve this outcome including by removing the
double negative in parenthesis
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
63(5)
|
This would mean the effectiveness of a security agreement
and a security interest depends on the intention of the grantor, which can
change without the knowledge of the secured party
|
|
Further clarification is needed otherwise the result will
be that there will be defensive registrations and secured parties who do not
take this precaution will inadvertently lose out when the grantor does change
the use. It would give grantors an easy avoidance measure.
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
64(3)(b)
|
Unduly restrictive requirement fo particularised description
|
As drafted, the requirement for particular types of
description is a significant restriction on the ability of parties, currently
enjoyed, to have security over what they like
|
Would be helpful if the Bill or regulations contained
examples of the sort of description that would satisfy the Bill's
requirements (both in relation to the requirements of this section and the
requirements of the register) otherwise courts may interpret this strictly,
particularly if they believe that the purpose of registration is to give
notice of the particular property which should be apparent from the face of
the register
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
64
|
How a security interest is perfected – as stated
earlier, definition should cover the security interest becoming effective
under foreign law (including where they do not have a notion of perfection)
|
|
Simply extending the definition of "perfection"
to cover perfection overseas will not be sufficient. It may be an artificial
concept under many foreign laws and it may not be easy to establish an
analogue to the Australian concept of perfection
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
67(1)
|
It is not clear whether the concept of
"after-acquired property" encompasses only things that are the
property of the grantor at general law, or whether it is intended to capture
property that is taken to be "collateral" under any other security
interest granted by the grantor
|
If a company has given a charge over its present and
after-acquired property, and that acquires possession of an asset by way of
finance lease, does the charge attach to the grantor's leasehold interest in
he asset, or does it attach to the asset itself?
|
|
|
Consumer Action Law Centre
|
67(2)
|
|
|
Should provide that a security interest cannot attach to
after-acquired property of a kind prescribed by the regulations or covered by
section 67(3)
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
67(3)
|
See no reason to include this provision
|
|
If it is going to be included, it should turn on whether
the security interest is regulated by the UCCC or its Commonwealth
replacement, rather than the type of goods the security interest relates to
|
|
Consumer Action Law Centre
|
67(4)
|
|
|
This section should be deleted from the Bill
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
68(4)
|
We have the greatest difficulty with the policy behind
this subclause. IT appears that there are many circumstances in which an
asset can be sold subject to a security interest, without the secured party
being able to prevent it. This seems to be the policy of section 124. This
seems to be particularly unfair on the secured party that it effectively
limits the recourse to the asset over which it was counting on security
|
|
Sub-sections (4) and (5) have been introduced to since the
first consultation draft but they do not address this issue. If it is
retained, this sub-section should only apply where the proceeds have arisen
because the grantor has transferred the collateral and no longer has an
interest in it.
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
69(3)(b)
|
|
|
Would be helpful to clarify the situation where a security
interest perfected under a foreign law gives rise to proceeds in Australia (e.g. when a chattel or an intangible owned by a grantor located outside Australia is sold and the proceeds paid into an ADI Account)
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
70(2),(3)
|
The reference to 5 business days is too short,
particularly as the secured party needs to react to an event of which it may
know nothing
|
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
75
|
Do not see why a secured party should lose its security
interest in collateral simply because the bailee issues a document of title,
an event over which the secured party has no control
|
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
75(1)(c)
|
In any event, the reference to 5 business days is too
short
|
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
76
|
This section seems to apply also so as to remove
perfection altogether even though security interest is perfected both by
control and registration
|
|
If so, it should only apply if the security interest is
not registered
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
77
|
Same comment as earlier, 5 business days is too short
|
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
78
|
Unclear why this applies equally to the grantor to whom
possession is returned, and to the transferee of chattel paper who is a new
party
|
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
78(3)
|
|
|
In our view, the security interest should also be
perfected by control
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
79
|
We are puzzled by the operation of this section.
|
How would it work where the assignment of the account (or
chattel paper) was absolute, that is it did not secure any obligation. What
would the deemed security interest in the returned collateral secure? How
would the transferee of the account learn of the return of the collateral, in
order to be able to perfect it within the 5 business day period referred to?
It is unclear why the person who receives a transfer of the debt arising on
the sale should automatically receive a security interest over the goods
|
This should be left as a matter of contract for the two
parties.
Once again the reference to 5 business days is too short.
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
79(4)
|
Why is temporary perfection required if the transferee's
security interest is already perfected by possession or registration?
|
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
81
|
|
|
This should have an exception for such items as aircraft
and ships only temporarily brought into Australia
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
83
|
|
|
This needs to provide rules for the location of investment
entitlements. Sub-section (3) needs to deal with the portion where the
issuer is an individual who moves, or has locations in several states.
Either a more complex provision is called for or it should be left to general
law
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
84
|
In our view, the Division should not apply when the
grantor has nothing left to sell: that is, where the "security
interest" is an absolute transfer. Also, it is unclear how the Division
is intended to apply in the case of interests acquired for value other than
by way of purchase (e.g. a declaration of trust given for value)
|
Under current law, leasing property other than real
property does not give the lessee any interest in the property within the
ordinary meaning of that term: a "lease" of personal property is
just bailment
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
85(1)(b)
|
Don't understand the reason behind deleting that the
purchaser would take subject to the unperfected security interest if it knew
that the transfer breached a security agreement from the consultation draft
|
|
This provision at least should continue. It may be
preferable to provide that this rule applies where the transferee has no
knowledge of the security interest rather than knowledge of a breach of the
security agreement creating the security interest
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
86(1)(a)
|
|
|
This provision should only apply where property must be
described by serial number
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
86(1)(b)
|
As currently drafted, this provision significantly
detracts from the worth of having an all-assets security
|
|
This provision should not apply when the transferee had
actual knowledge of the transferor, and a search against the transferor would
have revealed, for instance, that there was a charge over all its assets.
