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Australian Finance Conference Level 8, 39 Martin Place, Sydney, 2000. GPO Box 1595, Sydney 2001

ABN 13 000 493 907 Telephone: (02) 9231-5877 Facsimile: (02) 9232-5647 e-mail: afc@afc.asn.au

22 December 2014

PPSA Review Secretariat Commercial and Administrative Law Branch Attorney-General’s Department 3-5 National Circuit BARTON ACT 2600 By email to ppsareview@ag.gov.au

Attention: Mr Bruce Whittaker

Dear Mr Whittaker,

REVIEW OF THE PERSONAL PROPERTIES SECURITIES ACT - RESPONSE TO CONSULTATION PAPER 4

We attach the response of the Australian Finance Conference, the Australian Equipment Lessors Association and the Australian Fleet Lessors Association to Consultation Paper 4.

If you would like to discuss our response, please contact me or Catherine Shand on (02) 9231 5877 or by email to catherine@afc.asn.au.

Kind Regards,

Yours truly,

Ron Hardaker Executive Director

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AUSTRALIAN FINANCE CONFERENCE, AUSTRALIAN EQUIPMENT LESSORS ASSOCIATION AND AUSTRALIAN FLEET LESSORS ASSOCIATION

RESPONSE TO PERSONAL PROPERTY SECURITIES ACT CONSULTATION PAPER 4

22 December 2014

Review of the Personal Property Securities Act 2009

Consultation Response Template Consultation Paper 4

Instructions:

Please use the form below to provide feedback with respect to the proposed recommendations and issues listed in each section of the form. Please refer and respond to the proposed recommendation or issue as set out in Consultation Paper 4. The heading and paragraph number of the relevant sections of the consultation paper are included to help guide you.

Please note your agreement or disagreement with the proposed recommendation by deleting either ‘Yes’ or ‘No’ where indicated. Comments can be provided in the box below each proposition. There is no word limit for comments but succinct responses clearly setting out the reasons for agreement or disagreement with the proposed recommendation will be of most use for the purposes of the review.

You may respond to as many or as few propositions as you wish.

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Name: Ron Hardaker Organisation: Australian Finance Conference

Australian Equipment Lessors Association Australian Fleet Lessors Association

Background/Expertise/Interest in PPSA Review: Finance Industry Association Contact Details: 02 9231 5877

2.2.2 How the terms affect the registration of a financing statement Proposed recommendation 4.1: That the Act be amended as described in Section 2.2.2. Do you agree with the proposed recommendation? Yes, taking into a ccount

the following comments Comments:

One member has commented as follows: We agree that the registration should not need to indicate whether the collateral is consumer property or commercial property. However, we think that:

(a) it is unnecessary for registrations against individuals to have a maximum term of seven years on the basis that the amendment demand process already provides sufficient protection and the NZ and Canadian PPSAs do not include an equivalent restriction; and

(b) the prohibition on identifying the grantor in a registration against an individual in respect of serial numbered collateral is also unnecessary, given the restrictions on searching the PPSA and the fact that registrations against non-serial numbered collateral will in any case identify the grantor.

However, if the requirements in relation to individuals cannot be repealed, then we agree with the recommendation.

Another member commented: We agree that simplification along the lines of the Reviewer’s recommendation would assist, for the reasons set out in the Reviewer’s comments. As a commercial financier of “small ticket” including those with individuals as borrowers (as well as “large ticket” transactions with borrowers needing larger funding requirements), there is little to no value in being able to search against an individual grantor as part of the credit assessment process.

2.2.3 Other uses of the terms "consumer property" and "commercial property" Proposed recommendation 4.2: That the definitions of "consumer property" and "commercial property" in s 10 of the Act be deleted. Do you agree with the proposed recommendation? Yes Comments:

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2.3 The "inventory" question Proposed recommendation 4.3: That item 1 of the table in item 4.1 of Schedule 1 to the Regulations be deleted. Do you agree with the proposed recommendation? Yes Comments: We agree with the proposal to delete Item 1 of the Table in Item 4.1 of Schedule 1 to the Regulations. The “inventory” field is only meaningful if, when “ticked”, the “control” field is also “ticked”. So if both the “inventory” and “control” fields are retained, then it would be preferable if the inventory field could only be ticked if the control field is ticked. However there seems little point in distinguishing between “control of inventory” and “control of other property”. It would therefore be preferable for the recommendation in the Consultation Paper to be adopted so there is only a “control” test.

2.4 The "control" question Proposed recommendation 4.4: That item 2 of the table in item 4.1 of Schedule 1 to the Regulations be deleted. Do you agree with the proposed recommendation? Yes Comments: Yes, for the reasons given in the Consultation Paper. Also see our response to the previous question.

2.5 The "subordinate" question Proposed recommendation 4.5: That item 6 of the table in s 153(1) be deleted.

Do you agree with the proposed recommendation? Yes Comments: Yes, for the reasons given in the Consultation Paper.

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2.6 The collateral classes Should a new collateral class be added to the Register, of "all present and after-acquired property relating to"? Comments: If this amendment is made, the rules around this category would need to be clear, for example how a secured party should describe a building site, a shopping centre or an agricultural undertaking; or the assets of a particular trust where one trustee is the legal owner of the property of a number of trusts. Perhaps for the categories of both “all present and after acquired property except” and “all present and after acquired property relating to” it should be necessary to attach a copy of the security agreement (or at least an extract which identifies the collateral) to avoid a searcher needing to make further enquiries of the grantor or other secured party or going through the process in section 275 of the Act to obtain further information. One member has commented as follows: “We do not think this adds anything substantial, because “AllPAAP Except” can be used for exactly the same purpose. E.g, the following two are functionally equivalent:

• AllPAAP Relating To “the premises at 1 Example St, Sydney”. • AllPAAP Except “property not located at the premises at 1 Example St, Sydney”.

