Introduction

2.1 This chapter explains aspects of the present law of personal property securities in Australia. The questions it deals with are

• what types of property can be taken as security?
• what kinds of security are there?
• what kinds of arrangements can give rise to a security?
• is the property already being used as security?
• what priority can the lender get for the security against other lenders?

The need for reform is reflected in the inadequacy of the answers provided to these questions by the existing law. Possession, registration and their effects are critical issues that are not presently treated consistently. The degree to which potential lenders can rely upon existing registers and possession affects how investment decisions are taken - investors will not take security if the existing law cannot guarantee their priority in the event that the borrower defaults.

What types of personal property can be taken as security?

2.2 There are very few, if any, restrictions on what type of personal property can be used as security: anything commercially acceptable as security can be used if the lender and borrower so agree.¹ Security can be taken over tangible and intangible property,² including intellectual property such as copyright. Sometimes the law itself prescribes the type of property which is to be taken as security. For example, the law has long recognised that repairers who are asked to repair goods, and carriers who are asked to transport goods from place to place, can keep the goods concerned as security for payment of their charges.³

What kinds of security are there?

Introduction

2.3 Securities are characterised by a transfer of either possession or rights of ownership (legal or equitable). There are many kinds of securities that can be taken over personal property. The paragraphs which follow discuss the four main types of securities - the mortgage, the charge, the lien and the pledge. The differences between these securities are reflected in the way that possession or ownership rights are transferred. Issues to be borne in mind in this analysis are

• Whether the lender or the borrower has title to the goods
• which party is in possession of the goods
• what effect the security has against third parties.

The mortgage

2.4 A mortgage gives the creditor ownership rights over the mortgaged property, although the debtor will normally keep possession of the property. In a legal mortgage, the creditor becomes the legal owner of the property (subject to an equity of redemption⁴). For an equitable mortgage, the debtor keeps the legal title, and the creditor gets an equitable right, that is, a right to full ownership if the debtor defaults.

The charge

2.5 In a charge the debtor gives neither legal nor equitable title to the property, and keeps possession of it. The debtor contracts with the creditor that it will not deal with the property in a way which is inconsistent with the creditor’s rights. Although title is not transferred, the contract qualifies the debtor’s title and creates an equitable interest in the property.⁵ Unlike the mortgage (where title is transferred), a creditor in whose favour a charge has been given must take legal action to enforce its rights. A fixed charge affects specified property, while a floating charge affects property in the debtor’s hands for the time being, and generally becomes fixed⁶ when some specified event occurs, such as default. Only when a charge becomes fixed can the creditor exercise its rights over the property.

The lien

2.6 Possessory liens. A lien is a security that arises by operation of the common law, by statute or in equity as a consequence of a contract between parties. At common law the lienholder has a right to keep possession of property that comes into its possession in connection with the contract (for example, an innkeeper can keep possession of goods left by a guest who leaves without paying the bill). Statutes have extended the lienholder’s right, to allow the lienholder to sell, and pass good title to, the goods once the statutory time period has elapsed. These statutes cover warehoused goods, crops, wool, sugar cane, fruit and stock.⁷

2.7 Non-possessory liens. Liens can also arise in situations where the lienholder does not have possession of the secured property. There are five types of non-possessory liens,⁸ namely

• equitable liens. Equitable liens may be governed by statute or they may arise by operation of the general law (for example, a trustee has a lien for his or her expenses over the trust property⁹). Where the security arises by statute it is termed a statutory equitable lien (for example, a worker is given a charge for the money due to him or her for work upon moneys due to a contractor or sub-contractor in respect of the relevant contract and likewise a sub-contractor is given a charge for the money due to him or her on the sub-contract for any money payable to the contractor or sub-contractor under whom he or she has contracted¹⁰). Equitable liens “give the lienee a right to take possession of another person’s property in certain circumstances and to retain the property or sell it to pay off a debt”¹¹. Equitable liens only confer a right to have a specific claim satisfied out of specific property. The right does not depend on possession, nor does it confer a right to possession. The right can only be enforced by a judicial sale.¹²
• maritime liens. Maritime liens do not require possession. Recognised maritime liens currently include damage done by a ship, salvage, seaman’s wages, master’s wages and disbursements, bottomry and respondentia.
• partner’s liens. A partner has a lien over the property of the partnership.
• preferable liens. An example of a preferable lien is the interest created by the Liens on Crops and Wool and Stock Mortgages Act 1892 (NSW). This Act confers a preferable lien on mortgages of growing crops, wool and stock.
• statutory liens. An example of a statutory lien is the interest created by the Warehouseman’s Liens Act 1935 (NSW). It gives the warehouse owner the power to retain possession of goods stored in its warehouse if the storage costs have not been paid for.