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
86(1)(e)
|
See no policy reason in the context of this rule for
effectively enabling parties to assume that a known security interest did not
prohibit a transfer of the property
|
|
Would be preferable to vary this to "The transferee
has no knowledge of the security interest".
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
87(c)
|
This section could have very wide-reaching effects: case
law traditionally interprets "ordinary course of business" very
widely in this context, far wider than in the ordinary course of trading
|
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
88(1)(c)
|
It is unclear whether the threshold is an amount per item,
or the amount for an aggregate sale. It is also unclear how this provision
would apply if the market value is greater than $5000, but the transferee
(reasonably) believes that the market value is less than $5000
|
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
88(1)(f)
|
|
|
May also be appropriate to limit the definition of
"knowledge" that applies to this clause
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
90(b)
|
This provision is unsatisfactory as currently drafted.
|
Schemes of arrangement are the currently favoured method
for company takeovers. Similar things can happen with units in trusts and
options
|
It is extremely important to retain this ability.
|
|
Queensland Law Society and Piper Alderman
|
90(c)
|
The words "unless the transferee's interest is a
security interest" at the beginning of sub-section 90(c) are unnecessary
as the Division of which section 90 forms a part does not apply if the
transferee's interest is itself a security interest (see section 84(1))
|
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
92(2)
|
|
|
We support the inclusion of this section in addition to
section 81, although it may be possible to combine the two provisions into
one.
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
92(1)(h), (2)(g)
|
|
|
May also be appropriate to limit the definition of
"knowledge" that applies to this clause.
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
95
|
In this and other sections referring to security interests
to which the Act does not "operate" it is not clear what is
referred to
|
|
"Does not operate" should be replaced with
"does not apply" – the language of Section 6
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
98(2)
|
Appears to be unduly wide
|
Appears to subrogate the secured party to the rights of
predecessors in title which relate to the property irrespective of what type
of rights they are, and against whom the rights may be exercised
|
This should be limited to the rights as against the
transferee or the rights arising out of the particular transfer
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
100(3)
|
We do not understand the policy requirement that would
allow someone to disregard a pre-existing security interest, particularly one
perfected by registration. Also, why do secured interests perfected by
control have priority over secured interests perfected by possession?
|
It would significantly erode the flexibility and value of
all assets security, if the security holder had to go to the trouble of
obtaining control over every controllable asset in order to avoid losing
priority, even to parties who took with notice.
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
100(4)
|
Again, if the subsequent security interest holder has
notice of the first, it should not get priority
|
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
100(6)
|
|
|
If a secured party has a security interest by control, but
subsequently takes one instead by registration and gives up control or loses
control, but at no stage is unperfected, the priority time should perhaps be
the date on which it was first perfected by control. However, the register
should reflect the earlier priority date
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
100(8)
|
|
Priority could be established by the time of attachment,
followed by the time of execution of the security agreement as a tie-breaker
|
Would be helpful to expand or clarify the priority rules
that apply in this case, or else state that the general law applies.
Tie-breakers would be needed under these rules where there were two security
agreements each granting security over an asset which is acquired later.
Both would attach when the asset was acquired
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
101
|
This section does not resolve circular priority positions
as there is nothing to say which is the first security interest
|
That is, where A has priority over B which has priority
over C which has priority over A
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
101(1)(a)
|
How can a security interest have priority over a security
interest which does not exist? How do you select what sort of security
interest the putative non-existent security interest would be
|
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
103
|
It seems that this section could be deleted without any
damage. The heading of the section is misleading, as the question of whether
the Act applies to some security interests is not necessarily answered on
constitutional grounds (see section 6)
|
|
Should not have the effect of privileging security
interests which are covered by the Act over those which are excluded under
section 6.
|
|
Australian Finance Conference
|
105
|
The Bill permits secured parties to subordinate priorities
|
|
The AFC recommends that the Bill’s regulations include the
power to prescribe a form of subordination agreement.
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
109(1)(c)
|
The notice requirements would seem to be quite onerous for
someone who has a retention of title arrangement in relation to a trading
relationship.
|
|
If notice remains a requirement, then it should be
effective in relation to those secured parties who receive it, whether or not
other secured parties receive it. In other words, the holder of the purchase
money security interests would rank ahead of those who receive the notice
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
109(3)(b)(ii)
|
If the description in the notice cannot be general, this
could be very time-consuming on behalf of holders of purchase money security
interests, particularly suppliers of goods under ROT terms
|
|
It should be possible to give a generic description
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
111(3)
|
This section seems objectionable to us at least to the
extent that it applies to assignments are in substance security interests,
and we note that it is not found in the NZ legislation. We do not think that
this provision should give the holder of a security interest priority over an
earlier interest of which the holder was aware at the time it took the
security interest.
|
It is unclear what, if any, steps the holder of the
purchase money security interest could take to protect its position once it
receives a notice. It is also unclear why a purchase money security interest
in an asset should lose priority over the proceeds of the asset in this way.
|
In general terms, if absolute assignments are defined as
security interests, then assignments of receivables should be dealt with in
the same way as other extinguishment provisions even though they are defined
as security interests, and the approach should be consistent
|
|
Australian Securitisation Forum
|
111(4)
|
We repeat our earlier submission that it is critical from
a securitisation perspective that notices to be given under section 111(4)
are sufficiently flexible so that the holder of a priority interest would not
have to notify a holder of a PMSI each time additional collateral in the same
category was acquired for new value
|
|
|
|
Australian Finance Conference
|
112
|
Inadequacy of 5 business day registration time limit for
priority
|
|
There are a number of options for addressing concerns,
including adoption of the New Zealand allowance of 15 days from the grantor
acquiring possession. The AFC recommends, taking into account the range of
reasons identified to justify a different time limit, that registration
before the end of 5 business days after settlement (i.e. when the security
interest attaches by value being given by the secured party) should establish
the PMSI priority
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
112(1)
|
We understand the logic of having a short period because
the secured party is aware of the grantor acquiring the possession, and
should be prepared for it.
|
|
Nevertheless, 5 business days still seems a little short
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
Division 4
|
The rules generally provide for temporary perfection of
the transferor-granted interest for 24 months, but it is unclear why this
time period was chosen. It seems too long a period to protect third parties
and not long enough to protect defrauded financiers.
|
Why temporarily perfect the transferor-granted interest as
against purchasers for 24 months but as against secured parties for only 5
days after knowledge is acquired? Why elevate the commercial interests of
financiers over those of other commercial parties? Why provide for temporary
perfection, but then make it depend on the very uncertain test contained in
clause 70?
|
We see no reason for a different rule (namely, 5 business
days after knowledge is acquired) where another security interest is
granted. By including this rule, the Bill therefore favours subsequent
secured parties over other parties who may be prejudiced by the continuing
security interest, but we see no policy justification for the difference in
treatment.