It could also be asked what it means to say that property “relates” to a premises, building, trust, etc. Is the relevant nexus “located at”, “forming part of” or something else? The nexus should be specified by the secured party in the description, not hard-wired into the field. This collateral class could be modified to be, eg, “AllPAAP (Limited)”, then leave the further description/limitation wording up to the secured party. In any case, none of this assists a searcher who only obtains “top level” search results, and then will have to obtain a copy of the registration certificate to see what is in the free text field. “

2.6 The collateral classes Do you agree that the collateral classes should be changed as suggested in Section 2.6.5? Do you have any alternative suggestions? Comments: We agree with reducing the number of collateral classes and making the distinctions between them more intuitive. One member has commented: “Having only one serial-numbered property collateral class, still requires sub-fields to cater for the different possible serial numbers of motor vehicles, watercraft, etc. Still, it might simplify the “top level”. See comments on AllPAAP Relating To, above. In addition, … the sub-class “Agriculture” should be renamed more clearly (eg) “Crops or Livestock”, because “Agriculture” is commonly and incorrectly taken to refer to any agricultural property.”

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2.6 The collateral classes Do you have any practical experience of working with the Canadian and New Zealand systems for identifying collateral in a registration? Comments: One member has provided the following response: My experience with the British Columbian model was that the collateral was a free text field only. There were no collateral classes or boxes to check. The secured party (or law firm acting for them) had to ensure the free text description accurately described the collateral (not too much, and not too little). A pretty standard approach developed for most kinds of securities. Over time, it works its way out and was fine. I prefer the BC model to the AU model. The BC model allowed a lot more specificity in the descriptions. A big downside with the AU model is that the PPSA itself does not make any mention of the free text field. Another member replied as follows: I have experience working with the PPSA in New Zealand and Australia. While I do not think there is any need to amend the collateral classes in Australia so they match the NZ collateral classes, I do believe that there is a need to clarify the legal effect of the free text field and also to change the Act so that it is compulsory to include a description in the free text box. Without the requirement to include a free text description, the register is not functioning to its full potential as a notice board of security interests as it would be very rare that a search of the Australian PPSR against a grantor would give a searcher an accurate understanding about what security interests have been registered against a particular grantor and what collateral such security interests relate to. This is due to the overuse of the “ALLPAAP with exceptions” collateral class to perfect security interests that are really only in respect of specific items and the fact that a secured party may register against the “Other Goods” collateral class but not include a description of the goods in the free text box, meaning that a searcher has no idea what type of goods the security interest or goods may relate to. If I contrast this to my experience in NZ, the majority of the time a search against a grantor would give the searcher an accurate understanding of what security interests had been registered and what collateral such security interests relate to. In my view, this is due to the compulsory requirement in NZ to include a description in the free text box. From my experience, the requirement to have a compulsory description in the free text box did not result in secured parties including overly cumbersome or circular descriptions in the free text box either. While this change would mean additional work for secured parties initially while they draft standard collateral descriptions to be included in the free text box, going forward it would arguably simplify the registration process while making the register much more user friendly for searchers and mean that searchers would be able to accurately identify security interests registered against a particular grantor - which would cut down the time that would need to be spent by financiers, purchasers etc when carrying out DD, doing their underwrite etc.

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2.7.2 The legal effect of the free text field Should the Act be amended to clarify the legal effect of the free text field? Comments: Yes. We agree that this should be clarified. We have received the following comments from two Members: The free text field ought to be retained (ie, as optional, except for “AllPAAP Except” or the proposed “AllPAAP (Limited)”). It would be preferable for the PPSA include a provision that clarifies that, to the extent that the free text identifies collateral (or excludes collateral), then the legal effect is to include (or exclude) that collateral (assuming that the collateral is otherwise within the selected collateral class). We agree that legal effect of the free text field should be clarified, particularly by requiring it to contain some text sufficient to allow a searcher or person proposing to take an interest in another’s personal property to have some starting point of enquiry, besides the identity of a secured party. That is, for example, a blank ‘Other Goods’ registration without any description of the collateral does not assist that searcher and in the instance of insolvency/administration, does not assist the liquidator/administrator beyond making initial enquiries with a secured party. We also note that the Federal Court in the 2012 judgment of Hastie Group (No. 3) found that the administrator was allowed to dispose of equipment in respect of which no registration existed properly identified such equipment. We also note the comments made in CP4 with respect to s 151(1).

2.7.3 Should the free text field be compulsory? Proposed recommendation 4.8: That the Act not be amended to oblige a registrant to include details of collateral in the free text field as a condition to making it an effective registration. Do you agree with the proposed recommendation? Yes Comments: Based on our comments above for Section 2.7.2, we support this proposed recommendation. However, encouragement by AFSA to provide further detail in the free text field, where appropriate, would be for the benefit of secured parties and searchers, for the reasons set out in Section 2.7.3 of the Consultation Paper.

2.7.4 What type of information should be allowed in the free text field? Proposed recommendation 4.9: That the Act not be amended to prohibit the practice described in Section 2.7.4. Do you agree with the proposed recommendation? Yes Comments:

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2.7.5 Should the free text field be available for the "allpap" class? Proposed recommendation 4.10: That the Register functionality not be amended to activate the free text field for a registration against the collateral class "allpap". Do you agree with the proposed recommendation? Yes Comments: Introducing a free text field (in order for a secured party to limit the scope of their registration) would mean that there is, functionally, no difference between AllPAAP and AllPAAP except. If a free text field were to be introduced for AllPAAP, then (in order to preserve the usefulness of having a separate AllPAAP class) we think that the Act (and the register) would need to clearly state that the free text had no legal effect in the case of AllPAAP (in which case there would seem to be little point in having the free text field). A searcher identifying “AllPAAP” in a top-level search, should not have to retrieve a copy of the registration certificate just to determine whether there are any limitations, exceptions or clarifying descriptions.

2.8 The "PMSI" question Proposed recommendation 4.11: None at this stage, pending further consideration. Comments: We agree with the suggestion in Consultation Paper that a security interest that is a PMSI should be able to be perfected by a registration that does not tick the PMSI box, on the basis that it is then an "ordinary" security interest for priority purposes, or at least does not automatically obtain PMSI super-priority by virtue of the PPSA, but subject to any contrary agreement between secured parties (e.g .in a priority deed). Refer also our comments in response to Section 6.8.3 of Consultation Paper 3.

