CHAPTER 2
Key issues
2.1
In general, submitters to the inquiry acknowledged and supported the
practical reasons for the Bill, that is, the need for a fully functional PPS
Register when the PPS Act comes into operation.[1]
However, a few issues continued to concern some contributors, including: the
commencement date for the PPS reforms; and current levels of awareness
regarding the PPS reforms.
Commencement date for the PPS reforms
2.2
The Australian Government initially intended for the PPS Act to commence
in May 2010[2]
but, as a result of this committee's inquiry into the exposure draft of the Personal
Property Securities Bill 2008,[3]
the commencement date was delayed until May 2011.[4]
In February 2011, commencement of the PPS reforms was again deferred to October
2011 due to, among other things, the need for the Attorney-General's Department
(Department) to conduct user acceptance testing of the PPS Register in June
2011.[5]
2.3
According to the Department's submission to the current inquiry, the
user acceptance testing revealed significant concerns with the software
interface:
A first cycle of user acceptance testing commenced on 9
August 2011, however significant issues arose during this testing phase. These
issues did not relate to the stability of the PPS Register application itself,
but rather the interface between the [PPS] Register and the other necessary
systems, particularly the financial management system. With the time needed for
resolution of these issues to the satisfaction of Government and industry,
commencement of PPS reform on 31 October 2011 was no longer viable.[6]
2.4
Submitters agreed with the need to ensure the seamless operation of the
PPS Register upon commencement of the PPS Act. The Australian Finance
Conference, for example, emphasised the importance of an online register, which
has been fully tested, and is functional and ready for use:
The critical issues for the financial services industry
regarding the PPS registration commencement time are that, on whatever date the
PPS Register opens for business, it has to be fully-tested[,] functional and
ready for operation and that migration of existing registrations from current
Commonwealth, State and Territory Registers be complete.[7]
2.5
Some submitters considered that, barring further technical difficulties,
the PPS Act could commence operation on Monday, 30 January 2012, without
reliance on the provisions of the Bill.[8]
However, these submitters also supported the introduction of the proposed
contingency measures. As submitted by the Australian Finance Conference:
[T]here is now a reasonable level of comfort that the PPS
Register will be ready for the commencement time of 30 January 2012 (and our
members are planning for this date) [but] we nevertheless believe that it
contains little allowance for contingencies which may affect Register
development over the next few months or for unexpected external events which
could occur in the weeks leading up to the registration commencement time, for example,
through the data migration process.[9]
2.6
Other submitters questioned the potential dates which might be
determined by the Attorney-General under proposed new subsections 306(1) and
306(2). For example, Veda Advantage considered it prudent for the Australian
Government to have the ability for a further extension, if necessary, but
cautioned that any such period of time should be kept to a minimum.[10]
2.7
Other submissions pinpointed what they considered to be more acceptable
timeframes and commencement dates. The Australian Motor Industry Federation,
for example, asserted that commencement 'over the Easter period' is the most
desirable option, however:
any subsequent announcement of the [registration commencement
date] needs to be sufficiently immutable as to stand as a fixed goal in need of
attainment by all parties. A fixed commencement date on the Tuesday after the
2012 Easter break will, in the intervening months, ensure stability in the [PPS
Register] itself, as well as the opportunity to provide the sector with
adequate education for a successful implementation.[11]
2.8
DLA Piper Australia supported the Bill on the basis that the
Attorney-General determines both a 'migration date' and a 'registration
commencement date' in the first quarter of 2012, after the end of the Christmas
and New Year holiday period.[12]
In DLA Piper Australia's view, commencement of the PPS Act should take place on
a Monday to ensure that data migration is accurately completed (over a
weekend).[13]
Department response
2.9
The Department informed the committee that significant progress has been
made to achieve the proposed commencement date of October 2011, such that the
PPS reforms are now expected to commence operation on Monday, 30 January 2012.
However, the Department conditioned its advice on the performance of a second
cycle of user acceptance testing, which commenced on 19 September 2011 and was
due for completion on 11 November 2011:
Based on the level of testing already undertaken and the
progress of work across the program, the target dates that have been planned
with industry are that data migration commences on 28 November 2011 and the
registration commencement time is 30 January 2012. However, meeting these dates
is dependent on an assessment of readiness after user acceptance testing is completed.[14]
2.10
The Department subsequently advised the committee that the second cycle
user acceptance testing was completed 'with no critical defects identified'.