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
114(2)
|
This provision sits strangely with the fact that if the
first and second security interest had both been granted by the one party,
and the first security interest was not registered according to the serial
number, but the second was, the first would still take priority. It seems an
odd result if it should be different simply because the grantors are
different.
|
|
The holder of the transferee's security interest should
not get priority where it had actual knowledge that the acquisition
constituted a breach of the transferor's security interest.
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
116
|
It is unclear why this section applies only to certain
types of payment
|
|
This should not expressly prejudice the operation of
insolvency legislation (relating to preferences etc.) The provision is
generally too wide – it enables creditors who are vaguely aware of security
agreements, or that a company might be in trouble, to pursue payment, knowing
that if they receive payment, it will be free of security interests. There
should be some concept here of payments in good faith in the ordinary course
of business. It may also be appropriate to limit the definition of
"knowledge" that applies to this clause
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
117
|
There is no need for any attempt at restatement or
modification of these principles in the context of the PPS Bill.
|
Provisions like the Bills o Exchange Act and the
law merchant as to negotiability are clearly understood, and well settled. There
is no need to depart from them and there is certainly no reason for weakening
concepts of negotiability
|
This is extremely important for the operation of the
money-market which relies on bills of exchange, and on much of the banking
system which relies on cheque clearance. Simply making this Act subject to
the Bills of Exchange Act under section 18 would probably not achieve this
aim.
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
117(b)(i)
|
This section makes a new qualification on negotiability
and the ability of a party to acquire good title, which significantly erodes
the concept of negotiability. Under the current law, only actual knowledge
(not constructive knowledge) of defects will undermine negotiability
|
|
It may be better that this section simply state that a
party who acquires a negotiable instrument (defined to include only
instruments that are truly negotiable at law) acquires it free of a security
interest if, under the Bills of Exchange Act or other relevant law,
the holder takes free of all interests.
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
118
|
|
|
Given our views on the utility of the concept of chattel
paper, we think it would be preferable to treat these priority issues (if
they are retained at all) in the same way as accounts
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
118
(2)(b)
|
The purpose of this provision is unclear
|
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
120
|
It is unclear whether this section is meant to be
exclusive. It is also unclear how this section sits with section 103
|
If it is, it seems implicitly to give an extraordinary
privilege to holders of security interests over holders of other interests in
property. Particular difficulties arise when the grantor of the security
interest, has higher rights to the asset, than the party whose action created
the priority interest
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
120(1)
|
It is unclear how this fits in with the extinguishment
provisions
|
That is, it seems to be an extinguishment provision all of
its own, at least one in which the new interest (which could be ownership)
takes priority over the security interest
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
120(4)
|
By expressly referring to section 6(f)(ii) this means that
section 120 would be interpreted so as to give priority over security
interests which are covered by the Act over any other security interest of
the type referred to in section 6. This is unfair. See our comments on
section 102 above
|
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
121
|
Currently, an execution creditor has priority over an
uncrystallised floating charge, but automatic crystallisation can trump
them. This section would effectively replicate the position of an automatic
crystallisation clause.
|
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
121
|
There does not seem to be any clarification of the
position of holders of security interests in circulating assets as against
the Australian Taxation Office in relation to accounts and notices (e.g.
under section 218 of the Income Tax Assessment Act 1936)
|
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
122(1)
|
Usually an ADI could simply rely on a combination of
accounts or set-off, which is not a security interest, but there is already a
security interest over the account which has been perfected, it is unclear
why it should gain priority
|
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
123(1)
|
See our comments on section 79. The questions addressed
by this section would not arise if the question as to what happened in
relation to returned goods where a party has an assignment of the account
arising from those goods is left to the parties
|
|
|
|
Australian Securitisation Forum
|
124
|
Transfer of grantor's rights in collateral
|
|
Rather than permitting assignability, this section should
provide that a contractual prohibition on assignment is effective to preserve
the general law position
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
124(1)
|
Do not understand the need for this section. Also unclear
in relation to collateral/property that courts have regularly said is
unassignable e.g. insurance contracts and contracts of employment or assignment
to a party incorporated in another jurisdiction, which may or may not result
in Australian law ceasing to apply to that security interest
|
Seems to give a wide-spread licence to parties to ignore
contractual prohibitions on transfer of personal property
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
125
|
We see no reason why a law designed to reform the law of
security interests should so substantially change the position of parties to
transactions that are not in the nature of security
|
|
This provision need not be included to achieve the policy
of the bill, and should not be adopted without very comprehensive review
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
125(1)
|
The interaction between sections 125(1)(a) and (b) needs
to be clarified.
|
Paragraph (a) contains no temporal restriction in relation
to when the defence will have accrued or arisen. On that basis either
paragraph (b) is redundant or paragraph (a) needs to be read down.
