An address by ASIC Commissioner, Professor Berna Collier, to the 19th Annual Banking and Financial Services Law Conference, 6 June 2002.

Thank you for inviting me to speak at this session of the Banking and Financial Services Law Association Conference. In the context of the discussion of financing stock and debtors, the specific issues upon which we are focusing can best be summarised in the Australian context as fixed charges over book debts, and retention of title clauses. These issues raise interesting questions for a number of reasons.

First, both issues are very topical in Australia. It is fair to say that Agnew v Commissioner of Inland Revenue sent shivers down the spines of financial institutions' senior managers and legal advisers in this country. Further, retention of title or 'Romalpa' clauses continue to occupy secured creditors and insolvency practitioners in Australia, as evidenced by the continuing stream of litigation involving these transactions. The leading case in Australia on this topic – Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd – and more recent cases will be examined during the course of this presentation.

Secondly, in considering Agnew and Associated Alloys, the question arises whether they are in fact philosophically inconsistent. Notwithstanding the different issues arising in the cases, a fundamental question in common appears to be whether, in analysing arrangements in the nature of security, contractual form or substance is to be preferred. Traditionally, of course, equity prefers substance to form. It requires little drilling to note that the Privy Council in Agnew adopted the approach that substance was to be preferred, whereas it may be argued that the High Court in

Associated Alloys preferred form. It may be useful to come back to this issue during panel discussion later in the session.

Finally, it is important to recognise that New Zealand law in this area is diverging from Australian law. The Personal Property Securities Act 1999 (NZ) has meant that the issues as to fixed charges over book debt and retention of title clauses which so concern Australian lawyers are to a large extent otiose in that jurisdiction. This is an issue which Steve will be addressing after me, and I look forward to hearing his presentation on this topic.

Read the full speech (PDF 266 KB)