Personal Property Security Law Reform in Australia and New Zealand: The Impetus for Change

Penn State International Law Review Volume 27 Number 3 Penn State International Law Review Article 7 5-1-2009 Personal Property Security Law Reform in Australia and New Zealand: The Impetus for Change Anthony Duggan Michael Gedye Follow this and additional works at: http://elibrary.law.psu.edu/psilr Part of the International Law Commons Recommended Citation Duggan, Anthony and Gedye, Michael (2009) "Personal Property Security Law Reform in Australia and New Zealand: The Impetus for Change," Penn State International Law Review: Vol. 27: No. 3, Article 7. Available at: http://elibrary.law.psu.edu/psilr/vol27/iss3/7 This Article is brought to you for free and open access by Penn State Law eLibrary. It has been accepted for inclusion in Penn State International Law Review by an authorized administrator of Penn State Law eLibrary. For more information, please contact . Personal Property Security Law Reform in Australia and New Zealand: The Impetus for Change Anthony Duggan & Michael Gedye* Assume a period some time in the early part of the twentieth century. Country A introduced a telephone system some years back. Country B's government is now proposing to do likewise. A consortium of stakeholders, led by postal workers and stationery manufacturers, oppose the initiative on the ground that Country B has a postal service that works perfectly well. They point out that the postal service in Country A was always problematic because vast distances and harsh winters made deliveries unreliable but they say Country B does not have the same problems because it is much smaller and the climate is better. They concede that Country B's communications system could be improved, but they argue that only modest changes are needed: for example, the government might consider centralizing postal operations, which are currently run on a regional basis, and it might consider allowing postmen (no post-women in those days) to ride bicycles. They are ambivalent about a proposal to offer additional services, in particular, a telegram service, because they fear that telegram-writing might corrupt proper letter-writing. They argue that introducing telephones would be a bad idea because some people may have trouble learning to use them. There may be other adverse implications that have not occurred to anyone yet, and at least we know where we stand with the postal service. Question: I how should Country B's government respond? * Faculty of Law, University of Toronto and Business School, University of Auckland, respectively. Our thanks to Tom Telfer for helpful comments. All errors are ours. 1. Anthony Duggan, Submission to the Australian Commonwealth Attorney General's Department on Review of the Law on Personal Property Securities: Discussion Paper 1-Registrationand Search Issues, 2 (May 2007) (on file with author). PENN STATE INTERNATIONAL LAW REVIEW I. [Vol. 27:3,4 INTRODUCTION Australian and New Zealand secured transactions laws share a common history. But they took different paths, at least temporarily, in2 1999 when New Zealand enacted a Personal Property Securities Act based on the Canadian version of Article 9 of the United States Uniform Commercial Code. Australian personal property security law reform lagged behind, but there has been renewed activity over the past two years or so, culminating in the release of a draft Personal Property Securities Bill a few months ago. An interesting feature of the Australian and New Zealand experiences is the relative ease with which New Zealand managed the reform process and the equanimity, if not enthusiasm, with which the legal profession and other stakeholders greeted the proposals.3 In Australia, by contrast, personal property security law reform at least until recently has been dogged by a lack of political will, at best lukewarm support from the banks and other financial institutions and strong opposition from within the legal profession. This difference is curious given the close cultural, economic and political similarities between the two countries, their geographical proximity and their commitment to the harmonization of Australasian business laws via the Australia and New Zealand Closer Economic Relations Trade Agreement. Our aims in this paper are to: (1) explain why lawyers tend to oppose Article 9-type personal property security law reform; (2) critically analyze the reform opponents' main arguments; and (3) identify the key factors behind the impetus for change in Australia and New Zealand. We also comment briefly on the Australian Draft Bill and the New Zealand PPSA, with emphasis on the dangers of reinventing the wheel. This is a lesson which the New Zealanders, to their credit, for the most part have taken to heart but which, to the potential prejudice of a successful legislative outcome, the Australians continue to ignore.4 In Part II, below we provide a short historical account of the reform movements in the two countries. In Part III, we compare and contrast the legal profession's reactions to the reforms in Australia and New Zealand. In Part IV, we identify the factors that provided the impetus for change, looking first at Australia and then New Zealand. In Part V, we make 2. See Personal Property Securities Act 1999 (N.Z.) [hereinafter NZPPSA 1999]. 3. Although there was a considerable time lag between the date when the proposals for Article 9-type reforms were first floated in New Zealand and the enactment of the legislation. See Part II B, below. 4. Although the New Zealand legislation does depart from the Canadian model in a number of respects. See Part V B, below. 2009] PERSONAL PROPERTY SECURITY LAW REFORM some brief remarks about the recently released Australian Draft Bill, followed by some observations about the New Zealand PPSA. Part VI concludes. II. HISTORICAL BACKGROUND A. Australia The defects in the Australian personal property security laws have been well documented.5 The history of proposals for law reform has been long and tortured and this, too, has been well documented.6 But for David Allan's unflagging efforts, the cause may well have been lost for good in 1993, following the Australian Law Reform Commission's illconsidered recommendations for a home-grown PPSA.7 Professor Allan almost single-handedly managed to keep the issue alive, by convening stakeholder workshops at Bond University in 1995 and 2002, 8 by exploiting his connections with the Banking Law Association and, generally, by taking every available opportunity to prod reluctant governments into action. The current chapter in the saga was sparked by a truly Pythonesque episode. The then Commonwealth Attorney-General, Philip Ruddock, was to be the keynote speaker at a combined Queensland Law Society/Queensland Bar Association symposium in 2005. He arrived early and, to kill time, decided to sit in on one of the presentations currently under way. By chance, the presentation he walked in on was Professor Allan making the case, agai (...truncated)