The pledge

2.8 The most common example of a pledge¹³ is the pawn. Pawns are characterised by a transfer of possession from the borrower to the lender while the borrower retains full ownership of the pledged goods. If the borrower does not redeem the pawn within a specified time, then, at common law, the pawnbroker can sell the goods and pass good title. This common law right to dispose of uncollected goods has been enshrined in legislation.¹⁴

What types of borrowing arrangements give rise to securities?

Introduction

2.9 The categories of security arrangements are not closed. A transaction may have the effect of creating a security even though it cannot be characterised as a mortgage, charge, lien or pledge. The contract may relate to borrowings or to sales, either to traders or to the ultimate consumer. Common forms of arrangement that create security include assignments and transfers, leases, factoring arrangements and sales of goods subject to title retention. These arrangements are often documented in a bill of sale. Federal, State and Territory legislation, including the Corporations Law, makes extensive provision about the validity, form and content of bills of sale, and whether they are to be publicly registered.¹⁵

Assignments and transfers of intangible property

2.10 ‘Assignment’ is the expression most commonly used to refer to the transfer of interests in intangible property such as book debts, shares, intellectual property and life insurance policies. For example, a company may assign its book debts to a bank to secure a loan from a bank. If the company defaults on the loan, the bank can exercise full rights of ownership over the debts and collect them as if it were the company.

Leases

2.11 Leases are generally used to allow the lessee to possess and use property that it does not own. The lessor transfers possession in return for payment of a fee. The traditional lessee does not, and never intends to, own the property - there is no intention that the property be used as security for the performance of either party’s obligations under the arrangement. Leases can, however, be used as a means of financing a transaction, the ultimate goal of which is a sale. It is often tax-effective to do so. The lease payments are worked out so that when the lease expires the lessee has paid what he or she would have paid to buy the goods in the first place, plus interest.¹⁶ The lease may include a provision for the transfer of ownership to the lessee at the end of the period of the lease. To the extent that a lease has the effect of transferring title in order to secure the performance of an obligation, it will be a security.

Factoring

2.12 A factoring arrangement is, in essence, the sale of ownership of book debts. The buyer does not account to the seller for any of the debts collected, and can write them off or deal with them as it chooses. Traders enter into these arrangements to raise capital, for commercial convenience or as a way of securing loans. Where a factoring agreement transfers title in book debts for the purpose of securing performance of an obligation then it will give rise to a security.

Sale of goods subject to title retention

2.13 A title retention clause is a provision in a contract of sale of goods under which the seller keeps the title to the property until some defined event occurs. For example, in the case of a sale of goods from a supplier to a retailer as stock in trade, or from a manufacturer to one of its customers, the event may be full payment of the price to the supplier. In the case of a consignment, where the supplier keeps title until the sale of the goods by the retailer to the consumer, the event will usually be the completion of the sale. Here, the supplier’s ownership interest in the goods continues into the proceeds of the sale, because the retailer is considered to be the agent of the supplier for resale. In the case of a hire-purchase arrangement, the event will usually be payment of all instalments and exercise of the option to buy.

Is the property already being used as security?

Introduction

2.14 These kinds of arrangements give rise to situations where goods in the possession of one party are in fact owned by another or subject to a security in favour of another. If the party in possession of the goods seeks to use them as security a careful potential lender will want to know whether the goods are already being used as security. It can, of course, ask the borrower. But few lenders would be prepared to rely on this alone. Most will want to check on some public register to see who is the owner or whether the goods are already encumbered. But this is more difficult than it seems. There are different registers for different kinds of property, different registers for different kinds of security and different registers for different kinds of borrowing arrangements. Sometimes, these registers overlap. At other times, there will no relevant register. The difficulty in determining whether property is already being used as security is the most significant single deficiency in the existing law.

Different registers for different kinds of property

2.15 Many different registers for specific kinds of property. There are different registers for different kinds of property. Some are national, others are State registers. For example, it is not difficult to find out whether a motor vehicle is being used as security. All Australian jurisdictions have registers for this purpose.¹⁷ But to be certain the search would have to extend to all States and Territories. The States and Territories are proposing to establish a uniform national Register of Encumbered Vehicles (REVs).¹⁸ For other kinds of property, however, the matter is not so simple.

