Australian Personal Property Securities Laws

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  • Topic: Uniform Commercial Code, Personal property, Property law
  • Pages : 9 (3189 words )
  • Download(s) : 88
  • Published : May 1, 2013
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Question 1

(a)
Australian laws relating to personal property securities (“PPS”) have been messy for years, based on often incomplete state records which have never been centralised. The major rationales for the reforms are that the previous laws were inflexible, outdated, and prevent product innovation.[1] Personal property incorporates intellectual property , an important repository of wealth in the 21st century. This causes a need to incorporatefor flexible and modern laws which encourage consumers and producers to “conveniently … raise finance …on the security of such property”[2] which encourage investment which in turn leads to the creation of wealth.

The old PPS laws are majorly derived from 19th century legislation borrowed from the common Law of England[3]. The main modernising legislation is Article 9 the Uniform Commercial Code (UCC)[4] of the United States . As in the USA, there is a need to reduce the costs associated with the Consumer Credit Code. The UCC is meant to ensure efficiency and cost savings, although the strange habit Americans have of doing things at County level increases filing costs and complexity, whilst the habit of having different registries for boats, cars, mobile homes and all-terrain vehicles in Pennsylvania for example makes the concept of a uniform “certificate of title” for a vehicle ludicrous. [5]

Previous legislation had gaps and contradictions especially on the security interest.[6] For example, as noted by Craig Wappett,

AJ Smeman Car Sales v Richardsons Pre-run Cars and Kayls Leasing Corporation Proprietary Limited v Fletcher neither the Bills of Sale and Other Instruments Act 1955 (Qld) nor the Hire-Purchase Act 1959 (Qld) would apply to instruments entered into outside of Queensland in respect of goods subsequently brought into Queensland.[7]

The new process of registration is still cumbersome and confusing.[8] There are mMany disadvantages are associated with filing the instruments to evidence a security interest. For example, until a security holder signs a security agreement, he/she is precluded from obtaining a registration.[9] The current PPS laws on PPS pose some difficulties to financiers especially “when taking security over receivables and inventory”.[10] In most cases because of the PPS requirements applied on PPS, small businesses find it hard to get the required financing, compared to the USA small business can acquire financing since personal property is not regarded as a major security.

Prospective purchasers and lenders involved in personal property need to see, easily and cheaply, whether the involved property had

any associated burden.[11]

The PPSA, 2009 is a comprehensive legislation and puts the onus on the party who has a ‘security interest’ in the personal property to put it on notice to all concerned [in]… the personal property, about the charges which are going to be [registered…] by registering them online into the Personal Property Security Register (PPSR)[12]. This will not only secure the interests of the buyer, [but]… any third party …who has already been approached and has partial interest tied up with the property.

The new laws are determined not only for movable and immovable properties, but also for tangible and intangible assets, which can be secured as mortgage or as collateral securities by borrowers, whether individuals or corporations. As such, the PPSA also covers the sale and purchase of companies and businesses, especially those which have a credit line history. This Act will also ensure that the vendor will not be able to sell the business until all dues of the creditors have been settled…. Instant online registration will ensure that lenders and creditors are aware of any change in ownership …. Interests of secured creditors are of special concern in … bankruptcy proceedings as their rights take precedence over the rights of the unsecured creditors…”.

(b)

Before the Personal Property...
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