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
125(1)(a)
|
The language has now been modified and since the first
consultation draft to resemble more closely the current law. We still query
the need for it
|
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
125(3)
|
This sub-section will have a significant effect in such
things as project finance where the nature of the thing being assigned is
important, and in securitisation where set-off against the securitised debts
is a major issue.
|
It introduces considerable uncertainty, and the use of
terms such as "commercially reasonably" and "material adverse
effect" are fertile ground for litigation
|
This is an unnecessary departure from current principles:
it should be left to the parties to decide
|
|
Australian Securitisation Forum
|
125(3),(4) & (6)
|
Rights on transfer of account or chattel paper
|
Use of terms such as "commercially reasonably"
and "material adverse effect" are open to broad interpretation by
the transferor and may not provide sufficient comfort to rating agencies and
investors
|
These sub-sections should be removed
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
125(5)
|
This causes particular difficulty in circumstances of
project finance and also in many other areas.
|
If a party has taken assignment of a debt, or a contract,
why is it that the assignor can still change it?
|
It should not be up to the courts to determine whether or
not modification is "commercially reasonable" or has a
"material adverse effect". They may be matters on which the
parties have their own views. It would be on that basis that they may have
entered into the transaction
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
125(7)
|
The transferor should simply be able to make an
irrevocable direction to the account debtor to make payments to the
transferee, as is currently the position. This seems to add significant
difficulties and uncertainties in an area where currently there are none.
Also, we are not sure why the transferee needs to provide proof when the
direction would have come from the transferor
|
Under paragraph (b), it appears that the direction would
not work if the transferee fails to provide proof on the 6th
Business Day.
|
|
|
Australian Securitisation Forum
|
125(7)
|
It is not evident why this section should be limited to
intangible property or chattel paper
|
|
Proof of sale should not be required under section
125(7)(b). Proof of sale should also not be required as the risk of an
assignee wrongfully asserting a right to a debt against a debtor is slim
|
|
Queensland Law Society and Piper Alderman
|
125(7)
|
The first line "if collateral that is intangible
property or chattel paper is transferred..." in our view the reference to
'intangible property' should be a reference to 'accounts'. Section 125(7)
deals with accounts and chattel paper not intangible property
|
|
In our view the reference to 'intangible property' should
be a reference to 'accounts'
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
125(8)
|
We do not understand why this clause is necessary, and why
it cannot be left to the general law
|
Why can't the account debtor ignore any irrevocable
direction from the transferor which is not in the form of the Notice? Why is
it that the transferee has only five business days to provide proof?
|
It simply may not be possible in the five business days.
If it eventually provides proof after a longer period then it should be
effective from time of proof
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
126(1)
|
Further difficulties arise for borrowers who want to
restrict the ability of banks to assign their rights in respect of loans made
by the borrowers, say, to hedge or vulture funds
|
|
The provision, if it is retained, should also permit an
account debtor to obtain injunctive relief to prevent a transferor from
proceeding with a prohibited transfer. Also if adopted, the provision should
not prevent the grant of an injunction to prevent an assignment, or the
rights to terminate the contract
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
126(2)
|
This is unnecessary, even if sub-section (1) is accepted.
|
The account debtor should have an action against the
transferee for inducing a breach of contract, if the transferee took with
knowledge of the breach
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
127(1)
|
This provision is unnecessary, as it would be a rare
security agreement that would be binding on a licensor in those circumstances.
|
It is hard to imagine how a holder of an intellectual
property, who gives a licence to use the intellectual property to a party who
then gives a security interest, is bound by the security interest
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
129(1)
|
This section seems to leave a few gaps. It does not deal
with a sale or "other encumbrance on" the land given before
perfection of the security interest in the crops. It does not seem to deal
with security interest in crops being granted after the creation of some
other form of interest in the land other than a lease or mortgage
|
It does not seem to cover a position where a security
interest in crops is granted, but a lease or mortgage of the land is granted
after the grant of the security interest in crops, but before the perfection
of the security interest in crops
|
If the land is sold before the security interest of the
crops is perfected, by a mortgagee who is not subject to the security
interest in crops, then the sale should not be subject to the security
interest in crops
|
|
Law Society of New South Wales
|
130
|
The provisions that crop security interests be limited to
crops planted at the time of, or within six months after, the making of the
security agreement and excluding progeny from livestock security interests
[clause 42(3)]
|
|
It is noted that the existing State legislation provides
for crops mortgages for crops grown over a five year period (section 7(5) Security
Interests in Goods Act 2005 (NSW)).
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
130
|
|
|
Recommend that this section be expanded to explain what
the priority position is as between two competing security interests that
both arise under the clause. Would also be helpful to expand on the meaning
of "to enable the grantor to produce the crops" in section 130(b)
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
131
|
|
|
Same comments as for section 130
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
133
|
The boundary between accessions and commingling are
unclear. But are defined by reference to identity being lost
|
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
134
|
This seems to apply whether or not the security interest
in the accession has been perfected. This seems contrary to the principles
in the remainder or the legislation
|
|
If there is a security interest over the improved
property, then it would seem to follow that the rights of the owner of the
accession, such as they are, have priority over a holder of the security
interest in the improved property, but not over the improved land itself
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
135(c)
|
The policy rationale behind the requirement that the
security interest have been perfected immediately after the person acquired
the security interest, and have been continuously perfected ever since, is
not clear.
|
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
135(e)
|
This seems to be contrary to the policy of the priority
provisions in section 100, in giving protection to an unperfected security
interest over a perfected security interest when the perfected security
interest takes with knowledge of the breach of the unperfected security
interest
|
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
136(c)
|
If the security interest is not even attached to the
accession, why is this section necessary at all? How could a security
interest attach to an accession, after its identity had been lost?