• Ships. If the proposed security is a ship, the relevant register is the Australian Register of Ships.¹⁹
• Intellectual property. If it is the design of an article, a trademark or a patent, the Register of Designs, or of Trademarks or of Patents will be the relevant register.²⁰ There is no register specifically for copyright.
• Life insurance policies. Each life insurance company is required by law to keep a register of life insurance policies. A mortgage of the policy need not be noted on the policy document itself but, to be valid, an assignment must be registered in the company’s register.²¹
• Crops, wool and livestock. Queensland has a special register of liens on sugar cane crops.²² South Australia has one for fruit crops.²³ New South Wales, Tasmania and South Australia have special registers for interests in growing crops, wool and stock.²⁴

2.16 Other registers for property generally. If the security is a bill of sale and there is no specific register for the property to which the bill applies, the property might well fall within the definitions of ‘chattels’ or ‘personal chattels’ in the bills of sale legislation in each State and Territory.²⁵ If the security is not a bill of sale, the property may fall within the definition of ‘goods’ contained in the chattel securities legislation.²⁶ Generally speaking, in those States and Territories which have enacted chattel securities legislation, the defintion of ‘goods’ excludes interests in unshorn wool, stock and growing crops because these are covered by the bills of sale or instruments legislation. This distinction between growing wool and crops and shorn wool or harvested crops arises out of the common law rule that growing produce is only a ‘personal chattel’ within the meaning of the bills of sale legislation if it is separately bailed, assigned or charged.²⁷ If the produce is assigned together with an interest in the land upon which the produce is being grown it is not a ‘personal chattel’ within the meaning of the bills of sale legislation. The lender will have to search these registers in each jurisdiction where it thinks a bill of sale or chattel security might have been registered. The definitions of ‘chattels’, ‘personal chattels’ and ‘goods’ differ slightly from jurisdiction to jurisdiction. For example,

• interests in book debts are covered in the Queensland legislation but not elsewhere²⁸
• interests in horses and cattle are covered in some, but not all, jurisdictions,²⁹ and the South Australian legislation expressly excludes ‘more than ten horses or more than ten head of cattle belonging to one owner’.³⁰

Different registers for different legal categories

2.17 Which register is used may depend not only upon the type of property secured but also the legal categorisation of the security or the borrowing arrange-ment. All bills of sale Acts cover ‘assignments’,³¹ ‘assurances’ and other modes of transferring the legal title to goods, as well as licences authorising possession of goods to be transferred as security. Some jurisdictions add to this another legal category of arrangements: ‘charges’ over property.³² Queensland deems hire-purchase agreements³³ to be bills of sale within the meaning and purpose of the Bills of Sale and Other Instruments Act 1955 (Qld) whereas other jurisdictions do not. New South Wales legislation expressly extends the term ‘bills of sale’ to include equitable rights over property.³⁴

The Australian Register of Company Charges - company property

2.18 If a company creates a charge over any or all of its property, and the charge is of a kind covered by Part 3.5 of the Corporations Law, the company must ensure that the charge is registered with the Australian Securities Commission (ASC) on the Australian Register of Company Charges (ARCC).³⁵ This requirement applies whether or not the charge can be, or must be, registered in another register, for example, a bills of sale register.

Overlapping registers

2.19 Existing registers are not mutually exclusive: there may be two or more laws requiring or allowing registration of the same security in different registers. Laws may overlap between jurisdictions or within the same jurisdiction. For example, a lien or mortgage taken over livestock, wool or crops which is registrable under the Liens on Crops and Wool and Stock Mortgages Act 1898 (NSW) must also be registered on the New South Wales bills of sale register if the interest is assigned without an interest in the land upon which the livestock, wool or crops is being grown.³⁶ If the interest is registrable on the bills of sale register in New South Wales it may also be able to be registered on the goods register created by the Registration of Interests in Goods Act 1986 (NSW)³⁷. However, the need for dual registration disappears when the security is a charge over company property which must be registered under the Corporations Law on the ARCC. The Corporations Law provides that, where registration of a security - such as a crop or wool lien, or a stock mortgage - is required on more than one register, registra-tion of the charge under the Corporations Law will have the effect of the security also being duly registered under the other law.³⁸ Comments in a recent decision of the Supreme Court of Queensland suggest that, even if a secured party takes advantage of these provisions under the Corporations Law and does not register its interests on the relevant State register at all, or fails to comply with all the registration requirements, registration or deemed registration will not protect the secured party against third parties.³⁹ This is further discussed at paragraph 4.44.

Not all securities can be registered

2.20 Bills of sale registers. Some securities cannot be registered at all. The bills of sale legislation expressly excludes some security arrangements. For example, securities that arise under a marriage settlement, or under a transfer of goods in the ordinary course of business, and bills of sale of goods in foreign parts or at sea, cannot be registered under the New South Wales Act.⁴⁰

2.21 Australian Register of Company Charges. More comprehensive coverage is achieved under the Corporations Law. Under that Law, a company must register specified kinds of legal or equitable charges that it creates over its property. Charge includes a mortgage and an agreement to give or execute a charge or mortgage.⁴¹ There are, however, several other kinds of security arrangement that do not fall within the traditional notions of charge or mortgage and are not registrable. Examples include the security created under hire-purchase agreements, reservation of title clauses and conditional sale agreements.

Priorities: what is the lender’s position?