2.9 Description of proceeds Proposed recommendation 4.12: None at this stage, pending further consideration. Comments: In our response to Consultation Paper 2, we strongly supported the suggestion that the Act be amended to provide for automatic perfection over proceeds. On that basis, item 2.4 of Schedule 1 to the Regulations could be deleted.

2.10.4 How broad should the concept be? (a) Should the categories of serial-numbered property be broadened? If so, how? (b) Should the categories of serial-numbered property be reduced? If so, how? (c) Does any change need to be made in relation to the use of patent application numbers (if patents continue to be a category of serial-numbered property)?

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Comments: Opinions differ among our Members. One of member finances “boat motor trailer” (BMT) packages and “repowers” where a new engine is fitted to an old vessel. They seek the following outcome for inboard and outboard engines: that security interests over them be registrable as ‘serial numbered goods’ in the collateral class ‘watercraft’. The serial number will be the engine/serial number. This would make an engine registration consistent with the other components of a BMT package and reduce the risk of competing secured interests or disputes about priority with regard to boats and engines which are attached to them but are treated differently. They state that this would have the potential to improve the market for consumer and business finance by assisting financiers to identify existing security interests quickly and cheaply and thereby to approve, document and settle BMT facilities more efficiently. More detailed information and reasoning is set out in Attachment “A”. This particular member currently operates only in the consumer market, and some of their concerns relate to the fact that a secured party cannot get a PMSI in respect of a boat motor to be used predominantly for personal purposes. We supported the proposed recommendation in paragraph 6.8.1.3 of Consultation Paper 2 that ss 14(2)(c) and (2A) be deleted. If this is implemented, some of these concerns would be alleviated. However some of these issues will also be relevant to the financiers of commercial vessels, particularly in relation to finances of repowers/replacement engines for existing vessels. We also received the following responses: 1. We support retention of the existing categories of serial-numbered property. We have no view on patent application numbers. 2. We agree that extending the concept of serial numbered property should not be favoured. As provided in the response to Consultation Paper 3, a clearly articulated process of allowing a secured party to perfect its interests over property subleased or provided to a third party should be set out in the PPSA. As further provided in the response to Consultation Paper 3, removal of the vesting provisions may allow a secured party in these circumstances to exercise its rights over the property with a third party as an unperfected security interest. 3. The serial-numbered property categories could be broadened and while we agree that the most robust system would be by making reference to a unique and verifiable number (eg. a government- issued VIN), we note that for motor vehicles, Chassis Numbers and Manufacturer Numbers are also valid identifiers which are not government-issued and may not be unique and verifiable. There is no reason why other serial numbers may not be used (eg. photocopiers and other items of office machinery). Perhaps the use of identifiers for expanded categories could be optional, and at the same time, limit the application of sections 44 and 45 to motor vehicles only.

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2.10.5 The registration period Proposed recommendation 4.14: That the table in s 153(1) of the Act be amended to provide that a registration against serial-numbered property have a maximum period of seven years if the grantor is an individual, but that it be able to have the same registration period as for any other collateral, in the case of any other type of grantor. Do you agree with the proposed recommendation? Yes Comments:

2.10.6.1 Motor-vehicles - breadth of the concept (a) Should the concept of "motor vehicle" under the Act more closely with its vernacular meaning? (b) If not, should it be simplified in some other way? If so, how? Comments: The preference of our members is to restore the pre-July 2014 definition of “motor vehicle” and to widen it to include easily identifiable valuable items such as in-board and out-board boat motors on the basis that both secured parties and persons buying or leasing these types of goods should have the benefit on being able to use the Register to record and find security interests over them. Please refer to our comments in relation to boat motors in 2.10.4 above. One member has commented as follows: We wonder whether s44 (as opposed to s45) is primarily a consumer protection measure. Its effect has been to force secured parties in non-consumer financings and leasings to register serial-numbered registrations in respect of vehicles and watercraft (in some cases in addition to a non-serial numbered registration). It may also be worth considering whether a vehicle that has been allocated a VIN should automatically be deemed to be a ‘motor vehicle’. Otherwise, we do not think there is a great need to simplify the concept or align it more closely with its vernacular meaning. There will always be goods that are “on the cusp” (eg, slow off-road vehicles), as far as the definition is concerned - and may require double registrations as “motor vehicle” and “other goods”.

2.10.6.2 The July 2014 amendment Proposed recommendation 4.16: That the Regulations be amended as described in Section 2.10.6.2. Do you agree with the proposed recommendation? Yes Comments: It is suggested that rather than requiring a secured party to make a replacement registration to re-perfect the security interest (as it will be in “borderline” situations), that a regulation be made to clarify that a previously perfected registration will not become unperfected by virtue of the change to the definition of “motor vehicles”. That is, if the security interest was were perfected before the definition change, it remains perfected despite it no longer being a “motor vehicle” after the change. The practice of some secured parties making dual registrations may mean that they fall foul of s 151(1) because it may be argued that it is not reasonable for a secured party to make a registration in two separate collateral classes in respect of the same item of collateral, as well as the (if somewhat nominal) increase in cost and administration involved. Further, it is not possible to search for specific Other Goods as there is no “keyword search” functionality (whereas it is possible to search for specific Motor Vehicles by reference to serial number).

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2.10.7 Aircraft Proposed recommendation 4.17: If aircraft continues to be a class of serial-numbered property for the purposes of the Act, that item 2.2(1) of Schedule 1 to the Regulations be amended so that a registration to perfect a security interest over aircraft may include the aircraft's serial number, but is not required to. Do you agree with the proposed recommendation? Yes, subject to

following comments

Comments: Consideration should be given to: 1. The potentially increased diligence burden for aircraft financiers (who currently may assume that among registration types, only an aircraft serial-numbered registration is capable of perfecting a security interest in an aircraft), including the need to enter into priority agreements with AllPAAP (Except) type financiers. To the extent that this recommendation is adopted, it will need to be made clear that aircraft remain a type of property that “may” be described by serial number so that purchasers and financiers at least retain the benefit of s44; and 2. Whether the proposed change adversely affects the impending accession to the Cape Town Convention.