|
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
139(1)
|
|
|
It would be appropriate for this section to also confirm
that the security agreement will also be taken to have satisfied section
67(3)(ii)
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
140
|
We question whether this is the correct approach,
particularly in relation to a mass of fungibles
|
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
140(b)
|
There seems to be a drafting issue in Section 140(b) – it
refers to the tangible property continuing in the product. We query whether
the limit on the value of the continuing security should be referable to the
value of the original property relative to the value of the whole product (or
the original value of its constituent components) rather than its original
value
|
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
142(2)
|
The use of the word "equally" in line 3 appears
to be at odds with the "pro-rata" mechanism in section 143
|
|
We recommend it be deleted
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
Clause 143
|
Value of obligations if insufficient proceeds
|
|
If the property is fungible and becomes part of an
undifferentiated mass, then the secured parties should be entitled to a
proportionate part of the whole, or the proceeds of the whole
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
Clause 143
|
|
|
Presumably also section 143 should only apply when the
security interests are held by different parties
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
144
|
We query how this section can operate if, by definition,
the separate identity of the accession will have been lost
|
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
145
|
|
|
There should be some general notice provision like s170 of
the Conveyancing Act 1919 (NSW) to allow deemed service by leaving
notices at an address etc. This should apply to all notices required under
the Act
|
|
Australian Securitisation Forum
|
149(1)(a)
|
Request clarification that securitisation transactions
where accounts or chattel paper are transferred or assigned to an SPV not in
connection with the securing of a payment or performance of an obligation
(but rather a true sale of the accounts or chattel paper) are not covered by
this Chapter
|
|
This should be the case even where the transferee may have
indemnity rights or other rights against the transferor in connection with
the transfer of the accounts or chattel paper
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
149(4)
|
|
|
We suggest that the regulation of consumer items should be
left to the Uniform Consumer Credit Code or its Commonwealth successors
|
|
Consumer Action Law Centre
|
149(4)
|
|
|
Should also exclude sections 164 and 180(2) from
application to collateral that is used by a grantor predominantly for
personal, domestic or household purposes
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
150
|
By listing just three parties, this section begs the
question as to what happens to the rights between other parties
|
|
It may be better if this section were drafted to make it
clear that except where it expressly provides to the contrary, the Part does
not derogate from any right that any person may have against another in
respect of the security agreement or the collateral, including the parties to
the security agreement
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
154
|
|
|
We do not think that the provision should exclude consumer
transactions, consumers are sufficiently protected elsewhere. However, to
the extent the Bill does deal differently with consumer transactions, this
should be by reference to whether the security interest is regulated by the
UCCC rather than by reference to the nature of the goods to which the
security interests relates
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
154
|
If the definition of "grantor" is left wide, it
may be difficult, if not impossible, to "contract out" as it would
require the secured party to contract with everybody with an interest in the
collateral
|
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
154(1)
|
|
|
This should refer to goods to be used predominantly for
personal, domestic or household purposes at the time they were initially
acquired. Otherwise there will be significant uncertainties on
enforcement. Also, a secured party should be able to rely on the certificate
as to the use of the collateral, similar to section 11 of the UCCC. Clauses
172(2) and 177 should be added to the list
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
154(2)
|
This appears to take away from the ability to contract out
of giving notice because the parties cannot contract out of obligations in
relation to person who are not parties to the security agreement
|
This would remove much of the benefit of being able to
contract out, and would impose duties and restrictions in relation to the
enforcement of security interests that are not found in the current law. In
relation to 154(2) sub-section (5) is not adequate to deal with the issue
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
155
|
|
|
Would be better for the PPS Bill to recognise the
possibility that receivers can be appointed by anyone over property anywhere
and, if it is necessary to derogate from this in some cases, by regulation or
otherwise to provide for it
|
|
Australian Finance Conference
|
155
|
The Bill’s enforcement provisions do not apply to the
personal property that is being dealt with by a controller within the meaning
of Part 5.2 of the Corporations Act
|
|
Recommends that the enforcement of a fixed charge or goods
mortgage given by a company over specific tangible property be dealt with in
accordance with Chapter 4 (Enforcement of Security Interests) of the Bill, rather than the controller provisions of the Corporations Act
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
156
|
This provision could cause significant complexity
|
|
If the ability to choose between enforcement regimes is
retained, it should not be subject to a requirement that the choice be
"reasonable": it would be highly undesirable to suggest that it is
"unreasonable" for a secured party to choose the enforcement regime
that is most advantageous to it
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
157
|
It is unclear how this section would operate. We do not
understand why there is a need for the elaborate provisions giving all
parties a notice that the mortgagee intends to enforce the securities as if
it were land
|
|
If the secured party is proceeding as if the property is
land, the notice requirements should not differ from those applicable to
security interests over land.
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
159(3)
|
This can put the account debtor under a difficult
position, if it is unsure as to the efficacy of the security, or the validity
of the notice. The timing is also interesting
|
|
This entire section 159 seems over-prescriptive. A better
provision would be simply one that was general, and said that the secured
party can exercise any of the rights of the grantor in relation to the
collateral
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
159(4)
|
Further, this seems to be inconsistent with sub-section 5
|
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
160(5)
|
The reference to 5 business days is too short
|
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
161
|
This section seems to give the secured party the right to
seize collateral, even though another party may have a higher right. This
raises the overall question as to whether the "collateral" is the
asset, or the right of the grantor to that asset. We note that there is an
apparent gap relating to the seizure of shares and any other property
excluded from the definition of intangible property
|
|
This section should make provision for deemed
"seizure" of other intangible assets like accounts. Seizure should
be deemed to have occurred if notice has already been given to the account
debtor, so that the secured party is in control in the wider sense
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
161
|
We do not understand the policy behind sub-section (3).
If a secured party now has possession and control of an asset, so that all
the world knows that it has possession and control, why shouldn't it be taken
to have perfected its security interest?
|
|
Sub-section (2) should be a general provision and not
limited to Chapter 4
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
162
|
It is unclear what happens if the secured party has
possession or control sufficient to be able to sell, but because of the
nature of the asset the possession or control does not constitute perfection,
but is perfected by other means
|
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
162(2)
|
It is unclear what happens if notice cannot be given
because the grantor cannot be found. It is also not clear what the notice
needs to state
|
|
The process should only be initiated if the notice states
(for example) that the secured party is to be taken to have seized the
collateral
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
163(1)
|
The conceptual model behind much of the drafting seems to
be that there is one asset subject to the security interest which should be
sold as soon as possible. Reality is often very different
|
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
163(3)
|
This gives a new field of uncertainty. It is a higher
duty of care than the normal "good faith"
|
Currently, secured parties are allowed to have regard to
their own interests. Requiring them to have regard to the interests of a
large number of other parties is a significant change, may be onerous and
will certainly be a fertile field for litigation
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
163(3)(a)
|
We don't see why an express permission for delay is
required
|
|
The default position should be the current one, namely
that the secured party can sell the property at what it thinks it the
appropriate moment, subject to its duties.