Introduction

2.22 Borrowers do not always repay the money they borrow, and can use property as security more than once. A lender will therefore want to know how its claim to the property (if secured) will stand as against other secured creditors’ claims in the event that the borrower defaults and the rights of secured parties are activated. The legal rules that answer this question are the priority rules. They are rules of the common law and of equity although legislation has modified them significantly, or created new, statutory priority rules. The problem with priorities is that it is very difficult to know in advance with any degree of certainty what the applicable priority rules are and which creditor will have priority in the event of default.

The common law and equity

2.23 The common law and equity rules about priority are complicated, technical and difficult to understand and apply. Whether a lender’s security will get priority depends principally on two factors, namely

• whether the interest the security gives is one the law characterises as a legal interest or as one enforceable only in equity⁴²
• the order in which the competing securities arose.

If both competing security interests are ‘legal’ or both are ‘equitable’, the earlier will (generally speaking) have priority over the later. If the earlier interest is the equitable one and the later the legal one, the legal will prevail unless the later creditor was aware of the earlier equitable interest. Overlaying these rules are two of more general application. The first is that a person who buys the property in good faith and without knowing about the earlier security can have clear title to it, unaffected by the security.⁴³ The second covers cases where there has been fraud. Fraud will either mean that the security is invalid from the start⁴⁴ or it will prevent the fraudulent party from taking the benefit of the security to the same extent as it would have been able to without the fraud.⁴⁵

Beyond this, there are several detailed and complex exceptions, based on technical legal distinctions, that may apply in particular cases.⁴⁶

Priority under statutes

2.24 Statutory modifications. These common law rules have been altered or modified by many statutes covering personal property securities. Some of these statutes, however, do not deal with priorities. In these cases, the general law as to priorities applies. In statutes that do address priority questions, a consistent approach is not always taken.

2.25 Bills of sale. Even the form in which priority rules are couched can be confusing. Some bills of sale legislation clearly provides that the priority order of bills of sale is to be governed by the date the bills were registered.⁴⁷ Other legislation is more complicated. In the Northern Territory, for example,

in default of registration ... the bill of sale shall be null and void, to all intents and purposes whatsoever .... ⁴⁸

The practical effect of this provision is that the date of registration governs the priority order. Again, some bills of sale laws invalidate a bill that has not been registered, but only against specified people, or only in certain circumstances.⁴⁹ These provisions operate in the same way as priority rules. In these cases, in the appropriate circumstances, the date of execution governs the priority order against all parties save the specified ones. There is no uniformity of approach. Nor is there uniformity on the question whether a bill of sale is effective to protect against third parties. In some jurisdictions, there is no protection until after the bill is registered.⁵⁰ In other jurisdictions, a bill is invalid until registered but once registered it is retrospectively validated back to the time when it was signed.⁵¹

2.26 Chattel securities laws. Recent chattel securities laws also exhibit diversity in their approach toward priority rules. Some of these laws regulate priorities as between securities, but only if the securities are registered under those laws. The priority of unregistered securities must be determined under the general law.⁵² In other jurisdictions, the chattel securities law simply does not address priority questions at all.⁵³ Again, the common law must be applied.

2.27 Corporations Law. The Corporations Law has detailed rules⁵⁴ governing priorities of securities over companies’ property. It ignores the common law distinction between equitable charges and legal charges. Instead, priority depends primarily on

• the date of registration of the charge and
• whether the creditor seeking priority had notice of the earlier charge.⁵⁵

However, there are still significant gaps in the Corporations Law’s coverage of priorities. The Corporations Law does not affect the operation of several federal laws that could affect priorities,⁵⁶ and it does not cover some kinds of charge at all.⁵⁷ Priorities as between these charges must be worked out according to the common law rules or the rules in the particular federal law (if there are any).

Overlapping laws - an example

2.28 The application of this patchwork of overlapping and not always consistent priority rules can cause confusion, even in courts. A recent case illustrates the point.⁵⁸ A credit union had taken a bill of sale over a motor vehicle. The bill was registered under the local chattel security law. A bank later took out an equitable charge over the whole of the assets of a company and registered it under the Companies Code, the then equivalent of the Corporations Law. The charge included the particular motor vehicle. When the car was sold, there was a dispute between the credit union and the bank about which had priority to claim the proceeds of sale. The trial court found for the credit union on the basis, principally, that the bank had ‘constructive notice’ of the credit union’s security because the credit union had registered its bill of sale. It found that there was ‘obvious conflict’ between the two sets of rules. On appeal, however, the South Australia Supreme Court held that the bank was not affected by constructive notice, holding that the Companies Code did not require lenders to search all the other registers on which a charge might be registered. Accordingly, registration under the Companies Code was enough to protect the bank fully.⁵⁹ The fact that the trial court had considerable difficulty working out the relationship between the two sets of law illustrates the confusion and cost that overlapping priority laws can cause. The result itself - that the later security prevailed over the earlier one, and that the later secured party did not, in the circumstances, have to search any register - illustrates the need for a single register.