2.10.8 Intellectual property licences Proposed recommendation 4.18: If Government decides to continue to apply the concept of serial-numbered property to certain types of intellectual property, that items 2.2(1)(a)(ii)(E) and (c)(iii)(E) of Schedule 1 to the Regulations be deleted. Do you agree with the proposed recommendation? Yes/No Comments: No comment.

2.11.1.1 Individual grantors - the rules Proposed recommendation 4.19: Do you agree that financial institutions should use the same rules as others to identify grantors, rather than AML/CRF Act data? Comments: Yes, we strongly support the current approach.

2.11.1.2 Is a driver's licence appropriate as the principal source of details for an individual grantor? Proposed recommendation 4.20: That items 3 to 8 of the table in item 1.2 of Schedule 1 to the Regulations not be amended. Do you agree with the proposed recommendation? Yes Comments:

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2.11.2 Body corporate grantors Proposed recommendation 4.21: That item 5 of the table in item 1.3 of Schedule 1 to the Regulations be amended to provide that the identifying details for a body corporate that is not captured by any of items 1 to 4 of the table be its name or identifying number under the law under which it is incorporated. Do you agree with the proposed recommendation? Yes Comments:

2.11.3.2 The use of ABNs Should the use of ABNs for trusts be discontinued? Comments: One member has commented: We are not convinced that discontinuing registration by trust ABN (where it exists), and replacing it with registration by “trustee details”, is a net improvement in terms of certainty, fairness or simplicity. One reason is that it would require the secured party to somehow track changes of trustee (to avoid the problem with unperfection arising from transfers under s34), as well as potentially make multiple registrations (or a registration with multiple grantors) for trusts with multiple trustees (again, tracking any changes to the joint trustee group). Another reason would be that it would become more difficult to distinguish (at the top level of a PPSR search) whether particular trust assets were part of the collateral. Another member has commented that the issue is largely a technological one and the prescriptive requirements of the Act and Regulations (including provisions deeming registrations ineffective or seriously misleading) should be eliminated as far as possible. The PPSR should be enhanced such that registration may be made on grantor name, ACN, ABN, trustee, trust name or trust ABN, and a search on any of these should return the registrations on all of these. The registry should connect to all government websites and information available to connect the registrations. Alternatively, registrants should be able to link trusts with the trustee. This view applies across a number of matters.

2.11.3.3 The name of the trust Proposed recommendation 4.23: That a registration relating to assets of a trust not be required to include the name of the trust. Do you agree with the proposed recommendation? Yes Comments: Yes for the reasons given in the Consultation Paper.

2.11.3.4 A trust that has both an ARSN and an ABN Proposed recommendation 4.24: If the Regulations continue to require that registrations be made against a trust's ABN, that item 1.5(1)(b) of Schedule 1 to the Regulations be amended to make it clear that it applies "to any trustee of a trust that is not a body corporate". Do you agree with the proposed recommendation? Yes Comments: Yes for the reasons given in the Consultation Paper.

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2.11.4.1 The distinction between a partnership, and the partners in a partnership Proposed recommendation 4.25: That the current distinction drawn in item 1.4 of Schedule 1 to the Regulations, between the assets of a partnership and a partner's net interest in the partnership, be maintained and clarified. Do you agree with the proposed recommendation? Yes Comments: For reasons set out in the Consultation paper.

2.11.4.2 Partnerships that do not have an ABN Should a registration be made against a partnership's name (and not the individual partners) if the partnership does not have an ABN? Comments: We do not agree with this proposal for the reasons given in the Consultation Paper.

2.11.5 Multiple grantors Should the Act be amended to clarify when it is appropriate to include more than one person or entity in a registration as the grantor? Comments: Our member have commented as follows: Our view (and, we think, the prevailing market view) is that a registration against multiple persons or entities is only appropriate where a security is given by those persons or entities jointly. We are happy for this to be clarified but do not have a strong view either way.

2.11.6 Foreign names, and exact vs close match searching Proposed recommendation 4.28: That: (a) the Register continue to use an exact-match methodology for searches; and (b) the Regulations be amended to provide, in circumstances where a grantor's or secured party's name or other identification details would otherwise need to be entered on the Register in letters that are not accepted by the Register, that the registrant be able instead to use any reasonable transliteration of that name or other identifying details for the purposes of the registration. Do you agree with the proposed recommendation? Yes Comments: Yes for the reasons given in the Consultation Paper.

2.12.1.2 The definition of a "secured party" Proposed recommendation 4.29: That paragraph (b) of the definition "secured party" in s 10 of the Act be deleted. Do you agree with the proposed recommendation? Yes Comments: Yes for the reasons given in the Consultation Paper.

2.12.1.3 The table in s 153(1) Proposed recommendation 4.30: That item 1(b) of the table in s 153(1) of the Act be amended as described in Section 2.12.1.3. Do you agree with the proposed recommendation? Yes Comments: Yes for the reasons given in the Consultation Paper.

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2.12.2 Multiple secured parties Does the current process for including multiple secured parties in a registration need to be changed? Comments: No.

2.12.3 GONIs Proposed recommendation 4.32: That the expression "GONI" on the Register be replaced with a term that more clearly indicates its purpose. Do you agree with the proposed recommendation? Yes

Comments (including suggestions for the replacement term): We agree because the term is not self-explanatory or intuitive. Suggestions are “Secured Party Identifier”, “Secured Party Account

Number”, “Secured Party Reference” or “Security Interest Reference”.

2.13.3 The registration period - What can be done? Should the end-time rules be amended to provide that the maximum registration period for all registrations is seven years? Comments: No. Long-dated or open-ended end-times are useful in financings of indefinite or long duration.

