Mark Dreyfus (Isaacs, Australian Labor Party, Shadow Attorney General) Share this | Hansard source

This bill amends the Personal Property Securities Act 2009 to extend the minimum duration of a PPS lease from more than one year to more than two years. The amendments will operate so that a lease of an indefinite term will not be a PPS lease unless and until it has run for more than two years. The effect of these amendments is that a PPS lease of more than two years is a security interest that should be registered on the PPS Register.

Labor in government introduced the Personal Property Securities Act in 2009. It was introduced to the parliament by Attorney-General Robert McClelland. The act is an important reform which provides a uniform, functional approach to personal property security law governing all transactions that create a security interest. This includes the national uniform Personal Properties Securities Register, in which security interests may be registered and searched. The Personal Properties Securities Act 2009 harmonised over 70 Commonwealth, state and territory laws, as well as the common law and the rules of equity that govern security interests in personal property. The previous laws varied in their application, according to the form of the transaction, the nature of the debtor or the jurisdiction in which the property was located—which had the potential to significantly add to transaction costs.

Other countries, notably New Zealand, Canada and the United States, had by 2009 all implemented reforms in this area. The PPS reforms were intended to have a significant impact on business and consumers enhancing Australia's position as a financial centre by enabling banks and financiers to gain greater access to international finance, which in turn would assist growth and employment in Australia. The aim of the PPS reform in relation to PPS leases was to improve the ability of individuals and businesses, particularly small to medium sized businesses, to use more of their property to secure lending. The reforms were the subject of extensive consultation and received significant support and input from stakeholders, including industry, financiers, business and the legal industry.

Labor is proud of these reforms. The PPS reforms constitute real regulatory reform that cuts red tape, lowers costs for businesses and improves productivity. In government Labor worked hard to recognise the important role that personal property securities play in the Australian economy. Labor recognised the cost, confusion and uncertainty that surrounded personal property before Labor's reforms and we wanted to alleviate that burden on small business. The Productivity Commission estimated that Labor's reforms would save $70 million a year in compliance costs. This stands in stark contrast to the current Liberal government's imagined commitment to so-called red tape removal that rests on amending legislation with minor changes like deleting commas and correcting typos or repealing hundreds of spent acts that no longer have any legal effect.

The Personal Properties Securities Act provides for the circumstances in which the lease of goods will constitute a security interest for the purposes of the act. This currently includes leases for a term of more than 12 months or indefinite leases. Previously, the act also applied to leases for 90 days or more of serial numbered goods, a category that includes motor vehicles. However, this stipulation was removed by the Personal Properties Securities Amendment (Deregulatory Measures) Act 2015, which Labor supported.

The amendments in this bill make small changes Personal Properties Securities Act but they will provide significant relief for small businesses, particularly for the short-term rental and hire industry which enter into short-term lease arrangements or indefinite-term leases. The bill responds to issues that were raised by a number of submissions to the Whittaker review in relation to the effect of the act on small business, particularly the hire and rental industry, which enter into short-term lease arrangements or indefinite-term leases. That review highlighted the challenges for small business that are created by the operation of act, including the imposition of significant administrative burdens and substantial compliance costs.

A number of recent Supreme Court decisions have also highlighted problems with the operation of the PPS Act in relation to PPS leases, whereby owners of property have lost the right to their property because their interest was not registered. The provisions of the act relating to PPS leases operate to prevent the owner's loss of property that can occur in security arrangements where the goods are in the possession of the borrower. If a borrower uses property as security for subsequent borrowings, sometimes the second lender is not made aware of the owner's existing security interest. The register of personal property securities ensures that lenders are able to identify security interests.

Recent Supreme Court decisions in New South Wales and Western Australia have interpreted the operation of the act in relation to PPS leases. If owners of property do not register their interest on the PPS Register, and a hirer uses the property as security for borrowing without the knowledge of the owner, and the hirer becomes insolvent, the liquidator has an enforceable right to possession of the property. It has raised concerns for small businesses, particularly for the hire and rental industry, that owners of property have lost the right to their property because their interest was not registered. Property owned by hire companies can be lost when a customer defaults or becomes insolvent.

The minister was required to review the operation of the Personal Properties Securities Act. The Attorney-General, Senator Brandis, launched the review he was required to undertake in April 2014. It was led by Mr Bruce Whittaker. The final report of the Whittaker review was tabled on 18 March 2015.

In response to problems identified by small business in relation to PPS leases, during the course of the Whittaker review, the government enacted the Personal Property Securities Amendment (Deregulatory Measures) Act 2015, with Labor's support, so that certain categories of leases do not need to be put on the PPS Register. The Whittaker review highlights the concerns of small business which are partially addressed by this bill, including: low levels of awareness about the act leading to a failure to engage with the registration process and adverse consequences or loss of property; need for professional advice about the operation of the act due to its complexity and the costs of that advice; financial and administrative burdens of the registration and search process; and the cost of resolving disputes relating to the operation of the act. Small and family businesses that do not have the resources to meet the financial burden of the act are vulnerable to loss of property.

The final report of the Whittaker review is 542 pages of comprehensive analysis and review of the Personal Property Security Register. It contains some 394 recommendations for improving the operation of the act. This bill does not implement any of the recommendations in the final report. So let's be clear: this bill is not anything close to the comprehensive legislative reform called for by the Whittaker review. This bill is a minor tweak.

Labor is happy to support this bill if it will alleviate some of the burden currently borne by small business. But let's be clear: this is a lazy and erratic government that has no idea how to engage in proper, broad-scale legislative reform. If only this government would start thinking clearly about what it is trying to achieve and actually work towards methodically achieving some of those goals, then maybe Australians would have the kind of government that they were promised. This government is content to boast about minor tweaks instead of the bold deregulatory reform agenda that they proclaimed. Sadly, this government seems to have no reform agenda and it has no coherent plans for Australia's future. Instead we have seen an inert government that actually ran out of legislation during the first week of parliament this year.

Labor will support this small, sensible reform, but it is only one of hundreds of other sensible reform measures that this government could be bringing to this parliament. There are so many opportunities in Australia's regulatory framework to make improvements to ensure that our laws are operating effectively and are not unfairly or unnecessarily placing the burden on certain areas of society or industry. Labor would be happy to work with this government to make similar changes to a whole range of acts of parliament, but changes must be carefully considered and they must be the product of proper, thoughtful engagement with the issues and the result of consultation with those affected. I commend the bill to the House.

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