Consequences of not registering the security

Introduction

2.29 Generally speaking, if the lender does not have possession of the property being used as a security, it will need to take active steps to publicly notify its security if it wants the security to be fully effective against other lenders on the same property. Earlier in this chapter the kinds of securities that can be registered in each existing register was discussed.⁶⁰ The following paragraphs set out some of the other consequences of failing to register.

Civil consequences

2.30 There are number of civil consequences that attach to failure to register a security where the borrower keeps possession of the property. The security may be invalid, giving the lender no rights at all against the property.⁶¹ Alternatively, the lender’s security may be invalid against an official receiver or trustee in bankruptcy. Finally, the unregistered security could be ranked behind registered ones, that is, the holders of registered securities will be entitled to be satisfied out of the property before the holders of the unregistered ones. In a particular case, two or more of these consequences may follow.⁶²

Criminal consequences

2.31 Whenever a company creates a ‘registrable charge’ over its property, it ‘shall ensure that there is lodged’ with the ASC a notice of the charge. The same applies when a company acquires property subject to a charge or a charge is varied to increase the debt or create a negative pledge.⁶³ Not to lodge such a notice is a contravention of the Corporations Law - a criminal offence. The debtor company, not the creditor, is guilty of the offence. The Corporations Law makes ‘any officer of the company who is in default’ guilty as well.⁶⁴ The penalty is a fine of up to $500.⁶⁵

Registering the security

Procedure and time limits

2.32 The procedures for registering securities vary from jurisdiction to jurisdiction and from register to register. Under the New South Wales bills of sale legislation, different procedures are prescribed for ‘traders’ bills of sale’ and ordinary bills. An ordinary bill must be lodged within 30 days. For trader’s bills, however, the time limit is 15 days, and registration cannot occur until a further 14 days have passed. During that time, anyone can lodge a caveat against registration.⁶⁶ This distinction between traders’ and other bills is not reflected in other jurisdictions, although in Tasmania a procedure similar to the caveat procedure applies to all bills. The time limits within which bills must be lodged vary throughout the country from 15 to 30 days, to (in Western Australia) times that depend on how far the place of execution is from Perth. No time is prescribed in the Northern Territory. Under the Corporations Law, the time limit is 45 days.⁶⁷ In Queensland, there is a further special problem: there are different bills of sale registers and where a bill is to be registered depends on where the property being used as security is situated.⁶⁸

Renewing registration

2.33 Except in the Australian Capital Territory, a bill of sale, once registered, must be regularly re-registered. In some jurisdictions registration must be renewed every 5 years; in others, the time limit is 4 years, 3 years or 12 months.⁶⁹ The consequences of not renewing registration also vary. In all jurisdictions except New South Wales, failure to renew registration invalidates the bill. In New South Wales failure to comply with renewal requirements only causes the bill to become invalid as against an official assignee or trustee of a bankrupt’s estate.⁷⁰

The need for reform

2.34 There are many defects in the present law about taking security over personal property. One of these defects is a preoccupation with the technical form of transactions and a lack of regard for whether transactions subject to existing personal property security regimes are in fact intended to create security rights over personal property. Important types of securities are not covered by the existing regimes. As well, the priority rules which apply to each of the schemes are often confusing and difficult to apply. These criticisms are compounded by a lack of uniformity of rules between similar schemes in different jurisdictions and by a multiplicity of registers in each jurisdiction. Prudent potential investors or lenders who are interested in the level of secured debt of an individual or company must be prepared to search registers not only in their own jurisdiction but in all other jurisdictions as well. This task is made all the more cumbersome by the fact that in each jurisdiction different registers exist for different types of property, different legal categories of securities and different types of borrowing arrangements. The high costs associated with these searches are inevitably passed on to borrowers in the form of higher interest rates and additional charges. There is a great need for reform of Australian personal property security laws.

FOOTNOTES

1. There are some restrictions on particular persons giving security over personal (or other) property: eg, superannuation funds cannot lawfully borrow even if security is given: see Occupational Superannuation Standards Regulations (Cth) reg 16(1)(b).

2. In relation to the taking of security over deposit accounts, the Australian Bankers’ Association (ABA) note that the English Court of Appeal decision in Re Charge Card and the New South Wales Supreme Court decision in Broad v Commissioner of Stamp Duties have cast considerable doubt over the efficacy of a charge taken by a bank over a deposit account of a customer as security for other lending.

3. These types of interests are known as liens: see paragraph 2.6.

4. This is a right to compel the creditor to give the ownership of the property back when the debtor has performed all its obligations under the arrangement.