3.2 What are the consequences if a financing statement does not comply with the table in s 153(1)? Proposed recommendation 4.34: That s 153(1) be amended to clarify that data entered on the Register will be a financing statement if the data populates the fields referred to in the table in that section, whether or not the data as so entered is accurate. Do you agree with the proposed recommendation? Yes Comments: Yes for the reasons given in the Consultation Paper.

3.3 When will a financing statement be ineffective? Proposed recommendation 4.35: That s 164(1) and 165 be amended as described in Section 3.3. Do you agree with the proposed recommendation? Yes Comments:

3.4 What is "seriously misleading"? (a) Do you agree with the explanation of the term "seriously misleading" that is given in Section 3.4? (b)Should the explanation be included as a definition in the Act? Comments: (a) Yes (b) There is a view that the explanation should not be included as a definition; and that it in any event it should be subject to a ‘reasonableness’ test, i.e. the manner of the description causing a searcher to form the view that the registration did not cover the item of collateral in question to a reasonable person and not the subjective view of any particular searcher.

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4.2.2 Should s 151(1) be repealed? (a) Should s 151(1) be repealed? (b) Should s 151(1) be amended to only allow a registrant to register a financing statement against a grantor if it has the grantor's consent to do so? Comments: (a) No, this section should be retained in its current form. We are aware of a number of instances where vexatious registrations have been made as a means of delaying enforcement of security interests and think that section 151 provides some assistance in these cases. (b) No, this places an unacceptable administrative burden on financiers given that it is often vital for a financing statement to be registered prior to settlement (e.g. in order to obtain PMSI priority). This would require the financier to have a separate consent agreement signed in addition to its loan and security documents (given the loan and security documents are, in many cases, only received at or shortly before settlement).

4.2.3 How certain must it be that there is or will be a security interest? Proposed recommendation 4.38: That s 151(1) be amended, if it is retained, to provide that a person may register a financing statement if the person believes on reasonable grounds that the person described in the statement as the secured party is or may be, or may become, a secured party in relation to the collateral. Do you agree with the proposed recommendation? Yes Comments: Yes for the reasons given in the Consultation Paper.

4.2.4 How precisely must the registration describe the collateral? Would it be appropriate for s 151(1) to provide that a registration must describe the collateral in a manner that is no broader than is reasonably necessary to identify the collateral that the registrant reasonably believes is or may be subject to a security interest in the favour of the nominated secured party? Comments: We think little is gained from trying to restrict description of collateral to the narrowest description reasonable, particularly if s 151(1) is amended as described above. This would also likely add to clutter on the register. For example, a supplier who has previously supplied one type of goods would potentially need to register additional “other goods” registrations each time a different type of goods is supplied. If such an amendment were adopted, we expect that ultimately a practice would develop of describing the collateral along the lines used for AllPAAP Except registrations (ie the free text box in an “other goods” registration would likely be completed by referring to “all other goods of the grantor except any goods which are not subject to, or have been released from, a security agreement in favour of the secured party”). This would do little to assist searchers.

4.3.1 Advance registrations Should the mechanism in ss 151(2) and (3) for removing advance registrations be retained? Should the timeframe of five business days be removed? Comments: We support extending the time frame to 10 business days or for removing it altogether.

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4.4.2 "Unperfected" security interests Proposed recommendation 4.41: That s 167 be amended so that it applies (and applies only) to registrations against individuals (or to registrations against serial-numbered property that do not include the grantor's details because the grantor is an individual), and so that it only requires the secured party to remove a registration from the Register if it no longer has any security interest over any collateral that is perfected by the registration. Do you agree with the proposed recommendation? Yes Comments: A member seeks extension of the time within which registration must be removed, on the basis 5 business days is too short. The member comments that, as a large commercial lessor with many thousands of security agreements, it is difficult for our IT and other systems to effectively manage the thousands of registrations we have over grantors. It may be, for example, that a registration is required to be maintained where finance payments have been paid in full but the equipment has not yet been returned to our control or possession, i.e. until all obligations under the security agreement have also been performed. The obligation to remove a registration should be expanded to something along the lines of when the secured party becomes reasonably aware that the security interest in the collateral has been released, or otherwise within 5 business days after written request of the grantor (assuming that no security interest exists).

4.4.2 Who may make an amendment demand? Proposed recommendation 4.42: That s 178(1) be amended to allow an amendment demand to be made by a person who is identified as the grantor in the registration, or was otherwise the grantor of the security interest to which the registration related. Do you agree with the proposed recommendation? Yes Comments:

4.4.3 Deemed security interests Proposed recommendation 4.43: That s 178(1) be amended to accommodate the fact that a registration may perfect a security interest that does not secure an obligation because it is deemed to be a security interest by s 12(3) of the Act. Do you agree with the proposed recommendation? Yes Comments:

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4.4.4 Changes to the collateral class (a) Should s 178 be amended to require a secured party to make a fresh, narrower registration as required, and then release the previous, overly-broad one? Is this necessary to respond to an amendment demand? (b) Should the functionality of the Register be amended to allow a secured party to amend the collateral class in a registration from a broader class to a narrower (or to a number of narrower) classes? Comments: (a) One member has stated that if this proposal is adopted, the Act should be amended to allow “linking” to preserve priority. Another notes that the proposal assumes that the security interest will be continuously perfected by the new registration and therefore retain the priority time of the original registration. However, a person searching the register will have no other means of discovering the original registration (and the earlier priority time applicable to the security interest) once the original registration has been discharged. Undiscoverable priority times are already an issue outside the amendment demand process (eg where a security interest is initially perfected by possession or control and subsequently by registration or where an earlier registration in respect of a continuously perfected security interest is discharged outside of the amendment demand process). While we are not in favour of the mandatory linking of registrations (given the margin for error and degree of complexity this would add to the register), the risk of undiscoverable priority times should be minimised to the extent possible. Option (b) is the preferred approach. (b) This is preferable, and will be very useful (as it does not result in an undiscoverable priority time). However, the secured party should not be forced to amend the registration just because it selected a broad collateral class.

