Increasing harmonisation of the commercial laws of Australia and New Zealand in recent years means lawyers can now deal with one 'Australia'

 
In recent years New Zealanders have enjoyed the increasing harmonisation of the commercial laws of Australia and New Zealand. Instead of dealing with various states of Australia, we can now deal with the one 'Australia', which is much easier. This harmonisation has gathered pace as the federal government has enacted Commonwealth laws in place of state legislation.

The Australian government has just announced that it will provide $113.3m over five years to harmonise Australia's personal property securities laws in one Commonwealth Act and develop a single online register of personal property security interests, modelling the legislation on the New Zealand Personal Properties Securities Act (PPSA), which came into force in May 2002. (This legislation is itself a descendant of the personal properties securities legislation of certain provinces of Canada, with the grandfather being Article 9 of the US Uniform Commercial Code.)

Key features of New Zealand's Personal Properties Securities Act

* Expands the concept of a security interest to the position of lessor under a lease (for more than 12 months' duration) and to a supplier of goods under a retention of title condition - which deemed security interests can achieve super priority over all other claimed security interests in the same goods

* Provides for the priority of security interests (eg the right to take possession of goods and apply the sale proceeds in satisfaction of debt), essentially by reference to the timing of registration of a financing statement on an electronic security interest register - rather than by reference to ownership

* States the circumstances in which buyers and lessees can deal with goods free of any security interest (granted by the vendor or lessor)

The Australian Attorney-General's Department is conducting a personal properties securities review and has recently issued the last of three review papers - available at www.ag.gov.au/pps

The Committee is to be commended for the level of consultation, the quality of the questions asked, and the solutions proposed.

Australian proposals

Particularly impressive in the Australian proposals is the continuing respect (not so evident in the New Zealand PPSA) shown for circulating or 'current' assets. In New Zealand all personal property can be acquired by a purchaser or lessee free of the security interest granted by the vendor/lessor, except in one technical situation (which never arises in practice) if "acquired in the ordinary course of business of the seller/lessor". This acquisition is free of security interest to all goods - including goods that were 'fixed charge assets' under the old New Zealand regime, and the current Australian regime.

However, the Committee is na9ve in its view that the "ordinary course of business of the seller/lessor" can only apply to the floating charge assets - accounts receivable and inventory.

Take, for example, a trucking company with 15 trucks in its fleet - it will churn its trucks in the ordinary course of its business - and the trucks are not inventory. In New Zealand, the buyer of a truck from a trucking company in the ordinary course of the vendor's business will take the truck free of every security interest given by the vendor. Be careful Australia!

The Australian proposal follows the New Zealand legislation in recognising a separate regime for consumer goods (goods used or required primarily for personal, domestic or household purposes). Consumer goods have their own enforcement regime which reflects consumer protection legislation, and buyers of consumer goods where the value does not exceed $2,000 acquire the goods free of any security interest whatsoever.

New Zealand's experience

The New Zealand PPSR is choked with an enormous number (in New Zealand terms) of registered financing statements, many of which are incoherent, incorrect or improper. Recent judicial authority in New Zealand has confirmed that the function of PPSR is not to give notice to those persons who search the PPSR (persons who are looking to acquire a certain asset from a certain debtor or to take security over that asset) of the existence of security interests in certain goods. It is simply notice that a secured party claims that has security given to it by a debtor secured party. Having that notice, the searcher can make its own independent enquiries as to what goals of the debtor are subject to an existing security interest.

The alternative policy is to require some rigour in relation to the description of the goods, so that the searcher can readily discard as irrelevant to the proposed lending or purchase decision claimed security interests over assets that are not intended to be dealt with by that proposed buyer/lender.

The halfway house is the Ontario solution, which requires a party who takes a security interest that has super priority to give notice (including a description of the secured goods) to the prior secured parties of that same debtor.

Australia do want a new personal property securities law, but an improved one that New Zealand can then harmonise with.

Conclusion

The Bill does not propose any extension of the duration of copyright for any type of copyright work. This, and other perceived 'deficiencies' in the Bill, have led the International Intellectual Property Alliance, an association that brings together US pro-copyright lobby groups, to list New Zealand as a nation warranting 'special mention' in its recent annual submission to the US government, featuring the Alliance's views on the inadequacy of intellectual property protection around the world.

Justin Toebes is a partner in the Wellington office of Buddle Findlay, one of New Zealand's leading law firms and national leader of Buddle Findlay's insolvency and credit recovery team. Justin can be contacted by phone: + 64-4-498 7328 or email justin.toebes@buddlefindlay.com