5. Professor Sykes has argued that security rights which arise only upon default embody the concept of hypothecation: El Sykes The Law of Securities, 4th ed, 1986, Law Book Co, Sydney, 19. The NZLC cites Salmond as describing the security interest created by an hypothecation as’.. . merely a shadow cast by the debt upon the property of the debtor . . . ‘ and comments that ‘ . . . this [interpretation] may overstate the case in the sense that not all charges are hypothecations.... [Al floating charge, and a fortiori a fixed equitable charge over chattels create an interest before default . . . ‘: NZLC PP6, Reform of Personal Property Security Law: A report to the Law Commission by Professor John H Farrar and Mark A O’Regan, 1988, Wellington, NZ, 17.

6. A floating charge is said to ‘crystallise’ when it attaches to specific property.

7. Warehoused goods: Warehouseman’s Liens Act 1935 (NSW) s 6, Warehouseman’s Liens Act 1958 (Vic) s 7, Warehouseman’s Liens Act 1973 (Qld), Warehouseman’s Liens Act 1941 (SA) s 7, Warehouseman’s Act 1952 (WA) s 7 and Warehouseman’s Liens Act (NT); crops: Liens on Crops and Wool and Stock Mortgages Act 1898 (NSW); wool: Liens on Crops and Wool and Stock Mortgages Act 1898 (NSW); Stock Mortgages and Wool Liens Act 1924 (SA).; sugar cane: Liens on Crops of Sugar Cane Act 1931 (Qld); fruit: Liens on Fruit Act 1923 (SA); stock: Liens on Crops and Wool and Stock Mortgages Act 1898 (NSW); Liens on Crops and Wool and Stock Mortgages Act 1898 (NSW); Stock Mortgages and Wool Liens Act 1924 (SA); uncollected goods: Disposal of Uncollected Goods Act 1966 (NSW); Disposal of Uncollected Goods Act 1967 (Qld); Disposal of Uncollected Goods Act 1961 (Vic); Disposal of Uncollected Goods Act 1970 (WA); Disposal of Uncollected Goods Act 1976 (NT).

8. For further information see W Carter, P Lane, CJ Tolhurst and EM Peden, Helmore’s Commercial Law and Personal Property in New South Wales, 10th ed, 1992, Law Book Co, Sydney, 126-136.

9. El Sykes, op cit, 68.

10. El Sykes, op cit, 707. For an example, see the Workmen’s Liens Act 1893 (SA) s 7.

11. JW Carter, P Lane, GJ Tolhurst and EM Peden, op cit, 10th ed, 1992, Law Book Co, Sydney, 127.

12. El Sykes, op cit, 667; EA Francis & Kj Thomas, Mortgages and Securities, 3rd ed, 1986, Butterworths, Sydney, 88.

13. This should not be confused with the so called ‘negative pledge’, which s a contractual obligation not to use the property as security again without the consent of the occured party. It gives no interest in the property of itself, but is normally associated with a floating charge, which does.

14. Pawnbrokers’ Act 1902 (NSW); Pawnbrokers’ Act 1984 (Qld); Pawnbrokers’ Act 1888 (SA); Pawnbrokers’ Act 1860 (WA); Pawnbrokers’ Act 1857 (Tas); ACT: Pawnbrokers’ Act 1900 (NSW) as amended for the ACT OOP 33 of 1990 905078X. Victoria has repealed its Act.

15. Corporations Law; Bills of Sale Act 1898 (NSW); Chattel Securities Act 1987 (Vic); Bills of Sale and Other Instruments Act 1955 (Qld); Bills of Sale Act 1886 (SA); Bills of Sale Act 1899 (WA); Bills of Sale Act 1900 (Tas); Instruments Act 1933 (ACT); Instruments Act 1980 (NT).

16. Interest charges paid on an operating lease are tax deductible except where the operating lease is made unlawful by the terms of Part III, Division 16D of the Income Tax Assessment Act 1936 (Cth).

17. Registration of Interests in Goods Act 1986 (NSW); Chattel Securities Act 1987 (Vic); Motor Vehicle Securities Act 1986 (Qld); Goods Securities Act 1986 (SA); Chattel Securities Act 1987 (WA); Motor Vehicle Securities Act 1984 (Tas); Registration of Interests in Motor Vehicles and Other Goods Act 1989 (NT); Registration of Interests in Goods Act 1990 (ACT).

18. The national REVs scheme. In brief, the national REVs scheme will involve the establishment of a central database accessible by communication facilities situated throughout Australia. It is envisaged that the database will be administered by a separate legal entity jointly owned by the States and Territories. The local State and Territory agencies currently administering the individual State and Territory schemes will retain responsibility for administration of the national scheme within their own respective jurisdictions. It is hoped that the national REVs scheme will assist in the alleviation of difficulties encountered by motor dealers and financial institutions which have suffered significant financial loss in the past as a result of, for example, the cross-border movement of vehicles. In an effort to ensure individual privacy, there has been strong opposition to using the scheme to record information that would identify individual debtors. This development is fully discussed in Research Paper 1.