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
164
|
In our view, the "necessarily incidental" test
is a harsh one, particularly by comparison with other tests which relate to reasonableness
|
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
165
|
The reference to 5 business days is too short.
|
|
Section 156(1) would not allow the secured parties to
enter into an agreement of this type. The "contracting out" list
in section 154(1) should be extended to include this section as well. We
query whether this should require notice in all circumstances. The provision
for seizure by higher ranking parties should not be limited to security
interests
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
165(4)
|
This seems to be drafted so as to always require a longer
period than 5 business days
|
If the collateral is immediately deliverable, and the
higher ranking secured party is entitled to it, then it should be immediately
delivered. There is no reason why a lower ranking secured party should have
any longer grace period in delivering possession than the grantor
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
165(5)
|
This provision significantly tilts the balance in favour
of lower ranking secured parties
|
|
A higher priority party should not be obliged to pay costs
incurred by a lower ranking party: such a rule seems to give a blank cheque
to a lower ranking party. The normal rules should apply, namely that a lower
ranking security holder should take its chances.
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
165(7)
|
This timing limit seems unduly restrictive, given that the
higher priority party needs to receive and check through invoices. The
provision also gives undue leverage to lower ranking parties to put
commercial pressure on higher ranking parties who may want to have a work-out
or leave a business running in the interests of overall recoveries
|
|
The current law position should be preserved, which is
that a holder of a security interest only has to compensate grantors of
security interests and lower ranking owners of security interests if it
breaches its duties as mortgagee
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
166
|
As mentioned above in relation to section 161, this seems
to suggest that a secured party may sell collateral, even though it only has
limited rights to that collateral
|
|
Seizure should not be necessary for the secured party to
sell collateral
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
166(2)
|
We do not see why section 166(2)(b) should not apply to
some forms of properties for personal, domestic or household purposes, subject
to the UCCC
|
|
Would be better for the Bill to provide that a secured
party may lease the relevant collateral subject to the terms of the security
agreement (rather than permit the parties to agree that the secured parties
may lease the collateral)
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
166(3)
|
We wonder why this section is necessary: surely all
enforcements of security agreements must be in accordance with the security
agreement?
|
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
166(6)
|
This seems to be inconsistent with section 124(1)
|
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
166(7)
|
We don't understand the note at the bottom of this
sub-section
|
|
We do not read section 68 and subclauses 42(2) and (3) to
have that effect. If they do, they should be changed
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
167(3)(b)
|
This considerably extends the number of people who can
bring a claim. We wonder why the debtor is referred to in the section as the
debtor has no interest in the collateral
|
|
We think that there should be some limit, otherwise this
legislation seems to give a possibility of a great deal of tactical or
nuisances litigation.
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
170(1),(2)
|
This may be burdensome if the sale is being conducted in
many lots over a period of time
|
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
170(3)
|
This could be burdensome, particularly estimating receipts
under a lease
|
|
It would be much better simply to give an account after a
period which deals with all receipts over that period, rather than an item by
item description
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
170(5)&(6)
|
This effectively requires the secured party to prepare
accounts of a business that is taking over a business. Companies are only
required to produce accounts annually, and have a significantly longer period
than 1 month in which to produce them
|
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
171(1)(a)
|
Given the width of the definition of "grantor",
this would give the secured party the right to dispose of the asset free of
interests which are superior to that of the secured party
|
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
171(1)(c)
|
|
|
This should relate to all lower ranking interests, not
just security interests
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
172(2)
|
It is unclear why this provision is necessary. This seems
to be generally incompatible with the normal provision that a security holder
can choose its moment to exercise its power of sale, and also hold onto
property in order to extract value from it.
|
Parties who are lower down the priority chain can always
force a sale by paying out the higher ranking security interest
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
174
|
It is unclear why this provision is necessary, given that
there is the remedy of foreclosure, and also that a secured party has an
ability to buy the assets under section 167
|
|
If the enforcement provisions are excluded for deemed
security interests, like commercial consignments and leases, then it would be
appropriate for there to be no discharge of the secured obligation. They
should be able to exercise their current rights, that is, to keep the
property, and to sue for the amount recoverable (albeit, mitigated by their
retention of the assets)
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
175
|
|
|
This provision should be more clearly limited to notices
where the secured party proposes to acquire the property itself
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
176
|
This section may not be particularly helpful: if there is
a dispute of this kind, it is likely to end up in court
|
|
|
|
Australian Securitisation Forum
|
177(2)(b)
|
We acknowledge the changes made to this section in
response to submissions. Is the new reference to “future advances” in
section 177(2)(b) duplicative of the remaining words in that paragraph?
|
|
Parties should be able to contract out of this section
under section 154. Section 177(2)(c) should contemplate secured creditors
ranking pari passu with the enforcing secured creditor
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
Clause 181
|
This is a significant and unnecessary departure from
existing rights, which should not be retained in the Bill.
|
|
This is a concept which should be left to credit
regulation, if it appears at all. If the grantor has waived its right under
this provision, then this should also apply to everyone else
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
Clause 186(4)
|
If the Registrar refuses access of suspends the register,
the Bill does not offer any guidance about what effect would be had on
priorities etc.
|
This concern applies particularly in relation to temporary
perfection
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
187(c)
|
What other interests (other than security interests) are
contemplated here?
|
|
|
|
Australian Finance Conference
|
189(1)
|
The Bill refers to the registration of collateral. AFC has a concern that this expression is not consistent with the expectations of secured parties
and with the core rationale for the Bill.
|
|
Recommend that the Bill should refer to registration of a
security interest, not registration of collateral.