The Department noted that moderate level issues are currently being targeted
for resolution by 30 January 2012, 'or shortly after'; and lower level issues
(which are largely cosmetic) will be resolved after the registration
commencement date. The Department further advised that it is 'confident in the
operation of the PPS Register, and...continue[s] to plan for commencement on 30
January 2012'.[15]
Current levels of awareness regarding the PPS reforms
2.11
As observed in several submissions, PPS reform is a significant micro‑economic
reform project, which fundamentally alters personal property securities law and
practice in Australia.[16]
The reforms will broadly affect the commercial business community, as well as
individuals using, or seeking to use, commercial credit facilities.
2.12
While no individuals submitted to the inquiry, the committee received
evidence suggesting that there is little understanding in the general community
of the impact of the PPS Act on commercial transactions.[17]
Further, within the commercial business community, there are varying levels of
awareness, knowledge and preparation.[18]
2.13
The Australian Motor Industry Federation indicated that it has
communicated its concerns regarding an industry-wide lack of preparation and
knowledge to both the Department and Insolvency and Trustee Service Australia (ITSA)
(which will be responsible for the PPS Register). The Australian Motor Industry
Federation does not believe, however, that its concerns have been adequately
addressed.[19]
2.14
The Australian Bankers' Association submitted that it expected the
Australian Government to initiate another awareness campaign closer to the
commencement date, which would alert and educate both the business community
and the general public with respect to the changes to the law and the
significance of the PPS Register.[20]
Department response
2.15
The Department informed the committee that ITSA has engaged with the
Australian Motor Industry Federation and the Motor Trades Association of
Australia to develop information products (such as fact sheets) tailored to the
specific trades in the motor industry (such as spare parts, smash repairers,
and motor vehicle lease and rental providers).[21]
2.16
In relation to a more general awareness and communications campaign, the
Department advised that it has developed a communications campaign, which is
proposed to begin the week commencing 22 January 2012 and continue through
until June 2012:
The advertising will comprise national, radio, print and
online advertising. The approximate cost is $1.2 million (excluding GST)...[I]t
is anticipated that online advertising will be placed on sites such as
carsales.com.au.[22]
Committee view
2.17
The committee's inquiry into this Bill has necessarily proceeded swiftly
due to the 'migration time' and 'registration commencement time' currently provided
for in the PPS Act. The committee notes, however, that a core element of the
PPS regime – the PPS Register – is not yet fully functional and might not be
ready for implementation on the prescribed commencement date (1 February 2012).
2.18
The committee acknowledges that the Bill would enable the
Attorney-General to determine a later commencement date but that the Department
remains hopeful of commencing data migration on 28 November 2011, and effecting
commencement of the operative provisions of the PPS Act on Monday, 30 January
2012, consistent with the original timeframes of the PPS Act.
2.19
However, should the Department's intentions not eventuate – for example,
due to further technical difficulties with the online register – the committee
considers that it would be counterproductive to have to launch the PPS Register
in order to meet the prescribed commencement date. In the committee's view, it
is much more important to implement a fully tested, error-free online database.
This is particularly so when the database in question definitively registers
security interests nationwide. In addition to its legal and economic portent,
the proper functionality of the PPS Register is also vital on a practical level
to instil stakeholder confidence in the new register and its overarching
regime.
2.20
The committee therefore endorses the provision of contingency measures
as proposed in the Bill; however, in the committee's view, it is important that
stakeholders are provided with as much information as possible regarding PPS
reform.
2.21
With respect to the commencement date, several submitters to the current
inquiry complained about the 'false starts' throughout 2011. In the committee's
view, much of the dissatisfaction was caused by a lack of information regarding
the reasons for the delay. Perhaps the best illustration of this point is the
Explanatory Memorandum to the Bill, which offers no explanation as to why
it is necessary, almost at the last minute, to amend the PPS Act to enable the
Attorney-General to determine a commencement date later than 1 February 2011.
2.22
The committee expresses concern about the lack of explanation provided
in the Explanatory Memorandum to the Bill, particularly as the information was
so readily available for provision in the Department's submission to the
inquiry and its responses to questions on notice. It would have been of
assistance to the committee if a more comprehensive explanation had been provided
at the outset.
2.23
As a final point, the committee notes advice from the Department that an
extensive education and awareness campaign is proposed to take place in the
first half of 2012 to target small and medium enterprises (and their advisers),
and which includes a consumer component.[23]
The committee commends the Department on developing this campaign, and fully
expects it to assist in raising awareness of the PPS reforms within the
commercial business and general communities.
Recommendation 1
2.24
The committee recommends that the Attorney-General's Department revise
and reissue the Explanatory Memorandum to provide a comprehensive explanation
of the reasons for the Bill, as stated in the Attorney-General's Department's evidence
to this inquiry.
Recommendation 2
2.25
Subject to the preceding recommendation, the committee recommends that
the Senate pass the Bill.
Senator
Trish Crossin
Chair
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