19. Shipping Registration Act 1981 (Cth) s 56.

20. Designs Act 1906 (Cth) s 38A; Trade Marks Act 1955 (Cth) s 53; Patents Act 1990 (Cth) s 20.

21. Life Insurance Act 1945 (Cth) s 87(1)-(2), 88, 117.

22. Liens on Crops of Sugar Cane Act 1931 (Qld) s 4(3).

23. Liens on Fruit Act 1923 (SA).

24. Liens on Crops and Wool and Stock Mortgages Act 1898 (NSW); Stock, Wool and Crop Mortgages Act 1930 (Tas) (applies to chattel mortgages, not liens); Stock, Mortgages and Wool Liens Act 1924 (SA) (does not apply to hen interests in fruit crops: see footnote 7).

25. Bills of Sale Act 1898 (NSW) s 3; Instruments Act 1958 (Vic); Bills of Sale and Other Instruments Act 1955 (Qld) s 6(1); Bills of Sale Act 1886 (SA) s 2; Bills of Sale Act 1899 (WA) s 5; lls of Sale Act 1900 (Tas) s 4(1); Instruments Act 1980 (NT) s 8(1); Instruments Act 1933 (ACT) s 8(1).

26. Chattel Securities Act 1987 (Vic) s 3; Chattel Securities Act 1987 (WA) s 3; Registration of Interests in Motor Vehicles and Other Goods Act 1989 (NT); Registration of Interests in Goods Act 1986 (NSW). The Victorian Act covers all chattel securities other than bills of exchange regulated by the Instruments Act 1958 (Vic), securities over choses in action and money, securities over ships, aircraft, livestock, unshorn wool and growing crops, securities over shorn wool and harvested crops which are not covered by the Instruments Act and securities over documents of title (eg bills of lading). The WA and NT Acts by and large reflect these provisions. However, there are no specific provision about excluding securities in aircraft and ships in the NT legislation. The Goods Securities Act 1986 (SA) and the Registration of Interests in Goods Act 1990 (ACT) make provision for goods to be prescribed to come within the scope of the legislation but they are mainly directed towards interests in motor vehicles. The New South Wales Act applies to interests taken in respect of any personal property other than choses in action and money and interests which are registrable under the Liens on Crops and Wool and Stock Mortgages Act 1898 (NSW). This necessarily implies that interests arising out of a bill of sale created in New South Wales can be noted on two registers. See paragraph 2.19 in relation to overlapping registers.

27. Ex parte Daglish [1873] LR 8 Ch 1072.

28. Bills of Sale and Other Instruments Act 1955 (Qld) s 6(1); the Bills of Sale Act 1898 (NSW) s 3, and the Instruments Act 1935 (NT) s 8(1) exclude choses in action (which includes book debts) from the definition of ‘personal chattels’.

29. eg horses are included in the definition of ‘personal chattels’ in the South Australian Act but excluded from the scope of operation of the Queensland Act.

30. They are included in, eg, Bills of Sale Act 1889 (WA) s 5; the SA legislation is the Bills of Sale Act 1886 (SA) s 2. Under the SA Act, the position where there are joint owners is unclear.

31. Assignments do not include (1) assignments for the benefit of the creditors of the person giving the assignment; (2) assignments of any ship or vessel or any share thereof: Bills of Sale Act 1899 (NSW) s 3; Instruments Act 1958 (Vic); Bills of Sale and Other Instruments Act 1955 (Qld) s 6(1); Bills of Sale Act 1886 (SA) s 2; Bills of Sale Act 1899 (WA) s 5; Bills of Sale Act 1900 (Tas) s 4(1); Instruments Act 1980 (NT) s g(1); Instruments Act 1933 (ACT) s8(1).

32. Bills of Sale and Other Instruments Act 1955 ((21d) s 6(1); Bills of Sale Act 1886 (SA) s 2; Bills of Sale Act 1899 (WA) s 5.

33. Except hire-purchase agreements where the owner is a person who ordinarily sells, or hires under hire-purchase agreements, chattels of the same class and the agreement is made in the ordinary course of businesses: Bills of Sale and Other Instruments Act 1955 (Qld) s 6(5).

34. Bills of Sale Act 1898 (NSW) s 3, definition of a ‘bill of sale’.

35. Corporations Law s 262, 265: the Law defines a ‘charge’ as including a mortgage and an agreement to give or execute a charge or mortgage.. . ‘: Corporations Law s9, definition of ‘charge’. The Corporations Law s 262(1) identifies the types of charges that must be registered; the remaining subsections set out exceptions to the general requirement to register.

36. The test for whether growing crops are ‘personal chattels, within the meaning of the bills of sale Acts is the same for fixtures: growing crops are ‘personal chattels’ when separately assigned or charged, but not when assigned together with an interest in the land on which they grow: Ex parte Daglish. See paragraph 2.20.