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
189(2)(c)(ii)
|
If the Registrar is satisfied that the application is made
in contravention of section 190, what redress does the security party have?
|
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
190(1)
|
This is in fact an onerous requirement and will put
secured parties into a difficult bind given the uncertainty of the "in
substance" approach
|
|
From discussions on the previous exposure draft we think
the concern this is trying to address is unscrupulous financiers running out
and taking out "pre-emptive" registrations in order to gain a
priority position – this can be addressed by a requirement that the person
believe on reasonable grounds that they will obtain the interest for which
they are applying for registration – it shouldn't matter whether or not it's
a security interest. Alternatively the requirement should be that they
believe on reasonable grounds that they will have an interest in the property
and that they believe that interest might be regarded as a security interest
|
|
Australian Finance Conference
|
191
|
details of subordination may be recorded or changed on the
PPSR, but this is not mandatory
|
|
The AFC recommends that the Bill’s regulations include the
power to prescribe a form of subordination agreement.
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
191 – Item 1 – the secured party
|
Often, security is held by a trustee for a shifting band
of secured parties
|
|
The requirement should be satisfied simply by mentioning
the name of the trustee
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
191 – Item 2 – the grantor
|
It is unclear how much detail will be required, especially
if the secured party does not have all the detail to hand
|
|
This seems to put a lot of information onto the register
which could slow down the registration of security interests. A solution may
be to limit it to the actual party that grants the security interest
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
191 – Item 4 – the collateral and proceeds
|
It is unclear how an "all assets" charge would
fit with this requirement.
We also query why the registration must relate to a single
class of assets.
It is unclear how the Bill proposes to deal with the
transfer of accounts in batches, for instance in a securitisation
|
|
It would also help if the permitted descriptions are as
broad as possible
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
191 – Item 6 – the end time for registration
|
Seven years may be an appropriate time for cars or
household goods but it may be inappropriately short for many other types of
property owned by individuals
|
|
As noted previously, it would be better to refer to
security interests regulated by the UCCC rather than security interests over
particular types of property
|
|
Consumer Action Law Centre
|
191 – Item 6
|
|
|
Should prescribe a default registration period of five
years for consumer property or property described by serial number
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
191 – Item 7 – subordination
|
We do not see the need for the registration to describe
subordination arrangements
|
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
191 – Item 9 – any matter prescribed
|
|
|
There should be provision for insertion of information
about restrictions of dealings with the asset, or the granting of further
security interests
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Consumer Action Law Centre
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194
|
|
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Should not apply to property to be used predominantly for
personal, domestic or household purposes
|
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Intellectual Property Committee of the Business Law
Section of the Law Council of Australia
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194
|
Provides that personal property may be registered as
collateral either before or after a security agreement is made. This
provision confers a right on any lender at any time to register a security
interest over any personal property of any person without the knowledge,
consent or approval of that person
|
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|
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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196(1)(c)
|
This unacceptably puts parties at risk of mistakes or
failures by the Registrar or the Registry that cause the description to be
unavailable
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|
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
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198(2)
|
It is unclear whether this means that, for example, a
registration is ineffective if the secured party fails to disclose all
parties interested in the collateral (and therefore currently defined as
"grantors") even if it did not know about them
|
|
There should be some saving in relation to misleading
entries honestly made by the secured party, otherwise there is a very heavy
onus on the secured party and a significant risk of misstatement and loss of
the security
|
|
Intellectual Property Committee of the Business Law
Section of the Law Council of Australia
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198(2)
|
Provides that defects in the description of collateral
will not operate to render a security interest ineffective before the
earliest of several stated periods
|
The effect of this is that the collateral may be described
in a seriously misleading manner and yet the security interest will still be
effective. This seems to defeat the point of registration
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|
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Australian Securitisation Forum
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199
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reference to “grantor’s details” in section 199(b) be
clarified so that a trustee as grantor is required to state the trust in
respect of which it is the grantor. This will facilitate pin-pointing a
particular trust debtor where the debtor acts as trustee for numerous trusts
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
199(a)
|
It is not clear what property is contemplated to be
covered by the regulations as to be covered by serial numbers. This could
have serious effects in relation to "all assets" charges
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|
|
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Australian Finance Conference
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200
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Imposes requirements on a secured party if details on
which a registration is based, change
|
|
Recommend that, unless a secured party becomes actually
aware that registered details have changed, there should be no obligation to
change details from those already registered
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
200(2)
|
The reference to 5 business days is too short
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|
|
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Australian Finance Conference
|
200(2)
|
The reference to 5 business days is too short
|
|
Recommend 10 business days is a more realistic and
reasonable tune for change or response
|
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
203(1)
|
The same comment applies here as section 189(2) That is,
there may be some doubt as to whether an interest of right its security
interest
|
|
In that case, the party should be entitled to make any
defensive registration, and require the Registrar to enter it into the
Register
|
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Consumer Action Law Centre
|
206(2)
|
|
|
Should be amended to require a secured party to apply for
an amendment of a registration to omit collateral or to end its effective
registration 'as soon as reasonably practicable' after the unperfection time
occurs, and no longer than before the end of five business days after the day
the unperfection time occurs
|
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
207
|
There seems to be no equivalent requirement here for the
party seeking the amendment to have a belief on reasonable grounds
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|
|
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
208(1)(c)
|
It is not clear to us why a security trust instrument
should be excluded
|
|
|
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
209(5)
|
Five business days is far too short a period for a large
financial institution to respond to the demand, to find the appropriate
materials in its files and to compose a response
|
|
|
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Australian Finance Conference
|
209(5)
|
The reference to 5 business days is too short
|
|
Recommend 10 business days is a more realistic and reasonable
tune for change or response
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
210
|
This seems to be extraordinarily biased against the
secured party
|
|
|
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Australian Finance Conference
|
210(4)
|
The reference to 5 business days is too short
|
|
Recommend 10 business days is a more realistic and
reasonable tune for change or response
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
223(3)
|
This seems to require that every time a secured party
registers a security interest it needs to give notice to the grantors and
others, adding to the paperwork
|
|
|
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Consumer Action Law Centre
|
223(5)
|
|
|
Should be amended to require a statement holder to ensure
that the notice is given to each interested person as soon as reasonably practicable
after the time of the verifiable event, and no longer than before the end of
14 days after the time of the verifiable event
|
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
224
|
|
|
If the register is electronic and can be checked
electronically by the secured party, the Registrar should not need to add to
its costs by giving the secured party a copy of the new registration or
amendment initiated by that secured party
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
227 Item 7
|
|
|
This should extend to parties who propose to deal with a
person, who are to take an exposure to risk on that person, but not
"provide credit" to it
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
227 Item 14
|
|
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This should extend to administrators appointed under
different laws outside Australia, that are analogous to receivers,
administrators, liquidators etc.
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
233
|
The invalidity of the security in liquidation and
voluntary administration is a heavy sanction and we are concerned that the
current drafting will create unnecessary difficulties
|
|
|
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
233(1)
|
The sudden death cut-off date is too draconian
|
|
It would be better to have the relevant provision
providing that the security interest is void as against the relevant
insolvency official, rather than vest in the official. An administration is
often a temporary appointment. If the administrator is removed, then it
still should be possible for the secured creditor to retain its rights.
Under this arrangement, it would lose them irreparably. The court should
have the discretion to allow perfection after commencement of the winding up
etc, as the court currently does in relation to charges
|
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Australian Securitisation Forum
|
233(3)(a)
|
|
|
chattel paper should also be included in section 233(3)(a)
as there is no reason to distinguish between a transfer of an account that
does not secure payment or performance of an obligation from a transfer of
chattel paper in the same circumstances
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
233(4)
|
We find this section very difficult to follow
|
|
|
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
234
|
We think this section is too narrow in scope. Any person
who has their rights vested in the grantor should be entitled to compensation
|
|
The only qualification on that should be that where the
right confiscated secures another obligation it should not entitle them to
additional compensation over and above the other obligation
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
235
|
This additional duty is unnecessary and may be counterproductive
|
|
If such a section must remain, it should simply include an
obligation to act in good faith
|
|
Queensland Law Society and Piper Alderman
|
235
|
We believe existing statutory provisions and equitable
principles provide adequate protection against improper business practices
and it is not necessary or desirable to enact additional and differently
worded safeguards
|
|
|
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Australian Finance Conference
|
235 & 236
|
These provisions are not justified and bring uncertainty
to an Act trying to do the opposite. The meaning, scope and application of
duty are unclear.
|
|
Recommend the omissions of these two sections
|
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
236
|
This section is objectionable. It appears to extend the
field of parties entitled to damages to those currently owed no duty of care
|
|
|
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
237
|
Most legislation providing for registers in relation to
land give rights to statutory compensation for misstatements in the register,
rather than trying to absolve the Registrar from responsibility. The absence
of such a statutory compensation scheme, coupled with the immunity from suit,
is an unnecessarily retrograde step.
|
|
|
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Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
241
|
This seems onerous, particularly the requirement to
itemise property when the security may just cover all assets, or a class of
assets. The holder of the security interest has no such information.
|
|
The provision could be made of little effect if, as we
presume would be the case, all parties make an agreement as provided in
subsection (6)
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
273
|
What is the rationale for including presumptions about
transactions between related entities? The commentary states that the
presumptions “are derived from current state legislation”. Which legislation?
|
|
As stated above, "value" should not be a
requirement for an effective security interest. It does not seem appropriate
to require a criminal standard of proof ("beyond reasonable doubt")
to rebut the presumptions in this clause
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
281
|
|
|
Where parties have agreed between themselves a division
between a fixed and floating charge over assets, that should continue so that
an asset which is subject to a floating charge under an existing fixed and
floating charge (that is entered into before the relevant time) should be
regarded as circulating assets and fixed charge assets as non-circulating
assets
The legislation should preserve the existing position in
relation to the ATO and execution creditors, that is, that the automatic
crystallisation is effective
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
282
|
This section only provides that an existing interest is
enforceable "in respect of particular personal property" if it
would have been "so" enforceable before the commencement time. The
"so seems to suggest that it must have been enforceable in respect of
that particular personal property This seems to leave unprotected existing
security interests to the extent they cover assets acquired after the time.
|
|
The words "in respect of particular personal
property" should be removed
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
284
|
This provision applies the priority rule in section 120 of
the PPS bill to interests arising under legislation or a rule of law or
equity after the “registration commencement time”. What happens to such
interests arising before that time?
Will the states and territories enact similar legislation
which includes a comparable provision for interests arising under states and
territories acts and instruments made under them?
|
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
287
|
Should the reference to “another security interest”: in
the second line be to ”another transitional security interests”? The
priority rules in clause 292 apply to priority disputes between transitional
security interests
|
|
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
294
|
The priority between competing security interests will
depend on such things as whether the security interests are legal or
equitable. It is unclear as to whether this distinction is maintained.
|
|
If all new security interests under the bill are to be
regarded as legal security interests and deprive existing equitable security
interests of priority then query the constitutional effect
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
294(1)(b)
|
|
|
The specific provisions of the Bill that apply should be
stated, ie. parts 2.4 and 3.1 of the Bill
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
301(b)
|
There does not appear to be any obligation on the states
to give data in a transitional register to the Registrar.
|
|
As noted above, an obligation should be imposed on the
states to give data in a transitional register to the Registrar in this bill
or if there are constitutional limitations in corresponding legislation
enacted by the States and Territories
|
|
Allens Arthur Robinson
Blake Dawson
Freehills
Mallesons Stephen Jaques
|
302(2)
|
What happens if the migrated information is migrated
incorrectly and parties suffer loss as a result of the incorrect migration?
There appears to be no compensation if the Registrar makes a mistake. We know
this is consistent with the bill which absolves a Registrar from the
responsibility for misstatements in the PPS register. See our comments on
section 237.
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