4.4.5.1 Security trust instruments Proposed recommendation 4.45: That s 179(3) be deleted. Do you agree with the proposed recommendation? Yes/No Comments: No comment.

4.4.5.2 The contents of an "amendment statement" Proposed recommendation 4.46: That reg 5.9(g) of the Regulations be deleted, and that the balance of that regulation be simplified so that it is easier for users who are unfamiliar with the Act to understand what it requires. Do you agree with the proposed recommendation? Yes Comments: Yes for reasons set out in the Consultation Paper.

4.4.5.3 Terminating the Registrar's administrative process - when does a proceeding "come before a court"? Proposed recommendation 4.47: That it be made clear that a proceeding "comes before a court" for the purposes of s 179 when a party first files an originating process with the court. Do you agree with the proposed recommendation? Yes Comments: Yes for the reasons set out in the Consultation Paper.

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4.4.5.4 Should the whole "amendment demand" process be replaced? (a) Should we adopt the NZ approach to amendment demands, for some or all grantors? (b)If so, what time should be allowed for the secured party to obtain the necessary court order? Comments: While members have not expressed a strong view either way:

1. The NZ approach involving a secured party obtaining a court order is cumbersome and costly and we are not convinced that the onus of proof about the registration should be shifted from the person making the amendment demand to the secured party; and

2. As we have suggested in other representations to the Review and to AFSA, a ‘show case’ procedure not involving the courts would be a more efficient and effective way for the amendment demand process.

4.4.6 Contracting out of amendment demands Should a secured party be prohibited from requiring its grantor to agree not to make an amendment demand? Comments: No - parties should be free to agree that an amendment demand will not be made.

4.5 Expired registrations Do Sections 4.2 and 4.4 sufficiently address the concern over removing expired registrations from the Register? Comments: We think it improves the situation of the PPSR holding expired registrations.

5.1 Modes of access to the Register Are the current modes of access to the Register sufficient? If not, what are some suggestions of other methods? Comments: Yes.

5.2 Should a secured party be required to include a copy of its security agreement with its registration? Proposed recommendation 4.52: That the Act not be amended to require a secured party to file a copy of its security agreement as part of its registration. Do you agree with the proposed recommendation? Yes Comments: For reasons set out in the Consultation Paper.

5.3 Should a registration be required to specify a maximum secured amount? Proposed recommendation 4.53: That the Act not be amended to provide that a registration be required to specify a maximum amount secured. Do you agree with the proposed recommendation? Yes Comments: For reason set out in the Consultation Paper.

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5.4 Registering against multiple collateral classes Proposed recommendation 4.54: That item 4(c) of the table in s 153(1) of the Act, and the functionality of the Register, be amended to enable a registration to be made against a number of collateral classes at the same time using a common free text field. Do you agree with the proposed recommendation? Yes, subject to the

following comments: Comments: Please refer to our comments above on “AllPAPS (Relating To)”. The multiple collateral class proposal seems to be a functional duplication of the AllPAAPS (Except) class (which, above, we have recommended to be reframed as “AllPAAPS (Limited)”). We are not sure how a “multiple collateral class” registration would appear to a person searching the register. We assume that the searcher who only obtains “top level” search results, would only see “Multiple” or the relevant designator. We think that this would decrease the efficiency of the register, particularly as the AllPAAPS and AllPAAPS Except classes are already available. We assume from the description of the “multiple collateral class” proposal that the registration would not allow for recording of serial numbers; in which case, it would seem to have limited use.

5.5.1 The legal implications of linking registrations Proposed recommendation 4.55: That the Act and the Regulations not be amended to provide that a security interest will only be continuously perfected by a series of registrations if those registrations are linked using the "Earlier Registration Number" field on the Register. Do you agree with the proposed recommendation? Yes Comments: We agree for the reasons set out in the Consultation Paper. We note that there remain issues with certainty relating to the registration time that is relevant to refinances (s 14(5)), transfers (s 34) or indefinite-term leases that become PPS leases after a year (under a proposed amended s 13(1)).

5.5.2 The mechanics of linking Proposed recommendation 4.56: That the Register be amended to allow multiple registration numbers to be entered in the "Earlier Registration Number" field on the Register. Do you agree with the proposed recommendation? Yes Comments: We agree for the reasons set out in the Consultation Paper.

5.6 Only one registration per asset? Proposed recommendation 4.57: That the current structure of the Register as principally a grantor-based registration system be retained, and that it not be amended to allow one registration to perfect all security interests over an asset, regardless of the identity of the grantor. Do you agree with the proposed recommendation? No Comments: As observed in the Consultation Paper, the Register is both a grantor and asset based register. For reasons we have articulated in our earlier submissions to the Review, there is a need to allow one registration to perfect all security interests over an asset, regardless of the identity of the grantor. The need arises in the efficient and effective management of PPSA risks arising in the context of sub-leasing.

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5.7 Separate registers for leases? Proposed recommendation 4.58: That the Act not be amended to provide for separate registers for security interests that arise from different types of transactions. Do you agree with the proposed recommendation? Yes Comments:

5.9.2 Should the range of "interested persons" be widened? Proposed recommendation 4.59: That the list of "interested persons" in s 275(9) be expanded to include a judgment creditor of a grantor that is considering whether to enforce its judgment by seeking execution against property that is described in the secured party's registration. Do you agree with the proposed recommendation? Yes/No Comments: No comment.

5.9.3 The timeframe for responses Proposed recommendation 4.60: That the period within which a secured party must respond to a request for information under s 275, as set out in s 277, remain 10 business days. Do you agree with the proposed recommendation? Yes/No Comments: Our members have not expressed a view.

5.9.4 Does a secured party need to provide an entire copy of the security agreement? Proposed recommendation 4.61: That s 275 be amended to provide that a secured party is only required to provide those parts of a security agreement that are relevant to ascertaining the identity of the grantor and the secured party, the identity of the collateral, and the amount secured. Do you agree with the proposed recommendation? Yes Comments: We agree for the reasons set out in the Consultation Paper.