37. s3.

38. Corporations Law s 273.

39. Re Bauer Securities Pty Ltd & Anor; Austral Mining Construction Pty Ltd v NZI Capital Corporation Ltd & Anor (1991) 4 ACSR 328. See chapter 4, footnote 68.

40. Bills of Sale Act 1898 (NSW) s3.

41. Corporations Law s 9, definition of ‘charge’.

42. The distinction may be appreciated by example: in a mortgage, the legal title to the goods is given to the mortgagee subject to its agreement to give it back when the debt is paid. If title or possession do not pass, the creditor will likely have an equitable interest: one that arises, not because the creditor has an ownership interest in the goods, but because the creditor’s rights only arise because of the contract between the two.

43. This is an exception to the fundamental common law doctrine of dependent title. This doctrine states that a person who does not have a good title cannot transfer one - memo dat quod non habet.

44. Void ab initio.

45. Either because it will be stopped from relying on the security or it will have to rank after other secured creditors.

46. An example is the rule called the rule in Dearle v Hall, which applies only to choses in action and makes the priority order dependent on the order in which notice of the security arrangement is given to the debtor. it is unclear, in Australia, whether the rule extends beyond choses in action to equitable interests generally.

47. eg Bills of Sale Act 1886 (SA) s 18; Bills of Sale and Other Instruments Act 1955 (Qld) s 7(2)(b).

48. Instruments Act 1935 (NT) s 9(2).

49. eg Bills of Sale Act 1898 (NSW) s 4(2): invalid against execution creditors, trustees in bankruptcy and trustees under deeds of assignment for the benefit of creditors.

50. eg Bills of Sale Act 1898 (NSW) s SC (but only for a trader’s bill of sale); Instruments Act 1935 (NT) S 9.

51. eg Bills of Sale Act 1900 (Tas) s5.

52. Chattel Securities Act 1987 (Vic) s 10; Motor Vehicle Securities Act 1986 (Qld) s 12; Goods Securities Act 1986 (SA) s 12.

53. Registration of Interests in Goods Act 1986 (NSW); Registration of Interests in Goods Act 1990 (ACT); Registration of Interests in Motor Vehicles and Other Goods Act 1989 (NT).

54. Corporations Law ss 279-82.

55. Including constructive notice. A person who could reasonably have known of a charge has constructive notice even if he or she did not in fact know.

56. Copyright Act 1968 (Cth), Designs Act 1906 (Cth), Life Insurance Act 1945 (Cth), Patents Act 1990 (Cth), Trade Marks Act 1955 (Cth): see Corporations Law s 273(1)(b).

57. eg a pledge, deposit, letter of hypothecation or trust receipt in relation to a negotiable instrument or to a document of title to goods: Corporations Law s 262(2)(c).

58. Australian Central Credit Union v Commonwealth Bank of Australia (1990) ASC 55-987.

59. Australian Central Credit Union v Commonwealth Bank of Australia (unreported) Supreme Court of South Australia, 27 February 1991.

60. See paragraphs 2.14 - 2.21.

61. The lender will still, generally, be able to sue the debtor personally to recover the debt; in these cases, the lender will not have recourse to the property.

62. The possibility exists that, because registration under the Corporations Law is compulsory, a failures to register may amount to misleading or deceptive conduct in trade or commerce. If someone else, say, a later lender or (if the borrower is a company) an investor or shareholder, loses money because it is not aware of the earlier security, an action for damages for the loss may be available under the Trade Practices Act 1974 (Cth) or State and Territory fair trading legislation: Trade Practices Act 1974 (Cth) s 52,82; Fair Trading Act 1985 (Vic) s 11, 37; Fair Trading Act 1987 (NSW) s 42, There is, as yet, no reported case where this argument has been used.

63. Corporations Law s 263, 264, 268(2).

64. Corporations Law s 270(2); for definition of ‘officer in default’ see s 83, 79.

65. Corporations Law s 1313. The ‘penalty notice’ provision, under which the ASC can impose an administrative penalty for contraventions, is not available for these contraventions. In any event, the maximum penalty that can be imposed under the penalty notice scheme is only $250.

66. If a caveat is lodged, the bill cannot be registered until the caveat is withdrawn or removed.

67. Corporations Law s 263(1).

68. Bills of Sale and Other Instruments Act 1955 (Qld) s9.

69. eg 5 yews: Bills of Sale Act 1898 (NSW) s 5(1), Bills of Sale and Other Instruments Act 1955 (Qld) s 12(1), Instruments Act 1935 (NT) s 9A(2); 4 years: Bills 4 Sale Act 1900 (Tas) s 18; 3 years: Bills of Sale Act 1899 (WA) s 14(1); 12 months: Bills of Sale Act 1886 (SA) s 19a(1).

70. Bills of Sale Act 1898 (NSW) s5.