This paper was co-authored by Kellie Cook, Senior Associate
This is the second of Kott Gunning’s “PPS eh?” updates regarding the statutory review of the Personal Property Securities Act 2009 (Cth) (PPSA or Act).
On 4 April 2014 the Attorney General announced that the Government will undertake a review into the PPSA. Following a consultation process, the interim report was submitted to the Government on 31 July 2014 and made publicly available on 15 August 2014.
A final report is due on 30 January 2015.
Proposals for change
Submissions were invited in relation to (a) issues peculiar to small businesses and (b) all other issues. The PPS Review Secretariat received 37 submissions prior to the closing date of 6 June 2014.
From the interim report, it seems that submissions fell, broadly, into the following categories:
- those that argued in favour of removing particular business activities from the ambit of the PPSA;
- those that sought to limit the impact the PPSA has on businesses;
- those that sought to improve and simplify the PPS Register; and
- those that sought to address the complexities of the PPSA itself.
The interim report laments that “the submissions demonstrate…that the Act is more complex than it needs to be” and that the Act will “never be an ‘easy read’” and will “always be complex”. Indeed the word “complex” is used 67 times in the interim report.
…so we need more submissions
Despite acknowledging the “considerable merit” of many of the proposals for change that were submitted, the PPS Review Secretariat declined to make any specific recommendations to the PPSA, the Regulations or the operation of PPS Register at this stage. Instead, a series of supplemental consultation papers on the PPSA will be prepared and released to “identify and discuss potential areas for reform as raised in the submissions, and suggest other opportunities to simplify or clarify the operation of the Act or to attune it more closely to the Australian business environment”. These supplemental consultation papers will be released with a view to “broadening and deepening understanding of the Act and the policies that underpin it, and to inform the recommendations in the final report.”
A list of topics that might be covered by the supplemental consultation papers is set out in Annexure B to the interim report and include:
- transactions to which the PPSA applies;
- creation of a security interest;
- modes of perfection;
- dealings in collateral;
- priority rules;
- enforcement of a security interest;
- the register;
- peculiar types of collateral;
- interaction with the Corporations Act (circulating assets and section 588FL); and
- other provisions (sections 275, 339 and 343).
The interim report sets out (at Annexure C of the report) a set of criteria that the PPS Review Secretariat proposes to take into account in considering any proposed amendments to the PPSA. These criteria are, broadly, as follows:
- the overall objective of the Act;
- the need to seek a balance between the interests of secured parties and third parties (buyers or lessees);
- each rule should be expressed as simply as possible and be applied consistently across all types of personal property and security interest;
- the rules should be comprehensive and apply to all types of personal property and to all types of security interest unless there are clear policy reasons for an exception;
- the rules should be as flexible as possible and should include as few formal requirements as possible;
- the rules should provide transparency in relation to the existence of security interests; and
- the rules should fit and be able to function in harmony with the balance of our law.
Was anything recommended to be done now?
Two recommendations were made by the interim report. These include:
- the review continue to engage with the Australian Financial Security Authority (AFSA) and in particular that AFSA’s advice be sought on the practicalities of any proposed changes to the PPSR and their likely associated costs and timing; and
- AFSA, in conjunction with small business representatives (particularly those representing the interests of retention of title suppliers and the hiring industry) and their advisers, develop a targeted short-term, multi-faceted education and awareness raising campaign designed to:
- make affected small businesses more aware of the existence of the PPSA and that it can affect them; and
- provide more guidance on how small businesses can make effective registrations for their most common types of security interests.
For more information on this update or any other PPSA matters please contact Emma Leys on (08) 9321 3755.
The information published on this website is of a general nature and should not be construed as legal advice. Whilst we aim to provide timely, relevant and accurate information, the law may change and circumstances may differ. You should not therefore act in reliance on it without first obtaining specific legal advice.