5.9.5 The effect of a confidentiality agreement - the scope of s 275(6)(a) (a) Should this section also apply to confidentiality agreements between the secured party and the grantor? (b)Should a confidentiality agreement that obliges the grantor or debtor not to disclose information about the transaction but leaves the secured party free to make disclosures engage the exemption as well? (c)Should s 275(6)(a) be amended to accommodate carve-outs of the type discussed in Section 5.9.5? Comments: Our members have not expressed a view.

5.9.5 The effect of a confidentiality agreement - the qualifications in s 275(7) (a)Should ss 275(7)(a) and (b) be deleted? (b) Should ss 275(7)(c) and (d) be deleted? (c) Can you explain why the wording of paragraphs (c) and (d) of s 275(6) is structured so differently? Comments: Our members have not expressed a view.

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5.9.6 Disclosure that is prevented by a duty of confidence How can the circularity described in Section 5.9.6 be broken? Should the banker's duty of confidence prevail? Comments: One of our bank members has supported that the proposal that the banker’s duty of confidence prevail.

5.10 Layout of the Register Proposed recommendation 4.65: That the layout of the Register, and the order and manner in which it asks questions of a registrant or a searcher, be reviewed in order to make them as simple and easy to use as possible, particularly from the perspective of an unsophisticated user. Do you agree with the proposed recommendation? Yes Comments:

5.11 Supporting functionalities Proposed recommendation 4.66: That AFSA be asked to incorporate suggestions in the submissions that go to the supporting functionalities of the Register into its current planning processes, and to discuss them with AFSA's consultative forums, as appropriate. Do you agree with the proposed recommendation? Yes Comments: We strongly support this proposed recommendation in order to progress quickly as many as possible of the recommendations from the final review report. AFSA’s process of consultation with the PPSA Stakeholder Forum and the PPSA Operations Forum is working well and allows an appropriate level of consultation in relation to proposed changes to the Register Functionality. We understand that there is also an IT forum convened by AFSA. The costs of any changes approved via the AFSA forums can be accommodated in the Cost Recovery Impact Statement process that is already in place for the PPSR.

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5.12.1 Serial-numbered property that is consumer property Proposed recommendation 4.67: That s 157(1) be amended to require a secured party to give a notice of a verification statement to the grantor, whether or not the grantor's details are included in the registration, on the basis described in Section 5.12.1. Do you agree with the proposed recommendation? No Comments: It is our understanding the current approach implements the intended outcome. It is neither accidental nor a gap. It reflects a considered policy. In fact, with the benefit of experience, it is our view that the requirement to give to a grantor notice of verification statement be removed altogether. In commercial transaction it is consistently contracted out. Also, learning from experience from REVs, a verification statement or equivalent was not required, and not was there any justification for the obligation to be introduced during the 20 years it was in operation. Should our preferred position of repealing s 157 not be accepted, we offer the following additional comments for consideration. It is not clear what concerns a grantor may have with being named a grantor to a registration or having its personal property be included as collateral in a registration, particularly given the ability to make amendment demands (which the reviewer notes are followed through by secured parties in 95% of instances, suggesting that the overwhelming majority of secured parties are acting reasonably and in good faith) and the operation of s151(1) against vexatious registrations. For that reason, it is not entirely clear what purpose receiving a verification statement serves. The proposed change is not appropriate given section 157(3) under which a secured party cannot contract out of the requirement to give a notice of verification statement if the collateral described in the registration is consumer property. This section appears to be aimed at protecting individuals’ privacy (as consumer property will almost always be held by an individual). This is further reinforced by section 157(4), which provides that a contravention of s157(1) is “an act or practice involving interference with the privacy of an individual” for the purposes of the Privacy Act. However, where a registration is made by serial number against consumer property (and therefore does not disclose the grantor’s details), the privacy concerns are not relevant. It is therefore unreasonable to require secured parties to serve a notice of verification statement where the grantor’s details are not included in the registration, without allowing secured parties the ability to contract out of this requirement. If section 157 is amended as proposed in the Consultation Paper, then section 157(3) should be amended to allow contracting out where a registration by serial number does not disclose the grantor’s details.

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5.12.2 Registration events Proposed recommendation 4.68: That the Act be amended to provide that a secured party is only required to give a notice of verification statement to the grantor in relation to a financing change statement, if the relevant change affects the way in which the registration identifies the grantor, the secured party or the collateral, but that the Act not be amended to exempt a secured party from the obligation to give a notice of verification statement just because it is part of a bulk transfer. Do you agree with the proposed recommendation? Yes/No Comments: Refer our comments at 5.12.1 to repeal the requirement to give notice of verification statements to grantors.

5.12.3 Should a notice of verification statement be optional for commercial transactions? Proposed recommendation 4.69: That s 157 of the Act not be amended to provide that a secured party need only give a notice of verification statement to a grantor in relation to commercial property, if it agrees with the grantor that it will do so. Do you agree with the proposed recommendation? Yes Comments: Refer our comments at 5.12.1 to repeal the requirement to give notice of verification statements to grantors.

5.13 Constructive notice of the contents of the Register Proposed recommendation 4.70: That the Act not be amended to provide that a person should not be taken to have knowledge of the contents of the Register where the general law would hold otherwise. Do you agree with the proposed recommendation? Yes Comments:

5.14 Residual references to the Register as a collateral register Proposed recommendation 4.71: That s 160 of the Act be amended as described in Section 5.14, and that corresponding simplifications be made where possible to other sections of the Act. Do you agree with the proposed recommendation? Yes Comments: There would seem to be some benefit in simplifying the Act in this way and avoiding potential s588FL issues on the transfer of a registration to a new secured party.

5.15 Court power to rectify errors in registration? Should the Act give Courts a general power to provide relief for errors in registrations? Do you agree with the proposed recommendation? Yes Comments: We agree that the court should have this power and that a “flag” be available to indicate that a registration is affected by a court order if this would not be otherwise obvious from the Register.

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5.16 Registrar's power to correct errors on the Register Proposed recommendation 4.73: That s 186 be amended to make it clearer that it applies only to data that was removed from the Register by the Registrar. Do you agree with the proposed recommendation? Yes/No Comments: We acknowledge the arguments in paragraph 5.16 of the Paper. In response to the question “Should a version of Sask PPSA s 35(7) be included in the Act?” in paragraph 4.6.2 of Consultation Paper 2 (relating to re-perfection) we commented as follows: “For practical convenience there may be merit in exploring a similar version of Sask PPSA s35(7) on the basis there is no detriment to any other secured party that registered in the intervening period (i.e. while the registration is removed). The case of SFS Projects Australia Pty Ltd v Registrar of Personal Property Securities ([2014] FCA 846) (“SFS”) is relevant. The Court decided that the PPS Registrar has the power under s 186 to restore data to the Register that was incorrectly removed due to an error by the person who applied for its removal. It held that the word “incorrectly” in s 186 is not limited to errors by the Registrar and that the purpose of this section is to ensure that incorrectly removed registrations may be restored. Its view was that the PPSA is intended to benefit security holders by providing for the perfection of security interests to establish priority between security holders; and that because section 186 is a remedial or beneficial provision, any ambiguity should be resolved in favour of the intended beneficiaries (in this case the assignees of security interests). To address uncertainty about the Registrar’s powers to correct errors, it may be advisable to amend the PPSA to clarify this, rather than putting secured parties and the Registrar to the expense and inconvenience of court action. We suggest that the PPS Registrar be consulted about this issue.” We have received further support for inclusion of an equivalent to Sask PPSA s 35(7) in the Act, however the words “without authorisation” would not be needed because our token number system does not exist in Canada, where anyone can potentially discharge a registration. The concern is that as a result of SFS, administrators/receivers may receive more arguments about errors made, despite what appears on the PPSR at the time of their appointment, and no matter when the error was made. In contrast, if s. 186 allows the Registrar to restore data removed in error, but only within 30 (or perhaps as mooted below 15) days of the removal, then the administrator/receiver has to worry only about errors made in the 30 day period prior to appointment, not for indefinitely. We submit that this is preferable to giving the Court a discretion. Such a day rule would retain the concept that what is on the Register governs, whereas a Court discretion retains uncertainty as to whether something removed may yet be restored. This would mean that if an error is made and 31 (or 16) days go by, then the party that made the error has lost the chance to rectify. This would be better overall for the PPS system and other secured parties. We understand that on removal of a registration, the Registrar is required to give a secured party a financing change statement, so at that point they will know of the removal (if not already) and can/should act promptly to rectify. Safeguards to protect other secured parties who rely on the Register in the meantime are appropriate, based on the proviso in s 75(7) of the Sask PPSA. A time limit of 15 business days (for consistency with other provisions in the Act) may be appropriate for an application to the Registrar where a registration has been wrongly or mistakenly removed. Relevant to this may be whether the Registrar is required to give a secured party prior notice of intention to remove a registration because it is about to expire or has expired. If the Registrar does give prior notice (as was the case with REVS), then for expiring registrations, a secured party should not be able to double-dip, by being able to sit back, let removal happen, then seek restoration. The secured party in these instances should act on the notice of intention.

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5.17.2 Registrations migrated from the ASIC charges register Proposed recommendation 4.74: That residual issues with registrations that were migrated from the ASIC charges register be addressed as described in Section 5.17.2. Do you agree with the proposed recommendation? Yes Comments: We agree for the reasons given in the Consultation Paper.

5.17.3 Registrations migrated from State and Territory motor vehicle or similar securities registers Proposed recommendation 4.75: None at this stage, pending further consideration. Comments: Noted. We assume that if these are systemic issues, they will be addressed for the benefit of all affected users of the Register.

5.17.4 Registrar's power to amend the Register Proposed recommendation 4.76: That the Act be amended to empower the Registrar to amend migrated data on the Register as the Registrar considers necessary to correct errors in the migration process. Do you agree with the proposed recommendation? Yes Comments: We agree for the reasons given in the Consultation Paper.

6.1 Registrar's discretion to refuse to register a financing statement Proposed recommendation 4.77: That ss 150(3)(c) and (d) be deleted. Do you agree with the proposed recommendation? No Comments: While we appreciate the electronic nature of registration presents issues for the Registrar when dealing vexatious, frivolous or prohibited registrations, our members have certainly experienced vexation registrations. We have written to the Review separately about those experiences. There is a clear role for the Registrar to be able identify and reject vexatious registrations. We are available to discussion options with the Reviewer and/or AFSA.

6.2 Amendment of the Register in accordance with a court order Proposed recommendation 4.78: That the Act be amended to provide that the Registrar does not need to exercise procedural fairness when giving effect to a court order, and that the Registrar instead be able to seek further directions from the court before giving effect to the court's order. Do you agree with the proposed recommendation? Yes Comments:

6.3 Registrar's investigative powers Proposed recommendation 4.79: That s 195A be amended to confirm that the Registrar's power to conduct investigations extends to investigations that are conducted for the purpose of pursuing the enforcement of civil penalties. Do you agree with the proposed recommendation? Yes Comments: We agree for the reasons set out in the Consultation Paper.

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6.4 A business day calendar Should concern over the term "business day" be addressed by requiring the Registrar to maintain a "business day calendar" on the Register’s website? Should the definition be simplified? If so, how? Comments: We agree that the Registrar should maintain a "business day calendar" on the website on the basis that the Registrar must have some form of calendar used for its own internal purposes and for reference in the case of disputes. It is preferable for all users to be able to access the same calendar. If this is done there is no need to simplify the definition of “business day”.

6.5 Notices to secured parties that cannot be located Proposed recommendation 4.81: That the Registrar be empowered to issue a notice to a secured party by publication on the Registrar's website, if the Registrar has no other valid notice details for a secured party, and that the associated notice period required by the Act be extended in these circumstances. Do you agree with the proposed recommendation? Yes Comments: